Genworth plans IPO of Australian business

US insurer Genworth Financial says it plans to sell as much as 40% of its $4 billion Australian business.

US insurer Genworth Financial says it plans to sell as much as 40% of its $4 billion Australian business, Genworth Mortgage Insurance Australia, in an initial public offering as early as June, a US Securities and Exchange Commission filing says.

Fund managers in Australia told Data Room that Commonwealth Bank of Australia is managing the IPO. CBA's financial analyst, the fund manager said, will meet with investors next week to discuss more details about the IPO including its potential valuation. CBA declined comment.

The SEC filing did not give any details as to how much money will be raised in the IPO, the number or price of the shares that will be sold or the underwriters of the share sale that may be one of Australia’s biggest IPOs of 2014.

Genworth values its Australian assets at $4bn, according to the SEC filing. The company expects to report a net profit of $231.1 million this year compared with $179.4m last year. Net earned premiums are estimated in 2014 to be $440.2m compared with $397.9m in 2013. The business’ loss ratio this year is 32%.

“Genworth Australia will use the net proceeds from the offer to repay intragroup funding arrangements with Genworth Financial and its subsidiaries,” says the SEC filing. “Genworth Australia and its subsidiaries will not retain any net proceeds from the offer.”

Genworth Australia will become the new holding company for Genworth Financial’s Australian mortgage insurance business after a reorganisation plan. The company’s Australian business is forecast In the year to date there have been nine IPOs that have priced, two are trading and seven are pending, according to Bloomberg data.

Genworth entered the Australian mortgage insurance market in 1997.

Genworth Financial said it was seeking to complete the offer in the first half of 2014, but that depended on market conditions, valuation considerations, including business performance, and regulatory considerations, among other factors.

“Although Genworth Financial has not made any final decision as to whether to pursue the offer at this time, consistent with customary practice in Australia, certain institutional investor education activities are being commenced ahead of a possible offer,” the filing said.