Genworth to offload LMI stake

by Adam Smith07 Nov 2011

Genworth's US-based parent company will sell a large stake of the Australian mortgage insurer to offset financial losses.

The initial public offering of Genworth Australia will see a 40% stake in the company offered on the ASX. The IPO is being pursued to release capital for the LMI provider's American parent company following a decline in net income for the financial year.

"Genworth plans to pursue a minority IPO of its Australian mortgage insurance business in the second quarter of 2012, subject to market conditions and regulatory review and approval. This move is part of a broader strategy to rebalance the business portfolio, support future growth opportunities for the Australian business with expanded access to the capital markets, maintain control positions of strategic mortgage insurance platforms in Australia and Canada, and together with other actions, free material capital for redeployment," the company said in its quarterly report.

Genworth's American operations saw net income fall from $83m in  the September quarter of 2010 to $29m in 2011, while expenses rose from $29m to $104m in 2011.

Genworth's Australian LMI business, meanwhile, saw better results than its American counterpart, with new insurance written up 4% for the quarter. While new LMI was down 3% year-on-year, the company said the mortgage market was showing improvement from increased refinancing activity.

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