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Things Better at Genworth’s Mortgage Insurance Unit

FEB 6, 2013 12:21pm ET
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Genworth Financial’s global mortgage insurance division had net operating income of $131 million in the fourth quarter, but the U.S. component reported a $34 million loss.

This represents an improvement in its MI business, as company president and CEO Tom McInerney said the U.S. MI operation continued its recovery in the fourth quarter. These results compare to net income for global MI of $56 million in 3Q12 (loss of $38 million for U.S. MI) and a loss of $13 million in 4Q11 (loss of $96 million for U.S. MI).

Genworth announced a corporate reorganization in January that separates its mortgage insurance lines from its life insurance lines.

For the full year, global mortgage insurance earned $202 million, compared with a 2011 loss of $185 million. The U.S. MI business improved to a loss of $140 million, from a loss of $513 million in 2011.

Genworth Financial earned $166 million in 4Q12, as its life insurance division had operating income of $76 million and its corporate and other division lost $40 million.

The global MI results for the most recent period include a $78 million gain from the new Government Guarantee framework in Canada. The change eliminated exit fee obligations and the gain is Genworth Financial’s share. Genworth owns 57.5% of Genworth MI Canada, which is separately traded. (Genworth Mortgage Insurance Co. holds 16.7% of Genworth Financial’s ownership interest in Genworth MI Canada, a move that was made to bolster capital.)

During the quarter the U.S. MI business wrote $5.1 billion of primary new insurance, up from $4.7 billion in 3Q12 and $3.2 billion in 4Q11.

Total flow delinquencies of 66,340 for 4Q12 represent a 4% decline from the third quarter and 21% from the same period in 2011.

The combined risk-to-capital ratio was 30.4-to-1, with the ratio at Genworth Mortgage Insurance Co. estimated to be 36.9-to-1.

When Genworth Financial implements its business reorganization, the company expects GMICO’s risk-to-capital ratio to fall by 12 to 15 points. Part of the plan has already been undertaken, which is transferring the European MI business to GMICO on Jan. 31. It increased the statutory capital of the MI by $230 million and if it had been in place on Dec. 31, 2012, the risk-to-capital ratio would have been reduced approximately 12 basis points.

Genworth MI Canada had 4Q12 net operating income of C$226 million ($226.4 million); without the reversal of the accrual, it would have earned C$89 million ($89.16 million).

The unit had net premiums written of C$117 million ($117.2 million), C$61 million ($61.1 million) less than in the third quarter and C$6 million ($6 million) less than 4Q11.

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