Genworth Financial posted a $161 million loss in the fourth quarter after adding $350 million of loss reserves for its mortgage insurance division.
In a statement company CEO Michael Fraizer noted that, "…as a result of losses in the U.S. Mortgage Insurance business, our overall results for the quarter and the year were not acceptable."
Fraizer said the company — spun off by General Electric last decade — will focus on "restoring under-performing business lines to acceptable return levels for the capital allocated while sustaining good performance in our other business lines."
Among the nation's eight MI firms, Genworth ranks fifth in terms of policies-in-force, according to figures compiled by National Mortgage News and Quarterly Data Report.
For the full year Genworth — which operates in a variety of insurance segments outside of mortgages — lost $135 million.
Discussing the new MI reserves, the firm said it set aside $150 million for lower cure rates (and lower modification benefits), and $200 million for anticipated declines in the cure rate going forward.
In January, Genworth's primary MI subsidiary received a two-year waiver from having to comply with the 25:1 risk-to-capital ratio. As of Dec. 31, 2010, the combined statutory risk-to-capital ratio was 21.9:1.
New flow insurance written for the U.S. MI business increased 44% in the fourth quarter year-over-year (to $2.6 billion from $1.8 billion) and by 8% from the third quarter. Including bulk activity, Genworth had total NIW (new insurance written) of $3.2 billion for the quarter.
Home Affordable Refinance Program modifications added another $1 billion, which Genworth treats as a modification of existing coverage rather than NIW.
Loss mitigation activities gave Genworth $126 million of savings during the quarter. Paid claims were $268 million. Average flow reserve per delinquent loan increased from $20,400 for the fourth quarter 2009 to $24,300, reflecting the aging inventory (due to various foreclosure moratoriums) and the reserve strengthening.
