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Genworth Reschedules IPO

Zacks Equity Research

Genworth FinancialInc. (GNW) is expected to close the Initial Public Offering (“IPO”) of its Australian mortgage insurance business in early 2013. Initially, the company intended to sell 40% of the stake in the second quarter of 2012. However, market conditions, valuation considerations including business performance and regulatory approvals will play a major role in its completion.

Given a soft operational performance in Australia in the recent times, the company decided to push forward its IPO. Genworth expects higher losses at Australian mortgage insurance business in the first quarter of 2012.  A rise in loss is anticipated as lenders hastened foreclosures. In particular, this was experienced in the coastal areas of Queensland,  which suffered catastrophes as well as a weak economy.

The IPO is an effort to reorganize the business portfolio, support future growth opportunities for the Australian business with greater access to the capital markets, maintain control positions of strategic mortgage insurance platforms in Australia and Canada, as well as free material capital for redeployment.

Genworth has been concentrating on its core business for some time now by streamlining its businesses. Early April, the company closed the divestiture of Genworth Financial Investment Services ("GFIS"), its tax and accounting financial advisor unit. Genworth decided to sell the unit to increase focus on its core asset management business within the Wealth Management segment.

In 2011, the company sold its Medicare supplement business and related blocks of in-force business to Aetna Inc. (AET) in order to focus on the Retirement and Protection segment.

The current Zacks Consensus Estimate for first-quarter 2012 is pegged at 24 cents per share. For full years 2012 and 2013, the Zacks Consensus Estimates are $1.14 and $1.70, respectively.

The quantitative Zacks #3 Rank (short-term Hold rating) for the company indicates no clear directional pressure on the stock over the near term.

Based in Richmond, Virginia, Genworth Financial offers a variety of products to customers in areas such as life insurance and lifestyle protection, long-term care insurance, annuities, asset management and mortgage insurance through financial intermediaries, advisors, independent distributors and sales specialists.

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