May 1, 2012 / 10:40 PM / 6 years ago

UPDATE 2-Genworth CEO resigns amid Australia woes

* Q1 oper EPS $0.06 vs est $0.11

* Q1 EPS $0.09 vs $0.12 last yr

* CEO Michael Fraizer resigns

* Australia MI unit posts loss of $21 mln in qtr

By Sharanya Hrishikesh

May 1 (Reuters) - Life and mortgage insurer Genworth Financial Inc’s quarterly profit fell below analysts’ expectations on a higher-than-expected loss at its Australian mortgage insurance unit, and the company said its chief executive has stepped down.

CEO Michael Fraizer has resigned, and chief financial officer Martin Klein has been named acting CEO, the company said in a statement.

Fraizer had held the top post since Genworth went public in 2004.

The insurer had said in April that it would push back the initial public offering of its Australian mortgage unit due to unfavorable market conditions in the country, and that it expects the unit to post a “modest” loss for the quarter.

Losses at its Australian unit were $21 million in the quarter, compared with a profit of $52 million a year ago.

BTIG analyst Mark Palmer said the company’s forecast of a “modest” loss for the unit had led some analysts to project the loss at single-digit million levels, leading to the insurer missing estimates.

Investors were worried that the delay in its Australian unit IPO would hit the insurer’s capital deployment plan.

Genworth has struggled to maintain its capital levels as its U.S. mortgage insurance business posted losses for years. The company has used its foreign units, especially its Canadian mortgage insurance business Genworth MI Canada, as a source of capital in the past.

The Australian unit’s listing would have freed up capital, which shareholders were hoping would be used for a long-awaited share buyback program.


Shares of Genworth, which was once part of industrial conglomerate General Electric, were up 6 percent at $6.50 in extended trade.

Analyst Palmer said he was not surprised with the positive stock reaction to Fraizer’s resignation, as many investors were frustrated with the management and held them responsible for the company being unable to realize its actual market value.

Investors have often been critical of the company for not doing enough to boost its share value, with hedge fund maven Steve Eisman even threatening a proxy war.

“I think there is hope among investors that they will eventually see a return of capital. But management’s near term focus needs to be on stabilizing the company’s operations. The U.S. MI unit’s improving results, which have been overshadowed by what has happened in Australia, should help boost the stock,” Palmer said.

Losses from the U.S. mortgage unit almost halved to $43 million, and new flow delinquencies - a measure of how many new loans were in default - fell about 23 percent.

Genworth’s shares have fallen almost 9 percent year-to-date, while the broader KBW Insurance Index, which consists of 24 insurers, has risen more than 10 percent i n the same period.

Genworth shares have lost almost half their value in the past year. They closed at $6.15 on Tuesday on the New York Stock Exchange.

For all alerts on Genworth’s first quarter results. [ID nASA04393]

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