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* Q2 EPS $0.16 vs loss/shr $0.28 last year
* US mortgage insurance unit losses fall to $25 mln from $255 mln
* Shares up 8 pct in after hours trade
By Sharanya Hrishikesh
July 31 (Reuters) - Life and mortgage insurer Genworth Financial Inc posted a second-quarter profit as losses narrowed at its U.S. mortgage insurance unit, and the company said its primary insurance regulator extended its capital waiver by another two years.
Genworth said the North Carolina Department of Insurance has granted Genworth Mortgage Insurance Corp (GEMICO), its primary mortgage insurance company, an 18-month extension to its capital waiver.
Mortgage insurers have been struggling to meet capital adequacy benchmarks and have time and again sought waivers to continue writing business in many states in the United States.
BTIG analyst Mark Palmer said the extension was a "significant positive" for the company, as most states tended to follow the primary regulator in granting waivers.
GEMICO currently has waivers or other authorizations to continue writing insurance in 44 states.
Net operating loss at Genworth's U.S. mortgage insurance unit narrowed to $25 million from $255 million in the comparable period last year. New flow delinquencies -- a measure of how many new loans were in default -- fell 21 percent.
The housing market, which collapsed during the 2007-2009 recession, has been a relative bright spot in the economy this year, although it remains hobbled by tight mortgage availability and on-going foreclosures. U.S. home prices rose for the fourth month in a row in May, suggesting the recovery in the housing market continued to gain traction.
Long-time Genworth Chief Executive Michael Frazier resigned in May after the insurer pushed back plans to sell a minority stake in its Australian mortgage insurance business through an initial public offering.
The Australian unit's listing would have freed up capital, which shareholders were hoping would be used for a long-awaited share buyback program.
The unit posted a net operating profit of $44 million compared with an operating loss of $21 million in the prior quarter.
Hedge fund Highfields Capital raised its stake in the insurer in May, and said it expects to discuss options for the insurer's U.S. mortgage insurance operations and other businesses.
"I think there are a couple of positives that came out of the quarter," analyst Palmer said. "The continuation of the positive trend at U.S. MI, the waiver extension, and the stabilization of the Australian MI unit, all should help to buoy the stock tomorrow."
The company reported net income of $76 million, or 16 cents per share, in the second quarter, compared with a net loss of $136 million, or 28 cents per share, a year earlier.
Genworth shares have fallen more than 17 percent since it reported first-quarter results in May, while the broader KBW Insurance Index, which consists of 24 insurers, has fallen almost 8 percent in the same period.
The company's shares closed at $5.04 on Tuesday on the New York Stock Exchange. They rose more than 8 percent after the bell.