September 9, 2009 / 1:50 PM / 9 years ago

UPDATE 1-Genworth sees new opportunity in mortgage insurance

NEW YORK, Sept 9 (Reuters) - Genworth Financial (GNW.N) sees increasing opportunity to underwrite “attractive, accretive” business through its U.S. mortgage insurance business, CFO Patrick Kelleher said at an investor meeting on Wednesday.

“The value proposition of mortgage insurance has become more clear than ever,” Kelleher said at the meeting held in New York by Keefe, Bruyette & Woods.

“We are encouraged by some of the dynamics in the mortgage insurance market,” he added, after nationwide contraction in the wake of the U.S. housing market downturn.

The Richmond, Virginia-based company, which also sells long-term care insurance and other life and retirement products, also expects to see growth in its mortgage insurance business in Canada and Australia, where mortgage defaults have been less severe.

Kelleher said Genworth, which unlike some of its peers did not secure financial aid from the federal government earlier this year, had sufficient capital to execute its business plan.

The company, after a successful public offering of part of its Canadian mortgage insurance business recently, is also looking at other opportunities to increase financial flexibility, Kelleher said.

Mortgage insurers provide coverage on home loans that are secured with downpayments of less than 20 percent, and pay out to lenders in the event of a default.

Investors have been looking eagerly for signs of any rebound in the mortgage insurance market after the sector was badly hurt over the past year. Genworth reported its fifth straight quarterly loss in the second quarter, hurt by increasing mortgage delinquencies.

Still the company has stuck with the business, and is seeing opportunities to clamp down on those who have abused the system. [ID: nN31119312]

New data shows some improvement in U.S. mortgage applications. Demand rose to its highest level since late May as consumers sought to take advantage of the lowest interest rates in months, data from the Mortgage Bankers Association showed on Wednesday.

Genworth is also seeing favorable trends on the investment side, with total impairments and losses decreasing, said Kelleher.

“We are seeing signs that the worst is behind us in terms of credit impairments,” he said.

Genworth’s shares have been more than halved over the past year, but have recovered strongly from a 52-week low of 71 cents last November, when investor concerns about life and mortgage insurers’ access to capital reached a fever pitch.

The stock rose 7 cents to $9.50 in early trade on the New York Stock Exchange on Wednesday.

Reporting by Lilla Zuill, editing by Dave Zimmerman

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