Mortgage

Genworth abandons mortgage insurer's preliminary public providing citing volatility within the sector

Genworth Financial has postponed its US private mortgage insurance business, citing volatility in stock prices for the other companies in the sector.

Enact Holdings' IPO was Plan B for the company following the completion of its acquisition by China Oceanwide on April 6th.

"Given the recent significant trading volatility in the mortgage insurance sector, the Genworth Board of Directors determined that current market prices for the proposed offering do not accurately reflect the value of Enact," said Tom McInerney, President and CEO of Genworth, in a press release ahead of the market on Thursday opened. "As a result, we have decided to postpone the IPO and will continue to review our options as market conditions develop."

On May 4, Genworth released preliminary details of Enact's initial public offering with a sale of 22.6 million shares (excluding an option to subscribe to 3.4 million shares and a private placement of 4 million shares) for between $ 20 and $ 24 per share.

Since the beginning of the month, the share prices of the four companies whose main business area is mortgage insurance have fallen significantly.

Essent Group opened at $ 53.28 per share on May 3 and closed at $ 46.06 on May 12. Over the same period, MGIC Investment rose from $ 15.44 per share to $ 13.31. NMI Holdings from $ 26 to $ 22.48; and Radian Group from $ 25 to $ 21.72.

Arch Capital Group, where PMI is one of several businesses on offer, saw a much smaller drop from $ 40.13 to $ 39.13.

Genworth, whose long-term insurance business has been an issue for the company for an extended period of time, rose from $ 4.37 per share to $ 3.85 per share over the same period.

All five competitors opened higher on Thursday morning and saw a significant price increase at 10:30 a.m. Essent gained 95 cents per share. NMI, 73 cents per share; Radian, 62 cents per share; Arch, 51 cents per share and MGIC, 49 cents per share.

But Genworth opened the day at $ 3.70 a share, 15 cents off, despite having regained ground by 10 a.m. and only 10 cents off the previous day.

"Our primary goal was and is to protect the value of Enact," said McInerney. "We maintain our positive long-term outlook for the MI sector given the strong trends in the US housing market and expected tailwinds as the economy recovers from COVID-19."

Genworth's liquidity position to meet its short-term commitments is not dependent on its IPO, the company added. As part of its legal settlement, the company is expected to pay AXA $ 345 million by September and repay an additional $ 513 million in outstanding debt. The holding company had cash and cash equivalents of approximately $ 757 million as of March 31.

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