Genworth Financial Revives IPO of Australian Insurance Unit
April 9, 2014 by Ernesto Calucag
MELBOURNE, Australia – Genworth Financial Inc. has revived plans to sell up to 40% of its Australian insurance business through an initial public offering during the first half of the year.
In a U.S. regulatory filing, Genworth said the move is “a strategic priority for 2014” but is still subject to market conditions and valuation considerations, including business performance and regulatory approvals.
Genworth said it is still determining with joint lead managers the number of shares and price per share to be offered.
The Richmond, Va.-based company said its Australian unit will not retain any proceeds from the IPO. Funds raised will be used instead to repay intragroup funding arrangements with Genworth and its subsidiaries.
Genworth initiated a similar move two years ago, when it announced plans for a US$850 million IPO of its mortgage insurance business in Australia, but delayed it after forecasting higher losses in the unit (Best’s News Service, Apr. 19, 2012).
The group’s Australian unit competes with QBE in the mortgage insurance market in the country. In 2013, Genworth Australia’s new insurance premium written totaled A$34.4 billion (US$32.0 billion) for 45% share of the market. This year, the company expects new premiums to slightly go down to A$33.8 billion.
Gross earned premium is forecast to increase by 10% this year, from A$471 million in 2013. The increase is driven by a A$12 million reduction in the contribution from the 2010 and prior book years, and A$57 million increase in the contribution for the 2011 and later book years, Genworth said.
The group’s net income jumped 72% to US$560 million in 2013, in part due to its improved mortgage insurance business in the United States. Genworth also noted that its long-term care insurance business is starting to have “a meaningful impact” on financial results.
Its U.S. mortgage insurance business posted net operating income of US$37 million in 2013, compared with a net operating loss of US$138 million in 2012.
Meanwhile, for its U.S. life insurance business, as of year-end 2013, long-term care insurance in-force premium rate increase approvals from 41 states represented about US$195 million to US$200 million of the expected US$250 million to US$300 million premium increase when fully implemented by 2017, Genworth said.
Rated subsidiaries of Genworth Financial Inc. have current Best’s Financial Strength ratings of A (Excellent).
(By Ernesto Calucag, Hong Kong news editor: Ernesto.Calucag@ambest.com)
