Home Topics Real Estate The nation's fifth largest mortgage insurer joins the IPO craze

The nation’s fifth largest mortgage insurer joins the IPO craze

Genworth Mortgage Insurance Corp. will be renamed Enact in a partial IPO that valued the company at $ 3.6 billion and paves the way for a future spin-off.

Genworth Mortgage Insurance Corp. is renamed Enact as parent company Genworth Financial prepares to sell nearly a fifth of the company to investors in a partial IPO for approximately $ 500 million. The deal values ​​the company at around $ 3.6 billion and paves the way for a future spin-off.

Genworth Mortgage Insurance is the fifth largest private mortgage insurance provider in the country. The parent company Genworth Financial is an insurance holding company that also offers long-term care insurance.

Genworth Financial, which has been publicly traded since 2004, last month considered a partial IPO and eventual spin-off of its mortgage insurance business after plans to merge with China Oceanwide Holdings Group Co. Ltd. $ 2.7 billion had been canceled.

On Tuesday, Genworth Mortgage Holdings Inc. announced plans to rename itself Enact Holdings Inc. and sell 22.6 million shares of Enact common stock for $ 20-24 per share. All of the proceeds – between $ 451.5 million and $ 541.8 million – would go to Genworth Financial subsidiary Genworth Holdings.

Mutual funds managed by Bayview Asset Management LLC have agreed to purchase an additional 4 million shares of Enact common stock at the IPO price minus a subscription discount. IPO subscribers will have the option to purchase an additional 3.4 million common shares of Enact at the IPO price.

If the subscribers fully exercise these options, Genworth Financial will have sold 18.4 percent of its shares in Enact – 15.9 percent to IPO investors and 2.5 percent to Bayview – the company said in an IPO prospectus.

This means that Genworth Financial will control a majority of all voting rights in Enact’s common stock so that it can continue to “determine the outcome of corporate actions that require the approval of majority shareholders, including, for example, the election of directors and the amendment of our Certificate of Incorporation and Statute. “

Following the IPO and private placement, 162.84 million shares of Enact common stock will be in circulation. If each share were worth $ 22 – the midpoint of the expected IPO stock price – Enact’s market cap would be $ 3.58 billion.

In an April 30 earnings call, Tom McInerney, CEO of Genworth Financial, said Genworth would be in no rush to sell more of its stake in Enact immediately after going public.

Genworth Financial’s “strong preference is to retain sufficient ownership of Genworth Financial [Enact] to have the opportunity to distribute the remainder to the general shareholders and to undertake a tax-free spin-off in the future, ”said McInerney.

The IPO prospectus summarizes both opportunities and risks for investors.

New insurance from top 6 private mortgage insurers | Source: Annual reports (MGIC, Essent, Radian, Genworth, National MI) and supplementary SEC filings for Arch 2019 and 2020.

“Demand for mortgage insurance is strong and has remained stable despite the COVID-19 pandemic, which continues to give us significant opportunities to generate attractive, profitable new business,” the company said. “Record low interest rates and a strong demographic base have given the entire real estate market a tailwind,” which has led to record levels of newly taken out insurance.

Genworth Mortgage Insurance Corp. increased the number of newly insured insurances by 60 percent to 99.9 billion US dollars in 2020, making it the fifth largest provider in the country.

Email Matt Carter

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