Home Topics Real Estate Genworth is postponing the IPO of its mortgage insurance business

Genworth is postponing the IPO of its mortgage insurance business

Citing volatile trading in mortgage insurers’ stocks, Genworth Financial has postponed plans to sell part of its mortgage insurance subsidiary through an IPO.

Citing volatile trading in mortgage insurers’ stocks, Genworth Financial has postponed plans to sell part of its mortgage insurance subsidiary through an IPO.

Genworth Mortgage Insurance Corp. is the fifth largest private mortgage insurance provider in the country. On May 4, parent company Genworth Financial announced plans to sell nearly a fifth of the company in a partial IPO for around $ 500 million.

In the middle of the expected price per share of $ 20 to $ 24, the deal would have valued the company at around $ 3.6 billion. The IPO should also pave the way for a future spin-off, with Genworth Mortgage Insurance being renamed Enact.

Genworth Financial announced today that it is holding back Enact’s partial IPO for the time being.

Thomas J. McInerney

“Given the recent significant trading volatility in the Mortgage Insurance (MI) space, the Genworth Board of Directors determined that current market prices for the proposed offering do not accurately reflect the value of Enact. Because of this, we have decided to postpone the IPO and will continue to review our options as market conditions develop, “said Tom McInerney, CEO of Genworth, in a statement. “Our main goal was and is to protect the value of Enact. We maintain our positive long-term outlook for the MI sector given strong trends in the US housing market and expected tailwinds as the economy recovers from COVID-19. “

Genworth had hoped to raise between $ 451.5 million and $ 541.8 million in the initial public offering, which would be used to pay off debt owed by the parent company. Genworth said its ability to meet short-term commitments was “not dependent on an IPO”. As of March 31, they had cash and cash equivalents of $ 757 million.

All six of the largest mortgage insurers in the country are publicly traded, although Genworth Financial is an insurance holding company that also offers long-term care insurance. All six mortgage insurers have stock prices down last month, though all but Genworth are still higher than they were three months ago. Genworth stocks are down around 6 percent in the past 3 months.

Volatility among the six largest mortgage insurers

Source: Yahoo Finance.

Based on today’s share price, parent company Genworth Financial’s market capitalization is approximately $ 2 billion – less than the approximately $ 3.6 billion valuation targeted for the partial IPO of its mortgage insurance business.

Market capitalization of the six largest mortgage insurers:

  • Arch MI (ACGL): $ 15.99 billion
  • MGIC (MTG): $ 4.88 billion
  • The (ESNT): $ 5.32 billion
  • Radian (RDN): $ 4.28 billion
  • National MI (NMIH): $ 1.99 billion
  • Genworth Financial (GNW): $ 1.98 billion

In its IPO prospectus, Genworth said that low interest rates and a strong demographic have given tailwinds to the entire real estate market, leading to record levels of new insurance policies. Last year, Genworth Mortgage Insurance Corp. the number of new insurance policies taken out increased by 60 percent to 99.9 billion US dollars, making it the fifth largest provider in the country.

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

Email Matt Carter

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