(Bloomberg) — Billionaire hedge fund investor John Paulson said Genworth Financial Inc. shares will probably rally as the company divests a stake in an Australian unit, and could gain further if the insurer splits itself in two.
“If the company chooses to spin off its mortgage-insurance and other life-insurance businesses into two separate companies, there could be substantial additional upside,” the money manager said in a letter to investors discussing first-quarter results at his Paulson & Co. funds.
Paulson has benefited from the rally of insurers including Richmond, Virginia-based Genworth and CNO Financial Group Inc. He previously pushed for a split at Hartford Financial Services Group Inc., which instead sold assets to focus on property- casualty coverage. He is best known for a successful bet against subprime mortgages, which made him a billionaire in 2007.
He has wagered on mortgage guarantors such as Radian Group Inc. and MGIC Investment Corp. to gain on a rebound in U.S. housing. Mortgage insurers cover losses when homeowners default and foreclosures fail to recoup costs.
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Paulson bought 8.4 million Genworth shares early last year at an average cost of $7.67, according to the letter. The stock advanced 3.3 percent to $18.21 at 4 p.m. in New York.