(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.
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.