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Genworth Puts Off Mortgage Insurance Unit IPO

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What You Need to Know

  • Genworth has delayed its Enact IPO, in which it had hoped to raise $623 million, due to market volatility.
  • The company says it has plenty of cash and liquidity.
  • The CEO says the company will evaluate its options as market conditions develop.

Genworth Financial Inc. announced today that its board has decided to postpone holding an initial public offering for Genworth’s mortgage insurance unit, Enact Holdings Inc.

IPO trackers had been predicting that Genworth would start the Enact IPO today.

Tom McInerney, the CEO of the Richmond, Virginia-based insurer, said the board decided that the market for mortgage insurance company stocks has been too volatile.

Because of the volatility, the board “determined that current market pricing for the planned offering does not accurately reflect Enact’s value,” McInerney said, in a comment included in the postponement announcement. “Therefore, we have decided to postpone the IPO and will continue to evaluate our options as market conditions develop.”

The Proposed Offering

Genworth was a major issuer of life insurance, annuities and long-term care insurance, and Enact is still a major U.S. mortgage insurance issuer. The company’s life, annuity and LTCI operations have suffered from the effects of low interest rates and LTCI pricing problems.

Genworth had hoped to raise up to $623 million by selling an 18.4% stake in Enact to the public through the IPO, with shares trading under the ticker symbol “ACT” on the Nasdaq Global Select Market. The company said it would use part of the proceeds to pay a settlement related to two companies it sold to AXA S.A. in 2015.

Company executives said they also thought a partial separation would increase investors’ awareness of Enact and improve its ratings.

The Future

Genworth ended the first quarter with $757 million in cash and other liquid assets, and it does not need cash from the IPO to meet near-tern obligations, the company said.

Enact has been doing well, and its prospects look good, McInerney said.

“We maintain our positive long-term outlook for the [mortgage insurance] sector, given strong trends in the U.S. housing market and expected tailwinds as the economy recovers from COVID-19,” he said.

(Photo: Michael Nagle/Bloomberg)