Aug. 02--Genworth Financial Inc.'s acting chief executive officer said a spinoff or sale of its struggling U.S. mortgage insurance business may not be viable at this time.
Comments made Wednesday by Martin P. Klein, the interim CEO of the Henrico County-based insurer, drove shares down 11 percent, or 56 cents, to close at $4.48 on the New York Stock Exchange.
Klein told analysts on a conference call Wednesday that "delinking" the mortgage insurance business from the company "may not necessarily be the most cost effective or most beneficial option for investors or bondholders."
He said a sale or spinoff may not be viable at this time "due to potential capital required to execute the transaction."
The company's U.S. mortgage insurance business has suffered repeated quarterly losses because of the housing market downturn.
In June, hedge fund Highfields Capital Management LP increased its investment in Genworth and said it would discuss options for the mortgage insurance operations that could include a sale or spinoff.
In an interview, Klein noted that the mortgage insurance business has seen narrowing losses and is expected to return to a profit this year.
The unit posted a loss of $25 million in the second quarter compared with a loss of $255 million in the same period in 2011. The company said the number of new delinquencies declined.
Genworth's board has completed a strategic review of the company's business mix and is planning changes to improve returns, Klein told analysts, saying that its stock price and bond spreads are "unacceptable."
"We need to address the complexity of our business portfolio so it is simpler for investors to understand and more attractive for them to invest their capital," said Klein, who had been the company's chief financial officer and was named interim CEO when Michael D. Fraizer, Genworth's founding chairman and CEO, resigned in early May.
The company did not disclose what changes it will make or what businesses might be sold, but Klein said in an interview that there are no "imminent plans" that would affect staffing at its operations in the Richmond and Lynchburg areas.
Genworth posted second quarter profit of $76 million compared with a net loss of $136 million in the same period of 2011.
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