The U.S. mortgage insurance business remained a bright spot for Genworth Financial, as fourth quarter adjusted operating income increased 29% and new insurance written rose nearly 95% over the prior year.
While the parent company lost $17 million in the fourth quarter, the U.S. MI business had an adjusted operating income of $160 million. This compares to the MI unit’s adjusted operating income of $137 million in the third quarter and $124 million in the fourth quarter of 2018.
(Genworth Financial lost $329 million in the fourth quarter of 2018.)
New insurance written totaled $18.1 billion during the quarter, down from $18.9 billion in the third quarter, but up from $9.3 billion a year ago.
Fourth-quarter growth in refinance originations drove the increased NIW, as well as an escalated market share commensurate with the company’s adoption of its risk-based pricing engine GenRate. Selective participation in forward commitment transactions also helped, Genworth said in a press release. Refis made up 29% of the quarter’s NIW, up from 21% in the third quarter and 5% in the fourth quarter of 2018.
Revenue from premiums grew to $237 million, up from $219 million in the third quarter and $193 million in the fourth quarter of 2018.
Besides higher NIW, “the growth in earned premiums versus the prior year was also driven by increased single premium cancellations from higher refinancing activity and a favorable $14 million pretax single premium earnings pattern adjustment, partially offset by lower average premium rates,” Genworth said.
Genworth also announced Fannie Mae and Freddie Mac reapproved the parent company’s acquisition by China Oceanwide, subject to meeting certain conditions and obligations to confidentiality restrictions.
Meanwhile, Genworth and China Oceanwide remain in negotiations with the New York Department of Financial Services to obtain a reapproval. The regulator said reapproval would be contingent on a capital contribution from Genworth to its life insurance subsidiary.
“We will continue to work hard to reach a prompt resolution with the NYDFS and satisfy all other closing conditions to complete the transaction as soon as possible,” Tom McInerney, president and CEO of Genworth Financial, said in the press release. “However, if the parties are unable to reach an agreement with the NYDFS that is also acceptable to our other state insurance regulators, Oceanwide and Genworth will need to consider other alternatives to the transaction for each party.”
The sale of Genworth’s Canadian mortgage insurance business — another move meant to ease the merger approval process — raised net cash proceeds of $1.8 billion. The U.S. MI unit, based on its ownership share, received $517 million of that amount.