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Genworth share price tumbles after missing estimates

Genworth Financial Inc., the mortgage guarantor and life insurer, posted the biggest decline in the Standard & Poor's 500 Index after third-quarter profit missed analysts' estimates on costs tied to bad home loans.

Genworth Financial Inc., the mortgage guarantor and life insurer, posted the biggest decline in the Standard & Poor’s 500 Index after third-quarter profit missed analysts’ estimates on costs tied to bad home loans.

The insurer’s share price was down $1.13, or nearly 9 percent, as of 3:08 p.m. (EST) in New York Stock Exchange composite trading. Richmond, Virginia-based Genworth’s operating income, which excludes some investment results, was 6 cents a share in the third quarter, missing by 20 cents the average estimate of 15 analysts surveyed by Bloomberg.

The operating loss at the U.S. mortgage-insurance unit widened to $152 million from $116 million a year earlier as the company set aside more reserves. Mortgage insurers pay lenders when homeowners default and foreclosures fail to recoup costs.

“The slow economy and struggling housing market” weighed on results, particularly in Florida, where the company strengthened reserves for delinquent loans by $85 million, Chief Executive Officer Michael Fraizer said.

Losses in Florida were fueled by foreclosures on properties owned by investors. Mortgage servicers have had a better success rate avoiding default by negotiating new arrangements in cases where owners occupy the property, Genworth said.

Two servicers managing mortgages at investor-owned properties in Florida are “having relatively low success rates in completing modifications,” Fraizer said on a conference call today. “Therefore more of these loans have proceeded to foreclosure.”

Genworth has declined about 1.4 percent this year, compared with the 16 percent advance of the 24-company KBW Insurance Index. Net income rose to $83 million from $19 million a year earlier, Genworth said late yesterday.

Credit-default swaps on Genworth’s debt surged to the highest since Oct. 7. Contracts on Genworth climbed about 30.4 basis points to 285.7, according to data provider CMA. That means investors would pay $285,700 annually to protect $10 million of Genworth’s debt for five years. Investors use credit-default swaps to protect from losses on corporate debt or to speculate on creditworthiness.