(Bloomberg) — Genworth Financial Inc. agreed to sell a European mortgage insurance operation to AmTrust Financial Services Inc. as Chief Executive Officer Tom McInerney divests assets to bolster capital amid tighter regulation on companies that back home loans in the U.S.
Genworth expects to record an after-tax loss of $140 million tied to the sale and will get net proceeds of about $55 million, the Richmond, Virginia-based insurer said Tuesday in a statement. Mortgage insurance policies cover costs when borrowers are unable to meet obligations and foreclosure fails to recover losses.
U.S. home-loan guarantors have been raising capital to prepare for private mortgage insurance eligibility requirements announced last year by the Federal Housing Finance Agency. Radian Group Inc. agreed in December to sell its bond insurer to Assured Guaranty Ltd. for about $800 million to free up capital and help meet the standards required for companies that back loans purchased by Fannie Mae and Freddie Mac.
AmTrust is "excited to rebuild" the Genworth operation, "especially at a time when we believe market conditions for mortgage insurance in Europe are improving," CEO Barry Zyskind said in a separate statement. "With this transaction, AmTrust will acquire an experienced management team and solid pipeline of business at a purchase price that we believe will reward our shareholders."
U.K., Germany
The unit had tangible book value of about $155 million as of June 30, AmTrust said. The operation is based in the U.K. and also sells products in Finland, Italy and Germany.
