Genworth Financial has raised $583 million by selling off a chunk of its Australian lenders mortgage insurance arm.
In what is Australia’s biggest initial public offering of this year, Genworth Australia sold 220 million shares at $2.65 each.
It had planned to sell between 195m and 260m shares at between $2.20 and $2.90 each, which is 6.2 to 8.2 times the company’s forecast 2014 net profit.
The sale of a 34% stake values the Australian business at around $1.7 billion.
However, the proceeds of the sale will not stay in Australia, but will go to Genworth Australia’s US parent Genworth Financial Group to reduce risk and rebalance capital among its three major mortgage insurance platforms in the U.S., Canada and Australia. The parent company will remain the largest shareholder.
According to the company, Genworth Australia holds a 45% market share in Australia.
Last year the company wrote $35.4 billion of residential mortgage loans in Australia. Its gross written premiums were $596.5 million.
Earlier this month a Genworth Financial shareholder brought a class action lawsuit in the U.S. alleging senior executives misled investors about the outlook for the IPO of its Australian mortgage unit.
The class action complaint, filed by the City of Hialeah Employees' Retirement System on 4 April in the district court for the Southern District of New York, alleged the defendants – Genworth Financial, its former CEO Michael Fraizer (who resigned in May 2012) and CFO and executive vice-president Martin Klein – disseminated false and misleading statements to the investing public.
This included allegedly misleading investors as to the stability and outlook of the company’s Australian mortgage insurance unit and the company’s ability to complete an IPO of its Australian business unit in the second quarter of 2012.
