Genworth Names McInerney CEO to Fix Mortgage Insurer
Genworth Financial Inc. (GNW), the insurer whose stock plunged more than 80 percent since the end of 2006, named Thomas J. McInerney as chief executive officer to stanch losses from insuring mortgages in the U.S.
McInerney, 56, a former executive at ING Groep NV, replaces Michael Fraizer, who stepped down May 1, the Richmond, Virginia- based insurer said today in a statement.
Genworth is seeking to regain investor confidence as Moody’s Investors Service reviews whether to cut the company’s credit rating to junk status. The insurer needs to limit losses from backing U.S. home loans and is seeking to divest a stake in its Australia mortgage-insurance unit after delaying a plan this year for an initial public offering.
“The choice of McInerney was a solid one for Genworth, as the company clearly will benefit from having a seasoned executive with extensive experience in insurance,” said Mark Palmer, an analyst at BTIG LLC, in a note to investors.
Genworth climbed 18 cents, or 2.7 percent, to close at $6.90 in New York. The company has gained 5.3 percent this year, compared with the 14 percent advance of the Standard & Poor’s 500 Index.
“Investors want to see actions,” James Riepe, Genworth’s chairman, said in a telephone interview. “As they see more and more actions on our part, they’re going to feel better about the company, and I think that will be reflected in the stock price.”
Credit swaps protecting against losses on the debt of Genworth fell 37.5 basis points to 415 basis points as of 3:30 p.m. in New York, according to data provider CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.
Credit-swaps levels typically fall as investor confidence improves and rise as it deteriorates. The contracts pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.
McInerney worked most recently as an adviser to Boston Consulting Group Inc., according to the statement. At ING, the largest Dutch financial-services company, he was chief operating officer of the insurance operation, responsible for a business with 425 billion euros ($552 billion) of assets and 35,000 employees, according to the statement. He previously was CEO of ING Americas, overseeing insurance, pension and investment- management businesses in the U.S., Canada and Latin America.
McInerney holds a bachelor’s degree from Colgate University and a master’s degree in business administration from the Tuck School of Business at Dartmouth College. Before working at ING, he was an executive at Aetna Financial Services.
“It is clear that everyone at Genworth is focused on sustaining its reputation for delivering high quality products and service,” McInerney said in the statement.
McInerney takes over as CEO and president effective Jan. 1, and will be elected to the insurer’s board of directors, according to the statement. Chief Financial Officer Martin Klein has been acting CEO.
Genworth has retreated from the sale of variable annuities and Medicare supplement coverage to focus on life insurance and long-term care policies in the U.S. The company said April 27 that Chief Investment Officer Ronald Joelson was stepping down from overseeing the $75 billion portfolio to join Northwestern Mutual Life Insurance Co. in the same role. Daniel Sheehan was promoted to Genworth CIO, the insurer said.
Fraizer, who guided Genworth through its spinoff from General Electric Co. after a 2004 IPO, had misjudged when results would rebound at the U.S. mortgage insurer. He told investors in a December 2009 presentation that Genworth expected quarterly operating earnings at the unit would “turn positive in the mid-2011 time frame.” In a July 2011 statement, Genworth cited “worsening trends” in the business as it used $375 million to provide capital support to the unit.
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