Genworth to Focus on Credit Grade Before Capital Return

Genworth Financial Inc., the insurer rated one level above junk, said it needs to improve its credit grade before returning capital to shareholders.

“We’d like to see the ratings higher than where they are today, then that will be the time to look at various options to improve shareholder value,” Chief Executive Officer Tom McInerney, 56, said in an interview today. “We’d like to have the ratings agencies in a place where we have better ratings and they have us at a stable outlook.”

Genworth avoided a downgrade to junk at Moody’s Investors Service by isolating its U.S. mortgage insurer this year. Standard & Poor’s still has a negative outlook on its BBB-rating, citing a need to improve operating results at the Richmond, Virginia-based company.

The insurer climbed 2.4 percent to $10.27 at 4 p.m. in New York, the eighth-biggest gain in the S&P 500 Index, after saying yesterday that first-quarter net income doubled. The mortgage guaranty unit, which reimburses lenders when borrowers default, had its first profitable period since 2007. McInerney is also raising prices for long-term care coverage.

The firm has rallied 37 percent this year as an improving housing market bolstered the unit. Still, Genworth’s shares have tumbled about 60 percent since the end of 2007, as losses from backing home loans drained capital during the housing crash. Genworth suspended its dividend and share repurchases in 2008.

“A very high priority that I have is to improve returns for shareholders and also return capital,” McInerney said. “We’re not there yet.”

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