In Depth Analysis: CalculatedRisk Newsletter on Real Estate (Ad Free) Read it here.

Friday, April 25, 2008

Genworth Financial Conference Call Comments

by Calculated Risk on 4/25/2008 11:10:00 AM

Here are a few comments from the Genworth conference call.

First, look at the significant change in their outlook for house prices and unemployment:

“First, U.S. housing market conditions have worsened and liquidity remains constrained. At year-end, we shared the view with many in the market that the magnitude of the house price declines from the peak in Q4 2005 would be 13% to 15%. Based on what we have seen to date, we now expect the decline to be in the 20% to 25% range with significant regional variation. Second, our outlook for U.S. unemployment worsened from 5% in December to closer to 6% by year-end 2008. In addition, the probability that we will see a recession in the U.S. is now higher; however, it is unclear whether the downturn will be mild or more severe.”
emphasis added
On Alt-A and A minus delinquencies:
“This quarter, we saw a significant deterioration in the 2007 flow book with 2007 reserve increases accounting for more than half of the build in total loss reserves. Delinquencies remain concentrated in alternative products like Alt-A and A minus, as well as in high loan balance states, particularly in Florida . If this adverse early development of the 2007 book continued over multiple years, we could see lifetime losses with certain lenders exhaust captive coverage, particularly those with relatively higher concentrations of Alt-A and A minus product and exposure to high loan balance states. However, it is too early to make such a determination and we are monitoring the situation while actively working on loss mitigation.”
In response, they have raised their prices:
“In addition, we announced yesterday a 20% price increase on our flow mortgage Insurance product.”