Genworth Financial is to sell a stake in its Australian mortgage insurance business through a public offer.

The announcement of the sale came after the company reported a dramatic fall in net income for the third quarter ending September 30.

Income was down from $US83 million ($79 million) in the third quarter of 2010 to $US29 million ($28 million) for this year.

But net operating income presented a stronger picture rising from $US29 million ($28 million) in 2010 to $US104 million ($100 million) in this year’s third quarter.

Genworth CEO Michael Fraizer says the results reflect an improvement in the company’s retirement and protection business.

“US mortgage insurance losses declined due to good loss mitigation results, stability in the ageing of loan delinquencies and higher levels of profitable new business,” he said.

“We continue to pursue and accelerate value-enhancing strategies to redeploy and optimise capital.

“This includes strategic management of new business levels and our plan to pursue a minority share IPO of our Australian mortgage insurance business.”

This sale is scheduled for the second quarter of next year, and Genworth is looking to generate up to $US80 million ($77 million) from the deal. It will be selling up to 40% of the local business. 

He says the sale will free up capital for redeployment elsewhere, and is “part of a broader strategy to rebalance the business portfolio”.

“It will support future growth opportunities for the Australian business with expanded access to the capital markets.”