Genworth CEO Fraizer remains calm, looks forward to growing his company amid mortgage crisis

Genworth Financial CEO says ‘reinvent everything’

RICHMOND, Va. — Some people would say, Genworth Financial Inc. CEO Michael Fraizer just has all the luck.

Fraizer, a 52-year-old with no formal business schooling has risen to the top of a $9 billion company.

“The harder I work, the luckier I get,” Fraizer said in an interview with The Associated Press. “I always hear people say, ‘That’s just luck.’ Well, luck’s made.”

It’s his hard-earned luck that has put him in a position most wouldn’t envy. He’s charged with leading a private mortgage insurance business as millions of homeowners have defaulted on their loans amid the worst housing market in years.

Like others, Genworth, which also sells life insurance and other financial products, has faced deteriorating financial conditions. It was hit hard by investment losses over the past couple of years as stock and credit markets weakened.

In March of last year, Genworth’s shares dropped to 84 cents. Several of its corporate neighbors in the Richmond area, including Circuit City Stores Inc. and LandAmerica Financial Group Inc., had already declared bankruptcy and folded, and many feared for Genworth as well.

There was widespread concern that many insurers and financial firms might not survive the deluge of defaults.

“A leader has an interesting responsibility, because everyone is watching you at those moments, but your job is to be calm,” Fraizer said. “You are a duck on a mill pond. You may be paddling underneath, but no one can see that.”

He added, “When you are going through this period of stress like this, reinvent everything you’ve ever dreamed of. When we come out the other side of this, we want to be well positioned.”

Today, Genworth’s shares are above $18.

In a candid conversation, Fraizer offered his take on several issues, including the housing market — and Genworth’s role; provided some financial advice for twenty-somethings; and explained how driving a tractor-trailer for four years made him the CEO he is today.

Excerpts of the interview follow.

Q: It’s been a tough economy. What’s been going through your head?

A: The first thing you had to do was face reality and assume reality was far worse than anything you’ve ever dreamed of. You had to say, “This could be permanent. Now what do I do?” I had to make sure our enterprise navigated it, and that we keep the promises that we made. Second thing you had to do is play defense but be very careful to compartmentalize things.

See the worst thing that happens when all hell’s breaking loose, is people get all raveled up. It’s like spaghetti and meatballs. They stare at it and say, “Oh my god, look at that.” And I’m like, “No, it’s all pieces.” I call it taking the mountain apart, as opposed to standing at the bottom and looking at it saying, “I’ve got to climb that?” You conquer it in pieces. You compartmentalize. You play defense.

Q: What did you tell your employees to keep them engaged?

A: There was a very chaotic period. People thought the entire financial system was in jeopardy. The first thing I told our people was “We do good things.” You’ve got to be grounded in your beliefs. What you do, not only can help individuals, but can help the country move forward. So, we do good things was the first message.

The second message was, “We are strong.” There was a lot of doubt about financial companies and a lot of misinformation floating around, including about us. My third point, “We will do everything we need to keep our promises.” And think about that word. I didn’t say insurance policies, I said promises. Because at the end of the day that’s what an insurance company does.

Q: What helped keep Genworth from suffering a fatal blow?

A: During the free fall period, lots of companies looked at every government program. Let’s face it. We didn’t know if we had a financial system or if we were going to deal with a depression or a recession. The fact is, our diversity helped us. Our U.S. market was hit very hard in both the investment area, and the mortgage insurance area. The Canada and Australian markets were stars.

Q: But it wasn’t easy for Genworth. The U.S. mortgage insurance business took a major financial hit. One of Genworth’s main lines of business is private mortgage insurance.

A: First remember our other segments. Different pieces had different profit characteristics. We believe we were one of the more conservative mortgage insurers. That being said, we haven’t seen a home price decline like this since the 1930s. We stepped back and looked at it from two fronts.

First, what do you want to do to contain risk and mitigate losses in your existing book of business, and secondly, how do you use this crisis as an opportunity to build a new, more attractive business. We did both.

We hired hundreds of people to help do things like modify mortgages, but also review the mortgages that we cover, to see if they comply with underwriting standards … and in some cases they didn’t, and in some cases we found a lot more fraud than you’d ever expect.

At the same time, we kept over 17,000 people in their homes because we helped them restructure their loans, and we’re proud of that.

Q: What about acquisitions? You say Genworth is interested in growing.

A: Our priority would be core growth, or organic growth. We have capital available for targeted, and I underline targeted, acquisitions that could complement one of our areas. I’d like to make our wealth management business a little bigger. And that’s a business where we’ve made a number of acquisitions and integrated them, and it’s been very successful. There’s an opportunity. And we may see some things internationally as well.

Q: You’re very passionate as you describe Genworth and all it encompasses. What keeps you going?

A: When you step back and look at life, there’s a saying: “The test of your time on Earth is fundamentally what you do for your family, what you do for those around you, and what do you do to make it easier for those who follow you when you are not around anymore.” To me, that’s the essence of life. What you do on those three fronts, because everything else is noise. You can’t take the toys with you.

Q: What has helped shaped who you are today?

A: I tell my employees, one of the greatest jobs I’ve ever had is, I used to drive a tractor-trailor rig for four years, for Mayflower Van Lines. That was one of the best experiences I had to prepare me for the corporate world.

When you’re a mover, you’ve moved offices, you moved families. You always had to put teams of people together. And it was grueling work. Not only were you driving, you were carrying, loading stuff in and out of houses. You had very diverse teams that you had to put together, quick. And learn how everyone ticked. What a great lesson. I started driving when I was 17, ended at 21. Ok. That’s funny. I cannot see my teenage daughter driving a tractor-trailer.

Q: What is your favorite thing to do when you’re not working?

A: Downhill skiing in Jackson Hole, Wyo.

Q: Any financial advice to younger generations?

A: I was sitting in Atlanta waiting for a flight and this young lady asked if I was coming from a business trip. She was going to Coast Guard training and she started asking me all these questions on what should someone in their 20s do.

First, stay out of debt. Pay it down, don’t get in anymore debt. Wow. I sound like Suze Orman.

But then we started talking about building blocks. Get that savings going, start putting together that safety net. My message to her was very simple: If governments can’t provide or corporations can’t provide what our parents’ got — or many of us my age— you won’t get it. So you, at your age need to be more astute and build your personal, and portable safety net, starting now.