NEW YORK - Genworth Financial Inc. shares slipped on Friday, a day after the insurer reported worse-than-expected second-quarter results as it was hit by losses in its U.S. mortgage insurance division and investment portfolio.

Its shares declined 36 cents, or 5.1 percent, to $6.75 in afternoon trading.

CEO Michael Fraizer said Friday that even while it is disappointing to post a quarterly loss, the company has seen some signs of improvement in divisions where it was hit the hardest, such as mortgage insurance.

Richmond, Va.-based Genworth reported a net loss of $50 million, or 11 cents per share, during the second quarter, smaller than the year-ago period. Excluding special one time items, the insurer earned $9 million, or 2 cents per share.

However, that fell short of analysts' expectations for earnings of 16 cents per share, according to Thomson Reuters. Analysts typically exclude special items from their estimates.

Genworth reported an operating loss of $134 million in its U.S. mortgage insurance business, compared with a loss of $59 million during the same quarter last year. Despite the growing loss, Fraizer said there are signs the housing market is stabilizing, loss mitigation activities could reduce losses in the coming quarters and new mortgage insurance business is performing well.

In the housing market, "not all signals are negative now," Fraizer told The Associated Press. "Momentum is shifting to the positive."

Over the past week, new reports showed better-than-expected increases in home sales in June. Also, a key reading on house prices showed a smaller year-over-year decline in May than in previous months, while prices in some major markets rose between April and May.

Fraizer noted those improving trends, coupled with better pricing and stricter underwriting standards, should improve new business in the coming quarters.

However, losses from existing policies are likely to remain a problem.

"The primary pressure remains whether people are working," Fraizer said of the deciding factor on homeowners' abilities to pay their mortgage. Mortgage insurers cover principal and interest payments if a borrow defaults on the loan.

Unemployment hit a 26-year high in June, climbing to 9.5 percent. It is widely expected the unemployment rate will eventually eclipse 10 percent.

Loan modification programs and other risk mitigation practices could help minimize losses as mortgage defaults mount and lead to additional claims payments, Fraizer said.

Fraizer also noted Genworth continues to strengthen its capital position. Genworth generated $705 million in cash as it completed an initial public offering for a minority stake in its Canadian mortgage insurance business. That extra cash further pads reserves, which exceed target requirements by $2.3 billion, Fraizer said.

Genworth has also paid off all upcoming debt maturities for 2009 and has no outstanding debt due until the middle of 2011.

Liquidity pressure has stung other financial firms in recent months as they face upcoming debt maturities in a time when credit markets haven't fully recovered from their near collapse last fall.

Earlier in the year, investors were concerned insurers and some other financial firms might not be able to survive because mounting investment losses would cripple cash reserves. Genworth shares dropped below $1 amid investors' broader concerns about liquidity problems at insurers, but have moved sharply higher as confidence returned to the sector.

Net investment losses totaled $59 million during the second quarter.

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