Aug. 1--Insurance giant Genworth Financial Inc. is taking a billion dollars from its safety net cushion of cash and putting it back to work in financial markets.

It's a sign the worst may be over in those markets -- just as is a sale of stock in Genworth's Canadian unit last month, which raised $705 million and was the biggest deal in Canada in two years.

The Henrico County-based company, one of the largest insurers in the nation, has been building up cash, paying off IOUs and shedding soured investments in bonds for months.

Now, it plans to start using about $1 billion of its $5.4 billion cash holdings more profitably, by investing in stocks and bonds, Chief Financial Officer Patrick B. Kelleher disclosed yesterday

"Bond markets feel normal again," said Michael D. Fraizer, Genworth's chairman and chief executive officer.

"You don't need to just sit on cash, you can just manage assets as normal."

Last fall's freeze-up in the world's money markets, hot on the heels of a housing meltdown that has Genworth's mortgage insurance business bleeding red ink, sparked Genworth's cash scramble.

Cost-cutting, which included laying off 400 people at its Henrico headquarters early in the year along with cashing in some of the company's own investments, helped reassure investors and customers shaken by the worst financial market collapse in decades.

Genworth insurance agents and financial advisers did plenty of hand-holding, too. A net outflow of money from investment accounts, as worried customers pulled out funds, reversed itself this spring, as a net $160 million flowed in during the second quarter. The number of policyholders letting policies lapse is actually at or below the levels of normal times.

"You've got to be out there every day helping people understand," Fraizer said.

Kevin D. Schneider, head of the company's U.S. mortgage insurance operations, meanwhile said federal and state programs to help homeowners who are falling behind on their mortgages "haven't yet gained much traction."

But he said recent efforts by the U.S. Treasury, lenders and servicing companies are removing many obstacles. Schneider said he expects those programs to pick up by the end of the year.

So far this year, meanwhile, Genworth has saved $333 million through its efforts to help homeowners modify loans and by canceling policies that had been obtained by fraud or misrepresentation.

Also yesterday, Genworth's chief investment officer, Ronald Joelson, disclosed that Genworth had sold about half its holdings in CIT Group before the small-business lender faced a financial crisis this summer. The bonds it still holds have a face value of $90 million and a market value of $64 million, Joelson said

Genworth shares fell 21 cents to $6.90 yesterday, after the earnings report it issued late Thursday showed a second-quarter loss smaller than the year before.

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Contact David Ress at (804) 649-6051 or dress @timesdispatch.com.

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