- The Washington Times - Monday, April 13, 2009

NEW YORK (AP) - Shares of Genworth Financial Inc. lost nearly a fifth of their value Monday after the insurance company said it would not be eligible to participate in the government’s $700 billion financial rescue program, deflating hopes that it would soon get a lifeline.

Investors have been concerned that Genworth and other struggling insurance companies would be the next part of the financial industry to need help after banks, as the slumping stock market wallops their investment portfolios.

Genworth said late Thursday that the government had informed the company that it missed its deadline to become approved as a bank holding company and that the deadline would not be extended, rendering it ineligible to receive rescue funds.

Investors were disappointed by the news, sending the company’s stock down 18 percent or 49 cents to close at $2.26 on Monday. Markets had been closed for the Good Friday holiday. The shares had traded below $1 in early March but had rallied since then. The shares are still down about 3 percent for the year.

Deutsche Bank analyst Darin Arita said in a note Monday that the additional capital could have “significantly improved the holding company’s liquidity.”

Raymond James analyst Steven Schwartz said in an interview that Genworth’s problems are somewhat unique within the life insurance industry, and its current challenges should not necessarily be indicative of the entire group’s. Unlike other life insurers, Genworth has a significant mortgage insurance business, which had has been trampled by defaults on home loans.

“Genworth was the most conservative of all the mortgage insurers,” said Schwartz. “Unfortunately … being the best has not been good enough.”

While Schwartz is hopeful that the company will survive this downturn, many risks remain. “The company has funds to get through this, but there is not a whole lot of flexibility here,” he said.

Genworth faces deteriorating financial conditions and new competitive challenges. Like many other insurers, Genworth was hit hard by investment losses last year as stock and credit markets continued to weaken.

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