Entering text into the input field will update the search result below

Barron's: Buy the dip in Genworth

Sep. 20, 2014 9:30 AM ETGenworth Financial, Inc. (GNW) StockGNWBy: Stephen Alpher, SA News Editor1 Comment
  • Nailed badly this summer over worries about its long-term care unit, Genworth (NYSE:GNW) - whose share price about doubled in 2013 - is offering investors another buying opportunity, writes Jonathan Laing in Barron's. Q2 results this year showed a drop in operating profit from LTC to $6M from $46M a year earlier, and surging claim losses has the company reviewing the adequacy of its reserves.
  • The results of the review - and whether the company will need to take a reserve charge - are expected at this quarter's end. A further sting: It was less than a year ago management had done a "deep dive" into LTC reserves and given the "all clear" to analysts.
  • Even a massive and unlikely reserve charge of $1B would only cut Genworth's book value per share just a couple of dollars from the current $31.37 (vs. Friday's closing stock price of $13.19), says Laing. The actual charge, he says, is likely to be closer to an easily covered $200M. He expects the gap to book value to begin closing in the coming years.
  • The company isn't sitting still in LTC either, says Laing, noting premium increases nearly nationwide and the tightening of policy terms - basically eliminating lifetime benefits in favor of maximum benefit periods of 3-5 years. The big issue, of course, are those legacy policies (sold from 1974-2001) where lapse rates have been 1% or less vs. the 5-5% expected, and investment returns of 5.5% are less than 6.75% expected. Genworth will do good to break even on these, but their number should shrink to 123K over the next decade from 331K today based on mortality statistics.

Recommended For You

About GNW Stock

SymbolLast Price% Chg
Market Cap
PE
Yield (TTM)
Rev Growth (YoY)
Prev. Close
Compare to Peers

Related Stocks

SymbolLast Price% Chg
GNW--
Genworth Financial, Inc.