Genworth Shares Cut in Half After Earnings Miss

Genworth Financial Inc. (NYSE: GNW) announced its quarterly earnings after the market closed on Wednesday as a net loss of $844 million, or $1.70 per share. The turnaround that the company has pushed could be in jeopardy after this report. Shares had been above $18 this year, but they have been sliced in half after a 35% drop Thursday morning.

The analyst firm Macquarie believes the long-term care (LTC) charge was on the high side of the range of expectations. The firm also suggests that investors were giving Genworth the benefit of the after-tax $517 million of goodwill written off below-the-line anyway. Ultimately Macquarie thinks that concerns around Genworth’s active life reserves will weigh on the stock through fourth quarter results.

The company has a risk-based capital ratio of 445%, compared to an end-of-year target of 400% in U.S. based life insurance.

President and CEO Tom McInerney commented on the quarterly performance, saying:

We are very disappointed by our U.S. Life Insurance Division results. We continue to believe our LTC strategy is the best option for Genworth, but the turnaround in this business will be more difficult and prolonged because of the poor performance of the older generation products. Despite this setback, we remain steadfast in our commitment to transform this business.

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The firm Compass Point has downgraded Genworth stock.

Shares of Genworth were trading down about 36% at $9.02 after the first couple hours of trading. Shares are trading at a serious discount compared to the book value per share of $30.54.

The consensus analyst price target is $17.43, and the 52-week trading range is $8.75 to $18.74. Genworth has a market cap of over $4 billion.