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what a sad story!NEW YORK, April 13 (Reuters) - Genworth Financial Inc (GNW.N) shares tumbled on Monday after the money-losing life and mortgage insurer failed to qualify for new capital from the U.S. Treasury, prompting questions about the company's business model. In afternoon trading, the shares were down 58 cents, or 21.1 percent, at $2.17 on the New York Stock Exchange, after earlier falling as much as 30.5 percent to $1.91. Genworth, once part of General Electric Co (GE.N), is one of several insurers that sought to buy banks or savings and loans last year to win holding company status as lenders and qualify for taxpayer funds under the $700 billion Troubled Asset Relief Program. Insurers have seen capital squeezed as the value of their investments has fallen. After markets closed on Thursday, Richmond, Virginia-based Genworth abandoned its TARP request, saying the Office of Thrift Supervision had failed to approve its application to become a savings and loan holding company. Genworth had planned to buy Interbank fsb, a Maple Grove, Minnesota, lender, to be eligible for TARP money. "I don't believe Genworth has a viable business model in the current market environment," said Alan Rambaldini, an equity analyst at Morningstar Inc in Chicago. "The question is whether Genworth can muddle through the next couple of years until the economy turns around. That's the only thing that can save them." Neither Genworth nor the OTS would comment on why the company's application was allowed to expire. Last week, the Treasury Department said some insurers would be eligible for TARP money. Other insurers have won holding company status as lenders, including Hartford Financial Services Group Inc (HIG.N), MetLife Inc (MET.N) and Prudential Financial Inc (PRU.N). Genworth said it would pursue other options, including asset sales, to add financial flexibility. In 2008, the company lost $572 million, suspended its dividend and announced plans to cut 1,000 jobs. "OTS' rejection of Genworth's application under TARP is a major blow," analysts at Egan-Jones Ratings Co wrote late Thursday. "The company is no longer able to provide value to most obligors and therefore is basically in run-off mode." In September, Genworth announced plans to possibly spin off its U.S. mortgage insurance business, but it has not done so. That business had a $330 million operating loss last year. Rambaldini suggested Genworth could "perhaps split the company into two, like a good bank/bad bank situation." Genworth went public in 2004 and GE finished spinning it off in 2006. Genworth shares peaked at $37.16 in February 2007, Reuters data show. The cost to insure Genworth debt increased, indicating that investors see greater risk of default. The cost of insuring $10 of debt for five years rose on Monday to $5.85 million up front plus $500,000 annually, compared with $4.8 million up front plus $500,000 annually last week, a trader said. (Reporting by Jonathan Stempel; editing by John Wallace and Andre Grenon) |
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Msg # | Subject | Author | Recs | Date Posted |
52 | Re: what a sad story! | BuyMirBist DuSchein | 0 | 4/14/2009 2:56:08 PM |