UBS Downgrades Genworth Financial (GNW) to Sell; Unfavorable Risk/Reward

UBS downgraded Genworth Financial (NYSE: GNW) from Neutral to Sell with a price target of $4.25 (from $5.25) on unfavorable risk/reward.

Analyst Suneet Kamath commented, "Post GNW's 3Q:15 results, we are lowering our EPS estimates from $1.10 to $1.00 in 2016 and from $1.25 to $1.10 in 2017, largely reflecting: 1) the impact of reinsurance deals and higher competition in U.S. Mortgage Insurance (MI); 2) higher international MI loss ratios (reflecting macro pressures); 3) higher Corporate losses; and 4) a lower growth trajectory for Long-Term Care (LTC) earnings. On the last point, we note that "core" LTC earnings (i.e., ex-unusuals and the benefit from recent rate actions) has deteriorated y/y in 2015 YTD, with worse q/q results in each quarter this year. Going forward, we see limited near-term earnings upside from LTC, as reserve releases from pricing actions decline and the time it will take to implement additional premium increases. We lower our price target from $5.25 to $4.25 on our reduced EPS forecast and a lower peer-implied U.S. MI P/E. We downgrade GNW to Sell on the implied price downside, and a less favorable risk/reward following recent management comments."

For an analyst ratings summary and ratings history on Genworth Financial click here. For more ratings news on Genworth Financial click here.

Shares of Genworth Financial closed at $4.85 yesterday.

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