Genworth Financial (GNW) Slashed on Earnings Miss, Active Life Reserves Review; Compass Point Downgrades
Genworth Financial (NYSE: GNW) is getting slammed 36% early Thursday following the company's earnings miss and more importantly as an LTC review has extended to its Active Life Reserves (ALR).
As noted earlier, Compass Point analyst Ken Billingsley downgraded the shares and suspended its price target and estimates as a result, saying this will negatively impact investor sentiment until the reserve review is completed following the end of 4Q14.
"We had originally estimated the potential for a 15% reserve charge against the company’s DLR would not require the company to raise capital," Billingsley said. "However, we believe the market will anticipate a capital raise following the company’s further review of the larger Active Life Reserves."
He added, "While management expects to offset the impact from this ALR review through various “related management actions”, it will not be able to offset the impact to older blocks of business that were acquired. While we don’t believe the impact to ALR and TBVPS will be as severe as our initial assumptions on the following page, we illustrate what we believe the market will likely initially assume.. Depending on various factors, we believe the market will initially assume that GNW’s TBVPS could be negatively impacted by $3 per share or more."