Genworth stock worth more on upgrade
Up 13% after Citigroup analyst said insurer can withstand mortgage-related losses
Genworth Financial Inc. posted the biggest gain in the Standard & Poor’s 500 Index after Citigroup Inc. upgraded the insurer for the second time this month on the prospect that the company can withstand mortgage-related losses.
The insurer advanced 13 percent to $6.07 at 4:01 p.m. in New York. Colin Devine, a Citigroup analyst, raised his rating on Richmond, Virginia-based Genworth to “buy” from “neutral” in a note today. He had a “sell” rating from August 2009 until Nov. 11, according to data compiled by Bloomberg.
Genworth, the life insurer and mortgage guarantor, may use a public offering to sell as much as 40 percent of the Australian unit backing home loans, the company said Nov. 3. Losses on U.S. mortgage insurance contributed to Genworth’s stock slide of more than 50 percent this year and the bankruptcy of rival PMI Group Inc.
“The market appears to be overly discounting the possibility of bankruptcy risk for Genworth,” Devine wrote. “While the risk of continued mortgage insurance losses in the U.S., Canada and Australia remains high, as do earnings pressures on the domestic insurance businesses from low interest rates, we believe these factors are overly discounted into the current valuation and that insolvency is not a legitimate threat.”
–Bloomberg News–
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