Genworth problems

Nov 14, 2008

  1. bluemarlin08
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    bluemarlin08 Guru

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    Any of you following the Genworth texas crisis? Stock dropped from over 14 in Sept to below a dollar Wednesday and there was talk of them BK. Who will be next?
     
    Last edited by a moderator: May 25, 2012
  2. Frank Stastny
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    Frank Stastny Guru

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    No I haven't been. Thanks for bringing it to our attention. I have a lot of clients with Continental Life.

    Continental Life, before they became a part of Genworth, has for the last nine years been one of the best, most stable companies I could put my clients with. They have just, or about to, initiate a 25% premium increase for all their Med Supp plans.

    American Continental is now in Missouri but even it isn't all that competitive. Only a few dollars a year less than Continental Life.

    The last increase was 9% on Plan D and 25% on Plan F. I didn't understand why Plan D took such a big hit. Now I have a much better idea why.

    Thanks. The whole senior market appears to be going down the toilet. A greeters job at Wal-Mart is looking better and better.
     
  3. moonlightandmargaritas
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    moonlightandmargaritas Guru

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    As long as they give you one of those spiffy blue vests...
     
  4. JRoot
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    JRoot Guru

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    I read they got downgraded by Moody's, didn't read about the stock drop till now. Interesting...
     
    JRoot, Nov 14, 2008
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  5. bluemarlin08
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    bluemarlin08 Guru

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    I have a good bit of LTC and life business with them, so to say the least after the AIG issue I am concerned about all my carriers and what they are saying and not saying. Experience teaches me that the execs will say what is necessary to calm the masses. I do have some emails from Genworth that explaing their situation that I will forward to those that send PM, I don't know if I can attach it to a PM may have to deliver by email.
     
  6. SportsNut
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    Yes, their stock has been pummeled. They just tapped 930 mil of their 1.7 Bn credit line, which has taken the pressure off of them failing, at least for now. I had actually anticipated that since their stock was so low that one of the larger companies would scoop them up, if their long term obligations could be restructured. I guess all the rest of the companies have their own problems to deal with as opposed to taking on more exposure. Speaking of exposure, Genworth has quite a lot of it in their mtg ins division, and that is the largest weight on the stock, it seems.

    Genworth has eliminated their dividend and is cutting expenses with a hatchet, not a scappel, in an attempt to survive. The picture is not clear if that will happen. Due to the company being downgraded, they then did not qualify for access to the TARP money. This is a huge blow to their position.

    Here is more about the company and their situation in the link below.

    Genworth surges after tapping credit lines - MarketWatch

    While not wishing to dance on their grave, the stock GNW has been an excellent stock to day trade the past few months, due to the extreme volitility. I had just bought a gob of it @ 1.00 sh, the same day that it surged to 1.61 after the annoncement on the credit line access. Sold @ 1.55. I would rather be lucky than good, as I like to say. Of course this approach has extreme risk of capital and not recommended for those with low risk tolerance.
     
  7. insurehound
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    I don't get it. I thought insurance companies were suppose to invest a majority of their portfolio in highly graded corporate bonds to keep out of trouble. Is it that they have a similar situation that AIG has (holding company AIG, insurer American General)?

    BTW, my first post here...I'm really excited to communicate with other insurance professionals.
     
    Last edited: Nov 15, 2008
  8. bluemarlin08
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    bluemarlin08 Guru

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    As I understand, they must reserve so much for their life and LTC business and those reserves are typically invested in high grade debt investments, and I am told those are safe and adequatelt funded, the problem is they invested a large amount from their general account in these dysfunctional mortgage securities, that is their problem. To further complicate matters, if they try to sell off the insurance portion, not many buyers out there, as AIG is discovering, the cost to borrow is to high.
     
  9. insurehound
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    Thanks bluemarlin08...would that general account be from a holding company or the actual insurer? Again, I thought investments made from the general account had to be conservative in nature if it is the actual insurer...maybe I'm just naive :)
     
  10. somarco
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    somarco GA Medicare Expert

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    Ned is right. Insured products have statutory reserves, reinsurance, and state guaranty funds behind them. Policyholders are protected, but investors are not.

    It's going to take a while for all this to shake out, but eventually most of the carriers will weather this storm intact.

    As for Genworth, who knows? GE might even be interested in buying them back at a depressed price.
     
    somarco, Nov 15, 2008
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