Genworth Suspends Dividend After Third-Quarter Loss
November 16, 2008
After Genworth Financial announced a $258 million loss for the third quarter, analysts forecast a possible consolidation of the company. Analysts expect that Genworth would likely spin off its foreign units if it decides to restructure
Moody’s Investors Service downgraded the Richmond, Va.-based company’s commercial debt rating on November 10th and lowered the rating on its insurance units to ‘A’ from ‘AA’ with a negative outlook. The company’s troubles stem largely from the housing market downturn, and Genworth said that it may sell its mortgage insurance unit.
The credit-rating downgrade renders Genworth ineligible for a government program to purchase short-term debt, The Wall Street Journal reported. The company is trying to repay $1.1 billion in debt that will be due in the middle of 2009.
Genworth has suspended its dividend “for the foreseeable future,” freeing about $175 million per year. It has also deployed $500 million in cash from its holding company to its U.S. life insurance companies, leaving the holding company with about $435 million in cash.
In a statement on the firm’s website, Genworth CEO Michael Fraizer said the company “will uphold our obligations to our policyholders, supported by regulations that ensure the assets of our company further protect these policies.”
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