Dec. 2 (Bloomberg) — Genworth Financial Inc. fell in New York trading as JPMorgan Chase & Co. cut its price target, citing a reserve shortfall at the insurer.
The stock declined 2.2 percent to $8.99 at 9:58 a.m. in New York, the biggest drop in the 21-company Standard & Poor's 500 Insurance Index.
Jimmy Bhullar, an analyst at JPMorgan, lowered his price target for Genworth shares to $11 from $18 today, citing a "cautious" outlook for the insurer's main businesses such as mortgage guaranties and life coverage. Bhullar said Genworth may record costs of $200 million to $300 million to bolster reserves at its long-term care businesses in the current quarter, and that the company's ultimate shortfall may be more than $2 billion.
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"We feel that Genworth's reserve hole is significantly larger than the upcoming charge," Bhullar wrote. "Given the company's limited disclosure on its in-force block, as well as significant management discretion in setting assumptions for reserve analysis, we consider projecting the charge with precision an exercise in futility."
Genworth has tumbled about 42 percent this year as the insurer was forced to set aside more funds to cover claims on long-term care policies, which help pay for nursing home stays and home health aides. The insurer posted a third-quarter loss of $844 million last month amid higher-than-expected claims costs for the business.
Genworth is conducting another review of the business and has said it plans to announce preliminary results this month.
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