Genworth: A Fearful Market Demands Capital Strength
February 10 2009 - 4:15PM
Dow Jones News
As Treasury Secretary Timothy Geithner outlined his vision for
the next phase of the Troubled Asset Recovery Program Tuesday, now
renamed the Financial Stability Plan, he didn't specifically
address whether insurance companies would be allowed to
participate.
Among other changes, Geithner said participants in the program
will need to show how Treasury Department assistance will preserve
or generate new lending.
Insurers can do that, said Michael D. Frazier, chief executive
officer of Genworth Financial Group (GNW), in an interview
Tuesday.
Last year, Genworth, applied for a thrift charter to qualify for
the capital-purchase program. The application is pending. No
insurers have yet received Treasury funds, and it is unclear if
they will.
Frazier said that his company has argued to legislators that
allowing insurers to participate in Treasury capital investments
will benefit Main Street, through expanding companies' retirement
and protection business and by allowing their mortgage-insurance
business to guarantee more loans.
He said Genworth can meet its capital needs without Treasury
funds, "but in this type of new world we live in, we look at
options for additional capital flexibility. It is an uncertain
world."
Getting the capital would reassure investors, Frazier said.
"In a fear-based market, the market says show me," he said.
"People need to see big capital buffers."
That could be said for most of the big life insurers, which
reported weak earnings and rising investment losses for the fourth
quarter, putting a drag on capital levels for all.
Other insurers that have said they are in the running for
Treasury capital are Principal Financial Group (PFG), Lincoln
National Corp. (LNC) and Hartford Financial Corp. (HIG).
All the insurers reported fourth-quarter earnings that were
dragged down by continuing investment losses and weaker results in
their variable annuity businesses.
Financial-services companies traded down Tuesday after
Geithner's remarks failed to rally investors. Life insurers that
are in the running for Treasury capital were among the biggest
losers.
Principal traded down 32% near the close of trading Tuesday.
Hartford was down 14% and Lincoln National was down 18%.
Genworth traded down 15%, recently, losing an earlier gain after
trading higher earlier. Genworth reported a fourth-quarter loss,
but reported risk-based capital ratios above expectations, which
caused the insurer's shares to rise in early trading, but the gains
disappeared amid a general downturn in insurance share prices
Tuesday.
-By Lavonne Kuykendall, Dow Jones Newswires; 312-750 4141;
lavonne.kuykendall@dowjones.com
(Shirleen Dorman and Donna Kardos contributerd to this
reort.)