Genworth Financial Inc. plunged the most since 2012 after higher-than-expected claims costs at its long-term care insurance unit prompted a company review of whether its reserves are adequate.
The insurer dropped 8 percent to $14.96 at 9:31 a.m. in New York trading, the biggest slump in the Standard & Poor’s 500 Index. Second-quarter operating profit was 31 cents a share, trailing the 36-cent average estimate of 10 analysts surveyed by Bloomberg, the Richmond, Virginia-based insurer said in a statement late yesterday.
Chief Executive Officer Tom McInerney is taking over supervision of the U.S life business, including long-term care, replacing James Boyle, who was named to head the unit in January. Profit from long-term care fell to $6 million in the second quarter from $26 million in last year’s second quarter. Larger insurers including MetLife Inc. have retreated from the coverage after being burned by low interest rates and larger-than-planned expenses for home health aides or nursing home stays.
“All may not be as well within GNW’s long-term care business as we had believed,” Sean Dargan, an analyst at Macquarie Group Ltd., said in a note to client, using the company’s ticker symbol.
Dargan cut the stock to neutral from outperform, noting that the reserve review is the company’s second in three years and that Boyle left six months after being hired. He cut his estimate for 2014 earnings per share to $1.26 from $1.35.
Net income climbed 25 percent to $176 million on gains from Genworth’s mortgage insurance unit. The insurer had advanced 4.7 percent this from Dec. 31 through yesterday in New York trading after doubling in 2013, McInerney’s first year as CEO.
Boyle was named chairman of HealthFleet Inc., a provider of technology to the health-care industry. Before joining Genworth, he was president of John Hancock Financial Services Inc.