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Barron's released yet another self-fulfilling prophecy on Saturday. This time, the beneficiary was Genworth Financial (NYSE: GNW).

Barron's noted the roller-coaster ride the insurance company's stock has experienced in recent years. It blames Genworth's lack of stability on the “boom and bust in mortgage insurance, pricing mistakes in the tough long-term health-care business, and a failed public offering for its Australian holdings.” Barron's also notes sales by David Einhorn and purchases by Seth Klarman, both hedge fund managers.

However, Barron's contended that the situation is improving at the Richmond, Virginia-based company. The publication cited Genworth's recent reorganization of its US and European mortgage-insurance operations into a single unit and the addition of CEO Thomas McInerney as primary drivers in this regard.

Barron's noted that McInerney is expected to “push the mortgage unit for growth and seek regulatory approval to raise prices in Genworth's long-term-care products” as well as sell off businesses to reduce debt.

Also, Barron's believed that the resurgence in the US housing market places Genworth in good position.

Yet, Barron's doesn't paint an entirely rosy picture of the firm. The publication notes that Genworth, which has a “commanding 40 percent market share” in long-term healthcare insurance, must give greater attention to this segment.

Barron's noted that it has been a “challenging market as medical-care costs rise and people live longer” and that “ultralow interest rates” have made it difficult for insurers to fund their products profitably.

Ultimately, Barron's concluded the stock is undervalued. The publication noted that David Marcus, co-founder of Evermore Global Advisors, pegs the stock at $18 per share - over 70 percent higher than its current value.

Genworth Suspends Individual Long-Term Care Insurance in California

Interestingly, days before Barron's mentioned the company's long-term healthcare insurance segment needs more attention, Genworth announced the suspension its individual long-term care insurance in California.

On March 6, Genworth announced its California Choice and Choice Partnership products will be suspended effective March 21, citing that the move is appropriate “in light of the return profiles” on both products. These products accounted for approximately 12 percent of the company's 2012 long-term care insurance sales.

Genworth hoped to replace the two suspended products with its new Privileged Choice® Flex product. Privileged Choice® Select is pending approval in the Golden State. The company also plans to launch this product in 31 additional states on April 15.

Market Reaction

Barron's has a history of self-fulfilling prophecies. When it says a stock will decline, it usually declines on the next trading day. Conversely, when it says a stock will rise, it usually does so on the next day. This is in line with the publication's large, wealthy reader base, 96 percent of whom have acted on information from it, as notes Barron's.

Now, after a steady rise to the high $9 mark, Genworth is closing in on $10.50. The stock is at its highest point in the past 20 months.

Genworth is up around 5.5 percent on Monday.

Posted-In: David Einhorn Seth Klarman Thomas McInerneyNews Barron's Media Best of Benzinga

 

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