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The Cost Of Care

24 October 2016 by lberuti

GNW ( Genworth Financial Inc ) offers insurance, wealth management, investment and financial solutions. It products covers mortgage guaranty, life insurance and long-term care insurance. It operates in the US, Canada, Australia, New Zealand, Mexico and some European countries. Recently, the company had been selling assets to ensure it had sufficient liquidity after it was hit by losses on its long term care (LTC) coverage, which pays for home health aides and nursing home stays. The challenges facing the LTC unit were probably behind the decision of GNW to agree to sell itself to China Oceanwide for $2.7Bln, and they are also the reason why GNW is unlikely to receive a higher offer despite the small premium offered ($5.43 per share vs a closing price of $5.21 on Friday) to equity investors. But the Chinese company also promised to provide $600mln to GNW to address debt maturing in 2018, which was fast becoming a major hurdle for GNW in its current form. Credit investors breathed a major sigh of relief, and sent GNW’s 5-year risk premium 78bps tighter to 578bps. Meanwhile, the broader credit market took comfort from the positive tone in equities after a decent start to the reporting season and from the resolution of the political impasse in Spain which will enable Mr Rajoy to eventually serve a second term. iTraxx Main and CDXIG were 1bp tighter at 70bps and 74bps respectively, while iTraxx Crossover and CDXHY were 4bps tighter at 316bps and 397bps respectively.