Genworth Financial shares plunge on downgrade

The latest slide in Genworth's stock also came after the former General Electric Co. unit disclosed in a regulatory filing Monday that it is no longer eligible to participate in a federal program to sell commercial paper, a source of short-term funding for companies.

The stock, which traded above $15 per share as recently as early September, plunged $1.48, or about 54 percent, to close at $1.24 Tuesday. The stock had remained above $20 after it began trading in June 2004 following the company's spinoff from GE, and it peaked above $30 through most of the 2006-2007 period. But credit market troubles and a declining economy have sent the stock reeling in recent months.

On Monday, Moody's cut Genworth's senior debt rating to "Baa1" from "A2." The financial strength ratings of its primary life-insurance subsidiaries were slashed to "A1" from "Aa3." All the new ratings are still considered investment grade.

The outlook on the ratings is negative, which is considered a long-term view.

In a Securities and Exchange Commission filing, Genworth said it participated last month in the Federal Reserve's Commercial Paper Funding Facility, established to help companies secure funding in a market hurt by a dearth of buyers amid the financial downturn.

"However, as a result of the downgrade of our holding company, we are no longer eligible to sell commercial paper to the facility, although the outstanding commercial paper that is currently held by the CPFF will continue to be held until maturity," Genworth said.

Last week, the Richmond, Va.-based company reported a third-quarter loss of $258 million, or 60 cents per share, including $478 million in net investment losses. Genworth suspended its dividend and share repurchase program and said it is considering asset sales, debt refinancing or a possible capital raise to bolster its reserves.

Also on Tuesday, Genworth named Ronald Joelson as chief investment officer, in charge of managing the mortgage and life insurer's nearly $70 billion investment portfolio. Joelson most recently worked as managing director of insurance strategic markets coverage at JP Morgan Asset Management.

In aftermarket trading, Genworth shares rose 5 cents, or 4 percent, to $1.29.