NEW YORK (TheStreet) -- The potential breakup of insurance giant Genworth Financial (GNW) is leaving investors unsure of how to value its businesses -- particular long-term care insurance, which is one of its biggest.
Richmond, Va.-based Genworth attributes much of its 64% decline over the past 12 months to its long-term care unit, and investors are especially uneasy with it given the low-interest-rate environment and high frequency of claims, according to Steven Schwartz, an analyst with Raymond James.
"They're the largest player in long-term care, there is no long-term care comparison," he said. "And nobody's even sure if there's even value in it, or if it's no value, negative value, or even so negative it will eat through any capital that supports the business."
Shares closed down 2.6% Tuesday at $8.18, Genworth said it would reduce its stake in Genworth Australia by 14% in a share offering through subsidiary Brookfield Life Assurance Company Limited, according to a company statement. The proceeds could be used either to help meet bolster the U.S. private mortgage insurance business or help fund $300 million in debt due in 2016, according to a report Monday from Jefferies analyst Colin Devine.
Genworth said in April that first-quarter net income fell 7% from the previous year, to $204 million, and attributed much of the decline to long-term care, where sales fell by 50%.
"Our lower sales year-over-year in part reflected the impact of the overall long-term care insurance industry sales trends, which were down approximately 22% in 2014," the company said in a statement. Other causes for the drop in revenue were higher pricing on a new product that gives customers more flexibility on long-term care options and distributors suspending Genworth-product sales because of rating-firm downgrades.