Genworth Financial Inc., a provider of life insurance and mortgage guaranties, posted the largest gain in the Standard & Poor’s 500 Index on speculation the company will benefit from the rebound of the housing market.
Genworth rose 6.7% to $10.50 at 4 p.m. in New York trading. The Richmond, Va.-based company has advanced 40% this year. Scotia Capital upgraded the company two levels to sector outperform, the second-highest of the bank’s four ratings. Barron’s said March 9 the insurer will reward investors.
New-home sales rose to an annual pace of 437,000 in January, the highest rate since July 2008, according to Commerce Department data last month. U.S. home prices probably will rise 8% this year, up from a previous estimate of a 4.7% increase, according to Bank of America Corp. Mortgage insurers cover lenders’ losses when homeowners default and foreclosures fail to recoup costs.
“The resurgent U.S. mortgage market offers Genworth its best chance to grow,” Barron’s said. “Investors think the shares, which still sell for less than half of book value, could be worth as much as $18 or more.”
Mortgage insurers have surged this year on bets the companies can increase sales as the government works to limit its role in the housing market. MGIC Investment Corp., based in Milwaukee, climbed 4.5%, extending its gain since Dec. 31 to 93%. Radian Group Inc., which also sells mortgage insurance, jumped 5.9% and is up 65% this year.
Joanne Smith, an analyst at Scotia Capital, cited Genworth’s “strong leverage to an improving housing market.” She raised her 12-month price target to $12 a share from $9.50, in a note to investors.