Genworth tumbles as it fails to qualify for aid

By Jonathan Stempel

NEW YORK (Reuters) - Genworth Financial Inc (GNW.N: Quote, Profile, Research) shares tumbled on Monday after the money-losing life and mortgage insurer failed to qualify for new capital from the U.S. Treasury, prompting questions about the company's business model.

In afternoon trading, the shares were down 58 cents, or 21.1 percent, at $2.17 on the New York Stock Exchange, after earlier falling as much as 30.5 percent to $1.91.

Genworth, once part of General Electric Co (GE.N: Quote, Profile, Research), is one of several insurers that sought to buy banks or savings and loans last year to win holding company status as lenders and qualify for taxpayer funds under the $700 billion Troubled Asset Relief Program. Insurers have seen capital squeezed as the value of their investments has fallen.

After markets closed on Thursday, Richmond, Virginia-based Genworth abandoned its TARP request, saying the Office of Thrift Supervision had failed to approve its application to become a savings and loan holding company.

Genworth had planned to buy Interbank fsb, a Maple Grove, Minnesota, lender, to be eligible for TARP money.

"I don't believe Genworth has a viable business model in the current market environment," said Alan Rambaldini, an equity analyst at Morningstar Inc in Chicago. "The question is whether Genworth can muddle through the next couple of years until the economy turns around. That's the only thing that can save them."

Neither Genworth nor the OTS would comment on why the company's application was allowed to expire. Last week, the Treasury Department said some insurers would be eligible for TARP money.

Other insurers have won holding company status as lenders, including Hartford Financial Services Group Inc (HIG.N: Quote, Profile, Research), MetLife Inc (MET.N: Quote, Profile, Research) and Prudential Financial Inc (PRU.N: Quote, Profile, Research).