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Genworth Removed from the S&P500 Index after Market Cap Erosion

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Genworth removed from the S&P 500 Index

Insurer Genworth Financial (GNW) was impacted when it was replaced on the Standard & Poor’s 500 Index (SPY) after its shares lost almost half of its value during the year. It was replaced by Synchrony Financial (SYF), a consumer finance company spun off from General Electric (GE). This change went into effect on November 17, 2015.

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Rationale for the removal

Genworth Financial (GNW) was moved to the S&P MidCap 400 Index after its market cap declined by nearly one-fifth since the financial crisis. Genworth has a market capitalization of $2.5 billion as of November 20, justifying its inclusion in the MidCap Index rather than the large cap index. Standard & Poor’s defines large caps as stocks with a market capitalization greater than $10 billion.

Shares of the company have plunged 40% during 2105 so far after a 45% decline in 2014, which led to erosion in its market capitalization. The company has been generating losses on its long-term policies that cover clients’ expenses for nursing home stays and home health aids. These sustained losses have led to hard selling in the stock.

As part of the effort to boost the company’s stock prices and reduce losses, the company’s chief executive officer, Tom McInerney, has been shrinking the company through asset sales as he seeks to build capital, limit risk, and simplify operations.

Investors seeking exposure to Genworth Financial (GNW) could consider the Financial Select Sector SPDR ETF (XLF). Genworth constitutes 0.13% of the XLF portfolio.

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