Key Highlights

● KBW cut Genworth to Market Perform from Outperform.

● The firm set a price target of $10.50.

● KBW also cut Voya Financial to Market Perform with a $108 target.

● KBW cited a weaker third-quarter markets backdrop.

Genworth Financial (NYSE:GNW) was in focus on Friday, October 9, after Keefe, Bruyette and Woods, the financial-sector specialist known as KBW, downgraded the insurer to Market Perform from Outperform, according to market data. KBW set a price target of $10.50 and cited a weaker third-quarter markets backdrop. A verified figure for the stock's move on the day was not available.

Market Perform is a neutral rating: it signals that the analyst expects the stock to perform roughly in line with the broader market rather than ahead of it. Moving from Outperform to Market Perform therefore removes a positive recommendation without turning bearish.

A wider call on insurers

Genworth was not the only life and retirement insurer that KBW turned cautious on. The firm also downgraded Voya Financial (NYSE:VOYA) to Market Perform from Outperform, with a $108 price target, and trimmed its third-quarter and 2027 earnings estimates for that company. KBW cited the market backdrop in both cases.

For insurers, the market backdrop matters because returns on investment portfolios, the value of assets they manage and the performance of products linked to markets all feed into earnings. Asset manager Invesco, for example, reported September assets under management of $2,537.8 billion, down slightly from August, with $1.1 billion of long-term outflows.

What Genworth does

Genworth is best known for long-term care insurance, which helps cover the cost of nursing homes, assisted living and in-home care. It also holds a majority stake in Enact, a US private mortgage insurer, which has been a major source of cash for the parent company. In recent years Genworth has focused on stabilising its long-term care business, returning capital to shareholders through buybacks and building a new senior care services business.

Rates cut both ways

Interest rates are a double-edged factor for insurers. Higher yields can boost income on bond portfolios, which make up the bulk of insurers' investments. But rising yields also lower the market value of existing bonds and can affect housing activity, which matters for mortgage insurers such as Enact.

The 10-year Treasury yield held near a 24-year high on Friday. The Fed raised rates in September for the first time since 2023, and minutes from that meeting said another increase would likely be appropriate by year end. Governor Christopher Waller said on Thursday that he expects further hikes to bring inflation back to the Fed's goal.

Investors poured a record $19.78 billion into US bond funds during the week, according to market data, while US equity funds saw outflows of $5.11 billion.

The broader market

Financials had a good day overall, with the sector among the S&P 500's stronger performers ahead of bank earnings. The S&P 500 rose 46.18 points to 7,811.54, about 7 points below its record close. The Dow climbed 423.31 points to 51,654.95, and the Nasdaq Composite added 172.83 points to 27,366.17. On the NYSE, advancers outnumbered decliners by about 1.65 to 1.

Insurer Results Will Test Whether KBW's Caution Is Borne Out

Third-quarter results from Genworth and other insurers will show whether KBW's caution on the quarter is borne out. Before that, big banks report from Tuesday, October 13, through Friday, October 16, with Travelers (NYSE:TRV) reporting on October 16, offering an early look at the insurance sector. September consumer prices arrive on Wednesday, October 14, and the Fed meets October 27 and 28. On Monday, October 12, stocks are open while bond trading pauses for Columbus Day.