Genworth Financial 3Q21 Earnings Analysis

Catalysts

• Partial IPO of Enact generated $535 million for Genworth Financial, which they used to repay part of their debts, that is, $296 million of the AXA Promissory notes

• Still owns 81.6% of Enact, currently valued at $3.07 billion

  • Rising demand for housing

  • Record Low Mortgage rate further increases demand for mortgages and consequently mortgage insurance

  • Asset price inflation - further increase in housing prices

• Can buyback more debt, and possibly buyback shares and pay dividends

Risks

• Rising mortgage rates

• Emerging Housing bubble

• Rising liabilities of Life Insurance Business

• Most of the profits come from the US Mortgage Insurance Business

• Low interest rates

Financial Analysis

Valuation

• My personal Biases

  • 6.1% of my portfolio with 5.7% in competitor, Essent Group

  • First invested for arbitrage opportunity

• Assumptions

  • FCF of $1.8 Billion a year discounted at 15% till judgment day

• We will look at exit multiples of book value for 2026 with current BVPS at $30.1

Conclusion

• No need to complex analysis to see how undervalued the stock is

• Enact could increase the valuation multiples on it

• Intrinsic value of $12 Billion with expected returns of 24% per year

Full Analysis and Research: https://ishfaaqpeerally.teachable.com/courses/662813/lectures/24173712