Genworth Financial - Successful Enact IPO


Recently Genworth Financial had a successful partial IPO of its Mortgage Insurance business, Enact. The company used part of the cash to repay some of its debt and S&P and Moody's upgraded the credit rating of Genworth Financial. Genworth Financial stocks $GNW has a PE ratio of 1.7 and PB ratio of 0.12, trading at about 10% of its Graham number. The company is valued less than its subsidiary, Enact. This is a prime example of a deep-value stock and a market inefficiency.


Enact is a Private Mortgage Insurance business and there are many tailwinds on this industry right now with record-low mortgage rates and the housing boom. Enact is currently being valued less compared to competitors with PB ratio of 0.9 vs 1.2 for Essent Group $ESNT . If Enact is undervalued and eventually, the price will go up, it means this will be good for the parent company too.


$535 million were raised during the IPO of Enact and all this cash goes on the balance sheet of Genworth Financial, which still owns 81.6% of the company. They were able to use $296 million to repay part of their debt.


Genworth Financial has many options in front of it such as paying dividends or buying back shares.

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