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Genworth Financial, Inc. Message Board

  • joeschmo_4 joeschmo_4 Jul 21, 2011 10:41 AM Flag

    Think This Through

    GNW shares are plummeting down 18% from where they traded yesterday. Yes, there are problems. Housing and RE continue to be the pits and The Street is behaving like it will never end. Bond rates are near zero and their investment portfolio is likely suffering.

    But you're looking at one of the top LTC, MI, Life Insurance companies in the country with a BV over 3x the current share price that is still profitable.

    Is it a time for wild-eye rampant selling?

    Think it through.

    Joe

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    • i think the smartest game plan is the one ORI seems to be following, they are refusing to put new capital into their mi company (so far at least) and instead are making it maneuver its way through the regulatory issues on its own, while at the same time sacrificing market share by taking a hard line on paying claims, that helps capital in two ways, 1) they don't have to pay as many claims, and 2) new business consumes capital when it is first written, worst case they have to stop writing new business altogether, but probably won't have to contribute capital to pay claims, gnw, on the other hand, is also in no danger of running out of cash in the short run to pay claims, the capital contribution is to keep statutory ratios down in order to continue to write new business, also, they are hardly denying any claims, their total "loss mitigation" savings, which include denying claims, will only be 500m this year, so figure at most half of that, or 250m, will be from denials, compare that to PMI, who has roughly the same size book, they denied or rescinded nearly 250m in Q1 alone, so everything points to gnw positioning themselves to grab market share, but why?, no one knows if usmi has any future, and if so, how big an industry it will be, meanwhile you have three competitors who have no choice but to continue to fight for new business, witness RDN's recent move to expand guidelines and cut prices, so they are positioning themselves to fight for a bigger slice of a very small pie against companies with their backs to the wall, this is a bad strategic mistake imho, but one that was well telegraphed during their last conference call, i just sense this mgmt team is arrogant, that the challenges they got from Eisman and the like about the usmi business just made them even more determined to stick with it, that is a lethal trait for any business, as we are going to see in the coming quarters.

    • I understand the info has always been in the quarterly reports. What I'm saying is that they have never had a separate presentation that they have put out on the MI div.

      They may be stupid but I find it hard to believe they will come out in defense of it, but in all reality, what can they do with it. Can't think of a soul that would want it and a spinoff is probably not feasible either! As far as closing it down goes, they are still on the hook for what is on the books so I don't see any way for a graceful exit until it at least returns to profitability which could easily still be as far out as 2014-15 unless something drastically happens to alter this economy in the near term future. JMHO. GLTA.

    • they are all available in the link below, pretty much the exact same info they released last night for usmi, see page 42 from last quarter for the start of usmi, the only thing they added this quarter was the detail on the reserves by dq bucket, i think they did that to make investors comfortable on their reserves for current dqs, but if current dqs were all there was to worry about, no one would be worried, if you are long you better hope they don't come out swinging on the call in defense of usmi, like they did last call, that is not going to play well.

      http://phx.corporate-ir.net/phoenix.zhtml?c=175970&p=irol-quarterlyreports

    • Strange that I've been in the stock for over 3 yrs now and have never seen a presentation on MI released before. They do release it on the 8K or 10K when results come out but I've just never seen a separate presentation released on it ahead of actual results. You may be right but I can't find a position from which they will be able to defend this. Something is going to give one way or the other, soon IMO.

    • they release that level of info on usmi every quarter, it is in the financial supplement, my best guess on the pre-announce is they want the market to digest the info so they can go on the call and defend usmi even furhter, there has been a lot of angst over the reserves at the mis, so they boosted their reserves a lot, and they think that by doing that they will get investors off their back, what they fail to understand is it isn't just reserves on current dqs that is the issue, it is future losses from loans that aren't yet dq, and lack of new business in the face of qrm, gse reform, etc, investors could (and have) looked past the reserving issue if losses were behind them, and there was a ton of new business available, but as their numbers show, new dqs still outpace cures, and niw remains anemic, so while they may have covered current dqs, they are going to keep incurring losses, watch for the stock to tank further when they do that call and come out in defense of usmi, not a lot of investors are going to like that.

    • I could understand the pre announcement Matt. Might as well get it out of the way. What I found really intriguing was the MI presentation. They have never before released that much info about the MI division. Seems like they wanted everyone to get a good look at it, for what reason I don't know.

    • Broke - the pre-announcement was certainly without precedent. I really can't figure out why they did it. Maybe just to allow for some time for tempers to drop prior to the call :).

      Re the Fitch warning, I would hope that they would want to preserve their life ratings. After all, life is the biggest part of the company. Fraizer needs to seriously reconsider the current US MI plan. If not, i hope that Lampert and/or the other hedgies try to effect a management change.

    • They could very well be setting it up to be spun off Matt. You've been around here probably as long or longer than me and I have NEVER seen them post figures on the MI division like they did last night! They have historically been very tight lipped on company operations figures until normal quarterly earnings announcements and have never divulged the indepth disclosure of the MI division that they did last night! I'm never one to be a pumper about a buyout or a spinoff but they could have just as easily made the earnings pre announcement (which I've also never seen them do) without releasing the indepth info about MI. JMHO. GLTA.

      PS. Now on get an email that Fitch has placed GNW on ratings watch negative. Something is going to give soon IMO.

    • you are wrong if you believe that their reserving will put any pressure on their competitors, mi reserving is all over the map, and has been for years, look at rdn, they increased their market share during the crisis despite having the lowest reserve factors in the industry, bottom line is the banks who chose the mi don't care about financial strength of the mi because they are not on the hook for counterparty risk (as the goldman analyst has pointed out on the calls), and the gses need to keep them all writing so they can generate enough profit from new business to pay old claims (and help rescind coverage to generate putbacks), gnw's usmi is going to suck any and all profits out of this company for years, and for what, what future does usmi even have, there is no ten years of premiums in the future, gnw might not fail, but the usmi is going to suck the life out of the company, even their current move was idiotic, so they downstream enough capital to keep the company just above regulatory limits, what is the point of that, bottom line is mgmt is making a huge strategic mistake in supporting this business, and the stock price is going to pay for it, as another poster pointed out, the usmi losses are going to cost all the writing companies eventually, who wants to buy life insurance from a faltering company.

    • Great post, thank you Fab.

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