Genworth Financial, Inc. (GNW)

The BOD needs to ask themselves is it in the "longterm interests of our stockholders" to grant Tom stock; especially in light of the buyback plan

Long-Term Incentive Award Design
Our long-term incentive awards to executive officers have included, over time, different combinations of
SARs, PSUs, RSUs and PCAs. Taken together, we believe our annual long-term incentive grants provide our
named executive officers with effective retention value and appropriate incentives to achieve long-term
company performance objectives, while aligning our executive officer compensation program with the longterm interests of our stockholders.

Tom's holding
11/14/2021 - 3115504
08/11/2022 - 3839625
Net sales 500,000

It seems most of the value for GNW is generally in owning 81.6% of ACT…and getting dividends from ACT.

So, I am a bit surprised that, after reporting EPS of $1.25 while analysts were expecting $0.85, that the 3Q and 4Q analyst estimates have really not risen much. Perhaps the analysts are alerting their associated investment arms and paid subscribers before we see them publicly raise estimate.

But, I do see a few raises…but very moderate. FY2022 has risen…but primarily due to haven beaten 2Q by so much as 3Q and 4Q estimates are still $0.85 & $0.83 respectively. And, while the regular dividend is modest, ACT is on record about a year end special dividend.

Now, it seems ACT is trading primarily with book value or P/B. So, the share price will move with changes in the book value which will be earnings less dividends (which the shareholders get so total return of ACT will be earnings).

So, I eventually expect ACT EPS estimates to eventually get over $4/share which means total return (share price + dividends) for ACT shareholders will be $4 share…again as it seems to trade primarily at a P/B of around 1.0.

This $4 share gain is around 15%/year gain which seems reasonable in these times and markets. The returns for GNW should do just a slight bit better as it needs to ‘catch up’ to ACT’s valuation and then reflect the upcoming credit upgrades.

But, longer term, it seems better to continue to hold…and perhaps transfer GNW holdings into ACT when valuations improve, as GNW has significant additional overhead with its Mgmt and BoD.

But, ACT seems to be performing well…and trading at book value means little downside….just so long as home prices hold as then there is little risk from defaults.

GNW does have some tax credits in the short term…and perhaps a Santander lawsuit gain…but otherwise, their gains will come from ACT less additional overhead.

I’ll be watching for more ACT EPS increases.

The CEO addressed a question on "intrinsic value" during the conference call. He also indicated that buybacks were appropriate due to the belief that GNW is trading below "intrinsic value". So, that would suggest we will continue to see buybacks up to "intrinsic value". So, what is the "intrinsic value" now and where will it be in the near future? CEO response to the question was:

"Yes. I think what we've been saying, Geoff, for many years is when we look at intrinsic value, we look at the value of Enact, and we assume the intrinsic value over the housing cycle. And so generally, our view is Enact in the MI has traded at 1x book or better. So that's how we value Enact.

And then for now, we're putting 0 value in for the Life Companies. I do think we could find down the road for legacy business, there's life and annuity business clearly has some capital associated with that, that has some value. And then obviously, we're not assuming any value yet for our new business, but we think that ultimately it could have value. And so it's really the intrinsic value of Enact as we see it, as I described, zero for the Life Companies and then the net cash, net debt, and net corporate position."

So, is that?... $4,080.5k (ACT book value) x 81.6% = $3,329.7 + $1,141 (corp cash & inv) - $1,477 (corp liabilities) = $2,993.7 divided by 507.8 (total shares outstanding) = $5.90 per share

That would go up as ACT releases excess reserves, ACT generates cash from operations, GNW generates cash through tax assets, and GNW creates value in life/annuity and new business.

What is your calculation of "intrinsic value" for GNW today? in 2023?

The volume was pretty strong today and I am pretty sure it was not due to the buybacks. To retire the $152 million bond in September, Genworth will need to conserve its cash for the next couple months. The only explanation for the strong volume in a down day is that some institutions have also noticed how undervalued GNW is and started to accumulate. As I have explained in my previous posts, the minimum value of GNW is $5.2/share. We are nowhere near that price, so we have a lot of room to move up from here. Our first test would be the next Friday when Aug 19th options expire. If the trend has changed, we should see at least $4 calls will be assigned. If institutions start serious accumulation, even August $4.5 calls will be assigned. However, I would be happy if only $4 calls get assigned next Friday.

@Bjohn: When someone said that you've been pumping GNW for years, I thought you said you weren't around for too long? Now, you're saying that you've been playing GNW since 05?

I'm sure I already know the answer to this...If you, in deed, have been playing GNW since 05, you took a beating right out of the gate, didn't you?

My original comment still stands...my bag dwarfs yours!!! I been successful in the game for over 25 years before I bought a TON of GNW well below $2.00.

Then again, I'm not as transparent as you because NONE of the chest pounding can be verified, so, you go ahead and think you're a player;)