Summary
- Merger between Genworth Financial, Inc., and China Oceanwide is still pending approval from the Canadian authorities.
- Genworth managed to improve revenue and earnings Q/Q.
- They are getting approvals on some of the biggest rate hikes for the long-term care insurances in force.
- Stock has upside only in case of merger success; weak financial position puts independent turnaround in question.
Business in brief
Genworth Financial, Inc. (GNW), called further as Genworth, is a $1.465 billion cap insurer which was spun off from General Electric (GE) in 2004. It operates in following segments (excluding corporate and runoff, i.e., non-strategic and not actively sold) in the U.S., Canadian and Australian markets:
- U.S. Mortgage Insurance. They have been providing private mortgage insurance products and services in the United States since 1981 and operate in all 50 states and the District of Columbia. The U.S. private mortgage insurance industry is affected in part by the requirements and practices of the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”). Fannie Mae and Freddie Mac are government-sponsored enterprises (“GSEs”). The “GSEs” purchase and provide guarantees on residential mortgages as part of their governmental mandate to provide liquidity through the secondary mortgage market. According to the Gensworth’s last 10-K, approximately 99% of their primary insured loans were “prime” in credit quality with "FICO" credit scores of at least 620. In this market, not only five other private mortgage insurers are their competitors, but also U.S. and state government agencies (principally the Federal Housing Administration and the U.S. Department of Veterans Affairs), mortgage lenders, the “GSEs”, reinsurers and other participants in the mortgage finance industry.
