Genworth MI (TSX: MIC) recently disclosed that they repurchased 1,454,196 shares in mid-May for roughly $34.38 per share, a repurchase representing $50 million.
The buyback algorithm they employed was less than subtle, mainly the repurchase of 137,210 shares per day for 10 days and 82,096 shares for the last day. As 57% of the shares outstanding are owned by Genworth (NYSE: GNW), they supplied 57% of the liquidity for these transactions. 620,818 shares were taken out of the public float.
This repurchase was executed at slightly less than book value, which means it will be mildly beneficial to book value per share – my estimates are that based off of end of Q1-2015, the transaction would add 3 cents of book value per diluted share.
Of course, the transaction will be hugely accretive to earnings – the buyback represents 1.56% of shares outstanding, which means this will add a couple pennies a share to the quarterly EPS figures. In addition, the buyback also means that the company will not have to give out an extra $2.3 million a year in dividends.
At the end of Q1, the company had $200 million in surplus of its own internal buffer, which is 220% of the minimum capital test required to operate. The company reported 233%.
As the company typically book about $90 million in income a quarter, the buyback likely represents a “cash neutral” policy of balancing dividends (est. $36 million in this upcoming quarter) and share buybacks, at least with its current market value. If their market value remains suppressed below book value and they keep executing buybacks on a quarterly basis, I foresee higher equity prices in the future.
Long-time readers here will remember that I disagreed strongly with management’s decision to repurchase shares at $40/share back in 2014. May 2015’s repurchase I completely agree with – a shame they could not execute it in March, but still, they (and shareholders) will receive good value for this $50 million repurchase.
I continue holding Genworth MI shares since mid-2012.