Genworth MI’s slow ascent

Genworth MI (TSX: MIC) reports their third quarter earnings on Thursday.

The stock has been on a mild uptrend as of late:

I suspect in absence of anything material in the Canadian real estate market, that the upcoming quarter will be financially positive and the market has already anticipated this.

Genworth MI is also likely to announce an increase in their quarterly dividend. They also executed on a modest share buyback in the previous month.

Probably the biggest amount of uncertainty would come from the parent company, Genworth Financial (NYSE: GNW) where it is not apparent whether their merger will receive sufficient authorization from the federal government authorities to proceed or not. Because they have an upcoming US$600 million debt maturity in May 2018, things are getting a bit tight financially – while their holding company does have around $800 million to work with, an analogy after $600 million of that goes to pay the debt would be like running the automobile with no bars of gasoline left on the tank gauge.

Their 10-Q states, “In the absence of the China Oceanwide transaction or in the event we are unable to refinance our debt maturities, we expect we would be required to pursue asset sales, including potential sales of our mortgage insurance businesses in Canada and Australia and/or a partial sale of our U.S. mortgage insurance business to service our holding company debt.”

Will Genworth MI be sold? It would be an easy US$1.6 billion for them or more depending on how much of a premium they receive…

4 thoughts on “Genworth MI’s slow ascent”

  1. Any interest in speculating on potential buyers? I would think Berkshire and Fairfax would be interested. I would say E-L Financial too but it’s probably a bit too big and concentrated for them.

  2. I guess the market wasn’t anticipating the quarterly report after all! First time MIC has traded above book in a long time.

  3. Hi Tyler, not yet. I don’t view the level of risk rising in the next few months and I’m facing a “what would I do with the cash?” issue. The stock is more richly valued today relative to its value in the past. I’d think this would be a great time for Genworth Financial to dump the whole unit (question here is whether the 43% minority gets to follow on or not).

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