Genworth MI (TSX: MIC) filed with SEDI last week that they executed a share buyback in the month of August, purchasing approximately 913,000 shares at roughly CAD$36/share. This is nearly 1% of their shares outstanding. In light of the fact that they were making rumblings in filings a year ago with respect to the adverse consequences of increasing capital requirements with respect to the OSFI policy changes, this is most definitely a signal that they are now in an excess capital situation. The share buyback is at a discount of 13% to book value, so management cannot be accused of wasting value with this purchase (a rare characteristic that I very rarely seem managements of other companies perform when they conduct share buybacks).
Finally, Genworth MI traditionally increases its quarterly dividend rate in the third quarter announcement or announces a special dividend. The current regular quarterly dividend is likely to increase from 44 cents a share to around 47 or 48 cents. Management has a good track record of prioritizing buybacks when the share price is depressed to book or giving out special dividends when the share price is relatively high – I do not view a special dividend as being likely. Although my Genworth MI position is smaller than it used to be in the portfolio, it is a significant equity holding of mine and I see no reason to sell at this juncture, in absence of other opportunities.