Genworth Comes Through!

I have owned my GNW stock for a long time. I actually first bought them based on a Smart Money article in January 2008. That was not a "smart" buy as they were hit hard. Hard to believe, but back then they actually paid a dividend. At one point, they had dropped 80%.  I sold them at a large loss in 2009. But always kept them on my watch list.

I re-bought them in December 2011. I accumulated shares all that spring and was then devastated when their Australian IPO was postponed.  That took them from about $9 a share to the low $4s by August of 2012.  Sadly, I did not buy a ton more then, even though I commented publicly how cheap they were.  I did buy a bunch though, for my kids college fund on October 5th last year for $5.35.

So my average share cost is $7.48. (My kids have several tranches and are in at $6.52). GNW closed last night at $10.03 (that will make the math easy) and they were up 58 cents after hours based on earnings report (Genworth Financial Announces First Quarter 2013 Results).  The key item (to me) was that they made $21m in their US Mortgage Insurance division.  This division has been a loss leader for a number of quarters, so to get back in the green has a levered effect.

The other key metric is the growth in book value. They are now $32.90 versus $29.89 a year ago. I always find it strange that life insurers show their total book value and then BV excluding accumulated other comprehensive income (lowers BV to $23.11).  These are gains that have not been realized (sold).  So if you had 10 shares of a stock at $100 and it went to $150, $500 would show up in accumulated other comprehensive income.  As most of those securities could be sold today (assuming there is a liquid market), I feel that is a real asset and the BV is the $32.90 figure.  Now they do have about $1.2b of goodwill and intangible assets, I would not count those (about $2.30 a share).  But all-in-all, they are still a fraction of tangible BV.

When you dig through the quarter, it was not all pretty.  They did have a $46m restatement on how they have been booking premiums.  They still have a lower capital ratio than required by states for MI, but have gotten a waiver.  So this is not a super healthy company, still a bit ill.  But in my mind, the prognosis is a full recovery.