Shares of long-term care and mortgage insurer Genworth Financial (NYSE: GNW) have been trapped in a narrow trading range for the past four years under the proposed acquisition deal at 5 , $ 43 by China Oceanwide (COW). After 17 extensions, Genworth officially announced the termination of the merger agreement on April 6, 2021 and proposed strategic alternative plans to reduce debt and potentially cede some of its lucrative mortgage insurance business in the United States via a Initial Public Offering. The shares were initially sold in this announcement, until the market digested the potential for freeing up shareholder value without a merger price cap chained to the shares. The US housing market has been white-hot with demand far outstripping supply, fueled by rising raw material costs and the pandemic-triggered migration to single-family homes. Mortgage business and subsequently mortgage insurance business are equally strong, fueled by low interest rates. With the COW deal behind them, Genworth shares are expected to rise vigorously in line with its peers. Cautious investors looking for a discount game on the continued growth of the housing market can watch Genworth Financial stocks for opportunistic pullback levels.
Publication of fourth quarter 2020 results
On February 16, 2021, Genworth released fourth quarter 2020 results for the quarter ending December 2020. The company reported earnings per share (EPS) of $ 0.34 excluding non-recurring items, beating analysts’ estimates. consensus $ 1.29, $ 0.01. Revenue increased 11% year-over-year (YoY) to $ 2.26 billion, beating analysts’ estimates of $ 2.06 billion. Adjusted operating income for mortgage insurance in the United States (MI subsidiary) for fiscal 2020 was $ 381 million. The Multi-Year Tariff Action Plan (MYRAP) for Long-Term Care (LTC) with an annual tariff increase of $ 344 million was approved in 2020 with an estimated net present value of around $ 2 billion. As of December 31, 2020, the company holding cash and liquid assets was $ 1.1 billion, of which $ 71 million was restricted cash. The Company repaid its February 2021 debt of $ 338 million.
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Take-out conference call
Genworth Financial CEO Tom McIerney set the tone: âFirst, as we discussed in January, we remain focused on preparing for a possible partial IPO of US MI, subject to conditions. the market as well as the satisfaction of various conditions and approvals. While we are not permitted to discuss the details associated with this transaction due to the application of related gun and securities laws, I can tell you that we have started our preparations for the IPO. over a year ago as part of our contingency planning … our intention to pursue a partial US IM, we received multiple expressions of interest from third parties and various transactions involving our IM activities in States United, including a 100% US MI sale. The board and management will review these proposals in the future as we continue to prepare for an IPO. Our priority in any transaction would be to maximize long-term shareholder value by unlocking the value of US MI and further isolating US MI ratings. The Company will align its Life business structure in the United States, which currently serves 3 million clients, and is committed to improving its long-term care insurance model in the United States. It is not planned to inject more capital in this segment because it can be maintained on the 2.3 billion dollars of consolidated statutory capital.
Price of action inducer
The Company has an unsecured principal payment of $ 660 million at 7.75% due September 2021. The Company is considering a partial IPO of its MI business in the United States which has achieved a compound annual growth rate ( CAGR) of adjusted income by 27% since 2014. The Company has improved since the initial merger agreement four years ago, as it consolidated its balance sheet and paid off debt. As the merger deal is terminated, the move towards an IPO spin-off of its US MI division is driving action as soon as possible with its upcoming debt payment. Cautious investors looking for exposure can watch for opportunistic pullback levels to move into a position.
GNW Opportunistic Withdrawal Levels
Using the rifle charts over monthly and weekly periods provides a broader view of the GNW stock landscape. The monthly guns chart is in a decisive setup as the declining 5-period moving average (MA) stands at $ 3.34 with a falling monthly stochastic as stocks attempt to hold above the 3. $ 54. Fibonacci level (fib). Monthly weak market structure (MSL) buy triggered on the breakout up to $ 3.32. The weekly sell off of the top of the market structure (MSH) was triggered when $ 4.16 was broken. The weekly gun chart is also in a decisive phase as it tries to break above the weekly 5 period MA at $ 3.48 as the weekly stochastic cross rallies. The $ 3.68 is a key fib breaking level. Cautious investors can watch for opportunistic pullback levels at $ 3.48 fib, $ 3.32 monthly MSL trigger, $ 3.17 fib, $ 2.75 fib, $ 2.60 fib, and $ 2.26 fib. The upward trajectories are from the level of $ 4.54 to $ 7.37. Keep an eye out for peer mortgage insurers MTG, NMIH, ESNT, and RDN as the group tends to grow together.
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