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Long-term care and mortgage insurer Genworth Financial (NYSE: GNW) the stock trended strongly downward along with the rest of its peers in the mortgage insurance sector. The U.S. mortgage insurance business division named Enact was initially slated for an IPO in the $ 22 to $ 24 price range, but was suspended due to market conditions. That pushed stocks down in May, but quickly recovered over $ 4. It has been falling steadily for several weeks despite benchmarks reaching new highs. This reflects the lack of breadth of the US stock markets which rate the market’s performance on the S&P 500 and Nasdaq 100 indexes, which is very misleading. That’s for another article. Fundamentals remain strong for Genworth and any update on the timing of Enact’s IPO should immediately push up stock prices. The housing market remains strong and consumers still have pent-up or even stronger demand as material costs normalize. The US Federal Reserve still does not anticipate an interest rate hike until 2023, but inflation is also another reality that could cause the Fed to react sooner than expected. Management may have been premature in delaying the IPO, but the follow-up is still a reality. Cautious investors can watch for opportunistic pullbacks to gain exposure before the split.
Publication of first quarter 2021 results
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On April 29, 2021, Genworth released first quarter 2021 results for the quarter ending March 2021. The company reported earnings per share (EPS) of $ 0.33 excluding non-recurring items, beating analysts’ estimates. consensus of $ 0.23, $ 0.10. Revenue fell (-0.02%) year-over-year (year-on-year) to $ 1.99 billion, beating analysts’ estimates at $ 1.96 billion. The Company completed the sale of its Genworth Mortgage Insurance Australia Limited for net proceeds of $ 123 million. USMI had adjusted operating income of $ 126, up 33%. New defaults continue to decline, down 16%. Genworth CEO Tom McInerney said, “We have remained nimble and have taken decisive action to ensure that Genworth is well positioned to create value for our stakeholders going forward. Given the current cash flow of our holding company, the steps we have already taken with our strategic plan, our capital raising efforts and our expected cash flow profile, I am confident in Genworth’s ability to deliver on its debts over the next few years. We have the right strategy in place and the right team to lead our execution of this strategy, as well as the guidance of our new independent directors Jill R. Goodman, Howard D. Mills, III and Ramsey D. Smith, who we are delighted to have. ” welcome to our board of directors.
Take-out conference call
CEO McIerney set the tone for the long-term care (LTC) business: “We take a three-pronged approach to maximize the value of our LTC business and to monetize our deep expertise in this area. First and foremost, we continue to mitigate our drawbacks through our multi-year LTC pricing action plan and reduce benefit options. Both of these will continue to reduce our risk. We made exceptional progress in this effort through the end of the first quarter, reaching over $ 15 billion in net present value through LTC premium increases and benefit reductions, since 2012. Second, we are also exploring partnership opportunities with well-regarded third parties. to launch a new long-term care insurance business in the United States. He continued, “There is a huge need for long-term care solutions in the United States, with 54 million Americans aged 65 and over as of the end of 2019. And that number is expected to grow to 95 million by 2060. . There is few of it. players in the long-term care insurance market today due to serious financial problems arising from the existing long-term care insurance activities. We are evaluating opportunities to monetize our LTC expertise and intellectual property in partnership with strong third parties to develop a number of new LTC products and services. He didn’t talk much about USMI IPO.
Delayed IPO
On May 12, 2021, Genworth announced that it was delaying the USMI’s IPO due to market volatility. The Company will continue to monitor market conditions before pricing Enact’s IPO. The proposed IPO would result in the spin-off of 22.6 million shares and would continue to own 83.7% of the company. Enact sells private mortgage insurance to homeowners when they buy a home with less than 20% down.
GNW Opportunistic Withdrawal Levels
Using the gun charts on weekly and daily time intervals provides an accurate view of the landscape for the GNW stock. The weekly guns chart is in a strong downtrend with 5-period moving average (MA) resistance down near $ 3.77 Fibonacci level (fib). The weekly formed a high market structure (MSH) sell trigger on the blackout below $ 4.16. The Weekly Stochastic has a bearish mini reverse puppy targeting the lower Bollinger Bands (BB) near the $ 2.89 fib. Weekly weak market structure (MSL) buy triggered on the breakout above $ 3.25 which will be a key level for the bulls to defend. The daily guns chart has an extended downtrend with a 5 period MA down to $ 3.53 and lower BBs overlapping the weekly MSL trigger of $ 3.25. Cautious investors can watch for opportunistic withdrawal levels at $ 3.33 fib, $ 3.25 weekly MSL trigger, $ 3.15 fib, $ 2.89 fib, $ 2.74 fib, $ 2.56 fib, and $ 2.47 fib . The upward trajectories range from the $ 4.40 level to the $ 6.34 fib level. Keep an eye out for peer mortgage insurers MTG, NMIH, ESNT, and RDN as they tend to grow together.
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