AlphaSituations-Event/Catalyst Driven Research, AlphaSituations

Robert Sassoon

AlphaSituations-Event/Catalyst Driven Research

AlphaSituations

Since its establishment, AlphaSituations has delivered a track record of outperformance with a hit rate of winners of more than 70% of its portfolio of ideas generating annualized average returns of 20%. In January 2022, AlphaSituations was contracted by Water Tower Research, an investor engagement and stakeholder communication platform to provide coverage of Special Situations

Event-Driven

Genworth Financial Inc Cl A / Event-Driven

<a href="https://www.smartkarma.com/entities/genworth-financial-inc-cl-a" target="_blank" data-smartkarma-citation="entities:3876:1" rel="noopener">Genworth Financial Inc Cl A (GNW US)</a> has filed an amended S-1 for the pending IPO of its US Mortgage Insurance business, disclosing the quantity of shares to be sold and the pricing range, which looks attractively pitched relative to its publicly traded peers.  The  IPO will help to crystallize the value of the business with GNW which will continue to own more than 80% of the business. Moreover, given the limited float that comes with this IPO, GNW will continue to be a more  liquid investment alternative to leverage the recovering strength of this mortgage insurer. Our updated GNW SOTP assessment points to 45% upside  to $6.39 in the GNW share price (with potential for further upside) based on  our expectation that the IPO will be priced at the top end of the proposed $20-$24/share IPO pricing range.

Genworth Financial Inc Cl A (GNW US) has filed an amended S-1 for the pending IPO of its US Mortgage Insurance business, disclosing the quantity of shares to be sold and the pricing range, which looks attractively pitched relative to its publicly traded peers.  The  IPO will help to crystallize the value of the business with GNW which will continue to own more than 80% of the business. Moreover, given the limited float that comes with this IPO, GNW will continue to be a more  liquid investment alternative to leverage the recovering strength of this mortgage insurer. Our updated GNW SOTP assessment points to 45% upside  to $6.39 in the GNW share price (with potential for further upside) based on  our expectation that the IPO will be priced at the top end of the proposed $20-$24/share IPO pricing range.

SpinTalk: Catalyst For Undervalued Genworth Financial With Mortgage Insurance Business IPO Imminent

The abandonment of its merger transaction with China Oceanwide has freed a financially healthier <a href="https://www.smartkarma.com/entities/genworth-financial-inc-cl-a" target="_blank" data-smartkarma-citation="entities:3876:1" rel="noopener">Genworth Financial Inc Cl A (GNW US)</a> to pursue its revised strategic plan without restrictions and without uncertainty regarding its ultimate ownership. With what had seemingly been a never ending saga now finally over, we assert that Plan B will likely yield a more beneficial outcome to GNW shareholders than had the Oceanwide transaction moved to completion in the current circumstances.

The abandonment of its merger transaction with China Oceanwide has freed a financially healthier Genworth Financial Inc Cl A (GNW US) to pursue its revised strategic plan without restrictions and without uncertainty regarding its ultimate ownership. With what had seemingly been a never ending saga now finally over, we assert that Plan B will likely yield a more beneficial outcome to GNW shareholders than had the Oceanwide transaction moved to completion in the current circumstances.

SpinTalk: How Genworth Financial Holdings (GNW US)Creates More Value Without The Oceanwide Merger

Silver Point

Thomas J. Monaco

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

Genworth Financial Inc Cl A / Equity Bottom-Up

*Aussie Business Weakens Again: Genworth Mortgage Insurance Australia (GMA.AU) [GMA] reported a FY 2H20 bottom-line loss of AUD 17.6 mn. Despite the loss, the level was an improvement of AUD 72.4 mn over the AUD 90.0 mn loss posted in FY 1H20. You simply cannot earn money if your combined ratio is 137.7% - albeit an improvement over the 215.0% posted during the previous half. Despite the expense ratio improvement of 127.4% to 20.5%, the claims ratio increase of 50.1% to 117.1% acted as quite the offset and drove the loss as the 4Q20 refinement of reserving due to COVID-19 related factors was the primary culprit; and*Genworth Still Waiting To Clear That Chinese Wall: China Oceanwide (715.HK) still does not have the money to consummate the Genworth Financial (GNW.US) [Genworth] transaction – missing its merger agreement deadline for the 17th time on December 31, 2020.  While the merger agreement still remains in effect, management does “not believe a closing can occur in the near-term”, as Genworth (with no other option) continued to play this same old tired game with China Oceanwide by extending its merger agreement deadline.

*Aussie Business Weakens Again: Genworth Mortgage Insurance Australia (GMA.AU) [GMA] reported a FY 2H20 bottom-line loss of AUD 17.6 mn. Despite the loss, the level was an improvement of AUD 72.4 mn over the AUD 90.0 mn loss posted in FY 1H20. You simply cannot earn money if your combined ratio is 137.7% - albeit an improvement over the 215.0% posted during the previous half. Despite the expense ratio improvement of 127.4% to 20.5%, the claims ratio increase of 50.1% to 117.1% acted as quite the offset and drove the loss as the 4Q20 refinement of reserving due to COVID-19 related factors was the primary culprit; and*Genworth Still Waiting To Clear That Chinese Wall: China Oceanwide (715.HK) still does not have the money to consummate the Genworth Financial (GNW.US) [Genworth] transaction – missing its merger agreement deadline for the 17th time on December 31, 2020.  While the merger agreement still remains in effect, management does “not believe a closing can occur in the near-term”, as Genworth (with no other option) continued to play this same old tired game with China Oceanwide by extending its merger agreement deadline.

Genworth Financial – Wrong Time For An Aussie Fail

Following a series of optimistic updates about China Oceanwide's progress towards raising the required funds to finally complete its acquisition of <a href="https://www.smartkarma.com/entities/genworth-financial-inc-cl-a" target="_blank" data-smartkarma-citation="entities:3876:1" rel="noopener">Genworth Financial Inc Cl A (GNW US)</a>,  the deal appears to be back on life support at best.  But, while the more than 30% drop in the GNW share price in reaction to the latest development suggest otherwise,  we believe GNW  is far less dependent on a succesful  outcome for this transaction than it was 4 years ago when the merger was announced. On November 30, 2020, we publish an insight -<a href="https://www.smartkarma.com/insights/mergertalk-broken-deals-do-not-necessarily-lead-to-broken-investments" target="_blank" rel="noopener">MergerTalk:Broken Deals Do Not Necessarily Lead To Broken Investments</a>- which highlighted a snapshot study we copnducted revealing that broken deals merger deals could turn out better for target company shareholders down the road. Indeed, our valuation assessment set out below and based on what we believe are conservative assumptions indicates that fair value for GNW is higher than the offer price still on the table by Oceanwide.  So, unless Oceanwide can complete the final steps and consummate the acquisition in fairly short order, we would go as far as to say that it may now be more beneficial to GNW shareholders for the company to walk away from the deal.

Following a series of optimistic updates about China Oceanwide's progress towards raising the required funds to finally complete its acquisition of Genworth Financial Inc Cl A (GNW US),  the deal appears to be back on life support at best.  But, while the more than 30% drop in the GNW share price in reaction to the latest development suggest otherwise,  we believe GNW  is far less dependent on a succesful  outcome for this transaction than it was 4 years ago when the merger was announced. On November 30, 2020, we publish an insight -MergerTalk:Broken Deals Do Not Necessarily Lead To Broken Investments- which highlighted a snapshot study we copnducted revealing that broken deals merger deals could turn out better for target company shareholders down the road. Indeed, our valuation assessment set out below and based on what we believe are conservative assumptions indicates that fair value for GNW is higher than the offer price still on the table by Oceanwide.  So, unless Oceanwide can complete the final steps and consummate the acquisition in fairly short order, we would go as far as to say that it may now be more beneficial to GNW shareholders for the company to walk away from the deal.

MergerTalk:Why Genworth Financial Should Now Consider Breaking Off Its Engagement To China Oceanwide

*No Deal, Move On: China Oceanwide (715.HK) still does not have the money to consummate the Genworth Financial (GNW.US) [Genworth] transaction – missing its merger agreement deadline for the 17th time on December 31, 2020.  Genworth announced that while the merger agreement still remains in effect, management does “not believe a closing can occur in the near-term”; and  *Update Call January 5, 2021: Genworth is hosting a pre-market update call on January 5, 2021 which should provide more color on its contingency plans.

*No Deal, Move On: China Oceanwide (715.HK) still does not have the money to consummate the Genworth Financial (GNW.US) [Genworth] transaction – missing its merger agreement deadline for the 17th time on December 31, 2020.  Genworth announced that while the merger agreement still remains in effect, management does “not believe a closing can occur in the near-term”; and  *Update Call January 5, 2021: Genworth is hosting a pre-market update call on January 5, 2021 which should provide more color on its contingency plans.

United States

Genworth Financial Inc. offers insurance, wealth management, investment and financial solutions   The Company offers products that include life insurance products, long-term care insurance, and mortgage guarantee insurance coverage on residential mortgage loans.  Genworth is active in the United States, Canada, Australia, New Zealand, Mexico and multiple European countries.

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Genworth Financial Inc Cl A (GNW US)

SpinTalk: Catalyst For Undervalued Genworth Financial With Mortgage Insurance Business IPO Imminent

Genworth's now seemingly imminent partial IPO of its US Mortgage Insurance business looks attractively pitched and should drive more value for GNW...

Robert Sassoon

SpinTalk: How Genworth Financial Holdings (GNW US)Creates More Value Without The Oceanwide Merger

GNW shareholders are likely to better off now that the Oceanwide deal has been called off deal as the focus turns to the pending separation of...

Robert Sassoon

Genworth Financial – Wrong Time For An Aussie Fail

GENWORTH FINANCIAL: Genworth Mortgage Insurance Australia reported a FY 2H20 bottom-line loss as its combined ratio was 137.7%. China Oceanwide...

Thomas J. Monaco

MergerTalk:Why Genworth Financial Should Now Consider Breaking Off Its Engagement To China Oceanwide

Unless Oceanwide can consummate the acquisition ireasonably quickly, we explain why it may now be more beneficial to GNW shareholders for the...

Robert Sassoon

Genworth Financial –What A Surprise…

GENWORTH FINANCIAL: China Oceanwide Simply Does Not Have The Money To Consummate This Transaction, And Genworth Needs To Move On - But It Wont Be...

Thomas J. Monaco

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