1) I'm with you on the market view of the Genworth US sell down. I viewed them as a financially distressed owner and see it as a positive to be free from their situation. I don't think they had cash to support us, in fact, I think the little 'cash' they had was their stake in Genworth Australia, which they sold at fire-sale prices!
2) I'm definitely no expert on lending standards and welcome other thoughts. My prevailing opinion was that loan quality had increased from 2014 when loans started being assessed at 300bp above the variable rates. I also understand that households have saved a lot during COVID and built up substantial buffers on their home loans (the RBA said the median owner occupier is 21 months ahead, up from 10 months pre-COVID).
3) Agreed. This is a big problem. Hopefully every dog has its day! I expect the rotation to compelling value shares such as Genworth to continue this year.
4) Agree and really good point. LMI is non-core to QBE and as you note in 1), there is value in having a parent with deep pockets. So both businesses could be takeover targets. I see the run-off value of Genworth as $6.00 a share, so it is the role of management to demonstrate value above that. We are not close to that now, so the run-off question needs to be asked. I can't blame them for trying and innovating. I can't see them burning much cash trying. I personally have a lot of confidence in the CEO, CFO and Chairman not to mess things up. Sure, they can be frustratingly conservative, but I see them as experienced and qualified team to manage the organisation and the risks faced.
5) Agreed. Another special dividend this half should help attract SMSF interest in a boring insurance company. It would take the yield to 16% plus those juicy franking credits.
GMA Price at posting:
$3.00 Sentiment: Buy Disclosure: Held
(20min delay)