Two men say they're Jesus, one of them must be wrong

Genworth (GMA) reported Net Tangible Assets of $3.33 per share as at 31 December 2020.

Yesterday, Westpac (WBC) announced the sale of its captive LMI to Arch Capital, with the sale price “at book value” at completion (expected in 2H21).

Having looked at enough investment banking pitch books, this valuation of Westpac’s LMI business implies a 2H21 GMA share price approximately 28% higher than yesterday’s closing share price of $2.59.

Perpetual, on the sell down by Genworth’s US parent, became a substantial owner of GMA with a 5.32% holding. Two days prior to WBC’s announcement, Perpetual ceased to be a substantial holder by selling 4.4m shares - including selling down circa 43% of holdings in their largest account (account number 696) and circa 36% reductions in four other accounts (651, 652, 2163 and 2216). On this announcement, Perpetual reduced their holding in GMA to an estimated 4.2%.

Based on the aforementioned valuation of GMA (based upon the WBC LMI transaction), Perpetual is foregoing potential upside of around $3.3m by 2H21 - and even more if they continue to sell their GMA holdings.

Whilst there are inevitably other factors in play for both Arch and Perpetual, when it comes to LMI in Australia, one is a buyer and the other a seller.

As per Mark Knopfler, “Two men say they're Jesus, one of them must be wrong.”