Jonathan Booth, CFA
Hedge fund manager, deep value, special situations, long-term horizon

Genworth Had A Very Good Quarter; Investors Clearly Don't Understand It Whatsoever

Genworth's (NYSE: GNW) Q4 2015 earnings release and earnings call was excellent. LTC reserve assumptions were proven accurate and expected profit margin even increased. Mortgage Insurance in the U.S., Australia, and Canada all did exceptionally well despite the fear that slowing growth in China and low commodity prices would result in massive defaults. LTC even showed a profit this quarter.

The life insurance one-time expense was primarily a deferred acquisition cost ("DAC") unlock, which is very common in life insurance. DAC is amortized over the life of the insurance policy based on expected profitability in that contract. So the company has to project profits 20 or more years into the future. That is impossible to do with accuracy, and

Join Seeking Alpha PRO to read this archived article and 11,574 other archived articles
FREESA PRO MEMBERS
IDEA GENERATORXExclusive access to 10 PRO ideas every day
INVESTING IDEAS LIBRARYXExclusive access to PRO library of more than 15,000 ideas
SECTOR EXPERT NETWORKXExclusive access to all sector experts for direct consultation
PERFORMANCE TRACKINGXTrack performance of all PRO stock ideas
PROFESSIONAL TOOLSXProfessional Idea Filters to zero-in based on industry, market cap and more
"In just the first month of using PRO, I used it to generate two ideas which were actionable for me. As a result of these two positions, I have earned more than 20 times the annual subscription costs for PRO."Michael Yagemann, Greenbridge Capital
"I am pleasantly surprised with the scope of small and mid-cap coverage PRO offers. You can't find that any where else."Patrick Rice, Mainstay Capital Management
You may cancel at any time for any reason, and receive a prompt refund for membership on months paid and not used (max. 6 months). Details