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Prediction: Genworth's Future

|Includes: Genworth Financial, Inc. (GNW)

Genworth ($GNW) has been paying down debt over the past several years and is now specifically focused on paying $1-2B in debt over the next year or two. The purpose it to put itself in a position to split the company.

I believe that GNW will either: (NYSE:I) sell the entire mortgage business or spin it off, or (II) sell the entire life insurance/annuity business or spin it off minus LTC, unless it is taken private sooner.

Why? LTC cannot currently operate on its own given the dynamics of the industry. And it's unlikely that someone would buy the LTC business given its massive size. However, if GNW received the proceeds of a large sale or spin off as stated above then it could use this amount to fund LTC and keep regulators happy. Plus it would retain a stream of business other than LTC as a source of diversified revenue (mtg or life/annuities).

A spinoff, as opposed to a sale, would allow the company to unload debt on the spun off company thereby leaving the parent company with a much leaner balance sheet.

It's interesting to see that AIG is thinking or selling or spinning off the mortgage insurance unit to increase shareholder value.

The million dollar question is how any of these would affect the share price. That is difficult to determine without more information, too many assumptions would have to be made.

Disclosure: I am/we are long GNW.