Genworth Life And Annuity Insurance Company Phone Number

Genworth Life And Annuity Insurance Company Phone Number – Genworth Financial (NYSE:GNW) is a company that continues to provide an incredible margin of safety. It is like a mortgage insurer and provides long-term care and life insurance policies. The company is trading at a highly compressed valuation, and that’s because its long-term care insurance business has been issuing policies at very uneconomic rates for years, creating huge policy liabilities for company. While this business is underperforming, with clear value drivers for other parts of the business, including a mortgage insurance business that went through a minority IPO (also trading as Enact Holdings (ACT) on NASDAQ) and significant non-operating loss tax assets on the books, we found that On a sum-of-the-parts basis, the health and life insurance portion of Genworth’s business was assigned a negative value. Since the investments still cover the liabilities for the life and health insurance business, and we know this because we can deconsolidate the separately traded Enact Holdings from the books, this negative value makes no sense . It’s essentially a no-brainer purchase.

Genworth’s financial thesis is a sum-of-the-parts logic that is easy to follow. There are three elements to business. mortgage insurance business that went through a minority IPO, which means that Genworth still owns 81% of the shares (and therefore their results are still consolidated with Genworth), tax assets arising from tax sharing agreements with subsidiaries that make up Genworth’s business and . Now this will be realized thanks to their profitability and finally the wart on the face of the company which is life and health insurance business.

Genworth Life And Annuity Insurance Company Phone Number

Genworth Life And Annuity Insurance Company Phone Number

The life insurance segment as a whole is not such a problem, the issue is the long term care business. It is very profitable at the moment, but it is very temporary.

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As the years progress, its covered groups will be at the exact age where they will file claims for Genworth insured benefits for their long-term care. As the name suggests, these benefits are payable over a period of time, and this looming obligation slows down the “future policies and benefits” line of the balance sheet.

For some FIG analyses, this balance line is the difference between the NPV of the benefits paid under the company’s models, such as morbidity and mortality assumptions and the age of the insured pool, and the NPV is applied.

Which means only part of the annual premiums are intended to cover claims and not to generate additional economic income. Naturally, the insurance company’s goal is to get more premiums than this

As you can see from the larger data provided by GNW about the LTC segment, the bulge among their covered groups is just beginning to see the incremental benefits of their coverage and is still relatively young. It was ten years before the herd was severely depleted due to regular age-related mortality. Pain comes from this segment.

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How did this happen? In effect, an actuarial failure means they mispriced the policy. As this commitment puts pressure on GNW, the company has been able to work with state regulators to adjust premiums under this policy to better maintain GNW’s position. Because it was factually sound and basically a “wrong” arrangement, they were able to make about $20 billion worth of interest rate changes on a discounted basis, and probably more, although the process was complex and multifaceted. Regulators benefit from the improved solvency of the insurer and the errors are actuarial and should not have occurred in the first place. While consumers are experiencing premium increases, they have enjoyed submarket premiums for years.

But it is not that important to design additional rate changes, because while the policy is technically ineffective, the diseconomy margin is already smaller than you need to justify a negative value for this business segment, and you will see. In the moment why, when we consider Enact.

Legislation is the second pillar of the thesis. It went through a minority IPO, where GNW still owns 81% of the company, but the market values ​​it at $4.39 billion. Therefore, GNW’s share is $3.5 billion. GNW shares are $2.22 billion, so you can probably see where this is going when we do SotP later.

Genworth Life And Annuity Insurance Company Phone Number

But first, very briefly about their business. ACT’s insured mortgages and its market is that in order for banks to sell the originated mortgages on the JSE, freeing up capital for further lending, risk requirements must be met. Where the mortgage may be too risky for the GSEs to buy on a vanilla basis, a company like Genworth or Essent ( ESNT ) will insure enough of the mortgage to take the mortgage off the banks’ balance sheets for sale . Mortgages are inherently risky when LTV ratios are very high, often due to low down payments. With Millennials being the next generation of homebuyers and secular US housing trends looking good, more of these mortgages will be needed to accommodate the next generation of newly formed families. It’s not bad business, and WFH is just another windfall that requires more square footage per household, steals space from offices, and requires a bigger mortgage.

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In any case, since Enact is fully consolidated under consolidation accounting, we can look at its balance sheet and unbundle it from Genworth to get an idea of ​​what the balance sheet looks like for the rest of the business. L&H, so get an idea of ​​how problematic it is. The balance is real.

Enact has about $5.5 billion in assets to cover a substantial $1.2 billion in current claims related to mortgage defaults. While a rate increase could mean more defaults, nothing points to higher default rates yet, so the net claim range from Enact is about $4.3 billion.

Going back to GNW’s balance sheet, they have about $80 billion in investments and liability reinsurance to cover about $75 billion in total losses. Deducting Enact’s $4.3 billion in assets actually puts them in a small surplus of $780 million. Claims here arise from both future policy liabilities, current reserves, long-term loans and also separate account liabilities and account balances of the policy owner (mainly accounts held by investors in GNW annuities and other securities products that provide money, because remember that fees and commissions are like money for insurance companies The traditional way of doing things without creating claim liabilities, the risk of these products rests with the owners).

This surplus could easily be increased by new rate action or simply by new well-priced business at L&H or elsewhere that could be built over the next few years without too much rapid pressure driving premiums and NPV of claims. They will have time to improve their book as claims gradually come in (although they will certainly accelerate as the elderly start claiming LTC). The fact that the assets cover the liabilities, even if only partially, is a good start for the company’s SotP and operating margin of safety.

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We can already see that the shares of Enact Holdings owned by GNW are relatively larger than the market cap of GNW. But there’s more: significant NOLs, which are tax assets for the company. This stems from some fee-sharing agreements between the company’s subsidiaries, but ultimately they are balanced in black and white and make serious business sense. In 2021, they received $119 million in NOLs to offset taxes. There were $960 million in NOL assets at the last balance sheet date. While this book value is a decent way to value them, let’s consider the effects of the discount, since this NOL only applies when a gain is realized. Assuming that about $80 million in realized assets (down from $119 million today, based on some low cost LTC policy trade-off) will generate cash flow over the next 5 years, we get valuation of $406 million at a relatively reasonable 7% when discounting. rate. Discount rates are somewhat arbitrary, but they take into account the assumptions of the CAPM for the cost of capital.

Since we used long-term borrowings, cash and other liabilities and assets to calculate LTC’s operating surplus, after deconsolidating Enact’s balance sheet, we have everything we need to value Enact as a non-operating assets and of course. Pay attention to tax assets. The market is indicating a negative implication for the L&H business, which includes the large LTC business. Just giving this business a 0 rating and not a very negative one means a lot of progress.

Again, even if L&H’s business isn’t paying enough for the economic return on its LTC policies, that’s not enough to bring the company down. With more potential rate action, the economic value of this business is currently represented by our surplus rate, which comes from a network of assets to cover

Genworth Life And Annuity Insurance Company Phone Number

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