Jonathan Booth, a hedge fund manager in Baton Rouge, La., says Genworth Financial Inc. (NYSE:GNW) is a good investment and did better in the fourth quarter than most investors seem to understand.
Genworth, a major provider of mortgage insurance and long-term care insurance (LTCI), reported losing $240 million in the fourth quarter of 2015 on $2.2 billion in revenue, compared with a net loss of $708 million on $2.2 billion in revenue for the fourth quarter of 2014.
The LTCI unit generated $19 million in operating income for the fourth quarter of 2015 on $633 million in revenue.
Booth writes in a commentary published by Seeking Alpha that the net loss was partly due to a routine deferred acquisition cost (DAC) adjustment; that the company’s core mortgage insurance units in Australia, Canada and the United States did well; that ending new life and fixed annuity sales should help cut costs without having much effect on revenue; and that the LTCI unit did well.
The company’s LTCI reserve assumptions turned out to be on target, and the expected gross margin on LTCI business increased to a range of $2.5 billion to $3 billion, from $2.1 billion a year ago, Booth says.
Booth says he believes holding the stock will bring rewards for patient investors.