Genworth Financial Inc (GNW): A Tale of Two Genworths

A search for the company by the name of Genworth will turn up two different results in most financial searches. The one with a greater U.S. presence being Genworth Financial Inc (NYSE:GNW) and the one with a greater Canadian presence being Genworth MI Canada. Despite sharing a similar name, these two stocks have very different characteristics when it comes to how they fit in an investor’s portfolio. Here we will examine the differences between the two Genworths in an effort to highlight potential risks and rewards.

Big discount, no dividend

Looking at the valuations behind Genworth Financial the stock appears extremely cheap. Shares trade at only 0.3 times tangible book value reflecting a large discount even when compared to other insurance companies. Even the bailout poster child, American International Group Inc (NYSE:AIG), trades at a higher valuation of 0.6 times tangible book.

Much of this lowered valuation could stem from Genworth Financial Inc (NYSE:GNW)’s heavy involvement in the mortgage insurance business. When American International Group Inc (NYSE:AIG) made headlines and the entire mortgage market was melting down, investors fled anyone issuing or insuring mortgages. With a hesitation among many investors towards re-entering a market that caused such pain, Genworth’s stock is likely suffering the consequences of lingering investor fears.

As the recovery takes hold and the housing market begins to rebound, Genworth Financial’s shares should benefit from both increased profits and reduced investor fears about the industry in general. It is also important to note that Genworth Financial has divisions involved in wealth management and various other types of insurance. While mortgage insurance is still a key part of the business, diversification into multiple segments gives Genworth Financial a better chance at riding out downturns in the mortgage market. As of now Genworth Financial Inc (NYSE:GNW) does not pay a dividend, although it may reinstate one in the future. Investors in the hunt for dividends should read on about the other Genworth.

Small discount, sizable dividend

Living in a global market, sometimes the best returns are found internationally. For this example, we will look at Genworth MI Canada. This Genworth is much more focused on mortgage insurance but conducts business in Canada where the housing collapse was not nearly as bad and the financial markets are more tightly regulated.

Genworth MI Canada’s chart only runs back a few years because it was spun off from Genworth Financial in an IPO in mid-2009. This makes it difficult to value Genworth MI Canada in a thriving economy by comparing it to past charts. To fairly estimate Genworth MI Canada’s value we will have to look at the current numbers.