Steve Eisman Tells Genworth Financial It’s “Overseen Massive Destruction Of Shareholder Value,” Threatens To Wage Proxy Battle On Conference Call, Throw Management “Out Of Here”By Bess Levin
Jazzy-Jeff style. Do not test him on this one.
Operator: Steven Eisman, FrontPoint.
Steven Eisman: Yes, hi. I think it is pretty clear this was a very poor quarter, but there are larger issues here that I think you need to address. Frankly, the only accomplishment that this management team can truly point to is the survival of this Company, which I don’t mean to minimize, but otherwise, this management team has overseen a massive destruction of shareholder value. In fact, at the current price to book, Genworth is selling at a steep discount to both MGIC and PMI, the pure play MIs and this is probably because this Company does not meet its cost of capital in any of its businesses. In other words, the market currently is ascribing negative value to your non-MI businesses. It’s a pretty astonishing statement and I don’t get any sense of urgency from this management team as to how this is all going to be addressed. I think going down the current road seems to me a complete waste of time.
Clearly, the best use of capital for this Company is to buy back stock when it is at a discount, less than 40% of book value. The ROE on that activity is multiples higher than any new business you can write. So it seems we can go down a couple of roads. Number one, you could shut down businesses and use resulting excess capital to buy back stock or you can give us a roadmap and a time schedule, which we are going to hold you to as to when each of your businesses will achieve at least its cost of capital.
I want you to understand that my patience and the patience of your shareholders is not infinite and my patience is just about done. And I would like a response to my comments. And one other thing, at the beginning of this conference call, Mr. Fraizer said that they might do bolt-on acquisitions. Do not do that. Your stock is selling at less than 40% of book value. You do a bolt-on acquisition and I will wager a proxy battle immediately to throw you out of here. And I would like a response.
Mike Fraizer: (Genworth Financial- Chairman & CEO): You have touched upon a number of areas.
GNW Transcript [PDF]