August 6, 2015

Genworth Analysis

Before making an investment decision, investors are advised toread carefully the Offering Memorandum, including thedescription of the risks, fees, expenses, liquidity restrictions andother terms of investing in the funds. Performance data has notbeen prepared to meet any specific requirements applicable to thepresentation thereof and should in no event be viewed aspredictions or representations as to actual future performance.Investment may involve a high degree of risk and should beconsidered only by investors who do not require access to theircapital and can withstand the loss of all or part of theirinvestment. Return targets in this document are subjectivedeterminations and do not reflect either actual past performanceor a guarantee of future performance. Referenced benchmarksmay fail to provide a meaningful comparison. Forward lookingstatements are based upon assumptions which may differmaterially from actual events. This information should not berelied upon in making an investment decision.

DISCLAIMER

Approach to investing:

Out-of-favor stocks that are mispriced due to uncertainty or fear, misunderstanding or obscurity

Conduct significant due diligence to overcome those hurdles

Invest only at a deep discount to intrinsic value

Limited to 15 to 20 best ideas

About Booth-Laird Investment Partnership

In-Depth Analysis

Genworth (ticker symbol: GNW) is a hybrid Mortgage Insurance, Life Insurance, and Long-Term Care (LTC) Insurance company

Spun-off from GE in 2004

Largest mortgage insurance company outside the U.S.

Pioneer in LTC insurance decades ago

$3.7B market cap

Profile

Unholy combination of P&C Insurance and Life Insurance

Issues in life insurance overshadowing strong p&c insurance

Beaten down to a low fraction of net book value

New management after severe issues from credit crisis

Plans to eventually split the p&c and life insurance businesses

Complexity that requires research, understanding, and patience

Described Hartford Group (HIG) 3 years ago and GNW today

HIG Redux 2012 revisited

Presented long thesis for Hartford Group (HIG) in July 2012

Stock was selling for 35% of NBV at ~$16/share

We felt it was trading for lower than a worst case scenario

Conservative upside was 60% of NBV in original analysis

Ultimately sold in July 2014 for $39 at 90% of NBV

143% gain in 2 years

How did HIG work out?

Selling for ~25% of net book value

Down 60% from 52-week high due to long-term care reserve issues

Probability of current management destroying 75% of net book value very low

Probability of net book value being overstated 400% very low

Risks misunderstood by the market due to complex accounting and new material weakness in controls

Substantial upside using three different valuation approaches

Asset Play Opportunity

Oldest predecessor founded 1871

GE Capital accumulated a number of disparate insurance companies

Spun off from GE in largest IPO of 2004

As a major U.S. and global mortgage insurer, severely hurt by the credit crisis

New management and majority of directors since crisis

Mortgage insurance past darkest hour, steadily improving

Late 2014, long-term care ins. reserve issues came to light

Review of reserves led to steep increase early 2015

Credit ratings reduced one notch as a result

Background

7 of 10 board members new since credit crisis, including Chairman

Rich insurance experience

Key executives replaced since credit crisis

CEO hired externally January 2013

CFO joined company in 2011

CRO hired externally January 2014

Greater focus on risk management

No accident LTC insurance issues came to surface in late 2014

Greater focus on simplicity no sacred cows

New Management

Unique combination of life, LTC, and mortgage insurance

Only major insurance company in all three businesses

Life insurance is not true insurance, it is an investment

Insurer cannot make money off of insurance premiums alone

Manage market risk only, not insurance risk

Mortgage insurance is true insurance

Pay a cost up front to protect against potentially larger cost later on

LTC is a combination of the two

Pay cost up to protect against potentially larger cost later on

Insurer cannot make money off of insurance premiums alone policies structured like life insurance

Complex Hybrid Model (1 of 2)

Included numerous other insurance lines as a result of GE kitchen sink spin-off

New management and board determine core of business was mortgage, life insurance, and LTC insurance

Sold or placed the remainder into run-off:

Variable annuities

Variable life insurance

Corporate-owned life insurance

Accidental & health insurance

Institutional insurance

Medicare supplement insurance

International Protection insurance

Complex Hybrid Model (2 of 2)

Now a strength of the company

#1 private mortgage insurer in Australia and in Canada

Both markets essentially oligopolies

A leading private mortgage insurer in the U.S.

Post-European recession, only offers mortgage insurance in 4 countries Germany, UK, Finland, and Italy

97% of mortgage insurance sold to prime borrowers

Mortgage Insurance Profile

Publicly-traded in Australia IPO in 2014

Trading for 0.88x net book value

GNW still owns 51% of the company

4 banks handle vast majority of mortgages in Australia

Estimated 44% market share

Lost one major bank customer 2015 over ratings reduction stemming from LTC insurance 10-15% of policies

No impact on policies in force, no material impact on net income

Loss ratios are outperforming local market

Well capitalized capital adequacy ratio exceeds target

Australia Mortgage Insurance (AMI)

AMI Combined Ratio

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

100.00%

2012 2013 2014 2015E

Loss Ratio Combined Ratio

AMI TTM Underlying ROE

10.4%

11.7%12.0% 11.9%

12.2%12.4%

4Q13 1Q14 2Q14 3Q14 4Q14 1Q15

12 month trailing underlying ROE

Publicly-traded in Canada IPO in 2009

Trading for 0.81x net book value

GNW still owns 57.5% of the company

Largest private insurer in Canada

Mort. Ins. 90% guaranteed by Canadian government

Book Value per Share has increased at a CAGR of 9.3% last 5 years

Average operating ROE of 12.8% last 6 years

Well capitalized capital adequacy ratio exceeds target

Low interest rate for foreseeable future

Canada Mortgage Insurance (CMI)

CMI Combined Ratio

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

100.00%

2012 2013 2014 2015E

Loss Ratio Combined Ratio

CMI Operating ROE

14.0%13.0% 13.0%

12.0% 12.0%

2010 2011 2012 2013 2014

Wholly-owned

7 Mortgage Insurance companies before credit crisis

2 went bankrupt

2 more nearly went bankrupt

GNW did not come close

Claims skyrocketed due to crisis

Delinquencies peaked in 2010

Down substantially and still dropping

61% of risk in force composed of 2009+ loans

Returned to profitability in 2013

ROE of 5.6% 2014 is low but improving

U.S. Mortgage Insurance (USMI)

USMI Combined Ratio Improving

40.00%

60.00%

80.00%

100.00%

120.00%

140.00%

160.00%

180.00%

2012 2013 2014 2015E

Combined Ratio Breakdown

Loss Ratio Combined Ratio

USMI Op Income Improving

$(114)

$37

$91 $101

$(150)

$(100)

$(50)

$-

$50

$100

$150

2012 2013 2014 1H 2015

Government Sponsored Entities (GSEs)

Want a vibrant private mortgage insurance industry

Suspended rules requirements during crisis

Announced new capital adequacy rules effective mid-2015

GNW expects to meet new rules

Needs to increase capital $500-$700M

Sold additional Australia stock

Sold international protection business

Utilizing captive reinsurance

In compliance with maximum leverage ratio of 25:1

GNW at 13.7:1 and dropping

USMI Capitalization

Includes life, annuities, and LTC insurance

Universal Life and Fixed Annuities are primary focus going forward for non-LTC business

Well capitalized RBC ratio of 455% exceeds target of 400% and regulator requirements of even lower percentages

For reference, respected stalwart New York Lifes RBC ratio is 500%

Non-LTC products are steady performers

TTM ROE of ~4% is low but improving

Will benefit substantially from a rising interest rate environment

Reducing headcount and other expenses to further improve ROE

Life Insurance Business

Insurance ratings reduced by Moodys, S&P, and A.M. Best as a result of LTC reserve increase still adequate and above

Reduction in insurance rating caused some brokers to stop selling new GNW products

Represents 18% of linked-benefit, 16% of annuity, and 9% of LTC sales

No impact on existing policies vast majority of annual premium

Could be bumped back to previous ratings as LTC uncertainty recedes

Life Insurance Ratings Reduction

DALBAR announced insurance awards 2014

Received 2014 Service Award for life insurance unit

Ranked first for high quality of service in LTC

Ranked 3rd for quality of service provided to life insurance policyholders

Received Annuity Service Award

1 of 6 six companies that emerged as titans of customer service in 2014

Per DALBAR:

Genworth emerged as an industry leader for 4th consecutive year, with proven leadership in the high level of professionalism, knowledge and respect for the their policyholders that was found in over 94% of calls evaluated for service.

Industry average is only 57%

Respected Operator

Source of why stock is down

LTC Insurance primer:

Covers cost of the elderly and disabled who can no longer care for themselves but do not warrant stay in the hospital

Average age of first year policyholder is 58

Average age of first year of claim is 80

Average duration of claims is 3 years

Like life insurance, claims exceed premiums paid over life of policy, so company relies on policy lapses and sufficient investment yield

GNW was a pioneer of LTC insurance 30 to 40 years ago

Few competitors today

LTC Insurance

Lack of historical data and unexpected advances in medicine caused the following key assumptions to be underestimated when policy first written decades ago

Lapse rate

Used avg. life insurance lapse rate of 5 to 6%, but actual lapse rate has been 0.7%

Frequency - % of policyholders making claims

Severity total cost once claim is made

Result

Significant increase in reserves for future claims

LTC Insurance Issues

LTC reserves typically reviewed once every 4 years

Last review in 2012 accredited incorrect assumptions to credit crisis, made no major adjustments

New management came on board after, notice the key variables were still off, ordered a complete review in 2014, 2 years ahead of schedule

With Q3 2014 earnings release, announced increase in claims reserve and review of the Active Life Reserve, to be released with Q4 2014

Hired two actuarial firms, one to calculate the new reserve and the other to review the calculation

Vetted the new reserve calculations with regulators

LTC Insurance Reserve Review

2 separate reserves:

Claims reserve for current claims - policyholders receiving benefits today. Severity key variable Increased $700M, new survival ratio of 4.6 is

conservative

Active Life Reserves policyholders who have yet to make a claim Increased another $700M for older acquired block

expected to realize a loss Reduced expected profit on organic block, but no

reduction in NBV needed unless expect a loss Extensive vetting process and assumptions used provide

comfort

Also wrote off $500M of goodwill

LTC Insurance Reserve Update

Increasing rates on existing policies and reducing benefits

Working with state insurance commissioners

Requesting increases of 15-40%

Rate increases are product by product

Received approval from 47 states for one product

Received approval from 30 states from another product

Exited 2 states where rate increases not approved

Adverse selection will occur used conservative lapse rate for reserves as a result

LTC Insurance Rate Increases

Company expects the requested rate increases to result in increased premiums for existing policies of $380 470M by 2017 with no additional cost

Net operating income, after tax, for LTC the last 3 years:

2012 - $101M

2013 - $129M

2014 - $59M before the reserve increase

Benefit reductions also reduce reserve requirements

Expect to increase rates annually for existing policies to get to appropriate profitability level

Expect ROE of 20% on new policies written going forward

LTC Insurance Going Forward

Management has openly discussed its intent to eventually split up the mortgage and life insurance businesses, most likely via a spin-off of one of the units

Would unlock the value in the mortgage insurance businesses evidenced by the Australia and Canada subs

Overshadowed by LTC issues

Combination of two very different businesses keeps a lot of investors away

Split would create purer plays and likely increase investor interest for both businesses

Plans delayed temporarily by LTC and by new USMI capital requirements

Likely no sooner than FY 2016 probably later

Likely Split in the Future

Material Weakness disclosed with 2014 10-K

Related to immaterial error that was not caught in an Excel spreadsheet

Determined it could have been material

Wall Streets reaction to and commentary on the material weakness reveals a lack of understanding of what that actually means and the impact

Our audit background, particularly of Shaw and its numerous material weaknesses, provides a deep understanding

Risk is the material weakness that you dont know about, not the one you do know about and overcome with extensive managerial and auditor review

Material Weakness

1. Reserves could prove to be inadequate

2. Regulatory risk in all markets is ever present when dealing with financial companies

3. Company may not be able to get any additional rate increases on LTC Insurance

4. Any further insurance rating reductions would hurt the stock

Risks to Consider

Valued using three methods

1. Projecting net income by business line and summing the parts

2. Balance sheet approach primary focus since asset play

3. Based on statutory capital sanity check

Completed upside and downside valuation

Upside conservative

Downside aggressive to incorporate worst case scenarios

Valuation Methodology

Primarily viewed as an Asset Play, similar to HIG

Limited to financial companies assets and liabilities predominantly financial in nature

Why we love asset plays:

Rare

Reduces execution risk

The farther below realizable net asset value, the less the execution risk

We pass on most due to inability to determine a reasonable maximum liability

Asset Play

Primarily focused on stressing balance sheet to determine maximum realistic destruction of value

Eliminated unrealized gain in fixed maturities portfolio in OCI, even for upside

Assumed further increase in LTC reserves of over $3B

Increasing acquired block loss and eliminating organic block margin plus an additional hit of $2.6B for assumption changes

Key is to ensure our risk of losing money is very low

Proof of conservative approach

Assumed $0 for lifestyle protection business or write-off of full NBV of $815 in original analysis when invested even for our upside analysis

Company recently announced sale for $510M

Key Assumptions

Valuation

Weighted Avg Valuation Upside Downside

Intrinsic Value $16 $8.85

Stock Price $5.64 $5.64

Upside 183% 57%

Focus is on the balance sheet, not earnings Key is determining if more than 75% of NBV will be

destroyed or written off since currently selling for 25% of NBV Even when stressing it aggressively, at worst the

company is worth 40% of Q2 2015 NBV

1. Primarily beating lowered expectations

2. An increase in insurance ratings

3. Time to prove new LTC reserve levels are adequate or capping the risk in some way

4. Continuing to get rate increases approved by the majority of states for LTC insurance

5. Announcing they can begin paying a dividend again from USMI to the holding company

6. Successfully splitting the company into separate mortgage and life insurance businesses

Catalysts

Stock dropped 20% in one day - ridiculous overreaction

Results showed continued progress and stability of NBV (highest priority for us)

Market wanted a big announcement on sale of life and annuity business

Mgmt decided not to sell life and annuity because the offers were too low and it could impact their ratings

We applaud this decision

Life, annuity, and LTC should be a package deal if LTC is to be readily accepted still intend to split business eventually

HIG made a mistake by announcing intention to sell life and annuity before finding buyer in 2012, which significantly hurt distribution

Have to show a commitment for brokers to promote it

Market reaction to Q2 15 results

Appendix

Passed CPA exam, ABV exam, and all 3 CFA exams on first attempt

2006 Elijah Watt Sells Award (top 10 CPA exam score in the world out of 50,000+ test takers)

2008 Baton Rouge Business Report Top 40 Under Forty Award

B.S., Accounting and M.S., Accounting from Louisiana State University

3+ years of auditing experience with two of the Big 4 accounting firms

Exceptional performer every year & early promoted

Lead senior of Fortune 500 audit client

Former Assistant Director of State Economic Competitiveness under Governor Jindal

Accredited Member magazine and SeekingAlpha.com contributing author

About the Managers:Jonathan Booth, CFA, CPA/ABV

7 years of accounting and auditing experience with

KPMG Big 4 accounting firm

Postlethwaite & Netterville largest accounting firm in Louisiana

The Edgen Group Manager of Financial Reporting

Edgen-Murray Corporation Assistant Controller

B.S., Accounting from Louisiana State University

M.B.A. from Southeastern Louisiana University

Louisiana Society of CPAs Business & Industry Committee

2012 AICPA Leadership Academy one of 36 selected from across the nation for prestigious 4 day event

About the Managers:Kevin Laird, CPA

Contact Information

Booth-Laird Investment Partnership

9005 Westlake Avenue

Baton Rouge, LA 70810

(225) 767-1439

Jonathan Booth, CFA, CPA/ABV

Chief Executive Officer

Cell: (225) 978-1532

jonathan.booth@boothlaird.com

Website: www.boothlaird.com

Blog: www.boothlaird.com/boothlairdblog/

Twitter: http://twitter.com/#!/BoothLaird

Kevin Laird, CPA

President & Chief Operating Officer

Cell: (225) 229-6567

kevin.laird@boothlaird.com