Google might have been the biggest IPO of 2004 in terms of hype, but Genworth Financial was the biggest in terms of capital raised: $2.8 bn to Google’s $1.7 bn. While Google’s founders were busy talking to Playboy and running the gauntlet of the SEC’s quiet period rule, Genworth was spun off from General Electric (GE) in a less controversial – though no less successful – manner. Since the IPO in May 2004, GE has raised another $5.6 bn in two secondary offerings of Genworth stock, leaving it holding 27 percent of the shares.
The new, NYSE-listed insurance holding company was a subsidiary of giant conglomerate GE until it was sold off as part of a plan to streamline GE’s businesses. Although Genworth was considered a somewhat minor part of GE, in its new guise it has become one of the world’s leading insurance companies, with 15 mn customers and operations in 24 countries. But while Genworth had no problem gaining recognition from its customer base, the same was not true of an investor base that knew little about it.
‘At the time of the IPO, we had a business that was not broadly known and had not been taken to investors on its own footing,’ explains Jean Peters, senior vice president of investor relations and corporate communications at Genworth’s headquarters in Richmond, Virginia. ‘An investor’s first decision point is to ask, How believable is that story? So we spent a great deal of time building a story as a company that would execute its growth plans.’
IR from scratch
Before Peters and her colleagues could hit the road selling the Genworth story, they had to set about constructing an IR mentality within the company. And in Peters, who has years of experience at a number of leading insurance companies including John Hancock Financial Services (acquired by Canada’s Manulife Financial in 2004), Allmerica Financial and Providian Financial (since merged with Washington Mutual), Genworth secured the perfect candidate for the job.
Coming into Genworth, Peters knew exactly what she had to do. ‘Building an IR mindset in the company really requires taking it through the discipline of what the Street needs to see, how investors and analysts get their information, what they want to focus on and how to take the financial data and relate them to the strategic messages,’ she says.
Peters profited from her well-developed understanding of the requirements of IR in the insurance sector. Specifically, she was aware of the need for a detailed quarterly financial supplement to help explain the accounting methods behind the company’s diverse range of financial products.
‘We have built an arrangement at the organization so each of the business segments goes through a quarterly assessment of what the Street is writing about the industry, about our competitors and about us, then building messages that speak to the issues that are most important to investors,’ Peters explains. ‘We do it in a very disciplined way.’ And the Street certainly seems to agree, judging by the number of analysts who have heaped praise on Genworth’s quarterly supplements.
Working in unison
Disciplined planning and a targeted approach are behind Genworth’s IR. As Peters points out, ‘We’ve sold $9 bn of stock for GE in the past 16 months and we’ve had better subscriptions in each subsequent sale as a result of clarifying the message and gaining the support of investors and analysts.’
This impressive performance has been achieved by a reasonably small group of people. Peters, who reports to the CEO, is responsible for corporate communications and investor relations; Alicia Charity is vice president of IR. Charity, who also worked alongside her boss at John Hancock, is assisted by two analysts but, Peters highlights, the IR team is only one part of the process of communicating with investors. ‘We work hand in glove with the CFO and the finance team on issues of planning and control,’ she says.
‘Part of what allows us to operate is the way we manage throughout the organization on a matrix basis,’ Charity says. ‘We work very closely with our finance team and our business units, and really embed ourselves in their financial review process, their operations and their strategy sessions. That level of understanding within IR and the support we get by putting ourselves within the financial review structure allow us to have the knowledge we need to communicate effectively externally but also to leverage work that’s already been done in the organization.’
Peters and Charity have put these strong links with senior management to good use on roadshows in the US, Canada and Europe. Given the obvious time constraints on the top brass, they like to piggyback meetings. ‘When our leaders are in Europe doing business reviews, we use those opportunities to meet with investors,’ Peters explains.
The IR team has also clocked up the miles in North America. ‘We’ve done three roadshows in a little under a year and a half,’ Charity notes. ‘For the first couple of offerings we were really focused on the large cities. But for the latest offering [in September 2005], we split into two teams and were able to cover a lot more geographic diversity, hit some middle-market cities, hit Canada, and spend a little more time with investors we hadn’t touched before to give them another level and depth of knowledge. It was good from our perspective because we were able to bring in some great new names.’
Looking ahead
Although its initial focus was the institutional market, Genworth is now planning to shore up its retail investor base, which currently accounts for less than 10 percent of the shares. ‘We’re going to be developing a program targeted specifically at retail shareholders and building that out as we go into 2006,’ Charity says.
A substantial proportion of Genworth’s business comes from overseas so another goal for the coming year is to bring in more foreign investors and push cent mark. ‘We see this as an important activity in the coming year now that we have a much broader liquidity and shareholder base,’ Peters says. ‘After all, GE is becoming a less significant factor and will eventually be out of the stock entirely.’
Talking to a selection of Genworth’s analysts, it becomes clear the IR team’s deep understanding of the company’s various businesses continues to underpin the IR effort. One analyst even suggests that Peters ‘would be a qualified CFO at any of Genworth’s peers’. While she might not be about to switch jobs just yet, Peters agrees that, in IR, proactive engagement with your own business is as crucial as proactive engagement with your investors.
‘My philosophy is that we have to understand the businesses to be able to communicate effectively with investors,’ she concludes. ‘We have to understand their competitive issues, their finances, so I don’t want a lot of layers between myself and the businesses. I want to be able to go out there and see what’s going on, learn it first hand – and then be able to communicate it.’
