Genworth Faces Deal Resistance in Delaware
February 13, 2018 by Allison Bell
Genworth Financial Inc. says the Delaware Department of Insurance is one of the regulatory agencies slowing its efforts to sell itself to China Oceanwide Holdings Group Ltd.
Genworth needs a large amount of cash to handle debts maturing in May. Because regulators are taking so long to approve the China Oceanwide deal, and delaying Genworth’s access to the cash infusion the deal would provide, Genworth will have to try to get secured debt financing, the company says.
The Richmond, Virginia-based insurer talked about the status of the China Oceanwide deal today when it released its earnings for the fourth quarter of 2017.
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Earnings
Genworth has been a major issuer of life insurance, annuities and mortgage insurance, and one of the major players in the long-term care insurance (LTCI) market.
The company as a whole is reporting $265 million in net income for the fourth quarter on $1.7 billion in revenue, compared with a net loss of $63 million on $2.2 billion in revenue for the fourth quarter of 2016.
Results for the fourth quarter include a $456 million gain related, partly, to the effects of the new Tax Cuts and Jobs Act.
The company’s operating results exclude the effects of the new tax law and other unusual gains and charges. The company reported a $290 million operating loss before income taxes for the latest quarter, compared with a $56 million operating loss for the year-earlier quarter.
The LTCI unit reported $17 million in operating profits for the quarter, up from a $1 million operating loss for the year-earlier quarter.
New individual LTCI sales held steady at $1 million.
New group LTCI sales increased to $4 million, from $1 million.
China Oceanwide
China Oceanwide, a Chinese real estate development company that has been expanding into financial services, has been trying to acquire Genworth since October 2016.
China Oceanwide executives say they still want to complete the Genworth deal.
In earlier earnings calls, Genworth has reported that one obstacle to completing the deal has been resistance from the Committee on Foreign Investment in the United States. CFIUS, an agency that reviews international deals involving U.S. companies for national security implications, has concerns about data security. Genworth says it has come up with a mitigation plan that involves an outside data services company.
Genworth says now that another obstacle is a disagreement with Delaware insurance regulators over the value of life insurance operations domiciled there.
“The parties continue to work towards an acceptable solution in order to move forward in the transaction approval process,” Genworth says of the Delaware valuation concerns.
What’s Core
Tom McInerney, Genworth’s president, said in a statement that the results demonstrate Genworth’s operational discipline, and he implied that, at this point, discipline means keeping the mortgage insurance operation healthy.
“We continue to believe the transaction with Oceanwide represents the greatest and most certain value for our stockholders, and we are pursuing a secured debt transaction to address our 2018 debt obligation, and are continuously evaluating the strategic alternatives we may need to exercise to insulate our U.S. mortgage insurance business from continued ratings pressure,” McInerney said.
