The agreement could increase the odds the China Oceanwide deal
will be completed.
Genworth Financial Inc. and China
Oceanwide Holdings Group Co. Ltd. say they have reached a preliminary agreement
with New York state regulators over how much capital should be infused into a
Genworth subsidiary in New York state.
The agreement should remove one of the
remaining obstacles to efforts by China Oceanwide to acquire Genworth, Genworth
and China Oceanwide said Monday.
The agreement in principle with New York calls
for Genworth to contribute $100 million to the New York subsidiary once
the China Oceanwide deal closes, Genworth and China Oceanwide said.
China Oceanwide, a Beijing-based real estate
developer and financial services company, has been trying to acquire Genworth
since October 2016.
Genworth Chief Executive Officer Thomas
McInerney said in February, during a conference call Genworth held with
securities analysts to go over fourth-quarter earnings, that one challenge was
that Genworth and the New York State Department of Financial Services had
different ideas about how much capital Genworth should put in Genworth Life
Insurance Company of New York (GLICNY).
Genworth is a major mortgage insurance issuer,
and it has been a major issuer of life insurance, annuities and long-term care
insurance.
Genworth used GLICNY to write long-term care
insurance and other products in New York state.
Genworth has said that, once it completes the
China Oceanwide deal, it will put $175 million in Genworth Life and Annuity
Insurance Company (GLAIC), another subsidiary, but that it does not intend to
put any additional capital beyond the $175 million into GLAIC.
New York regulators approved China Oceanwide’s
efforts to acquire Genworth, and GLICNY, once, but the transaction has been in
progress so long that the original approval expired.
Genworth now needs to get New York regulators
to reapprove the deal before it can go ahead with being acquired.
In addition to agreeing to add $100
million in capital to GLICNY, Genworth has agreed to submit additional
documentation, according to Genworth and China Oceanwide.
“Oceanwide and Genworth are working to
complete this process as soon as possible,” the companies said in the agreement
announcement.
The companies noted that they will also have
to give some other U.S. insurance regulators information about the agreement
with the New York state regulators.
“If the parties are able to obtain the [New
York department] reapproval and confirm the other U.S. regulatory approvals,
Oceanwide will also need to receive clearance in China for the currency
conversion and transfer of funds in order to complete the transaction,” the
companies said.
The companies said they hope to close
the transaction on or about March 31.
Genworth investors welcomed the deal.
As the S&P 500 stock index fell 2.81%
today, to 3,003.37, Genworth’s share price rose 14.83%, to $4.80.
Catherine Seifert, a CFRA Research equity
analyst, put out a commentary welcoming news of the preliminary agreement with
New York regulators but adding that additional regulatory hurdles remain.
“After several years of delays, [Genworth] and
China Oceanside do not seem eager to postpone this transaction beyond their
latest deadline of March 31,” Seifert writes in the commentary. “However, we
caution that this situation is fluid and could change.”
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