NU Online News Service, Nov. 19, 2003, 9:40 a.m., EST – General Electric Company says it intends to pursue an initial public offering of a new company that comprises most of its life and mortgage insurance operations.
The new company is to be named Genworth Financial Inc. GE, based in Fairfield, Conn., says it expects to complete the IPO in the first half of 2004. GE says it plans to sell about 30% of the equity of the new company in the IPO and expects to reduce its ownership position over the next three years as Genworth moves toward being a fully independent company. It intends to use the proceeds to invest in growth initiatives and reduce “parent-support debt” at GE Capital.
GE previously announced its intent to reduce the level of its insurance-related assets from about 40% to about 15% of its total financial services assets. The businesses GE will contribute to the new company represents around 20% of its financial services assets and approximately half of the assets of GE’s insurance segment at September 30, 2003, it says. As of that date, the businesses had a book value of approximately $10 billion, net of assets to be retained by GE.
“This IPO is both an important step in the transformation of GE and a significant opportunity for Genworth,” said GE Chairman and CEO Jeff Immelt. “We continue to execute on the clear portfolio and capital allocation strategies that we have articulated to create a faster-growth GE. We have made tremendous progress, but in doing so we have limited the capital available to our insurance businesses. As a separate public company, Genworth will be able to pursue its own strategy with direct access to the capital markets to fund its own business initiatives.”
Following the announcement, Fitch Ratings downgraded the long-term issuer and senior debt ratings of GE Financial Assurance Holdings Inc. to “A” from “A+” and placed both the long-term debt ratings and the “AA” insurer financial strength ratings of GEFA’s primary life insurance subsidiaries on “rating watch negative.”
Those life subsidiaries include General Electric Capital Assurance Company, GE Life and Annuity Assurance Company, General Electric Capital Life Assurance Company of New York, First Colony Life Insurance Company, Federal Home Life Insurance Company and American Mayflower Life Insurance Company of New York.