The department looked into the possibility of China Oceanwide becoming the parent of Genworth Life Insurance Company of New York, one of Genworth’s subsidiaries.
The department told Genworth that, based on a preliminary review of China Oceanwide, “there is no reason to believe that China Oceanwide is an unsuitable controlling owner of GLICNY,” Genworth said earlier this week.
In related news, Genworth said it added $116 million in statutory reserves at its Genworth Life and Annuity Insurance Company unit in the fourth quarter of 2016 to support universal life products with secondary benefits guarantees. The company expects to add $95 million per year to the reserves for the next two years, mainly because of new information about how long older policyholders might live.
Genworth said it has a $1.5 billion margin for long-term care insurance at its Genworth Life Insurance Company unit, but a negative statutory margin of about $400 million for the LTCI business at GLICNY. For GLICNY, another method for calculating the margin came up with a negative margin of just $110 million. Genworth did not add cash to its LTCI statutory reserves, the company said.
China Oceanwide, a Beijing-based real estate development and financial services firm, announced plans in October to acquire Genworth for about $2.7 billion in cash. China Oceanwide also promised to provide a $525 million cash infusion for Genworth and $600 million in cash the Richmond, Virginia-based insurer can use to refinance or retire notes set to mature in 2018.
Genworth shareholders will vote on the deal March 7.
Genworth has been a major seller of mortgage insurance, long-term care insurance and annuities.
The Great Recession shook the mortgage insurance units, and the prolonged low-interest-rate environment has hurt the LTCI and annuity units.
Genworth’s annuity business is now a child of the LTCI business. To get cash from the annuity business, the parent company must reach through the LTCI business. Genworth is trying to get regulators’ permission to make the annuity business a sister of the LTCI business, rather than a child, so that it and an acquirer would have an easier time separating the annuity business from the LTCI business.
Genworth is working to persuade insurance regulators in New York state, Delaware and elsewhere that accepting the China Oceanwide offer, including the cash infusion, would be better for the policyholders than continuing to have the annuity business be a child of the LTCI business.
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