Genworth Financial Inc. has a significant amount of debt that’s on track to mature in May 2018.
Genworth, which has been a major player in the U.S. annuity and stand-alone long-term care insurance (LTCI) markets, has been hoping to use $600 million in cash from China Oceanwide Holdings Group Co. Ltd., a would-be acquirer, to make the payments.
Genworth and China Oceanwide are still working hard to complete the deal, but continuing delays in getting regulatory approvals for the deal could force Genworth to look for other strategies for meeting its obligations, Genworth said in a document filed today with the U.S. Securities and Exchange Commission.
Genworth talked about the May 2018 debt payment financing issue in routine reports filed in connection with the release of its results for the third quarter.
Most publicly traded companies hold conference calls with securities analysts to go over their earnings reports, but many of those companies suspending earnings calls while in the middle of efforts to complete major mergers. Genworth has stopped holding earnings calls while the China Oceanwide deal effort is under way.
China Oceanwide announced plans to acquire Genworth about a year ago. The federal Committee on Foreign Investment in the U.S., an agency that reviews the possible national security implications of international corporate deals, recently raised questions about the China Oceanwide-Genworth deal, and Genworth said in September that it was working on mitigating those concerns. Genworth did not disclose the nature of the concerns but appeared to imply that they could have something to do with policy administration.
Genworth reported $175 million in net income for the third quarter on $2.2 billion in revenue, compared with a net loss of $380 million in net income on $2.2 billion in revenue for the third quarter of 2016.
Genworth has large mortgage insurance operations as well as life operations.
The U.S. life unit is reporting a $4 million operating loss for the latest quarter on $389 million in revenue, compared with $50 million in operating income on $418 million in revenue for the year-earlier quarter, with just $1 million in sales during the latest quarter.
The fixed annuity division within the life unit is reporting $13 million in operating income for the latest quarter on $190 million in revenue, compared with $15 million in operating income on $218 million in revenue for the year-earlier quarter.
The LTCI unit is reporting an adjusted operating loss of $5 million on $641 million in premiums and $3 million in sales for the latest quarter, compared with a $270 million adjusted operating loss on $610 million in premiums and $5 million in sales for the year-earlier quarter.
Genworth has been trying to improve the performance of the LTCI unit by increasing premiums. The company has hoped that an increase in policy lapse rates could also reduce LTCI policy obligations. In the third quarter, however, the claim termination rate was less favorable, according to a Genworth analysis of LTCI unit results.
—Read 7 Peeks Into Long-Term Care Insurance Issuers’ Thinking on ThinkAdvisor.