Genworth Financial Inc. says it could sell one of its mortgage insurance businesses in Canada or Australia if it has trouble getting a term loan.
The Richmond, Virginia-based insurer talks about its ideas for raising cash in 2017 annual financial report it filed earlier this week with the U.S. Securities and Exchange Commission.
A copy of the filing is available here.
Genworth, which has been a major seller of life insurance, annuities and long-term care insurance (LTCI) as well as of mortgage insurance, has $600 million in debt coming due in May, $400 million coming due in 2020, and $1.1 billion coming due in 201.
In recent years, the mortgage insurance businesses have written much more new business than the U.S. life, annuity and LTCI businesses.
Originally, Genworth was hoping to use financing from its would-be buyer, China Oceanwide Holdings Group Co. Ltd., to handle the debt payments due in May. Regulators in Delaware, and at the Committee on Foreign Investment in the United States, have had questions about the China Oceanwide deal. Genworth has been unable to stick to its original deal completion schedule and get cash from China Oceanwide.
Genworth has talked in recent weeks about handling the May debt payment bills by using the value of its mortgage insurance subsidiaries as collateral for borrowing $450 million.
In the new SEC filing, Genworth says it now hopes to get a $400 million term loan from a syndicate, or group, of lenders.
“However, there can be no assurance that syndication of the term loan will be successful, that we will be able to obtain the term loan under the terms that we currently pursue, or on terms satisfactory to us, or that we will ultimately enter into the term loan,” Genworth says in a discussion of risks related to liquidity and credit.
Genworth is also considering other strategies for protecting the ratings of its U.S. mortgage insurance business, such as a partial sale, if the transaction with China Oceanwide cannot be completed.
In a table summarizing the company’s liability for future policy and contract claims, Genworth says it now estimates that it ended 2017 with $9.6 billion in future claim obligations, up from $9.3 billion a year earlier.
- Projected LTCI obligations increased to $8.5 billion, from $8 billion.
- Projected life insurance obligations increased to $244 million, from $226 million.
- Projected fixed annuity obligations increased to $24 million, from $16 million.
Elsewhere in the section on future policy obligations, Genworth notes that it could face risks related to future life insurance benefits obligations as well as future LTCI benefits obligations.
If, for example, LTCI claim costs for an acquired block of LTCI policies turned out to be 5% higher than expected, that could cost the company an extra $160 million.
If the lapse rate at the company’s own block of in-force term life and whole life policies increased to a level 10% higher than expected, that could increase costs by $400 million.
— Read Genworth Asks to Change Terms of Notes on ThinkAdvisor.