Executives at Genworth Financial Inc. managed to keep the company’s long-term care insurance (LTCI), life insurance and annuity operations on track in the second quarter as they focus on trying to complete a pending sale of the company to a unit of China Oceanwide Holdings Group Co. Ltd.
Genworth as a whole reported $249 million in net income for the quarter on $2.16 billion in revenue, compared with $271 million in net income on $2.22 billion in revenue for the second quarter of 2017.
The Richmond, Virginia-based company managed to hold revenue almost steady even though it has stopped actively selling much of any product other than mortgage insurance.
LTCI, Life and Annuity Performance
For years, Genworth was a leader in the stand-alone long-term care insurance, life insurance and annuity markets.
The LTCI unit is reporting $22 million in adjusted operating income on $1 billion in revenue, compared with $33 million in adjusted operating income on $1 billion in revenue for the year-earlier quarter.
Premium increases helped Genworth push LTCI premium revenue up to $632 million, from $623 million.
The life insurance unit is reporting $4 million in adjusted operating income on $367 million in revenue, compared with a $1 million net loss on $411 million in revenue for the year-earlier quarter.
The fixed annuity unit is reporting $31 million in adjusted operating income on $172 million in revenue, compared with $7 million in adjusted operating income on $210 million in revenue for the year-earlier quarter.
Genworth was hoping to use cash from China Oceanwide to pay off a large amount of debt that matured in the spring. Instead, because the China Oceanwide deal is still in progress, Genworth made the debt payments by using cash on hand, and by issuing new debt secured by the value of mortgage insurance subsidiaries.
Genworth’s holding company cash and liquid asset total has fallen to $622 million, from $858 million a year earlier.
The consolidated risk-based capital ratio for its life insurance companies has fallen to 275%, from 331%.
China Oceanwide Deal
China Oceanwide and Genworth have extended their deal deadline several times already. The current deadline is Aug. 15.
China Oceanwide can walk away from the deal Aug. 15 if regulators have not approved the transaction.
The companies have received a key approval from the Committee On Foreign Investment In the United States a national security agency that apparently had concerns about how the companies might handle customers’ personal data. The companies have resolved that issue by agreeing to have an outside company take charge of customer data.
Genworth and Oceanwide continue to work towards closing their previously announced proposed transaction as quickly as possible.
During the quarter, CFIUS completed its review of the proposed transaction and concluded that there are no unresolved national security concerns. In connection with the CFIUS review of the proposed transaction, Genworth and Oceanwide entered into a mitigation agreement which, among other things, requires Genworth to use a U.S.-based, third-party service provider to manage and protect the personal data of Genworth’s U.S. policyholders.
The companies still need deal approvals from other regulators in the United States and in other countries.
Genworth said it and China Oceanwide may update some of the deal terms, to reflect that Genworth has already made the big debt payments due in May.
“Genworth and Oceanwide continue to provide regulators with updated information to facilitate their review of the transaction,” Genworth said, in a note about the deal included with the earnings announcement.
Lu Zhiqiang, chairman of China Oceanwide, said in a statement that his company is still interested in completing the Genworth deal.
“Oceanwide remains committed to the transaction, which would provide Oceanwide with the opportunity to enhance our global insurance expertise and bring better insurance market solutions to China,” Lu said in the statement.
In the past, Lu has said that one of his main goals is to bring Genworth’s expertise in the LTCI market to China.
— Read Delaware Sees Hidden Value in Genworth’s Annuity Unit, on ThinkAdvisor.