The New York State Department of Financial Services officials are trying to use their ability to block the sale of Genworth Financial Inc. to make Genworth increase capital levels at a life insurance subsidiary in New York.
The New York department wants Genworth to add the capital, to Genworth Life Insurance Company of New York (GLICNY), as a condition for the department reapproving Genworth’s efforts to be acquired by China Oceanwide Holdings Group Co. Ltd.
Genworth Chief Executive Officer Thomas McInerney said last week that Genworth executives hopes to get the required capital contribution down to a level that China Oceanwide, and insurance regulators in other states, can tolerate.
McInerney talked about the GLICNY capital contribution negotiations last week, during a conference call the company held to go over its fourth-quarter earnings with securities analysts.
“China Oceanwide and Genworth really want this deal to close,” McInerney told the analysts. “I think all the other states want it to close. I think New York wants it to close. But it comes down to what is a fair capital commitment to New York. And we’re flexible on that.”
China Oceanwide, a financial services company and real estate developer based in Beijing, has been trying to acquire Genworth since October 2016.
The New York department has already approved the deal, but completing the deal has taken so long that the approval has expired.
Genworth is a large mortgage insurer. It was a major issuer of life insurance, annuities, and long-term care insurance (LTCI). It still has large blocks of life, annuity and LTCI business on its books, and it still writes some LTCI coverage.
The subsidiary that has written most of Genworth’s LTCI coverage is Genworth Life Insurance Company (GLIC), a company that is regulated by the Delaware Department of Insurance.
GLIC owns a majority interest in GLICNY, and another Genworth subsidiary owns the rest of GLICNY.
GLIC provides LTCI coverage for about 1 million people outside of New York state, and GLICNY provides LTCI coverage for about 76,000 people in New York state, according to figures provided during the earnings call.
Genworth has said that, when it completes the China Oceanwide deal, it will put $175 million cash into GLIC, but that, aside from making that contribution, it will expect GLIC to stand on its own. Genworth says that, to keep GLIC healthy, state insurance regulators must approve LTCI premium increases.