Genworth Financial Inc. may reduce spending on some long-term care insurance (LTCI) operations due to a decision to de-emphasize efforts to be acquired by China Oceanwide Holdings Group Co. Ltd.
Thomas McInerney, the chief executive officer of the Richmond, Virginia-based company, talked about the company’s LTCI operations Tuesday, during a conference call with securities analysts regarding the China Oceanwide deal status with .
McInerney said Genworth intends to cut costs by shedding some capabilities, such as LTCI sales and marketing operations, that it had been keeping to support the China Oceanwide deal. China Oceanwide would have liked to use those operations to start a new, stand-alone LTCI issuer in the United States quickly, he said.
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“We do not takes these actions lightly,” McInerney said of the proposed cost reductions. “We know this is a challenging time for our employees.”
McInerney said Genworth will give more details about the changes in early February, when the company releases its earnings for the fourth quarter of 2020.
Genworth is descended from a financial services company that was once an affiliate of General Electric. It continues to be a major issuer of mortgage insurance in the United States. It has been a major issuer of life insurance, annuities and long-term care insurance, and it continues to generate some LTCI sales.
McInerney said during the call that Genworth still has 1.1 million LTCI policies in force.
About 50,000 of the insureds are using their benefits, and about 35,000 of those 50,000 claimants are using their benefits to pay for home care, McInerney said.
Genworth will focus on supporting the mortgage insurance operations. It says the life and annuity subsidiaries, which are the ones that wrote the LTCI business, will have to operate on a stand-alone basis, and that Genworth has no intention of putting more of its capital into those subsidiaries.
China Oceanwide has agreed to provide some cash that would be used to increase Genworth life and annuity subsidiary capital levels, if the China Oceanwide-Genworth deal closes.
McInerney said that efforts to increase LTCI premiums have been an important part of improving Genworth’s finances, and that the company has obtained enough rate increase approvals to generate about $334 million in additional premiums per year on a base of $984 million in annual LTCI premium revenue.
China Oceanwide Deal
China Oceanwide, a real estate developer and financial services company based in Beijing, has been trying to acquire Genworth since October 2016.
Genworth executives said Dec. 10, during a meeting with shareholders, that they hoped the deal could be completed by Dec. 31.