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Life Health > Long-Term Care Planning

Investment Strategist Challenges Genworth Board

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What You Need to Know

  • Klarquist is the CEO and chief investment officer at Seven Corners Capital.
  • He is seeking a seat on the board of a publicly traded venture capital fund.
  • He opposes the reelection of the four directors who serve on the Genworth board compensation committee.

An investor is asking other investors to help him oust the Genworth Financial directors who serve on the Genworth board compensation committee.

Scott Klarquist — the president, CEO and chief investment officer at Seven Corners Capital Management — announced the effort in an open letter to Genworth shareholders that was filed Wednesday with the SEC.

Shareholders should vote against the compensation committee members because Genworth is paying its top executives and directors too much, Klarquist said in the letter.

“I believe Genworth’s senior executive compensation makes little sense,” Klarquist said.

Tom McInerney, Genworth’s CEO, earned $8.5 million in cash compensation awards, stock awards and other compensation in 2021, and he and other Genworth senior executives and directors are paid as if they were associated with insurers, such as CNO Financial Group and Unum Group, with an average “market cap,” or total stock value, that’s about five times higher than Genworth’s market cap,  Klarquist said.

Klarquist does not compare executive or director compensation levels based on variables such as revenue or asset size.

Klarquist said in the letter that he is the beneficial owner of 30,100 shares of Genworth’s Class A common stock.

He also intends to file a preliminary proxy statement and proxy card to be used to solicit votes at Genworth’s annual meeting, according to a note at the bottom of his open letter. Genworth plans to start a virtual-only annual meeting at 9 a.m. Eastern Daylight Time May 19.

Klarquist was not immediately available for comment.

Genworth said in a separate filing that Klarquist has told it that he intends to run for a seat on the Genworth board.

“You may receive proxy solicitation materials from Mr. Klarquist,” Genworth said. “We are not responsible for the accuracy of any information contained in any solicitation materials filed or disseminated by, or on behalf of, Mr. Klarquist or any other statements that he may otherwise make.”

The Genworth board is recommending unanimously that shareholders vote for the board’s own nominees and ignore Klarquist’s materials.

Shareholders can revoke any Klarquist proxy cards they have sent by calling Genworth, notifying the company through the internet, returning a later-dated proxy card, or attending the Genworth annual meeting.

Genworth was not immediately available for comment.

Genworth

Genworth is a Richmond, Virginia-based insurer that was once a large issuer of life insurance, annuities, long-term care insurance and mortgage insurance.

The company has suspended sales of life insurance and annuities and sells only negligible amounts of LTCI coverage. It continues to own a majority stake in Enact Holdings — a large, publicly traded mortgage insurance affiliate that continues to sell large amounts of mortgage insurance.

Genworth descends from The Life Insurance Company of Virginia, a carrier created in 1871.

General Electric’s GE Capital affiliate acquired Life of Virginia in 1996. GE later created Genworth in 2004, by spinning it off and putting it in charge of the old GE Capital insurance operations.

Genworth began to suffer severe financial problems around 2010, because of the inaccurate assumptions about the behavior of long-term care insurance insureds and the effects of prolonged low interest rates on the bond investments supporting the company’s long-term care insurance policies.

The company’s board brought McInerney to try to turn the company around in 2013.

The company struggled with losses and the collapse of efforts to be acquired by China Oceanwide, a financial services company in China.

Performance has improved over the past two years, and S&P Global Ratings recently increased Genworth’s long-term issuer credit rating to B+, from B.

Scott Klarquist and Seven Corners

Klarquist has a bachelor’s degree and a law degree from the University of Virginia. He worked as a corporate transactions lawyer from 2001 through 2013, then spent about three years operating as a private investor.

In 2016, he started Seven Corners Capital.

The firm bills itself as an investment research and advisory firm that seeks to use in-depth research to find investment opportunities. One of the company’s specialties is looking for turnaround opportunities.

The firm has posted a number of open letters to shareholders on an activism section on its website. The letters relate to companies such as Precision Optics Corp., Rite Aid and Firsthand Technology Value Fund as well as to Genworth.

Firsthand Technology Value Fund is a publicly traded venture capital fund. Klarquist also is seeking a seat on that company’s board.

(Image: Adobe Stock)