China Oceanwide to Acquire Genworth for US$2.7 Billion
October 25, 2016 by Iris Lai
RICHMOND, Va. – China Oceanwide Holdings Group Co. Ltd. has agreed to acquire all of the outstanding shares of Genworth Financial Inc. for US$2.7 billion.
China Oceanwide, a private and family owned international financial holding group, will pay US$5.43 a share in cash for Genworth.
As part of the transaction, China Oceanwide will contribute about US$600 million of cash to address Genworth’s debt maturing in 2018 and US$525 million of cash to the company’s U.S. life insurance businesses, Genworth said in a statement. Separately, Genworth disclosed preliminary charges unrelated to this transaction of US$535 million to US$625 million after-tax associated with long-term care insurance claim reserves and taxes, according to Genworth.
Genworth said the acquisition “is expected to mitigate the negative impact of these charges on Genworth’s financial flexibility and facilitate its ability to complete its previously announced U.S. life insurance restructuring plan.” This transaction is the best strategic alternative to maximize stockholder value, added Genworth.
The additional US$1.1 billion capital commitment “enables debt reduction and cash infusion to the U.S. life insurance businesses,” said Genworth. It also facilitates a “long-term objective of improving U.S. mortgage insurance ratings over time,” as well as growth opportunities.
“In acquiring Genworth and contributing US$1.1 billion of additional capital, we are providing crucial financial support to Genworth’s efforts to restructure its U.S. life insurance businesses by unstacking Genworth Life and Annuity Insurance Co. from under Genworth Life insurance Co. and address its 2018 debt maturity,” Zhiqiang Lu, chairman of China Oceanwide, said in a statement. He added, “we have structured the transaction with the intention of increasing the likelihood of obtaining regulatory approval.”
Genworth will become a standalone subsidiary of China Oceanwide upon the completion of the deal, according to Genworth. The transaction is subject to approvals by Genworth’s stockholders and regulators.
The company’s “day-to-day operations are not expected to change as a result of this transaction,” said Genworth. It intends “to maintain its existing portfolio of businesses” including Genworth MI Canada Inc. and Genworth Mortgage Insurance Australia Ltd.
In February, Genworth notified 330 employees that they were being dismissed, with most of the jobs supporting the sale of life insurance and annuities. The layoffs followed the disclosure that Genworth was stopping further sales of its money-losing life and annuity products, and focusing instead on its profitable long-term care and mortgage insurance lines (Best’s News Service, Feb. 5, 2016).
In January, Genworth completed the sale of certain blocks of term life insurance to Protective Life Insurance Co., which was to generate $100 million to $150 million to Genworth (Best’s News Service, Jan. 18, 2016).
“China Oceanwide is an ideal owner for Genworth going forward. They recognize the strength of our mortgage insurance platform and the importance of long-term care insurance in addressing an aging population,” Tom McInerney, president and chief executive officer of Genworth, said in a statement.
Beijing-based China Oceanwide has made active moves into insurance businesses in China with the consolidation of its units under the Asia Pacific brand. The group renamed Minan Property & Casualty Insurance Co. Ltd. to Asia Pacific Property & Casualty Insurance Co. Ltd. as an alignment to the group’s insurance brand. China Oceanwide had said the group and other shareholders planned to inject 8 billion yuan (US$1.2 billion) into Asia Pacific P&C to strengthen its development. China Oceanwide is also planning to set up Asia Pacific Reinsurance and Asia Pacific Online Life Insurance as part of the group’s establishment of its insurance operation (Best’s News Service, March 07, 2016).
Genworth Life Insurance Co. currently has a Best’s Financial Strength Rating of B++(Good).
(By Iris Lai, Hong Kong bureau manager: Iris.Lai@ambest.com)
