RICHMOND, Va., Feb. 27, 2017 /PRNewswire/ -- Genworth
Financial, Inc. (NYSE: GNW) announced statutory financial and cash
flow testing results for its life insurance companies for the year
ended December 31, 2016. The results
include:
- Long term care insurance (LTC) statutory margins were modestly
lower relative to 2015 in Genworth Life Insurance Company (GLIC),
with positive margin of approximately $1.5
billion after reflecting provisions for adverse deviation
(PADs). Results include the LTC business previously reinsured to
Brookfield Life and Annuity
Insurance Company Limited (BLAIC) which merged with and into GLIC
in October 2016. The decline in
margins was primarily from higher expected future claim costs
driven mostly by assumption updates impacting claim termination and
benefit utilization rates, partially offset by the impact of
anticipated premiums driven mostly by future in-force rate
actions.
- LTC statutory margins for Genworth Life Insurance Company of
New York (GLICNY) resulted in a
negative margin of approximately $400
million, after reflecting PADs, compared with a negative
margin of approximately $270 million
as of year end 2015. The LTC statutory cash flow testing factors
used by the New York regulator
vary from those used by other regulators, including only allowing
approved LTC in force premium rate increases or benefit reductions
to be utilized in cash flow testing. However, unlike prior years,
GLICNY was permitted to aggregate cash flow testing results across
product lines for 2016. As a result, GLICNY's aggregated cash flow
testing resulted in a negative margin of approximately $110 million. No additional reserves were
required to be established in 2016 given previously recorded cash
flow testing reserves. The remaining negative margin of
approximately $110 million is
expected to be recognized over the next two years. As of year end
2016, the risk-based capital (RBC) ratio for GLICNY was 438
percent.
- Stand-alone testing (Actuarial Guideline 38) of universal life
insurance products with secondary guarantees resulted in a
$116 million increase in statutory
reserves in the fourth quarter of 2016, primarily in Genworth Life
and Annuity Insurance Company (GLAIC). GLAIC expects to record
additional reserves of $95 million in
each of the next two years in GLAIC. The negative impact was
primarily driven by assumption changes due to emerging mortality
experience in older age populations. As of year end 2016, the RBC
ratio for GLAIC was 564 percent.
- As a result of the above impacts, the consolidated U.S. life
insurance company RBC ratio of GLIC was 329 percent as of year end
2016 which also included an approximate eight point reduction from
the merger of BLAIC in the fourth quarter of 2016.
As announced on February 7, 2017,
all filings required under the merger agreement for regulatory
approval of the transaction have been submitted. The Committee on
Foreign Investment in the United
States staff has also now initiated its review period.
In addition, the New York Department of Financial Services (NY DFS)
has informed Genworth that, based on its preliminary review of the
China Oceanwide Holdings Group Co., Ltd. (China Oceanwide)
organizational and ownership structure in connection with the
pending application and noting that the review of the proposed
transaction has not been completed, there is no reason to believe
that China Oceanwide is an unsuitable controlling owner of
GLICNY. Whether the transaction itself may be approved
remains subject to a complete review by the NY DFS.
The previously announced transaction with China Oceanwide is
subject to receipt of required approvals by Genworth stockholders,
regulators and other closing conditions.
About Genworth Financial
Genworth Financial,
Inc. (NYSE: GNW) is a Fortune 500 insurance holding company
committed to helping families achieve the dream of homeownership
and address the financial challenges of aging through its
leadership positions in mortgage insurance and long term care
insurance. Headquartered in Richmond, Virginia, Genworth traces its roots
back to 1871 and became a public company in 2004. For more
information, visit genworth.com.
From time to time, Genworth releases important information via
postings on its corporate website. Accordingly, investors and other
interested parties are encouraged to enroll to receive automatic
email alerts and Really Simple Syndication (RSS) feeds regarding
new postings. Enrollment information is found under the "Investors"
section of genworth.com. From time to time, Genworth's
publicly traded subsidiaries, Genworth MI Canada Inc. and Genworth
Mortgage Insurance Australia Limited, separately release financial
and other information about their operations. This information can
be found at http://genworth.ca and
http://www.genworth.com.au.
Cautionary Note Regarding Forward-Looking
Statements
This press release contains certain "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements may be identified by words such
as "expects," "intends," "anticipates," "plans," "believes,"
"seeks," "estimates," "will" or words of similar meaning and
include, but are not limited to, statements regarding the outlook
for the company's future business and financial performance.
Forward-looking statements are based on management's current
expectations and assumptions, which are subject to inherent
uncertainties, risks and changes in circumstances that are
difficult to predict. Actual outcomes and results may differ
materially due to global political, economic, business,
competitive, market, regulatory and other factors and risks,
including, but not limited to, the following:
- risks related to the proposed transaction with China
Oceanwide Holdings Group Co., Ltd. (China Oceanwide) including:
the company's inability to complete the transaction in a timely
manner or at all; the company's inability to obtain stockholder or
regulatory approvals, or the possibility that the parties may delay
the transaction or that materially burdensome or adverse regulatory
conditions may be imposed in connection with any such regulatory
approvals; legal proceedings may be instituted against the company
in connection with the proposed transaction; the proposed
transaction may disrupt the company's current plans and operations;
certain restrictions during the pendency of the transaction may
impact the company's ability to pursue certain business
opportunities or strategic transactions; there may be insufficient
continued availability of capital and financing to the company
before the consummation of the transaction; there may be further
rating agency actions and downgrades in the company's financial
strength ratings; there may be changes in applicable laws or
regulations; the company may not recognize the anticipated benefits
of the transaction; the amount of the costs, fees, expenses and
other charges related to the transaction may be material;
management's attention may be diverted from the company's ongoing
business operations; the merger agreement may be terminated in
circumstances that would require the company to pay China Oceanwide
a fee; the company's ability to attract, recruit, retain and
motivate current and prospective employees may be adversely
affected; and disruptions and uncertainty relating to the
transaction, whether or not it is completed, may harm the company's
relationships with its employees, customers, distributors, vendors
or other business partners, and may result in a negative impact on
the company's business;
- strategic risks in the event the proposed transaction with
China Oceanwide is not consummated including: the company's
inability to successfully execute alternative strategic plans to
effectively address its current business challenges (including with
respect to the restructuring of its U.S. life insurance businesses,
debt obligations, cost savings, ratings and capital); the company's
inability to attract buyers for any businesses or other assets it
may seek to sell, or securities it may seek to issue, in each case,
in a timely manner on anticipated terms; failure to obtain any
required regulatory, stockholder and/or noteholder approvals or
consents, or the company's challenges changing or being more costly
or difficult to successfully address than currently anticipated or
the benefits achieved being less than anticipated; inability to
achieve anticipated cost-savings in a timely manner; adverse tax or
accounting charges; and inability to increase the capital needed in
the company's businesses in a timely manner and on anticipated
terms, including through improved business performance, reinsurance
or similar transactions, asset sales, securities offerings or
otherwise, in each case as and when required;
- risks relating to estimates, assumptions and valuations
including: risks related to the impact of the company's annual
review of assumptions and methodologies related to its long term
care insurance claim reserves in the third quarter of 2016 and its
margin reviews in the fourth quarter of 2016; inadequate reserves
and the need to increase reserves (including any changes the
company may make in the future to its assumptions, methodologies or
otherwise in connection with periodic or other reviews); inaccurate
models; deviations from the company's estimates and actuarial
assumptions or other reasons in its long term care insurance, life
insurance and/or annuity businesses; accelerated amortization of
deferred acquisition costs (DAC) and present value of future
profits (PVFP) (including any changes it may make in the future to
its assumptions, methodologies or otherwise in connection with
periodic or other reviews); adverse impact on the company's
financial results as a result of projected profits followed by
projected losses (as is currently the case with its long term care
insurance business); and changes in valuation of fixed maturity,
equity and trading securities;
- risks relating to economic, market and political
conditions including: downturns and volatility in global
economies and equity and credit markets; interest rates and changes
in rates (particularly given the historically low interest rate
environment) have adversely impacted, and may continue to
materially adversely impact, the company's business and
profitability; deterioration in economic conditions or a decline in
home prices that adversely affect the company's loss experience in
mortgage insurance; political and economic instability or changes
in government policies; and fluctuations in foreign currency
exchange rates and international securities markets;
- regulatory and legal risks including: extensive
regulation of the company's businesses and changes in applicable
laws and regulations; litigation and regulatory investigations or
other actions; dependence on dividends and other distributions from
the company's subsidiaries (particularly its international
subsidiaries) and the inability of any subsidiaries to pay
dividends or make other distributions to the company, including as
a result of the performance of its subsidiaries and insurance,
regulatory or corporate law restrictions; adverse change in
regulatory requirements, including risk-based capital; changes in
regulations adversely affecting the company's international
operations; inability to meet or maintain the private mortgage
insurer eligibility requirements (PMIERs); inability of the
company's U.S. mortgage insurance subsidiaries to meet minimum
statutory capital requirements and hazardous financial condition
standards; the influence of Federal National Mortgage Association
(Fannie Mae), Federal Home Loan Mortgage Corporation (Freddie Mac)
and a small number of large mortgage lenders on the U.S. mortgage
insurance market and adverse changes to the role or structure of
Fannie Mae and Freddie Mac; adverse changes in regulations
affecting the company's mortgage insurance businesses; inability to
continue to implement actions to mitigate the impact of statutory
reserve requirements; impact of additional regulations pursuant to
the Dodd-Frank Wall Street Reform and Consumer Protection Act (the
Dodd-Frank Act); and changes in accounting and reporting
standards;
- liquidity, financial strength ratings, credit and
counterparty risks including: insufficient internal sources to
meet liquidity needs and limited or no access to capital (including
the company's inability to enter into a credit facility); recent or
future adverse rating agency actions, including with respect to
rating downgrades or potential downgrades or being put on review
for potential downgrade (including in connection with the company's
recent announcement of a material increase to the company's
universal life insurance reserves), all of which could have adverse
implications for the company, including with respect to key
business relationships, product offerings, business results of
operations, financial condition and capital needs, strategic plans,
collateral obligations and availability and terms of hedging,
reinsurance and borrowings; defaults by counterparties to
reinsurance arrangements or derivative instruments; defaults or
other events impacting the value of the company's fixed maturity
securities portfolio; and defaults on the company's commercial
mortgage loans or the mortgage loans underlying its investments in
commercial mortgage-backed securities and volatility in
performance;
- operational risks including: inability to retain,
attract and motivate qualified employees or senior management;
ineffective or inadequate risk management in identifying,
controlling or mitigating risks; reliance on, and loss of, key
customer or distribution relationships; availability, affordability
and adequacy of reinsurance to protect the company against losses;
competition; competition in the company's mortgage insurance
businesses from government and government-owned and
government-sponsored enterprises (GSEs) offering mortgage
insurance; material weakness in, or ineffective, internal control
over financial reporting; and failure or any compromise of the
security of the company's computer systems, disaster recovery
systems and business continuity plans and failures to safeguard, or
breaches of, its confidential information;
- insurance and product-related risks including: the
company's inability to increase sufficiently, and in a timely
manner, premiums on in force long term care and life insurance
policies and/or reduce in force benefits, and charge higher
premiums on new policies, in each case, as currently anticipated
and as may be required from time to time in the future (including
as a result of the company's failure to obtain any necessary
regulatory approvals or unwillingness or inability of policyholders
to pay increased premiums), including to offset the impact on the
company's margins of updated claim reserves assumptions in
connection with its annual review of its long term care insurance
claim reserves in the third quarter of 2016 and its annual U.S.
life insurance assumption reviews in the fourth quarter of 2016;
the company's inability to reflect future premium increases and
other management actions in its margin calculation as anticipated;
failure to sufficiently increase new sales for the company's long
term care insurance products; inability to realize anticipated
benefits of the company's rescissions, curtailments, loan
modifications or other similar programs in its mortgage insurance
businesses; premiums for the significant portion of the company's
mortgage insurance risk in force with high loan-to-value ratios may
not be sufficient to compensate the company for the greater risks
associated with those policies; decreases in the volume of high
loan-to-value mortgage originations or increases in mortgage
insurance cancellations; increases in the use of alternatives to
private mortgage insurance and reductions in the level of coverage
selected; potential liabilities in connection with the company's
U.S. contract underwriting services; and medical advances, such as
genetic research and diagnostic imaging, and related legislation
that impact policyholder behavior in ways adverse to the
company;
- other risks including: occurrence of natural or man-made
disasters or a pandemic; impairments of or valuation allowances
against the company's deferred tax assets; the possibility that in
certain circumstances the company will be obligated to make
payments to General Electric Company (GE) under the tax matters
agreement with GE even if its corresponding tax savings are never
realized and payments could be accelerated in the event of certain
changes in control; and provisions of the company's certificate of
incorporation and bylaws and the tax matters agreement with GE may
discourage takeover attempts and business combinations that
stockholders might consider in their best interests; and
- risks relating to the company's common stock including:
the continued suspension of payment of dividends; and stock price
fluctuations.
The company undertakes no obligation to publicly update any
forward-looking statement, whether as a result of new information,
future developments or otherwise.
Important Information For Investors and
Stockholders
This communication may be deemed to be a
solicitation material in respect of the proposed transaction with
China Oceanwide Holdings Group Co., Ltd. Genworth filed the
definitive proxy statement with the SEC in connection with the
solicitation of proxies for a special meeting to be held on
March 7, 2017 (the Proxy Statement).
The Proxy Statement and a proxy card are in the process of being
mailed to each stockholder entitled to vote at the meeting.
Genworth stockholders are urged to read the Proxy Statement
(including any and all amendments and supplements thereto) and all
other relevant documents which Genworth will file with the SEC when
they become available, because they will contain important
information about the proposed transaction and related matters.
Stockholders will also be able to obtain copies of the Proxy
Statement, without charge, when available, at the SEC's website at
www.sec.gov or by contacting the investor relations department of
Genworth at the following:
investorinfo@genworth.com
Participants in the Solicitation
Genworth and its
directors and executive officers may be deemed to be participants
in the solicitation of proxies of Genworth's stockholders in
connection with the proposed transaction with China Oceanwide
Holdings Group Co., Ltd. Genworth's stockholders may obtain,
without charge, more detailed information regarding such interested
participants in the Proxy Statement, Genworth's Annual Report on
Form 10-K filed with the SEC on February 26,
2016, any Statements of Changes in Beneficial Ownership on
Form 4 of such participants, filed with the SEC, and certain other
documents to be filed with the SEC in connection with the proposed
transaction.
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SOURCE Genworth Financial, Inc.