Genworth Financial Inc.
) announced that it has gained approval for implementation of its
U.S. Mortgage Insurance Capital Plan. The plan was previously
announced in Jan 2013 to reduce the risk-to-capital ratio of the
U.S. mortgage insurance subsidiary and the risk of a default
under the indenture governing Genworth's senior notes, and was
pending regulatory approval.
As per the plan, the European mortgage insurance subsidiaries'
ownership is transferred to that of Genworth Mortgage Insurance
Corporation (GMICO) effective Jan 31, 2013.
It also executes a legal entity reorganization which engages in
the formation of a new parent company under which Genworth will
become a wholly owned subsidiary and the existing shares and
shareholders of Genworth will come under that of the 'new
parent'. Also the U.S. and European subsidiaries will be
converted to wholly owned subsidiaries of the new parent which
will be listed under the New York stock Exchange under the symbol
Additionally under adverse situations the capital plan provides
Genworth with the ability to execute a 'New Co.' option which
allows it to write profitable business consistently in all 50
states. The plan is expected to reduce the risk-to-capital ratio
of GMICO and the U.S. mortgage insurance subsidiaries by
approximately 15 and 10 points respectively.
Genworth is well supported by an estimated $950 million cash and
liquid securities at the end of first quarter, 2013. Thus, in
spite of paying $100 million to GMICO as per the deal, Genworth
expects to have a high cash balance and an additional $350
The implementation of the plan is expected to augment the
financial flexibility of Genworth and strengthen its capital
position thereby enhancing the profitability of the business
Genworth currently carries a Zacks Rank #4 (Sell). Among
others in the industry
Lincoln National Corporation
StanCorp Financial Group Inc.
Reinsurance Group of America Inc.
) carry a favorable Zacks Rank #2 (Buy) and are worth
GENWORTH FINL (GNW): Free Stock Analysis
LINCOLN NATL-IN (LNC): Free Stock Analysis
REINSURANCE GRP (RGA): Free Stock Analysis
STANCORP FNL CP (SFG): Free Stock Analysis
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