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Genworth (GNW) Subsidiary to Sell Term Life Insurance Blocks

Genworth Financial, Inc.GNW announced that its wholly owned indirect subsidiary - Genworth Life and Annuity Insurance Company - has inked a deal to sell some blocks of term life insurance to Protective Life Insurance Company. The blocks would be sold via reinsurance.

Most of the term life insurance blocks to be sold are reinsured to River Lake Insurance Company and River Lake Insurance Company II at present. The deal is pending regulatory approvals and is expected to culminate by the first quarter of 2016.

Post completion of the transaction, Genworth will continue to service the policies that include in force term life insurance worth almost $108.7 billion, which are backed by nearly $2.3 billion of statutory reserves as of the second quarter end.

The upcoming sale is expected to leverage Genworth's financial flexibility and increase its strength by generating capital from low-return lines of businesses. The company expects to initially generate capital worth $100-$150 million from the deal. Additionally, the transaction will utilize all the net operating losses of U.S. life insurance companies resulting in anticipated inter-company tax payments to the holding company and other entities for using tax benefits over time.

Apart from tax benefits and additional capital generation, Genworth's return on equity (ROE) is expected to improve with the transaction. Also, the company expects minimal impact on its income. Additionally, Genworth foresees an after-tax GAAP loss of $275-$325 million in third-quarter 2015, primarily due to the write-off of deferred acquisition costs related to selling of term life insurance blocks.

Genworth is focusing more on streamlining and simplifying its business. The company also intends to strengthen its mortgage insurance and long-term care businesses, increase excess capital, and improve earnings and ROE. Hence, the aforesaid agreement will further bolster the company's business plans.

Zacks Rank and Stocks to Consider

Genworth presently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the insurance space worth considering are Amerisafe, Inc. AMSF , Primerica, Inc. PRI and Sun Life Financial, Inc. SLF . While Amerisafe sports a Zacks Rank #1 (Strong Buy), both Sun Life Financial and Primerica hold a Zacks Rank #2 (Buy).

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GENWORTH FINL (GNW): Free Stock Analysis Report

AMERISAFE INC (AMSF): Free Stock Analysis Report

PRIMERICA INC (PRI): Free Stock Analysis Report

SUN LIFE FINL (SLF): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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