Genworth to Be Sold to China Oceanwide for $2.7B

Genworth writes mortgage insurance in the U.S., and has stakes in a Canadian and an Australian home-loan guarantor. Mortgage insurers cover losses for lenders when homeowners default and foreclosure fails to recoup costs. This deal gives China Oceanwide the chance to benefit from gains in the U.S. housing market.

McInerney has been seeking to free up capital to pay bonds coming due, and has also been boosting capital by selling assets. He struck a deal in 2015 to sell a European mortgage unit to AmTrust Financial Services Inc. and also agreed to have Axa SA buy a European unit that offers customers protection against the financial impact of major illness, accident or death. He's also been working to restructure the business units in a way that's acceptable to regulators, and won approval from bondholders earlier this year to reorganize some of its units.

The deal will help give Genworth the finances to separate a life and annuity operation from another life insurance arm, according to the statement. Lu said the transaction was structured to make it easier to obtain regulatory approval.

'Ideal Owner'

Genworth shares have slumped from as high as $15.53 at the end of 2013 as the company dealt with its long-term care operations. The insurer has also been seeking in recent years to boost rates on old long-term care coverage as medical costs increased and more people than expected held on to those policies. The Chinese buyer has no intention or obligation to add more capital to support those legacy obligations, according to the statement.

"We believe that this transaction creates greater and more certain stockholder value than our current business plan or other strategic alternatives," McInerney said in the statement. "China Oceanwide is an ideal owner for Genworth. They recognize the strength of our mortgage insurance platform and the importance of long-term care insurance in addressing an aging population."

Overseas buyers have been seeking to enter the U.S. insurance market to expand in a large market and counter some challenges at home. Japan's Dai-ichi Life Insurance Co. agreed in 2014 to buy Birmingham, Alabama-based Protective Life Corp., and Sumitomo Life Insurance Co. agreed to purchase Symetra Financial Corp. last year. China's Anbang agreed to a deal for Des Moines, Iowa-based Fidelity & Guaranty Life that same year, but has hit a roadblock, pulling an application for regulatory approval from New York to buy the firm. Anbang has renewed discussions with regulators about the transactions, people with knowledge of the talks said in September.

The deal is expected to close by the middle of 2017, the company said in the statement. Genworth received advice from Goldman Sachs Group Inc., Lazard Ltd., Willkie, Farr & Gallagher LLP, and Weil, Gotshal & Manges LLP, while the board of directors sought guidance from Richards, Layton & Finger. China Oceanwide was advised by Citigroup Inc., Willis Towers Watson Plc, Sullivan & Cromwell and Potter Anderson & Corroon LLP.

Genworth also announced charges associated with its long-term care reserves and taxes of about $535 million to $625 million, unrelated to this transaction.