WASHINGTON (dpa-AFX) - China Oceanwide Holdings Group Co., Ltd. and Genworth Financial, Inc. (GNW) announced that they reached a definitive agreement by which China Oceanwide has agreed to acquire all of the outstanding shares of Genworth for a total transaction value of approximately $2.7 billion, or $5.43 per share in cash.
Separately, Genworth also announced preliminary charges unrelated to this transaction of $535 to $625 million after-tax associated with long term care insurance (LTC) claim reserves and taxes. The China Oceanwide transaction 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.
The transaction is subject to approval by Genworth's stockholders as well as other closing conditions, including the receipt of required regulatory approvals.
As part of the transaction, China Oceanwide has additionally committed to contribute to Genworth $600 million of cash to address the debt maturing in 2018, on or before its maturity, as well as $525 million of cash to the U.S. life insurance businesses. This contribution is in addition to $175 million of cash previously committed by Genworth Holdings, Inc. to the U.S. life insurance businesses.
Upon the completion of the transaction, Genworth will be a standalone subsidiary of China Oceanwide and Genworth's senior management team will continue to lead the business from its current headquarters in Richmond, Virginia. Genworth intends to maintain its existing portfolio of businesses, including its MI businesses in Australia and Canada. Genworth's day-to-day operations are not expected to change as a result of this transaction.
The transaction is expected to close by the middle of 2017, subject to the requisite approval by Genworth's stockholders as well as certain other closing conditions, including the receipt of regulatory approvals. Both China Oceanwide and Genworth have initiated discussions with regulators in key jurisdictions.
Genworth expects to increase LTC claim reserves by approximately $400 to $450 million pre-tax resulting in an after-tax charge to earnings of $260 to $300 million for the third quarter.
Additionally, Genworth anticipates the updated claim reserves assumptions will impact itsmargins. The company expects that future rate action plans and other management actions will help mitigate the anticipated impact. The net impact on margins is not known at this time, as the analysis and work will be completed in the fourth quarter.
In light of the company's latest financial projections, including the projected impact to current and future earnings associated with higher expected claim costs in LTC and sustained low interest rates, the company also expects to record a non-cash charge of $275 to $325 million primarily related to deferred tax assets that are not expected to be utilized before their expiration.
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