RICHMOND, Va., Feb. 21, 2018 /PRNewswire/ -- Genworth
Financial, Inc. (NYSE:GNW) announced today its expected
statutory capital and cash flow testing (CFT) results for its U.S.
life insurance companies for the year ended December 31, 2017. Additional financial
information for the year ended December 31,
2017, including final statutory results, will be included in
the company's upcoming Form 10-K. The expected statutory capital
and CFT results include:
- The aggregated CFT results for Genworth Life Insurance Company
(GLIC) resulted in an expected positive margin of approximately
$0.6 billion after including
approximately $2 billion of
provisions for adverse deviation (PADs). The decline in margins
included lower interest rates and long-term care insurance (LTC)
assumption changes differentiating between policies with and
without lifetime benefits, partially offset by the impact of
anticipated premiums driven mostly by modeling refinements and some
modest additional expected future in-force rate actions.
- The aggregated CFT results for Genworth Life Insurance Company
of New York (GLICNY) resulted in
an expected incremental negative margin of $0.4 billion, after including $1 billion of PADs. Additional CFT reserves of
$188 million and $58 million have been recorded in the fourth and
second quarters of 2017 and GLICNY will phase-in additional
reserves to eliminate the remaining $0.3
billion negative margin over the next two years as agreed
upon with the New York Department of Financial Services
(NYDFS). Filed for but not yet approved future in force
premium increases or benefit reductions have not been included in
GLICNY CFT. GLICNY currently has a LTC rate increase request
filed with the NYDFS, that if fully approved and implemented, would
eliminate the need for the phase-in of the additional CFT reserves.
As of year-end 2017, the company action level risk-based capital
(RBC) ratio for GLICNY is expected to be between 280 and 290
percent.
- Stand-alone testing (Actuarial Guideline 38) of universal life
insurance products with secondary guarantees and other updated
assumptions resulted in a $335
million increase in statutory reserves in the fourth quarter
of 2017, primarily in Genworth Life and Annuity Insurance Company
(GLAIC). This included $95 million of
an agreed upon phase-in of reserves, with the final $95 million of the three-year phase in to be
included in 2018 results. The remaining reserve addition was
primarily driven by both the lower interest rate environment
prescribed as of June 30, 2017, and
an update to our mortality expectations. As of year-end 2017, the
RBC ratio for GLAIC is expected to be between 420 and 430
percent.
- As a result of the above impacts, the consolidated U.S. life
insurance company RBC ratio of GLIC is expected to be between 280
and 290 percent as of year-end 2017. This estimate also includes an
approximate 20 point net reduction from 2017 tax reform, primarily
due to the revaluation of admitted deferred tax assets at the new
21 percent corporate federal tax rate, partially offset by expected
benefits from the application of the new tax rules.
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 find suitable
mitigation options to address CFIUS's interest and obtain
regulatory approvals, or the possibility that such mitigation
options or regulatory approvals may further delay the transaction
including as a result of valuation differences with Delaware regarding GLAIC, or will not be
received prior to April 1, 2018 (and
either or both of the parties may not be willing to further waive
their end date termination rights beyond April 1, 2018) or that materially burdensome or
adverse regulatory conditions may be imposed or undesirable
measures may be required in connection with any such regulatory
approvals, including any mitigation approaches that may be
necessary to obtain CFIUS approval (including conditions or
measures that either or both of the parties may be unwilling to
accept or undertake under the terms of the existing agreements or
at all); existing and potential legal proceedings may be instituted
against the company that may delay the transaction, make it more
costly or ultimately preclude it; the risk that the proposed
transaction disrupts the company's current plans and operations as
a result of the announcement and consummation of the transaction;
certain restrictions during the pendency of the transaction that
may impact the company's ability to pursue certain business
opportunities or strategic transactions; continued availability of
capital and financing to the company before, or in the absence of,
the consummation of the transaction; further rating agency actions
and downgrades in the company's debt or financial strength ratings;
changes in applicable laws or regulations; the company's ability to
recognize the anticipated benefits of the transaction; the amount
of the costs, fees, expenses and other charges related to the
transaction may be material; the risks related to diverting
management's attention 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 on any of its strategic plans to
effectively address its current business challenges (including with
respect to the restructuring of its U.S. life insurance businesses,
debt obligations, including the debt maturing in May 2018, cost savings, ratings and capital),
including as a result of a failure to complete the China Oceanwide
transaction or the inability to pursue alternative strategic plans
pending the transaction; the company's inability to continue to
sell long term care insurance policies; 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 and on anticipated terms; an 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; a failure to obtain any required regulatory, stockholder,
noteholder approvals and/or other third-party approvals or consents
for such alternative strategic plans; 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; an inability to achieve anticipated cost-savings in a
timely manner; and adverse tax or accounting charges;
- 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 and margin reviews, including risks
that additional information obtained in finalizing its margin
review or other changes to assumptions or methodologies materially
affect the impact on margins; inadequate reserves and the need to
increase reserves (including as a result of any changes the company
may make 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 as a result of any changes it may make 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); adverse impact on the company's results of operations,
including its loss ratios as a result of its annual review of the
premium earnings pattern for its mortgage insurance businesses; 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 (including changes to tax 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; 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 complete a secured debt transaction);
future adverse rating agency actions, including with respect to
rating downgrades or potential downgrades or being put on review
for potential downgrade, 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; the design and effectiveness of its disclosure controls
and procedures and internal control over financial reporting may
not prevent all errors, misstatements or misrepresentations; 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 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 any impact on the company's margins
in connection with its annual review of its long term care
insurance claim reserves and margin reviews; its inability to
reflect future premium increases and other management actions in
its margin calculation as anticipated, including in connection with
its margin reviews; 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.
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SOURCE Genworth Financial, Inc.