Mortgage insurer Genworth Financial has reported a net loss of $441 million in the second quarter of 2020, compared with net income of $168 million the the prior year quarter.
The company recently reached a settlement agreement with AXA regarding a dispute over payment protection insurance claims underwritten by the company’s former lifestyle protection insurance business and, as a result, Genworth recorded an after-tax loss of $516 million for the settlement as part of discontinued operations in the current quarter.
The company reported an adjusted operating loss of $21 million compared with adjusted operating income of $178 million, in the second quarter of 2019.
The net loss in the quarter included investment gains of $101 million, net of taxes and other adjustments.
Net investment income was $786 million in the quarter, compared to $793 million in the prior quarter and $816 million in the prior year.
Genworth also commented on the merger agreement with China Oceanwide Holdings, which was recently delayed until September 30.
“Although the closing process has been further delayed by the COVID-19 pandemic, the Oceanwide transaction continues to represent the best strategic option for Genworth’s shareholders, and benefits policyholders, customers and employees,” said Tom McInerney, president and CEO of Genworth.
“The fifteenth waiver and extension of the merger agreement provides both parties with the flexibility needed to navigate this uncertain environment. In order to address our near-term financial obligations including the recently announced AXA settlement, we are moving forward with steps to enhance our liquidity while working diligently towards closing the transaction.”
LU Zhiqiang, chairman of Oceanwide, added, “The acquisition of Genworth is a strategically important transaction and a priority for China Oceanwide.
“The financing progress has been delayed given the significant economic impacts of lock-downs associated with the global pandemic, but we remain committed to securing financing for the transaction in order to close the transaction as soon as possible.”
As part of the fifteenth waiver and extension, Genworth and Oceanwide also agreed to additional interim milestones designed to provide more clarity to Genworth on Oceanwide’s progress towards financing the transaction.
Specifically, the fifteenth waiver includes provisions for Oceanwide to submit satisfactory evidence to Genworth by August 31, 2020 confirming that:
Approximately $1 billion is available to Oceanwide from sources in Mainland China to fund the acquisition of Genworth; and Hony Capital and/or other acceptable third parties have committed to provide Oceanwide $1 billion or more from sources outside of China to fund the transaction.
Given the delay in the closing process, Genworth is moving forward with plans to address its near-term liabilities and financial obligations, which include the recently announced settlement agreement with AXA and approximately $1 billion of debt maturing in 2021.
Genworth expects these steps to include a debt financing in the near term and taking the necessary steps to launch a 19.9 percent initial public offering of its U.S. Mortgage Insurance business, subject to market conditions, in the event the China Oceanwide transaction is terminated.