Genworth Financial Inc., the insurer battered by losses on long-term care coverage, has said it could pursue more divestitures to help pay down more than $500 million in debt maturing in 2018 as turmoil in the bond market shuts out junk borrowers.
“In the current environment, it would be very difficult for us to refinance the 2018 maturities, given the concerns with oil and gas and commodities” in the bond market, Chief Executive Officer Tom McInerney said in an interview Feb. 5. “The good news is we have the luxury of time on our side for that to turn and, if not, we do have four or five avenues from an asset-sale perspective to meet that principal payment.”
Genworth was cut to junk by Standard & Poor’s in 2014 because of losses tied to long-term care coverage. That raised borrowing costs and hurt sales of life insurance, as consumers opted for better-rated rivals.
McInerney announced on Feb. 4 that he would halt life insurance and fixed-annuity sales and separate Genworth’s long-term care business, which offers coverage to pay for home-health aides and nursing home stays. He also posted a fourth-quarter loss, capping the insurer’s second straight unprofitable year.
McInerney has sold a European mortgage insurance operation to AmTrust Financial Services Inc. to free up capital, and reached a deal in which Dai-ichi Life Insurance Co.’s Protective Life Corp. agreed to buy blocks of life insurance policies from Genworth. He said that he will probably keep the Australian mortgage unit, given current market valuations and possible dividends from the business.
“There are a number of things we could consider,” McInerney said during a conference call Friday discussing fourth-quarter results. “If you look at near-term potential asset sales, it’s probably more oriented toward perhaps considering some of the blocks in life and annuity.”
The insurer agreed to sell a European lifestyle-protection unit last year and used proceeds to pay down some $298 million of debt maturing in 2016.
Genworth expects that suspension of life and annuity sales will reduce expenses by about $50 million annually. The insurer plans to eliminate jobs including about 75 in Richmond, where the company is based, and about 200 in Lynchburg, where the company processes new business, McInerney said. Genworth has more than 1,000 employees in each of the Virginia cities, he said.
Genworth joins insurers including American International Group Inc. and MetLife Inc. in seeking to exit some assets. McInerney said he expects there are enough buyers for the life insurance assets on the market.
“We had a lot of interest” when taking assets to the market in recent months, McInerney said in the interview. “We ended up selling two of the blocks to Protective, but there were quite a number of other parties interested in our remaining block, so I don’t foresee challenges.”
–With assistance from Lily Katz and Sridhar Natarajan.