Genworth separating mortgage unit from the rest of the company
Richmond-based Genworth Financial Inc. plans to create a new holding company that separates its mortgage insurance business from other operations.
Genworth’s reorganization was announced early Wednesday as part of a “comprehensive capital plan” for its U.S. mortgage insurance unit. The mortgage insurance operation has been the source of big losses since the collapse of the housing market during the 2007-09 Great Recession.
The Fortune 500 company has faced pressure from ratings agencies and shareholders to make changes in its operations, with some investors calling on Genworth executives to sell or spin off its U.S. mortgage insurance business.
The company has been under the scrutiny of Moody’s Investor Service since June when it cut the financial strength rating of Genworth’s U.S. Life Insurance unit and announced a review for possible downgrade of its ratings of the parent company and U.S. mortgage insurance business.
In addition to mortgage insurance sold in the U.S. and around the globe, Genworth’s businesses include life insurance, long-term care insurance and wealth management services.
Last month, the company hired Thomas McInerney as CEO, replacing Michael Fraizer, who resigned in May. He had led the Fortune 500 company since it was spun off from General Electric in 2004.
Under the reorganization plan, a new holding company would be created under which the U.S. mortgage insurance subsidiaries would operate separately from the rest of Genworth (the old parent company). The company’s outstanding senior and subordinated notes would remain the obligations of the “old parent.”
Genworth said that, under this arrangement, the solvency of the U.S. mortgage insurance subsidiaries will not affect its ability to meet its debt obligations.
Genworth will contribute $100 million to its mortgage insurance operation as part of its capital plan.
The company plans to complete its reorganization during this year’s second quarter.