Under the capital plan, ownership of the European mortgage insurance subsidiaries will be moved under GMICO. These subsidiaries will provide approximately $200 million in additional statutory capital to GMICO. This transfer has received regulatory approval and the company anticipates completing the transfer during the first quarter of 2013.
Genworth also has obtained requisite GSE (Government Sponsored Enterprise) approvals to implement a "NewCo" type structure which would allow for the continued writing of new business in all 50 states. The future option would be implemented if certain unanticipated adverse conditions were to occur, such as an elevated risk-to-capital level, revocation of the regulatory risk-to-capital waivers, or reduction in market share thresholds. If a new U.S. mortgage insurance company is created pursuant to this option, it will have no legacy obligation to GMICO. At the time of formation, "NewCo" would be subject to GSE eligibility guidelines and capital requirements and would allow access to third party funding sources. As part of this plan, Genworth has agreed to contribute $100 million of cash to GMICO. Genworth also agreed to contribute another $100 million in the event that GMICO were to enter into a deferred payment order with the North Carolina Department of Insurance or if projections indicate that GMICO may not have sufficient resources to pay valid claims. Genworth will also guarantee that, between October 1, 2012 and June 30, 2017, GMICO will receive, in the normal course, $150 million from dividends from currently owned affiliate securities and deferred tax asset utilization. Given these obligations are intended to be funded through normal operations, the guarantee is not expected to have a material impact on Genworth. GMICO received from affiliates an estimated $60 million in dividends and tax benefits during 2012. In the event that the "NewCo" option is implemented, its implementation will require requisite state regulatory approvals, and is contingent upon Genworth and GMICO meeting their respective obligations pursuant to the approvals granted by the GSEs. The company believes the events that would result in the potential "NewCo" implementation are unlikely to occur and expects to continue to write new business out of GMICO for the foreseeable future.
"One of Global Mortgage Insurance's strategic priorities was maintaining the ability to write new profitable business in U.S. Mortgage Insurance while focusing on a return to profitability," said Kevin D. Schneider, president of Genworth's Global Mortgage Insurance Division. "The ability to implement the "NewCo" option, if necessary, benefits Genworth, our investors and customers by providing an additional layer, along with our continued GMICO waivers and use of Genworth Residential Mortgage Assurance Corporation (GRMAC), that will ensure our continued ability to write profitable new business."Internal Legal Entity Reorganization