Business Context and Reporting Period
This Form 8-K, dated December 12, 2019, reports the completion of a major asset disposition by Genworth Financial, Inc. The Company sold its Canada mortgage insurance business to Falcon Holding LP, an affiliate of Brookfield Business Partners L.P. The transaction was accounted for as discontinued operations starting in the third quarter of 2019.
Key Financial Metrics
- Sales Price: Approximately CAD$2.3 billion in cash (approximately USD$1.7 billion based on a hedged exchange rate of 0.7590).
- Total Cash Proceeds: Approximately USD$1.8 billion, comprising the net cash proceeds of USD$1.7 billion plus a special dividend of approximately USD$0.1 billion received prior to closing.
- Loss on Sale: An after-tax loss of $164 million was recorded in connection with the held-for-sale accounting criteria.
- Pro Forma Data: Unaudited pro forma financial statements for the years ended December 31, 2018, 2017, and 2016, and a balance sheet as of September 30, 2019, are included as Exhibit 99.2.
Material Changes
The primary material change is the divestiture of the Canada mortgage insurance business, which alters the Company's geographic footprint and asset base. Additionally, the Company completed an internal reorganization prior to the sale, contributing 100% of its ownership interest in Genworth Mortgage Holdings, Inc. (GMHI) to Genworth Holdings, Inc. Consequently, Genworth Holdings now owns 100% of GMHI, which holds the U.S. mortgage insurance companies.
Outlook, Risks, and Contingencies
The Company expects to reflect revisions to the loss on sale in the fourth quarter of 2019 based on the finalization of post-closing adjustments. The filing includes a cautionary note regarding forward-looking statements, highlighting that actual results may vary materially due to foreign exchange fluctuations and interest rates affecting the final post-closing purchase price adjustments.
Investor Verification Checklist
- Review Exhibit 99.2 for the unaudited pro forma condensed consolidated financial statements reflecting the sale.
- Monitor the fourth quarter 2019 financial results for final adjustments to the $164 million after-tax loss.
- Verify the final post-closing purchase price adjustments, as the initial USD$1.7 billion figure is subject to foreign exchange and other variables.
- Examine the Share Purchase Agreement (Exhibit 2.1) for detailed terms of the transaction with Brookfield.