Genworth Financial Inc. announced that it is planning to revamp its U.S. mortgage insurance business, which includes a legal entity reorganization that would create a new holding company structure. The plan for its U.S. mortgage insurance business would reduce Genworth Mortgage Insurance Co.'s risk-to-capital by up to 15 points, reduce the likelihood the U.S. mortgage insurance subsidiaries will require more capital and ensure it can continue to write new business and reduce the risk of a default under the indenture governing Genworth's senior notes. Genworth Mortgage Insurance is its main U.S. mortgage insurance unit.

Currently, GMICO is allowed to write business because of waivers granted by state insurance regulators and from Fannie Mae and Freddie Mac. With the plan, the company is forming a new holding company, and the current Genworth Financial would be renamed Genworth Holdings, which would be a direct subsidiary of Genworth Financial. The company is delinking its U.S. mortgage insurance operations from Genworth Holdings.

Genworth Financial reported that it expects completing the reorganization in the second quarter. Under the plan, Genworth will contribute $100 million to GMICO. The plan includes several actions, some of which need regulatory approval, Genworth said.

These include transferring ownership of the European mortgage insurance subsidiaries to GMICO, and implementing the legal entity reorganization that creates the new holding company structure. Ownership of the European mortgage insurance subsidiaries will be moved under GMICO, and these subsidiaries will provide about $200 million in additional statutory capital to GMICO. This transfer has received regulatory approval, and the company expects completing the transfer during the first quarter.

Genworth obtained the approvals to implement a "NewCo" structure that would allow for the continued writing of new business in all 50 states. This option would be used if adverse conditions occurred, such as a higher risk-to-capital level or the regulatory risk-to-capital waivers being revoked. When formed, "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 agreed to contribute $100 million in cash to GMICO and another $100 million if GMICO were to enter into a deferred payment order with the North Carolina insurance department or if projections indicate that GMICO may not have sufficient resources to pay valid claims. Implementation of this plan will reduce "uncertainties related to its U.S. mortgage insurance subsidiaries''.