Looking to get one of several pending lawsuits off its back, local insurance giant Genworth Financial announced Friday a nine-figure settlement that will be paid to plaintiffs of a class action case filed in late 2014.
The Henrico County-based company, which sells mortgage insurance, long-term care insurance and other products, said it will pay $219 million to resolve the case filed by a Michigan retirement fund. It accused Genworth, its CEO Thomas McInerney and CFO Martin Klein of violations of federal securities laws by allegedly misleading investors and making false statements about the health of its long-term care insurance reserves, a line of business that has fueled major losses at the company in recent years.
Of the total settlement amount, $150 million will be covered by insurance policies the company holds, with $69 million coming from Genworth directly.
As is typical with such settlements, Genworth continues to claim the lawsuit is without merit but said it is “settling the lawsuit to avoid the burden, risk and expense of further litigation.”
Filed originally in October 2014 in Richmond federal court, the original plaintiff was the City of Pontiac General Employees’ Retirement System, which was an institutional investor in Genworth stock. The case had been scheduled for trial in May but had gone to mediation in the fourth quarter of 2015, through which the proposed settlement was reached.
It’s one of several lawsuits the company and its insiders have faced in recent years related to the disclosures of the state of its long-term care insurance, policies that provide coverage for in-home care and stays at nursing homes and assisted living facilities. The company has struggled over the last couple of years to properly predict the reserve cushion it needs for such policies.
Genworth reported a net loss for 2015 of $413 million, an improvement on its $1.04 billion loss in 2014. Those losses were fueled largely by the need for larger than expected LTC insurance reserves.
At least two lawsuits are still pending against Genworth and its top brass, both of which are class action lawsuits from retirement funds that question its handling of its LTC business and an IPO of its Australian mortgage insurance arm. The lead plaintiffs in those pending cases are the City of Hialeah Employees’ Retirement System and International Union of Operating Engineers Local No. 478 Pension Fund, the latter of which was filed in January.
Genworth says it will continue to “vigorously” defend itself in the cases.
This latest settlement is still subject to court approval and is expected to take several months to be finalized, the company said.
Genworth’s stock, trading under the symbol of GNW, closed Friday at $2.80 per share, up 4.67 percent.