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July 21, 2020

Genworth settles dispute over PPI mis-selling losses with AXA

By Verdict Staff

Genworth Financial has reached an agreement with AXA to settle the dispute relating to liability for payment protection insurance (PPI) mis-selling losses.

The losses incurred from mis-selling complaints for PPI underwritten by two companies that AXA acquired from Genworth in 2015.

Under the terms of the settlement, Genworth has agreed to pay AXA £100m ($125m) by 23 July.

This amount is in addition to a £100m interim cash payment made by the company to the French insurer in January this year and expensed in the fourth quarter of last year.

Furthermore, Genworth also has agreed to issue a secured promissory note to AXA, pursuant to which Genworth has agreed to make deferred cash payments worth £317m in two instalments.

Additionally, the company will also pay a significant portion of all future mis-selling losses incurred by AXA, to be invoiced quarterly by AXA.  This note will terminate upon the payment in full of all the obligations by the due dates.

The agreement provides Genworth with certain rights to recoveries to recoup payments for the underlying mis-selling losses, if AXA recovers amounts from third parties related to the mis-selling losses.

Genworth president and CEO Tom McInerney said: “The settlement removes uncertainty around the amount of the liability arising from the AXA litigation, defers our obligation to make the bulk of the payments to AXA and allows us to move forward with our plans to pursue alternatives to raise capital and meet our near-term liquidity needs, which includes our $1bn in debt maturing in 2021.

“These alternatives include a potential debt offering, as well as the ability to prepare for a 19.9% IPO of our US Mortgage Insurance business, subject to market conditions, should our pending transaction with China Oceanwide not close.”

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