RICHMOND, Va. – Genworth Financial, Inc. announced March 11 that it has reached an agreement in principle to settle a lawsuit brought back in Oct. 2014 by shareholders who accused the company, its current CEO and former CFO of securities violations tied to misleading disclosures about its long-term care insurance business.
Plaintiffs in the lawsuit alleged securities law violations by Genworth, CEO Tom McInerney, and former CFO Martin Klein, related to certain disclosures in 2013 and 2014 concerning, among other things, understating Genworth's LTCI reserves. The agreement in principle was reached in connection with a voluntary mediation. A jury trial had been set to begin in May, but the settlement will include a full release of all Defendants in connection with the allegations made in the lawsuit.
The Plaintiffs, led by a pair of public pension funds, claimed that Genworth’s top executives misled investors in a December 2013 earnings conference call by saying the company’s internal review of the LTCI business showed that its LTCI reserves were adequate.
Genworth said in a press release announcing the settlement in U.S. District Court for the Eastern District of Virginia that, “The Company believes that the Plaintiffs' claims are without merit, but is settling the lawsuit to avoid the burden, risk and expense of further litigation.”
The agreement provides for a settlement payment to the class of $219 million (inclusive of all Plaintiffs' attorneys fees and expenses and settlement costs), of which $150 million will be paid by Genworth's insurance carriers, and $69 million pre-tax will be paid by Genworth. The company's payment is expected to be made into an escrow account during the first quarter of 2016. In addition, Genworth expects to incur additional legal fees and accruals related to the litigation over amounts previously accrued and expensed of approximately $10 million pre-tax in the first quarter of 2016.
The settlement is subject to definitive documentation, notice to the putative class, and court approval, a process expected to take several months.
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