In re Genworth Financial, Inc. Securities Litigation
Status: Ongoing Case
Survived motion to dismiss in this securities litigation alleging that Genworth concealed poor market conditions in the months leading up to a planned IPO of its Australian MI unit, and failed to tell shareholders about significant loan delinquencies stemming from the deteriorating economic conditions
On July 28, 2014, Labaton Sucharow was appointed co-lead counsel in this securities class action against Genworth Financial, Inc. (Genworth), a provider of insurance and wealth management services.
The plaintiffs allege that Genworth issued false and misleading statements that, among other things: (1) failed to properly account for projected losses related to Genworth's Australian mortgage insurance unit (Australian MI) in accordance with Generally Accepted Accounting Principles;(2) concealed the extent of its exposure to anticipated losses and defaults;and (3) concealed known trends concerning Australian MI's increased claims and delinquencies, particularly related to the Queensland flood in 2011.
On June 16, 2015, the court denied the defendants' motion to dismiss in its entirety and sustained the complaint. The court ruled that the Genworth's statements were not forward-looking, and therefore were not protected by the safe harbor, a provision that shields companies from liability with respect to any forward-looking statement.
The case is City of Hialeah Employees' Retirement System v. Genworth Financial, Inc., No. 14-cv-2392 (S.D.N.Y.). Lead plaintiffs are City of Hialeah Employees' Retirement System and New Bedford Contributory Retirement System. The defendant is Genworth Financial, Inc.
In November 2011, Genworth announced plans to sell up to 40 percent of its Australian MI unit in a minority-stake IPO as part of an effort to strategically rebalance the company's portfolio and capital. At the time, the company stated that it planned for the IPO to take place in 2Q'12. On February 2, 2012, Genworth announced its results for 4Q'11 and assured investors that the contemplated IPO process was proceeding according to schedule. During the class period, Genworth continued to offer assurances that the IPO was progressing as planned and that the outlook for the Australian mortgage insurance business remained strong, even when confronted with questions regarding the possibility that the IPO might be delayed.
On April 17, 2012, Genworth reported that it would, in fact, delay the IPO until early 2013. Additionally, Genworth disclosed that it projected poor loss experience in Australia, including a loss at its Australia MI unit that the company attributed to natural catastrophes in coastal areas of the Queensland region (which began more than a year prior, in December 2010), "regional economic slowdowns" and "certain groups of small business owners and self-employed borrowers." In reaction to these revelations, Genworth stock price declined $1.83 per share, or 23.77 percent, to close at $5.87 per share on April 18, 2012.