US-based Genworth Financial has pledged a portion of its majority shareholding in Genworth Mortgage Insurance Australia to Axa, as part of an agreement to settle a court dispute.

The move follows a High Court ruling in the UK last year, when Genworth Financial was ordered to pay the French insurer for payment protection insurance (PPI) mis-selling losses.

The dispute involved losses incurred from mis-selling complaints for PPI underwritten by two companies that Axa had bought from Genworth Financial.

Genworth Financial will issue a promissory note to the French insurer, using 19.9% of its 52% holding in the Australian lenders’ mortgage insurer to secure the instrument.

Genworth Mortgage Insurance Australia says the business “is not party to the litigation or the settlement deed, promissory note or security agreement”.

“That promissory note is partially secured by a security over 19.9% of the ordinary shares of the company, held by [Genworth Financial’s] subsidiaries,” the Australian company said in an investor update today.

“The promissory note will terminate upon the payment in full by [Genworth Financial] of all the obligations by the due dates.

“The security does not give Axa any ability to control votes attached to secured shares in the company unless the security becomes enforceable.”

In agreeing to accept the promissory note as collateral, Axa will receive deferred cash payments of £317 million ($569 million) in two installments, with the first due on June 30 2022 and the final one three months later on September 30.

Following the UK court ruling last year, Genworth Financial will also pay Axa £100 million ($179 million) by Thursday and a significant portion of all future mis-selling losses incurred by the French insurer. Axa will invoice Genworth every quarter the amount to be paid.

“Genworth also has agreed to make certain mandatory prepayments in the event that it executes certain debt or equity transactions or receives subsidiary dividends from its mortgage insurance companies,” the US financial services firm said.