Genworth Divests Wealth Management Business

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Genworth Financial, Inc. (GNW) completed the divestiture of its Wealth Management business to AqGen Liberty Acquisition, Inc., for $412.5 million.

Sale proceeds approximated $316 million net of transaction costs and payments to settle obligations to the former owners of its Altegris businesses. Genworth intends to deploy the proceeds along with cash balance to pay down the 2014 debt maturities.

Genworth, in third quarter, expects to record additional after-tax loss of up to $10 million related to the divestiture.

To better focus on capital generation, increase financial strength and flexibility of the company as well as simply the business model, Genworth decided to divest the wealth management business. The vend-off includes divesting Genworth Financial Wealth Management, and alternative solutions provider, the Altegris companies. As a result, it entered into an agreement end of March with AqGen Liberty Acquisition, Inc., a subsidiary of AqGen Liberty Holdings LLC, a partnership of Aquiline Capital Partners and Genstar Capital for the same.

This divestiture also marks its heightened focus on core business and capital generation from a non-core business. In April last year, the company divested its tax and accounting financial advisor unit, Genworth Financial Investment Services (:GFIS) to Cetera Financial Group for about $79 million plus contingent consideration

Genworth Financial Wealth Management will continue to operate under its current brand name until an appropriate new name is announced later this year.

Genworth has always remained focused to enhance its operational results. As such in June this year, Genworth Financial decided to sever 400 positions, of which 150 are not to be filled. Genworth will have $80 to $90 million in annual pre-tax expense savings when the plan is fully implemented.

Genworth, in the last reported quarter, missed the Zacks Consensus Estimate after three straight quarter surprises. However, results were much above the year-ago level. Also, the average beat remains nearly 17%.  With sustained focus on strengthening its portfolio and a drive to enhance operational results, we expect it to regain the momentum.

Genworth carries Zacks Rank #3 (Hold). Life insurers China Life Insurance Co. Ltd. (LFC), StanCorp Financial Group Inc. (SFG) and Lincoln National Corporation (LNC) carry favorable Zacks Rank #1 (Strong Buy) and are worth considering.

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