Executives at Genworth Financial Inc. have been busily reshaping the company's operations over the past few years, all in a bid to narrow the carrier's focus. Genworth took another step in that direction Thursday with the announcement of the much-anticipated sale of its wealth management unit.
In a $412.5 million transaction, Genworth Wealth Management was sold to
Aquiline Capital Partners LLC and Genstar Capital LLC. The deal includes Genworth Financial Wealth Management, a consulting platform, and Altegris Investments Inc., a provider of alternative investments.
The sale is part of Genworth's overall plan to concentrate on core businesses, particularly life insurance, fixed annuities, long-term-care coverage and mortgage insurance, according to company officials. The insurer sold its tax and accounting advisory unit, Genworth Financial Investment Services, to Cetera Financial Group in January 2012. Since then, rumors about potential suitors for Genworth Wealth Management — clearing firms and regional brokerages — have swirled.
Both Aquiline and Genstar are buyers with an eye toward the financial services arena. Early this month, Genstar announced its purchase of Acrisure, an insurance brokerage firm.
Alois Pirker, a senior analyst with Aite Group LLC, noted that private-equity firms are a “classic go-between” in terms of buying up wealth management units. “They can either be a consolidator, or they can give [their targets] more money to shape the firm and help it become more attractive, so they can shop it around.”
Management at Genworth has positioned the wealth management business as a “noncore” operation. In the third quarter of 2012, Martin Klein, Genworth's finance chief and then-acting chief executive, said the unit could “be a significant source of capital,” noting that Genworth had invested in raising the unit's value. “We will also be evaluating opportunities to ultimately realize that value at the appropriate time,” he said.
As more companies, especially insurers, seek to raise capital, sales of noncore-brokerage operations are likely to continue.
“Overall, private-equity firms have demonstrated a lot of curiosity in the turnkey asset management and RIA space,” said Dave DeVoe, a managing partner at DeVoe & Co.
In the meantime, management at Genworth's wealth management unit is pleased that the business will have a new opportunity to grow. The transition won't affect advisers who use the platforms, said Gurinder S. Ahluwalia, chief executive officer of Genworth Financial Wealth Management.
“We found a partner who's excited about our business and about serving the adviser,” he said. “What's cool about being core and central to a business is that they want you to take on more capabilities. As we go forward, we're excited to roll out new capabilities and services, and think of ways we can integrate more solutions to our offering.”
