Insurance company Genworth Financial, Inc. (GNW) said Wednesday that it has agreed to sell its wealth management business to private equity firms Aquiline Capital Partners LLC and Genstar Capital LLC for $412.5 million. The sale is part of Genworth Financial's efforts to divest non-core businesses and utilize the sales proceeds to repay debt.
The sale includes both of Genworth Wealth Management's businesses - investment management and consulting platform Genworth Financial Wealth Management or GFWM, and alternative investment solutions provider Altegris.
Martin Klein, executive vice president and chief financial officer of Genworth Financial said, "This transaction is another step forward in executing our strategy, by generating capital from a non-core business and increasing financial flexibility for Genworth. The sale of Wealth Management also provides the opportunity for our employees there and the purchaser to have a strong business to grow going forward."
Richmond, Virginia-based Genworth Financial will record an after-tax loss of about $40 million relating to the transaction, of which about $35 million will be recorded in the first quarter and the remainder upon closing.
The company expects the sale to close in the second half of 2013, subject to customary closing conditions. Proceeds from the transaction will be used by the company to address the 2014 debt at maturity or before.
Genworth said that as of the first quarter of 2013, the wealth management business will be classified as an asset held for sale in the balance sheet and discontinued operations in the statement of net income, and will be excluded from operating income.
GFWM primarily provides independent financial advisors with comprehensive support across every phase of their practice, helping them to meet clients' wealth management and investment needs. Altegris offers liquid alternative mutual funds, a wide platform of hedge funds and separately managed accounts.
Tony Salewski, a Principal of Genstar said, "GFWM and Altegris are each well-positioned to meet the growing needs of independent financial advisors and increased demand from retail investors for access to alternative products. Aquiline and Genstar will leverage our collective investment experience to help the management teams capitalize on these trends and grow their businesses."
Goldman, Sachs & Co. and Sullivan & Cromwell LLP advised Genworth on this transaction.
New York-based Aquiline Capital Partners invests in financial services enterprises in industries such as asset management, property and casualty insurance, banking, securities, life insurance and financial technology.
San Francisco-based Genstar Capital is a middle market private equity firm that has more than $4 billion of committed capital under management and targets investments focused on selected sectors within the financial services, software, healthcare, and industrial technology industries.
Aquiline and Genstar were advised by Deutsche Bank. Credit Suisse has provided a debt financing commitment in connection with the acquisition.
GNW closed Wednesday's trading at $10.19, down $0.03 or 0.29 percent on a volume of 6.16 million shares. However, in after-hours, the stock gained $0.24 or 2.36 percent to $10.20.
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