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Genworth's Sale of Financial Advisor Unit Credit Positive

Following a larger trend of companies industry–wide shedding non-core businesses in order to emerge nimbler and more focused, Genworth Financial Inc., announced last week that they had reached an agreement to sell Genworth Financial Investment Services (GFIS), their tax and financial advisor unit, to Cetera Financial Group.

The deal is viewed as credit positive by Moody’s in their Weekly Credit Outlook. Under the terms of the deal, Cetera will provide Genworth with $78.5 million at the closing in addition to an earn-out provision. The deal is expected to close in 90 days and Genworth anticipates that they will report an after-tax gain of $15 million regarding the sale.

Genworth has become adept at pruning less strategic aspects of the organization. Recently, they sold their Medicare supplement business, a product offering in which they had a small stake to Aetna Inc., for $276 million. This was on the heels of an announcement that they would stop selling retail variable annuities and group variable annuities, another aspect of the business that they had a minor share in.

GFIS, was the company’s sole financial advisor unit and Genworth anticipates realigning itself to focus on providing service and support to independent advisors. Jettisoning products that do not reap substantial amounts of cash over the near term is mainly a product of the recent economic turmoil. 

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