Genworth Financial Inc (NYSE:GNW) seems to be giving up on its long term medical care and is now seeking buyers for its life and annuity unit. The news has yet to be made public, but insider reports state that the company is weighing the breakup. The reports outlined steep losses on policies as the reason for the move. The Goldman Sachs Group Inc. has been brought in to help with the sale of Genworth Lift and Annuity Insurance Co.
The details also indicated that if the entire unit cannot be sold as a whole, the company might consider breaking it into parts before the sale. The sale of GLIAC is expected to fetch a discount for the year end capital, with a surplus of $2.1 billion. It is also expected the income from the sale would be used to buy back bonds, in an attempt to lower the company’s debt.
David Havens, a credit strategist at Imperial Capital, stated that the move indicates that the company is restructuring, while dealing with the challenges from its long term care business. The current strategy of the company seems to be pretty defensive, but expect it to change in a couple of years. Currently, none of the high officials at Goldman or Genworth are agreeing to comment on the issue.
The decision for a breakup is probably wise from Genworth, considering the fact that it does not have enough money to cover long term care payouts. The company had already lost $1.6 billion by 2Q2014 making it rethink their strategy. The sale, if confirmed, would be the second by the company. Previously it was confirmed that Genworth is selling one of its subsidiary in Europe, which helps people pay bills if they are unable to work. GLIAC had reported earnings of $200 million last year, with $24 billion in assets and $20 billion in liabilities. It is also the second largest of the four subsidiaries the company operates.
Genworth Financial Inc (NYSE:GNW) closed at $7.79, dropping by 2.87%. The company has 497.38 million shares being traded in the market, with a 52-week range of $6.75-$18.74.