China-Backed Fund Joins Race For Genworth Arm

A China-backed fund has joined the race to acquire a unit of Genworth Financial (NYSE: GNW - news) , a struggling financial services group, that serves thousands of British customers.

Sky News understands that Xio Group, which is based in Hong Kong, is among a small number of remaining bidders for Genworth's lifestyle protection unit, which has operations in more than 25 countries, including Britain.

Xio, whose principals include former partners from private equity groups such as Permira, is said to be competing against Axa (Paris: FR0000120628 - news) , the French financial services group.

The emergence of Xio's interest comes after buyout firms including Apollo and JC Flowers are understood to have dropped out of the auction.

Insiders estimate that the division could fetch in the region of $500m (£327m).

The division had been identified as non-core by Genworth’s management as long ago as 2012, but it was only put up for sale late last year, when investment bankers at Barclays (LSE: BARC.L - news) were hired to oversee a sale process.

Genworth Lifestyle Protection writes both direct and reinsurance business including to large global companies that want access to the wholesale market.

Its products include credit-linked protection for customers when they are unable to meet repayments on specific financial commitments in the event of illness, accident, unemployment, disability or death.

The division’s auction comes as Genworth explores a wider break-up, including through a sale of its Life and Annuity Insurance Company following heavy losses on policies covering long-term medical care.

In February, it announced a strategic review after recording a $1.6bn (£1.1bn) loss in the second half of last year because it did not have suufficient money set aside to cover payouts on long-term care policies.

Speaking at the time, Tom McInerney, Genworth’s president and chief executive, said: "I am disappointed by the continued challenges in our older LTC [long-term care] blocks and how it is overshadowing otherwise strong performance and momentum in other businesses, however we have taken steps on many fronts to deal with these challenges in order to strengthen and rebuild the future."

Last month, the company sold a further stake in a unit in Australia to raise additional capital.

Genworth declined to comment on the discussions with bidders for its lifestyle protection arm, while Xio could not be reached for comment.