A.m. best affirms ratings of genworth financial, inc. and its key
life/health subsidiaries; maintains negative outlook
Oldwick, n.j.--(business wire)--a.m. best co. has affirmed the financial strength rating (fsr) of a (excellent) and issuer credit ratings (icr) of “a” of the key life/health subsidiaries of genworth financial, inc. (genworth) [nyse: gnw]. additionally, a.m. best has affirmed the icr of “bbb” of genworth and all its existing debt ratings. the outlook for all ratings is negative. all life/health companies are headquartered in richmond, va, unless otherwise specified. (please see below for a detailed listing of the companies and ratings.) the ratings acknowledge genworth’s established presence in the term life, long-term care, retirement and wealth management markets, favorable operating company liquidity, stable life operating company results and adequate life company risk-adjusted capital levels. consolidated operating results have trended positively overall despite continued high levels of losses from reserve strengthening and higher claims in genworth’s u.s. mortgage insurance business. holding company liquidity is adequate to meet near-term debt repayments and adjusted financial leverage is manageable at roughly 26%. although reported interest coverage is below a.m. best’s guidelines, additional liquidity is currently maintained at the holding company, and genworth’s international business segment (lifestyle protection and international mortgage insurance) retains sufficient dividend capacity. genworth’s primary mortgage subsidiary, genworth mortgage insurance corporation, has received certain regulatory waivers regarding risk to capital requirements. these revocable waivers allow it to continue to underwrite new u.s. mortgage insurance business with favorable credit risks given tighter underwriting standards since the financial crisis. nevertheless, the failure to maintain or complete additional state waivers, coupled with continued u.s. housing distress, could impact the holding company under certain severely stressed economic scenarios. therefore, a.m. best believes the risk of potential capital calls on the holding company could potentially place strain on genworth’s life/health companies. however, these risks are partially mitigated by the stable operating profile within the life insurance operations, the aforementioned dividend capacity from international operations and a generally improving u.s. economy. a.m. best notes genworth’s proactive capital management strategy entailing the sale of less capital-intensive products as well as product redesign and prudent hedging practices. additionally, capital at the life/health subsidiaries has benefited from the improving credit quality of its investment portfolio and the repricing of genworth’s legacy long-term care book. while overall capitalization levels at the life/health subsidiaries remain adequate, they have benefited from the utilization of captive reinsurance strategies to more efficiently fund redundant reserves. investment risk remains sizeable, though in line with peers, particularly with respect to holdings in below investment grade bonds, residential real estate (through rmbs) and commercial real estate (through cmbs and direct mortgages). however, investment risk is partially mitigated by a current net unrealized portfolio gain position, reduced levels of credit losses and prudent management strategies to proactively monitor and reduce credit risk. the fsr of a (excellent) and the icrs of “a” have been affirmed for the following key life/health subsidiaries of genworth financial, inc.: genworth life insurance company genworth life insurance company of new york genworth life and annuity insurance company the fsr of a- (excellent) and icrs of “a-” have been affirmed for continental life insurance company of brentwood, tennessee and american continental insurance company. the following debt rating has been affirmed: genworth financial, inc.—-- amb-2 on commercial paper the following debt ratings have been affirmed: genworth financial, inc.—-- “bbb” on jpy 60 billion 1.60% senior unsecured notes, due 2011-- “bbb” on $350 million 5.65% senior unsecured notes, due 2012-- “bbb” on $600 million 5.75% senior unsecured notes, due 2014-- “bbb” on $350 million 4.95% senior unsecured notes, due 2015-- “bbb” on $300 million 8.625% senior unsecured notes, due 2016-- “bbb” on $600 million 6.515% senior unsecured notes, due 2018-- “bbb” on $400 million 7.70% senior unsecured notes, due 2020-- “bbb” on $400 million 7.20% senior unsecured notes, due 2021-- “bbb” on $400 million 7.625% senior unsecured notes, due 2021-- “bbb” on $300 million 6.50% senior unsecured notes, due 2034-- “bb+” on $600 million fixed/floating rate junior subordinated notes, due 2066-- “bb+” on $100 million 5.25% convertible preferred stock genworth global funding trusts—“a” program rating-- “a” on all outstanding notes issued under the program genworth life institutional funding trust—“a” program rating-- “a” on all outstanding notes issued under the program the following indicative debt ratings under shelf registration have been affirmed: genworth financial, inc.—-- “bbb” on senior unsecured debt-- “bbb-”on subordinated debt-- “bb+” on preferred stock the principal methodology used in determining these ratings is best’s credit rating methodology -- global life and non-life insurance edition, which provides a comprehensive explanation of a.m. best’s rating process and highlights the different rating criteria employed. additional key criteria utilized include “understanding bcar for life and health insurers”; “rating members of insurance groups”; “a.m. best’s ratings & the treatment of debt”; “review of bcar treatment for xxx captives”; and “risk management and the rating process for insurance companies.” methodologies can be found at www.ambest.com/ratings/methodology. founded in 1899, a.m. best company is the world’s oldest and most authoritative insurance rating and information source. for more information, visit www.ambest.com. copyright © 2011 by a.m. best company, inc. all rights reserved.
