A.M. Best has downgraded the financial strength rating
(FSR) to B++ (Good) from A- (Excellent) and the issuer credit
ratings (ICR) to “bbb+” from “a-” of Genworth Life and Annuity
Insurance Company (GLAIC) (Richmond, VA). Concurrently, A.M.
Best has downgraded the FSR to B++ (Good) from A- (Excellent) and
the ICR to “bbb” from “a-” of Genworth Life Insurance
Company (GLIC) (Wilmington, DE) and Genworth Life Insurance
Company of New York (New York, NY). Additionally, A.M. Best has
downgraded the ICR to “bb+” from “bbb-” of Genworth Financial,
Inc. (Genworth) [NYSE: GNW] and its existing issue ratings by
one notch. The outlook for all ratings is negative, except for
GLAIC’s FSR outlook, which has been revised to stable from
negative. (Please see below for a detailed list of the issue
ratings.)
The rating downgrades reflect the uncertainty and material
execution risk of obtaining the required regulatory approvals
associated with Genworth’s recent strategic announcement during the
company’s fourth quarter 2015 earnings presentation on Feb. 5,
2016. A.M. Best notes that, in addition to the announcement,
Genworth reported a material reserve charge associated with the
company’s universal life business, which drove an operating loss in
the U.S. Life Insurance segment on a GAAP basis during the quarter.
The company’s year-end 2015 operating results continue to reflect
varying degrees of volatility and macroeconomic pressures occurring
in many of the company’s business segments, including its mortgage
insurance operations.
Genworth’s strategic announcement includes the unstacking and
restructure of various life and health insurance entities, subject
to regulatory approval, coupled with the suspension of marketing of
all traditional life and annuity business. As such, if completely
executed, GLIC’s business profile will become even more heavily
concentrated in long term care (LTC) business, which A.M. Best
views as one of the least creditworthy insurance products in the
market presently. While Genworth has achieved some success in
attaining rate increases to date, the profitability of the
company’s LTC business is heavily dependent on continued rate
increases and pricing actions to offset incorrect assumptions
associated with legacy blocks of business. Given Genworth’s intent
to isolate the liabilities of the LTC operations, A.M. Best
believes that the company anticipates additional challenges in the
management of this business.
The rating reflects A.M. Best’s belief that GLAIC is no longer
considered a core business within the Genworth organization.
Additionally, while GLAIC’s risk-adjusted capitalization would
likely benefit with the execution of the proposed run-off status,
the company may become a material source for holding company debt
service in the next few years. A.M. Best is concerned that if
substantial dividends were moved out of the entity to the holding
company level, it could drive a decline in current capitalization
levels.
Genworth continues to maintain an adequate level of financial
flexibility with financial leverage of approximately 27% as of Dec.
31, 2015. Holding company cash is currently just over $1 billion,
reflecting the recent redemption of the company’s 2016 debt
maturity. The next debt maturity, with approximately $600 million
outstanding, occurs in 2018. Currently, Genworth’s international
mortgage operations have been the sole providers of debt service to
the holding company and A.M. Best believes that financial
flexibility of the overall organization is likely to become
increasingly more limited in the next few years.
The ICR has been downgraded to “bb+” from “bbb-” with the
outlook remaining negative for Genworth Holdings, Inc. and
Genworth Financial Inc.
The following issue ratings have been downgraded with the
outlook remaining negative:
Genworth Holdings, Inc. (guaranteed by
Genworth Financial, Inc.)—
— to “bb+” from “bbb-” on $600 million 6.515%
senior unsecured notes, due 2018
— to “bb+” from “bbb-” on $400 million 7.70%
senior unsecured notes, due 2020
— to “bb+” from “bbb-” on $400 million 7.20%
senior unsecured notes, due 2021
— to “bb+” from “bbb-” on $750 million 7.625%
senior unsecured notes, due 2021
— to “bb+” from “bbb-” on $400 million 4.9%
senior unsecured notes, due 2023
— to “bb+” from “bbb-” on $400 million 4.8%
senior unsecured notes, due 2024
— to “bb+” from “bbb-” on $300 million 6.50%
senior unsecured notes, due 2034
— to “bb-” from “bb” on $600 million
fixed/floating rate junior subordinated notes, due 2066
The following indicative ratings on securities available under
the universal shelf registration have been downgraded:
Genworth Financial Inc.
— to “bb+” from “bbb-” on senior unsecured
debt
— to “bb” from “bb+” on subordinated debt
— to “bb-” from “bb” on preferred stock
Genworth Holdings, Inc.
— to “bb+” from “bbb-” on senior unsecured
debt
— to “bb” from “bb+” on subordinated debt
— to “bb-” from “bb” on preferred stock
Genworth Global Funding Trusts—program
rating to “bbb+” from “a-”
— to “bbb+” from “a-” on all outstanding
notes issued under the program
This press release relates to rating(s) that have been
published on A.M. Best’s website. For all rating information
relating to the release and pertinent disclosures, including
details of the office responsible for issuing each of the
individual ratings referenced in this release, please see A.M.
Best’s Recent Rating Activity web page.
A.M. Best is the world’s oldest and most authoritative
insurance rating and information source. For more information,
visit www.ambest.com.
Copyright © 2016 by A.M. Best Company,
Inc. and/or its affiliates. ALL RIGHTS RESERVED.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160209006587/en/
A.M. BestKate SteffanelliSenior Financial Analyst(908)
439-2200, ext. 5063kate.steffanelli@ambest.comorJoseph
Zazzera, MBAAssistant Vice President(908) 439-2200, ext.
5797joseph.zazzera@ambest.comorChristopher SharkeyManager,
Public Relations(908) 439-2200, ext.
5159christopher.sharkey@ambest.comorJim PeavyAssistant Vice
President, Public Relations(908) 439-2200, ext.
5644james.peavy@ambest.com
Genworth Financial (NYSE:GNW)
Historical Stock Chart
From Feb 2024 to Mar 2024
Genworth Financial (NYSE:GNW)
Historical Stock Chart
From Mar 2023 to Mar 2024