CONTACTS:
FOR IMMEDIATE RELEASE
OLDWICK - SEPTEMBER 06, 2019 10:01 AM (EDT)
AM Best has downgraded the Financial Strength Rating (FSR) to B (Fair) from B+ (Good) and the Long-Term Issuer Credit Rating (Long-Term ICR) to “bb+” from “bbb-” of Genworth Life and Annuity Insurance Company (GLAIC) (Richmond, VA). Concurrently, AM Best has downgraded the FSR to C++ (Marginal) from B- (Fair) and the Long-Term ICRs to “b” from “bb-” of Genworth Life Insurance Company (GLIC) (Wilmington, DE) and Genworth Life Insurance Company of New York (GLICNY) (New York, NY). Additionally, AM Best has affirmed the Long-Term ICRs of “b” of Genworth Financial, Inc. (Genworth) [NYSE: GNW] and Genworth Holdings, Inc. (both domiciled in Delaware), as well as their Long-Term Issue Credit Ratings (Long-Term IR). The outlook of these Credit Ratings (ratings) is stable.
The ratings of GLAIC reflect its balance sheet strength, which AM Best categorizes as strong, as well as its weak operating performance, limited business profile and appropriate enterprise risk management (ERM).
The rating downgrades of GLAIC follow a deterioration in AM Best’s view of its operating performance. There has been history of negative profitability in aggregate and in most lines of businesses. Uncertainty around the potential for future reserve increases and other write-downs decreases credibility of future earnings projections. Absolute and risk-adjusted capital, as measured by Best’s Capital Adequacy Ratio (BCAR), has decreased steadily over the past few years, driven by poor operating performance, although the overall balance sheet is assessed as strong. GLAIC calculated its risk-based capital (RBC) level at 422% at the end of 2018, a decrease from the prior year’s RBC score of 427%.
The ratings of GLIC and GLICNY reflect the group’s balance sheet strength, which AM Best categorizes as weak, as well as its weak operating performance, limited business profile and appropriate ERM.
The rating downgrades of GLIC and GLICNY follow a deterioration in AM Best’s view of its balance sheet strength and its operating performance. Risk-adjusted capitalization, as measured by BCAR and other capital metrics, deteriorated significantly. An offsetting factor is management’s focused strategy of garnering actuarially supported premium rate increases on in-force long-term care policies. Management identified the need for these increases in 2012, took corrective action and has achieved meaningful results, although the ability to gain sufficient premium increases across all states will take a number of years. While GNW has had some success at achieving these increases in the past, operating losses continue to persist and the impact and timing of the approval and receipt of those rate increases continue to be uncertain.
The rating affirmations of the two holding companies, Genworth and Genworth Holdings, Inc., as well as its associated debt, reflect the impact of the recently announced the sale of Genworth’s 57% stake in Genworth MI Canada, Inc. to Brookfield Business Partners. Net proceeds are expected to be approximately $1.8 billion, strengthening the balance sheet flexibility and liquidity of the holding company as the proceeds are expected mainly to be used to reduce upcoming debt.
The following Long-Term IRs have been affirmed with a stable outlook:
Genworth Holdings, Inc. (guaranteed by Genworth Financial, Inc.)—
— “b” on $400 million 7.70% senior unsecured notes, due 2020
— “b” on $400 million 7.20% senior unsecured notes, due 2021
— “b” on $750 million 7.625% senior unsecured notes, due 2021
— “b” on $450 million floating rate senior secured term loan, due 2023
— “b” on $400 million 4.9% senior unsecured notes, due 2023
— “b” on $400 million 4.8% senior unsecured notes, due 2024
— “b” on $300 million 6.50% senior unsecured notes, due 2034
— “ccc+” on $600 million fixed/floating rate junior subordinated notes, due 2066
The following indicative Long-Term IRs on securities available under the universal shelf registration have been affirmed with a stable outlook:
Genworth Financial, Inc.—
—“b” on senior unsecured debt
—“b-” on subordinated debt
—“ccc+” on preferred stock
Genworth Holdings, Inc.—
— “b” on senior unsecured debt
— “b-” on subordinated debt
— “ccc+” on preferred stock
This press release relates to Credit Ratings that have been published on AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
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