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18 Nov 2003
MOODY'S DOWNGRADES GE FINANCIAL ASSURANCE HOLDINGS, INC.'S SENIOR DEBT RATING TO A2 FROM Aa3 FOLLOWING ANNOUNCEMENT OF PLANNED IPO; DOWNGRADES LIFE INSURANCE FINANCIAL STRENGTH RATINGS TO Aa3 FROM Aa2; RATING OUTLOOKS ARE STABLE
New York, November 18, 2003 -- Moody's Investors Service downgraded GE Financial Assurance Holdings,
Inc.'s (GEFAHI) senior debt rating of its yen denominated
notes to A2 from Aa3. The rating agency affirmed GEFAHI's
commercial paper rating of Prime-1 which will be guaranteed by
GE Capital Corporation (GECC). Moody's also downgraded the
insurance financial strength (IFS) ratings of the GEFAHI life insurance
subsidiaries to Aa3 from Aa2. The outlook for the group's
ratings is stable.
These rating actions follow GE's announcements that it will pursue
an initial public offering (IPO) of a new holding company, Genworth
Financial, Inc. (Genworth), to which it will transfer
substantially all of its life insurance and mortgage insurance operations.
GE plans to file an S-1 registration with the SEC early in January
2004 and to complete the IPO of approximately 30% of Genworth during
the first half of 2004.
GE will contribute its international mortgage and European payment protection
insurance businesses to Genworth. However, GE will retain
certain consumer marketing and financing operations including a block
of U. K. based life insurance, GE Mortgage --
Mexico and the Partnership Marketing Group. Genworth will transfer
to GE, via reinsurance, certain blocks of runoff U.
S. life insurance and annuity business. Genworth will assume
the obligation for GEFAHI's long-term debt which consists
of 60 billion of yen denominated notes (approximately $490 million)
due in 2011. GEFAHI will retain its commercial paper program which
will be guaranteed by GECC.
Moody's said that the downgrade of the IFS ratings of the life insurance
companies reflects the change in ownership from 100% GE owned to
approximately 70% ownership. The revised ratings anticipate
no ongoing support from GE and the expectation that the GE stake will
disappear completely over a three year period, according to the
rating agency. The Aa3 IFS ratings reflect the intrinsic stand-alone
credit ratings of the life insurance companies, without any benefit
of GE ownership.
The rating agency cited the following factors contributing to the financial
strength of the Genworth life insurance companies: good track record
for managing risk, sound operations including diversified distribution,
good product breadth, strong market position in core business lines,
diversified earnings, and adequate capital. Moody's
noted, however, that the statutory profitability, statutory
capitalization, and the risk characteristics of some products including
long-term care, funding agreements, and term life,
placed the financial strength ratings more comfortably in the Aa3 category
on a stand-alone basis.
Moody's also said that it expects GECC to provide credit enhancement
for existing putable short-term funding agreements, issued
by General Electric Capital Assurance and GE Life and Annuity Assurance
Company, for a period of time and that this would enhance the liquidity
profile of two of the major Genworth life insurance subsidiaries.
The rating agency added, however, that it did not anticipate
any GE support to extend to the non-putable, long-term
funding agreement backed notes of Genworth's life insurance subsidiaries.
In addition, the rating agency indicated the Aa3 IFS ratings considered
the potential for an increased level of holding company financial leverage,
an increase in holding company cash needs to cover interest payments and
common stock dividends, and the associated likelihood for substantial
recurring dividends taken out of the life insurance companies.
Moody's said that the GEFAHI senior long-term debt rating
of A2 reflects the assumption of the yen denominated debt by Genworth,
and incorporates the new ownership structure and the expectation that
the sources of debt service will be totally independent from GE.
However, the rating agency added that Genworth should benefit from
diversified sources of cash flow from both its life insurance and mortgage
insurance operations. Moody's commented that it expects the
targeted financial leverage and interest coverage ratios of Genworth will
be appropriate for the A2 senior unsecured debt rating.
In affirming GEFAHI's commercial paper rating of Prime-1,
Moody's noted the guarantee provided by GECC.
The following ratings have been downgraded with a stable outlook:
GEFAHI - Senior unsecured debt (Yen) to A2 from Aa3.
General Electric Capital Assurance Company (GECA) - Insurance financial
strength to Aa3 from Aa2.
Federal Home Life Insurance Company (FHL) - Insurance financial
strength to Aa3 from Aa2.
GE Life and Annuity Assurance Company (GELAAC) - Insurance financial
strength to Aa3 from Aa2.
GE Capital Life Assurance Company of NY (GECLANY) - Insurance financial
strength to Aa3 from Aa2.
First Colony Life Insurance Company (FCL) - Insurance financial
strength to Aa3 from Aa2.
American Mayflower Life Insurance Company of NY (AML) - Insurance
financial strength to Aa3 from Aa2.
Premium Asset Trust - Series 2001-2, Series 2001-3,
Series 2001-6, Series 2001-8, Series 2002-1,
Series 2002-4, Series 2002-6, Series 2002-11
(Medium-Term Notes Backed by funding agreements issued by GECA)
-- Senior secured debt to Aa3 from Aa2.
Premium Asset Trust -- Series 2000-7, Series 2000-9,
Series 2003-4; Series 2003-8; Series 2003-9(Medium-Term
Notes Backed by funding agreements issued by GELAAC) -- Senior secured
debt to Aa3 from Aa2.
The following ratings have been affirmed with a stable outlook:
GEFAHI - Commercial paper at Prime-1.
GECA -- Short-term insurance financial strength at Prime-1.
GELAAC -- Short-term insurance financial strength at Prime-1.
The following rating has been withdrawn:
GEFAHI - Senior unsecured debt of (P)Aa3.
GE Financial Assurance Holdings, Inc., headquartered
in Richmond, VA, reported total assets of about $97
billion and shareholders' equity of approximately $15 billion as
of September 30, 2003.
Moody's Insurance Financial Strength Ratings are opinions of the ability
of insurance companies to repay punctually senior policyholder claims
and obligations. For more information, visit our website
Financial Institutions Group
Moody's Investors Service
Asst Vice President - Analyst
Financial Institutions Group
Moody's Investors Service
No Related Data.
© 2020 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.
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