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30 Jun 2008
Moody's affirms Genworth A2 senior debt rating; outlook negative
Approximately $4.2 billion of debt affected
New York, June 30, 2008 -- Moody's Investors has affirmed the debt ratings of Genworth Financial,
Inc. ("Genworth"; NYSE: GNW, senior debt at A2).
Additionally, the rating agency affirmed the Aa3 insurance financial
strength (IFS) ratings on the company's life insurance operating
subsidiaries. In a prior rating action, Moody's downgraded
to Aa3 from Aa2 the IFS ratings of Genworth's mortgage insurance
subsidiaries (see related press release for additional information on
mortgage insurance operations). The outlook for Genworth's
life insurance subsidiaries is stable; the outlook for Genworth Financial,
Inc. and the mortgage insurance ("MI") subsidiaries
Genworth's Aa3 IFS ratings on its U.S. life insurance subsidiaries
and its A2 senior unsecured debt rating are based on Genworth's good business
profile, supported by diversified earnings and product portfolio
with competitive positions in income and protection products, and
global mortgage insurance. The company's exposure to spread compression
and certain higher risk life insurance products such as long-term
care is offset to a large extent by its strong financial profile and focus
on risk management.
According to Scott Robinson, Vice President and Senior Credit Officer,
"Genworth's A2 senior unsecured debt rating is primarily supported
by the resources and cash flows provided by its life insurance and its
mortgage insurance operations."
While performance of Genworth Mortgage Insurance Corporation's (GMICO)
insurance portfolio originated prior to 2008 has eroded capitalization
on a risk adjusted basis and those exposures remain vulnerable to further
economic deterioration, the operation is poised to benefit from
improved mortgage insurance demand and new business quality given its
strong credit profile relative to many of its competitors.
The senior debt rating is two notches lower than the Aa3 insurance financial
strength (IFS) rating of the company's lead life insurance companies and
two notches from the Aa3 IFS rating on its MI operating companies.
Moody's noted that the notching between the holding company debt rating
and the "average" operating company rating - two notches -
is narrower than the typical three notches for most US-based insurance
groups. According to Robinson, "the basis for this
notching is due to the extent of Genworth's overall business diversification,
reflecting the long-term projected sources of earnings and cash
flows from the life insurance as well as international and domestic mortgage
insurance operations to the holding company to service Genworth's cash
The rating agency indicated that run-rate cash coverage of interest
expense of more than six times and earnings interest coverage greater
than ten times, as well as increased stability of GAAP and regulatory
earnings would produce upward pressure on life operating companies'
and the holding company's ratings. To the contrary,
financial leverage greater than thirty percent, consolidated risk
based capital of less than 325% in the life insurance companies,
or earnings interest coverage less than eight times would place downward
pressure on the ratings.
On May 19, 2008, Moody's assigned an A2 rating to Genworth's
issuance of $600 million of senior unsecured notes, which
were issued off its existing universal shelf registration.
The following ratings were affirmed, with a negative outlook:
Genworth Financial, Inc. -- senior unsecured
debt at A2, jr. subordinated debt at A3, preferred
stock at Baa1; senior unsecured debt shelf at (P)A2, subordinated
debt shelf at (P)A3, and preferred stock shelf at (P)Baa1;
The following ratings were affirmed, with a stable outlook:
Genworth Financial, Inc. -- short-term
debt of Prime-1 for commercial paper;
Genworth life insurance subsidiaries -- Genworth Life Insurance Company,
Genworth Life Insurance Company of New York, Genworth Life and Annuity
Insurance Company -- insurance financial strength at Aa3;
Genworth life insurance subsidiaries - -- Genworth Life Insurance
Company and Genworth Life and Annuity Insurance Company -- short
term insurance financial strength rating at P-1;
Funding agreement-backed note issuance program (FANIP) of Genworth
Life Institutional Funding Trust at Aa3;
Secured Note Issuance Program (the Program) of Genworth Global Funding
Trusts at Aa3;
Genworth Global Funding Trusts 2005-A; 2006-A through
E, G; 2007-A through D; 2007-1 through 5;
2008-1 through 22 at Aa3;
General Repackaging ACES SPC 2007-2, General Repackaging
ACES SPC 2007-3, General Repackaging ACES SPC 2007-6,
General Repackaging ACES SPC 2007-7 at Aa3;
Premium Asset Trust - Series 2001-3, Series 2001-8,
Series 2004-10, Series 2005-3,Series 2005-5
through 7 at Aa3;
Genworth Financial, Inc., headquartered in Richmond,
Virginia, reported shareholders' equity of $12.7 billion
as of March 31, 2008, down from $13.5 billion
as of December 31, 2007.
For the first quarter of 2008, the company reported net income of
$116 million, down from $324 million in the year-ago
Moody's insurance financial strength ratings are opinions of the ability
of insurance companies to repay punctually senior policyholder claims
For more information, visit our website at www.moodys.com/insurance.
Financial Institutions Group
Moody's Investors Service
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service
No Related Data.
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