New York, March 06, 2012 -- Moody's Investors Service has affirmed the debt ratings of Genworth Financial,
Inc. ("Genworth"; NYSE: GNW, senior debt at Baa3),
as well as the A2 insurance financial strength (IFS) ratings of the company's
primary life insurance operating subsidiaries. The outlook on Genworth
and all of its affiliates continues to remain negative.
RATINGS RATIONALE
According to Moody's Senior Vice President Scott Robinson,
"The affirmation of Genworth's ratings reflects continued
solid financial flexibility at the holding company, as evidenced
by its moderate financial leverage (21% as of December 31,
2011) and strong holding company liquidity position ($948 million
as of December 31, 2011)."
Commenting on the negative outlook on Genworth and its affiliates,
Robinson said it reflects the continuing uncertainty and downside risk
for significantly higher levels of delinquencies and losses from the US
mortgage insurance (MI) operations over the next few years. Such
a stress scenario would put greater demands on the financial resources
of Genworth, adversely impacting the holding company's excess
liquidity and the capital of the other insurance subsidiaries that would
be pressured to upstream more cash to the holding company. Somewhat
offsetting the risk of this downside and unexpected scenario, Moody's
noted that the company would have the option of placing the US MI business
in runoff, which would curtail additional capital contributions
in the short term to the business in order to write new business,
an option Genworth has not currently elected to pursue.
The rating agency added that the life company remains well capitalized
and has a leading position in long term care insurance and a strong position
in term insurance, along with strong brand awareness. Furthermore,
the company has relatively diversified earnings and competitive positions
in income and protection products, supported by solid diversification
of distribution. Offsetting these strengths, financial flexibility
has been pressured by recent performance in the domestic MI business,
there is pressure from shareholders to take "shareholder-friendly"
actions to improve market / book value, and the life company has
few lower risk product reserves; long-term care concentration
adds potential earnings and capital risk. Additionally, statutory
earnings have been modest over the past several years.
Genworth's Baa3 senior debt rating is 4 notches lower than the A2 IFS
ratings of the company's life insurance operating entities. The
notching differential between the main life insurance operating entities
and the holding company is greater than the standard 3 notches typical
for insurance groups, a reflection of the lower credit profile and
downside risks of US MI.
Rating Drivers -- holding company
According to Moody's, the following could lead to a change in outlook
of the holding company's ratings to stable from negative:
1) Losses and capital requirements of the stress case scenario for the
US MI operations are determined to have a modest impact on the group;
2) Positive ratings pressure on the company's lead life companies (see
below); and 3) Return on Capital of 4% or more. On
the other hand, the following could result in a downgrade of the
holding company's ratings: 1) Downgrade of the financial strength
ratings of the company's lead operating mortgage and/or life companies;
2) Adjusted financial leverage exceeding 30% and earnings coverage
falling below 2x on a sustained basis.
Rating Drivers -- life insurance group
The following could lead to a change in outlook to stable from negative
for the life insurance operating entities: 1) Losses and capital
requirements of the stress case scenario for the US MI operations are
determined to have a modest impact on the group; 2) 2012 US life
insurance GAAP operating earnings > $300 million, excluding
the impact of life block transactions; 3) US Life Insurance sales
growing at industry rate without disproportionate growth in LTC;
and 4) Unassigned surplus as of year-end 2012 > $100
million. To the contrary, aside from adverse results from
the stress analysis, other factors that could lead to a downgrade
include: 1) 2012 US life insurance GAAP operating earnings <
$300 million, excluding the impact of life block transactions;
2) Financial leverage in excess of 30% and/or earnings coverage
less than 2x on a sustained basis; and 3) Unassigned surplus as of
year-end 2012 < $100 million.
The principal methodologies used in rating Genworth were "Moody's Global
Rating Methodology for Life Insurers," published in May 2010.
Please see the Credit Policy page on www.moodys.com for
a copy of this methodology.
The following ratings were affirmed with a negative outlook:
Genworth Financial, Inc.— senior unsecured at Baa3,
junior subordinated debt at Ba1(hyb), senior unsecured shelf at
(P)Baa3, subordinate shelf at (P)Ba1, preferred shelf at (P)Ba2,
short-term debt rating for commercial paper at P-3
Genworth Life Insurance Company—insurance financial strength rating
at A2, short term insurance financial strength rating at P-1
Genworth Life and Annuity Insurance Company—insurance financial
strength rating at A2, short term insurance financial strength rating
at P-1
Genworth Life Insurance Company of New York—insurance financial
strength rating at A2
Genworth Global Funding Trusts—funding agreement-backed senior
secured Medium-Term Note Program at (P)A2
Genworth Global Funding Trusts 2006-C; 2006-E;
2007-A through C; 2007-3 through 4; 2008-1
through 2; 2008-5; 2008-7; 2008-9
through 49 — funding agreement-backed senior secured debt
at A2
Genworth Life Institutional Funding Trust—funding agreement backed
senior secured debt at A2, senior secured Medium-Term Note
Program at (P)A2
General Repackaging ACES SPC, Series 2007-2; Series
2007-3; Series 2007-6; Series 2007-7—funding
agreement-backed senior secured debt at A2
Premium Asset Trust Series 2005-3—funding agreement-backed
senior secured debt at A2
Genworth Seguros de Credito a la Vivienda—insurance financial strength
rating at Baa3, national scale insurance financial strength rating
at Aa3.mx
Genworth Financial, Inc., headquartered in Richmond,
Virginia, reported total assets of $114 billion and total
shareholders' equity of $17.7 billion as of December 31,
2011.
Moody's insurance financial strength ratings are opinions of the ability
of insurance companies to pay punctually senior policyholder claims and
obligations.
Visit Moody's website at www.moodys.com for more information.
REGULATORY DISCLOSURES
Although this credit rating has been issued in a non-EU country
which has not been recognized as endorsable at this date, this credit
rating is deemed "EU qualified by extension" and may still be used by
financial institutions for regulatory purposes until 30 April 2012.
Further information on the EU endorsement status and on the Moody's office
that has issued a particular Credit Rating is available on www.moodys.com.
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
Moody's considers the quality of information available on the rated entity,
obligation or credit satisfactory for the purposes of issuing a rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a rating is of sufficient quality and from sources Moody's
considers to be reliable including, when appropriate, independent
third-party sources. However, Moody's is not an auditor
and cannot in every instance independently verify or validate information
received in the rating process.
Please see Moody's Rating Symbols and Definitions on the Rating Process
page on www.moodys.com for further information on the meaning
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Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history. The date on
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Consequently, Moody's provides a date that it believes is the most
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for further information.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Scott Robinson
Senior Vice President
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Robert Riegel
MD - Insurance
Financial Institutions Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's affirms Genworth's holding company (sr debt at Baa3) and life entities (IFS at A2); outlook remains negative
