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Rating Action:

Moody’s downgrades Genworth’s life insurance ratings, outlook stable

24 April 2020

New York , April 24, 2020 -- Moody's Investors Service has downgraded the insurance financial strength (IFS) ratings of Genworth Financial Inc's (Genworth) life insurance subsidiaries, Genworth Life Insurance Company and Genworth Life Insurance Company of New York (GLIC and GLICNY, collectively, GLIC) to Caa1 from B3, and Genworth Life and Annuity Insurance Company (GLAIC) to B3 from B1. The downgrades reflect the companies likely decline in profitability and net capital generation in the near term resulting from the coronavirus and the related economic shock. Additionally, the action reflects the continued concerns on the dependency of future premium rate action approvals, the pressures from low interest rates adversely affecting margins, and the delays in completing the transaction with China Oceanwide Holding Group (China Oceanwide) (unrated). The outlook on Genworth's life insurance subsidiaries is stable.

The ratings for Genworth Holdings, Inc. (Holdings) (B2 senior unsecured debt rating, negative), and Genworth Mortgage Insurance Corporation (GMICO) (Baa3 IFS rating, positive) are not part of this rating action.

Please see the complete list of ratings below.

RATINGS RATIONALE

The downgrades of GLIC and its subsidiary GLAIC reflect Moody's expectation that the coronavirus-related economic downturn will weigh on the continued earnings volatility associated with their respective underlying liability profiles, and concern about GLIC / GLICNY's ability to grow margins and improve capital adequacy and obtain future rate actions to support long term care (LTC) policies. The LTC business in GLIC and GLICNY is adversely impacted by the low interest rate environment, which reduces expected returns on the company's investment portfolio supporting reserves. The rating action at GLIAC considers the higher than expected lapses in its life insurance business, as well as lower anticipated investment portfolio returns in its life and annuity businesses. GLAIC's ownership by GLIC also places downward pressure on its ratings.

The stable outlook on the life companies reflects their standalone ratings profiles. Moody's added it does not expect the companies to receive capital support from Holdings outside of the capital contributions as part of the China Oceanwide transaction, and thus they must rely on current financial resources, as well as future rate increases in the case of GLIC and GLICNY, to fund policyholder obligations.

The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The insurance industry has been one of the sectors affected by the shock given the coronavirus outbreak and resulting slowdown in business activity. We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety. Today's action reflects the impact on Genworth's life insurance subsidiaries of the breadth and severity of the shock, and the deterioration in credit quality it has triggered.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

Moody's cited the following factors that could lead to an upgrade of GLIC/GLICNY's ratings: (i) increased certainty regarding significant LTC rate approvals and/or other actions that help grow margins in the legacy LTC book of business, (ii) stability in statutory earnings, and return on statutory surplus greater than 4%, and (iii) sustained improvement in GLIC's RBC ratio above NAIC CAL RBC ratio of 300%.

Factors that could lead to a rating downgrade include: (i) continued uncertainty and/or further deterioration of the margins on LTC reserves, increasing the probability of a material reserve charge in the future, (ii) sustained NAIC CAL RBC ratio at GLIC of less than 175% CAL, and (iii) inability to obtain LTC rate approvals embedded in margin testing, further pressuring reserve adequacy of legacy LTC business.

For GLAIC's ratings, Moody's cited the following factors that could lead to an upgrade of its ratings: (i) stability in statutory earnings, and return on statutory surplus greater than 4%, and (ii) sustained CAL RBC ratio > 350%.

Conversely, factors that could lead to a rating downgrade of GLAIC's rating include: (i) failure to maintain NAIC CAL RBC > 300% for an extended period of time, and (ii) return on statutory surplus less than 4%.

The following ratings have been downgraded:

Genworth Life and Annuity Insurance Company: IFS rating to B3 from B1;

Genworth Life Insurance Company: IFS rating to Caa1 from B3;

Genworth Life Insurance Company of New York: IFS rating to Caa1 from B3;

Outlook actions

..Issuer: Genworth Life and Annuity Insurance Company

… Outlook, remains stable

..Issuer: Genworth Life Insurance Company

… Outlook, remains stable

..Issuer: Genworth Life Insurance Company of New York

… Outlook, remains stable

PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was Life Insurers Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1187348 . Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Holdings is the intermediate holding company of Genworth, an insurance and financial services holding company headquartered in Richmond, Virginia. Holdings also acts as a holding company for its respective subsidiaries including GLIC, GLAIC, and the international mortgage businesses. In addition, Holdings relies on the financial resources of Genworth including the US mortgage business to meet its obligations. The group reported GAAP net income (loss) available to Genworth's common shareholders of $343 million at December 31, 2019 on total assets of $101.3 billion and shareholders' equity of $14.6 billion.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004 .

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security 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 certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain 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.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569 .

At least one ESG consideration was material to the credit rating action(s) announced and described above.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

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.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Bob Garofalo
VP-Sr Credit Officer
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

Scott Robinson, CFA
Associate Managing Director
Financial Institutions Group
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

Releasing Office :
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

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