New York, February 03, 2011 -- Moody's Investors Service has placed 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 and the Baa2 IFS ratings
of Genworth Mortgage Insurance Corporation and its supported affiliates
(collectively, "GMICO"), on review for possible downgrade.
Moody's says the review follows Genworth's announcement of its 4Q10
results—a net operating loss of $135 million, including
a loss of $352 million in U.S. Mortgage Insurance
(MI). Continuing deterioration of the firm's U.S.
MI financial results and regulatory capital position are the primary drivers
of the review, as well as the continuing challenging economic environment
for MI, which could meaningfully affect portfolio performance trends
in the coming quarters. Results in Retirement and Protection and
International, $138 million and $117 million,
respectively, were in line with the rating agency's expectations.
According to Scott Robinson, Senior Vice President: "The review
for possible downgrade largely reflects the continued uncertainty with
the MI operations. While we do not anticipate that Genworth would
divert resources from its life companies to support its MI operations
in an amount that would diminish our view of capital adequacy at the life
operations, the weakened MI company could place pressure on the
overall organization's financial flexibility."
Moody's believes that profitability of the MI business remains highly
uncertain. During its review, Moody's will evaluate the projected
capital adequacy and profitability of GMICO as well as the life company
under various stress scenarios. Moody's will a) update its
assessment of GMICO's profitability and b) re-evaluate GMICO's
capital adequacy profile. Moody's will also evaluate the
life company's capital position under various stress scenarios as
well as the potential of financial support to the U.S. MI
operations. The rating agency noted that the life insurance company
ended the year with strong regulatory capital levels, approximately
390% in terms of NAIC risk based capital. Additionally,
the company reported $1 billion of cash and highly liquid securities
at its holding company, which it can use to repay $541 million
of senior notes and preferred stock maturing in 2011. The following
year, in 2012, the company has $222 million of senior
notes maturing.
Moody's added that a downgrade of the MI company may or may not
result in a downgrade of the life IFS (depending upon the potential of
financial support from the life operations) and/or holding company ratings.
Genworth's Baa3 senior debt rating is 4 notches lower than the A2 IFS
rating of the company's lead life insurance companies and 1 notch lower
than the IFS rating of the company's U.S. MI operating company.
The notching differential between the main life insurance operating entities
and the holding company is greater than the standard 3 notches,
a reflection of the lower rating of the MI company.
Moody's ratings of Genworth Financial Mortgage Insurance Pty Ltd.
(Genworth Australia) were not part of this rating action.
The following ratings were placed under review for downgrade:
Genworth Financial, Inc.— Senior unsecured at Baa3,
junior subordinated debt at Ba1(hyb), preferred stock at Ba2(hyb),
senior unsecured shelf at (P)Baa3, subordinate shelf at (P)Ba1,
preferred shelf at (P)Ba2, commercial paper at P-3
Genworth Life Insurance Company—Insurance financial strength rating
at A2
Genworth Life and Annuity Insurance Company—Insurance financial
strength rating at A2
Genworth Life Insurance Company of New York—Insurance financial
strength rating at A2
Genworth Mortgage Insurance Corporation—Insurance financial strength
rating at Baa2
Genworth Residential Mortgage Insurance Corporation of NC—Insurance
financial strength rating at Baa2
Genworth Global Funding Trusts—Funding agreement-backed senior
secured Medium-Term Note Program at (P)A2
Genworth Global Funding Trusts 2006-B through 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 2001-3; Series 2005-3—Funding
agreement-backed senior secured debt at A2
Genworth Seguros de Credito a la Vivienda (Mexico)—Insurance financial
strength rating at Baa3, national scale insurance financial strength
rating at Aa3.mx
Genworth Financial, Inc., headquartered in Richmond,
Virginia, reported shareholders' equity of $13.9 billion
as of December 31, 2010, up from $12.3 billion
as of December 31, 2009.
Moody's insurance financial strength ratings are opinions of the ability
of insurance companies to pay punctually senior policyholder claims and
obligations. Please see Moody's website at www.moodys.com/insurance
for more information.
The principal methodology used in rating Genworth and its affiliates was
"Moody's Global Rating Methodology for Life Insurers," published
in May 2010.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
New York
Robert Riegel
MD - Insurance
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Scott Robinson
Senior Vice President
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's reviews Genworth ratings for possible downgrade