A.M. Best Affirms Ratings of Genworth Financial, Inc. and Its Key Life/Health Subsidiaries; Maintains Negative Outlook

OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best Co. has affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of “a” of Genworth Life Insurance Company (Wilmington, DE), Genworth Life Insurance Company of New York (New York, NY) and Genworth Life and Annuity Insurance Company, the key life/health subsidiaries of Genworth Financial, Inc. (Genworth) [NYSE:GNW]. Additionally, A.M. Best has affirmed the ICR of “bbb” of Genworth and all its existing debt ratings. The outlook for all ratings is negative. All companies are domiciled in Richmond, VA, unless otherwise specified. (Please see below for a detailed listing of the companies and debt ratings.)

These ratings reflect Genworth’s diversified business profile across multiple product lines, consistently favorable operating company liquidity and adequate risk-adjusted capital position. Over the last year, Genworth has strengthened its balance sheet by completing several capital raising initiatives, de-risking its product and investment portfolios and implementing improved risk management practices within its U.S. mortgage insurance business. The ratings acknowledge Genworth’s established presence in the term life, long-term care, retirement and wealth management markets. These product lines have traditionally provided excellent earnings diversification and complemented Genworth’s domestic and international mortgage insurance business as well as its lifestyle protection business during more favorable economic environments. Holding company liquidity is adequate to meet near-term debt repayments, and financial leverage remains within acceptable rating guidelines, although interest coverage has declined in recent years.

Genworth’s operating profile—albeit improving—has been dampened by recent losses within its U.S. mortgage insurance business, underperformance of its international lifestyle protection business and moderately negative results within its legacy long-term care business. Additionally, A.M. Best notes substantial use of internal and external reinsurance over the last two years primarily to fund excess (XXX and AXXX) regulatory reserves. In spite of significant reductions in its realized and unrealized investment loss position, investment risks remain a concern. Specific areas of concern include Genworth’s exposure to commercial real estate, residential mortgage-backed securities and below investment grade bonds, which have experienced credit migration over the last year. A.M. Best notes that Genworth’s commercial real estate portfolio has had limited losses to date, with an average loan-to-value around 65% and a debt service coverage ratio at 2.3 times. Top line revenue growth has been muted due in part to the recession; however, Genworth continues to make progress in its overall insurance strategy to better penetrate its middle income target market.

The FSR of A (Excellent) and the ICRs of “a” have been affirmed for the following key life/health subsidiaries of Genworth Financial, Inc.:

• Genworth Life Insurance Company
• Genworth Life Insurance Company of New York
• Genworth Life and Annuity Insurance Company

The FSR of A- (Excellent) and ICRs of “a-” have been affirmed for Continental Life Insurance Company ofBrentwood, Tennessee and American Continental Insurance Company.

The following debt rating has been affirmed:

Genworth Financial, Inc. —

-- AMB-2 on commercial paper

The following debt ratings have been affirmed:

Genworth Financial, Inc.—

-- “bbb” on JPY 60 billion 1.60% senior unsecured notes, due 2011

-- “bbb” on $350 million 5.65% senior unsecured notes, due 2012

-- “bbb” on $600 million 5.75% senior unsecured notes, due 2014

-- “bbb” on $350 million 4.95% senior unsecured notes, due 2015

-- “bbb” on $300 million 8.625% senior unsecured notes, due 2016

-- “bbb” on $600 million 6.515% senior unsecured notes, due 2018

-- “bbb” on $300 million 6.50% senior unsecured notes, due 2034

-- “bb+” on $600 million fixed/floating rate junior subordinated notes, due 2066

-- “bb+” on $100 million 5.25% convertible preferred stock

Genworth Financial, Inc.—

--“bbb” on senior unsecured debt

--“bbb-”on subordinated debt

--“bb+” on preferred stock

Genworth Global Funding Trusts—“a” program rating

-- “a” on all outstanding notes issued under the program

Genworth Life Institutional Funding Trust—“a” program rating

-- “a” on all outstanding notes issued under the program

For Best’s Credit Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.

A.M. Best
Analysts:
Ken Johnson, 908-439-2200, ext. 5056
[email protected]
Rosemarie Mirabella, 908-439-2200, ext. 5892
[email protected]
or
Public Relations:
Rachelle Morrow, 908-439-2200, ext. 5378
[email protected]
Jim Peavy, 908-439-2200, ext. 5644
[email protected]

Source: A.M. Best Co.