AM Best has affirmed the Financial Strength Rating (FSR) of B (Fair) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “bb+” of Genworth Life and Annuity Insurance Company (GLAIC) (Richmond, VA). Concurrently, AM Best has affirmed the FSR of C++ (Marginal) and the Long-Term ICRs of “b” of Genworth Life Insurance Company (GLIC) (Wilmington, DE) and Genworth Life Insurance Company of New York (GLICNY) (New York, NY). Additionally, AM Best has affirmed the Long-Term ICRs of “b” of Genworth Financial, Inc. (Genworth) [NYSE: GNW] and Genworth Holdings, Inc. (both domiciled in Delaware), as well as their Long-Term Issue Credit Ratings (Long-Term IR). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect GLAIC’s balance sheet strength, which AM Best categorizes as strong, as well as its weak operating performance, limited business profile and appropriate enterprise risk management.
The ratings of GLAIC also reflect its strong balance sheet strength, including the level and quality of capital, and the quality of the asset portfolio. Although absolute and risk-adjusted capital, as measured by Best’s Capital Adequacy Ratio (BCAR), increased in 2019, many uncertainties around the strength of the balance sheet remain related to the potential for future reserve increases or asset impairments. There has been history of negative profitability in aggregate and in most lines of businesses. GLAIC calculated its risk-based capital (RBC) level at 438% at the end of 2019, an increase from the prior-year RBC score of 422%.
The ratings of GLIC and GLICNY reflect the group’s balance sheet strength, which AM Best categorizes as weak, as well as its weak operating performance, limited business profile and appropriate enterprise risk management.
The ratings of GLIC and GLICNY reflect AM Best’s view of its balance sheet strength and its operating performance. Risk-adjusted capitalization, as measured by BCAR and other capital metrics, is low and volatile. A strong offsetting factor is management’s focused strategy of garnering actuarially supported premium rate increases on in-force, long-term care policies. Management identified the need for these increases several years ago, took corrective action and has achieved meaningful results. While GNW has demonstrated success at achieving premium rate increases in the past, operating losses continue to persist due to deviation in experience relative to pricing assumptions. The impact and timing of the approval and receipt of those rate increases continue to be uncertain. GLIC calculated its RBC level at 213% at the end of 2019, an increase from the prior-year RBC score of 199%, while GLICNY’s RBC improved to 291% from 223% between 2018 and 2019.
The rating affirmations of the two holding companies, Genworth and Genworth Holdings, Inc., as well as its associated debt, reflect the ongoing challenges the operating companies face, its debt obligations and secured promissory note to settle recent dispute. Genworth has shown financial flexibility navigating through those complications, including the sale of Genworth’s stake in Genworth MI Canada, Inc. in 2019, the recent $750 million senior notes offering by Genworth Mortgage Holdings, Inc. and a potential 19.9% IPO of the U.S. mortgage insurance business. Finally, GNW continues to pursue closing the transaction with China Oceanwide Holdings Group Co. Ltd. and the $1.5 billion capital commitment, which has been delayed due to funding issues given current market challenges with COVID-19.
The following Long-Term IRs have been affirmed with a stable outlook:
Genworth Holdings, Inc. (guaranteed by Genworth Financial, Inc.)—
— “b” on $400 million 7.20% senior unsecured notes, due 2021
— “b” on $750 million 7.625% senior unsecured notes, due 2021
— “b” on $400 million 4.9% senior unsecured notes, due 2023
— “b” on $400 million 4.8% senior unsecured notes, due 2024
— “b” on $300 million 6.50% senior unsecured notes, due 2034
— “ccc+” on $600 million fixed/floating rate junior subordinated notes, due 2066
The following indicative Long-Term IRs on securities available under the universal shelf registration have been affirmed with a stable outlook:
Genworth Financial, Inc.—
–“b” on senior unsecured debt
–“b-” on subordinated debt
–“ccc+” on preferred stock
Genworth Holdings, Inc.—
— “b” on senior unsecured debt
— “b-” on subordinated debt
— “ccc+” on preferred stock
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media – Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
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