A.M. Best Revises Outlook to Stable for Genworth Financial, Inc. and Its Key Life/Health Subsidiaries

  A.M. Best Revises Outlook to Stable for Genworth Financial, Inc. and Its Key
  Life/Health Subsidiaries

Business Wire

OLDWICK, N.J. -- May 24, 2013

A.M. Best Co. has revised the outlook to stable from negative and 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 (Richmond, VA), the key life/health subsidiaries of
Genworth Financial, Inc. (Genworth) (NYSE: GNW). Additionally, A.M. Best has
assigned an ICR of “bbb” to Genworth, a newly formed holding company. The
outlook assigned to the ICR is stable.

Concurrently, A.M. Best has revised the outlook to stable from negative and
affirmed the ICR of “bbb” of Genworth Holdings, Inc. (GHI) (formerly known as
Genworth Financial, Inc.), which is now a direct subsidiary of Genworth. A.M.
Best also has revised the outlook to stable from negative and affirmed the
existing debt ratings of GHI, which are guaranteed by Genworth. (Please see
below for a detailed listing of the companies and debt ratings.)

The ratings and revised outlook for Genworth and its subsidiaries reflect the
group’s improved profitability, enhanced financial flexibility,
well-performing investment portfolio, focused yet diverse business profile and
sound risk-adjusted capitalization. Genworth continues to improve its
statutory capital position, de-risk both its product and investment portfolio
and implement necessary pricing actions on both its inforce blocks and newly
underwritten business. The life insurance segment complements Genworth’s
domestic and international mortgage insurance business, providing excellent
earnings diversification. Holding company liquidity remains good, and
financial flexibility continues to improve. Moreover, Genworth’s financial
leverage and interest coverage remain adequate for its current ratings.

Partially offsetting these positive rating factors are Genworth’s sizeable
long-term care business, exposure to interest-sensitive liabilities and strong
competition in its core life and fixed annuity products. Additionally,
although the segment reported a profit for the first quarter of 2013, the
domestic mortgage insurance business continues to underperform and places a
potential drag on the group’s future profitability. Moreover, management is
taking appropriate action to enhance margins on its long-term care business;
however, the product line’s results remain below A.M. Best’s expectations as
some of the older blocks struggle to achieve profitability.

Genworth continues to have significant life insurance reserves subject to
relatively high guaranteed minimum interest rates, primarily from its
universal life book. The ongoing earnings drag is currently manageable but
will exacerbate over a sustained period of low rates. Additionally, Genworth’s
core life products face strong competition. Pricing actions taken in 2012 have
reduced premium growth in 2012 and are likely to impact 2013 results as well.
However, overall profitability should improve from greater margins on new
products sold. Genworth took significant action with respect to the use of
existing captives to make more efficient use of capital at a moderate cost to
future earnings. Ongoing funding of excess reserves (both Regulation XXX and
AXXX) remains a priority, but not a near-term concern.

Genworth continues to improve the quality of its investment portfolio.
Impairments continue to decline to manageable levels, and the company took
advantage of favorable pricing in certain riskier asset classes to enhance
yield. A.M. Best notes that Genworth continues to take mortgage risk on both
sides of its balance sheet. The general account portfolio has seen little
impairments on commercial mortgage loans, and overall exposure to this asset
class is generally consistent with peers. Investments in structured securities
continue to perform solidly and are closely monitored. Additionally, A.M. Best
notes that recent metrics on the mortgage insurance side appear favorable;
however, A.M. Best remains somewhat concerned about a quick economic downturn
that would likely drive losses in this product segment. On the international
mortgage insurance front, A.M. Best notes management’s plan for an initial
public offering of a minority interest of the Australian mortgage subsidiary.
Nevertheless, A.M. Best does not expect this strategy to be executed in the
near term.

On April 1, 2013, Genworth announced the completion of a legal entity
reorganization with the net result being the creation of a new ultimate
holding company. This restructuring effectively removes the U.S. mortgage
insurance subsidiaries from the companies covered by the indenture governing
Genworth's senior notes. A.M. Best recognizes that the reorganization, which
included transferring ownership of the European mortgage insurance
subsidiaries to Genworth Mortgage Insurance Corporation and a contribution of
$100 million to U.S. mortgage insurance (USMI), may limit the potential
exposure of the life/health companies to the USMI business.

A.M. Best believes Genworth is well-positioned at the current rating level.
Factors that could lead to negative rating actions include a material decline
in operating performance in any of Genworth’s businesses, a significant
decline in its risk-adjusted capital and/or a material increase in leverage or
loss of holding company liquidity.

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 following debt ratings have been affirmed:

Genworth Holdings, Inc. (guaranteed by Genworth Financial, Inc.)—
-- “bbb” on $600 million 5.75% senior unsecured notes, due 2014 ($500 million
currently outstanding)
-- “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 $400 million 7.70% senior unsecured notes, due 2020
-- “bbb” on $400 million 7.20% senior unsecured notes, due 2021
-- “bbb” on $750 million 7.625% senior unsecured notes, due 2021
-- “bbb” on $300 million 6.50% senior unsecured notes, due 2034
-- “bb+” on $600 million fixed/floating rate junior subordinated notes, due

Genworth Financial, Inc. —
-- AMB-2 on commercial paper

Genworth Global Funding Trusts—“a” program rating
-- “a” on all outstanding notes issued under the program

Genworth Life Institutional Funding Trust—“a” program rating

The following indicative debt ratings on securities available under universal
shelf registration have been assigned:

Genworth Financial, Inc.—
-- “bbb” on senior unsecured debt
-- “bbb-”on subordinated debt
-- “bb+” on preferred stock

The following indicative debt ratings on securities available under universal
shelf registration have been affirmed:

Genworth Holdings, Inc.—
-- “bbb” on senior unsecured debt
-- “bbb-”on subordinated debt
-- “bb+” on preferred stock

The methodology used in determining these ratings is Best’s Credit Rating
Methodology, which provides a comprehensive explanation of A.M. Best’s rating
process and contains the different rating criteria employed in the rating
process. Best’s Credit Rating Methodology can be found at

A.M. Best Company is the world's oldest and most authoritative insurance
rating and information source. For more information, visit www.ambest.com.

       Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.


A.M. Best Co.
Ken Johnson, CFA, 908-439-2200, ext. 5056
Managing Senior Financial Analyst
Andrew Edelsberg, 908-439-2200, ext. 5182
Vice President
Rachelle Morrow, 908-439-2200, ext. 5378
Senior Manager, Public Relations
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
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