A.M. Best Assigns Debt Rating to Genworth Financial, Inc.'s New Senior Notes
OLDWICK, N.J. -- August 7, 2013
A.M. Best Co. has assigned a debt rating of “bbb” to the $400 million 4.90%
10-year senior unsecured notes recently issued by Genworth Holdings, Inc.
(GHI). The notes are guaranteed by GHI’s parent holding company, Genworth
Financial, Inc. (Genworth) [NYSE: GNW]. The assigned outlook is stable. The
existing financial strength, issuer credit and debt ratings of Genworth, GHI
and its domestic life/health insurance companies (all headquartered in
Richmond, VA) are unchanged.
GHI intends to use the net proceeds from this issuance, together with cash on
hand, to redeem at least a majority of the outstanding aggregate principal
amount of its 4.95% senior notes, due 2015. The remainder, if any, will be
utilized for general corporate purposes, which may include the redemption or
repurchase of debt, including additional senior notes, due 2015. Although
there may be a small increase in Genworth’s financial leverage ratio upon
issuance, the pro forma impact on leverage is essentially neutral in the
medium term given plans to call the 2015 maturing debt. Notes maturing in 2014
are expected to be funded with the proceeds from the sale of the wealth
management business, which is anticipated to close in the third quarter of
2013, and cash on hand.
Genworth’s ratings reflect its 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 portfolios 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
businesses, 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 its second consecutive profitable quarter in the
second quarter of 2013, the domestic mortgage insurance business continues to
underperform and places a potential drag on the organization’s future
profitability. Furthermore, 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
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. The pricing actions taken in 2012
reduced premium growth in the same year and are likely to impact 2013 results
as well. However, overall profitability should improve from greater margins on
new products sold.
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
Rachelle Morrow, (908) 439-2200, ext. 5378
Senior Manager, Public Relations
Andrew Edelsberg, (908) 439-2200, ext. 5182
Jim Peavy, (908) 439-2200, ext. 5644
Assistant Vice President, Public Relations
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