AM Best has revised the outlook to negative from stable for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed the Financial Strength Rating (FSR) of B (Fair) and the Long-Term ICR of “bb+” (Fair) of Genworth Life and Annuity Insurance Company (GLAIC) (Richmond, VA). The outlook of the FSR is stable. Concurrently, AM Best has affirmed the FSR of C++ (Marginal) and the Long-Term ICRs of “b” (Marginal) 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” (Marginal) 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 of GLAIC reflect its balance sheet strength, which AM Best assesses as adequate, as well as its weak operating performance, limited business profile and appropriate enterprise risk management (ERM).
The ratings of GLAIC also reflect its adequate balance sheet strength, including the level and quality of capital, and the quality of its asset portfolio. The revision of the Long-Term ICR outlook to negative reflects pressure on the company’s risk-adjusted capitalization in recent years, as well as increased losses over this period. Absolute and risk-adjusted capital, as measured by Best’s Capital Adequacy Ratio (BCAR), decreased in 2020, mainly driven by revised interest rate assumptions within the universal life with secondary guarantee block. Results for 2020 were negative with a $182 million statutory loss driven by changes in reserves in the universal life with secondary guarantee block as well as higher mortality due to the COVID-19 pandemic. GLAIC calculated its risk-based capital (RBC) level at 424% at the end of 2020; it has been in the 400% - 450% range for the past four years.
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 ERM.
The ratings of GLIC and GLICNY reflect AM Best’s view of their balance sheet strength and operating performance. Risk-adjusted capitalization, as measured by BCAR and other capital metrics, is low, in line with 2019. 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. GNW has demonstrated success at achieving premium rate increases in the past. The impact and timing of the approval and receipt of those rate increases remain uncertain. GLIC calculated its RBC level at 229% at the end of 2020, an increase from the prior-year RBC score of 213%, while GLICNY’s RBC deteriorated to 200% from 291% in 2019.
The rating affirmations of the two holding companies, Genworth and Genworth Holdings, Inc., as well as their associated debt, reflect the ongoing challenges the operating companies face, their debt obligations and secured promissory note to settle a 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 and a potential 19.9% initial public offering of Enact, the U.S. mortgage insurance business. More recently, the company sold its interest in Genworth Mortgage Insurance Australia Limited for total proceeds of $370 million. This has alleviated pressure on a September 2021 maturity that was retired in early July, as well as AXA liabilities. Earlier this year, the company announced the termination of the merger agreement with China Oceanwide Holdings Group Co. Ltd.
The following Long-Term IRs have been affirmed with a stable outlook:
Genworth Holdings, Inc. (guaranteed by Genworth Financial, Inc.)—
— “b” (Marginal) on $750 million 7.625% senior unsecured notes, due 2021
— “b” (Marginal) on $400 million 4.9% senior unsecured notes, due 2023
— “b” (Marginal) on $400 million 4.8% senior unsecured notes, due 2024
— “b” (Marginal) on $300 million 6.50% senior unsecured notes, due 2034
— “ccc+” (Weak) 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” (Marginal) on senior unsecured debt
—“b-” (Marginal) on subordinated debt
—“ccc+” (Weak) on preferred stock
Genworth Holdings, Inc.—
— “b” (Marginal) on senior unsecured debt
— “b-” (Marginal) on subordinated debt
— “ccc+” (Weak) 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 use of Best’s Credit Ratings, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
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