A.M. Best Removes From Under Review With Developing Implications & Affirms Credit Ratings of Genworth Financial, Inc. & Its A...

A.M. Best has removed from under review with developing implications and affirmed the Financial Strength Rating (FSR) of B+ (Good) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “bbb-” of Genworth Life and Annuity Insurance Company (GLAIC) (Richmond, VA). Concurrently, A.M. Best has removed from under review with developing implications and affirmed the FSR of B- (Fair) and the Long-Term ICRs of “bb-” of Genworth Life Insurance Company (GLIC) (Wilmington, DE) and Genworth Life Insurance Company of New York (New York, NY). Additionally, A.M. Best has removed from under review with developing implications and 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 assigned to these Credit Ratings (ratings) is stable.

A.M. Best has removed the under review status on all existing Genworth ratings based on its assessment of potential outcomes given the successful completion of the Committee on Foreign Investment in the United States process in June 2018. This represented a key step toward the pending acquisition of Genworth by China Oceanwide. Other regulatory regimes also need to approve the transaction. For now, Genworth management has formulated adequate financial flexibility, given a limited ability to access the public debt and equity markets.

Genworth addressed the May 2018 $600 million of senior debt with the issuance of a $450 million senior secured term loan in March 2018. In addition, the holding company maintains an adequate level of liquidity. Also, cash flow from the domestic and international mortgage businesses remains good.

The ratings of GLAIC reflect its balance sheet strength, which A.M. Best categorizes as strong, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management (ERM).

The ratings of GLIC reflect its balance sheet strength, which A.M. Best categorizes as weak, as well as its marginal operating performance, limited business profile and appropriate ERM.

GLIC’s operations remain focused on the long-term care (LTC) market, which A.M. Best has on its product continuum at the high end of risk. A.M. Best continues to view GLIC’s risk-adjusted capital level as weak, as measured by Best’s Capital Adequacy Ratio (BCAR), for year-end 2017. The LTC block continues to rely solely on premium rate increases and associated benefit reductions to prevent capital to further decline. A.M. Best notes the company has been successful at securing rate increases across its various LTC blocks, but operating performance remains volatile, and with the limited product profile, prevents meaningful organic capital growth. On the other hand, GLAIC’s risk-adjusted capital, as measured by BCAR, remains strong. However, this has continued to give rise to marginal and volatile operating performance with a limited business profile, reflective of the company’s decision to halt sales of its traditional life insurance and fixed annuity products in 2016.

Given the information at hand, A.M. Best believes the successful closing of a transaction with China Oceanwide will have neither a positive nor negative impact on the ratings of Genworth. However, A.M. Best will revisit that view when and if the transaction closes, and is presented with additional plans and company intentions, including capital contributions to any rated entities.

The following Long-Term IR has been assigned with a stable outlook:

Genworth Holdings, Inc. (guaranteed by Genworth Financial, Inc.)—-- “b” on $450 million floating rate senior secured term loan, due 2023

The following Long-Term IRs have been removed from under review with developing implications and affirmed with assigned outlooks of stable:

Genworth Holdings, Inc. (guaranteed by Genworth Financial, Inc.)—-- “b” on $400 million 7.70% senior unsecured notes, due 2020-- “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 removed from under review with developing implications and affirmed with assigned outlooks of stable:

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

Genworth Global Funding Trusts—The program rating of “bbb-” has been removed from under review with developing implications and withdrawn, as the vehicle is empty.

This press release relates to Credit Ratings that have been published on A.M. 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 A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.

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

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A.M. BestBruno Caron, FSA, MAAA, +1 908-439-2200, ext. 5144Financial Analystbruno.caron@ambest.comorKen Johnson, CFA, CAIA, FRM, +1 908-439-2200, ext. 5056Senior Directorken.johnson@ambest.comorChristopher Sharkey, +1 908-439-2200, ext. 5159Manager, Public Relationschristopher.sharkey@ambest.comorJim Peavy, +1 908-439-2200, ext. 5644Director, Public Relationsjames.peavy@ambest.com