A.M. Best has affirmed the financial strength rating 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 affirmed the ICR of “bbb” of Genworth and its existing debt ratings. The outlook for all ratings is stable. (Please see below for a detailed listing of the debt ratings.)
The ratings of Genworth and its subsidiaries reflect the group’s continued improvement in overall profitability, enhanced financial flexibility, strong risk-adjusted capitalization and diversified business mix. Genworth continues to improve its overall risk profile through the de-risking of both its investment and product portfolios, more recently with its focus on pricing actions within its older vintage and newly underwritten long-term care (LTC) blocks. The organization’s life insurance segment complements Genworth’s domestic and international mortgage insurance business, providing excellent earnings diversification. Holding company liquidity remains very good, and financial flexibility continues to improve as Genworth has been efficient with its capital management, in addition to demonstrating repeated access to the capital markets. A.M. Best believes Genworth’s financial leverage and interest expense coverage remain at adequate levels for its current ratings.
Partially offsetting these positive rating factors are Genworth’s sizeable exposure to LTC business, significant interest-sensitive reserves as well as the highly competitive environment in its core life and fixed annuity markets. While A.M. Best remains cautious with regard to LTC, Genworth has been successful in securing various levels of approvals for rate increases on its existing blocks of business from most states and continues to be transparent in its management of these legacy policies. Additionally, core earnings from Genworth’s life insurance segment have been somewhat lackluster in recent periods with some reported mortality volatility in the first quarter of 2014, consistent with many other life insurance peers. The group’s life insurance portfolio continues to evolve, with Genworth shifting to more capital-efficient products and implementing pricing actions within its term life blocks. Moreover, A.M. Best notes the company’s material exposure to economically sensitive business through its various life and annuity offerings, and will continue to monitor for significant spread compression due to guaranteed minimum interest rates and the ongoing low interest rate environment.