Genworth Holdings, Inc., a subsidiary of
Genworth Financial, Inc
), announced the offering of 4.9% $400 million 10 year senior
The net proceeds along with Genworth Holdings' cash balance will
be deployed to redeem most of the 4.95% senior notes due 2015,
pay premium and accrued interest on such notes. The remainder, if
any, will be utilized for general corporate purposes that may
include the redemption or repurchase of debt, including
additional senior notes due 2015.
It is a prudent strategy undertaken by the company to issue notes
of lower coupon rates and redeem them with higher coupon rates,
thereby trying to lower interest burden. This will likely enhance
the profitability of Genworth.
Furthermore, A.M. Best Co. assigned a debt rating of "bbb" with a
stable outlook to these notes. The rating agency expects leverage
to marginally increase with the new issuance. A.M. Best also
affirmed the financial strength rating, issuer credit rating and
debt ratings of Genworth, Genworth Holdings and its domestic
The ratings account for continuously improving operational
results, better financial flexibility, solid investment
portfolio, sturdy risk-adjusted capitalization and a diversified
business portfolio. Genworth remains focused to improve its
capital position, de-risk its products and investment portfolios,
and execute pricing actions.
However, considerable long-term care business, exposure to
interest-sensitive liabilities and heightened competition faced
by its core life and fixed annuity products partially dwarf the
positives. Furthermore, the persistently underperforming domestic
mortgage insurance business will likely have an adverse effect of
the company's results, going forward. According to A.M. Best,
despite management's focus on improving the long-term care
business margin, performance continues to underperform.
As per the rating agency, pricing implementation, which had
hindered premium growth in 2012, shall continue to do so in 2013
Rating affirmations or upgrades from credit rating agencies play
an important part in retaining investor confidence on the stock
as well as maintaining credit worthiness in the market. Rating
downgrades, therefore, adversely affect the business, apart from
increasing the costs of future debt issuances. We believe that
strong ratings will help Genworth retain investor confidence and
help it write more businesses going forward, thereby boosting
Genworth reported its second-quarter 2013 net operating income of
27 cents per share on Jul 30. The results fell short of the Zacks
Consensus Estimate of 29 cents but were much above the year-ago
level of 14 cents. During the reported quarter, Global Mortgage
Insurance put up a robust performance, long-term care insurance
witnessed progress on rate actions and the company garnered
benefits from the expense reduction initiatives.
Genworth presently carries a Zacks Rank #3 (Hold). Life insurers,
Lincoln National Corporation
StanCorp Financial Group Inc.
Health Insurance Innovations, Inc
) are worth taking a look. These carry Zacks rank #2 (Buy).
GENWORTH FINL (GNW): Free Stock Analysis
HEALTH INS INN (HIIQ): Free Stock Analysis
LINCOLN NATL-IN (LNC): Free Stock Analysis
STANCORP FNL CP (SFG): Free Stock Analysis
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