Fitch Ratings reiterated the Insurer Financial Strength (IFS)
at 'A-' for Genworth Life Insurance Company, Genworth Life and
Annuity Insurance Company and Genworth Life Insurance Company of
New York - the principal life insurance subsidiaries of
Genworth Financial Inc
) (also together known as Genworth Life). The rating outlook was
upgraded to Stable from Negative.
GENWORTH FINL (GNW): Free Stock Analysis
CHINA LIFE INS (LFC): Free Stock Analysis
PROTECTIVE LIFE (PL): Free Stock Analysis
STANCORP FNL CP (SFG): Free Stock Analysis
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Concurrently, the rating agency reiterated the 'A-' long-term
ratings on the Genworth Global Funding Trusts.
The outlook upgrade came on the back of the U.S. mortgage
insurance business returning to profitability, sturdy capital
position of Genworth Life's subsidiaries, lowered risks from
product and investment portfolio and better financial flexibility
at the holding company.
Fitch believes, with the divesture of Medicare supplement
business and the completion of two life block transactions, the
statutory capital position of Genworth Life has strengthened
However, a sustained low interest rate environment, weighing on
the performance of long-term care and fixed annuity businesses in
particular, and low interest coverage ratio keeps the rating
agency concerned. Additionally, increased regulatory supervision
related to the industry's use of affiliated captives might weigh
on Genworth's future ability to cede reserves to special-purpose
Nevertheless, rate increases on long-term care products will not
only help offset losses on older generation policies but also the
unfavorable impact from lower interest rates, unfavorable
business mix and lower-than-expected lapse rates.
Fitch stated it might consider a rating upgrade over a long term
if the U.S. mortgage insurance business continues to deliver
profitability, interest coverage moves to 7x or better and
statutory earnings at Genworth Life remain at $400 million
The ratings might be downgraded if the financial leverage moves
above 30%, statutory interest coverage falls below 3x, interest
coverage falls below 4x, risk based capital of Genworth Life
falls below 350% and substantial earnings charge from adverse
development of long-term care reserves.
Rating affirmations or upgrades from credit rating agencies play
an important part in retaining investor confidence on the stock
as well as maintaining creditworthiness in the market. We believe
that the company's strong score with the credit rating agencies
will help it write more business going forward.
Genworth carries a Zacks Rank #3 (Hold). Life insurers
Protective Life Corporation
StanCorp Financial Group Inc
) with a Zacks Rank #1(Strong Buy) and
China Life Insurance Co. Ltd
) with a Zacks Rank #2 (Buy) are worth noting.