A.M. Best Assigns Rating to Genworth Financial, Inc.’s New Senior Unsecured Notes

A.M. Best Co. has assigned a debt rating of "bbb” to the recently issued $300 million 8.625% senior unsecured notes due December 2016 for Genworth Financial, Inc. (Genworth) (Richmond, VA) [NYSE:GNW]. The notes are a drawdown from Genworth’s universal shelf registration, which was filed in August 2009.

Concurrently, A.M. Best has assigned indicative debt ratings to the aforementioned shelf registration, which replaced the shelf filed in November 2006. (See below for a detailed listing of the ratings.) The outlook assigned to all ratings is negative. The ratings on Genworth’s domestic life/health insurance companies and existing debt securities are unchanged.

The proceeds from this debt issuance are expected to be used for general corporate purposes and are a component of Genworth’s strategic capital raising initiatives that have been successfully executed in 2009. The issuance of these notes is expected to have a modest impact on Genworth’s financial leverage, which remains within A.M. Best’s guidelines for its current ratings. A.M. Best notes that Genworth’s fixed charge coverage has been reduced due in part to challenging operating results, most notably within its U.S. mortgage and international segments. However, the reduction in fixed charge coverage is partially offset by ample liquidity at the holding company and low levels of moderate term debt maturities within the next two years.

Genworth’s current ratings reflect the pressures on its operating profile from its U.S.-based mortgage insurance business, which is partially offset by earnings within its international segment and some improvement in its U.S. based retirement and protection segment. On a longer-term basis, Genworth’s established presence in the term life, long-term care and income annuity and mortgage insurance markets is expected to provide significant diversification of revenue and earnings under normalized market conditions.

A.M. Best notes that Genworth’s business profile is more concentrated with sizeable exposure to long-term care, which A.M. Best has historically viewed as a less creditworthy business relative to life insurance and annuities. Additionally, Genworth’s balance sheet remains exposed to mortgages on both sides of the balance sheet, vis-à-vis its life companies’ investments in whole loan commercial mortgages, residential and commercial mortgage-backed securities and its separate extensive domestic and international mortgage insurance businesses.

The following debt rating has been assigned:

Genworth Financial, Inc.—
-- "bbb” on $300 million 8.625% senior unsecured notes, due December 2016

The following indicative ratings have been assigned and are available under the shelf registration:

Genworth Financial, Inc.—
-- "bbb” on senior debt
-- "bbb-” on subordinated debt
-- "bb+” on preferred stock

For Best’s Credit Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.