Moody’s lowers outlook on Genworth to negative

Moody’s Investors Service today lowered its insurance financial-strength ratings on Genworth Financial Inc., giving the company and its life insurance subsidiaries a negative outlook.
The New York-based agency cut the insurer’s senior debt ratings to Baa3, from Baa1.
The insurance financial strength ratings of Genworth Life Insurance Co. and Genworth Life and Annuity Insurance Co. were also trimmed to A2, from A1.
Concerns about the way investment losses would affect Richmond, Va.-based Genworth’s profitability and capital generation, as well as the reduced financial flexibility at the holding-company level, was behind the downgrade.
On the bright side, Genworth’s primary life insurance company ended last year with strong regulatory capital levels, having a risk-based capital ratio level of greater than 400%, according to Moody’s.
The holding company had $900 million in cash at the end of last year.
Genworth drew on a bank credit facility last year to cover $700 million in debt that is maturing in May and June and repurchased about $400 million of the original $1.1 billion of debt due this year.
Nevertheless, Genworth’s profitability and capital generation will face pressure from investment losses over the near to medium term, according to Moody’s.
Credit deterioration at the company’s mortgage insurance subsidiaries was also a contributor to the downgrades.
Genworth spokesman Al Orendorff said he couldn’t comment on the actions taken by Moody’s because the company is in a quiet period ahead of the release of its first-quarter earnings next month.
However, he did say that “Genworth had less exposure to the equity markets than some of its peers, the life insurance group had strong capital levels and the company had taken prudent steps to prepare for a potential stress scenario.”