AM Best Upgrades Issuer Credit Ratings for Most of Genworth Financial, Inc.’s U.S. Life Subsidiaries; Downgrades Credit Ratings of Genworth Life and Annuity Insurance Company

AM Best has upgraded the Long-Term Issuer Credit Ratings (Long-Term ICR) to “b+” (Marginal) from “b” (Marginal) and affirmed the Financial Strength Rating (FSR) of C++ (Marginal) of Genworth Life Insurance Company (GLIC) (Wilmington, DE) and Genworth Life Insurance Company of New York (GLICNY) (New York, NY). The outlook of these Credit Ratings (ratings) is stable. Additionally, AM Best has upgraded the Long-Term ICRs to “b+” (Marginal) from “b” (Marginal) of Genworth Financial, Inc. (Genworth) [NYSE: GNW] and Genworth Holdings, Inc., as well as their associated Long-Term Issue Credit Ratings (Long-Term IRs). (Both companies are domiciled in Delaware.) The outlook of these ratings is stable.

Concurrently, AM Best has downgraded the FSR to B- (Fair) from B (Fair) and the Long-Term ICR to “bb-” (Fair) from “bb+” (Fair) of Genworth Life and Annuity Insurance Company (GLAIC) (Richmond, VA). The outlook of these ratings is negative.

The ratings of GLIC and GLICNY reflect their balance sheet strength, which AM Best assesses as weak as well as its marginal operating performance, limited business profile and appropriate enterprise risk management (ERM).

The rating upgrades of GLIC and GLICNY reflect a noticeable improvement in operating performance in recent years as management has maintained its strategy of garnering actuarially supported premium rate increases on in-force, long-term care (LTC) policies and have achieved meaningful results. Operating performance in recent years has benefited from increased lapses and a decline in utilization in the LTC line of business as a result of the pandemic. The rising interest rate environment also is a net positive, which is offset somewhat by higher costs associated with rising inflation. While the group has demonstrated success at achieving premium rate increases in the past, the impact and timing of the approval and receipt of those rate increases continue to be uncertain and a potential risk.

The ratings of GLAIC reflect its balance sheet strength, which AM Best assesses as adequate, as well as its weak operating performance, limited business profile and appropriate ERM.

The rating downgrades of GLAIC are due primarily to the company’s weak level of risk-adjusted capital, as measured by Best’s Capital Adequacy Ratio (BCAR), which has decreased substantially over the previous 12 months, with the company posting a statutory net loss of $179 million for year-end 2021 driven by declining equity markets that require a higher level of reserves for the company’s variable annuity business and higher mortality due to the COVID-19 pandemic. The negative outlook for GLAIC reflects the continued pressure on its current balance sheet strength assessment. AM Best will continue to monitor the company’s ability to improve its current level of risk-adjusted capitalization. A failure to execute on capital management initiatives designed to improve risk-adjusted capital may result in further negative ratings actions.