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Genworth Responds To Recent Ratings Actions

11/06/14

RICHMOND, Va., Nov. 6, 2014 /PRNewswire/ -- Genworth Financial, Inc. (NYSE: GNW) today issued the following statement in response to actions taken today by certain rating agencies.

"We are disappointed that certain rating agencies took negative actions regarding our ratings at this time," said Tom McInerney, President and CEO. "We have solid capital positions across all of our businesses and strong liquidity at the holding company, and we are working on actions to improve capital, financial flexibility, and earnings over time. We remain sharply focused on building shareholder value."

Genworth ended the third quarter with approximately $1.1 billion of cash and liquid assets at the holding company, a buffer of $720 million in excess of one and a half times annual debt service. The company believes the near term impact from these ratings or outlook changes will have minimal impact on the holding company, although future borrowing costs are likely to increase, and the holding company has no debt maturities until 2016. These changes in ratings or outlook are expected to reduce sales in some of its products. Additionally, the company currently intends that its U.S. mortgage insurance business will meet the additional capital requirements contained in the private mortgage insurer eligibility requirements by the anticipated effective date of June 30, 2015, primarily through reinsurance (or similar) transactions, together with cash available at the holding company.

Genworth continues to work with the rating agencies on their rating evaluation of the company and has announced it will be taking a number of steps to build capital and improve statutory earnings, including pursuing additional LTC premium rate actions, seeking opportunities to reduce or capitate risk in legacy LTC blocks and adjusting its sales mix.  In addition, it is exploring block transactions and expanding the company's use of reinsurance.

About Genworth Financial

Genworth Financial, Inc. (NYSE: GNW) is a leading Fortune 500 insurance holding company committed to helping families become more financially secure, self-reliant and prepared for the future. Genworth has leadership positions in long term care insurance and mortgage insurance and competitive offerings in life insurance and fixed annuities that assist consumers in solving their insurance, retirement and home ownership needs.

Genworth operates through three divisions: U.S. Life Insurance, which includes life insurance, long term care insurance and fixed annuities; Global Mortgage Insurance, containing U.S. Mortgage Insurance and International Mortgage Insurance segments; and the Corporate and Other division, which includes the International Protection and Runoff segments. Products and services are offered through financial intermediaries, advisors, independent distributors and sales specialists. Genworth, headquartered in Richmond, Virginia, traces its roots back to 1871 and became a public company in 2004. For more information, visit genworth.com. From time to time, Genworth releases important information via postings on its corporate website. Accordingly, investors and other interested parties are encouraged to enroll to receive automatic email alerts and Really Simple Syndication (RSS) feeds regarding new postings. Enrollment information is found under the "Investors" section of genworth.com. From time to time, Genworth's publicly traded subsidiaries, Genworth MI Canada Inc. and Genworth Mortgage Insurance Australia Limited separately release financial and other information about their operations. This information can be found at http://www.genworth.com.au and http://genworth.ca.

Cautionary Note Regarding Forward-Looking Statements

This press release contains certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by words such as "expects," "intends," "anticipates," "plans," "believes," "seeks," "estimates," "will" or words of similar meaning and include, but are not limited to, statements regarding the outlook for the company's future business and financial performance. Forward-looking statements are based on management's current expectations and assumptions, which are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may differ materially due to global political, economic, business, competitive, market, regulatory and other factors and risks, including, but not limited to, the following:

  • Risks relating to the company's businesses, including downturns and volatility in global economies and equity and credit markets; downgrades or potential downgrades, being placed on negative outlook or being put on review for potential downgrade of the company's financial strength or credit ratings; interest rate fluctuations and levels; adverse capital and credit market conditions; the valuation of fixed maturity, equity and trading securities; defaults or other events impacting the value of the company's fixed maturity securities portfolio; defaults on the company's commercial mortgage loans or the mortgage loans underlying the company's investments in commercial mortgage-backed securities and volatility in performance; the availability, affordability and adequacy of reinsurance to meet the company's needs; defaults by counterparties to reinsurance arrangements or derivative instruments; an adverse change in risk-based capital and other regulatory requirements; insufficiency of reserves and required increases to reserve liabilities (including as a result of any changes the company may make to its assumptions, methodologies or otherwise in connection with its active life margin review in the fourth quarter of 2014); legal and regulatory constraints on dividend distributions by the company's subsidiaries; competition, including from government-owned and government-sponsored enterprises (GSEs) offering mortgage insurance; loss of key distribution partners; regulatory restrictions on the company's operations and changes in applicable laws and regulations; legal or regulatory investigations or actions; the failure of or any compromise of the security of the company's computer systems and confidential information contained therein; the occurrence of natural or man-made disasters or a pandemic; the effect of the Dodd-Frank Wall Street Reform and Consumer Protection Act; ineffective or inadequate risk management program; changes in accounting and reporting standards; goodwill impairments; impairments of or valuation allowances against the company's deferred tax assets; significant deviations from the company's assumptions in its insurance policies and annuity contracts; accelerated amortization of deferred acquisition costs and present value of future profits (including as a result of any changes the company may make to its assumptions, methodologies or otherwise in connection with its active life margin review in the fourth quarter of 2014); inability (including as a result of the company's failure to obtain any necessary regulatory approvals) to increase premiums on in force and future long term care insurance products (including any current rate actions and any future rate actions, such as rate actions resulting from any changes the company may make to its assumptions, methodologies or otherwise in connection with its active life margin review in the fourth quarter of 2014) in a timely manner and sufficient amount; the company's  inability to reflect future premium increases and other management actions in its active life margin calculation (including in connection with its active life margin review in the fourth quarter of 2014); the company's inability to successfully implement the management actions it has and is developing to offset adverse impacts resulting from its claim reserves review completed in the third quarter of 2014, its active life margin review being conducted in the fourth quarter of 2014 or otherwise; the failure of demand for life insurance, long term care insurance and fixed annuity products to increase; the  capital needs in the U.S. life insurance and U.S. mortgage insurance businesses being higher than it anticipates and its inability to increase its capital on the anticipated timetable and terms or at all, and with the anticipated benefits; medical advances, such as genetic research and diagnostic imaging, and related legislation; ability to continue to implement actions to mitigate the impact of statutory reserve requirements; political and economic instability or changes in government policies; fluctuations in foreign currency exchange rates and international securities markets; the significant portion of the company's international mortgage insurance risk in force with high loan-to-value ratios; increases in U.S. mortgage insurance default rates; failure to meet, or have waived to the extent needed, the company's U.S. mortgage insurance subsidiaries' minimum statutory capital requirements and hazardous financial condition standards; the influence of Federal National Mortgage Association (Fannie Mae), Federal Home Loan Mortgage Corporation (Freddie Mac) and a small number of large mortgage lenders and investors and changes to the role or structure of Fannie Mae and Freddie Mac; inability to meet the proposed private mortgage insurance eligibility requirements (PMIERs) guidelines on the contemplated timetable with the contemplated funding (including (a) if reinsurance or similar transactions are not available due to adverse market conditions, costs and other terms of such transactions, the GSE's approach to and capital treatment for such transactions and the performance of the company's U.S. mortgage insurance business, among other factors, and (b) the capital required to meet the PMIERs guidelines and operate the company's business is higher than anticipated due to, among other things, (i) the PMIERs guidelines adopted differing materially from the current draft; (ii) the way the guidelines are applied and interpreted by the GSEs and the Federal Housing Finance Agency (FHFA); (iii) the future performance of the U.S. housing market; (iv) the company generating and having expected U.S. mortgage insurance business earnings, available assets and risk-based required assets (including as they relate to the value of the shares of the company's Canadian mortgage insurance subsidiary that are owned by the U.S. mortgage insurance business as a result of share price and foreign exchange movements or otherwise), reducing risk in force and reducing delinquencies as anticipated, and writing anticipated amounts and types of new U.S. mortgage insurance business; and (v) the company's projected overall financial performance, capital and liquidity levels being as anticipated); inability to realize the benefits of the company's rescissions and curtailments as anticipated; the extent to which loan modifications and other similar programs may provide benefits to the company; deterioration in economic conditions or a decline in home prices in the United States; problems associated with foreclosure process defects in the United States that may defer claim payments; decreases in the volume of high loan-to-value mortgage originations or increases in mortgage insurance cancellations in the United States; increases in the use of alternatives to private mortgage insurance in the United States and reductions by lenders in the level of coverage they select; the impact of the use of reinsurance with reinsurance companies affiliated with the company's U.S. mortgage lending customers; and potential liabilities in connection with the company's U.S. contract underwriting services;
  • Other risks, including the risk that the anticipated benefits of the announced expense reduction are not realized and the company may lose key personnel related to actions like this as well as general uncertainty in the timing of the company's turnaround; the possibility that in certain circumstances the company will be obligated to make payments to General Electric Company (GE) under the tax matters agreement with GE even if the company's corresponding tax savings are never realized and payments could be accelerated in the event of certain changes in control; and provisions of the company's certificate of incorporation and bylaws and the tax matters agreement with GE may discourage takeover attempts and business combinations that stockholders might consider in their best interests; and
  • Risks relating to the company's common stock, including the suspension of dividends and stock price fluctuations.

The company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.

SOURCE Genworth Financial, Inc.

Investors: Amy Corbin, 804 662.2685, Amy.corbin@genworth.com; Media: Al Orendorff, 804 662.2534, Al.orendorff@genworth.com

NYSE: GNW

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