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Fitch Maintains Genworth Life's 'BB' IFS Ratings on Watch Evolving
September 26, 2017 / 6:45 PM / 21 days ago

Fitch Maintains Genworth Life's 'BB' IFS Ratings on Watch Evolving

(The following statement was released by the rating agency) CHICAGO, September 26 (Fitch) Fitch Ratings has maintained the 'BB' Insurer Financial Strength (IFS) ratings of Genworth Life Insurance Company (GLIC), Genworth Life and Annuity Insurance Company (GLAIC) and Genworth Life Insurance Company of New York (collectively, Genworth Life) on Rating Watch Evolving. A full list of rating actions follows at the end of this release. Genworth Life's ratings remain on Rating Watch pending the approval of a transaction in which China Oceanwide Holdings Group Co. Ltd. (China Oceanwide) plans to acquire all outstanding shares of Genworth Life's ultimate parent Genworth Financial, Inc. (GNW) for $2.7 billion in cash. The transaction is subject to regulatory approval and was expected to close by mid-2017. Regulatory review is ongoing and the close deadline has been extended to November 2017. The Rating Watch Evolving status reflects uncertainty as to whether the proposed transaction will be approved, as well as uncertainties as to China Oceanwide's effect on GNW's financial and operating strategies should the transaction close. China Oceanwide is a privately held, family owned international financial holding company based in Beijing, China, with operations in financial services, energy, culture, media, and real estate. Fitch expects to resolve the Evolving Watch status following regulators' approval or disapproval of the transaction. China Oceanwide plans to contribute $600 million to GNW to address the maturity of $597 million of senior notes before the May 2018 maturity date and $525 million to Genworth Life. If consummated, Fitch believes that the transaction addresses near-term concerns regarding upcoming debt maturities and potential capital impact tied to further long-term care (LTC) reserve charges. However, underperformance of the LTC business continues to pressure Genworth Life's reserve margins and capital adequacy. KEY RATING DRIVERS Genworth Life's ratings reflect the company's large exposure and market-leading position in the LTC market, which Fitch views as one of the most risky products sold by U.S. life insurers due to above-average underwriting and pricing risk, high reserve and capital requirements and exposure to low interest rates. The company's reported statutory capitalization is strong relative to rating expectations but vulnerable to adverse LTC reserve development. Fitch believes GNW's access to the capital markets for future funding needs and overall financial flexibility is limited. Over the intermediate term, holding company funding needs are highly dependent on existing cash balances, ordinary and special dividends from the mortgage insurance businesses, or further asset sales and block transactions. RATING SENSITIVITIES Key rating sensitivities that could result in a rating downgrade include: --If Fitch believes there is a decline in financial flexibility as the result of a failure to complete the proposed acquisition, the ratings could be downgraded. --New information that indicated China Oceanwide's financial or operating profile is not supportive of Genworth Life's current ratings. --Significant additional charges related to long-term care or run-off business in the near- to intermediate-term. Key rating sensitivities that could result in a rating upgrade include: --Successful completion of the proposed acquisition of GNW and capital contribution by China Oceanwide, together with Fitch gaining comfort that China Oceanwide will be supportive of GNW's credit quality longer-term. --Successful un-stacking of GLAIC from GLIC ownership could result in GLAIC's financial strength being evaluated independently from GLIC's. If the proposed acquisition successfully closes, the effect of China Oceanwide's ownership on GNW will be an important analytical consideration. If Fitch has insufficient information to evaluate the effect of China Oceanwide's ownership on the rated entities, Fitch may have to withdraw the ratings for lack of information. FULL LIST OF RATING ACTIONS Fitch maintains the following ratings on Rating Watch Evolving: Genworth Life Insurance Company; Genworth Life and Annuity Insurance Company; Genworth Life Insurance Company of New York; --IFS at 'BB'. Contact: Primary Analyst Donald F. Thorpe, CPA, CFA Senior Director +1 312 606-2353 Fitch Ratings, Inc. 70 West Madison Street Chicago, IL 60602 Secondary Analyst Douglas L. Meyer, CFA Managing Director +1 312 -368-2061 Committee Chairperson James B. Auden, CFA Managing Director +1 312-368-3146 Media Relations: Benjamin Rippey, New York, Tel: +1 646 582 4588, Email: benjamin.rippey@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Insurance Rating Methodology (pub. 26 Apr 2017) here Additional Disclosures Solicitation Status here#solicitation Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. 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The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. 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Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

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