Moody’s downgrades Genworth’s life insurance as profits drop

Moody's Investors Service has downgraded the insurance financial strength (IFS) ratings of Genworth Financial's life insurance subsidiaries due to a decline in profitability and net capital generation in the near term resulting from the coronavirus and the related economic shock.

Genworth Life Insurance Company (GLIC) and Genworth Life Insurance Company of New York (GLICNY) have been downgraded to Caa1 from B3, and Genworth Life and Annuity Insurance Company (GLAIC) to B3 from B1.

The rating action reflects the concerns on the dependency of future premium rate action approvals, the pressures from low interest rates adversely affecting margins, and the delays in completing the tr

Moody's expects that the coronavirus-related economic downturn will weigh on the continued earnings volatility associated with their respective underlying liability profiles, and concern about GLIC / GLICNY's ability to grow margins and improve capital adequacy and obtain future rate actions to support long term care (LTC) policies.

The LTC business in GLIC and GLICNY is adversely impacted by the low interest rate environment, which reduces expected returns on the company's investment portfolio supporting reserves. The rating action at GLIAC considers the higher than expected lapses in its life insurance business, as well as lower anticipated investment portfolio returns in its life and annuity businesses. GLAIC's ownership by GLIC also places downward pressure on its ratings.