Bangkok--23 May--Standard & Poor's
MELBOURNE (Standard & Poor's) May 23, 2014--Standard & Poor's Ratings Services said today that the ratings on Genworth Financial Mortgage Insurance Pty. Ltd. (Genworth Australia; AA-/Stable) have been affirmed and the outlook revised to stable from negative, following the settlement of the company's partial initial public offering (IPO) on May 21, 2014.
As we have previously stated, we viewed the planned partial IPO of Genworth Australia as being necessary for the company to maintain its current ratings and three-notch rating-differential above the Genworth Financial Inc. (Genworth) group's core life insurance companies (GLIC; A-/Stable), and group credit profile (GCP), under our group rating methodology. We have revised our outlook on Genworth Australia to stable from negative, as:
- All of our criteria requirements are met for Genworth Australia's classification as an insulated subsidiary of Genworth, with a three-notch rating differential above the GCP;
- Significant minority ownership of around 34% is in place as a result of the successful partial IPO. Importantly, this figure exceeds the 20% threshold for external ownership, which is a key requirement in our group ratings methodology for allowing an insulated subsidiary to be rated at three notches above the group credit profile; and
- The insurer has sufficient external influence from independent directors and an independent chair is in place, with Genworth Australia having made gradual changes to the board composition in anticipation of the partial IPO.
The stable outlook reflects our expectation that Genworth Australia's SACP will remain very strong, with maintenance of capital adequacy commensurate with an 'AA' score under our lenders' mortgage insurance capital model, its leading market position, and sound operating performance.
The ratings could be lowered in the event of a material deterioration in the financial risk profile, such as significant deterioration in capital adequacy under our insurance capital model, which we do not expect to be corrected by management action within a reasonable period of time. We could also lower the ratings in the event of a severe deterioration in market share, a material and sustained weakening in operating performance or a change in market conditions that weakened our view of Genworth Australia's business risk profile.
We do not expect the ratings to be raised over the medium term.
RELATED CRITERIA AND RESEARCH
Related Criteria
- Use of CreditWatch And Outlooks, Sept. 14, 2009 Group Rating Methodology, Nov. 19, 2013
- Enterprise Risk Management, May 7, 2013
- Management And Governance Credit Factors For Corporate Entities And Insurers, Nov. 13, 2012
- Principles Of Credit Ratings, Feb. 16, 2011
- Hybrid Capital Handbook: September 2008 Edition, Sept. 15, 2008
Related Research
- Ratings And Outlook On Genworth Australia Unchanged At ‘AA-/Negative’ Following Signaling Of Partial IPO Timing, April 7, 2014
- Genworth Financial Mortgage Insurance Pty Ltd., Feb. 13, 2014
- Australian Lenders’ Mortgage Insurance Capital Model, Aug. 16, 2010
Complete ratings information is available to subscribers of RatingsDirect at www.globalcreditportal.com and at www.spcapitaliq.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.