A.M. Best Affirms Ratings of Genworth Financial, Inc.

Assigns Ratings to American Continental Insurance Company

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating (FSR) of A+ (Superior) and issuer credit ratings (ICR) of "aa-" of the key life/health insurance subsidiaries of Genworth Financial, Inc. (Genworth) (Richmond, VA) (NYSE:GNW). Additionally, A.M. Best has assigned an FSR of A- (Excellent) and an ICR of "a-" to American Continental Insurance Company (American Continental) (Brentwood, TN), a wholly owned indirect subsidiary of Genworth. A.M. Best also has affirmed the ICR of "a-" and existing debt ratings of Genworth.

Concurrently, A.M. Best has assigned a debt rating of "a-" to Genworth's $600 million 6.515% senior unsecured notes due May 22, 2018. This rating action is in line with Genworth's existing senior debt ratings. The outlook for all ratings is stable. (Please see link below for a detailed listing of the companies and ratings.)

Genworth's ratings reflect its solid operating performance, favorable liquidity position and extensive distribution channels. The ratings also recognize Genworth's established presence in the mortgage insurance, term life, long-term care and income annuity markets, which provide significant diversification of revenue and earnings.

The primary offsetting rating factors are the group's exposure to the industry-wide uncertainties associated with long-term care and, to a lesser extent, Medicare supplement liabilities. In addition, relative to life industry peers, Genworth is significantly exposed to mortgage-related risk on both sides of the balance sheet, where performance is dependent upon prevailing economic conditions. The company's comprehensive risk management program and its expertise in both investment management and the underwriting and pricing of its businesses partially mitigate these concerns. A.M. Best also notes that the loans insured by Genworth's U.S. mortgage insurance business are predominantly of prime credit quality.

American Continental's ratings reflect its position as the primary Medicare supplement product platform for Genworth. It also acknowledges the financial flexibility and access to resources resulting from its ownership by Genworth. While the Medicare supplement business carries the potential for earnings volatility, contributions from this line continue to represent a relatively small percentage of Genworth's overall operating income.

A.M. Best believes that Genworth's balance sheet has a manageable amount of financial leverage that can be comfortably serviced from the earnings currently generated by its insurance operations. The company's pro forma debt-to-adjusted capital ratio is approximately 26%, reflecting the recent $600 million senior note issuance. However, due to the deterioration in GAAP earnings over the last two quarters resulting from increased loss ratios in its U.S. mortgage insurance line as well as realized investment losses, interest coverage has declined. A.M. Best notes that should GAAP earnings continue to deteriorate, Genworth's interest coverage could fall below A.M. Best's minimum expectations for its current ratings.

For a complete listing of Genworth Financial, Inc.'s FSRs, ICRs and debt ratings, please visit www.ambest.com/press/061604genworth.pdf.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.