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Research Update: Genworth Australia Outlook Revised To Stable On Strengthened Earnings; Ratings Affirmed At 'A'

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Insurance Industry And Country Risk Assessment Update: April 2025


Research Update: Genworth Australia Outlook Revised To Stable On Strengthened Earnings; Ratings Affirmed At 'A'

Overview

  • Genworth Australia's earnings strengthened considerably over 2021 due to the strong economic rebound from the COVID-19 pandemic and a favorable housing market. We continue to view Genworth Australia as having a strong competitive position with a leading market share, and strong capital adequacy.
  • We are revising our outlook on Genworth Australia to stable from negative. At the same time, we are affirming our ratings on Genworth Australia at 'A'. We are also affirming the 'BBB+' rating on its subordinated debt.
  • Our stable outlook reflects our view that Genworth Australia will maintain a strong competitive position, solid earnings, and robust capital adequacy.

Rating Action

On Feb. 8, 2022, S&P Global Ratings revised its outlook on Genworth Financial Mortgage Insurance Pty Ltd. (Genworth Australia) and Genworth Financial Mortgage Insurance Pty Ltd. (NZ Branch) (Genworth NZ Branch) to stable from negative. At the same time, we affirmed our 'A' insurer financial strength and issuer credit ratings on Genworth Australia and insurer financial strength rating on Genworth NZ Branch. We also affirmed the rating on Genworth Australia's subordinated debt at 'BBB+'.

Rationale

The 'A' ratings and stable outlook on Genworth Australia reflect our view of the insurer's strong competitive position, backed by its leading local market share, and strong capital adequacy. Our base case is that Genworth Australia's financial resources will be sufficient to support the 'A' ratings over the next two years.

We expect Genworth Australia will maintain sound earnings over our forecast period, supported by generally improved broader market conditions. The economic effects of the COVID-19 pandemic, and associated lockdowns, have been more moderate than initially expected. The rapid decline in the unemployment rate over the past year should lessen near-term mortgage service stresses, and associated mortgage insurance defaults and claims. We also recognize the benefits of record-low interest rates, recent house price appreciation, and the improvement in mortgage underwriting standards that affect the quality of Genworth Australia's insurance in-force.

We expect Genworth Australia's competitive position to remain robust with a leading market share in lenders' mortgage insurance in Australia. The renewal of the Commonwealth Bank of Australia (AA-/Stable/A-1+) contract to December 2025 moderates the reliance on a single contract, noting the monoline insurer receives over half of its business from that source. The company has a diverse Australia-wide presence and a history of sound profitability and innovative strategies that are also supportive of the business profile.

We view Genworth Australia's capital and earnings assessment as strong, reflecting capital adequacy consistent with the 'A' level under our mortgage insurance capital model. We also recognize the robust capital buffer as of Sept. 30, 2021, with regulatory cover at 1.87x, well above the insurer's target range.

Outlook

The stable outlook on Genworth Australia reflects our expectation that it will maintain its strong competitive position as the largest provider of lenders' mortgage insurance in Australia, as well as capital adequacy at the upper end of the 'A' level, according to our capital model.

Upside scenario

We could raise the ratings on Genworth Australia over the next two years if our assessment of its capital adequacy improved to a level consistent with the 'AA' category or stronger, according to our capital model.

Downside scenario

Although unlikely, we could lower the ratings on Genworth Australia over the next two years if there is:

  • A deterioration in its competitive position, resulting in a material weakening in its market share;
  • A material decline in its operating performance; or
  • A weakening in its prospective capital position to below the 'A' level, under our global insurance capital model.

Ratings Score Snapshot

To From
Financial strength rating A A
Anchor a a
Business risk Strong Strong
IICRA Intermediate Intermediate
Competitive position Strong Strong
Financial risk Strong Strong
Capital and earnings Strong Strong
Risk exposure Moderately low Moderately low
Funding structure Neutral Neutral
Modifiers 0 0
Governance Neutral Neutral
Liquidity Exceptional Exceptional
Comparable ratings analysis 0 0
Support 0 0
Group support 0 0
Government support 0 0
IICRA--Insurance Industry And Country Risk Assessment.
ESG credit indicators: E-2, S-2, G-2

Related Criteria

Related Research

Ratings List

Ratings Affirmed

Genworth Financial Mortgage Insurance Pty Ltd.

Subordinated BBB+
Ratings Affirmed; CreditWatch/Outlook Action
To From

Genworth Financial Mortgage Insurance Pty Ltd.

Issuer Credit Rating
Local Currency A/Stable/-- A/Negative/--

Genworth Financial Mortgage Insurance Pty Ltd.

Genworth Financial Mortgage Insurance Pty Ltd. (NZ Branch)

Financial Strength Rating
Local Currency A/Stable/-- A/Negative/--

S&P Global Ratings Australia Pty Ltd holds Australian financial services license number 337565 under the Corporations Act 2001. S&P Global Ratings' credit ratings and related research are not intended for and must not be distributed to any person in Australia other than a wholesale client (as defined in Chapter 7 of the Corporations Act).

Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.standardandpoors.com for further information. Complete ratings information is available to subscribers of RatingsDirect at www.capitaliq.com. All ratings affected by this rating action can be found on S&P Global Ratings' public website at www.standardandpoors.com. Use the Ratings search box located in the left column.

Primary Credit Analyst:Julian X Nikakis, Sydney (61) 2-9255-9818;
julian.nikakis@spglobal.com
Secondary Contact:Craig A Bennett, Melbourne + 61 3 9631 2197;
craig.bennett@spglobal.com

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