Fitch Ratings is keeping Genworth Life Insurance with a negative rating outlook in large part because of the “continuing, albeit lower” losses at its private mortgage insurance sister company. But it believes management will still provide capital to the troubled unit.
While home prices and unemployment are stabilizing, they are still a significant headwind on the mortgage insurance business. Fitch also pointed to the fact that Genworth Mortgage Insurance Co. needs regulatory and secondary market forebearances to be able to write new business.
But since Genworth’s management believes the mortgage insurance business has economic value, in turn Fitch believes the parent company “will continue to provide reasonable support to this business.”
Fitch’s current rating on Genworth can accommodate a moderate amount of additional losses at the mortgage insurance unit, including additional capital replenishment. Genworth Life’s insurer financial strength rating is A-. But the need the amount of and form of any additional capital funneled to GMICO could impact that rating.