Genworth Financial Mortgage Insurance Pty Ltd.

The negative outlook reflects our view that Genworth Australia's financial profile may deteriorate beyond our expectations in the upcoming 18-24 months, and be inconsistent with the 'A' rating. The one-in-three chance of a downgrade will take into account the effects of higher unemployment and how that translates into higher mortgage insurance claims, as well as moderating factors such as a quicker economic rebound or company actions. We could lower the rating on Genworth Australia if we see: A weakening in its capital adequacy, as measured by our capital model, reflecting higher-than-expected claims stemming from higher mortgage defaults as a consequence of higher unemployment; A deterioration in the insurer's competitive position resulting in a further weakening in its market share; or

...The 'A' ratings on Genworth Financial Mortgage Insurance Pty Ltd. (Genworth Australia) reflect our assessment of its strong competitive position and its strong financial risk profile. We assign an 'a' anchor recognizing the company's leading market position and strong brand, its diversified geographic footprint across Australia, and its sound customer base. Genworth Australia plays an important role in the industry as an advocate in government and regulatory channels. Further supporting the ratings on Genworth Australia are its strong capital adequacy, low leverage, conservative investment portfolio, and well-diversified reinsurance arrangements. At the same time, we recognize that the insurer's monoline status can expose it to sector-specific difficulties that can, over time, affect its earnings profile. Genworth Australia's earnings are sensitive to the weakened economic conditions associated with the COVID-19 pandemic. We see a risk that higher-than-expected unemployment may increase...

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