Genworth MI Canada Inc.

The negative outlook reflects the economic uncertainty associated with COVID-19 and impact that could have on the company's losses and risk-adjusted capitalization over the next 12 months. We could lower our ratings in the next 12 months if the pressures from unemployment lead to higher-than-anticipated losses, especially in larger areas where insurance in force is underwritten (i.e., the Greater Toronto Area and Ontario), leading to a potential weakening of capitalization, in our view. We could affirm the ratings and revise the outlook to stable in the next 12 months if we see an accelerated improvement in macroeconomic conditions and the company's capitalization doesn't significantly deteriorate. Real Canadian GDP contracts by 5.6% in 2020, and increases by 4.9% in 2021 and

...Economic uncertainties persist, and they could weigh on Genworth Canada's earnings and capital. Monetary and fiscal policy measures the Canadian government has undertaken have somewhat abated macroeconomic pressures, though uncertainties persist. The unemployment rate is still high, and a resurgence of the coronavirus during the winter could warrant countermeasures, including shutdowns. In addition, the pent-up demand in housing may be unsustainable, leading to house price reversal. We believe, in the near term, losses may be elevated compared with pre-pandemic levels, but manageable within earnings. The company has excellent capitalization, backed by strong operating profitability. Genworth MI Canada Inc. and its operating subsidiary (collectively, Genworth Canada) have a solid record of operating profitability backed by its prudent risk-focused underwriting approach, which, in our view, may help the company to navigate the current economic stress. Although losses could increase, we expect...

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