The ratings affirmation reflects our expectations that Genworth Australia's claims experience should continue to normalize--to loss ratios of around 50%--over the next two quarters to deliver a profitable 2012 result, albeit down on 2011. In line with our expectations, the company reported an improved loss ratio--in U.S. GAAP terms--of 54% for the second quarter compared to 154% in the prior quarter due to significant reserve strengthening. In our opinion, there is evidence of delinquency rates stabilizing for Genworth Australia's coastal Queensland, 2007 and 2008, and self-employed books, which have been sources of ongoing stress on the insurer's claims frequency and severity, as well as signs that better quality 2010 and 2011 vintages are exhibiting relatively favorable claims development trends. We
