Fitch cuts Genworth

Fitch Ratings said it has downgraded Genworth Financial, Inc.'s issuer default rating to A- from A+ and primary life insurance subsidiary Insurer financial strength ratings to A+ from AA-.

The ratings are removed from rating watch negative; the outlook is negative, the agency said.

According to Fitch, the rating action on the life insurance companies primarily reflects Fitch's concerns over a significant decline in consolidated life and Bermuda reinsurers' statutory capital levels, which declined by 20% to $3.4 billion at June 30 from $4.2 billion at year-end 2007.

The decline was driven by the payment of a $300 million dividend to the holding company, investment impairments, as well as an operating loss in Genworth Life and Annuity Insurance Co. from the recapture of certain reinsurance arrangements and a valuation correction on survivorship universal life, the agency noted.

Fitch said it expects that additional investment impairments will likely be reported in the second half of 2008, further pressuring statutory capital.

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