Insurers of Mortgages Downgraded
A WSJ NEWS ROUNDUP
July 10, 2008
Moody's Investors Service downgraded the insurance financial-strength ratings of the mortgage-insurance operations of two companies.
It downgraded to A3 from Aa2 the ratings of PMI Group's U.S. mortgage-insurance subsidiaries, including PMI Mortgage Insurance Co. and PMI Insurance Co. It also downgraded to A3 from Aa3 the ratings of PMI Mortgage Insurance Co. Ltd., and PMI Guaranty Co., a provider of credit enhancement products.
Moody's also downgraded the insurance financial-strength rating of American International Group Inc.'s mortgage-insurance operating companies, citing their weakened credit profile resulting from high mortgage defaults and uncertainty about ultimate losses.
The ratings company cut by one notch to Aa3 its ratings on AIG's United Guaranty Residential Insurance Co. and a subsidiary, noting their risks are mitigated in part by limited exposure to higher risk mortgage products and "robust capital adequacy."
The companies also benefit from a net worth maintenance agreement provided by AIG and a reinsurance agreement from one of AIG's operating entities, but the performance of their insured portfolio has deteriorated, Moody's noted.
Moody's also downgraded by two notches to A1 the ratings of the group's second-lien insurance company, United Guaranty Residential Insurance Co. of North Carolina, and its student-loan insurance company, reflecting uncertainty about the future prospects for the businesses after AIG completes a previously announced review of all its operations.
Moody's also warned losses within the second-lien and student-loan sectors could "meaningfully surpass standalone claims paying resources" and fundamentals in these segments are unlikely to improve in the near term.
