NEW YORK --Standard & Poor's Ratings Services said today it has removed its 'AA-' counterparty credit and financial strength ratings on CMG Mortgage Insurance Co. (CMG MI) from CreditWatch with negative implications. At the same time, Standard & Poor's affirmed its ratings on CMG MI. The outlook is negative.(Federal Reserve Bank, Washington, DC, photo top left)
"The affirmation reflects our view that the recent downgrade of PMI Mortgage Insurance Co. (PMI MIC), a co-owner of CMG MI, will not have a material impact on CMG MI's financial strength," said Standard & Poor's credit analyst James Brender. "When we lowered the financial strength rating on PMI MIC on April 8, 2008, we placed the ratings on CM
G MI on CreditWatch negative to evaluate the impact of the downgrade on CMG MI."The economic environment for mortgage insurers in 2008 is significantly more difficult than in prior years, but a prolonged downturn should continue to have less of an impact on CMG MI than other mortgage insurers.
The short-term prospects for the mortgage and housing markets are bleak, but CMG MI's portfolio of insured loans exhibits very strong credit quality, and mortgages to credit union customers have had a lower foreclosure rate than mortgages originated by other lending institutions.
CMG MI's operating performance is strong, as demonstrated by a combined ratio that is lower than those of all other private mortgage insurers. Capitalization is very strong. CMG MI's capital adequacy ratio (CA
R) of 89% is above Standard & Poor's minimum threshold for a 'AA' financial strength rating.The CAR reflects the buildup of retained earnings because of strong operating performance, partially offset by dividend payments to parents in 2006 and 2007.
"The negative outlook on CMG MI reflects Standard & Poor's assessment
that the environment for mortgage insurers remains very challenging in the short term," said Mr. Brender. "We also have moderate concerns that further deterioration in PMI MIC's financial strength could affect CMG MI."Media Contact:
Jeff Sexton, New York,
(1) 212-438-3448
Analyst Contacts:
James Brender, New York (1) 212-438-3128
Andrew Dral, New York (1) 212-438-5677
James Brender, New York (1) 212-438-3128
Andrew Dral, New York (1) 212-438-5677
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