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CU System
SandP affirms CMG Mortgage Insurances BBB rating
SAN FRANCISCO (2/6/12)--CUNA Mutual Group Mortgage Insurance Co. (CMG MI) Friday announced that Standard & Poor's Rating Services affirmed the company's "BBB" rating, maintaining a negative outlook.

Although the report expressed concerns about the private mortgage insurance sector as a whole, it noted that, "Relative to its peers … CMG MI's operating results have improved at a faster and more stable rate."

"CMG MI has worked closely with credit union customers to actively manage our portfolio, while implementing risk management practices to ensure the quality of new business," Kim Shaul, CMG MI senior vice president and co-general manager, said about the report.  

The mortgage insurance sector is experiencing high losses amid a struggling economy and very weak job and housing markets, the report said.

"Relative to its peers, however, CMG MI's operating results have improved at a faster and more stable rate," the report added. "Compared with the same period in 2010, the third-quarter 2011 pretax statutory operating loss (normalized for changes in the contingency reserve) decreased 47% to $19 million from $36 million, and the statutory loss ratio decreased to 118% from 140%. Moreover, unlike many of its peers, CMG MI did not have significant adverse reserve development.

"We believe CMG MI's capitalization relative to its operating results compares favorably to that of its peers," the report continued. "With statutory capital of $230 million and risk-to-capital ratio of 20:1 at the end of third-quarter 2011, CMG MI is better positioned to absorb operating losses expected in 2012. We also do not expect CMG MI to exceed the risk-to-capital or minimum policyholder protection thresholds put in place by certain state regulators. Because of this, CMG MI is at lower risk of facing regulatory action."

S&P explained its rationale for CMG MI's negative outlook "reflects the current trajectory of operating performance and the potential that adverse deviation may strain CMG MI's capital position."

Regarding the outlook, the report continued: "We expect delinquencies to continue at an elevated but decreasing level throughout 2012, with a full-year default rate approaching 5% and a loss ratio falling to less than 100%. We could lower the ratings if, at any time, CMG MI's pretax statutory income is not on a trajectory toward profitability in 2013."
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