OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has assigned the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” to Mortgage Guaranty Insurance Corporation and the following subsidiaries: MGIC Indemnity Corporation, MGIC Assurance Corporation and MGIC Reinsurance Corporation of Wisconsin (collectively referred to as MGIC). All companies are domiciled in Milwaukee, WI. The outlooks assigned to these Credit Ratings (ratings) are stable.
The ratings reflect MGIC’s balance sheet strength, which A.M. Best categorizes as strongest, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).
MGIC’s risk-adjusted capital, as measured by the Best Capital Adequacy Ratio (BCAR), is currently at the strongest level both on a stressed and unstressed basis. Shareholders’ equity at MGIC has increased in the past five years and A.M. Best expects further increases in the near term. The company’s strong liquidity position, conservative investment portfolio and financial flexibility, as well as its compliance with Private Mortgage Insurer Eligibility Requirements (PMIERs) financial requirements, all support the balance sheet assessment of strongest.
MGIC’s operating performance is assessed as adequate based on positive underwriting results as reflected in the loss and combined ratios of its mortgage insurance business during the past few years. MGIC’s historical loss and combined ratios, which spiked significantly during 2008-2012, have declined meaningfully over the past five years, reflecting improvements in the housing market. MGIC’s expense ratio remains one of the lowest in the mortgage insurance industry. MGIC’s overall operating performance over the past five years has been fueled by favorable macroeconomic conditions that greatly impact the quality of mortgage originations and the credit profile of borrowers.
MGIC’s business profile is assessed as limited as the company is a monoline (re)insurer. Furthermore, it faces stiff competition not only from other private mortgage insurers and governmental agencies (i.e., Federal Housing Administration and Veterans Affairs) providing mortgage insurance, but also from products that effectively reduce the demand for private mortgage insurance. In addition, the product risk is considered high because the performance of the mortgage insurance industry is linked to the macroeconomic environment and the policies of the government-sponsored enterprises (i.e., Fannie Mae and Freddie Mac).
MGIC’s overall ERM assessment is appropriate, as the company employs a robust ERM framework and infrastructure that is embedded across the company. MGIC’s ERM framework is commensurate with the size, nature and complexity of its mortgage insurance business. A.M. Best considers MGIC’s risk assessment capabilities to be aligned appropriately with its risk profile.
This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.
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