Fitch Affirms Triad's Ratings; Outlook Stable.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has affirmed the long-term issuer and senior debt ratings of Triad Guaranty As a verb, to agree to be responsible for the payment of another's debt or the performance of another's duty, liability, or obligation if that person does not perform as he or she is legally obligated to do; to assume the responsibility of a guarantor; to warrant. Inc. (TGIC TGIC Triglycidyl Isocyanurate ) at 'A+'. Additionally, Fitch has affirmed its insurer financial strength rating on TGIC's insurance subsidiary, Triad Guaranty Insurance Corp. (Triad) at 'AA'. The Rating Outlook is Stable. The ratings reflect Triad's historical operating performance which has compared well with peers, as well as Triad's sound capital base, as measured under Fitch's proprietary mortgage insurance risk-based capital model, for its given ratings. Triad also maintains effective underwriting standards, and closely monitors its outstanding risks, particularly when the company enters less proven or higher-risk asset classes. This affirmation of Triad's current rating factors in today's announcement that the company's net income declined significantly in the fourth quarter of 2006 due to a sizeable increase in the company's reserves, which resulted in increased losses. This action is not unlike other earnings reports released by several of Triad's mortgage insurance competitors. Losses within the U.S. mortgage insurance industry have begun to increase noticeably as a result of higher severity per claim. This has resulted from increased average loan balances on individual mortgages as well as declining real estate values, which increase LTVs on individual mortgages. While the higher average loan balances are newer to the industry, Fitch believes that the weaker real estate market and higher loss environment are reaching more normalized levels than the industry has seen in the past several years, which was a time of unusually strong home price appreciation in the U.S. Fitch will monitor these developing trends and their impacts on the mortgage insurance industry. Specific to Triad, Fitch will pay close attention to its future loss claims, particularly given the company's recent aggressive push into less traditional mortgage products, such as pay option adjustable-rate mortgages Adjustable-rate mortgage (ARM) A mortgage that features predetermined adjustments of the loan interest rate at regular intervals based on an established index. The interest rate is adjusted at each interval to a rate equivalent to the index value plus a predetermined spread, or (option ARMs), which have the ability to negatively amortize. These option ARMs typically carry higher balances than Triad's traditional mortgage insurance customer, and this product has yet to be fully tested in a more adverse economic environment. TGIC reported $65.6 million of net income on net earned premium Earned premium is the portion of an insurance written premium which is considered "earned" by the insurer, based on the part of the policy period that the insurance has been in effect, and during which the insurer has been exposed to loss. of $210.9 million in 2006. The company's total assets at year-end 2006 were $895.6 million with $570.2 million of shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. . Fitch affirms the following ratings with a Stable Outlook: Triad Guaranty Inc. -- Long-term issuer at 'A+'; -- $35 million 7.9% fixed coupon senior notes due Jan. 15, 2028 at 'A+'. Triad Guaranty Insurance Corporation -- Insurer financial strength (IFS) at 'AA' Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
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