Fitch Affirms Triad's IFS and Debt Ratings; Outlook Stable.CHICAGO -- 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 'A+' 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. Incorporated (TGIC TGIC Triglycidyl Isocyanurate ). Additionally, Fitch has affirmed its 'AA' insurer financial strength rating on TGIC's insurance subsidiary, Triad Guaranty Insurance Corporation (Triad). The Rating Outlook is Stable. Triad's ratings are based on its consistently strong operating results, largely due to strict underwriting standards relative to peers. While Triad has increased its exposure to riskier limited documentation mortgages through the growth of its bulk portfolio, the majority of these transactions utilize stop losses and deductibles which limit Triad's potential losses. Triad also performs well under Fitch's proprietary mortgage insurance risk-based capital model. The insurer maintains excess levels of aggregate claims-paying resources and comfortably passes the model at the 'AA' stress level. Offsetting these positives is Triad's expense ratio which has shown steady improvement but continues to trail the industry average. In addition, Fitch continues to hold the view that captive reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. relationships share premiums disproportionately to the risk assumed. Triad's relatively small size and lower market share increase its dependence on deep-cede captive arrangements to enhance its relationships with its lender customers. Growth in net written premium has been somewhat dampened by Triad's use of such arrangements. TGIC's debt-to-total capital ratio was 6.5% as of year-end 2005 and GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). earnings-based interest coverage was a sound 29.1 times (x). Fitch anticipates the corporation will maintain adequate interest coverage levels going forward to support debt servicing requirements. TGIC reported $57 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 $167 million in 2005. The company's total assets at year-end were $768 million with $499 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. . Unlike the rest of the insurance industry, Fitch will not be issuing its new ratings standards, including the assigning of new Issuer Default Ratings (IDR IDR In currencies, this is the abbreviation for the Indonesian Rupiah. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. ), for TGIC and the rest of the mortgage insurance industry at this time (see report entitled 'Insurance Industry: Global Notching Methodology,' published Feb. 28, 2006 and available at www.fitchratings.com). The decision to postpone the implementation of IDR ratings for TGIC and its competitors is the result of a recent Model Act #555 titled 'Insurer Receivership Model Act' which was published by the National Association of Insurance Commissioners The National Association of Insurance Commissioners (NAIC) is an Internal Revenue Code Section 501(c)(3) non-profit organization which seeks to organize the regulatory and supervisory efforts of the various state insurance commissioners from around the United States. . In this Model Act, policyholder obligations with respect to mortgage insurance may not be afforded priority, and may be specifically carved out from Class 3 'policyholder claim obligations' and instead appear to be classified as Class 6 obligations on par with 'claims of other unsecured creditors.' Fitch is postponing the implementation of the new methodology for mortgage insurers until Fitch is better able to understand how Model Act #555 may be adopted at the state level. Regardless of the outcome of the Model Act, Fitch does not expect the IFS ratings of the U.S. mortgage insurers to be affected. If Fitch determines that mortgage insurance policyholders do not have priority, Fitch may tighten notching between the IFS rating and parent debt rating. Triad Guaranty Inc. --Long-term issuer Affirm 'A+'/Outlook Stable; --$35 million 7.9% fixed coupon senior notes due Jan. 15, 2028 Affirm 'A+'/Outlook Stable. Triad Guaranty Insurance Corporation --Insurer financial strength Affirm 'AA'/Outlook Stable. 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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