Standard & Poor's Research Update: GE Mortgage Insurance Ltd. 'AA' Ratings Affirmed; 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 -- Credit Rating:AA/Stable/--
On Nov. 10, 2004, Standard & Poor's Ratings Services Ratings Service
A company, such as Moody's or Standard & Poor's, that rates various debt and preferred stock issues for safety of payment of principal, interest, or dividends. affirmed its 'AA' counterparty credit and financial strength ratings on U.K.-based GE Mortgage Insurance Ltd. (GEMI GEMI Global Environmental Management Initiative
GEMI Global Energy Management Institute (University of Houston)
GEMI General Electric Mortgage Insurance
GEMI Global Exchange of Military Information ). The outlook remains stable.
The ratings reflect GEMI's strategic importance to both its management parent, General Electric Mortgage Insurance Corp. (GEMICO; AA/Stable/--), and its ultimate legal parent, Genworth Financial Genworth Financial is an international financial services organization that offers a portfolio of primarily consumer-focused products through its various companies, including annuities, combination products, investment services, life insurance, long term care insurance, medicare Inc. (GNW GNW Genworth Financial (stock symbol)
GNW Good News Week (TV show)
GNW Great Northwest
GNW Great Northern War (1700-1721)
GNW Guns 'n' Wankers (band) ; A/Stable/A-1). The ratings also reflect GEMI's strong earnings to date, very strong capitalization, and developing management team dedicated to conservative risk management. These positive factors are partly offset by GEMI's marginal competitive position in Europe and expected worsening operating performance. GEMI is a wholly owned subsidiary Wholly Owned Subsidiary
A subsidiary whose parent company owns 100% of its common stock.
In other words, the parent company owns the company outright and there are no minority owners. of GNW through its U.K. holding company, GEFA GEFA Genuine Fashion Accessories (Philippines)
GEFA General Electric Capital Financial Assurance Holdings, Inc. UK Holdings Ltd., and writes European (primarily U.K.) mortgage insurance business with a presence in nine European countries.
Standard & Poor's views GEMI's 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. agreement with GEMICO as a vital rating support factor, buffering potential technical shocks during GEMI's expansion. Standard & Poor's believes that GEMI will remain strategically important to Genworth's global mortgage insurance operations, and continued ongoing parental support will be crucial in maintaining the rating at the current level.
Major Rating Factors
--Strong operating performance. GEMI continues to demonstrate very strong earnings and an attractive loss ratio. These positive traits could be affected by the inherent volatility and harsher conditions expected in the U.K. property market in the short to medium term.
--Strong stand-alone and very strong overall capitalization. GEMI's stand-alone capital adequacy ratio Capital adequacy ratio (CAR), also called Capital to Risk (Weighted) Assets Ratio (CRAR), is a ratio of a bank's capital to its risk. National regulators track a bank's CAR to ensure that it can absorb a reasonable amount of loss. , based on Standard & Poor's risk-based capital model, was strong at year-end 2003. GEMI's capital adequacy ratio is expected to remain strong over the medium to long term as fresh capital is injected as needed as needed prn. See prn order. . Capitalization is considered very strong when considering its stand-alone capital level, its strategic importance to GEMICO and GNW, and its reinsurance agreement with GEMICO. In addition to the explicit support GEMI receives from GEMICO, it also benefits from GEMICO's underwriting sign-off, use of intellectual property, and financial flexibility.
--Sophisticated approach to risk management. GEMI has a dedicated and prudent risk-management team that uses appropriately sophisticated modeling when analyzing the risk profile of the business.
--Expense burden. GEMI is instrumental in opening up the EU market and incurring further costs by lobbying for capital relief for lenders. However, such heavy investment in infrastructure could facilitate infiltration for potential competitors, and the expenses associated with this marketing strategy are substantial. These risks are partly mitigated by leveraging the existing platform of GNW's payment-protection business in Europe.
--Expected worsening loss ratio. GEMI will be exposed to rising interest rates, escalating U.K. and European household debt, and the likelihood that this could be accompanied by increasing levels of mortgage delinquencies and defaults.
--Modest size base to support projected growth. GEMI has yet to reach the size normally required to operate in this type of business and will continue to depend on support from its parent as it grows in Europe. GEMI does, however, have a growing competitive position and is instrumental in opening Europe's still nascent mortgage insurance market. The company is in a prime position to take advantage of new business opportunities triggered by the weakening phase in the European mortgage cycle.
Ratings List GE Mortgage Insurance Ltd. Counterparty credit rating AA/Stable/-- Financial strength rating AA/Stable
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