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PMI MORTGAGE INSURANCE CLAIMS-PAYING ABILITY RATED 'AAA' BY FITCH -- FITCH FINANCIAL WIRE --

PMI MORTGAGE INSURANCE CLAIMS-PAYING ABILITY RATED 'AAA' BY FITCH
 -- FITCH FINANCIAL WIRE --
 NEW YORK, July 15 /PRNewswire/ -- PMI Mortgage Insurance Co.'s claims-paying ability is rated 'AAA' by Fitch. PMI has over $40 billion of mortgage insurance in force, including nearly $8 billion of pool insurance on mortgage-backed securities.
 The rating is Fitch's first of a mortgage insurer and signals the debut of Fitch's ongoing analysis of the mortgage insurance industry. PMI meets Fitch's stringent new criteria covering capital adequacy, underwriting, asset quality, management, business strategy, and ownership.
 Central to the rating is an evaluation of PMI's capital adequacy under catastrophic economic conditions. Fitch uses a detailed credit loss model to quantify the impact of a severe and prolonged period of mortgage defaults. Losses are determined by foreclosure rates and regional market value declines. Pricing assumptions, loss payout patterns, and investment performance are also incorporated. Under a number of rigorous scenarios, Fitch has determined that PMI has sufficient capital resources to pay all claims. These include a capital agreement with Allstate Insurance Co., its immediate parent, and $300 million of joint and several reinsurance with AXA Re, a unit the AXA Group of France, and Capital Reinsurance Co. PMI's experienced management is credited with guiding the insurer out of the industry downturn of the mid-1980's with impressive results. Since then, PMI has increased its share of the primary mortgage insurance market and is the second most active pool insurer. Importantly, this growth has not been at the expense of profitability. Increasing premium rates, conservative underwriting policies, and attention to risk diversification have contributed to PMI's improving profitability and insured portfolio quality. PMI has also developed a number of innovative products to enhance its competitive position.
 Returns on assets and surplus have steadily increased during the last three years to reach 8.40 percent and 21.3 percent, respectively, for the twelve months ended March 31. PMI's combined ratio, a measure of underwriting profitability, reached a record 37.6 percent in 1991. This is a vast improvement from the 232.3 percent recorded in 1987, the trough of the industry cycle. Also contributing to PMI's underwriting results has been its implementation of innovative risk evaluation systems and disciplined expense controls.
 PMI's statutory capital was $386 million at March 31, up 17 percent from a year ago, and 64 percent higher than its capital base at year-end 1987. Following this trend, PMI's risk-to-capital ratio was conservatively 18.9:1 at March 31, well below the 25.0:1 statutory limit, and below PMI's self-imposed limit of 23.0:1. In claim reserving, PMI carefully reviews policy year projections to set loss reserves for future claims. Its reserving methodology has resulted in reserves that have proven conservatively redundant in recent years.
 A risk is the increase in certain regional delinquency rates due to weak economies. This is mitigated by the improved quality of PMI- insured loans that should keep claim rates far below historical highs. PMI's aggregate delinquency rate has, in fact, declined through mid- 1992. Above average exposure to PMI's home state of California is partly offset by that state's below average delinquency rate.
 Invested asset quality is excellent and conservatively managed by Allstate's experienced investment group. A risk is PMI's somewhat high exposure to the equity market, with stock investments at 19 percent of surplus. This risk is reduced by issuer and industry diversity.
 -0- 7/15/92
 /CONTACT: David P. Wells, 212-908-0517, or Lygia X. Campbell, 212-908-0695, both of Fitch/ CO: PMI Mortgage Insurance Co. ST: IN: FIN SU: RTG


SM -- NY016 -- 9429 07/15/92 09:49 EDT
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Publication:PR Newswire
Date:Jul 15, 1992
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