NEW YORK, July 9 (Reuters) - Moody’s Investors Service on Wednesday cut its ratings on PMI Group’s PMI.N U.S. mortgage insurance subsidiaries, citing their dwindling capital levels as losses from mortgage securities escalate.
“While U.S. mortgage insurance demand and new business quality have both improved in recent months, performance of (the mortgage insurance companies’) exposures originated prior to 2008 has eroded capitalization and those exposures remain vulnerable to further economic deterioration,” Moody’s said in a statement.
The performance of all of PMI’s mortgage portfolio has deteriorated, with Alt-A, variable rate and interest-only mortgages performing the worst, Moody’s said.
Higher-than-average delinquencies in their portfolios has left capital adequacy at PMI’s subsidiaries at the lower end of the range for mortgage insurers continuing to write new business, Moody’s said.
Moody’s cut the insurance financial strength ratings of PMI’s mortgage insurance arms three notches to “A3,” the seventh-highest investment grade, from “A3.”
PMI’s senior debt was also cut five notches to “Baa3,” the lowest investment grade, from “A1” and the junior subordinated debt was cut five notches to “Ba1,” one step below investment grade, from “A2.”
The outlook on the ratings is negative, indicating an additional downgrade is more likely over the next 12-to-18 months. (Reporting by Karen Brettell; Editing by Dan Grebler)
