Recipient email addresses will not be used in mailing lists or redistributed.
Use semicolon to separate each address, limit to 20 addresses.
characters you see
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Already a customer?
Don't want to see this again?
Accept our to continue to Moodys.com:
AND SCROLL DOWN!
By clicking “I AGREE” [at the end of this document],
you indicate that you understand and intend these terms and conditions to be
the legal equivalent of a signed, written contract and equally binding, and
that you accept such terms and conditions as a condition of viewing any and all
Moody’s information that becomes accessible to you [after clicking “I AGREE”] (the
“Information”). References herein to “Moody’s” include Moody’s
Corporation, Inc. and each of its subsidiaries and affiliates.
Terms of One-Time Website Use
you have entered into an express written contract with Moody’s to the contrary,
you agree that you have no right to use the Information in a commercial or
public setting and no right to copy it, save it, print it, sell it, or publish
or distribute any portion of it in any form.
acknowledge and agree that Moody’s credit ratings: (i) are current opinions of
the future relative creditworthiness of securities and address no other risk; and
(ii) are not statements of current
or historical fact or recommendations to purchase, hold or sell particular
securities. Moody’s credit ratings and
publications are not intended for retail investors, and it would be reckless
and inappropriate for retail investors to use Moody’s credit ratings and
publications when making an investment decision. No
warranty, express or implied, as the accuracy, timeliness, completeness,
merchantability or fitness for any particular purpose of any Moody’s credit
rating is given or made by Moody’s in any form whatsoever.
3. To the extent permitted by law, Moody’s and its directors,
officers, employees, representatives, licensors and suppliers disclaim
liability for: (i) any indirect, special, consequential, or incidental losses
or damages whatsoever arising from or in connection with use of the
Information; and (ii) any direct or compensatory damages caused to any person
or entity, including but not limited to by any negligence (but excluding fraud
or any other type of liability that by law cannot be excluded) on the part of
Moody’s or any of its directors, officers, employees, agents, representatives,
licensors or suppliers, arising from or in connection with use of the
4. You agree to read [and
be bound by] the more detailed disclosures regarding Moody’s ratings and the
limitations of Moody’s liability included in the Information.
5. You agree that any disputes relating to this agreement or your use of
the Information, whether sounding in contract, tort, statute or otherwise,
shall be governed by the laws of the State of New York and shall be subject to
the exclusive jurisdiction of the courts of the State of New York located in
the City and County of New York, Borough of Manhattan.
26 Sep 2003
MOODY'S DOWNGRADES THE INSURANCE FINANCIAL STRENGTH RATING OF GENERAL ELECTRIC MORTGAGE INSURANCE CORPORATION (GEMICO) TO Aa2; RATING OUTLOOK IS STABLE
New York, September 26, 2003 -- Moody's Investors Service has downgraded the insurance financial strength
rating of General Electric Mortgage Insurance Corporation (GEMICO) to
Aa2, from Aaa. The rating outlook is stable. According
to Moody's, this rating action is based on GEMICO's decision
that a Aaa rating does not provide enough differentiation from a Aa2 rating
to justify the costs of continuing to operate its business at a Aaa rating.
For example, pressures from consolidating, powerful mortgage
originators, and from Fannie Mae and Freddie Mac, are squeezing
returns for GEMICO and for other mortgage insurers. These factors
among others, combined with GEMICO's modest leverage,
are making the return on equity hurdles set by General Electric Capital
Corporation (GECC), GEMICO's parent, increasingly difficult
This rating action also reflects GECC's new strategy, which focuses
on subsidiaries being self-sufficient from a financial perspective.
Furthermore, GEMICO has determined that there is inadequate market
incentive to remain Aaa, as there is no meaningful distinction between
Aaa- and Aa-rated mortgage insurers for MBS enhancement,
or for the GSEs. Moody's stable rating outlook reflects an expectation
of tight operating parameters at GEMICO, and the importance to GEMICO
of remaining a strong Aa-rated firm in order to remain a participant
in the mortgage insurance business in the USA.
According to Moody's, its Aa2 financial strength rating for GEMICO
still reflects the implicit support from its parent, GECC (Aaa-rated),
a subsidiary of the General Electric Company, which provides GEMICO
with a strong operational infrastructure, excellent systems,
management depth and technology. As part of a large, diversified
holding company, GEMICO faces less pressure to diversify outside
of the mortgage insurance business, and can more easily avoid riskier
mortgage insurance products that some of its peers are offering.
In addition, GEMICO has conservative underwriting standards and
operating practices. Moody's also noted a favorable risk profile
within GEMICO's book of business.
However, operating as a Aa2-rated mortgage insurer,
and trying to meet return on equity hurdles set by its parent, could
place pressure on GEMICO's operating profile, and should cause it
to operate at higher leverage ratios. In addition, having
to meet these return on equity hurdles will increase the potential for
the GEMICO to enter into riskier product types. However,
to date GEMICO has avoided most of the riskier product areas.
GEMICO is the fourth-largest of the seven private mortgage insurance
groups in the USA, based on its market share of primary mortgage
insurance written for the first half of 2003. The MI has largely
avoided bulk/structured market transactions and subprime business,
which present substantial credit risks for mortgage insurers. Over
the long-term it may be challenging for GEMICO to continue to avoid
these transactions. Nevertheless, Moody's believes that GEMICO
will continue to make safeguarding its credit exposures a priority.
GEMICO is a tightly run operation which benefits from the vast resources
of the GE family.
GEMICO has expanded its menu of risk-sharing products, including
captive reinsurance. These activities have grown over time,
cementing originator relationships. Moody's views the captive
reinsurance agreements as providing modest risk transference and little
capital relief. In August 2003, GEMICO informed originators
that it will no longer participate in 40% excess-of-loss
reinsurance agreements, with a phase-out of these structures
effective January 1, 2004. Moody's believes that this
is a bold step for GEMICO, particularly given its moderate market
share, as it has significant risks. The fact that GEMICO
is not the market leader demonstrates, in our view, the seriousness
of captives for mortgage insurers and for GEMICO, and the need for
the MI industry to move towards resolving the profitability drain that
these structures create. It is Moody's expectation that GEMICO's
competitors may very well begin to reconsider these arrangements in light
of this move, and of a similar, earlier move by MGIC,
the leading mortgage insurance firm; and recently a similar announcement
by United Guaranty Residential Insurance Company. However,
while Moody's expects some loss of market share by GEMICO as a result
of this decision, GEMICO's loss in market share could become
larger if its competitors continue to offer high excess-of-loss
captive reinsurance to gain market share.
Moody's noted that GEMICO's current leverage (at about 10
times risk-to-capital) is low, reflecting sound profitability
on older books of business and good credit loss results. The firm's
limited subprime exposure is a distinct plus. However, the
firm continues to be vulnerable to changes in GECC's business strategy
and capital allocation. In addition, the GEMICO Group upstreamed
$500 million of dividends to its parent during 2002, and
another $500 million so far in 2003, a material increase
from 2001, when dividends were $125 million. While
these dividends do not challenge the Aa2 rating, a continued strategy
of large dividends would materially weaken the company's capital
strength and current rating, particularly given the profitability
strains GEMICO is facing.
Further downward shifts in GEMICO's rating would most likely be
due to material adverse shifts in losses from its in-force book,
which Moody's does not expect, a decision to substantially
boost the underwriting risk appetite of the firm, further structural
squeezes on profitability, or strategic shifts at GECC.
General Electric Mortgage Insurance Company, based in Raleigh,
North Carolina, USA, writes residential mortgage insurance
in all 50 states. GEMICO, rated Aa2 for insurance financial
strength, is a subsidiary of the General Electric Capital Corporation,
which in turn is a subsidiary of the General Electric Company, a
Aaa-rated, diversified holding company.
VP - Senior Credit Officer
Real Estate Finance Group
Moody's Investors Service
John J. Kriz
Real Estate Finance Group
Moody's Investors Service
No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.
CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES (“MIS”) ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MOODY’S PUBLICATIONS MAY INCLUDE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY’S OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. CREDIT RATINGS AND MOODY’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY’S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.
MOODY’S CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS OR MOODY’S PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.
ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.
CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.
All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing the Moody’s publications.
To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.
To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.
NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.
Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any rating, agreed to pay to Moody’s Investors Service, Inc. for ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and MIS also maintain policies and procedures to address the independence of MIS’s ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com
under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”
Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.
Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.
MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable) for ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.
MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.