MoodyÕ downgrades Old Republic outlook to stable

Failed recapitalization plans for mortgage insurance business

Moody’s Investor Service (MCO) announced that it changed the rating outlook for Old Republic International Corp. (ORI) from positive to stable.

The change comes after Old Republic announced it cancelled its earlier recapitalization plan for its mortgage insurance business.

"The cancellation of the previously announced recapitalization plan is credit negative for Old Republic's debt holders as the company was unable to exit its troubled and financially weak mortgage insurance unit over the short term,” said Paul Bauer, Moody’s analyst.

“Over the longer term however, we believe the risk of Old Republic's mortgage unit negatively impacting the overall consolidated group will continue to gradually decline," Bauer added. 

Moody’s said that this rating action did not affect the A2 insurance financial strength ratings and stable outlook of the lead operating subsidiaries of Old Republic General and Old Republic Title nor the A3 IFS ratings and stable outlook of the group's PMA subsidiaries.

Old Republic’s stable outlook “reflects the company’s plan to contribute holding company funds to support the regulatory capital of RMIC Companies, which includes lead mortgage insurance company Republic Mortgage Insurance Company. RMICC is seeking regulatory approval to substantially increase or possibly restore to 100% the pay-out on both existing deferred claim obligations and on all new claim settlements going forward. While RMICC is steadily improving given falling mortgage delinquencies, declining foreclosure initiations and backlogs, and rebounding home prices, Old Republic is not planning to re-enter the mortgage guaranty business.”

Moody’s also affirmed the Baa3 senior debt rating for Old Republic. 

Read Moody's full report here

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