NEW YORK - (Business Wire) Fitch Ratings today released a Special Report that details its examination of property-casualty companies' exposure to subprime mortgage collateral.
Fitch analyzed full-year 2007 GAAP financial results for publicly traded U.S. property/casualty insurers in an effort to quantify exposure to and credit quality of mortgage-backed securities with subprime and Alt-A collateral; exposure to and underlying credit quality of municipal bonds insured by financial guarantors; and the likely surge in claims under directors' and officers' (D&O) liability and errors and omissions (E&O) business lines due to subprime mortgage-related issues.
The discoveries found manageable impact on stockholders' equity from write-downs, realized and unrealized losses from residential mortgage-backed securities, asset-backed securities, and collateralized debt obligations.
While negative rating actions by Fitch in the U.S. property/casualty insurance sector due to subprime exposure have been very limited, Fitch does expect poor collateral performance in subprime-related investments to continue in 2008, and has growing concerns in the Alt-A sector. Further, it should be noted, highly illiquid, volatile market conditions have spread somewhat to other asset classes which could impact insurers' broader investment portfolio performance.
Fitch continues to monitor all developments in the subprime mortgage market, and also the property/casualty insurance industry's exposure to this market from both an asset and liability perspective. While Fitch believes the industry's concentration in high investment-grade securities will limit investment losses in this market, the agency is concerned about the potential for further deterioration in the market and its affect on other sectors of the credit market.
For more information and for a copy of the Special Report, 'Subprime Mortgage Exposure for Property/Casualty Insurers' please visit www.fitchratings.com under the following headers: Financial Institutions > Insurance > Special Reports.
For additional background research on the subprime mortgage markets and the effect on Life Insurers, please refer to Fitch's special report 'Subprime Mortgage Exposure for U.S. Life Insurers,' dated Feb. 21, 2008.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
Fitch Ratings, Chicago
Doug M. Pawlowski, CFA, 312-368-2054
Dafina M. Dunmore, CFA, 312-368-3136
Tana M. Higman, 312-368-3122
Christopher A. Grimes, 312-368-3263
Kenneth Reed, 212-908-0540
(Media Relations, New York)
