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S&P Affirms Republic Mortgage and Affiliate 'AA' Ratings

October 28, 2002

NEW YORK--(BUSINESS WIRE)--Standard & Poor's-- Standard & Poor's Ratings Services affirmed its double-'A' counterparty credit and financial strength ratings on Republic Mortgage Insurance Co. (RMIC), a U.S. residential mortgage insurer, and Republic Mortgage Insurance Co. of NC (RMIC-NC), an affiliate of RMIC licensed to do business in New York State. Standard & Poor's also said that the outlook on these companies is stable.

All business written by RMIC-NC is either reinsured to or assumed from RMIC. RMIC-NC is a core unit of RMIC and therefore is assigned the same financial strength rating as RMIC under Standard & Poor's group rating methodology.

"RMIC will show flat to slightly higher year-over-year earnings in 2002 as management avoids heavy volume-building in the bulk market and other initiatives that could increase accounting earnings but have a significant risk of adverse future loss development," said Standard & Poor's credit analyst Charles Titterton. In 2003, earnings could decline modestly because of the continuation of this strategy and possibly higher default rates in the prime sector of the national mortgage market, but they will remain strong. Market share of new insurance written will remain close to the company's historical 10% level. Capitalization will remain at least adequate for the rating.

RMIC is the sixth largest of the eight commercial mortgage insurers interactively rated by Standard & Poor's, but it has a strong geographical spread of risk and a very strong embedded book of prime residential mortgage risk. Relations with lenders are very strong, with good dispersion. Management has maintained these characteristics for many years while consistently writing about 10% of premium in the residential mortgage insurance sector. The company is an important unit of Old Republic International Corp., a successful, well-capitalized insurance holding company with interests in commercial insurance, life insurance, and title insurance.

In keeping with industry performance, results of operations have been very strong to extremely strong every year since 1990. Loss control has been the strong suit, with the loss ratio consistently better than the industry's. However, the expense ratio has consistently been substantially higher than the average of the company's competitors.

Copyright 2002, Standard & Poor's Ratings Services



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