Moody’s Investor Service
has announced a revision of its 2020 outlook for the mortgage insurance sector from positive to stable.
The ratings service issued an Outlook Report that stated the revision was based on “slowing economic growth and forecasts for higher unemployment levels point to somewhat weaker macroeconomic conditions for the sector.” However, Moody’s also noted that it expected “overall economic and housing market conditions to remain broadly supportive of strong mortgage credit performance over at least the next couple of years.”
The Outlook Report also forecast that the sector will continue to enjoy strong profitability, albeit with shrinkage in underwriting margins that were “poised to decline over the next couple of years given last year’s premium rate cuts, increased price competition and higher reinsurance spending.”
"Our stable outlook is underpinned by the transformation of the sector's risk profile over the past several years due to the increased utilization of reinsurance, which will mitigate the impact of an adverse economic environment on mortgage insurers' earnings and capital," Moody's Vice President James Eck said.