DBRS Discontinues Ratings on United Guaranty & Affiliate

DBRS has today discontinued the Issuer Rating of United Guaranty Corporation (UGC) and the Financial Strength rating of its major U.S. mortgage insurance subsidiary, United Guaranty Residential Insurance Company (UGRIC).

The original DBRS rating on AIG United Guaranty Mortgage Insurance Company Canada (AIGUG Canada, an affiliate of UGC) was based on a capital and liquidity support agreement between AIGUG Canada and United Guaranty Corporation which allowed AIGUG Canada to maintain regulatory capital and reserve requirements and to meet its contractual financial obligations on a timely basis. The Financial Strength rating of UGRIC, as the major operating subsidiary of UGC, was the primary driver of the UGC Issuer Rating.

Under its terms, however, the support agreement can be terminated by UGC should the Financial Strength rating on AIGUG Canada on a stand-alone basis be equal to or higher than the Issuer Rating of UGC. Given that the current A (high) Financial Strength rating of AIGUG Canada (Under Review with Positive Implications) exceeds the BBB (high) Issuer Rating of UGC, UGC is electing to terminate the existing support agreement as of January 15, 2010. Correspondingly, there is no reason for DBRS to continue to rate either UGC or UGRIC and the ratings are being discontinued as of today.

On January 5, 2010, DBRS placed the A (high) Financial Strength rating of AIGUG Canada Under Review with Positive Implications following the announcement that a Canadian investor group of which Ontario Teachers’ Pension Plan (Ontario Teachers) is a lead sponsor, had entered into a definitive agreement with American International Group, Inc. (AIG) to acquire its Canadian mortgage insurance operations. The closing of that transaction is expected to occur early in the second fiscal quarter at which time the Under Review status will be reviewed for resolution.

Note:

The applicable methodology is Rating Mortgage Insurance Companies in Canada, which can be found on our website under Methodologies.

This is a Corporate (Financial Institutions) rating.