Genworth, and RMBS sub-debt, downgraded by Fitch

Just to prove that the rating agencies maintain their own independent view on the mortgage insurers and the level of support they provide to residential mortgage-backed securities, Fitch downgraded 53 subordinated tranches of Australian RMBS to 'A+' from 'AA-' last week, and changed the outlook on two senior tranches to negative from stable. This was the result of Fitch revising its view on Genworth Financial Mortgage Insurance Pty Ltd.

Fitch no longer rates Genworth, having withdrawn its ratings last November, presumably for what are business reasons. But it does maintain an internal assessment for the purposes of being able to review Australian RMBS.

Fitch did not say what its concerns are in relation to Genworth, but given it had downgraded the insurer financial strength rating assigned to the company to 'AA-' from 'AA' prior to withdrawing its rating, it now apparently believes an insurer financial strength rating of 'A+' is appropriate.

This rating action came after Fitch affirmed its 'AA-' insurer financial strength rating assigned to QBE Lender's Mortgage Insurance Limited, along with the 'A' and 'A+' ratings assigned to parent company, QBE Insurance Group Limited, and its other key subsidiaries. The outlook on all ratings is stable.

Fitch said the rating affirmations reflect QBE's continued strong operating performance, good level of diversification (both geographically and by product), and its solid, albeit lower, regulatory capital position. However, the group's capital adequacy ratio and the probability of adequacy of QBE's reserves both weakened during 2008 and Fitch would not want to see this trend continue in 2009.