A rapid escalation in mortgage defaults and foreclosures led to extremely high losses and negative operating returns last year by mortgage guaranty insurers, said rating firm A.M. Best Co.
The Oldwick, N.J.-based firm said the "tremendous" negative impact of those events resulted in a 2007 industrywide combined ratio of 141.3, as compared with the five-year average of 87.7 and the ten-year average of 75.4.
This was a sharp contrast to the record years of profitability earlier in the decade, during which most mortgage insurance companies added to their capital base, enabling them to better withstand the subsequent downturn in the housing market cycle, said Best.
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