Arch Capital Group last Friday acquired CMG Mortgage Insurance Co. from PMI Mortgage Insurance Co., a move that Moody's Investors Service sees as positive for Arch but credit-negative for existing players in the mortgage-insurance market that may have to contend with well-capitalized new entrants going forward.

CMG, says Moody's is a legacy mortgage-insurance company that has been in rehabilitation under the receivership of the Arizona Department of Insurance since 2011. The ratings agency says the acquisition is “credit-positive for Arch because mortgage insurance will diversify its business, and current market conditions are attractive for well-capitalized mortgage insurers not encumbered by legacy exposures.”

Moody's adds, “Under the terms of the agreement, Arch will acquire CMG and PMI's mortgage insurance operating platform, significantly limiting the operational risk inherent in entering a new market, and will reinsure non-delinquent loans insured by PMI between 2009-2011.” The acquisition will also give Arch access to CMG's relationship with CUNA Mutual Group, and relationships with a number of credit unions that tend to originate higher-quality prime loans, says Moody's.