Fitch Places Old Republic International Corp. on Rating Watch Negative

NU Online News Service, Jan. 26, 11:42 a.m. EST

Fitch Ratings has placed Old Republic International Corporation's (ORI) 'A' insurer financial strength rating and 'BBB' issuer default rating on Rating Watch Negative due to continued troubles at its mortgage-insurance subsidiary.

Fitch says there is uncertainty as to ORI's “ability to continue to avoid a covenant breach under its debt obligations in light of ongoing challenges” at Republic Mortgage Insurance Co. (RMIC), which was issued an Order of Supervision from the North Carolina Department of Insurance on Jan. 20.

The ratings agency notes that ORI is subject to acceleration on its debt if any of its significant subsidiaries experience bankruptcy, insolvency, rehabilitation or reorganization.

While Fitch says that ORI has signaled that the development at RMIC will not trigger a breach of this covenant, Fitch says “the uncertainty surrounding how the RMIC runoff will play out, and the significance of the consequences should the covenant ultimately be breached, are potentially inconsistent with investment-grade debt and issuer default ratings at ORI.”

Fitch says it will review the ratings after additional analysis and ORI's fourth-quarter earnings announcement.

In August 2011, Fitch affirmed ORI's 'A' rating and removed the company from Rating Watch Negative, stating that it did not anticipate that a runoff of RMIC would have a significant adverse impact on capital and liquidity.