Sagen MI Canada Inc.

The stable outlook reflects our view that the company will maintain its strong competitive position with a sizable market share and excellent capitalization supported by improving earnings. Offsetting these strengths are the significant increase in home price valuations that resulted in a largely unaffordable housing market and continued high Canadian household consumer debt leverage. We could lower our ratings in the next two years if: Mortgage delinquencies cause higher-than-anticipated losses, leading to a potential weakening of capitalization; Aggressive financial strategy policies lead to a material change in the company's risk profile; or Financial leverage increases to more than 35% on a sustained basis. We are unlikely to upgrade Sagen in the next two years because of the monoline nature of

...Sagen MI Canada's near-term loss ratios could elevate if the labor market conditions in Canada worsens, and house price continues to decline, though we expect the potential losses could be absorbed within earnings. While the Canadian economy has shown resilience through the first quarter of 2023, S&P Global economists think some weakness is likely. We believe the unemployment rate could rise to 6.0% by the end of fourth quarter 2023 and could remain high through 2024. We expect the Bank of Canada to hold its policy rate at 4.5% until early 2024, when we expect it will start easing. In addition, the home prices (measured by MLS home price index) were down by 12.32% on a year-over-year basis in April 2023. While housing starts and home sales have edged up in recent months, and the housing market seems to have bottomed out, we believe the downside risks persists. With these expectations, we believe the new business volumes will remain muted, mortgage delinquencies could increase resulting...

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