Fitch has affirmed QBE Lenders’ Mortgage Insurance’s (LMI) insurer financial strength rating at AA-. It has also affirmed its rating on the operating subsidiary of Genworth Mortgage Insurance Australia, Genworth Financial Mortgage Insurance, at A+.

The move reflects the two companies’ strong credit profiles and entrenched positions in the Australian LMI market, the ratings agency says.

“Solid operating performances and no debt support financial flexibility, and internally generated capital is able to support growth if required,” Fitch says of QBE LMI.

QBE LMI also enjoys a “major position” in the market, which has been supported by strong macroeconomic conditions and housing price rises, particularly in Sydney and Melbourne.

“The major banks continue to use LMI to transfer risk, despite little if any capital relief, and the product is not as price-sensitive as other types of insurance,” Fitch says. “Typically renewed on a multi-year basis once the infrastructure is in place, LMI involves little direct additional cost for the lender, given the policy premium is paid for by the borrower.”

Fitch says the Genworth business has a higher rating than the group’s US life operating subsidiaries due to the “strength of the regulatory ring-fencing” in Australia.

“The company’s A+… rating reflects a robust standalone credit profile, which includes strong capital ratios, a conservative investment approach and a leading market position in a niche insurance sector with high barriers to entry.

“A favourable operating environment has supported earnings and the company’s financial flexibility was enhanced by improved capital market access following its partial initial public offering [last year].”

QBE LMI and Genworth jointly control more than half of the Australian LMI market.