S&P has affirmed QBE Lenders’ Mortgage Insurance’s “A+” financial strength and issuer credit ratings and expects the outlook to remain stable over the next two years.

The affirmation reflects the unit’s “very strong business risk position and strong financial risk profile supported by strong capital and earnings”.

“We believe QBE LMI has a very strong competitive positive as the second largest player in the Australian lenders' mortgage insurance market,” the ratings agency said.

“The insurer has also maintained sound operating performance in the context of the current market headwinds and increased intensity of competition in the local LMI market.”

S&P also revised QBE LMI’s financial flexibility to “adequate” from “strong”, given it no longer perceives it as a partially insulated subsidiary of QBE Group due to a greater interdependency of the two entities.

Downward ratings pressure on QBE LMI could occur if the group credit profile is lowered or capital adequacy deteriorates substantially below the 'A' category level under S&P’s global mortgage insurance capital model.

Other factors that could negatively impact ratings include deterioration of the business risk profile from a very strong level due to material deterioration in operating performance or a structural deterioration of earnings or a loss of a major client.

S&P says an upward ratings movement for QBE LMI is unlikely given that the ratings are currently capped at the group’s credit profile.