S&P Downgrades 5 Mortgage Insurers

Standard & Poor's Ratings Services downgraded credit ratings of five U.S. mortgage insurers on Tuesday as losses of these mortgage insurers were bigger than S&P’s expectations. The rating agency also expects that unemployment will continue to rise through the second quarter of 2010 and this will further weigh on the mortgage insurers. Currently, the outlook for the mortgage insurers is negative. 

In October, S&P put seven mortgage insurers on watch for downgrade with the expectation of worse claims. The five mortgage insurers, whose ratings were lowered on Tuesday, are Republic Mortgage Insurance Co., a unit of Old Republic International Corp (ORI - Snapshot Report), PMI Mortgage Insurance Co, a unit of PMI Group Inc (PMI), Radian Mortgage Insurance Inc, a unit of Radian Group Inc (RDN - Snapshot Report), Genworth Mortgage Insurance Corp., a unit of Genworth Financial Inc (GNW - Analyst Report), and United Guaranty, a division of American International Group Inc (AIG - Analyst Report). 

According to S&P, though the overall economy is showing signs of improvement, the market turmoil significantly impacted and will impact the mortgage insurers’ portfolios. As a result, S&P expects more rating downgrades in the near future. 

S&P lowered Republic Mortgage Insurance Co. by three notches to BBB-minus, the lowest investment-grade rating, from A-minus, the fourth lowest investment-grade level. 

Ratings of PMI Mortgage Insurance Co and Radian Mortgage Insurance Inc were lowered by one notch to B-plus, the fourth highest junk rating, from BB-minus. 

Ratings of Genworth Mortgage Insurance Corp. was lowered by two steps to BBB- minus, the lowest high grade, from BBB-plus, the third lowest investment grade. S&P also lowered the ratings of United Guaranty by one step to BBB, the second lowest investment grade, from BBB-plus. 

With unemployment expected to peak at 10.4% in the middle of 2010 and continuous rising foreclosures, S&P expects recovery of the financial conditions of the mortgage insurers to be sluggish. We will keep an eye out for any worsening in ratings of mortgage insurers in the near future.

Read the full analyst report on ORI

Read the full analyst report on PMI

Read the full analyst report on RND

Read the full analyst report on GNW

Read the full analyst report on AIG