S&P downgrades Mortgage Insurers

By Sari R. Updated on 9/25/2013

Standard & Poor's has downgraded its ratings on three companies that insure mortgages: Mortgage Guaranty Insurance Corp., Radian Group and Genworth Financial. Ratings on MGIC was lowered from B+ to B after company's significant losses in its mortgage insurance business. As a result, MGIC's parent company, MGIC Investment Corp. was downgraded from CCC+ to CCC.

S&P has expressed that its outlook on both the parent and mortgage insurance segment is negative and they expect losses to continue through 2013. MGIC lowered its loss last quarter by 37% from the earlier year quarter, but the company is still affected severely by mortgage defaults that occurred in recent years.

The next company downgraded by S&P was Radian who also saw its insurer financial strength rating go from B+ to B, while the credit rating on Radian Group went from CCC+ to CCC. S&P said Radian Asset Assurance and Radian's bond insurance subsidiary remain unaffected by this ratings action. S&P considers weak from a financial security standpoint because of the big losses impacting the mortgage insurance segment and ongoing troubles in the housing market.

Genworth Mortgage Insurance Corp. was the last company discussed in this article who saw its rating lowered from BB- to B and its outlook shifted to negative. S&P explained that operating losses at Genworth could impede the insurer's ability to pay claims in the future and weaken its financial position.