Standard & Poor’s downgraded the insurer financial strength rating for Radian Asset Assurance Inc. to A from AA and kept it on negative watch.
The rating agency cited Radian’s declining business prospects and limited financial flexibility as reasons for the downgrade, as well as the company’s softening prospects for reinsurance, and the deterioration in the credit of Radian Asset’s parent, Radian Group Inc.
“In our view, business prospects and financial flexibility have declined for Radian Asset and there is ongoing uncertainty regarding its competitive position and ownership,” said Standard & Poor’s analyst Robert Green in a release accompanying the action.
In the release, Standard & Poor’s said it was concerned about the potential for Radian to lose reinsurance business because of the downgrades to the other bond insurers. As they fall below triple-A, the financial guaranty companies may not turn to Radian’s reinsurance services as they had previously in trying to preserve their ratings.
The rating agency also said that the uncertainty in the bond insurance market overall has hurt the company.
The watch with negative implications reflects the uncertainties surrounding the company and the industry, and its potential sale, Standard & Poor's said.
Meanwhile, Radian Asset was not downgraded due to any lack of capital adequacy or credit issues, Radian said in a press release.
“We note that this downgrade will likely inhibit Radian Asset’s ability to write business,” the release stated. “Radian Asset remains fully committed to its policy holders and will retain the key staff required to honor those commitments.”
“Despite Standard &Poor’s decision to downgrade Radian Asset, we will continue ongoing discussions with the rating agencies and other key constituencies,” S.A. Ibrahim, Radian chief executive officer said. “Importantly, Radian Asset will now serve as a potential source of significant, non-dilutive capital for Radian. As a result, we are currently re-evaluating our capital strategy and reassessing our need for additional capital.”
