Moody's Drops Radian Group's Primary Mortgage Insurance Subsidiaries to Ba3

Moody's Investors Service last week downgraded Radian Group Inc.'s primary mortgage insurance subsidiaries to Ba3 from A2, while saying it will soon conclude its review for downgrade of bond insurer Radian Asset Assurance Inc.'s A3 rating.

The decision concludes a review of Radian's rating Moody's initiated on Oct. 10.

The agency cited the stress on Radian's risk-adjusted capital position due to Moody's higher mortgage loss expectations for the downgrade, among other factors. The large losses Radian has incurred are "placing meaningful capital strain on the firm," and without additional capital injections, it could run up against maximum statutory risk to capital guidelines within the next 18 months, Moody's said.

The rating agency also said there is "increased uncertainty regarding the future role of the mortgage insurers within the framework of the evolving mortgage finance market."

Radian responded to the downgrade by saying its capital position is adequate and that it can continue to write new business. The company does not believe Moody's review reflected Radian's "substantial claims-paying resources" and the "improving quality" of its mortgage insurance portfolio.

Radian said it will have "sufficient capital and liquidity to pay all anticipated claims, maintain a strong market position, and continue to write new mortgage insurance business throughout 2009."

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