Fitch Ratings yesterday downgraded XL Capital Assurance Inc. to junk status, dropping the insurer financial strength rating to BB from A, and moving the financial guarantor to negative outlook.

The downgrade reflects Fitch's assessment of XLCA's capital position, the company's plans for raising additional capital, an update of the exposure of XL to subprime-related mortgages, and the "material erosion" of the franchise and business value for XL Capital, which is owned by Security Capital Assurance Ltd. Earlier this month, SCA announced that it would temporarily cease writing new business to preserve capital.

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