Standard & Poor's Friday downgraded Radian Group Inc. to BB from BB-plus, while taking no action on its operating subsidiaries Radian Guaranty Inc. and Radian Asset Assurance Inc.

Both the mortgage and bond insurance companies - rated BBB-plus - remain on review for downgrade. The downgrade to Radian Group came as Standard & Poor's took action on a number of mortgage-insurance holding companies, and in some cases the operating companies themselves.

"These downgrades resulted from a sector-wide reassessment of mortgage insurers' loss costs," analyst James Brender said in a statement.

The increase in loss cost estimates at Radian Guaranty were not large enough to merit a downgrade, Standard & Poor's said. The agency downgraded Radian Group and other holding companies because of the "strain that the disruption in the financial markets has placed on these firms' financial flexibility."

Standard & Poor's earlier this month placed a number of mortgage insurers on review for downgrade, citing the worsening economic outlook. Its analysts predict unemployment of more than 8% by mid-2009 and peak-to-trough decline in home prices of 30%.

The agency will complete a more comprehensive review of the mortgage insurers and resolve the outstanding CreditWatch issues by mid-March. During the review, it said it will look at a number of factors, including reassessing loss cost estimates based on macroeconomic conditions, efforts to stabilize the mortgage and housing markets, and whether higher unemployment will translate into more delinquencies.

Standard & Poor.'s said it expects to downgrade most mortgage insurers, some by multiple notches.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.