Standard & Poor’s Thursday affirmed its double-A ratings on bond insurers MBIA Insurance Corp. and Ambac Assurance Corp. and removed their ratings from CreditWatch negative.

Standard & Poor’s placed the ratings of both on negative outlook due to the impact of their exposure to domestic nonprime mortgages and collateralized debt obligations of asset-backed securities.

“We assigned a negative outlook to MBIA due to its significant exposure to domestic nonprime mortgages and related exposures to collateralized debt obligations of asset-backed securities,” said Standard & Poor’s credit analyst David Veno.

“The negative outlook on Ambac reflects our view that the company’s exposure to domestic nonprime mortgages and related exposures to CDO of ABS has likely damaged its franchise and that the company faces diminished new business flow,” said credit analyst Dick Smith.

Standard & Poor’s said removal of the negative outlook will depend on ultimate losses as well as the future potential business prospects, strategic decisions and regulatory outcome. Both companies have discussed capitalizing muni-only subsidiaries, and Ambac expects its Connie Lee subsidiary could begin writing new business as early as the fourth quarter of this year.

Standard & Poor’s downgraded the companies and placed them on CreditWatch negative June 5, citing diminished business flow in both public and structured finance and the deterioration of the RMBS and CDO of ABS exposures.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.