Standard & Poor's has downgraded the ratings on five mortgage insurance companies, saying industry losses have exceeded its prior expectations and the recession has had a deeper impact on their portfolios than expected.

S&P said claims payments remain below expectations as a result of the backlog of foreclosures and the moratoria implemented earlier in the year. However, the report notes "the lower-risk books of business within the mortgage sector (such as those with higher FICO scores or lower loan-to-value ratios) have been and will be more adversely affected than we had anticipated and U.S. mortgage insurers' losses will continue to be greater than previously expected overall." The company hardest hit by the downgrade was Republic Mortgage Insurance Co., whose rating was dropped from 'A-' to 'BBB-'.

Ironically, S&P said RMIC received a two-notch uplift, "reflecting that company's strategic importance to Old Republic International (RMIC's parent company) and management's requirement that the mortgage insurance group capital be self sustaining."

United Guaranty was dropped from 'BBB+' to 'BBB', with S&P giving it "a four-notch benefit because of a net-worth-maintenance agreement from its ultimate parent, American International Group Inc., and a reinsurance treaty from a higher-rated affiliate."

Genworth was dropped from 'BBB+' to 'BBB-' with one notch of benefit because of the potential for support from its parent company. PMI and Radian were cut from 'BB-' to 'B+'.

Back in October, MGIC was downgraded to 'B+'. S&P said it is still reviewing CMG Mortgage Insurance Co. and California Housing Loan Insurance Fund.

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