Standard & Poor’s today downgraded to 'BB' from 'BBB-' the financial strength, financial enhancement, and corporate credit ratings of bond insurer Radian Asset Assurance. Radian will remain on negative watch.

S&P, which last downgraded Radian Asset Assurance by two notches in early April, said in a press release that the New York-based monoline “has significant exposure to several asset classes that have experienced deterioration and higher capital charges and that could result in losses.”

The rating agency noted the insurer is being run off by its parent company, Radian Guaranty,
Radian’s corporate exposure to CDOs “represents more than 42% of total exposure,” S&P analysts said in the press release. “This concentration, in our view, exposes the company to significant loss in certain adverse scenarios.”

“The rating action reflects adverse loss development in Radian Asset Assurance’s insured portfolio that has resulted in higher capital charges and which could result in losses,” said credit analyst Dick Smith.

The now below-investment grade insurer will face an additional downgrade if the parent company — which currently holds a BB-minus rating that remains on negative watch — is lowered, S&P said.

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