Radian's Financial Strength Rating Downgraded

Standard & Poor's has lowered the financial strength rating on Radian Insurance Inc., a subsidiary of Philadelphia-based Radian Guaranty Inc., by three notches, cutting it from AA-minus to A-minus. The move came two weeks after S&P put this rating and others associated with Radian Guaranty on CreditWatch with negative implications. A statement from Radian said the move by S&P was not related to the financial solvency of Radian Insurance but because of the decision to stop writing net-interest-margin security and second-lien business. (Radian Insurance does not write any insurance for first-lien loans.) In its statement, S&P said Radian Insurance "could report strong statutory net income for 2008 and 2009, but S&P believes that over the next five years, the firm's paid losses will be several times larger than the premium it collects. Radian Insurance has a sizable capital base, but it could still require support from Radian Guaranty or Radian Group because of the significant claim payments Standard & Poor's expects it will have to make in the next few years." Radian's statement in response declared that Radian Insurance "has adequate claims-paying resources to cover its losses and pay all policyholders even without the support" of its corporate parents.