Monoline Downgrades: FGIC, Security Capital,CIFG

April 1, 2008

Standard & Poor’s Ratings Services has lowered its financial strength rating on Financial Guaranty Insurance Co. (FGIC) six notches, to ‘BB’ from ‘A’, and its rating on holding company FGIC Corp. six notches, to ‘B’ from ‘BBB’. S&P also removed the ratings from CreditWatch with negative implications, where they had been placed on March 21, 2008; the outlook is negative. Concurrently the rating agency suspended its ratings on public finance and corporate transactions insured by FGIC that do not have an underlying public rating (SPUR). “In our opinion, FGIC has been slow to identify the unfavorable insured portfolio trends that have emerged and has failed to implement a strategic plan to re-establish itself as a viable operating entity capable of writing new business,” said S&P. “The company has suspended underwriting new business in order to generate internal capital. Our increased concerns over regulatory and managerial issues have led to a downgrade to the speculative grade level. Unlike many of its peers, FGIC has been unsuccessful so far in raising new external capital. The violation of certain New York State Insurance Department risk limits, as noted in financial statements released on March 26, 2008, may further hamper these efforts. The departure of FGIC’s president, announced today, may further reduce management’s overall effectiveness.”

Standard & Poor’s Ratings Services has lowered its rating on Security Capital Assurance Ltd.’s series A perpetual noncumulative preference shares to ‘D’ from ‘C’, and has removed the rating from CreditWatch with negative implications. “The rating action follows the company’s failure to make its March 31, 2008, dividend payment,” said S&P.

Fitch Ratings has downgraded the following Insurer Financial Strength (IFS) ratings of CIFG Guaranty (CIFG) and its affiliates to ‘A-‘ from ‘AA-‘: CIFG Guaranty; CIFG Assurance North America, Inc.; CIFG Europe. Fitch has also removed CIFG from Rating Watch Negative, where it was originally placed on Feb. 5, 2008. The Rating Outlook is Negative. “The downgrade of CIFG and its affiliates is based on Fitch’s updated assessment of CIFG’s capital position, a review by Fitch of CIFG’s updated business plan, consideration of various qualitative ratings factors, and an update on Fitch’s current views of U.S. subprime related risks,” said the announcement.

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