The negative outlook on MBIA Insurance Corp and Ambac Assurance Corp mean they still may be downgraded from "AA," the third highest rating, over the next two years.
Says a spokesperson for Standard & Poor’s, "We assigned a negative outlook to MBIA due to its significant exposure to domestic nonprime mortgages and related exposures to collateralized debt obligations (CDO) of asset-backed securities (ABS). 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.”
The two bond insurers were downgraded from "AAA" in June, reflecting losses the companies are expected to take from insuring risky mortgage-backed debt.