S&P Considering Downgrading FGIC Again, Principal Owner PMI Posts $1B Quarterly Loss
On Friday Standard & Poor's stated that may downgrade FGIC Corp and its insurance arm, after the bond insurer's principal owner PMI Group decided not to put additional capital into FGIC.
Mortgage insurer PMI on Monday posted a $1 billion quarterly loss dragged down by its investment in FGIC. PMI highlighted growing problems in the mortgage and bond insurance industries as fallout from the housing slump spreads.
S&P had stripped FGIC's insurance arm of its top "AAA" rating in January and now rates the company "A," the sixth-highest rating. It rates FGIC Corp "BBB," the second-lowest investment grade.
FGIC's insurance arm Financial Guaranty Insurance Co is no longer writing new business and will have trouble raising capital, S&P said in a statement.
FGIC has told New York regulators it wants to split its insurance business, putting the safer municipal bond insurance with a new affiliated company and keeping riskier structured finance as insured obligations of FGIC. Prospects for FGIC would be negative under that plan, S&P said.
"Should the split company plan not succeed, FGIC's ability to raise capital and resume writing new business would be less likely, in our view," S&P added.
Published on March 24, 2008
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