TEXT-S&P release on four U.S. mortgage insurers

(The following statement was released by the rating agency)

April 8 - Standard & Poor's Ratings Services said today that it lowered its
counterparty credit rating on MGIC Investment Corp. (MTG.N) (MGIC Investment)
to 'BBB' from 'A-' and its counterparty credit and financial strength ratings
on the mortgage insurance subsidiaries (MGIC) to 'A' from 'AA-'. The ratings
were removed from CreditWatch, where they were placed on Jan. 24, 2008, with
negative implications. The outlook is negative.
Standard & Poor's also said that it lowered its counterparty credit rating on
Old Republic International Corp. (ORI.N) (ORI) to 'A' from 'A+' and its
counterparty credit and financial strength ratings on ORI's core subsidiaries
to 'AA-' from 'AA'. The ratings were removed from CreditWatch, where they were
placed on Feb. 25, 2008, with negative implications. The outlook is negative.
At the same time, Standard & Poor's lowered its counterparty credit rating on
PMI Group Inc. PMI.N (PMI Group) to 'BBB+' from 'A' and its counterparty
credit and financial strength ratings on PMI Group's mortgage insurance
subsidiaries in the U.S. (PMI) and Europe (PMI Europe) to 'A+' from 'AA'. The
ratings were removed from CreditWatch, where they were placed on Feb. 13, 2008,
with negative implications. The outlook is negative.
In addition, Standard & Poor's lowered its counterparty credit rating on Radian
Group Inc. (RDN.N) (Radian Group) to 'BBB' from 'A-' and its counterparty
credit and financial strength ratings on Radian Group's mortgage insurance
subsidiaries (Radian MI) to 'A' from 'AA-'. These ratings remain on
CreditWatch, where they were placed on Feb. 13, 2008, with negative
implications.
"The downgrades reflect weaker-than-expected results for the fourth quarter of
2007 and the continued deterioration in key variables that influence claims for
mortgage insurance," explained Standard & Poor's credit analyst James Brender.
When we resolved the CreditWatch status of several mortgage insurer ratings on
Nov. 21, 2007, we stated that if unemployment rose above 6%, incurred losses
for all mortgage insurers would be significantly higher than our expectations.
Our most recent macroeconomic forecast shows unemployment reaching 5.8% in
2009, and there is considerable uncertainty in the job markets. The
deterioration in the housing markets has also been worse than our expectations.
Now, we believe median home prices will decline 20% from the peak in 2006. By
contrast, the forecasts we used in November 2007 assumed a decline of 11%.
As a result of the deterioration in the housing and job markets, Standard &
Poor's believes mortgage insurers' operating results for 2008 and 2009 will
compare unfavorably with our previous expectations. Our current forecasts
predict that most companies will not generate an underwriting profit until
2010, but individual results will vary.
Capital adequacy and available liquidity indicate that the mortgage insurers'
near-term ability to satisfy claims from existing resources remains strong.
Some companies will likely need to raise additional capital to support their
current level of new business because claims from existing business will
deplete some capital. All the mortgage insurers that we downgraded today have
capital adequacy ratios above Standard & Poor's minimum for a 'AAA' rating.
However, we expect the capital adequacy ratios to decline in 2008 because of
operating losses. The insurers have very liquid investment portfolios, but the
financial flexibility of some of their holding companies has weakened.
"Despite the challenging environment for mortgage insurers, there are some
long-term positive factors for the industry," Mr. Brender added. "The most
important of these is the rigor the industry has shown in reducing its exposure
to higher risk products, such as mortgages with reduced documentation or high
loan-to-value ratios or to properties in declining housing markets." Mortgage
insurers have also benefited from a trend toward higher FICO scores and more
fixed-rate mortgages. Other positive factors include greater demand for
mortgage insurance, higher persistency, and lower expense ratios. These could
make the 2008 vintage profitable despite significant home price depreciation.
Fannie Mae and Freddie Mac (collectively, the government-sponsored enterprises;
GSEs) will review the mortgage insurers that now have ratings below 'AA-' and
decide whether they are still eligible to insure mortgages sold to the GSEs. In
the short term, replacing the capacity provided by those mortgage insurers that
Standard & Poor's rates below 'AA-' would be extremely difficult. Standard &
Poor's estimates that firms now rated below 'AA-' accounted for 58% of the
industry's flow market share in 2007. The other mortgage insurers do not have
the capital to absorb all of this volume. Standard & Poor's would likely
downgrade any mortgage insurer that loses its eligibility to insure mortgages
sold to the GSEs.
In addition to the rating actions on mortgage insurers, Standard & Poor's
lowered its counterparty credit and financial strength ratings on PMI Guaranty
Co. to 'A+' from 'AA', removed them from CreditWatch negative, and assigned a
negative outlook. Standard & Poor's also placed its 'AA' counterparty credit,
financial strength, and financial strength ratings on Radian Asset Assurance
Inc. on CreditWatch negative.
Standard & Poor's will hold a telephone conference call on April 9, 2008, at
11:00 a.m. EDT to discuss these rating downgrades and the outlook for the U.S.
mortgage insurance sector. The live call-in numbers for this call are (1)
210-839-8781 (U.S.) and (44) 20-7108-6390 (U.K.); the conference ID for this
call is #4191429, and the passcode is SANDP. A replay of this call will be
available starting about an hour after the call concludes through Wednesday,
April 16; the replay number will be (1) 203-369-1649.
Complete ratings information is available to subscribers of RatingsDirect, the
real-time Web-based source for Standard & Poor's credit ratings, research, and
risk analysis, at www.ratingsdirect.com. All ratings affected by this rating
action can be found on Standard & Poor's public Web site at
www.standardandpoors.com; select your preferred country or region, then Ratings
in the left navigation bar, followed by Credit Ratings Search.
(New York Ratings Team)