NEW YORK, Sept 28 (Reuters) - Standard & Poor’s on Monday cut its ratings on MBIA Inc (MBI.N) and its structured finance insurance arm, MBIA Insurance Corp, citing an expectation the company will continue to take significant losses from insuring risky loans.
S&P cut MBIA Insurance two notches to BB-plus, one step below investment grade, from BBB. MBIA Inc was also cut one notch to BB-minus, three steps below investment grade, from BB.
The outlook for both companies is negative, indicating additional downgrades may be likely over the next one-to-two years.
“Macroeconomic conditions continue to contribute to losses on the group’s structured finance products,” S&P said in a statement. “Sizable exposures to certain asset classes within the insured portfolio could create significant losses and balance-sheet volatility.”
MBIA’s losses to residential- and commercial-mortgage backed securities could be higher than previously expected, S&P said.
S&P also affirmed its ratings on MBIA’s municipal bond insurance arm, National Public Finance Guarantee, at A, the sixth highest investment grade. The rating agency continues to have a developing outlook on the company, indicating its rating could be raised, lowered or left unchanged.
The outlook reflects uncertainty around MBIA’s ability to raise new capital and write new business in the unit, S&P said. (Reporting by Karen Brettell; Editing by Leslie Adler)