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Moody's cuts FGIC debt to Ba1
Moody's Investors Service said it downgraded the senior debt rating of FGIC Corp. to Ba1 from Aa2.
The downgrade reflects the company's weakened capitalization and business profile in part from exposure to the U.S. residential mortgage market, the agency said.
The ratings remain on review for downgrade, reflecting continuing uncertainty about the firm's strategic and capital plans.
The actions result from Moody's ongoing assessment of ratings in the financial guaranty insurance sector and follow the downgrade on Feb. 7 of XL Capital Assurance Inc. from Aaa to A3, the agency noted.
Among primary financial guarantors, ratings of MBIA and Ambac remain under review for downgrade, with those reviews expected to conclude in the next few weeks. Although further analysis is needed, Moody's said it believes that, in contrast to XL Capital Assurance and FGIC, MBIA and Ambac are better positioned from a capitalization and business franchise perspective.
The agency also said it believes FGIC's significant exposure to mortgage-related risk has had consequences for its business and financial profile beyond the associated impact on capitalization.
Moody's said it believes that FGIC's historically strong franchise, particularly in the municipal segment, has weakened significantly relative to the other large financial guarantors, as has its prospects for future profitability and financial flexibility.
With respect to underwriting and risk management, Moody's said it believes that FGIC's relatively significant exposure to the mortgage sector indicates a risk posture somewhat greater than its peers and reflects the company's aggressive portfolio growth and capital management since its ownership change in December 2003.
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