Moody's Investors Service Inc. lowered its insurer financial strength rating for Old Republic International Corp.'s mortgage insurance subsidiary to A1, from Aa3, citing "the deterioration in" its "capital adequacy and medium term profitability prospects."

The rating agency said late Friday that the Chicago company's "mortgage insurance portfolio overall" does not meet its "capital adequacy" requirements for the A rating "on a risk-adjusted basis," though it has "both the ability and the willingness" to raise the unit's "capital resources to levels consistent with single-A metrics in the near term."

Remaining able to do business with the government-sponsored enterprises "will be an important rating consideration for the company," Moody's said.

Freddie Mac said last month that it would not impose restrictions on three large mortgage insurers that had been downgraded to the single-A level, but that it would stop doing business with a fourth that had been cut below the A level.

The Mortgage Insurance Companies of America said Monday that policies written in May by members of the trade group on individual mortgages fell 21.7% from April and 48.7% from a year earlier, to $15.5 billion.

Defaults fell 8% from April and rose 47.8% from a year earlier, to 67,967. The trade group said in May that a spike in defaults in April reflected a change in the way a major lender (which it did not identify) reports them.

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