S&P cuts ratings on Genworth Financial's units

The credit ratings agency reduced its counterparty credit and financial strength ratings on Genworth Mortgage Insurance Corp. and its financial strength rating on Genworth Residential Mortgage Insurance Corp. of North Carolina by one notch to "AA-" from "AA."

Standard & Poor's also said that it lowered its counterparty credit and financial strength ratings on Genworth Financial Mortgage Insurance Ltd. to "AA-" from "AA."

The outlook on all these companies remains negative, the credit ratings agency said.

Standard & Poor's move follows Moody's Investors Service, which placed on review for possible downgrade late Tuesday the debt ratings of Genworth Financial.

Over the past couple of weeks, Genworth's stock has been hit hard by concerns about its mortgage exposure in the wake of the collapse of American International Group Inc.

Earlier this month, the government stepped in and provided AIG with a two-year, $85 billion loan to help keep it in business. As one of the world's largest insurers, AIG teetered on the brink of bankruptcy as it looked for fresh cash to help shore up its balance sheet, which was facing a liquidity crunch amid the continued downturn in the credit markets.

U.S. mortgage insurers have been hit hard as homeowners have fallen behind on loan payments, and fewer mortgages are being issued as lending practices have tightened.

At Genworth Financial, write-offs of mortgages and asset-backed securities related to subprime and Alt-A mortgages were $326 million in the second quarter. Alt-A mortgages are given to people with minor credit problems or who lack proper documentation to get a traditional prime loan, while subprime mortgage loans are given to customers with poor credit histories.

Shares of Genworth Financial dropped $1.28, or 14.8 percent, to $7.34 in afternoon trading. The stock has lost two thirds of its value since January.