Standard & Poor?s Ratings Services downgraded its outlook on RAM Reinsurance Co. Ltd.?s ?AAA? financial strength rating to negative from stable over concerns about ?consistently below-average earnings and return on equity over the past several years, coupled with uncertainty as to whether the company can show significant improvement in the near to intermediate term.?

S&P also revised its outlook on RAM Holdings Ltd.?s ?A+? senior unsecured debt rating to negative from stable.

Bermuda-based RAM Re, which provides financial guaranty reinsurance for US and international public finance and structured finance transactions, was adversely impacted by non-recurring items including expenses in anticipation of the company?s recent initial public offering and sector specific loss reserve increases. It posted first quarter income of $6.6 million or 25 cents per share despite $1.3 million in expenses associated with its April 27 listing on the Nasdaq.

It added $54 million to its capital resources in 2006 with a new $40 million bank soft-capital facility and $14 million from the proceeds of the IPO.

Vernon Endo, president and chief executive officer of RAM Holdings Ltd., said yesterday that the company will continue to pursue its strategy to improve earnings and ROE as a priority.

?Although we remain cautious about market conditions for the remainder of 2006, given our historic growth and as we improve operating leverage, we believe we are on track to show significant improvement in our ROE over the near-term, and to achieve our ROE growth objectives over the mid-term,? he said in a statement.

?While RAM Re?s plans include strategies for improvement in these important measures of financial health, the company?s recent history dictates that it will have to demonstrate these improvements before the outlook could be returned to stable,? said Standard & Poor?s credit analyst Dick Smith. ?If RAM Re fails to demonstrate significant improvement, the ?AAA? ratings could be pressured.?

As a financial guarantee reinsurer, Ram sells reinsurance policies to insurers on securities such as municipal bonds and asset securitisations. Financial guaranty insurance protects against non-payment of principle and interest on financial instruments.

Financial guaranty insurance protects against non-payment of principle and interest on these kinds of instruments.

Shares of RAM rose five cents to close at $12.60 on the Nasdaq Stock Market yesterday. Since its IPO on April 27, shares have traded between $12.25 to $13.85, somewhat lower than the $14 to $16 range initially expected in the IPO.