NEW YORK, April 8 (Reuters) - Standard & Poor's on Wednesday cut its ratings on major U.S. mortgage insurers, after increasing its estimate for losses the companies are expected to take from mortgage loans.

"The downgrades reflect a significant increase in Standard & Poor's estimate of mortgage insurers' loss costs for loans," the rating agency said in a statement. It also reflects "the impact this revision will have on the companies' operating results, capitalization, and competitive positions."

"The key drivers of the increase in loss-cost assumptions are the increase in our assumption for peak unemployment and the sharp rise in delinquent loans," S&P said.

The rating agency now expects unemployment to rise to 10 percent, from its previous expectation of 7.9 percent.

"The deterioration in the housing markets has been only moderately worse than we expected, but it has translated into greater delinquency rates than we anticipated," S&P said.

S&P cut Radian Group Inc (RDN.N: Quote, Profile, Research) six steps to CCC, eight steps below investment grade and a deeply distressed rating, and lowered PMI Group Inc (PMI.N: Quote, Profile, Research) eight notches to the same CCC level. Their insurance arms were also downgraded.

Radian's shares dropped 4.2 percent in after hours trading while PMI's shares fell 5.4 percent.

The rating of Genworth Financial Inc's (GNW.N: Quote, Profile, Research) insurance arm Genworth Financial Mortgage Insurance was reduced two steps to BBB-plus, the second-lowest investment grade. For details, see [ID:nN08365675]