Don't Bite The Hand That Feeds You

[TheInvisibleHand ™]

Why Abk is better then Mbi and other insurers.

Unlike MBI, Abk acted quicker to position itself for recovery, and bad news is priced in and actually way oversold. The recent downgrade at Moodys was a mood point for abk, while it proposes another hurdle for MBI. Abk has all ready raised ample cash and has over 15 billion.

ABk said " Ambac said the downgrade wouldn't have a material impact on its GICs' collateral requirements."

While MBI said "MBIA said in a statement Friday that it will be required to post around $4.5 billion in collateral. The company also said it expects it will need $2.9 billion to satisfy potential termination payments under the GICs."



In conclusion Abk is the better play, and will recover much quicker.


http://online.wsj.com/article/SB121400959257893809.html?mod=yahoo_hs&ru=yahoo

MBIA, Ambac Plans Threatened
Insurers to Proceed
With New Units
Amid Downgrades
By LAVONNE KUYKENDALL
June 21, 2008; Page B2

Plans by struggling bond insurers MBIA Inc. and Ambac Financial Group Inc. for a fresh start may be squelched by sharp, new ratings downgrades by Moody's Investors Service.

MBIA and Ambac recently launched subsidiaries to step in as new triple-A-rated public finance insurers. The moves had quickly followed ratings agency Standard & Poor's decision to strip its triple-A credit ratings from the bond insurers earlier this month.

But those plans were threatened Thursday evening when Moody's downgraded credit ratings for the two bond insurers even more severely -- to A2 for Moody's, and Aa3 for Ambac.

Both insurers said they would move forward anyway, but they may face difficulty getting top credit ratings for the new units. A top-notch, triple-A rating is considered a necessity to do business insuring municipal bonds.

Moody's said a factor in MBIA's downgrade was its diversion of $900 million in capital to the new unit, rather than using it to reinforce its existing bond insurer.

Jack Dorer, managing director of Moody's financial institutions group, said the diversion of capital will be a factor in evaluating the new entity. "We would consider a whole host of factors including the financial strength of other entities within the group."

Moody's also expressed concerns about Ambac's plan to move excess capital to its currently unused bond-insurer subsidiary, Connie Lee.

Customers have lately shunned MBIA and Ambac amid the uncertainty over the insurers' ultimate subprime losses.

"We are moving forward with our transformation plan, which we will pursue in conjunction with the New York State Insurance Department," said Jay Brown, MBIA chairman and chief executive, in the Thursday statement. Ambac said the downgrade wouldn't impair its "ability to proceed with its plans related to the capitalization of Connie Lee Insurance Company."

The downgrade triggered collateral calls on some of the insurers' guaranteed investment contracts, or investments that promise to guarantee principal and an interest rate. MBIA said in a statement Friday that it will be required to post around $4.5 billion in collateral. The company also said it expects it will need $2.9 billion to satisfy potential termination payments under the GICs. Ambac said the downgrade wouldn't have a material impact on its GICs' collateral requirements.

In 4 p.m. New York Stock Exchange composite trading, MBIA's stock fell 86 cents, or 13%, to $5.59, while Ambac rose two cents to $2.05. In the past 52 weeks, shares of Ambac traded as high as $88.65, and shares of MBIA as high as $68.98.

Write to Lavonne Kuykendall at [e-mail]