MBIA to keep $900 million at holding company
Monday June 16, 8:13 am ET
MBIA to retain $900 million at holding company, instead of transferring to operating unit
NEW YORK (AP) -- Bond insurer MBIA Inc. said Monday it is no longer considering transferring $900 million from its holding company to its operating subsidiary, according to a regulatory filing.
The $900 million was raised earlier in the year as part of an attempt to help the insurer keep its crucial "AAA" financial strength ratings, but with Standard & Poor's cutting that rating to "AA" and Moody's Investors Service saying it is reviewing the rating for a possible downgrade, MBIA decided not to transfer the funds.
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Earlier in June, S&P cut Armonk, N.Y.-based MBIA's financial strength rating to "AA" from "AAA" because MBIA faces reduced business and financial flexibility. Top-notch ratings are vital to helping ensure the generation of new business.
MBIA said in a filing with the Securities and Exchange Commission it is "pursuing opportunities" to help the beleaguered bond insurance sector as a whole, including working with the New York State Insurance Department and other industry stakeholders.
Rising defaults on mortgages has ratings agencies worried there will be a spike in claims payments in the coming months, as bonds backed by those mortgages are likely to default. The rise in claims would severely cut into cash reserves for some bond insurers and potentially put others out of business.
Ratings agencies began to review bond insurers operations late in 2007 to see if they were worthy of top-notch ratings. Most bond insurers have seen their ratings cut by at least one agency.
Since December, MBIA has raised about $2.6 billion to help ensure it has enough money to pay out a potential spike in claims, while still maintaining enough excess capital to maintain a "AAA" rating.
Since ratings agencies started reviewing bond insurers' financial strength, MBIA has maintained it has sufficient capital to cover any and all policy claims.
"Last week, the actions taken and statements made by both Moody's and Standard & Poor's made it clear that, at this point, maintaining 'AAA' ratings for MBIA would be dependent on other factors besides the amount of capital or claims-paying resources we have," C. Edward Chaplin, MBIA's chief financial officer, said in the filing. "Our capital-raising efforts since the fourth quarter of 2007, which put us at the forefront of the industry, were completed to meet the rating agencies' capital requirements to maintain a 'AAA' rating."
MBIA still carries a "AAA" rating from Moody's as the agency reviews the insurer. MBIA is rated "AA" by Fitch Ratings.
