MBIA posts $2.3b Q4 net loss

MBIA Inc, the world's largest bond insurer, posted its biggest-ever quarterly loss and said it is considering new ways to raise capital after a slump in the value of subprime-mortgage securities the company guaranteed.

The fourth-quarter net loss was $2.3 billion, or $18.61 a share, raising concern the Armonk, New York-based company will lose its top credit ratings. The loss came a day after FGIC Corp's insurance unit became the third company to be stripped of its AAA grade.

MBIA is seeking to convince Moody's Investors Service to retain the highest ranking for its insurance unit as Chief Executive Officer Gary Dunton tries to shore up capital through stock and bond sales. Without the Aaa stamp, MBIA's business would be crippled and throw ratings on $652 billion of securities into doubt. The threat of losses prompted the New York State Insurance Department to call a meeting of banks last week to discuss a rescue.

"In the absence of a credible bailout plan, I think investors and issuers need to assume that MBIA, along with all of the other companies, will face continuing, worsening downgrade pressure all year," said Matt Fabian, a managing director at Concord, Massachusetts-based consulting firm Municipal Market Advisors.

Excluding writedowns and some other items, the operating loss was $407.8 million, or $3.30 a share, MBIA said yesterday. "We are disappointed in our operating results," Dunton said in the statement.

CDO expansion

Bond insurers guarantee $2.4 trillion of debt combined and are sitting on losses of as much as $41 billion, according to JPMorgan Chase & Co analysts. Their downgrades could force banks to write down $70 billion, Oppenheimer & Co analyst Meredith Whitney said yesterday in a report.

MBIA is reeling from an expansion out of municipal securities into guaranteeing collateralized debt obligations, which repackage assets such as mortgage bonds and buyout loans into new securities with varying risk. As the value of some CDOs plummet, ratings companies are pressing the insurers to add more capital.

Hedge fund manager William Ackman has also stepped up pressure on the companies. Ackman, a managing partner of Pershing Square Capital Management LP, released a letter to regulators on Wednesday estimating MBIA's CDO losses would reach $11.6 billion. Ackman has trades set up that would profit from a decline in the price of the shares and bonds of MBIA and Ambac Financial Group Inc, the second largest insurer.

Agencies

(China Daily 02/01/2008 page17)