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NEW YORK - MBIA said it would have the cash to meet commitments even after reporting a worse-than-expected loss, but rating agencies kept the pressure on the world's largest bond insurer with a series of actions and warnings late in the day.
United States bond insurers' shares staged a comeback after MBIA held a marathon conference call on Thursday to reassure investors. US government bonds rose on a wave of safe-haven buying following a rating agency cut of an MBIA rival.
Speculation about looming cuts in credit ratings for bond insurers has battered the US stock market in recent sessions, though shares were broadly higher on Thursday. Despite gloomy employment data on Thursday, financial stocks rebounded.
MBIA closed up 11 per cent at US$15.50, and Ambac Financial Group jumped 9.2 per cent to US$11.72, both on the New York Stock Exchange. MBIA's stock has tumbled about 50 per cent this year, while Ambac has plummeted almost 70 per cent.
Late on Thursday, Moody's Investors Service warned that the amount of capital needed to support the mortgage-related risks of bond insurers has grown significantly and some bond insurers may not be able to support their 'AAA' ratings. Moody's expects to conclude a review of the industry by mid- to late-February.
Rival rating agency S&P cut its ratings on smaller MBIA competitor FGIC's bond insurance arm, and placed its top ratings on MBIA on review for a possible downgrade. S&P also said it may cut the 'AAA' rating of XL Capital Assurance, the bond insurance arm of Security Capital Assurance.
S&P cut Financial Guaranty Insurance's 'AAA' insurer financial strength rating by two notches to 'AA' and cut parent FGIC's long-term rating by three notches to 'A' from 'AA'. FGIC is owned by a group that includes mortgage insurer PMI Group and private equity firms Blackstone Group, Cypress Group and CIVC Partners. -- REUTERS
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