MBIA seeks to reassure investors; S&P puts on review

By Patrick M. Fitzgibbons

NEW YORK (Reuters) - MBIA Inc (MBI.N) said on Thursday it will have enough cash to meet its commitments even after reporting a worse-than-expected quarterly loss, while Standard & Poor's is reviewing the top ratings it gave to the world's largest bond insurer.

Still, U.S. bond insurers' shares staged a comeback after MBIA held a marathon conference call to reassure investors. U.S. government bonds also 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 U.S. stock market in recent sessions, though the shares were broadly higher Thursday. Despite gloomy employment data Thursday, financial stocks rebounded.

MBIA shares closed up 11 percent at $15.50, and Ambac Financial Group Inc (ABK.N) jumped 9.2 percent at $11.72, both on the New York Stock Exchange. MBIA stock has tumbled about 50 percent this year, while Ambac has plummeted almost 70 percent.

Late Thursday, rating agency S&P cut its ratings on smaller MBIA competitor FGIC Corp's bond insurance arm, and placed its top ratings on MBIA on review for a possible downgrade.

The rating agency also said it may cut the "AAA" rating of XL Capital Assurance Inc, the bond insurance arm of Security Capital Assurance SCA.N.

S&P cut Financial Guaranty Insurance Co's "AAA" insurer financial strength rating by two notches to "AA." It also cut parent company FGIC Corp's long-term rating by three notches to "A" from "AA."

FGIC is owned by a group that includes mortgage insurer PMI Group Inc (PMI.N) and private equity firms Blackstone Group LP (BX.N), Cypress Group and CIVC Partners LP.

The fortunes of the bond insurers have moved center stage in the global credit crisis that began last summer after defaults soared on U.S. subprime mortgages, causing losses for banks, funds and insurers.

The insurers have guaranteed municipal and consumer debt worth about $2.4 trillion, of which about $900 million is "structured finance" debt, including mortgage bonds held in collateralized debt obligations (CDOs).

S&P's main competitor, Moody's Investors Service, is also reviewing MBIA and the entire bond insurance sector.

THE LOSSES

Just after midnight EST on Thursday, MBIA reported a loss of $2.3 billion, or $18.61 a share, versus a profit of $181 million, or $1.32 a share, a year earlier.

On an operating basis, MBIA lost $3.30 a share, wider than the Wall Street expectation of $2.97, according to Reuters Estimates.

MBIA said it was writing down $3.5 billion in its credit derivatives portfolio, including a credit impairment of $200 million.