MBIA's bond insurer unit loses top rating from Fitch

By Walden Siew and Dan Wilchins

NEW YORK (Reuters) - MBIA Inc's (MBI.N: Quote, Profile, Research, Stock Buzz) insurance arm on Friday lost its top rating from Fitch, which said the biggest bond insurer in the world fell as much as $3.8 billion short of what it needed to keep the highest rating.

Earlier this year even the possibility of downgrades of major bond insurers roiled financial markets. But Fitch's action comes after several insurers have already lost their triple-A ratings, and was not a surprise to investors who are already discounting the value of MBIA insurance.

But still, the news is not positive for MBIA, which guarantees about $680 billion of debt and needs to appear robust and stable to win new business.

MBIA's shares fell 68 cents, or 4.8 percent, to close at

$13.61.

MBIA Insurance Corp still carries the top ratings from Moody's Investors Service and Standard & Poor's. The bond insurer believes these agencies better understand the risks in its portfolio, and asked Fitch last month to stop rating it.

MBIA raised $2.6 billion of capital earlier this year, and has made other moves to boost its ability to pay claims, such as deciding in February not to guarantee new asset-backed securities for six months.

Standard & Poor's and Moody's Investors Service affirmed MBIA Insurance Corp's triple-A ratings in February, and Chief Executive Jay Brown, told Reuters then that he expected those ratings to stand for 12 to 18 months.