NEW YORK Nov 7 Moody's Investors Service on Friday cut its ratings on MBIA Inc's (MBI.N) insurance arm and also sent ratings on the holding company's debt into junk territory, citing diminished business prospects and a weaker financial profile.
Moody's cut bond insurer MBIA Insurance Corp two notches to "Baa1," the third-lowest investment grade, and cut MBIA Inc's debt two notches to "Ba1," one step below investment grade.
MBIA's business has suffered from "its exposure to losses from U.S. mortgage risks and disruption in the financial guaranty business more broadly," Moody's said in a statement.
Moody's said it also expects MBIA to have more losses from mortgage related securities, and that losses may also spread to other forms of debt it insures.
MBIA responded in a statement that it disagrees with the downgrade, but said it will have little direct impact on the firm.
"Our policy-holders and debt holders can rest assured that we will meet our obligations to them on time and in full and that we are doing everything we can to ensure that MBIA weathers the current financial crisis," MBIA Chief Executive Jay Brown said in a statement.
"In addition, as a result of the portfolio rebalancing that we began in the second quarter, we have sufficient liquidity to meet all termination payments due on our Guaranteed Investment Contracts as a result of the downgrade," he said.
Moody's on Wednesday cut its ratings on MBIA's competitor Ambac Financial Group ABK.N, sparking a cash shortfall at its finance unit that required the transfer of assets from the insurance arm to cover collateral needs. (Reporting by Karen Brettell; Editing by Dan Grebler)