The holding company will keep the money as it considers options for "supporting the bond insurance market,'' MBIA said in a statement. The funds aren't needed to pay claims at the insurance unit, MBIA said.
”Our landscape has changed,'' Chief Financial Officer C. Edward Chaplin said in the statement. S&P and Moody's Investors Service “made it clear that, at this point, maintaining Triple-A ratings for MBIA Insurance Corporation would be dependent on other factors besides the amount of capital or claims-paying resources we have,'' he said.
MBIA, Ambac Financial Group Inc. and other bond insurers stumbled after expanding beyond municipal bonds to guaranteeing securities linked to subprime mortgages and home-equity loans that are now defaulting at record rates. MBIA and Ambac, which had been trying to preserve their AAA status, balked when credit- rating companies raised the standards that would have to be met.
"They're walking away from their policyholders and their surplus noteholders,'' William Ackman, managing partner of hedge fund Pershing Square Capital Management LP, told reporters today at a conference in New York. Pershing Square had set up trades designed to profit from a decline in MBIA and Ambac shares, which have plunged more than 90 percent in the past year.
MBIA raised $2.6 billion last quarter as ratings companies said MBIA Insurance Corp. needed more capital to protect the AAA ranking as losses on subprime mortgage securities mounted. Moody's said June 4 it's likely to lower the rating despite the additional capital. S&P cut its rating to AA a day later.