MBIA is going through a very hard period.
MBIA Inc. is engaged in providing financial guarantee insurance, investment management services, and municipal and other services to public finance and structured finance clients on a global basis. The Company conducts its financial guarantee business through its wholly owned subsidiary, MBIA Insurance Corporation and provides investment management products and financial services through its wholly owned subsidiary MBIA Asset Management, LLC. MBIA manages its activities primarily through two principal business operations: insurance and investment management services.
Dec 19 MBIA Inc announced that Standard & Poor's Ratings Services has affirmed the Triple-A insurance financial strength ratings for MBIA Insurance Corporation. The Company also announced that Standard & Poor's changed its Outlook for MBIA Inc. and MBIA Insurance Corporation to Negative from Stable.
The company recognized that there was uncertainty in the mortgage and housing markets, but it was confident that it would successfully manage through this challenging period, while growing the business profitably, and return to Stable Outlook.
But the problems didn’t end here. The bond insurer presented details of its exposure to the troubled credit markets that made up about $30.61 billion backed by mortgages and collateralized debt obligations, including a pool of about $8.14 billion in CDOs backed by a combination of other CDOs and mortgages.
As a result MBIA shares fell 27% to $19.41.
Standard & Poor's equity analyst Catherine Seifert wrote in a note on the S&P MarketScope Web site: "We share the market's dismay that this revelation changes the risk profile of MBI as compared with its financial guaranty peers." Seifert cut her 12-month target price to $19 from $35.
Perhaps the reason is worsening expectations for the performance of insured nonprime residential mortgage-backed securities and CDOs of asset-backed securities. S&P said its "stress test" analysis showed the affected companies may experience "claims and/or capital-consumptive negative rating transitions such that their capital resources may no longer be sufficient at their respective rating levels."