Ahead of the Bell: MBIA 'baffled' after downgrades

NEW YORK (AP) _ Bond insurer MBIA Inc. said late Thursday it was "baffled" by Moody's Investors Service decision to cut several of its ratings on the company.

Moody's slashed MBIA's insurance financial strength rating for MBIA Insurance Corp. to "A2" from "Aaa," its surplus note rating for MBIA Insurance to "Baa1" from "Aa2," and the senior debt for MBIA to "Baa2" from "Aa3."

MBIA said Moody's assertion that it is strongly capitalized and benefits from substantial embedded earnings in its insurance portfolio "would seem to support sustaining a 'Aa' rating while satisfying Aaa minimum capital requirements."

The "Aaa" rating its Moody's highest.

"With $16 billion in claims-paying resources ... we have more than enough capital to meet obligations to policyholders," Armonk, N.Y.-based MBIA said in a release. "This is an issue of ratings and not solvency."

Deutsche Bank analyst Darin C. Arita said MBIA's $1.4 billion of liquid assets could be used to capitalize a new subsidiary to write new business.

He kept a "Hold" rating and $6 price target, implying he expects the stock to slip 7 percent below Thursday's $6.45 close.

MBIA shares have fallen 65 percent so far this year.