BAILOUT? - New York Insurance Superintendent watching bond insurers, may intervene
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FASB changes US accounting rules for bond insurers
NEW YORK, May 23 (Reuters) - The main U.S. accounting rule maker said on Friday bond insurers will have to recognize claim liabilities when the bonds they have insured have experienced deterioration, in a move that will likely force bond insurers to recognize claims sooner.
The Financial Accounting Standards Board said the new rules are effective for periods starting after December 15, 2008, which for major bond insurers is the first quarter of 2009. (Reporting by Dan Wilchins; Editing by Brian Moss)
NEW YORK, May 23 (Reuters) - The main U.S. accounting rule maker said on Friday bond insurers will have to recognize claim liabilities when the bonds they have insured have experienced deterioration, in a move that will likely force bond insurers to recognize claims sooner.
The Financial Accounting Standards Board said the new rules are effective for periods starting after December 15, 2008, which for major bond insurers is the first quarter of 2009. (Reporting by Dan Wilchins; Editing by Brian Moss)
Moody's may downgrade Ambac, MBIA ratings
Wednesday June 4, 12:54 pm ET
Moody's places Ambac, MBIA ratings on review for possible downgrade
NEW YORK (AP) -- Moody's Investors Service says it may downgrade the ratings on bond insurers MBIA and Ambac.
Moody's says it is reviewing the AAA insurance financial strength ratings on Ambac Assurance Corp. and MBIA Insurance Corp.
Moody's says the "most likely" outcome of the review will be a downgrade.
Shares of both Ambac and MBIA are falling sharply in afternoon trading on the news.
Wednesday June 4, 12:54 pm ET
Moody's places Ambac, MBIA ratings on review for possible downgrade
NEW YORK (AP) -- Moody's Investors Service says it may downgrade the ratings on bond insurers MBIA and Ambac.
Moody's says it is reviewing the AAA insurance financial strength ratings on Ambac Assurance Corp. and MBIA Insurance Corp.
Moody's says the "most likely" outcome of the review will be a downgrade.
Shares of both Ambac and MBIA are falling sharply in afternoon trading on the news.
ABK AMBAC Fincl and MBIA ratings lowered at S&P (2.30 -0.21) -Update-
S&P lowered its financial strength ratings on Ambac Assurance and MBIA Insurance(MBI) to 'AA' from 'AAA' and placed the ratings on CreditWatch with negative implications. The ratings on the holding companies, Ambac Financial Group and MBIA have also been lowered to 'A' and 'A-' from 'AA' and 'AA-', respectively, and placed on CreditWatch with negative implications. The rating actions on the cos reflect belief that these entities will face diminished public finance and structured finance new business flow and declining financial flexibility. In addition, S&P believes continuing deterioration in key areas of the U.S. residential mortgage sector and related CDO structures will place increasing pressure on capital adequacy. The 'AA' financial strength ratings of these companies are supported by currently sound claims paying ability and liquidity levels in our opinion. Resolution of the negative CreditWatch will be dependent on clarification of ultimate potential losses as well as future business prospects, the outcome of strategic business decisions, and potential regulatory developments.
S&P lowered its financial strength ratings on Ambac Assurance and MBIA Insurance(MBI) to 'AA' from 'AAA' and placed the ratings on CreditWatch with negative implications. The ratings on the holding companies, Ambac Financial Group and MBIA have also been lowered to 'A' and 'A-' from 'AA' and 'AA-', respectively, and placed on CreditWatch with negative implications. The rating actions on the cos reflect belief that these entities will face diminished public finance and structured finance new business flow and declining financial flexibility. In addition, S&P believes continuing deterioration in key areas of the U.S. residential mortgage sector and related CDO structures will place increasing pressure on capital adequacy. The 'AA' financial strength ratings of these companies are supported by currently sound claims paying ability and liquidity levels in our opinion. Resolution of the negative CreditWatch will be dependent on clarification of ultimate potential losses as well as future business prospects, the outcome of strategic business decisions, and potential regulatory developments.
Citigroup, Merrill, UBS Face Further Writedowns, Whitney Says
By Jeff Kearns
June 9 (Bloomberg) -- Citigroup Inc., Merrill Lynch & Co. and UBS AG may post further writedowns of $10 billion on their debt holdings after the two biggest bond insurers were stripped of their AAA rankings, according to Oppenheimer & Co. analyst Meredith Whitney.
MBIA Inc. and Ambac Financial Group Inc., the world's largest bond insurers, had their AAA financial strength rankings reduced by Standard & Poor's June 5, taking with them the ratings on more than $1 trillion of securities they guaranteed.
Whitney, who correctly predicted in October that Citigroup Inc. would cut its dividend, boosted her estimate for losses tied to the so-called monoline insurers from a January forecast of $40 billion.
``Without the top credit ratings, monolines will have a more difficult time generating new business. The limited earnings potential of monolines poses a risk to the value of the insurance and hedges on the subprime related securities provided to the banks and brokers,'' the New York-based analyst wrote.
Whitney rates both Citigroup, the biggest U.S. bank, and Merrill, the world's biggest brokerage, at `` underperform.'' She doesn't cover UBS, the European bank hardest hit by the U.S. subprime contagion.
To contact the reporter on this story: Jeff Kearns in New York at jkearns3@bloomberg.net.
Last Updated: June 9, 2008 08:44 EDT
By Jeff Kearns
June 9 (Bloomberg) -- Citigroup Inc., Merrill Lynch & Co. and UBS AG may post further writedowns of $10 billion on their debt holdings after the two biggest bond insurers were stripped of their AAA rankings, according to Oppenheimer & Co. analyst Meredith Whitney.
MBIA Inc. and Ambac Financial Group Inc., the world's largest bond insurers, had their AAA financial strength rankings reduced by Standard & Poor's June 5, taking with them the ratings on more than $1 trillion of securities they guaranteed.
Whitney, who correctly predicted in October that Citigroup Inc. would cut its dividend, boosted her estimate for losses tied to the so-called monoline insurers from a January forecast of $40 billion.
``Without the top credit ratings, monolines will have a more difficult time generating new business. The limited earnings potential of monolines poses a risk to the value of the insurance and hedges on the subprime related securities provided to the banks and brokers,'' the New York-based analyst wrote.
Whitney rates both Citigroup, the biggest U.S. bank, and Merrill, the world's biggest brokerage, at `` underperform.'' She doesn't cover UBS, the European bank hardest hit by the U.S. subprime contagion.
To contact the reporter on this story: Jeff Kearns in New York at jkearns3@bloomberg.net.
Last Updated: June 9, 2008 08:44 EDT
MBIA shares gain following letter from CEO
Thursday June 12, 4:45 pm ET
MBIA shares rise after chief executive's letter pledges efforts to increase shareholder value
NEW YORK (AP) -- Shares of MBIA Inc. rallied Thursday after the beleaguered bond insurer's chairman and chief executive sent a letter to shareholders that in part said the company will make an effort to increase shareholder value.
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In the letter released late Thursday, Chairman and CEO Jay Brown discussed the company's downgrade from Standard & Poor's credit ratings agency, which last week cut MBIA and fellow bond insurer Ambac Financial Group to "AA" from "AAA." S&P's move came a day after Moody's said it was considering a similar downgrade, and Fitch Ratings had already cut the two. At issue is the companies' exposure to various residential mortgage-backed securities that are going or have gone sour because of the housing crisis.
The ratings cuts generated fears that without the "AAA" ratings from at least two agencies, the bond insurers will be unable to write new business, and continue to operate only by collecting payments and making claims on existing policies, a status known as "run-off," and the already battered stocks fell even further.
Brown said that because of the downgrades, MBIA may not use $900 million in proceeds from the sale of stock to shore up its capital reserves, as originally intended. The letter said the company will instead use the money to "pursue opportunities to support the bond insurance market as a whole."
Among the possibilities he suggested was setting up one of its subsidiaries as a Triple-A subsidiary for a new public finance business, meaning it would back debt like municipal bonds but not riskier vehicles backed by things like mortgages.
That's "probably a bit of wishful thinking," said JPMorgan analyst Andrew Wessel. "I think it's impossible to get regulatory and rating agency approval for that new venture, probably in the next 12 months," he said in a telephone interview, explaining that regulators would want to make sure MBIA has enough cash to cover its existing policies first. While the New York State Insurance Department can't force MBIA to use the capital it raised as originally intended, Wessel said, it can stop it from setting up a new business.
Brown's letter also mentioned suggestions he's received to "increase shareholder value by either a special dividend or a share buyback," but Wessel discounted those notions as well. He noted MBIA bought back shares as they were falling -- the stock traded for $68.98 as recently as October -- and those efforts didn't help prevent its plunge. And the investors who supplied the $900 million would likely balk at its use for a dividend, Wessel said.
Michael Grasher, an analyst at Piper Jaffray, noted MBIA may regain its Triple-A status as time passes, because it can't write new business without the ratings, but can still generate money from its existing business that can help shore it up while the effects of the housing crisis shake out.
It will take until at least October or November -- and perhaps into 2009 -- before the damage from the residential-mortgage backed business is assessed, Grasher estimated, and he doesn't expect Moody's or S&P to re-evaluate the company for at least nine months to a year.
In the wake of a broader market rally, MBIA shares gained 46 cents, or 9.5 percent, to close at $5.31 after trading as high as $6.10 during the session. Volume was more than twice normal trading.
Wessel suggested a good portion of the rally likely came from short sellers, or traders who had made bets the stock would continue to fall, who had to cover those bets, which can generate a rally.
Ambac shares, which typically move in conjunction with MBIA's, gained 12 cents, or 6.3 percent, to $2.02. The stock traded as high as $89.07 a year ago.
Thursday June 12, 4:45 pm ET
MBIA shares rise after chief executive's letter pledges efforts to increase shareholder value
NEW YORK (AP) -- Shares of MBIA Inc. rallied Thursday after the beleaguered bond insurer's chairman and chief executive sent a letter to shareholders that in part said the company will make an effort to increase shareholder value.
ADVERTISEMENT
In the letter released late Thursday, Chairman and CEO Jay Brown discussed the company's downgrade from Standard & Poor's credit ratings agency, which last week cut MBIA and fellow bond insurer Ambac Financial Group to "AA" from "AAA." S&P's move came a day after Moody's said it was considering a similar downgrade, and Fitch Ratings had already cut the two. At issue is the companies' exposure to various residential mortgage-backed securities that are going or have gone sour because of the housing crisis.
The ratings cuts generated fears that without the "AAA" ratings from at least two agencies, the bond insurers will be unable to write new business, and continue to operate only by collecting payments and making claims on existing policies, a status known as "run-off," and the already battered stocks fell even further.
Brown said that because of the downgrades, MBIA may not use $900 million in proceeds from the sale of stock to shore up its capital reserves, as originally intended. The letter said the company will instead use the money to "pursue opportunities to support the bond insurance market as a whole."
Among the possibilities he suggested was setting up one of its subsidiaries as a Triple-A subsidiary for a new public finance business, meaning it would back debt like municipal bonds but not riskier vehicles backed by things like mortgages.
That's "probably a bit of wishful thinking," said JPMorgan analyst Andrew Wessel. "I think it's impossible to get regulatory and rating agency approval for that new venture, probably in the next 12 months," he said in a telephone interview, explaining that regulators would want to make sure MBIA has enough cash to cover its existing policies first. While the New York State Insurance Department can't force MBIA to use the capital it raised as originally intended, Wessel said, it can stop it from setting up a new business.
Brown's letter also mentioned suggestions he's received to "increase shareholder value by either a special dividend or a share buyback," but Wessel discounted those notions as well. He noted MBIA bought back shares as they were falling -- the stock traded for $68.98 as recently as October -- and those efforts didn't help prevent its plunge. And the investors who supplied the $900 million would likely balk at its use for a dividend, Wessel said.
Michael Grasher, an analyst at Piper Jaffray, noted MBIA may regain its Triple-A status as time passes, because it can't write new business without the ratings, but can still generate money from its existing business that can help shore it up while the effects of the housing crisis shake out.
It will take until at least October or November -- and perhaps into 2009 -- before the damage from the residential-mortgage backed business is assessed, Grasher estimated, and he doesn't expect Moody's or S&P to re-evaluate the company for at least nine months to a year.
In the wake of a broader market rally, MBIA shares gained 46 cents, or 9.5 percent, to close at $5.31 after trading as high as $6.10 during the session. Volume was more than twice normal trading.
Wessel suggested a good portion of the rally likely came from short sellers, or traders who had made bets the stock would continue to fall, who had to cover those bets, which can generate a rally.
Ambac shares, which typically move in conjunction with MBIA's, gained 12 cents, or 6.3 percent, to $2.02. The stock traded as high as $89.07 a year ago.