MBIA

MBIA Inc.

Company type	Public
Industry	Financial services
Predecessor	Municipal Bond Insurance Association
Founded	1973 (1973)
Founder	Aetna, Fireman's Fund, Travelers, Cigna, Continental (collaboration)
Headquarters	Purchase, New York , United States
Area served	United States
Products	Bond insurance, financial guarantees, fixed-income portfolio management
Number of employees	180 (2015)
Website	www.mbia.com

MBIA Inc. is a U.S.-based financial services firm established in 1973 originally as the Municipal Bond Insurance Association. With its headquarters located in Purchase, New York, MBIA stands as the foremost bond insurer and employed around 180 individuals as of 2015.

Company operations

As a monoline insurer, MBIA focuses primarily on municipal bonds, asset-backed securities, and mortgage-backed securities. The company provides financial guarantees functioning as credit enhancements. Additionally, MBIA manages fixed-income portfolios, administering roughly US$40 billion in assets under its supervision.

Corporate history

MBIA was created in 1973 through a collaboration of insurers (Aetna, Fireman's Fund, Travelers, Cigna, and Continental) aiming to diversify municipal bond investments. The company went public in 1987.

In 2002, hedge fund manager Bill Ackman contested MBIA's AAA credit rating by highlighting risks tied to its involvement with credit default swaps (CDS) on mortgage-backed collateralized debt obligations (CDOs). Ackman pointed out MBIA’s use of LaCrosse Financial Products, an "orphaned subsidiary," to conduct CDS trading despite regulatory limitations. He gained from short positions amid the 2008 financial crisis and brought attention to potential vulnerabilities in MBIA’s business strategy with regulators and investors. His efforts were chronicled in Confidence Game (Wiley, 2010), authored by Bloomberg journalist Christine Richard.

In January 2017, Assured Guaranty Ltd and its subsidiary Assured Guaranty Corp. acquired MBIA’s UK operations, signaling a strategic realignment of its international business.

Credit rating developments

• April 4, 2008 – Despite MBIA's request to suspend credit evaluations the previous month, Fitch Ratings downgraded MBIA's Insurance Corp rating from AAA to AA with a negative outlook.
• June 4, 2008 – For the second time that year, Moody's Investors Service placed MBIA’s rating under review for potential downgrade; earlier in February, Moody's had maintained the AAA rating following MBIA’s capital raise of $2.6 billion and suspension of new structured finance insurance.
• June 6, 2008 – Standard and Poor's lowered MBIA's Insurance Financial Strength rating from AAA to AA.
• June 19, 2008 – Moody’s reduced MBIA’s credit rating by five levels to A2.
• November 7, 2008 – Moody’s further decreased MBIA’s IFS rating from A2 to Baa1.
• June 25, 2009 – Moody’s downgraded MBIA into speculative grade territory from Ba3 to Ba1.
• March 5, 2010 – Moody’s assigned a B3 rating to MBIA’s IFS.
• November 19, 2012 – Moody’s dropped MBIA Inc.’s rating from B3 to Caa1.
• May 21, 2013 – Moody’s upgraded MBIA Inc. from Caa1 back to B3.
• May 21, 2014 – Moody’s further raised MBIA Inc.’s rating from Ba3 to Ba1.

These shifts in credit ratings illustrate the considerable difficulties that influenced MBIA’s financial standing and competitive position throughout this timeframe.

Further reading

• Barr, Alistair, "Assured Guaranty and MBIA decline amid rating worries: Standard & Poor’s introduces updated rating standards for bond insurers", MarketWatch, January 25, 2011
• Richard, Christine S., Confidence Game: How a Hedge Fund Manager Exposed Wall Street’s Deceptions, Hoboken, N.J.: Wiley/John Wiley & Sons, Inc., 2010.

External links

• Official company website