Moody's lowers MBIA

Moody's Investors Service said it downgraded the surplus note rating of MBIA Insurance Corp. to Baa1 from Aa2 and the senior debt rating of MBIA, Inc. to Baa2 from Aa3.

The outlook is negative.

The action concludes a review for downgrade that began on June 4 and reflects MBIA's limited financial flexibility and impaired franchise, as well as the substantial risk within its portfolio of insured exposures and a movement toward more aggressive capital management within the group, according to the agency.

The agency said that while the group remains strongly capitalized, estimated to be consistent with a Aa level rating, and benefits from substantial embedded earnings in its existing insurance portfolio, these other business factors led to the lower rating outcome.

MBIA's insured portfolio remains vulnerable to further economic deterioration, particularly given the leverage contained in its sizable portfolio of resecuritization transactions, including some commercial real estate collateralized debt obligations, Moody's said.

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