MBIA Inc. is an American financial services company. It was founded in 1973 as the Municipal Bond Insurance Association. It is headquartered in
Purchase, New York, and as of January 1, 2015 had approximately 180 employees.
MBIA is the largest
bond insurer.
[
]
Functions of the company
MBIA is a
monoline insurer primarily of
municipal bonds
A municipal bond, commonly known as a muni, is a bond issued by state or local governments, or entities they create such as authorities and special districts. In the United States, interest income received by holders of municipal bonds is often, ...
and on asset-backed securities and
mortgage-backed securities. Financial insurance or Financial Guarantees are a form of
credit enhancement
Credit enhancement is the improvement of the credit profile of a structured financial transaction or the methods used to improve the credit profiles of such products or transactions. It is a key part of the securitization transaction in struct ...
. It also provides a
fixed-income
Fixed income refers to any type of investment under which the borrower or issuer is obliged to make payments of a fixed amount on a fixed schedule. For example, the borrower may have to pay interest at a fixed rate once a year and repay the pr ...
asset management
Asset management is a systematic approach to the governance and realization of value from the things that a group or entity is responsible for, over their whole life cycles. It may apply both to tangible assets (physical objects such as buildings ...
service with about US$40 billion under management.
History
A consortium of insurance companies (
Aetna
Aetna Inc. () is an American managed health care company that sells traditional and consumer directed health care insurance and related services, such as medical, pharmaceutical, dental, behavioral health, long-term care, and disability plans, ...
,
Fireman's Fund,
Travelers
Traveler(s), traveller(s), The Traveler(s), or The Traveller(s) may refer to:
People Generic terms
*One engaged in travel
*Explorer, one who searches for the purpose of discovery of information or resources
*Nomad, a member of a community withou ...
,
Cigna
Cigna is an American multinational managed healthcare and insurance company based in Bloomfield, Connecticut. Its insurance subsidiaries are major providers of medical, dental, disability, life and accident insurance and related products and se ...
, and
Continental
Continental may refer to:
Places
* Continent, the major landmasses of Earth
* Continental, Arizona, a small community in Pima County, Arizona, US
* Continental, Ohio, a small town in Putnam County, US
Arts and entertainment
* ''Continental'' ( ...
) formed the Municipal Bond Insurance Association in 1973 to diversify their holdings in municipal bonds. The company went public in 1987.
In 2002,
Bill Ackman
William Albert Ackman (born May 11, 1966) is an American billionaire investor and hedge fund manager. He is the founder and CEO of Pershing Square Capital Management, a hedge fund management company. His investment approach makes him an activi ...
, a hedge fund manager, began research which concentrated on challenging MBIA's AAA rating, despite an ongoing probe of his trading by
New York State
New York, officially the State of New York, is a state in the Northeastern United States. It is often called New York State to distinguish it from its largest city, New York City. With a total area of , New York is the 27th-largest U.S. sta ...
and federal authorities. He was charged copying fees for copying 725,000 pages of statements regarding the financial services company, in his law firm's compliance with a subpoena. Ackman has called for a division between MBIA's bond insurers' structured finance business and their municipal
bond insurance Bond insurance, also known as "financial guaranty insurance", is a type of insurance whereby an insurance company guarantees scheduled payments of interest and principal on a bond or other security in the event of a payment default by the issuer of ...
side, despite statements from the insurance companies that this would not be a viable option.
He argued that the billions of dollars of
credit default swap (CDS) protection MBIA had sold against various mortgage backed
CDOs was going to be a problem. He also argued that it was not proper for MBIA, which was legally restricted from trading in CDS, to instead do it through a second corporation, LaCrosse Financial Products, which MBIA described as an "orphaned subsidiary". Ackman bought CDS against MBIA corporate debt as a way to bet that it would crash. When MBIA did, in fact, crash as the
financial crisis of 2007–2008
Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of fi ...
climaxed, he sold the swaps for a large profit. Ackman reportedly attempted to warn regulators, rating agencies and investors about the bond insurers' high risk business models. The story of Ackman's battle with MBIA was turned into a book called ''Confidence Game'' (Wiley, 2010) by Bloomberg News reporter Christine Richard. He reported covering his short position on MBIA on January 16, 2009 according to the 13D filed with the
SEC.
In January 2017, MBIA
UK was acquired by Assured Guaranty Ltd together with its subsidiary Assured Guaranty Corp.
Credit rating history
* April 4, 2008.
Fitch Ratings cut MBIA's Insurance Corp rating to AA from AAA with a negative outlook. Fitch issued the new, lower rating even though MBIA had asked the ratings company, the month before, to stop assessing its credit worthiness.
* June 4, 2008.
Moody's Investors Service announced that it would review MBIA's rating for possible downgrade for the second time in the year. Four months before this announcement, on February 2008, Moody's had affirmed the AAA rating after MBIA raised $2.6 bn in capital and announced that would stop insuring structured finance securities for six months.
* June 6, 2008. Despite having affirmed MBIA's AAA rating on February 2008,
Standard and Poor's decided to downgrade MBIA's Insurance Financial Strength (IFS) rating from AAA to AA.
* June 19, 2008. Moody's downgraded MBIA's credit rating 5 notches to A2.
* November 7, 2008. Moody's further downgraded the IFS rating to "Baa1" from "A2".
* June 25, 2009. Moody's downgraded MBIA from "Ba3" to "Ba1" which is a speculative grade.
* March 5, 2010. Moody's referred to MBIA's IFS rating as "B3".
* November 19, 2012. Moody's downgraded MBIA Inc. from "B3" to "Caa1".
* May 21, 2013. Moody's upgraded MBIA Inc. from "Caa1" to "B3".
* May 21, 2014. Moody's upgraded MBIA Inc. from "Ba3" to "Ba1".
References
* Smith, Dick P.
"MBIA Inc. and MBIA Insurance Corp." ''
Standard & Poor's
S&P Global Ratings (previously Standard & Poor's and informally known as S&P) is an American credit rating agency (CRA) and a division of S&P Global that publishes financial research and analysis on stocks, bonds, and commodities. S&P is cons ...
'', Global Credit Portal : Ratings Direct, December 29, 2010
Further reading
* Barr, Alistair
"Assured Guaranty, MBIA drop on rating concern : Standard & Poor’s proposes new ratings criteria for bond insurers" ''MarketWatch'', January 25, 2011
* Richard, Christine S.
''Confidence game : how a hedge fund manager called Wall Street’s bluff'' Hoboken, N.J. : Wiley/John Wiley & Sons, Inc., 2010.
External links
Company website
{{Authority control
Companies listed on the New York Stock Exchange
Insurance companies of the United States
Companies based in New York City
Financial services companies established in 1973
1973 establishments in New York (state)
Financial services companies based in New York (state)
American companies established in 1973