The Armonk, NY-based company took a $3.6 billion writedown on insured credit derivatives, including $800 million in credit impairments. But MBIA said the figure "does not accurately indicate actual or expected losses", adding that "fair value accounting, however, results in some inappropriate comparisons of MBIA's position to those of other financial institutions who must transact or collateralise at current market values or who could be subject to accelerated payments". Losses were unlikely to exceed the total $1 billion of credit impairments the company has announced, it said, while mark-to-market values were distorted by "the extreme illiquidity of today's market".
While the insurer has hung on to its AAA credit ratings, it said it was still $1.3 billion short of the target capital ratio set by Moody's, and predicted it would meet the target by September through "writing new business...monitoring and measuring portfolio runoff and terminations [and] pursuing additional reinsurance". It did not mention further capital raising.
The week on Risk.net, July 7-13, 2018Receive this by email