Don't worry too much. MBIA will have to capitalize the new insurance unit. You just can't go out and start writing insurance without the capital need to make good in the event of default. If there is no capital the rating agencies will note it with an appropriate rating (not AAA).
It is capitalized with 2.9 + 2.1 billion.....Jay Brown was on CNBC at noon. Dinallo was on at 8:30 to say that his office had approved the split (MBIA and National) and that the 2.9 billion was from a premium reserve account.
the only remaining issue is the rating....it was capitalized in order to achieve AAA.
And now the news is that ABK is also in final stages of capitalizing Evergreen for same purpose.
AGO did well in the afternoon even with the news of competition.
On Wednesday, Standard & Poor's credit ratings division cut the financial strength rating of the MBIA entity that will become National Public Finance to "AA-" from "AA." The new rating is three notches below a perfect "AAA" rating. MBIA is creating National Public Finance by transforming a previously held unit called MBIA Insurance Corp. of Illinois.
S&P said the downgrade reflects uncertain business prospects and its capital level, which falls just below a "AA" standard. The rating was placed on credit watch with a developing view, meaning the rating could be upgraded or downgraded within the next three months.
Kevin Brown, a spokesman for MBIA , said the insurer will work with Standard & Poor's and Moody's Investors Service to attain the highest ratings it possibly can for its operations. MBIA will work with the ratings agencies to determine what type of criteria and capital requirements it needs to meet to get top-notch ratings and will work toward achieving that, he added.
In a letter to shareholders, MBIA Chairman and Chief Executive Jay Brown said it plans to raise enough funds for the new company to exceed historical capital requirements needed for "AAA" ratings.
"This may not be the case immediately but we plan to raise sufficient new third-party capital on terms that are beneficial to our existing shareholders," he wrote in the letter. He added that MBIA does not plan to dilute existing shareholders.
He said the insurer has discussed the possibility of accessing funds through Treasury Department programs in an effort to bolster its capital position.