Bond and mortgage insurers jump on MBIA deal

Aug.28, 2008 in Market Outlook, U.S Hot Stocks

MBIA rallies on reinsurance deal

Bond, mortgage insurers gain early; investors mull Fannie shakeup

By John Spence, MarketWatch

Last Update: 8/28/2008 1:11:00 PM

BOSTON (MarketWatch) — Shares of mortgage and bond insurers rallied Thursday on
news that MBIA Inc. is in a deal to reinsure billions of dollars in municipal
bonds, showing the embattled bond insurer is able to attract new business despite
the credit crunch.

MBIA (MBI), which has lost its triple-A ratings, will reinsure $184 billion of
municipal bonds issued by Financial Guaranty Insurance Co., netting about $741
million in the deal.

During the credit storm, MBIA and other bond insurers have been hit by their
exposure to collateralized debt obligations linked to mortgages that have plunged
in value. The companies provide insurance against bond defaults, and MBIA and
other financial guarantors have been squeezed by higher claims from CDOs and
other debt instruments.

MBIA shares were up 18%, while Ambac Financial Group Inc. (ABK) rose 16%, MGIC
Investment Corp. (MTG) added 12%, Radian Group Inc. (RDN) rose 10%, and PMI Group
Inc. (PMI) tacked on 7%.

Shares of Ambac and MBIA have doubled in value over the past three months after a
steep plunge on credit-related fears.

Elsewhere in the financial sector, Fannie Mae (FNM) shares were up for the sixth
straight trading session. After Wednesday’s closing bell, the struggling
mortgage-finance company announced a series of high-level management changes, as
the firm tries to shore up its capital and reverse losses.

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