NEW YORK (Reuters) - MBIA Inc has launched a separate bond insurance company focused on public finance and has told investors it will no longer use credit derivatives to back insurance across its businesses.
MBIA said in a statement on Wednesday that it had transferred all of its public finance business to this new company, named National Public Finance Guarantee Corp. The new company has yet to be rated by credit rating agencies.
In a letter to MBIA's owners, Chief Executive Jay Brown wrote that this was not "a good bank/bad bank split." He also wrote that MBIA was in a position to pay all expected claims in the future, "even under severe global economic conditions like we are currently experiencing."
Brown said MBIA was no longer using credit derivatives because the price fluctuations of these instruments made the company's financial statements too volatile.
MBIA has been hard hit by the credit crunch, which began more than a year ago. It lost its "triple-A" credit rating after posting billions of dollars of losses from exposure to mortgages and complex debt instruments.
(Reporting by Elinor Comlay; Editing by Lisa Von Ahn)