Bond insurer MBIA said Moody's move to downgrade the company's financial strength rating Friday had little impact on the company and it can meet all its financial obligations to its clients.

"We disagree with Moody's approach to capital modeling for mortgage-related losses, particularly its 'stress on stress' methodology, Jay Brown, chief executive officer for the Armonk, N.Y-based company. "Nonetheless, the downgrade has very little direct impact on MBIA."

"Our policyholders and debt holders can rest assured that we will meet our obligations to them on time and in full and that we are doing everything we can to ensure that MBIA weathers the current financial crisis," he continued. "In addition, as a result of the portfolio rebalancing that we began in the second quarter, we have sufficient liquidity to meet all termination payments due on our Guaranteed Investment Contracts as a result of the downgrade.

"MBIA will continue to be a leader in our industry, and I fully expect that the market will value our product more than ever and appreciate the strength of the promise that stands behind it," Mr. Brown concluded.

Moody's Investors Service downgraded MBIA's insurance financial strength to "Baa1" from "A2" on the corporation and its subsidiaries.

Moody's also downgraded the debt ratings of MBIA senior unsecured debt to "Ba1" from "Baa2" and related financing trusts.

Moody's said the move was taken in view of MBIA's "diminished business and financial profile resulting from its exposure to losses from U.S. mortgage risks and disruption in the financial guaranty business. The outlook for the ratings is developing.

Moody's said there were four factors to making in its decision:

o First--Moody' expects greater losses on mortgage-related exposure, reflecting continued adverse delinquency trends.

o Second--there is a possibility of greater sector losses in extreme stress scenarios. These losses could possibly reach sectors beyond mortgage-related exposures as corporate and other consumer credits face a more challenging economic environment.

o Third--MBIA has diminished business prospects as reflected in its substantially reduced participation in the primary financial guaranty market in 2008.

o Fourth--the company has limited financial flexibility.

In its third-quarter results, MBIA reported it increased loss reserves by $961 million for mortgage-backed securities exposures and increased its credit-related impairments on credit default swaps by $66 million.

Moody's said it expects MBIA to have "a substantial capital cushion above expected loss levels." It has access to sufficient sources of liquidity to meet the needs of its asset management business, including the liquidity needs stemming from investment agreement terminations or collateral posting requirements.

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MBIA Says Moody's Downgrade Unwarranted

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