Even though MBIA Inc. asked Fitch Ratings to stop rating the firm, Fitch said today it will continue to do so as long as it has enough public information to make an evaluation.
In a statement released today, the rating service said it will maintain the financial strength and debt ratings of the Armonk, N.Y.-based insurer "for the foreseeable future." Fitch said it expects to be able to maintain the company's rating despite not having "access to certain nonpublic details concerning MBIA's insured portfolio," which it will no longer have access to.
In early February, Fitch placed MBIA on rating watch negative in response to losses and pressures the insurer sustained from the credit market crisis. A month later, MBIA requested Fitch stop rating the company and informed Fitch it would no longer have access to nonpublic information.
MBIA in making its request questioned the reliability of Fitch's rating methodology.
Fitch said it expects its review of MBIA to be completed in the next few weeks and that any changes from its "triple-A" rating would put it no lower than "double-A," "which represents very strong capacity to meet policyholder and contract obligations on a timely basis."
"We are disappointed that MBIA has requested that we withdraw our [insurance financial strength] ratings and that they have decided to stop providing us important nonpublic information about their portfolio," said Stephen W. Joynt, president and chief executive officer of Fitch Ratings.
Mr. Joynt said, "While we respect MBIA's decision not to provide us that information, we trust that they will respect our decision to continue to maintain a rating on MBIA, a company about which many investors are so clearly interested. The approach we are taking with MBIA is consistent with the approach we have taken in other similar situations."
Fitch said it had "discussed this situation with several major investors, some of whom hold MBIA insured securities that are only rated by Fitch, and we have concluded that maintaining the MBIA ratings at this time is most appropriate for investors and causes the least disruption to the marketplace.
"For example, several large money market funds hold tender option bonds rated by Fitch based on MBIA insurance. If we withdraw our rating they may be forced sellers into a market already challenged by liquidity issues. Maintaining a rating–whether ["triple-A"] or even if downgraded to ["double-A"] category–continues the recognition of the high quality of their investment."
Fitch said maintaining the rating for the next few months will be challenging and it may eventually find it "necessary to withdraw those ratings in the future, adding that it "can provide no assurance that the ratings will remain outstanding beyond then."
MBIA responded in a statement from its Chief Financial Officer, C. Edward Chaplin, in which he is quoted as saying, "We have previously stated our position on our relationship with Fitch and we completely respect their right to maintain MBIA's ratings for a period of time.
"While we acknowledge there are rating agencies that rely exclusively on public information to maintain ratings on MBIA, we agree with Fitch that the unique nature of the financial guarantee sector makes maintaining the MBIA ["Insurance Financial Strength"] and debt ratings more challenging without access to nonpublic information."
MBIA added, "Due to market developments, we believe that the nonpublic information currently in Fitch's possession soon will become out of date, and public information alone will be insufficient to maintain the ratings."
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.