MBIA considers split as it brings back former CEO Jay Brown

Source: Exec Digital USA

Date :20/02/2008 04:24:28

The return of former MBIA CEO Jay Brown could offset broader restructuring of the world’s biggest bond insurer, including dividing its operations.

Mr. Brown, who was chief executive until 2004 and executive chairman until May of last year, replaces Gary Dunton who resigned on Sunday.

The move comes as New York insurance regulators have increased pressure on MBIA and two other bond insurers, the Financial Guaranty Insurance Company and the Ambac Financial Group, to draw up plans that would preserve their top credit ratings.

Dividing operations

The former MBIA said on Tuesday MBIA had to re-examine its business model, adding that he would consider splitting MBIA’s business in an effort to appease regulators and retain its crucial triple-A credit ratings. Mr Dunton had expressed scepticism over a split in the past.

“We are not going anywhere. We are going to be here for a long time,” Mr. Brown said. “Our business has been bruised, there is no question about it.”

At present, the company combines its municipal business and its structured finance business, which has suffered losses because of exposure to subprime mortgages. The split would mean dividing these into two parts: one for municipal bonds and another for mortgage-related securities.

Losses related to guarantees on subprime mortgage securities caused a net loss for MBIA of $2.3 billion in the last quarter.

February 20, 2008