Bond-Insurer Rally

MBIA Inc. and Ambac Financial Group Inc., the two largest bond insurers, rally after Moody’s Investors Service said the companies are “better positioned” than rivals FGIC Corp. and Bermuda-based business insurer XL Capital Ltd. Moody’s cut the credit ratings on FGIC’s bond insurance units six levels to A3 from Aaa. MBIA rallied 98 cents, or 8.4 percent, to $12.62. Ambac rose $1.16, or 12 percent, to $10.53.

FGIC Corp. lost its Aaa bond insurance rating at Moody’s Investors Service, which said the company is in worse financial shape than larger competitors MBIA Inc. and Ambac Financial Group Inc.
The insurance units of New York-based FGIC were cut six levels to A3 and may be reduced again. MBIA and Ambac shares rose after Moody’s said they “are better positioned from a capitalization and business franchise perspective” than FGIC.

FGIC, the fourth-largest bond insurer, is about $4 billion short of the amount of capital needed to justify a Aaa ranking,