Triple-A rated CIFG Guaranty was placed on review for a possible downgrade today by Moody's Investors Service, because of concerns about mounting losses on the collateralized debt obligations the company insures and uncertainty over the future direction of CIFG's business.

"The rating action reflects the weakened capital profile of the group as a result of its mortgage and mortgage-related CDO exposures, as well as uncertainty over CIFG's future strategic direction," Moody's said in a release.

The review is expected to be completed in the next two weeks.

In December, CIFG received $1.5 billion in capital from the two French banks that control the insurer, Caisse Nationale des Caisses d'Epargne and Banque Federale des Banques Populaires.

Last month, Moody's updated their loss estimates for 2006 vintage residential subprime mortgage-backed securities to range from 14% to 18%, which undercut CIFG's capital cushion and brought it below acceptable Aaa levels, Moody's said. Further reviews of other subprime vintages is ongoing.

Moody's is also keeping a keen eye on the response of CIFG's parent banks in evaluating the financial guarantor's insurer financial strength. The rating agency expressed concern about the commitment of CIFG's parent banks to stand behind the financial guarantor in the midst of the current turmoil.

"Here we are saying that based on our analysis they are not adequately capitalized on their triple-A rating level," said Stanislas Rouyer, a Moody's senior vice president. "One of the questions that the parents will have to answer is whether they want to contribute more to the company or not."As the latest bond insurer to arrive on the scene, which it did in 2001, CIFG still presents a question for Moody's in terms of whether it can become one of the leading franchises in the market. Moody's also said in the release that future ratings action will depend on any efforts to amend risk management or governance practices at the insurer.

CIFG spokesperson Michael Ballinger said the bond insurer is exploring all of its options, and continuing to work closely with Moody's.

"There is uncertainty about what their strategy is going to be. When we look at these companies from a credit point of view, this is a concern," Rouyer said. "Until the strategy firms up, it is difficult to have a clear sense as to what it will mean for the rating of the company."

As CIFG and other bond insurers see their triple-A ratings threatened and downgraded, most traders and investors now look through the insurance to the underlying credit in evaluating bonds. Electronic trading platforms have started to notice.

A new function to be announced by BondDesk Group LLC on Monday will allow broker-dealers using the platform to view the underlying rating on insured bonds. A spokesman for rival TheMuniCenter said his platform had added a similar feature earlier this month.

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