SAN FRANCISCO (MarketWatch) -- Moody's Investors Service warned late Friday that AAA ratings of four leading bond insurers could be downgraded after the agency re-evaluated the companies' exposure to potential subprime mortgage losses.
The AAA ratings of Financial Guaranty Insurance Company (FGIC) and XL Capital Assurance, a unit of Security Capital (SCA) , were placed on review for possible downgrade, Moody's said. FGIC is partly owned by private-equity giant Blackstone Group (BX) and CIFG Guaranty were affirmed, but the rating outlooks changed to negative.
The AAA ratings of Ambac (ABK) , and Financial Security Assurance were affirmed with a stable outlook, Moody's added.
Bond insurers agree to pay principal and interest when due in a timely manner in the event of a default. It's a $2.3 trillion business that offers a credit-rating boost to municipalities and other issuers that don't have AAA ratings.
Shares of bond insurers like Ambac and MBIA have slumped in recent months on concern they could suffer losses from guaranteeing complex securities backed by subprime mortgages. Most companies are now trying to boost capital to avoid losing crucial AAA ratings. Without such ratings, their business models may be imperiled.
Moody's grouped the bond insurers into two main groups after completing its update.
The first group -- Ambac, Assured Guaranty and Financial Security Assurance -- have enough capital to keep their AAA ratings, even under a stressed housing market scenario, the agency said.
"The rest of the companies we see as having insufficient capital for their current ratings," Ted Collins, a managing director at Moody's, said in an interview.
All the companies are working on plans to boost capital, but Moody's is more certain about some companies' plans than others, he added.
Insurers put on review for a downgrade - FGIC and Security Capital - have less certain plans for increasing capital. Those put with a negative outlook - MBIA and CIFG - have clearer capital plans.
Ambac's AAA rating was affirmed because the insurer has enough capital. That's even before the company announced this week that it was buying reinsurance from rival Assured Guaranty.
"Our analysis showed that Ambac had sufficient capital today, even without this additional factor," Collins explained. "But in this environment, any capital raising or support is a positive from a credit rating perspective." 
Alistair Barr is a reporter for MarketWatch in San Francisco.
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