Feb. 14 (Bloomberg) -- MBIA Inc., the world's biggest bond insurer, said it is equipped to survive the slump in prices of mortgage securities and dismissed suggestions that the industry needs a rescue or stronger federal oversight.

``A bailout of highly credit-worthy companies who, at most, are at risk of losing the very highest ratings available, is misplaced,'' MBIA Chief Financial Officer Charles Chaplin said in prepared remarks to be delivered today at a hearing of the House Financial Services subcommittee on capital markets in Washington.

Chaplin and Ambac Financial Group Inc. Chief Executive Officer Michael Callen will make their presentations on Capitol Hill as they try to fend off credit rating downgrades and critics who say the companies may be headed for bankruptcy. One of the most vocal skeptics, hedge fund manager William Ackman, will also deliver remarks today alongside the MBIA and Ambac executives.

MBIA, based in Armonk, New York, and Ambac are among five companies struggling to maintain their top bond insurance credit ratings after a slump in the value of mortgage-linked securities the companies guaranteed. Standard & Poor's, Moody's Investors Service and Fitch Ratings are reviewing MBIA's top rating for a possible downgrade. Fitch already cut its AAA ratings on New York-based Ambac's insurance unit to AA. Ambac is also being scrutinized by Moody's and S&P.

``MBIA is more than adequately capitalized to meet obligations to policyholders,'' Chaplin, 51, said in his testimony.

Rescue Plans

Ambac said in a statement last night that Callen will tell the committee the company's main challenge is to achieve ``ratings stability.''

MBIA rose 61 cents to $12.25 at 9:38 a.m. in New York Stock Exchange composite trading. Ambac climbed 19 cents to $9.56.

MBIA and Ambac tumbled more than 80 percent in the past year in New York trading as they posted record losses of more than $5 billion and concern grew the companies may not get enough capital to sustain their ratings, casting doubt on $2.4 trillion of municipal and structured finance debt.

New York Insurance Department Superintendent Eric Dinallo last month organized banks to begin plans for a rescue of the insurers and said he may consider strengthening his oversight. Dinallo will also appear before the committee today, as will New York Governor Eliot Spitzer, U.S. Securities and Exchange Commission director Erik Sirri and Keith M. Buckley, a group managing director at Fitch.

Buffett's Offer

Dinallo will tell lawmakers he will consider splitting the bond insurers into two businesses, according to prepared testimony. ``One would have the municipal bond policies and any other healthy parts of the business,'' Dinallo said. ``The other would have the structured finance and problem parts of the business.''

Billionaire investor Warren Buffett yesterday offered to take over $800 billion of the municipal debt guaranteed by MBIA, Ambac and FGIC Corp., the fourth-largest bond insurer. Ambac yesterday said it rejected the offer. Two other insurers haven't responded, Buffett told CNBC television this week.

Spitzer told CNBC today that while Buffett's proposal would benefit municipalities, it wouldn't help the ``bad bank'' piece of the bond insurers' business. ``We don't want to create that schism yet if it can be avoided,'' Spitzer said.

`Rigorous Oversight'

MBIA said an industrywide bailout may perpetuate existing problems.

``Similarly, MBIA does not believe there is a need for federal oversight of the industry,'' Chaplin said. MBIA ``is confident that the rigorous oversight it has always been subject to from state regulators and the rating agencies will continue to be more than adequate going forward.''

Chaplin asked Congress to rein in the practices of Ackman and other so-called short sellers that are seeking to profit from the company's demise. Callen will talk about the ``undue fear'' created by inflated estimates of losses at the companies, the statement said.

Ackman has persisted in challenging MBIA's AAA credit rating for more than five years, saying MBIA hasn't been forthcoming about backing risky financial instruments such as those based on loans to the least creditworthy homebuyers. Ackman's Pershing Square Capital Management has been making bets that the stocks and bonds of MBIA and Ambac would fall, a strategy that helped Pershing Square to return 22 percent net to investors last year.

Risky Business

Short sellers sell borrowed stock with the purpose of profiting by repurchasing the securities later at a lower price and returning them to the holder.

Ackman last week wrote to U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke, urging them to put an end to a bank-led bailout because it would ``prolong the term and severity of the recent credit contraction.''

Ambac, which was the first to insure a bond in 1971, and MBIA, which started as the Municipal Bond Insurance Association in 1974, are reeling from an expansion into guaranteeing collateralized debt obligations. CDOs repackage assets such as mortgage bonds and buyout loans into new securities with varying risk. As the value of some CDOs plummet, ratings companies are pressing the insurers to add more capital.

MBIA last month reported a fourth-quarter net loss of $2.3 billion, or $18.61 a share, its biggest ever. The results led to a full-year net loss, snapping a streak of annual profitability dating back to at least 1991 that had been buoyed by the regular premiums from insuring municipal debt.

To contact the reporter on this story: Christine Richard in New York at crichard5@bloomberg.net

Last Updated: February 14, 2008 09:45 EST