May 6 (Bloomberg) -- MBIA Inc., the world's largest bond insurer, is assuming that housing prices across the U.S. will drop by up to 15 percent, a decline it will reflect in loss projections when it reports results next week.

MBIA, based in Armonk, New York, is projecting that housing prices nationwide will fall by 10 percent to 15 percent and that liquidity will return to the credit markets by the end of 2008, Chief Executive Officer Joseph Brown wrote in a letter to shareholders released today.

``As an investor in MBIA, it is important that you understand this core assumption as it is the basis for our best estimates for both loss reserves and credit derivative impairments,'' Brown wrote.

MBIA, which started as the Municipal Bond Insurance Association in 1974, raised $2.6 billion of capital after debt rating companies increased their projections for its losses on securities backed by home loans.

The company sold a $500 million equity stake to private equity firm Warburg Pincus LLC, raised $1.1 billion through the sale of additional shares and sold $1 billion in surplus notes through its insurance company. MBIA has no plans to sell additional shares, Brown said.

``We have adequate equity capital to get through this crisis and it makes no economic sense to our current owners to raise equity capital at today's price levels,'' Brown wrote.

MBIA has fallen 39 percent this year on the New York Stock Exchange.

Impairments

The company expects to have impairments in its asset management portfolio when it reports earnings May 12, Brown wrote. These impairments won't create liquidity problems for the company, he said.

The bond insurer has been writing more new business following the affirmation of its top credit ratings by Moody's Investors Service and Standard & Poor's, Brown said.

Ambac Financial Group Inc., the second-largest bond insurer, posted a first quarter loss of $1.66 billion last month, including $3.1 billion in charges for subprime-mortgage securities. The company's shares tumbled as much as 31 percent in New York Stock Exchange trading the day of the earnings announcement.

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

Last Updated: May 6, 2008 21:57 EDT