Jan. 23 (Bloomberg) -- Investor William Ackman ended his bet against MBIA Inc. after profiting from bankruptcy fears that sent the bond insurer’s stock and bonds lower over the past two years.

MBIA jumped 17 percent in New York Stock Exchange composite trading, the biggest increase in more than a month.

Pershing Square Capital Management, Ackman’s hedge fund, closed all its short positions on Armonk, New York-based MBIA’s shares and sold credit-default swap contracts that profited from concerns the company was nearing bankruptcy, Ackman said today in an interview.

Betting against MBIA and New York-based Ambac Financial Group Inc. helped Ackman’s fund, Pershing Square Capital Management, return 22 percent to investors in 2007. The gains followed five years in which Ackman told regulators, rating companies and investors that MBIA didn’t deserve an AAA credit ranking.

“It’s probably reading too much into it to say he’s no longer bearish,” said Matt Fabian, an analyst with Municipal Market Advisors in Westport, Connecticut. The stock’s volatility makes it expensive to short, he said.

Ackman first thought MBIA’s stock and bonds would fall in 2002 when he oversaw Gotham Partners, a New York-based investment firm. He wrote a 62-page report casting doubt on the AAA ratings at MBIA’s insurance unit, and last year seven bond insurers lost top rankings as losses on securities backed by subprime mortgages soared.

Pershing Square, based in New York, also closed credit- default swap contracts on another bond insurer, Financial Security Assurance Inc., Ackman said.

Further gains on MBIA in 2008 helped Ackman mitigate losses during a year in which the Standard & Poor’s 500 index dropped 38 percent, leaving his largest fund with a 12 percent loss.

MBIA rose 53 cents to $3.56 at 4:15 in New York trading. The stock is down 13 percent this year after a 78 percent drop in 2008.

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

Last Updated: January 23, 2009 20:07 EST