MBIA is fighting back.

Under attack from critics who describe it as effectively insolvent, MBIA, a big and troubled bond insurer in the United States, presented a spirited defense in a four-hour conference call Thursday with investors and analysts. Company executives did not allow the participants to ask questions directly, accepting only questions submitted in advance.

The unusual approach seemed to work. Shares of the company and the stock market as a whole moved higher after the executives started making their case just after 11 a.m. New York time.

The Standard Poors 500-stock index ended the day up 1.68 percent. MBIA climbed 11 percent, to $15.50.

The company rejected most of the arguments made by investors like William Ackman, a hedge fund manager who has bet against MBIAs stock. Ackman released detailed data on the companys insurance contracts Wednesday and warned it might face crippling losses linked to bad mortgage investments.

During the call, MBIA executives acknowledged that the company and its competitors had made mistakes in evaluating mortgage securities they guaranteed against losses for banks and other investors. MBIA also announced a $2.3 billion loss for the fourth quarter, its biggest ever, as it wrote down the value of some guarantees by $3.5 billion.

The executives said they were nonetheless confident that MBIA would keep its triple-A credit rating and weather the current turmoil. The company, which closed a $500 million investment from a private equity firm Wednesday, also said it was considering raising more capital.

“Our house was built on a solid foundation on a sound strategy,” said Gary Dunton, MBIAs chairman, who sprinkled his remarks with witticisms and occasional gibes at his critics.

Addressing the 80 percent drop in the companys stock price over the last 12 months, Dunton said, “Our only conclusion is that the market has overreacted to the real and obvious problems in our business.”

The debate over MBIAs future is far from over. Standard Poors said Thursday that it might downgrade the companys debt rating if MBIA were not able to raise new capital quickly.

The ratings agency downgraded a smaller bond guarantor, Financial Guaranty Insurance, to double-A from triple-A.

The New York State insurance superintendent, Eric Dinallo, is trying to persuade some of the biggest banks in the United States to invest in or lend money to MBIA.

New Yorks governor, Eliot Spitzer, said the state was making progress in the effort, Reuters reported.

A big issue facing MBIA is the fate of a Bermuda-based company, Channel Reinsurance, in which it owns a 17 percent stake. MBIA is counting on Channel Re to cover losses on $43 billion of securities. MBIA has written down its stake in Channel to zero to account for the declining value of its insurance contracts, and Moodys Investors Service is considering downgrading the reinsurers triple-A rating.

If Channel Re is unable to raise more capital and loses its top rating, MBIA might be forced to take back some or all of the insurance liability it has insured with the firm, said Donald Light, a senior analyst at Celent, a financial services research and consulting firm in Boston.

“The question is who has $100 million to $3 billion to put in those kinds of places,” Light said of Channel and other reinsurers.

February 26, 2008 — US stocks staged their biggest rally this month after Standard & Poor’s kept AAA debt ratings for the nation’s largest bond insurers, easing concern credit losses will extend the worst earnings slump since 2001.

MBIA Inc. and Ambac Financial Group Inc., which rely on their top credit scores to guarantee $1.2 trillion in bonds, led gains in the S&P 500 Index and helped banks and insurers rebound from earlier losses.

The S&P 500 rose 18.69 points to 1,371.80. The Dow Jones industrial average added 189.20 to 12,570.22. The Nasdaq composite was up 24.13 to 2,327.48.

MBIA climbed $2.40 to $14.58. Ambac rose $1.70 to $12.41.

MBIA is no longer under review for a downgrade by Standard & Poor’s, indicating the bond insurer is a step further away from losing its AAA insurance credit rating.

Ambac, which ranks second to MBIA among bond insurers, is still under review, S&P said.

MOSCOW: The Moscow police said Thursday that they were investigating whether a Cyprus-registered firm that they say has links to Hermitage Capital, one of the largest foreign-owned investment funds in Russia, had underpaid millions of dollars in taxes.

The announcement of the new tax investigation immediately raised concerns about the investment climate in Russia, just days after President Vladimir Putin blessed the signing of billions of dollars in deals at an economic forum in St. Petersburg. Some analysts warned that the authorities might be seeking to revoke a double-taxation treaty with Cyprus that benefits many companies working in Russia.

But others suggested that the investigation could be another step against William Browder, the Hermitage chief executive, who is a well-known campaigner for shareholder rights in Russia. He has been barred from the country since November 2005 for purportedly posing a threat to national security.

The tax department of the Moscow police is investigating whether Kameya, a company registered in Cyprus, failed to pay 1.145 billion rubles, or $44 million, in taxes, a police spokesman, Vladimir Korobkov, said. The investigation centers on whether Kameya illegally applied a tax scheme stipulated in a treaty to avoid double-taxation between Cyprus and Russia.

An official at Hermitage, who spoke on condition of anonymity because of the investigation, said that the fund had acted only as an adviser to Kameya on investing in Russia and that it was “completely independent” of the company.

But the police insisted that Hermitage owned the firm. “They especially opened a Cyprus firm to avoid paying taxes,” Korobkov said. The investigation was focusing on a May 2006 dividend payment, he added.

Under the double-taxation treaty with Cyprus, investors based in the country who put more than $100,000 into Russia can pay a reduced withholding tax rate of 5 percent on dividends, rather than the usual 15 percent.

Cyprus remains one of the top foreign investors in Russia, thanks to the many companies doing business in Russia that benefit from tax breaks by registering on the island.

“Its completely within the law that were the ones leading this,” Korobkov said. “There is absolutely nothing political here.”

He declined to comment on the Cyprus-Russia tax treaty and whether other firms would be investigated.

The Hermitage official said that the fund had been informed of the inquiry last week, when Interior Ministry officials visited its Moscow offices with a copy of the investigation summons.

The Hermitage official denied any wrongdoing by the fund or Kameya.

“The basis for this investigation contradicts Russian law and makes no sense,” he said.

The official also denied speculation by Kommersant newspaper Thursday that said the investigation could have been prompted by the funds use of so-called “gray schemes” to snatch up Gazprom shares.

Until January 2006, only Russian investors could buy shares in Gazprom, prompting many firms and funds to register in Cyprus to benefit from tax breaks while also opening Russian subsidiaries to buy stock in the company.

“Weve seen the documents and all they point to is the May 2006 dividend payment that was approved by the tax authorities,” the Hermitage official said. “There are no indications it has anything to do with Gazprom.”

Browders banning from Russia in November 2005, after nearly a decade of activity in the country, sent shock waves through the investor community. Many observers at the time suspected he was singled out over his attempts to fight for minority shareholder rights within companies like Gazprom and Surgutneftegaz.

“He was the pioneering investor into Russia,” said Roland Nash, head of research at Renaissance Capital. “He invested a lot of money at a difficult time when the rules werent particularly clear.”

Browder last applied for a Russian visa in February and has yet to receive a reply, the Hermitage official said.

Hermitage has been steadily reducing its presence in Russia. In March it opened a new fund to focus on emerging markets in Latin America, Asia and the Middle East. The fund currently manages $3.2 billion, representing about 6,000 investors. It does not say what percentage of its holdings is devoted to Russia.

“Its quite obvious in this situation that hes being singled out,” said Hawk Sunshine, head of equities at Metropol.

But he also warned of the wider effects of any investigation that centered on the Cyprus-Russia tax treaty.

The investigation “could set a precedent that calls the treaty into question,” Sunshine said. “The dual tax treaty is a cornerstone of tax planning in Russia.” If it were to fall apart, “there would be disastrous collateral damage, similar to the Yukos tax case,” he said.