The insurer's restatement deals with the company's use of non-traditional finite reinsurance, said Standard & Poor's director David Veno, whose firm maintains a "triple-A" financial strength rating with a "Stable" outlook. Mr. Veno said: "Based on the fact that they are restating earnings, it doesn't appear that [the deal with Converium Re] was a legitimate reinsurance arrangement."

The insurer's deal with Converium Re involved $265 million that MBIA had insured for bonds issued by Allegheny Health Education and Research Foundation, which went bankrupt in 1998.

MBIA's Converium Re transaction--and other suspect non-traditional finite reinsurance arrangements--has been drawing regulators' attention recently. MBIA received subpoenas last November from the Securities and Exchange Commission and New York Attorney General Eliot Spitzer's office regarding these products.

Other companies that received subpoenas on these products include American International Group, Ace Ltd., St. Paul Travelers, Zurich Reinsurance and Berkshire Hathaway's General Re.

Finite reinsurance products have drawn investigators attention after some companies were found to have used them to smooth their earnings picture and distort their true financial strength.

MBIA's announcement may mean there could be more such restatements in the future from companies whose use of finite reinsurance products are now under scrutiny, according to Fitch Ratings. "There is a real possibility that there will be other statements from insurers with past involvement in finite reinsurance," said Fitch's managing director Michael Barry.

Year by year, MBIA is cutting its 1998 income to $386 million from $433 million. The 1999 profit will be cut by $6 million, while the 2000 earnings is down by $4 million. The 2001 profit is cut by $3 million and 2003 income down by $238,000. On the other hand, the restatement will add about $6 million to MBIA's 2003-2004 profit.

MBIA said these changes won't have any material impact. Ratings agency Moody's Investors Service affirmed its "Aaa" insurance financial strength rating and an "Aa2" senior debt rating.