NEW YORK (Bloomberg) — MBIA Inc., the biggest bond insurer, rose 9.5 percent after saying it may use $900 million to start a new insurance company, buy back stock or pay shareholders a special dividend.

MBIA said in February that the money would go to its insurance subsidiary. Because Standard & Poor's stripped the insurer of its top rating on June 9 and Moody's Investors Service said on June 4 it may cut the rating, MBIA is considering using the cash to start a new insurance company, chief executive officer Jay Brown said in a letter to shareholders yesterday.

"We intend to pursue all strategies to maximise shareholder value," Brown said in his letter.

MBIA shares rose 46 cents to $5.31 in New York Stock Exchange composite trading after earlier rising as high as $6.10. The shares have fallen more than 91 percent over the last year.

Ambac Financial Group Inc., the second biggest bond insurer, rose 12 cents, or 6.3 percent, to $2.02, after earlier rising as high as $2.27.

The two insurers have written little new business in the municipal bond market since the rating companies began scrutinising whether they held enough capital to keep their top ratings given projected losses on bonds they'd guaranteed backed by home loans.

The companies said they may set up new insurers after Moody's threatened to strip the pair of the Aaa credit ratings that are key to writing new business in the municipal bond market. Neither company needs the capital at their existing insurance units to pay potential claims, MBIA and Ambac management said.

MBIA said it could use the money that it had raised through the sale of shares in February and had yet to contribute to its insurer. Ambac said it could seek to transfer money from its existing insurer to a newly created company.