NEW YORK (Reuters) - Moody's Investors Service on Thursday cut its top ratings on bond insurer CIFG Guaranty in what could be a crippling blow to its business, citing "significant" exposure to risky residential mortgage-backed securities.

Moody's cut CIFG's insurance financial strength rating four notches from "AAA" to "A1," the fifth-highest investment-grade rating. The outlook is stable, indicating an additional downgrade is not anticipated over the next 12 to 18 months.

As of March 31, 2007, the last period for which information is available on the company's Web site, CIFG's holding company had guaranteed about $78.7 billion of debt.

"CIFG's significant exposure to mortgage-related risk has material adverse consequences for its business and financial profile beyond the associated impact on capitalization, and affects our opinion about CIFG's other key rating factors," Moody's said in a statement.

CIFG's exposure to Collateralized Debt Obligations (CDOs) backed by risky mortgage-backed assets indicates a risk appetite inconsistent with the top rating, Moody's said.

In addition, CIFG "has not yet established a market position on par with its larger competitors and that the ongoing credit stress at the firm significantly weakened its franchise, raising questions about the degree to which it will be able to regain market traction within a reasonable timeframe," Moody's said.

A CIFG spokesman said the insurer is disappointed that Moody's had cut its credit rating, but is working with Moody's to address the agency's concerns and best service its clients.

"CIFG and its shareholders are exploring all of their options," he said.

Standard & Poor's and Fitch Ratings both rate CIFG the top "AAA" though Fitch has the insurer under review for downgrade.