NEW YORK (Bloomberg) ? MBIA Inc., the world?s biggest bond insurer, said first-quarter profit fell 6.5 percent, the fourth consecutive decline. Sales of new policies plunged as municipal debt sales dropped and competition increased.

Net income slid to $199 million, or $1.46 a share, from $212.8 million, or $1.52, a year earlier, the Armonk, New York- based company said in a statement yesterday. Profit excluding investment gains was $1.45, beating the $1.35 estimated by Morgan Stanley analyst Ken Zerbe.

Sales of new MBIA policies dropped 63 percent to $116 million as US municipalities sold fewer bonds and sought protection against defaults less often. Issuers and underwriters may also be ?shying away? from MBIA as state and federal regulators investigate its reinsurance accounting, Zerbe said.

Ambac, MBIA?s largest competitor, posted $233.5 million in new sales in the quarter, a 17 percent increase. MBIA, which restated earnings twice last year to correct reinsurance contracts, said it hadn?t lowered prices to unreasonable levels amid the increased competition.

?Market conditions, coupled with our commitment to disciplined pricing and underwriting, resulted in decreased new business production,? Gary Dunton, MBIA?s chief executive officer, said in the statement.

?We expect markets to remain challenging.?

State and local governments in the US sold $69.4 billion in debt in the first quarter, 29 percent less than a year earlier, according to Thomson Financial. The proportion that was insured fell to 49 percent from 62 percent, according to Zerbe.

Low interest rates pushed bond investors to seek poorer- quality, higher-yielding assets, reducing municipal borrowing costs and leaving less incentive to insure against defaults.