ARMONK, N.Y.--(BUSINESS WIRE)--
MBIA Inc. (NYSE: MBI):
Summary
Financial Results:
-- The Company recorded a net loss of $1.5 billion, or $6.97 per
share, for the first nine months of 2008, compared with net
income of $373.8 million, or $2.84 per share, during the same
period in 2007.
-- The Company recorded a net loss of $806.5 million, or $3.48
per share, for the third quarter of 2008, driven primarily by
increases to loss reserves on the Company's second lien
residential mortgage exposures and net realized and unrealized
losses attributable to the Company's Asset Liability
Management (ALM) business. The net loss for the third quarter
of 2007 was $36.6 million or $0.30 per share.
-- Net premiums written were $1.2 billion and $928 million in the
first nine months and third quarter of 2008, respectively,
compared to $654 million and $229 million in the comparable
periods of 2007. MBIA entered into an approximate $159 billion
reinsurance transaction with Financial Guaranty Insurance
Company (FGIC) effective as of September 30, 2008. The net
premium written on the transaction was $812 million. MBIA
received cash and liquid securities totaling approximately
$639 million, which represented the unearned upfront premiums,
net of a ceding commission retained by FGIC, associated with
the reinsured policies.
-- MBIA's insured portfolio stood at $778 billion at September
30, 2008, compared to $673 billion at September 30, 2007.
Excluding the FGIC reinsurance transaction, MBIA's insured
portfolio contracted by $54 billion since September 30, 2007
through maturities, amortization and refundings of insured
exposure.
-- The Company increased its case loss reserves by $961 million
for its insured exposures to certain second lien residential
mortgage securitizations. The additions to reserves reflect an
observed increase in delinquencies and a higher level of
assumed future losses. The elevated expected losses are
attributable primarily to high levels of loans that did not
meet eligibility criteria for inclusion in the MBIA-insured
transactions, improperly serviced loans, as well as the impact
of weakening economic conditions. The Company has commenced
legal action against two seller/servicers, and filed a claim
against a third, to obtain recoveries; however, the Company's
loss estimates do not yet include estimated recoveries related
to these improperly originated and serviced mortgage loans.
Strong Liquidity:
-- The Company maintains strong liquidity in its primary
subsidiary, MBIA Insurance Corporation, and in its holding
company, in both its asset/liability management business and
its holding company activities. As of September 30, MBIA
Insurance Corporation held approximately $2.7 billion in cash
and short-term investments, the ALM business held
approximately $8.1 billion in cash and government securities
and the holding company, excluding the ALM business, held
approximately $1.2 billion in cash and investments. The
Company has subsequently continued to add to its consolidated
cash position. In addition, the Company has substantially
reduced the liquidity risk related to its ALM business and
significantly improved the credit profile of the related asset
portfolio. It has sufficient cash and highly liquid assets to
meet any and all contractual GIC terminations in the event of
a rating downgrade. The Company also has sufficient maturing
assets and contingent sources of liquidity to meet all
maturing liabilities without issuing new liabilities or
selling assets in the current highly stressed credit
environment.
-- The Company repurchased shares of its common stock and debt
securities in the quarter. Year-to-date and third quarter
repurchases of the Company's common stock totaled 7.7 million
shares at an average price of $11.69 per share. Year-to-date
and third quarter, the Company repurchased $102 million par
amount of its outstanding corporate debt at discounts, which
resulted in a net gain of $24.5 million. The Company also
terminated a portion of its outstanding Guaranteed Investment
Contracts (GICs) and repurchased MBIA Global Funding LLC (GFL)
medium-term notes (MTNs) at discounts, resulting in net gains
to MBIA of $284.6 million for the first nine months of the
year, including $205.4 million in the third quarter. In
addition, MBIA repurchased approximately $47.3 million par
amount of its outstanding surplus notes at discounts for a net
gain of $10.0 million, all in the third quarter. All of the
debt repurchases were at MBIA's discretion and at the request
of the holders of such securities.
MBIA Inc. (NYSE: MBI), the holding company for MBIA Insurance
Corporation, today reported a net loss of $1.5 billion, or $6.97 per
share, for the first nine months of 2008, compared with net income of
$373.8 million, or $2.84 per share, during the same period in 2007.
For the third quarter, the net loss was $806.5 million, or $3.48 per
share, compared with a net loss of $36.6 million, or $0.30 per share,
for the same period of 2007. The net loss in the quarter was driven
primarily by increases to loss reserves on the Company's second lien
residential mortgage-backed securities exposures and net realized and
unrealized losses attributable to the Company's ALM business.
The Company incurred $961 million in pre-tax case loss and loss
adjustment expenses in the third quarter to reflect additional
projected losses due to further deterioration in the performance of
its insured exposures to certain second lien residential mortgage
securitizations. The net loss for the quarter also included $155.7
million of pre-tax net realized losses resulting primarily from the
rebalancing of, and impairments in, the investment portfolio in the
Company's ALM business. The net realized losses are in addition to the
$436 million in impairments booked by the Company in the second
quarter for estimated losses on investment assets sold in the third
quarter. The rebalancing began in the second quarter and continued
into the third quarter as the Company enhanced liquidity in the ALM
investment portfolio to meet actual and worst-case collateral posting
and termination payment requirements that could result from a ratings
downgrade. A $405 million unrealized net loss on financial instruments
at fair value (MTM) and foreign exchange was the other significant
component of the net loss in the third quarter. Partially offsetting
the realized and unrealized losses and case reserves in the third
quarter were $239.9 million in net gains on the extinguishment of
debt.
After-tax operating loss, a non-GAAP measure that excludes the
effects of timing-related gains and losses (all non-GAAP measures used
herein are defined in the attached Explanation of Non-GAAP Financial
Measures), for the first nine months of 2008 was $854.3 million, or
$3.94 per share, compared with after-tax operating income of $600.7
million, or $4.57 per share, for the first nine months of 2007.
After-tax operating loss for the third quarter of 2008 was $514.8
million, or $2.22 per share, compared with after-tax operating income
of $192.6 million, or $1.56 per share in the same period of 2007.
Excluding the extraordinary addition to case loss reserves, after-tax
operating income was $109.9 million.
"As we've discussed previously, our near-term objectives include
deleveraging our balance sheet and maximizing our liquidity position
in support of our long-term business transformation," said Jay Brown,
MBIA Chief Executive Officer. "We continued to make progress toward
those ends in the third quarter, as our balance sheet grew stronger
through debt repurchases and amortization of our insurance portfolio.
In addition, we rebalanced assets in our Asset Liability Management
business, which helped greatly reduce its liquidity risk.
"With our transformation on track and our liquidity position
bolstered, there were two notable events in the quarter," Mr. Brown
continued. "First, as we noted in our second quarter results, we
continually evaluate our housing-related exposures and adjust our loss
reserve and impairment estimates whenever deal performance does not
track with expectations. This was the case in the third quarter, and
we increased our loss reserves and impairments by approximately $1
billion to reflect our analysis of the impact of weakening economic
conditions and a greater number of defaults on improperly originated
and serviced mortgage loans.
"On a more positive note, we reinsured a $159 billion portfolio of
U.S. public finance bonds originally insured by FGIC," Mr. Brown said.
"This high quality book of business presented an attractive
opportunity that will generate long-term value for our shareholders."
Investment Management Services
Average assets under management in the Investment Management
Services (IMS) segment for the first nine months of 2008 were $60.4
billion, down 9 percent from $66.5 billion in the first nine months of
2007. Assets under management at September 30, 2008 were $52.1
billion, down 13 percent from $59.8 billion at June 30, 2008. The
decline is attributable primarily to maturities and terminations in
the ALM and conduit segments. The Advisory Services portion of the
Company's asset management business continued to perform well in a
difficult market as assets under management increased by 3 percent in
the nine months ended September 30, to $33.7 billion from $32.8
billion at December 31, 2007. Although assets under management in
Advisory Services declined 4 percent in the third quarter due to a
combination of client withdrawals and lower market values of assets,
the Company has continued to add new clients in this line of business.
As a result of the rebalancing of the ALM investment portfolio
during the second and third quarters, the Company has sufficient cash
and highly liquid securities in its ALM portfolio to fund all
potential termination payments under its insured GICs in the event of
any downgrade of MBIA Insurance Corporation by Moody's Investors
Service or Standard & Poor's Ratings Services. As of September 30,
MBIA had $17.9 billion in outstanding liabilities related to its ALM
business, of which $10.6 billion were GICs. All of the GICs are
collateralized by cash or high grade securities. Up to $7.8 billion of
the GIC portfolio can be terminated if MBIA Insurance Corporation is
downgraded. The remaining $10.1 billion in ALM liabilities consisted
of MTNs issued by GFL, term repurchase agreements and GICs that are
not subject to further collateralization or termination provisions
upon a downgrade.
MBIA has estimated worst-case cash needs to fund potential
termination payments under the GICs resulting from ratings downgrades
to be as much as $7.8 billion. This amount is lower than previously
reported due to amortization of the outstanding GICs. As of September
30, MBIA had approximately $8.1 billion in cash and government
securities in its ALM portfolio to satisfy these requirements. All
payments due on remaining liabilities related to the ALM business that
are not subject to termination upon a downgrade are expected to be
covered by available assets and other liquidity sources.
The pre-tax net loss for the IMS segment was $1.3 billion in the
first nine months of the year and $368.3 million in the third quarter,
as operating income was outweighed by realized losses and
mark-to-market losses on financial instruments and foreign exchange.
The IMS segment recorded $36.1 million in pre-tax operating income for
the first nine months of 2008, compared with $81.6 million in the same
period of 2007, excluding gains on GIC and MTN repurchases. In the
third quarter, IMS recorded a pre-tax operating loss of $13.8 million,
compared with $30.7 million of pre-tax operating income in last year's
third quarter, excluding gains on GIC and MTN repurchases. The
reduction in operating income was due to lower average balances in the
ALM business from amortization and GIC terminations coupled with lower
net interest spread due to sales of assets and reinvestment in cash to
protect against the impact of further downgrades.
The Company has terminated a portion of its outstanding GICs and
repurchased a portion of the GFL MTNs at discounts, resulting in a net
gain to MBIA of $284.6 million for the first nine months of the year,
including $205.4 million in the third quarter.
Within the IMS segment, a total of $177.8 million of pre-tax net
realized losses related primarily to the ALM business were incurred in
the third quarter. The net realized losses resulted from the
combination of sales of assets during the quarter and the recognition
of other than temporary impairments to several securities. Embedded in
the $177.8 million in pre-tax net realized losses are gains on
terminated total return swaps used as hedges which are offset by
corresponding unrealized losses in the Net/Gains Losses on Financial
Instruments at Fair Value line on the income statement. The net
realized losses are in addition to the $436 million in impairments
booked by the Company in the second quarter for estimated losses on
third quarter asset sales. Through September 30, the cumulative net
pre-tax cost to the Company associated with the rebalancing of the ALM
asset portfolio was approximately $500 million, including the benefit
of approximately $285 million in pre-tax net gains from terminations
of GICs and repurchases of GFL MTNs at discounts. Excluding the
positive impact of the GIC terminations and MTN repurchases, the
cumulative pre-tax cost of the ALM asset portfolio rebalancing
increased by approximately $270 million between June 30 and September
30 as market conditions worsened during the third quarter.
Insurance Operations
As was previously announced, MBIA Insurance Corporation provided
reinsurance for a portfolio of U.S. public finance bonds originally
insured by FGIC with total net par outstanding of approximately $159
billion. The net premium written associated with the reinsurance
transaction was $812 million. As a result, net premiums written
increased by 305% compared to the third quarter of 2007. In connection
with the reinsurance, MBIA received cash and liquid securities
totaling approximately $639 million, which represented the unearned
upfront premiums, net of a ceding commission retained by FGIC,
associated with the reinsured policies. As the transaction closed
effective September 30, 2008, it had no impact on the Company's third
quarter earnings. The reinsurance transaction is expected to result in
at least $41 million in new revenues in the fourth quarter. During the
third quarter the Company wrote almost no traditional direct insurance
business.
After two consecutive quarters of relatively flat early-stage
delinquencies within its insured second lien residential mortgage
securitizations, MBIA observed an increase in delinquencies in the
third quarter and a greater than expected level of losses being
realized within certain transactions. MBIA has adjusted its loss
modeling assumptions for these transactions to reflect a combination
of high levels of ineligible loans in the mortgage pools, the overall
weakening in the economic environment, servicer performance related
issues and relatively few successful loan modifications by the loan
servicers. As a result, it has increased its case loss reserves on its
second lien residential mortgage exposures by $961 million in the
third quarter. The increase in case loss reserves primarily reflects
additions to previously established reserves rather than a material
increase in the number of transactions requiring loss reserves.
In certain instances where samples of defaulted and severely
delinquent loans were subjected to forensic audits, up to 89 percent
of the delinquencies and defaults were associated with loans that MBIA
believes are in breach of the originators' representations and
warranties with respect to such loans and therefore should have been
excluded from the MBIA-insured securitizations. In October, MBIA
Insurance Corporation filed lawsuits against two mortgage loan
seller/servicers, and a claim against a third, alleging, among other
things, misrepresentations concerning the quality of loans that were
included in a number of MBIA-insured second lien residential mortgage
securitizations and a failure to honor their contractual obligations
to repurchase ineligible loans and a breach of their ongoing servicing
practices. In particular, MBIA believes that a very high proportion of
the defaulted loans in these securitizations are in breach of the
originators' representations and warranties with respect to such loans
and therefore should have been excluded from the securitizations.
The Company has not yet reflected as salvage or subrogation any
potential recoveries resulting from the seller/servicers' obligations
to repurchase ineligible loans from these second lien residential
mortgage transactions. The Company continues to evaluate these and
other potential recoveries and intends to pursue them aggressively.
Once the Company has concluded its evaluation, including assessing the
amount of potential recoveries, it is likely to establish salvage and
subrogation receivables that, depending upon the transaction, may
fully or partially offset the related case loss reserves. The
ineligibility of mortgages in the securitizations and the litigation
in general will have no impact on the holders of the insured
securities, as MBIA will continue to honor its payment obligations
under its policies.
With regard to expected losses within its insured multi-sector CDO
exposures, the Company recognized a $44 million pre-tax impairment on
one transaction in the third quarter and increased pre-tax impairments
on several other transactions by a total of $22 million for accretion
and for related loss-adjustment expenses. Although MBIA's insured CDO
exposures are accounted for at fair value, it regards the changes in
impairment estimates as critical information for investors since the
impairment estimates reflect amounts the Company expects to pay in
claims. In the absence of impairment, the Company expects the gains
and losses in fair value over time to be reversed upon the maturities
of the transactions. MBIA will continue to evaluate its
housing-related exposure and may need to adjust its loss reserves and
credit impairments should deal performance be worse than current
expectations. The performance of MBIA's public finance and
non-residential mortgage-related structured finance exposures
generally remains satisfactory and did not result in any significant
new case loss reserve activity in the third quarter. Within the
insured structured finance portfolio, MBIA's non-mortgage consumer ABS
exposures continued to perform within expectations, with delinquency
and loss rates comfortably below the levels that the transactions are
designed to withstand.
The Company recognized all of the incremental case loss reserve
activity as an immediate charge in the third quarter rather than
applying it against its unallocated loss reserve in order to maintain
an adequate unallocated loss reserve for its non-mortgage related
exposures. The Company's unallocated loss reserve increased to $240.9
million at September 30, 2008 after an addition of $21.5 million based
upon its formula-based loss reserving practice.
For the first nine months of 2008, MBIA paid a total of $903.6
million in claims associated with its second lien residential mortgage
exposures, including $491.3 million in the third quarter. MBIA
Insurance Corporation's cash inflows in the first nine months of the
year, largely from premiums and investment income, more than covered
these payments, with the result that MBIA Insurance Corporation had
operating cash flow of $407 million in the nine months ended September
30, 2008 and $130 million in the third quarter. The insurance
company's liquidity resources remain more than adequate to meet
anticipated claim payments. Insurance company cash and short-term
investments totaled approximately $2.7 billion as of September 30,
2008 and the Company expects to continue to build liquidity in the
insurance company.
The net par outstanding of MBIA's insured portfolio totaled $778
billion at September 30, 2008, compared to $673 billion at September
30, 2007. Excluding the FGIC reinsurance transaction, MBIA's insured
portfolio contracted by $54 billion since September 30, 2007 through
maturities, amortization and refundings of insured exposure. Refunding
volume reached a record high in the third quarter of 2008,
representing $10.1 billion in par and $94 million in accelerated
unearned premiums. Scheduled amortizations, refundings and early
retirements of insured obligations were partially offset by
approximately $1.8 billion in previously ceded exposures that were
reassumed from two reinsurers. There were no material commutations of
insured credit derivative exposures in the third quarter.
For the first nine months of 2008, the insurance segment's pre-tax
operating loss was $1.3 billion, compared with $817.9 million of
pre-tax operating income in the same period of 2007. In the third
quarter, the pre-tax operating loss for the insurance segment was
$749.6 million, compared to $265.2 million of pre-tax operating income
in the third quarter of 2007. The reductions for both the nine-month
period and third quarter were attributable primarily to credit
impairments and increases to loss reserves, interest expense on MBIA's
surplus notes and increased operating expenses resulting from a lower
expense deferral rate.
MBIA repurchased approximately $47.3 million par amount of its
outstanding surplus notes resulting in a net gain of $10.0 million,
all in the third quarter. The net gain is not considered a part of
operating income.
Net Gains/Losses on Financial Instruments at Fair Value
("Mark-to-Market")
In the third quarter of 2008, MBIA recorded a $405 million
unrealized net loss on financial instruments at fair value and foreign
exchange the major components of which included a $372 million net
unrealized loss on derivatives within the IMS segment, a $118 million
net unrealized loss on financial instruments within the corporate
segment and a $105 million net unrealized gain on insured credit
derivatives. The MTM loss attributable to the IMS segment was driven
largely by the reversal of the positive marks on two total return
swaps held in the ALM portfolio, as referenced above. The MTM loss
attributable to the corporate segment resulted primarily from a
negative mark on the Company's outstanding common stock warrants due
to an increase in MBIA's stock price as of quarter-end and greater
volatility in its stock price over the quarter.
Partially offsetting these factors was a $105 million pre-tax net
unrealized gain on insured credit derivatives. Spreads on collateral
in the Company's insured corporate CDOs widened in the quarter, and
subordination was eroded in the insured multi-sector CDOs. Offsetting
these effects were the cumulative impact of refinements to the
calculation of the spreads on CMBS transactions and the application
under SFAS 157 of the MBIA credit adjustment to all theoretical cash
outflows in the fair value model for corporate CDOs.
SFAS 157 requires the Company to adjust the fair value estimates
of its insured credit derivatives portfolio for the market's
perception of its non-performance risk. This amount can add
substantial volatility to mark-to-market results. If the market's
perception of MBIA's credit quality improves and MBIA Insurance
Corporation's CDS spreads tighten, the Company would record an
increase to its unrealized mark-to-market losses, all other things
being equal. The Company's balance sheet net derivative liability
attributable to insured credit derivatives decreased to $3.8 billion
at September 30 from $3.9 billion at June 30, 2008.
Holding Company Activities
MBIA Inc. continues to maintain a strong liquidity position. In
addition to the rebalancing of the ALM portfolio assets to enhance
liquidity, MBIA Inc. had approximately $1.2 billion in cash and
investments at September 30. Through November 4, the Company used $600
million of this cash to enhance the liquidity position of the ALM
portfolio. It also plans to put in place a three-year intercompany
repurchase agreement facility with MBIA Insurance Corporation under
which MBIA Inc. can transfer ALM assets at market value to MBIA
Insurance Corporation for up to $2 billion in cash. The intercompany
arrangement required and received regulatory approval. The use of
holding company free cash and this facility is expected to eliminate
the need to sell assets to meet ratings-triggered termination
requirements or future liability maturities in the current highly
stressed credit environment. The Company believes that these
resources, along with cash flows from the ALM asset portfolio will
cover all cash outflows on the portfolio, even if it cannot sell ALM
portfolio assets or refinance maturing liabilities.
MBIA Inc. continues to have a $500 million revolving credit line
with a group of highly rated banks. Covenant calculations relating to
net worth and leverage are affected by the Company's mark-to-market
adjustments on insured derivatives, among other things, and are
therefore highly variable. As of September 30, the line was partially
drawable and its availability remains highly dependent upon future
mark-to-market adjustments on insured derivatives.
MBIA Insurance Corporation has access to $400 million through its
Committed Preferred Custodial Trust ("CPCT") facility issued by eight
trusts (the "Trusts"), which were created for the primary purpose of
issuing CPCT securities and investing the proceeds in high-quality
short-term obligations. The Trusts are vehicles for providing MBIA
Insurance Corporation the opportunity to access new capital at its
sole discretion through the exercise of put options. The CPCT
securities are remarketed every 28 days with the interest rate set by
means of an auction. Due to the decline in the demand for short-term
structured securities during the last several quarters, all CPCT
securities were unable to be remarketed at their most recent
remarketing date, resulting in the current investors of the CPCT
securities receiving the maximum prescribed interest rate.
In November, MBIA began notifying the Trusts that it will exercise
its put option to sell to the Trusts the perpetual preferred stock of
MBIA Insurance Corporation. Upon MBIA exercising the put option, the
Trusts will transfer the proceeds to MBIA in exchange for the
preferred stock that will be held by the Trusts. The dividend rate on
the preferred stock will be the auction rate, subject to the maximum
rate. MBIA plans to hold the proceeds of $400 million in cash and cash
equivalent securities. Once MBIA completes exercising the put options
on all trusts, MBIA's consolidated shareholders' equity will have
increased by $400 million.
During the third quarter of 2008, the Company repurchased
approximately 7.7 million shares of its common stock at an average
price of $11.69. Approximately $250 million remains available under
the Company's $1 billion share buyback program, which was reinstated
by the Company's board of directors in the third quarter of 2008. The
Company also repurchased approximately $102 million par amount of its
outstanding corporate debt in the third quarter, resulting in a net
gain of $24.5 million.
Book Value
MBIA's Book Value per share as of September 30, 2008 was $11.37
compared with $16.67 at June 30, 2008 and $29.16 at December 31, 2007.
The reduction in the third quarter is attributable primarily to
increases in loss reserves and net realized and unrealized losses
related to the Company's ALM business. The year-to-date reduction also
includes the impact of dilution from MBIA's February 2008 equity
offering.
Adjusted Book Value (ABV) per share, a non-GAAP measure, declined
to $37.55 at the end of the third quarter from $77.89 at December 31,
2007, and from $42.16 at June 30, 2008. ABV per share declined in the
third quarter and year-to-date due primarily to increases in loss
reserves and net realized losses as well as a reduction in expected
future income from projected spread in the ALM business. These amounts
were partially offset by an increase in after-tax net deferred premium
revenue resulting from the FGIC reinsurance transaction. The
year-to-date reduction also includes the impact of dilution from
MBIA's February 2008 equity offering. In the third quarter, the
Company modified its formula for calculating ABV to exclude the impact
of unrealized gains and losses included in Other Comprehensive Income
(OCI).
Deferred Tax Asset
As of September 30, 2008, MBIA carried a net deferred tax asset of
$1.5 billion on its balance sheet. The amount of the deferred tax
asset, which can be used to offset future income, is driven by
cumulative mark-to-market losses of $4.1 billion and unrealized losses
recorded on the Company's derivative and investment portfolios. Since
capital losses, which generated a portion of the deferred tax asset
primarily associated with the rebalancing of the ALM portfolio, can
only be used to offset available realized capital gains, the Company
has increased its previously established valuation allowance by $93
million in the third quarter to a total of $292 million against the
portion of the deferred tax asset related to realized capital losses
expected to be carried forward. The Company believes that the income
expected in the future will be sufficient to allow it to realize the
full value of the remaining net deferred tax asset. However, the
Company's valuation allowance may increase or decrease in the future
depending on the nature and amount of future realized capital gains
and losses.
Implementation of SFAS 163 Accounting Standard
The Company is disclosing in the notes to its financial statements
for the period ended September 30, 2008 a schedule related to claim
liability and a description of its risk-management activities used to
track and monitor deteriorating insured financial obligations as
required by SFAS 163, Accounting for Financial Guarantee Insurance
Contracts, an interpretation of FASB Statement No. 60. Additional
requirements of SFAS 163 are currently scheduled to be implemented as
of January 1, 2009.
Conference Call
MBIA will host a webcast and conference call for investors today,
Wednesday, November 5 at 11:00 AM (EST) to discuss its third quarter
2008 financial results and other matters relating to the Company. The
dial-in number for the call is (877) 694-4769 in the U.S. and (404)
665-9935 from outside the U.S. The conference call code is 66705644. A
live webcast of the conference call will also be accessible on
www.mbia.com.
The webcast and conference call will consist of prepared remarks
followed by an open question and answer session. Questions for the
event may be submitted in advance to ConferenceCallQuestions@mbia.com.
In addition, conference call participants will be able to ask
questions during the question and answer session.
A replay of the call will be available approximately two hours
after the completion of the call on November 5 until 5:00 p.m. on
November 19 by dialing (800) 642-1687 in the U.S. or (706) 645-9291
from outside the U.S. The replay call code is also 66705644. In
addition, a recording of the call will be available on MBIA's Web site
approximately two hours after the completion of the call.
Forward-Looking Statements
This release contains statements about future results that may
constitute "forward-looking statements" within the meaning of the safe
harbor provisions of the Private Securities Litigation Reform Act of
1995. Readers are cautioned that these statements are not guarantees
of future performance. There are a variety of factors, many of which
are beyond MBIA's control, which affect the operations, performance,
business strategy and results and could cause its actual results to
differ materially from the expectations and objectives expressed in
any forward-looking statements. Accordingly, readers are cautioned not
to place undue reliance on forward-looking statements which speak only
as of the date they are made. MBIA does not undertake to update
forward-looking statements to reflect the impact of circumstances or
events that arise after the date the forward-looking statements are
made. The reader should, however, consult any further disclosures MBIA
may make in its future filings of its reports on Form 10-K, Form 10-Q
and Form 8-K.
MBIA Inc., headquartered in Armonk, New York is a holding company
whose subsidiaries provide financial guarantee insurance, fixed-income
asset management, and other specialized financial services. The
Company services its clients around the globe, with offices in New
York, Denver, San Francisco, Paris, London, Madrid, Mexico City,
Sydney and Tokyo. Its principal operating subsidiary, MBIA Insurance
Corporation, is rated A2 by Moody's Investors Service on review for
possible downgrade and AA by Standard & Poor's Ratings Services with a
negative outlook. Please visit MBIA's Web site at www.mbia.com.
Explanation of Non-GAAP Financial Measures
The following are explanations of why MBIA believes that the
non-GAAP financial measures used in this press release, which serve to
supplement GAAP information, are meaningful to investors.
Operating Income (Loss): The Company believes operating income
(loss) and operating income (loss) per share are useful measurements
of performance because they measure income from operations, unaffected
by investment portfolio realized gains and losses, gains and losses on
financial instruments at fair value (with the exception of credit
impairments on insured derivatives) and foreign exchange and other
non-operating items. Operating income (loss) and operating income
(loss) per share are also provided to assist research analysts and
investors who use this information in their analysis of the Company.
Adjusted Book Value ("ABV"): The Company believes the presentation
of ABV, which includes items that are expected to impact shareholders'
equity in future periods and, in general, do not require any
additional future performance obligation on the Company's part and
excludes gains and losses due to market value changes that have not
been realized through sales or impairments of assets or extinguishment
of liabilities, provides additional information that gives a
comprehensive measure of the value of the Company. ABV is not a
substitute for GAAP book value but does provide investors with
additional information when viewed in conjunction with GAAP book
value.
MBIA INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
----------------------------------------------------------------------
(dollars in thousands)
September December 31,
30, 2008 2007
------------ ------------
Assets
-----------------------------------------
Investments:
Fixed-Maturity Securities Held as
Available-For-Sale, at Fair Value
(Amortized Cost $16,039,190 and
$30,199,471) (Includes Hybrid
Financial Instruments at Fair Value
$28,523 and $596,537) $14,093,370 $29,589,098
Investments Held-To-Maturity, at
Amortized Cost
(Fair Value $3,127,058 and $5,036,465) 3,155,847 5,053,987
Investments Pledged as Collateral, at
Fair Value
(Amortized Cost $1,432,821 and
$1,243,245) 1,215,805 1,227,153
Short-Term Investments Held as Available-
For-Sale, at Fair Value
(Amortized Cost $9,745,125 and
$4,915,581) 9,737,260 4,915,581
Short-Term Investments Held-To-Maturity,
at Amortized Cost (2007 Fair
Value $545,769) - 549,127
Other Investments 328,502 730,711
------------ -------------
Total Investments 28,530,784 42,065,657
Cash and Cash Equivalents 2,555,848 263,732
Accrued Investment Income 342,940 590,060
Deferred Acquisition Costs 555,023 472,516
Prepaid Reinsurance Premiums 274,478 318,740
Reinsurance Recoverable on Unpaid Losses 107,262 82,041
Goodwill 79,406 79,406
Property and Equipment (Net of Accumulated
Depreciation) 101,232 104,036
Receivable for Investments Sold 1,311,157 111,130
Derivative Assets 1,099,969 1,722,696
Current Income Taxes 351,824 142,763
Deferred Income Taxes, Net 1,537,063 1,173,658
Other Assets 804,815 288,639
------------ -------------
Total Assets $37,651,801 $47,415,074
============ =============
Liabilities and Shareholders' Equity
-------------------------------------------
Liabilities:
Deferred Premium Revenue $ 3,514,710 $ 3,107,833
Loss and Loss Adjustment Expense Reserves 1,913,230 1,346,423
Investment Agreements 10,646,317 16,107,909
Commercial Paper - 850,315
Medium-Term Notes (Includes Hybrid
Financial Instruments at
Fair Value $284,594 and $399,061) 8,550,813 12,830,777
Variable Interest Entity Floating Rate
Notes 1,244,260 1,355,792
Securities Sold Under Agreements to
Repurchase 1,085,960 1,163,899
Short-Term Debt 7,158 13,383
Long-Term Debt 2,418,219 1,225,280
Deferred Fee Revenue 15,450 15,059
Payable for Investments Purchased 108,615 41,359
Derivative Liabilities 5,029,653 5,037,112
Other Liabilities 494,545 664,128
------------ -------------
Total Liabilities 35,028,930 43,759,269
------------ -------------
Shareholders' Equity:
Common Stock 273,296 160,245
Additional Paid-in Capital 3,056,863 1,649,511
Retained Earnings 2,789,028 4,301,880
Accumulated Other Comprehensive Loss (1,443,224) (490,829)
Treasury Stock (2,053,092) (1,965,002)
------------ -------------
Total Shareholders' Equity 2,622,871 3,655,805
------------ -------------
Total Liabilities and Shareholders'
Equity $37,651,801 $47,415,074
============ =============
MBIA INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS
----------------------------------------------------------------------
(dollars in thousands)
Three Months Ended September 30, 2008
-----------------------------------------------
Investment
Management
Insurance Services Corporate Subtotal
----------- ---------- ---------- ------------
Gross Premiums Written $ 950,674 $ - $ - $ 950,674
Ceded Premiums (22,970) - - (22,970)
----------- ---------- ---------- -------------
Net Premiums Written 927,704 - - 927,704
----------- ---------- ---------- -------------
Revenues:
Premiums Earned 276,206 - - 276,206
Net Investment Income 146,688 203,308 7,451 357,447
Fees and
Reimbursements 3,801 11,215 - 15,016
Realized Gains and
Other Settlements
on Insured
Derivatives - - - -
Unrealized Gains on
Insured Derivatives 104,818 - - 104,818
----------- ---------- ---------- -------------
Net Change in Fair
Value of Insured
Derivatives 104,818 - - 104,818
Net Realized Gains
(Losses) 25,992 (177,839) (3,837) (155,684)
Net Gains (Losses) on
Financial
Instruments
at Fair Value and
Foreign Exchange (6,819) (383,581) (119,426) (509,826)
Net Gains on
Extinguishment of
Debt 9,980 205,394 24,524 239,898
----------- ---------- ---------- -------------
Total Revenues 560,666 (141,503) (91,288) 327,875
----------- ---------- ---------- -------------
Expenses:
Losses and Loss
Adjustment 982,514 - - 982,514
Amortization of
Deferred Acquisition
Costs 24,619 - - 24,619
Operating 63,204 25,724 10,797 99,725
Interest Expense 48,084 201,036 18,486 267,606
----------- ---------- ---------- -------------
Total Expenses 1,118,421 226,760 29,283 1,374,464
----------- ---------- ---------- -------------
Loss before Income
Taxes $ (557,755) $(368,263) $(120,571) $(1,046,589)
=========== ========== ========== =============
Benefit for Income
Taxes
Net Loss
Three Months Ended September 30, 2007
-----------------------------------------------
Investment
Management
Insurance Services Corporate Subtotal
----------- ---------- ---------- ------------
Gross Premiums
Written $ 255,148 $ - $ - $ 255,148
Ceded Premiums (26,023) - - (26,023)
----------- ---------- ---------- -------------
Net Premiums Written 229,125 - - 229,125
----------- ---------- ---------- -------------
Revenues:
Premiums Earned 207,242 - - 207,242
Net Investment Income 141,409 425,244 721 567,374
Fees and
Reimbursements 4,880 12,137 - 17,017
Realized Gains and
Other Settlements
on Insured
Derivatives - - - -
Unrealized Losses on
Insured Derivatives (341,706) - - (341,706)
----------- ---------- ---------- -------------
Net Change in Fair
Value of Insured
Derivatives (341,706) - - (341,706)
Net Realized Gains
(Losses) 6,411 (5,973) (749) (311)
Net Gains (Losses) on
Financial
Instruments
at Fair Value and
Foreign Exchange 6,389 (17,407) 317 (10,701)
----------- ---------- ---------- -------------
Total Revenues 24,625 414,001 289 438,915
----------- ---------- ---------- -------------
Expenses:
Losses and Loss
Adjustment 22,203 - - 22,203
Amortization of
Deferred Acquisition
Costs 16,052 - - 16,052
Operating 30,517 27,934 6,544 64,995
Interest Expense 19,514 378,787 20,187 418,488
----------- ---------- ---------- -------------
Total Expenses 88,286 406,721 26,731 521,738
----------- ---------- ---------- -------------
Income (Loss) before
Income Taxes $ (63,661) $ 7,280 $ (26,442) $ (82,823)
=========== ========== ========== =============
Benefit for Income
Taxes
Net Loss
Three Months Ended September 30, 2008
--------------------------------------------------
Derivative
Eliminations(1) Reclassification(2) Consolidated
--------------- ------------------- ------------
Gross Premiums
Written $(8,245) $ (40,924) $ 901,505
Ceded Premiums 889 7,002 (15,079)
--------------- ------------------- ------------
Net Premiums
Written (7,356) (33,922) 886,426
--------------- ------------------- ------------
Revenues:
Premiums Earned (7,356) (34,106) 234,744
Net Investment
Income 1,023 (4,111) 354,359
Fees and
Reimbursements (2,679) (158) 12,179
Realized Gains and
Other Settlements
on Insured
Derivatives - 34,264 34,264
Unrealized Gains on
Insured
Derivatives - - 104,818
--------------- ------------------- ------------
Net Change in Fair
Value of Insured
Derivatives - 34,264 139,082
Net Realized Gains
(Losses) - (270,614) (426,298)
Net Gains (Losses)
on Financial
Instruments
at Fair Value and
Foreign Exchange - 275,626 (234,200)
Net Gains on
Extinguishment of
Debt - - 239,898
--------------- ------------------- ------------
Total Revenues (9,012) 901 319,764
--------------- ------------------- ------------
Expenses:
Losses and Loss
Adjustment - - 982,514
Amortization of
Deferred
Acquisition Costs - - 24,619
Operating (4,715) - 95,010
Interest Expense (4,297) 901 264,210
--------------- ------------------- ------------
Total Expenses (9,012) 901 1,366,353
--------------- ------------------- ------------
Loss before Income
Taxes $ - $ - (1,046,589)
=============== ===================
Benefit for Income
Taxes (240,111)
------------
Net Loss $ (806,478)
============
Three Months Ended September 30, 2007
--------------------------------------------------
Derivative
Eliminations(1) Reclassification(2) Consolidated
--------------- ------------------- ------------
Gross Premiums
Written $(9,461) $ (39,046) $ 206,641
Ceded Premiums 1,563 6,591 (17,869)
--------------- ------------------- ------------
Net Premiums
Written (7,898) (32,455) 188,772
--------------- ------------------- ------------
Revenues:
Premiums Earned (7,898) (31,029) 168,315
Net Investment
Income 3,030 3,450 573,854
Fees and
Reimbursements (2,969) (189) 13,859
Realized Gains and
Other Settlements
on Insured
Derivatives - 31,218 31,218
Unrealized Losses
on Insured
Derivatives - - (341,706)
--------------- ------------------- ------------
Net Change in Fair
Value of Insured
Derivatives - 31,218 (310,488)
Net Realized Gains
(Losses) - 650 339
Net Gains (Losses)
on Financial
Instruments
at Fair Value and
Foreign Exchange - (3,958) (14,659)
--------------- ------------------- ------------
Total Revenues (7,837) 142 431,220
--------------- ------------------- ------------
Expenses:
Losses and Loss
Adjustment - - 22,203
Amortization of
Deferred
Acquisition Costs - - 16,052
Operating (7,735) - 57,260
Interest Expense (102) 142 418,528
--------------- ------------------- ------------
Total Expenses (7,837) 142 514,043
--------------- ------------------- ------------
Income (Loss) before
Income Taxes $ - $ - (82,823)
=============== ===================
Benefit for Income
Taxes (46,183)
------------
Net Loss $ (36,640)
============
(1) Eliminations include:
(a)Elimination of intercompany premium income and expense.
(b)Elimination of intercompany asset management fees and expenses.
(c)Elimination of intercompany interest income and expense
pertaining to intercompany receivables and payables.
(2) Reclassification of derivative revenue and expense.
MBIA INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS
----------------------------------------------------------------------
(dollars in thousands)
Nine Months Ended September 30, 2008
-------------------------------------------------
Investment
Management
Insurance Services Corporate Subtotal
----------- ------------ ---------- ------------
Gross Premiums
Written $1,296,133 $ - $ - $ 1,296,133
Ceded Premiums (79,077) - - (79,077)
----------- ------------ ---------- -------------
Net Premiums
Written 1,217,056 - - 1,217,056
----------- ------------ ---------- -------------
Revenues:
Premiums Earned 749,427 - - 749,427
Net Investment
Income 447,388 833,502 22,315 1,303,205
Fees and
Reimbursements 6,476 36,525 - 43,001
Realized Gains and
Other Settlements
on Insured
Derivatives - - - -
Unrealized Losses on
Insured Derivatives (147,972) - - (147,972)
----------- ------------ ---------- -------------
Net Change in
Fair Value of
Insured
Derivatives (147,972) - - (147,972)
Net Realized Gains
(Losses) 68,106 (1,105,738) (2,970) (1,040,602)
Net Gains (Losses)
on Financial
Instruments
at Fair Value and
Foreign Exchange 155,239 (523,238) (108,157) (476,156)
Net Gains on
Extinguishment of
Debt 9,980 284,611 24,524 319,115
----------- ------------ ---------- -------------
Total Revenues 1,288,644 (474,338) (64,288) 750,018
----------- ------------ ---------- -------------
Expenses:
Losses and Loss
Adjustment 1,292,466 - - 1,292,466
Amortization of
Deferred
Acquisition Costs 63,147 - - 63,147
Operating 150,507 66,095 22,850 239,452
Interest Expense 141,495 765,955 58,577 966,027
----------- ------------ ---------- -------------
Total Expenses 1,647,615 832,050 81,427 2,561,092
----------- ------------ ---------- -------------
Loss before Income
Taxes $ (358,971) $(1,306,388) $(145,715) $(1,811,074)
=========== ============ ========== =============
Benefit for Income
Taxes
Net Loss
Nine Months Ended September 30, 2007
-------------------------------------------------
Investment
Management
Insurance Services Corporate Subtotal
----------- ------------ ---------- -------------
Gross Premiums
Written $ 731,384 $ - $ - $ 731,384
Ceded Premiums (77,236) - - (77,236)
----------- ------------ ---------- -------------
Net Premiums
Written 654,148 - - 654,148
----------- ------------ ---------- -------------
Revenues:
Premiums Earned 646,136 - - 646,136
Net Investment
Income 425,971 1,157,757 14,451 1,598,179
Fees and
Reimbursements 19,681 36,993 - 56,674
Realized Gains and
Other Settlements
on Insured
Derivatives - - - -
Unrealized Losses on
Insured Derivatives (357,772) - - (357,772)
----------- ------------ ---------- -------------
Net Change in
Fair Value of
Insured
Derivatives (357,772) - - (357,772)
Net Realized Gains
(Losses) 38,455 (1,949) (9,244) 27,262
Net Gains (Losses)
on Financial
Instruments
at Fair Value and
Foreign Exchange 10,244 (29,024) 151 (18,629)
Insurance Recoveries - - 6,400 6,400
----------- ------------ ---------- -------------
Total Revenues 782,715 1,163,777 11,758 1,958,250
----------- ------------ ---------- -------------
Expenses:
Losses and Loss
Adjustment 63,655 - - 63,655
Amortization of
Deferred
Acquisition Costs 50,114 - - 50,114
Operating 98,129 78,352 23,460 199,941
Interest Expense 61,961 1,034,796 60,548 1,157,305
----------- ------------ ---------- -------------
Total Expenses 273,859 1,113,148 84,008 1,471,015
----------- ------------ ---------- -------------
Income (Loss) before
Income Taxes $ 508,856 $ 50,629 $ (72,250) $ 487,235
=========== ============ ========== =============
Provision for Income
Taxes
Net Income
Nine Months Ended September 30, 2008
--------------------------------------------
Derivative
Eliminations Reclassification Consolidated
(1) (2)
------------ ---------------- ------------
Gross Premiums Written $(27,616) $(123,435) $ 1,145,082
Ceded Premiums 3,403 23,303 (52,371)
------------ ---------------- ------------
Net Premiums Written (24,213) (100,132) 1,092,711
------------ ---------------- ------------
Revenues:
Premiums Earned (24,213) (101,761) 623,453
Net Investment Income 14,833 (31,494) 1,286,544
Fees and Reimbursements (10,184) (564) 32,253
Realized Gains and Other
Settlements
on Insured Derivatives - 102,325 102,325
Unrealized Losses on
Insured Derivatives - - (147,972)
------------ ---------------- ------------
Net Change in Fair
Value of Insured
Derivatives - 102,325 (45,647)
Net Realized Gains
(Losses) - (372,167) (1,412,769)
Net Gains (Losses) on
Financial Instruments
at Fair Value and
Foreign Exchange - 405,303 (70,853)
Net Gains on
Extinguishment of Debt - - 319,115
------------ ---------------- ------------
Total Revenues (19,564) 1,642 732,096
------------ ---------------- ------------
Expenses:
Losses and Loss Adjustment - - 1,292,466
Amortization of Deferred
Acquisition Costs - - 63,147
Operating (14,662) - 224,790
Interest Expense (4,902) 1,642 962,767
------------ ---------------- ------------
Total Expenses (19,564) 1,642 2,543,170
------------ ---------------- ------------
Loss before Income Taxes $ - $ - (1,811,074)
============ ================
Benefit for Income Taxes (298,222)
------------
Net Loss $(1,512,852)
============
Nine Months Ended September 30, 2007
--------------------------------------------
Derivative
Eliminations Reclassification Consolidated
(1) (2)
------------ ---------------- ------------
Gross Premiums Written $(27,345) $(101,838) $ 602,201
Ceded Premiums 4,882 17,882 (54,472)
------------ ---------------- ------------
Net Premiums Written (22,463) (83,956) 547,729
------------ ---------------- ------------
Revenues:
Premiums Earned (22,463) (83,539) 540,134
Net Investment Income 10,505 12,581 1,621,265
Fees and Reimbursements (9,141) (402) 47,131
Realized Gains and Other
Settlements
on Insured Derivatives - 83,941 83,941
Unrealized Losses on
Insured Derivatives - - (357,772)
------------ ---------------- ------------
Net Change in Fair
Value of Insured
Derivatives - 83,941 (273,831)
Net Realized Gains
(Losses) - 2,576 29,838
Net Gains (Losses) on
Financial Instruments
at Fair Value and
Foreign Exchange - (16,208) (34,837)
Insurance Recoveries - - 6,400
------------ ---------------- ------------
Total Revenues (21,099) (1,051) 1,936,100
------------ ---------------- ------------
Expenses:
Losses and Loss Adjustment - - 63,655
Amortization of Deferred
Acquisition Costs - - 50,114
Operating (20,876) - 179,065
Interest Expense (223) (1,051) 1,156,031
------------ ---------------- ------------
Total Expenses (21,099) (1,051) 1,448,865
------------ ---------------- ------------
Income (Loss) before
Income Taxes $ - $ - 487,235
============ ================
Provision for Income Taxes 113,433
------------
Net Income $ 373,802
============
(1) Eliminations include:
(a)Elimination of intercompany premium income and expense.
(b)Elimination of intercompany asset management fees and expenses.
(c)Elimination of intercompany interest income and expense
pertaining to intercompany receivables and payables.
(2) Reclassification of derivative revenue and expense.
MBIA INC. AND SUBSIDIARIES
Reconciliation of Adjusted Direct Premiums to
Gross Premiums Written (1)
----------------------------------------------
(dollars in millions)
Three Months Ended Nine Months Ended
September 30 September 30
----------------------- -----------------------
2008 2007 2008 2007
----------- ----------- ----------- -----------
Adjusted Direct
Premiums (2) $0.4 $514.2 $73.7 $1,234.5
Adjusted Assumed
Premiums 811.5 0.0 811.5 0.0
----------- ----------- ----------- -----------
Adjusted Gross
Premiums 811.9 514.2 885.2 1,234.5
Present Value of
Estimated Future
Installment
Premiums (3) 0.0 (414.9) (23.3) (943.4)
----------- ----------- ----------- -----------
Gross Upfront Premiums
Written 811.9 99.3 861.9 291.1
Gross Installment
Premiums Written 138.8 155.9 434.2 440.3
----------- ----------- ----------- -----------
Gross Premiums Written $950.7 $255.2 $1,296.1 $731.4
=========== =========== =========== ===========
(1)The amounts consist of Financial Guarantee premiums and Insured
Derivative premiums.
(2)A non-GAAP measure.
(3)At September 30, 2008, June 30, 2008 and March 31, 2008 the
discount rate was 4.50%, 4.67% and 4.98%, respectively, and at
September 30, 2007, June 30, 2007 and March 31, 2007 the discount
rate was 5.13%, 5.13% and 5.10%, respectively.
Three Months Ended Nine Months Ended
September 30 September 30
----------------------- -----------------------
Net Income (Loss) per
Common Share: 2008 2007 2008 2007
---------------------- ----------- ----------- ----------- -----------
Basic ($3.48) ($0.30) ($6.97) $2.93
Diluted ($3.48) ($0.30) ($6.97) $2.84
Weighted-Average
Number of Common
Shares Outstanding:
Basic 231,758,958 123,705,544 217,089,104 127,658,105
Diluted 231,758,958 123,705,544 217,089,104 131,537,515
Components of Net
Income (Loss) per
Diluted Share (1)
----------------------
Net Income
(Loss) ($3.48) ($0.30) ($6.97) $2.84
Unrealized Gains
(Losses) on
Insured
Derivatives
Net of Credit
Impairments (2) 0.45 (1.80) 2.24 (1.77)
Net Realized Gains
(Losses) (1.60) - (5.58) 0.15
Net Gains (Losses)
on Financial
Instruments at
Fair Value
and Foreign
Exchange (3) (0.83) (0.06) (0.23) (0.10)
Net Gains on
Extinguishment of
Debt(4) 0.68 - 0.97 -
Tax Adjustment 0.04 - (0.43) -
----------- ----------- ----------- -----------
Operating Income
(Loss) (5) ($2.22) $1.56 ($3.94) $4.57
=========== =========== =========== ===========
(1)May not add due to rounding.
(2)Pre-tax credit impairments related to insured credit derivatives
for the three and nine months ended September 30, 2008 were $57.0
million and $896.8 million, respectively.
(3)Excludes $5.0 million and $33.1 million of pre-tax income for the
three and nine months ended September 30, 2008 and $3.3 million
and $13.6 million of pre-tax expense for the three and nine months
ended September 30, 2007, related to economic hedges.
(4)Represents gains from the repurchases of surplus notes, medium-term
notes and corporate debt.
(5)A non-GAAP measure.
MBIA INC. AND SUBSIDIARIES
Components of Adjusted Book Value per
Share
------------------------------------------
September 30, December 31,
2008 2007
------------- -------------
Book Value $11.37 $29.16
After-tax Value of:
Cumulative Unrealized Loss on Insured
Credit Derivatives 10.64 18.83
Cumulative Impairments on Insured
Credit Derivatives (3.09) (1.04)
Unrealized (Gains) Losses Included in
OCI 6.55 4.35
Deferred Premium Revenue (1) 9.98 16.27
Prepaid Reinsurance Premiums (1) (0.79) (1.69)
Deferred Acquisition Costs (1.56) (2.45)
------ ------
Net Deferred Premium Revenue 7.63 12.13
Present Value of Installment Premiums
(1) (2) 6.92 13.68
Asset/Liability Products Adjustment (0.54) 4.17
Loss Provision (3) (1.93) (3.39)
------- -------
Adjusted Book Value (4) $37.55 $77.89
======= =======
(1)The amounts consist of Financial Guarantee premiums and Insured
Derivative premiums.
(2)At September 30, 2008 and December 31, 2007 the discount rate was
4.50% and 5.06%, respectively.
(3)The loss provision is calculated by applying 14.5% to the following
items (excluding premiums related to derivatives) on an after-tax
basis:
(a) deferred premium revenue; (b) prepaid reinsurance premiums;
and, (c) the present value of installment premiums.
(4)A non-GAAP measure.
CONSOLIDATED INSURANCE OPERATIONS
Selected Financial Data Computed on a Statutory Basis
------------------------------------------------------
(dollars in millions)
September 30, December 31,
2008 2007
------------- -------------
Capital and Surplus $ 3,314.5 $ 3,663.1
Contingency Reserve 2,981.3 2,718.9
------------- -------------
Capital Base 6,295.8 6,382.0
Unearned Premium Reserve 4,194.3 3,762.8
Present Value of Installment Premiums
(1) 2,457.9 2,638.6
------------- -------------
Premium Resources (2) 6,652.2 6,401.4
Loss and Loss Adjustment Expense
Reserves 2,418.0 926.1
Soft Capital Credit Facilities 850.0 850.0
------------- -------------
Total Claims-paying Resources $ 16,216.0 $ 14,559.5
============= =============
Net Debt Service Outstanding (3) $1,184,130.9 $1,021,925.2
Capital Ratio (4) 188:1 160:1
Claims-paying Ratio (5) 85:1 83:1
(1)At September 30, 2008 and December 31, 2007 the discount rate was
4.50% and 5.06%, respectively.
(2)The amounts consist of Financial Guarantee premiums and Insured
Derivative premiums.
(3)Includes debt service of $256.7 billion assumed via reinsurance of
FGIC insured credits in the third quarter of 2008.
(4)Net debt service outstanding divided by the capital base.
(5)Net debt service outstanding divided by the sum of the capital
base, unearned premium reserve (after-tax), present value of
installment premiums (after-tax), loss and loss adjustment expense
reserves and soft capital credit facilities.
Source: MBIA Inc.
Contact: MBIA, Media:
Kevin Brown +1-914-765-3648
Elizabeth James +1-914-765-3889
or
MBIA, Investor Relations:
Greg Diamond +1-914-765-3190