Highlights
-- MBIA Inc.'s (the Company's) Adjusted Book Value (ABV) was $39.05 per
share at September 30, 2009 compared with $40.06 per share at December
31, 2008. ABV is a non-GAAP measure that excludes the impact of changes
in the fair value of insured credit derivatives and temporary asset
impairments but includes the present value of future expected loss
payments on insured credit derivatives, net of recoveries (credit
impairments).
-- The Company recorded net income available to common shareholders of
$863.6 million, or $4.15 per share, for the first nine months of 2009,
compared with a net loss of $1.5 billion, or $6.87 per share, during the
same period in 2008. The Company recorded a net loss to common
shareholders of $727.8 million, or $3.50 per share, for the third
quarter of 2009, compared with a net loss of $806.5 million, or $3.42
per share, for the third quarter of 2008.
-- National Public Finance Guarantee Corporation (National) and MBIA
Insurance Corporation (MBIA Corp.), the Company's primary insurance
operating subsidiaries, had statutory capital, surplus and contingency
reserves totaling $1.9 billion and $3.9 billion, respectively, as of
September 30, 2009.
-- Cash and short-term investments at National and MBIA Corp. totaled
$629.7 million and $1.9 billion, respectively, as of September 30, 2009.
Cash and short-term investments at the Corporate segment of the holding
company totaled $408.8 million as of September 30, while cash and
short-term investments in the wind-down Asset Liability Management (ALM)
business totaled $1.3 billion.
ARMONK, N.Y.--(BUSINESS WIRE)--
MBIA Inc. (NYSE: MBI) today reported Adjusted Book Value (ABV) per share
(a non-GAAP measure) of $39.05 as of September 30, 2009, compared with
$40.06 as of December 31, 2008. ABV declined slightly over the first
nine months of 2009 as increased credit impairments on insured credit
derivatives, other-than-temporary impairments of invested assets and
insurance incurred losses outpaced earnings from premiums and investment
income.
Net income available to common shareholders for the first nine months of
2009 was $863.6 million, or $4.15 per share, compared with a net loss of
$1.5 billion, or $6.87 per share, during the same period in 2008. In the
year-to-date period, net income was affected by a $1.2 billion pre-tax
improvement in the fair values of insured credit derivatives. All other
components of pre-tax income contributed $199.3 million. For the third
quarter of 2009, the net loss to common shareholders was $727.8 million,
or $3.50 per share, compared with a net loss of $806.5 million, or $3.42
per share, for the third quarter of 2008. The net loss in the third
quarter of 2009 was driven by an $810.2 million pre-tax unrealized loss
on insured credit derivatives, $238.8 million in pre-tax loss and loss
adjustment expenses primarily related to the Company's insured exposures
to second-lien mortgage loan securitizations, and $171.4 million in
pre-tax realized losses and other-than-temporary impairments on
investments. Book value per share was $13.16 as of September 30, 2009
compared with $4.78 as of December 31, 2008. The increase in book value
is primarily due to the $1.2 billion pre-tax improvement in the fair
values of insured credit derivatives, an increase of $749.6 million in
Other Comprehensive Income (OCI) and a net $199.3 million from all other
components of pre-tax income.
"The third quarter's loss is a reminder that the impact of this
recession continues to be felt throughout the economy," said President
and Chief Financial Officer Chuck Chaplin. "Incurred losses in our
insurance business were above expectations and the same housing-related
performance trends drove our asset losses and impairments, but those
losses were partially offset by gains on debt repurchases in the
quarter. In addition, National's earnings were consistent with its
business plans and our third-party Asset Management business added $1.0
billion in assets under management in the third quarter and $4.7 billion
year-to-date. On the litigation front, we continue to be highly
confident that the New York State Insurance Department's decision to
permit the creation of National will ultimately be upheld," Mr. Chaplin
continued. "Our litigation against sponsors of structured finance
vehicles where the nature of collateral was misrepresented is ongoing
and we continue to expect substantial recoveries from our contractual
right to put back ineligible mortgages."
Segment Results
The following is a summary of results for the first nine months and
third quarter of 2009, as well as book value and ABV per share data:
$ in millions Structured Investment
except
per share data U.S. Public Finance and Management
Finance International Services Corporate Consolidated
9/30/09 ABV per $ 20.05 $ 23.18 $ (4.35) $ 0.17 $ 39.05
share
12/31/08 ABV $ 18.95 $ 25.17 $ (3.26) $ (0.80) $ 40.06
per share
9/30/09 BV per $ 13.02 $ 8.81 $ (8.84) $ 0.17 $ 13.16
share
12/31/08 BV per $ 10.97 $ 5.16 $ (10.53) $ (0.82) $ 4.78
share
YTD Pre-tax $ 365 $ 1,253 $ (96) $ (106) $ 1,422
Income
Q3 Pre-tax $ 132 $ (1,076) $ (61) $ (60) $ (1,066)
Income
U.S. Public Finance Results
The U.S. Public Finance Insurance segment's contribution to ABV per
share was $20.05 as of September 30, 2009 as compared with $18.95 (pro
forma) as of December 31, 2008. The increase in both book value and
ABV per share is the result of net income for the segment. The
contribution to the Company's book value per share attributable to the
U.S. Public Finance Insurance segment was $13.02 as of September 30,
2009 compared with $10.97 as of December 31, 2008 (pro forma).
The U.S. Public Finance insurance business is conducted in the National
subsidiary.
While National wrote virtually no new business in the nine months ended
September 30, 2009, the existing book of business performed as expected
and generated scheduled premiums earned of $314.0 million in the first
nine months of 2009 and $96.4 million in the third quarter, up 75
percent and 69 percent, respectively, from the first nine months and
third quarter of 2008. The growth was primarily the result of the
previously announced reinsurance transaction with Financial Guaranty
Insurance Corp. (FGIC) in 2008. Refunded premiums earned totaled $111.7
million for the first nine months of 2009, down 37 percent from $178.1
million in the first nine months of 2008. Refunded premiums earned were
$46.5 million in the third quarter of 2009, down 47 percent from $87.9
million in the third quarter of 2008.
Pre-tax net investment income for the U.S. Public Finance Insurance
segment was $152.0 million for the first nine months of 2009 and $60.9
million in the third quarter. National's investment portfolio averaged
Double-A credit quality and totaled $5.4 billion as of September 30,
2009. National's investment portfolio comprised 56 percent taxable
securities and 44 percent tax-exempt securities as of quarter-end.
Loss and loss adjustment expenses for the U.S. Public Finance Insurance
segment totaled $91.7 million in the first nine months of 2009 and $28.7
million in the third quarter. The losses in the first nine months of the
year were primarily attributable to an affordable housing transaction
and a student loan transaction.
Expenses in the U.S. Public Finance Insurance segment for the first nine
months of 2009 consisted of $89.9 million from the amortization of
deferred acquisition costs associated with ceding commissions paid to
MBIA Corp. and $39.4 million in operating expenses. In the third
quarter, the amortization of deferred acquisition costs totaled $33.1
million and operating expenses were $11.0 million.
National had statutory capital, surplus and contingency reserves
totaling $1.9 billion at September 30, 2009, consisting of capital and
surplus of $509.0 million and contingency reserves of $1.4 billion.
National's claims-paying resources totaled $5.5 billion as of September
30, 2009.
Structured Finance and International Insurance Results
The Structured Finance and International Insurance segment, which is
operated by MBIA Insurance Corp. and its subsidiaries, had a
contribution to ABV per share of $23.18 as of September 30, 2009, as
compared with $25.17 (pro forma) as of December 31, 2008. The
reduction in ABV per share reflects the impact of impairments on insured
credit derivatives and incurred losses on insured second-lien mortgage
loan transactions, partially offset by earnings from premiums and
investment income. The contribution to the Company's book value per
share attributable to the Structured Finance and International Insurance
segment was $8.81 as of September 30, 2009, compared with $5.16 as of
December 31, 2008 (pro forma). The increase in book value per
share reflects net income for the segment driven by unrealized net gains
(marks-to-market) on insured credit derivatives.
While there was no new business written in the Structured Finance and
International Insurance segment in the first nine months of 2009, the
existing book of business generated $273.3 million in scheduled premiums
earned in the first nine months of the year and $74.8 million in
scheduled premiums earned in the third quarter.
Pre-tax net investment income for the Structured Finance and
International Insurance segment was $255.3 million in the first nine
months of 2009 and $64.1 million in the third quarter. Both the third
quarter and first nine months of the year were impacted by a lower level
of invested assets due to claims payments and by MBIA Corp.'s decision
to enhance its liquidity by holding a greater proportion of cash.
Fee income for the Structured Finance and International Insurance
segment totaled $132.9 million in the first nine months of 2009 and
$42.5 million in the third quarter. Fees in the third quarter included
$33.1 million representing the amortization of ceding commission income
received by MBIA Corp. from National in connection with the Company's
Transformation.
Realized gains and other settlements on insured credit derivatives
totaled $33.2 million in the first nine months of 2009, as $93.1 million
in premiums and fees attributable to insured credit derivatives were
partially offset by $60.0 million in losses paid on insured credit
derivatives. For the third quarter, realized losses and other
settlements on insured credit derivatives totaled $30.5 million as
premiums and fees of $29.4 million only partially offset the losses paid.
The Structured Finance and International Insurance segment recognized
pre-tax unrealized net gains (marks-to-market) on insured credit
derivatives of $1.2 billion for the first nine months of 2009. In the
third quarter, pre-tax unrealized net losses on insured credit
derivatives totaled $810.2 million.
Unrealized mark-to-market losses on insured credit default swap (CDS)
contracts during the third quarter were comprised of three primary
factors. The factors which negatively impacted the unrealized
mark-to-market losses were MBIA's lower nonperformance risk and
enhancements to internal model inputs. While credit spreads and market
recovery rate assumptions for MBIA Corp. improved during the third
quarter, the impact on mark-to-market results is the opposite. As MBIA
Corp.'s market credit perception improves, the market values of its
obligations increase, resulting in unrealized losses. In addition, some
enhancements were made to the model inputs used to estimate the
mark-to-market to better reflect the current environment and available
market information. Those enhancements also increased unrealized
mark-to-market losses. A partial offset to these negative factors was
the tightening of credit spreads on referenced obligations in the
insured CDS contracts, reflecting the market's view of an improving
credit and liquidity profile.
Pre-tax net investment losses from other-than-temporary impairments in
the Structured Finance and International Insurance segment totaled $90.8
million in the first nine months of the year and $50.4 million in the
third quarter. In the first nine months and third quarter of 2009 an
additional $170.4 million and $85.0 million, respectively, of pre-tax
non-credit-related impairments on debt securities were charged directly
to equity as the impairments were attributable to reductions in market
value that are expected to reverse prior to the maturity or sale of the
securities.
The Structured Finance and International Insurance segment incurred
$111.5 million in loss and loss adjustment expenses in the first nine
months of 2009 and $210.1 million in loss and loss adjustment expenses
in the third quarter. The future payment streams are discounted at a
risk-free rate which varies according to the tenors and currencies of
the insured obligations. Loss and loss adjustment expenses for the nine
month period benefited from the previously announced $1.1 billion in
expected recoveries recorded in the second quarter in connection with
ineligible mortgages in certain insured second-lien residential mortgage
loan securitizations that are subject to a contractual obligation by the
seller/servicer to repurchase or replace the mortgages. This amount was
increased by approximately $75.6 million in the third quarter following
additional forensic reviews of defaulted mortgage loan files. The
Company is continuing to review and evaluate additional mortgage loans
in its insured RMBS pools and expects that there will be additional
mortgages in these or in other transactions that are subject to a
repurchase or replacement obligation by the seller/servicer.
While the Company believes that these ineligible mortgage loans are
subject to the repurchase or replacement obligations of the
seller/servicers, successful challenges of such determinations by the
seller/servicers could result in the Company recovering less than the
amount of its estimated recoveries. Alternatively, recoveries and
damages from legal actions that MBIA Corp. has filed against certain of
the seller/servicers could result in recoveries that are substantially
higher than the amounts currently recognized as recoveries.
As part of the ongoing review of the performance expectations for its
insured portfolio, the Company monitors and discloses a non-GAAP measure
that it refers to as "credit impairments." Credit impairments represent
the present value of future expected loss payments on insured credit
derivatives, net of recoveries. The Company estimated $634.5 million and
$250.4 million in incremental credit impairments on its multi-sector CDO
exposures in the first nine months and third quarter of 2009,
respectively. Although the Company's income statement includes the
change in fair value of insured credit derivatives, it regards the
changes in credit impairment estimates as critical information for
investors since the credit impairment estimates reflect the present
value of amounts it expects to pay in claims net of recoveries with
respect to insured credit derivatives. The future payment streams are
discounted at the statutory discount rate of 5.03 percent. Cumulative
credit impairments on insured credit derivatives since the Company began
estimating them in the fourth quarter of 2007 total $2.4 billion,
consisting of $594.3 million in losses paid through September 30, 2009
and $1.8 billion in estimated credit impairments as of the same date.
The estimated credit impairment amount on insured credit derivatives is
analogous to case loss reserves on financial guarantee policies as both
represent the present value of future expected loss payments net of
recoveries.
Other than the credit impairments, the Company expects the unrealized
gains and losses in fair value (marks-to-market) to be reversed prior to
or upon the maturities of the insured credit derivatives. As of
September 30, 2009, the Company carried a net derivative liability (the
cumulative negative mark-to-market on insured credit derivatives) of
$4.2 billion for all insured credit derivatives.
The Structured Finance and International Insurance segment's insured
portfolio declined in size during the first nine months of 2009, to
$215.4 billion as of September 30, 2009 from $232.9 billion as of
December 31, 2008. During the first nine months of 2009, 16 insured
credit derivative transactions representing $11.7 billion in net par
exposure either matured or were contractually terminated prior to
maturity without payments by MBIA Corp., including four transactions
representing $2.1 billion in net par exposure in the third quarter.
There were no material commutations of insured credit derivative
exposures requiring a payment by MBIA Corp. in the first nine months of
the year. The reduction in net par resulting from amortization,
terminations and maturities during the quarter was partially offset by
the reassumption of approximately $3.5 billion in previously ceded
exposure as a result of commutation agreements with four reinsurers.
Subsequent to the end of the third quarter, MBIA Corp. entered into a
commutation agreement with one of its counterparties related to two
insured credit derivative transactions that resulted in the elimination
of $1.2 billion in net par exposure in exchange for a one-time payment
of $93.8 million, net of reinsurance. The payment by MBIA Corp. was less
than the estimated credit impairment associated with these two
transactions. In addition, MBIA Corp. commuted a financial guarantee
transaction with net par outstanding of $839.9 million at a cost of
$65.3 million, net of reinsurance. While MBIA Corp. had not previously
recorded a loss in connection with this transaction, the commutation
payment eliminated potential near term liquidity risk as well as future
performance volatility. The impact of the payments and reductions in
exposure will be reflected in the Company's fourth quarter results.
The Structured Finance and International Insurance segment's gross
insurance operating expenses (prior to deferrals or the amortization of
previously deferred amounts) were $149.0 million in the first nine
months of 2009 and $44.1 million in the third quarter. Cost-reduction
efforts have resulted in lower compensation-related expenses, but the
segment has experienced increases in consulting, legal and loss
prevention expenses, a significant portion of which continue to be
related to efforts to obtain recoveries on improperly originated and
serviced transactions. As there was no new business written in the
segment during the first nine months of 2009, no expenses were deferred.
During the third quarter of 2009, MBIA Corp. paid a total of $638.4
million in net claims primarily in connection with its second-lien
residential mortgage exposures. As of September 30, 2009, MBIA Corp.'s
statutory balance sheet reflected $5.2 billion in cash and invested
assets including $1.5 billion of cash and short-term investments
available to meet demands on its liquidity. The Company believes that
MBIA Corp.'s liquidity resources will adequately provide for anticipated
cash outflows.
MBIA Corp. had statutory capital, surplus and contingency reserves
totaling $3.9 billion at September 30, 2009, consisting of capital and
surplus of $2.5 billion and contingency reserves of $1.4 billion. MBIA
Corp.'s claims-paying resources totaled $7.1 billion as of September 30,
2009.
Investment Management Services
The Investment Management Services (IMS) business' contribution to ABV
per share declined from ($3.26) at December 31, 2008 to ($4.35) as of
September 30, 2009 due to asset impairments and negative spread between
its earnings on assets and the cost of its liabilities. Its contribution
to book value per share improved from ($10.53) as of December 31, 2008
to ($8.84) as of September 30, 2009. The improvement resulted from a
reduction in unrealized losses in OCI, partially offset by pre-tax
other-than-temporary impairments on structured investments in the ALM
investment portfolio.
Ending assets under management in the Advisory Services business were
$35.4 billion at September 30, 2009, up 1 percent from $34.9 billion as
of June 30, 2009, and up 11 percent from $31.9 billion as of year-end
2008. Excluding assets managed for affiliates, assets under management
in the Advisory Services business increased 4 percent in the third
quarter of 2009 and 23 percent in the first nine months of the year.
The ALM and conduit businesses continued to wind-down throughout the
first nine months of 2009. As of September 30, 2009, the Company had
$8.4 billion in outstanding guaranteed investment contract, medium-term
note and repurchase agreement liabilities (all at book value) related to
its ALM business, down from $11.8 billion as of December 31, 2008.
Liabilities held by third parties declined from $9.2 billion at December
31, 2008 to $5.8 billion at September 30, 2009. Total invested assets in
the ALM business were $7.4 billion as of September 30, 2009, excluding
unrealized losses, of which $1.3 billion consisted of cash and
short-term investments. The Company believes that its liquidity
resources, along with cash flows generated from the ALM assets, will
adequately provide for the cash outflows and collateral posting
requirements of the ALM business, irrespective of ratings. Assets under
management in the conduit business totaled $2.0 billion as of September
30, 2009, down from $2.4 billion as of December 31, 2008. Conduit assets
declined due to the maturity and scheduled amortization of transactions
and the repurchase of medium-term notes.
For the IMS operation, which comprises the Advisory Services business
and the wind-down ALM and conduit businesses, the third quarter pre-tax
net loss on financial instruments at fair value and foreign exchange was
$69.0 million, pre-tax net realized losses were $35.4 million and
pre-tax net investment losses from other-than-temporary impairments
totaled $42.9 million. An additional $20.8 million of pre-tax
non-credit-related impairments on debt securities were charged directly
to equity. The pre-tax net loss on financial instruments at fair value
and foreign exchange was primarily the result of losses on interest rate
swaps in the ALM portfolio and exchange rate movements on non-U.S.
dollar denominated liabilities, while the investment losses primarily
resulted from the recognition of other-than-temporary impairments to
securities held in the ALM asset portfolio. There were no impairments to
conduit assets. Pre-tax net gains on medium-term note repurchases
totaled $118.4 million in the third quarter.
Corporate Segment
The Corporate segment's contribution to consolidated ABV per share was
$0.17 as of September 30, 2009, as compared with $(0.80) as of December
31, 2008. The book value per share attributable to the Corporate segment
was $0.17 as of September 30, 2009, compared with $(0.82) as of December
31, 2008.
As of September 30, 2009 the Corporate segment of the holding company
had $408.8 million in cash and short-term investments, an amount
sufficient to meet approximately the next 2.5 years of debt service and
operating expense requirements.
Conference Call
The Company will host a webcast and conference call for investors
tomorrow, Tuesday, November 10, 2009 at 8:00 AM (EST) to discuss its
third quarter 2009 financial results and other matters relating to the
Company. The webcast and conference call will consist of brief remarks
followed by a question and answer session.
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 33556043. A
live webcast of the conference call will also be accessible on www.mbia.com.
A replay of the call will be available approximately two hours after the
completion of the call on November 10 until 5:00 p.m. on November 24 by
dialing (800) 642-1687 in the U.S. or (706) 645-9291 from outside the
U.S. The replay call code is also 33556043. In addition, a recording of
the call will be available on the Company's Web site approximately two
hours after the completion of the call.
Forward-Looking Statements
This release includes statements that are not historical or current
facts and are "forward-looking statements" made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of
1995. The words "believe," "anticipate," "project," "plan," "expect,"
"intend," "will likely result," "looking forward" or "will continue,"
and similar expressions identify forward-looking statements. These
statements are subject to certain risks and uncertainties that could
cause actual results to differ materially from historical earnings and
those presently anticipated or projected, including, among other risks,
the possibility that the Company will experience severe losses due to
increased deterioration in its insurance portfolios; significant
fluctuations in liquidity and asset values with the global credit
markets; the Company's ability to fully implement its Strategic Plan as
outlined in the Company's most recent Annual Report on Form 10-K;
further changes in the Company's credit ratings; and changes in general
economic and competitive conditions. These and other factors that could
affect financial performance or could cause actual results to differ
materially from estimates contained in or underlying the Company's
forward-looking statements are discussed under the "Risk Factors"
section in MBIA Inc.'s most recent Annual Report on Form 10-K, which may
be updated or amended in the Company's subsequent filings with the
Securities and Exchange Commission. The Company cautions readers not to
place undue reliance on any such forward-looking statements, which speak
only to their respective dates. The Company undertakes no obligation to
publicly correct or update any forward-looking statement if it later
becomes aware that such result is not likely to be achieved.
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 and Sydney. 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.
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.
Credit Impairments: Although MBIA's income statement includes the
change in fair value of insured credit derivatives, the Company believes
the estimation of credit impairments, which are the present value of
future expected loss and loss adjustment expense payments, net of
recoveries, on insured credit derivatives, provides additional important
information for investors. Other than the impairments, the Company
expects the gains and losses in fair value of insured credit derivatives
to reverse over time.
September 30, 2009 December 31, 2008
Assets
Investments:
Fixed-maturity securities held as
available-for-sale, at fair value
(amortized cost $11,330,409 and
$13,245,574) (includes hybrid
financial instruments at fair value $9,955,464 $11,223,716
$30,710 and $25,498)
Fixed-maturity securities held as
trading,
at fair value (amortized cost $115,946) 123,467 -
Investments held-to-maturity, at
amortized cost
(fair value $2,405,860 and $3,109,248) 2,861,353 3,156,969
Investments pledged as collateral, at
fair value
(amortized cost $652,992 and $1,101,929) 617,249 845,887
Short-term investments held as
available-for-sale, at fair value
(amortized cost $2,895,514 and 2,895,530 4,693,283
$4,728,090)
Short-term investments held-to-maturity,
at amortized cost (fair value
$605,650 and $485,857) 1,032,388 498,865
Other investments (includes investments 376,150 220,412
at fair value $373,097 and $216,805)
Total investments 17,861,601 20,639,132
Cash and cash equivalents 1,645,453 2,279,783
Accrued investment income 111,558 201,688
Premiums receivable 2,059,389 7,744
Deferred acquisition costs 477,429 560,632
Prepaid reinsurance premiums 367,110 216,609
Insurance loss recoverable 2,207,625 458,512
Reinsurance recoverable on paid and 53,440 173,548
unpaid losses
Goodwill 76,938 76,938
Property and equipment (net of 84,349 105,364
accumulated depreciation)
Receivable for investments sold 203,093 77,464
Derivative assets 780,795 911,188
Current income taxes 75,035 240,871
Deferred income taxes, net 1,309,423 2,374,164
Other assets 539,822 706,812
Total assets $27,853,060 $29,030,449
Liabilities and Equity
Liabilities:
Unearned premium revenue $ 5,121,978 $ 3,424,402
Loss and loss adjustment expense reserves 1,322,873 1,557,884
Reinsurance premiums payable 208,422 8,672
Investment agreements 2,881,757 4,666,944
Medium-term notes (includes financial
instruments carried at
fair value $142,017 and $176,261) 3,932,747 6,339,527
Variable interest entity notes 2,668,798 1,791,597
Securities sold under agreements to 501,961 802,938
repurchase
Long-term debt 2,718,076 2,396,059
Deferred fee revenue 88,000 44,989
Payable for investments purchased 303,949 239
Derivative liabilities 4,988,759 6,470,874
Other liabilities 362,171 504,306
Total liabilities 25,099,491 28,008,431
Equity:
Common stock 274,837 273,200
Additional paid-in capital 3,056,500 3,050,506
Retained earnings 2,633,690 1,629,187
Accumulated other comprehensive loss (1,044,568) (1,775,954)
Treasury stock (2,183,668) (2,182,519)
Total shareholders' equity of MBIA Inc. 2,736,791 994,420
Preferred stock of subsidiary 16,778 27,598
Total equity 2,753,569 1,022,018
Total liabilities and equity $27,853,060 $29,030,449
MBIA INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS (Unaudited)
(in thousands)
Structured
U.S. Finance and
Public International Investment
Finance
Three months ended Insurance Insurance Management Intercompany
September 30, 2009
(National) (MBIA Corp.) Services Corporate Subtotal Eliminations Consolidated
Revenues:
Premiums earned:
Scheduled premiums $ 96,363 $ 74,750 $ - $ - $ 171,113 $ (26,699) $ 144,414
earned
Refunded premiums 46,494 143 - - 46,637 (9,803) 36,834
earned
Total premiums 142,857 74,893 - - 217,750 (36,502) 181,248
earned
Net investment 60,913 64,067 47,102 4,293 176,375 (19,600) 156,775
income
Fees and 1,001 42,529 11,770 - 55,300 (41,009) 14,291
reimbursements
Change in fair value
of insured
derivatives:
Realized gains
(losses) and other 200 (30,482) - - (30,282) - (30,282)
settlements on
insured derivatives
Unrealized gains
(losses) on insured (11) (810,178) - - (810,189) - (810,189)
derivatives
Net change in fair
value of insured 189 (840,660) - - (840,471) - (840,471)
derivatives
Net gains (losses)
on financial
instruments at fair - 26,495 (68,988) (44,803) (87,296) - (87,296)
value and foreign
exchange
Net realized gains (330) (44,644) (35,358) 2,211 (78,121) - (78,121)
(losses)
Investment losses
related to
other-than-temporary
impairments:
Investment losses
related to - (135,403) (63,691) - (199,094) - (199,094)
other-than-temporary
impairments
Other-than-temporary
impairments
recognized in - 85,000 20,814 - 105,814 - 105,814
accumulated other
comprehensive loss
Net investment
losses related to - (50,403) (42,877) - (93,280) - (93,280)
other-than-temporary
impairments
Net gains on
extinguishment of - 13,059 113,035 602 126,696 - 126,696
debt
Total revenues 204,630 (714,664) 24,684 (37,697) (523,047) (97,111) (620,158)
Expenses:
Loss and LAE 28,708 210,052 - - 238,760 - 238,760
incurred
Amortization of
deferred acquisition 33,122 52,806 - - 85,928 (66,032) 19,896
costs
Operating 11,015 44,114 22,288 5,440 82,857 (5,744) 77,113
Interest - 55,189 63,721 16,561 135,471 (25,335) 110,136
Total expenses 72,845 362,161 86,009 22,001 543,016 (97,111) 445,905
Pre-tax income 131,785 (1,076,825) (61,325) (59,698) (1,066,063) - (1,066,063)
(loss)
Benefit for income (341,530)
taxes
Net loss (724,533)
Preferred stock
dividends of 3,271
subsidiary
Net loss available
to common $ (727,804)
shareholders
Investment
Three months ended Management Intercompany
September 30, 2008
Insurance Services Corporate Subtotal Eliminations Consolidated
Revenues:
Premiums earned:
Scheduled premiums $ 148,405 $ - $ - $ 148,405 $ (7,356) $ 141,049
earned
Refunded premiums 93,696 - - 93,696 - 93,696
earned
Total premiums 242,101 - - 242,101 (7,356) 234,745
earned
Net investment 146,688 199,257 7,451 353,396 1,023 354,419
income
Fees and 3,643 11,155 - 14,798 (2,678) 12,120
reimbursements
Change in fair value
of insured
derivatives:
Realized gains
(losses) and other 34,263 - - 34,263 - 34,263
settlements on
insured derivatives
Unrealized gains
(losses) on insured 104,818 - - 104,818 - 104,818
derivatives
Net change in fair
value of insured 139,081 - - 139,081 - 139,081
derivatives
Net gains (losses)
on financial
instruments at fair (6,819) (107,955) (119,426) (234,200) - (234,200)
value and foreign
exchange
Net realized gains 25,992 (314,395) (3,838) (292,241) - (292,241)
(losses)
Investment losses
related to
other-than-temporary
impairments:
Investment losses
related to - (134,058) - (134,058) - (134,058)
other-than-temporary
impairments
Other-than-temporary
impairments
recognized in - - - - - -
accumulated other
comprehensive loss
Net investment
losses related to - (134,058) - (134,058) - (134,058)
other-than-temporary
impairments
Net gains on
extinguishment of 9,980 205,394 24,524 239,898 - 239,898
debt
Total revenues 560,666 (140,602) (91,289) 328,775 (9,011) 319,764
Expenses:
Loss and LAE 982,514 - - 982,514 - 982,514
incurred
Amortization of
deferred acquisition 24,618 - - 24,618 - 24,618
costs
Operating 63,205 25,724 10,796 99,725 (4,714) 95,011
Interest 48,083 201,937 18,488 268,508 (4,297) 264,211
Total expenses 1,118,420 227,661 29,284 1,375,365 (9,011) 1,366,354
Pre-tax loss (557,754) (368,263) (120,573) (1,046,590) - (1,046,590)
Benefit for income (240,111)
taxes
Net loss $ (806,479)
MBIA INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS (Unaudited)
(in thousands)
Structured
U.S. Finance and
Public International Investment
Finance
Nine months ended Insurance Insurance Management Intercompany
September 30, 2009
(National) (MBIA Corp.) Services Corporate Subtotal Eliminations Consolidated
Revenues:
Premiums earned:
Scheduled premiums $ 314,035 $ 273,328 $ - $ - $ 587,363 $ (94,848) $ 492,515
earned
Refunded premiums 111,669 2,178 - - 113,847 (18,497) 95,350
earned
Total premiums 425,704 275,506 - - 701,210 (113,345) 587,865
earned
Net investment 152,041 255,315 169,458 15,622 592,436 (67,471) 524,965
income
Fees and 1,578 132,897 35,873 - 170,348 (115,031) 55,317
reimbursements
Change in fair value
of insured
derivatives:
Realized gains
(losses) and other 386 33,150 - - 33,536 - 33,536
settlements on
insured derivatives
Unrealized gains
(losses) on insured (178) 1,222,939 - - 1,222,761 - 1,222,761
derivatives
Net change in fair
value of insured 208 1,256,089 - - 1,256,297 - 1,256,297
derivatives
Net gains (losses)
on financial
instruments at fair - 38,991 91,717 (56,246) 74,462 - 74,462
value and foreign
exchange
Net realized gains 6,689 (35,718) 10,214 5,105 (13,710) - (13,710)
(losses)
Investment losses
related to
other-than-temporary
impairments:
Investment losses
related to - (261,133) (525,368) - (786,501) - (786,501)
other-than-temporary
impairments
Other-than-temporary
impairments
recognized in - 170,369 179,197 - 349,566 - 349,566
accumulated other
comprehensive loss
Net investment
losses related to - (90,764) (346,171) - (436,935) - (436,935)
other-than-temporary
impairments
Net gains on
extinguishment of - 13,547 231,850 2,542 247,939 5,158 253,097
debt
Total revenues 586,220 1,845,863 192,941 (32,977) 2,592,047 (290,689) 2,301,358
Expenses:
Loss and LAE 91,706 111,468 - - 203,174 - 203,174
incurred
Amortization of
deferred acquisition 89,855 168,827 - - 258,682 (192,019) 66,663
costs
Operating 39,379 148,973 60,522 20,985 269,859 (20,256) 249,603
Interest - 163,161 228,165 52,135 443,461 (83,572) 359,889
Total expenses 220,940 592,429 288,687 73,120 1,175,176 (295,847) 879,329
Pre-tax income 365,280 1,253,434 (95,746) (106,097) 1,416,871 5,158 1,422,029
(loss)
Provision for income 547,900
taxes
Net income 874,129
Preferred stock
dividends of 10,484
subsidiary
Net income available
to common $ 863,645
shareholders
Investment
Nine months ended Management Intercompany
September 30, 2008
Insurance Services Corporate Subtotal Eliminations Consolidated
Revenues:
Premiums earned:
Scheduled premiums $ 458,418 $ - $ - $ 458,418 $ (24,213) $ 434,205
earned
Refunded premiums 189,248 - - 189,248 - 189,248
earned
Total premiums 647,666 - - 647,666 (24,213) 623,453
earned
Net investment 447,388 802,293 22,315 1,271,996 14,833 1,286,829
income
Fees and 5,912 36,240 - 42,152 (10,184) 31,968
reimbursements
Change in fair value
of insured
derivatives:
Realized gains
(losses) and other 102,325 - - 102,325 - 102,325
settlements on
insured derivatives
Unrealized gains
(losses) on insured (147,972) - - (147,972) - (147,972)
derivatives
Net change in fair
value of insured (45,647) - - (45,647) - (45,647)
derivatives
Net gains (losses)
on financial
instruments at fair 155,239 (117,935) (108,157) (70,853) - (70,853)
value and foreign
exchange
Net realized gains 68,106 (684,068) (2,970) (618,932) - (618,932)
(losses)
Investment losses
related to
other-than-temporary
impairments:
Investment losses
related to - (793,837) - (793,837) - (793,837)
other-than-temporary
impairments
Other-than-temporary
impairments
recognized in - - - - - -
accumulated other
comprehensive loss
Net investment
losses related to - (793,837) - (793,837) - (793,837)
other-than-temporary
impairments
Net gains on
extinguishment of 9,980 284,611 24,524 319,115 - 319,115
debt
Total revenues 1,288,644 (472,696) (64,288) 751,660 (19,564) 732,096
Expenses:
Loss and LAE 1,292,466 - - 1,292,466 - 1,292,466
incurred
Amortization of
deferred acquisition 63,147 - - 63,147 - 63,147
costs
Operating 150,508 66,095 22,849 239,452 (14,662) 224,790
Interest 141,494 767,597 58,578 967,669 (4,902) 962,767
Total expenses 1,647,615 833,692 81,427 2,562,734 (19,564) 2,543,170
Pre-tax loss $ (358,971) $ $ $ $ - (1,811,074)
(1,306,388) (145,715) (1,811,074)
Benefit for income (298,222)
taxes
Net loss $
(1,512,852)
MBIA INC. AND SUBSIDIARIES
Components of Adjusted Book Value per Share
September 30, 2009
National MBIA Investment
Public
Finance Insurance Management
Guarantee
Corporation Corporation Services Corporate Consolidated
Reported Book Value $13.02 $8.81 ($8.84) $0.17 $13.16
Cumulative
unrealized loss
Plus: on insured 0.00 13.27 0.00 0.00 13.27
credit
derivatives,
after tax
Cumulative
impairments on
Less: insured credit 0.00 (5.76) 0.00 0.00 (5.76)
derivatives,
after tax
Unrealized
Reverse: (gains) losses (0.37) 0.90 4.89 0.00 5.42
included in OCI
Analytic Book Value 12.65 17.22 (3.95) 0.17 26.09
Net unearned
Plus: premium 8.51 6.87 0.00 0.00 15.38
revenue, after
tax(1) (2)
Asset/Liability
Plus: products 0.00 0.00 (0.40) 0.00 (0.40)
adjustment
Plus: Loss provision (1.11) (0.91) 0.00 0.00 (2.02)
(3)
Adjusted Book Value(4) $20.05 $23.18 ($4.35) $0.17 $39.05
December 31, 2008
National MBIA Investment
Public
Finance Insurance Management
Guarantee
Corporation Corporation Services Corporate Consolidated
Reported Book Value $10.97 $5.16 ($10.53) ($0.82) $4.78
Cumulative
unrealized loss
Plus: on insured 0.00 16.92 0.00 0.00 16.92
credit
derivatives,
after tax
Cumulative
impairments on
Less: insured credit 0.00 (3.78) 0.00 0.00 (3.78)
derivatives,
after tax
Unrealized
Reverse: (gains) losses (0.02) 1.18 7.85 0.02 9.03
included in OCI
Analytic Book Value 10.95 19.48 (2.68) (0.80) 26.95
Net unearned
Plus: premium 9.42 6.38 0.00 0.00 15.80
revenue, after
tax(1) (2)
Asset/Liability
Plus: products 0.00 0.00 (0.58) 0.00 (0.58)
adjustment
Plus: Loss provision (1.42) (0.69) 0.00 0.00 (2.11)
(3)
Adjusted Book Value(4) $18.95 $25.17 ($3.26) ($0.80) $40.06
(1) The amounts consist of Financial Guarantee premiums and Insured Derivative
revenue.
At September 30, 2009 the discount rate on Financial Guarantee installment
premiums was the risk free rate as defined by accounting principles for Financial
(2) Guarantee insurance contracts and the discount rate on Insured Derivative
installment revenue was 5.03%. At December 31, 2008 the discount rate was 5.03%
for both Financial Guarantee and Insured Derivative installments.
(3) The loss provision is calculated by applying 12% to net unearned premiums and net
unearned Insured Derivative revenue on an after-tax basis.
(4) A non-GAAP measure.
Net Income (Loss) per
Common Share:
Three Months Ended Nine Months Ended
September 30 September 30
2009 2008 2009 2008
Basic ($3.50) ($3.42) $4.15 ($6.87)
Diluted ($3.50) ($3.42) $4.15 ($6.87)
Weighted-Average Number
of Common Shares
Outstanding:
Basic 208,219,324 235,706,851 208,278,589 220,137,758
Diluted 208,219,324 235,706,851 208,278,589 220,137,758
INSURANCE OPERATIONS
Selected Financial Data Computed on a Statutory Basis
(dollars in millions)
National Public Finance Guarantee Corporation
Proforma
September 30, 2009 December 31, 2008
Capital and surplus $ 509.0 $ 416.0
Contingency reserve 1,351.8 1,357.0
Capital base 1,860.8 1,773.0
Unearned premium reserve 3,216.5 3,479.0
Present value of installment premiums (1) 286.5 298.0
Premium resources (2) 3,503.0 3,777.0
Loss and loss adjustment expense reserves 172.8 179.0
Total claims-paying resources $ 5,536.6 $ 5,729.0
Net debt service outstanding $844,431.4 $908,087.0
Capital ratio (3) 454:1 512:1
Claims-paying ratio (4) 196:1 206:1
Proforma
MBIA Insurance Corporation September 30, 2009
December 31, 2008
Capital and surplus $ 2,478.8 $ 3,087.0
Contingency reserve 1,432.5 1,238.0
Capital base 3,911.3 4,325.0
Unearned premium reserve 753.9 691.0
Present value of installment premiums (1) 1,936.4 2,088.0
Premium resources (2) 2,690.3 2,779.0
Loss and loss adjustment expense reserves 545.8 1,692.0
Total claims-paying resources $ 7,147.4 $ 8,796.0
Net debt service outstanding $281,217.1 $290,261.0
Capital ratio (3) 72:1 67:1
Claims-paying ratio (4) 45:1 37:1
(1) At September 30, 2009 and December 31, 2008 the discount rate was 5.03%.
(2) The amounts consist of Financial Guarantee premiums and Insured Derivative
premiums.
(3) Net debt service outstanding divided by the capital base.
Net debt service outstanding divided by the sum of the capital base,
(4) unearned premium reserve (after-tax), present value of installment premiums
(after-tax) and loss and loss adjustment expense.
Source: MBIA Inc.
Contact: MBIA Inc., Media:
Kevin Brown, +1-914-765-3648
or
MBIA Inc., Media:
Elizabeth James, +1-914-765-3889
or
MBIA Inc., Investor Relations:
Greg Diamond +1-914-765-3190