-- MBIA Inc.'s Adjusted Book Value (ABV), a non-GAAP measure, was $36.35
per share at December 31, 2009 compared with $40.06 per share at
December 31, 2008.
-- MBIA Inc. recorded net income available to common shareholders of $623.2
million, or $2.99 per share, for the full year 2009, compared with a net
loss of $2.7 billion, or $12.11 per share, in 2008.
-- MBIA Inc. recorded a net loss to common shareholders of $242.0 million,
or $1.16 per share, for the fourth quarter of 2009, compared with a net
loss of $1.2 billion, or $5.21 per share, for the fourth quarter of
2008.
-- National Public Finance Guarantee Corporation (National) and MBIA
Insurance Corporation (MBIA Corp.), MBIA Inc.'s primary insurance
operating subsidiaries, had statutory capital (consisting of
policyholders' surplus and contingency reserves) totaling $2.0 billion
and $3.5 billion, respectively, as of December 31, 2009.
-- Cash and short-term investments at National and MBIA Corp. totaled
$233.8 million and $1.1 billion, respectively, as of December 31, 2009.
Cash and short-term investments at the Corporate segment of the holding
company totaled $332.4 million at year-end, while cash and short-term
investments in the wind-down Asset Liability Management (ALM) business
totaled $1.2 billion at December 31, 2009.
ARMONK, N.Y.--(BUSINESS WIRE)--
MBIA Inc. (NYSE: MBI) (the Company) today reported Adjusted Book Value
(ABV) per share (a non-GAAP measure defined in the attached Explanation
of Non-GAAP Financial Measures) of $36.35 as of December 31, 2009,
compared with $40.06 as of December 31, 2008. ABV declined in 2009 as
increased credit impairments on insured credit derivatives, insurance
incurred losses and other-than-temporary impairments of invested assets
outpaced earnings from all other sources.
Net income available to common shareholders for 2009 was $623.2 million,
or $2.99 per share, compared with a net loss of $2.7 billion, or $12.11
per share, for 2008. In 2009, net income was driven by a $1.7 billion
pre-tax unrealized gain on insured credit derivatives, $746.3 million in
premiums earned, $655.5 million in net investment income and $269.5
million of net gains on the extinguishment of debt. These amounts were
partially offset by $873.0 million in operating expenses, deferred
acquisition cost amortization and interest expense, $864.1 million in
loss and loss adjustment expenses and $467.2 million in
other-than-temporary impairments of invested assets. Book value per
share was $12.66 as of December 31, 2009 compared with $4.78 as of
December 31, 2008. The increase in book value is primarily due to the
$1.7 billion pre-tax improvement in the fair values of insured credit
derivatives and an increase of $835.1 million in Other Comprehensive
Income (OCI).
"In 2009, MBIA continued to honor all its commitments and managed its
capital and liquidity for long-term health," said MBIA President and
Chief Financial Officer Chuck Chaplin. "Our structured finance and
international insurance business continued to be adversely impacted by
large volumes of ineligible mortgages in our insured securitizations.
National Public Finance Guarantee Corp. is ready and willing to wrap new
domestic public finance business and expects to do so once litigation
around its formation is resolved," Mr. Chaplin continued. "We're pleased
that our asset management advisory business attracted new customers in
2009, boosting assets under management from third-party clients by 25
percent."
Full Year 2009 Segment Results
The following is a summary of results by segment for the full year 2009,
as well as book value and ABV per share data:
$ in millions U.S. Public Structured Investment
except per Finance Finance and Management Corporate Consolidated
share data International Services
12/31/09 ABV $ 20.70 $ 20.79 $ (4.12 ) $ (1.02 ) $ 36.35
per share
12/31/08 ABV $ 18.95 $ 25.17 $ (3.26 ) $ (0.80 ) $ 40.06
per share
Change in ABV $ 1.75 $ (4.38 ) $ (0.86 ) $ (0.22 ) $ (3.71 )
per share
12/31/09 BV per $ 13.52 $ 7.75 $ (7.59 ) $ (1.02 ) $ 12.66
share
12/31/08 BV per $ 10.97 $ 5.16 $ (10.53 ) $ (0.82 ) $ 4.78
share
Change in BV $ 2.55 $ 2.59 $ 2.94 $ (0.20 ) $ 7.88
per share
2009 Pre-tax $ 551 $ 824 $ (90 ) $ (70 ) $ 1,217
Income
2008 Pre-tax N/A N/A N/A N/A $ (3,727 )
Income
U.S. Public Finance Results
In February of 2009, the Company established a separate U.S. public
finance financial guarantee insurance company, National Public Finance
Guarantee Corporation (National), within the MBIA Inc. group by
separating its domestic public finance business from the remaining
insured portfolio of MBIA Corp. (the Transformation). As a result of the
Transformation, the U.S. public finance insurance business is conducted
in the National subsidiary. National's contribution to ABV per share was
$20.70 as of December 31, 2009 as compared with $18.95 (pro forma)
as of December 31, 2008. The contribution to the Company's book value
per share attributable to National was $13.52 as of December 31, 2009
compared with $10.97 as of December 31, 2008 (pro forma). The
increases in both ABV and Book Value per share are the result of net
income for the segment.
National's existing book of business generated scheduled premiums earned
of $409.1 million in 2009, up 50 percent from $271.9 million in 2008.
The growth was primarily the result of the previously announced
reinsurance transaction with Financial Guaranty Insurance Corp. (FGIC)
which closed in September 2008. Refunded premiums earned totaled $153.6
million in 2009, down 34 percent from $234.1 million in 2008.
Pre-tax net investment income for National was $217.1 million in 2009.
National's fee income totaled $15.6 million in 2009, and included $14.5
million in payments from reinsurers related to the commutation of
certain reinsurance agreements and $1.1 million in waiver, consent and
other administrative fees associated with the ongoing management of the
insured portfolio. The payments from reinsurers represent amounts paid
to National over and above the return of unearned premium and loss
reserves upon the commutation of these reinsurance agreements and the
reassumption of the underlying exposure.
Loss and loss adjustment expenses for National totaled $93.9 million in
2009. The losses were primarily attributable to an affordable housing
transaction and a student loan transaction.
National's expenses for 2009 consisted of $116.1 million from the
amortization of deferred acquisition costs associated with ceding
commissions paid to MBIA Corp. and $58.4 million in operating expenses.
National had statutory capital of $2.0 billion and claims-paying
resources totaling $5.5 billion at December 31, 2009. National's
investment portfolio remains highly liquid, averaging Double-A credit
quality and totaling $5.3 billion as of December 31, 2009, up from $5.2
billion at the time of Transformation in February 2009. The average
asset allocation of National's investment portfolio in 2009 was 51
percent taxable securities and 49 percent tax-exempt securities.
National's insured portfolio totaled $508.0 billion in net par
outstanding at year-end.
National continues to maintain one of the largest staffs of municipal
credit analysts in the industry and to provide services to the municipal
bond investment community. It has published four Sector Studies in
recent months, and is providing individual credit information through
Ipreo's Municipal Information Center (Muni IC).
The Company's application to redomesticate National to New York was
approved by the New York State Insurance Department effective as of
December 1, 2009.
Structured Finance and International Insurance Results
The Structured Finance and International Insurance segment, which is
operated by MBIA Corp. and its subsidiaries, had a contribution to ABV
per share of $20.79 as of December 31, 2009, as compared with $25.17 (pro
forma) as of December 31, 2008. The contribution to the Company's
book value per share attributable to the Structured Finance and
International Insurance segment was $7.75 as of December 31, 2009,
compared with $5.16 as of December 31, 2008 (pro forma). The
reduction in ABV per share reflects the impact of impairments on insured
credit derivatives, incurred losses primarily driven by insured second
lien mortgage loan transactions and impairments of invested assets in
Variable Interest Entities (VIEs). Book Value per share increased as a
result of the impact of lower collateral spreads and wider MBIA credit
default swap (CDS) spreads on the mark-to-market on insured credit
derivatives.
The Structured Finance and International Insurance segment's existing
book of business generated $332.9 million in total premiums earned in
2009, down 11 percent from $374.3 million in 2008. Pre-tax net
investment income was $287.2 million for 2009, as MBIA Corp. held a high
proportion of cash to enhance its liquidity. Fee income totaled $234.1
million in 2009, including $70.6 million in non-recurring fees related
to reinsurance commutations. Pre-tax realized losses and other
settlements on insured credit derivatives totaled $167.0 million in
2009. Pre-tax unrealized net gains (marks-to-market) on insured credit
derivatives were $1.7 billion in 2009 as gains from narrower collateral
spreads, wider MBIA CDS spreads and transaction terminations were only
partially offset by losses from enhancements to valuation models and
inputs that produced lower valuations, subordination erosion, lower
recovery rates and collateral rating downgrades. The segment also
recorded pre-tax net realized losses totaling $73.2 million driven by
impairments to goodwill and other assets and $102.2 million in pre-tax
net investment losses from other-than-temporary impairments to invested
assets in consolidated VIEs. Operating expenses were $178.4 million in
2009, reflecting lower compensation expenses but increased consulting,
legal and loss prevention expenses. The amortization of previously
deferred expenses totaled $216.5 million in 2009 while interest expense
was $224.0 million, driven by interest on MBIA Corp.'s Surplus Notes and
VIEs.
The Structured Finance and International Insurance segment incurred
$770.2 million in loss and loss adjustment expenses in 2009. The $770.2
million of loss and loss adjustment expenses comprised $2.8 billion of
paid and expected future losses, net of $2.0 billion of expected
reimbursements and recoveries. Since the fourth quarter of 2007, MBIA
Corp. has incurred losses of $2.7 billion on its direct RMBS exposures
and made payments totaling $3.8 billion net of reinsurance on these
exposures.
Included in the Company's $2.0 billion insurance loss recovery estimate
are approximately $1.5 billion in expected recoveries recorded in
connection with ineligible mortgages in certain insured second-lien
residential mortgage loan securitizations that are subject to
contractual obligations by the seller/servicers to repurchase or replace
the mortgages. The Company's estimates for expected recoveries related
to ineligible mortgages increased from $1.2 billion as of September 30,
2009 and reflect a probability distribution of net cash inflows
resulting from the repurchase the of ineligible mortgages by the
seller/servicers that takes into account the uncertainty of such
expected recoveries. The Company is continuing to review and evaluate
additional mortgage loans in its insured RMBS pools and expects that
there will be a substantial number of additional mortgages in these or
in other transactions that are subject to repurchase or replacement
obligations by the seller/servicer.
While the Company believes that these ineligible mortgage loans must be
repurchased or replaced, successful challenges of such determinations by
the seller/servicers could result in the Company recovering less than
the amount of its estimated recoveries. Alternatively, further mortgage
file forensic reviews or statistical sampling and extrapolation to the
pools as a whole 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
(defined in the attached Explanation of Non-GAAP Financial Measures)
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. Such amounts are included in the
statutory results of the Company's insurance subsidiaries. The Company
estimated $777.4 million in additional credit impairments on its
multi-sector CDO exposures in 2009. Although the Company's income
statement includes the change in fair value (mark-to-market) 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 values of amounts it expects to
pay in claims net of recoveries with respect to insured credit
derivatives. Cumulative credit impairments on insured credit derivatives
since the Company began estimating them in the fourth quarter of 2007
total $2.5 billion, consisting of $838.4 million in losses paid through
December 31, 2009 and $1.7 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. The Company has recorded $1.8 billion in
estimated loss and loss adjustment expense reserves for these insured
credit derivatives in its statutory financial statements.
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 December
31, 2009, the Company carried a net derivative liability (the cumulative
negative mark-to-market on insured credit derivatives) of $3.8 billion
for all insured credit derivatives.
During 2009, 20 insured credit derivative transactions representing
$13.9 billion in net par exposure either matured or were contractually
terminated prior to maturity without payments by MBIA Corp. One
additional credit derivative transaction was terminated following a
payment by MBIA Corp. and receipt of the underlying reference asset. As
previously disclosed, 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. MBIA Corp.
also 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 Structured Finance and International Insurance segment's insured
portfolio declined in size during 2009, to $204.5 billion as of December
31, 2009 from $232.9 billion as of December 31, 2008. The reduction in
net par resulting from amortization, terminations and maturities during
the year was partially offset by the reassumption of approximately $5.8
billion in previously ceded exposure as a result of commutation
agreements with nine reinsurers.
During 2009, MBIA Corp. paid a total of $2.5 billion in net claims
primarily in connection with its second-lien residential mortgage
exposures. As of December 31, 2009, MBIA Corp.'s statutory balance sheet
reflected $4.4 billion in cash and invested assets including $1.1
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 of $3.5 billion and claims-paying
resources totaling $6.5 billion at December 31, 2009.
Investment Management Services
As previously announced, the Company has restructured its asset
management subsidiary, now known as Cutwater Asset Management
(Cutwater). Going forward, Cutwater will focus exclusively on its
fee-for-service third-party investment advisory business, maintaining a
separate operating structure and reporting its financial results as a
standalone segment of MBIA Inc. Cutwater will continue to manage MBIA
Inc.'s proprietary portfolios on a fee-for-service basis.
The Investment Management Services (IMS) business' contribution to ABV
per share declined from $(3.26) at December 31, 2008 to $(4.12) as of
December 31, 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 $(7.59) as of December 31, 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 IMS segment were $42.1 billion at
December 31, 2009, comprising $25.4 billion of third-party assets and
$16.7 billion of assets managed for MBIA Inc. and its subsidiaries.
Third-party assets under management increased 25 percent in 2009
reflecting both increases to assets under management for existing
clients and additional assets from new accounts generated during the
year.
The ALM and conduit businesses continued to wind down throughout 2009
and the Company intends to exit them as the respective underlying
portfolios naturally amortize and mature over time. As of December 31,
2009, the Company had $7.8 billion in outstanding par amount of
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. Total invested assets
in the ALM business were $6.7 billion as of December 31, 2009, excluding
unrealized losses, of which $1.2 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 any collateral posting
requirements of the ALM business. During the fourth quarter of 2009, the
ALM business began repaying its $2.0 billion secured loan from MBIA
Corp. due in November 2011. Payments totaling $400 million during the
quarter reduced the outstanding secured loan balance to $1.6 billion at
December 31, 2009. The balance has been further reduced to approximately
$1.5 billion in the first quarter of 2010.
Assets under management in the conduit business totaled $1.9 billion as
of December 31, 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 certain medium-term notes at
discounts. The book value of conduit equity at December 31, 2009 was
$88.6 million.
The Investment Management Services segment recorded $215.9 million in
net investment income in 2009 versus interest expense of $288.1 million
for the same period. The difference reflects the negative spread created
by the 2008 repositioning of the ALM asset portfolio to maximize its
liquidity in order to satisfy collateralization and termination payment
requirements. For 2009, the segment's pre-tax net gain on financial
instruments at fair value and foreign exchange was $139.5 million,
pre-tax net realized losses were $3.1 million and pre-tax net investment
losses from other-than-temporary impairments totaled $365.0 million. An
additional $170.8 million of pre-tax non-credit-related impairments on
debt securities were charged directly to equity. The pre-tax net gain on
financial instruments at fair value and foreign exchange was primarily
the result of gains on interest rate swaps in the ALM portfolio, 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 the extinguishment of debt totaled $247.1 million in 2009 and
resulted from the repurchase of medium-term notes at discounts.
Corporate Segment
The Corporate segment's contribution to consolidated ABV per share was
$(1.02) as of December 31, 2009, as compared with $(0.80) as of December
31, 2008. The book value per share attributable to the Corporate segment
was $(1.02) as of December 31, 2009, compared with $(0.82) as of
December 31, 2008.
As of December 31, 2009 the Corporate segment of the holding company had
$332.4 million in cash and short-term investments, an amount sufficient
to meet approximately the next 1.9 years of debt service and estimated
operating expense requirements.
MBIA Inc. purchased 39 percent of the outstanding preferred shares of
MBIA Corp. during 2009 through the combination of a previously disclosed
tender offer and open market transactions. The purchase price of the
preferred shares totaled $10.8 million, or 10 percent of their
liquidation preference amount of $108.2 million. The Company also
repurchased $64.1 million of its 4.50% Notes due June 2010 and $9.5
million of its 9.375% Notes due February 2011 at discounts during 2009,
resulting in gains totaling $3.7 million.
The Company repurchased approximately 5.0 million shares of its common
stock during 2009 at an average price of $3.16. Approximately $104
million of repurchase authorization remains available under the
Company's $1.0 billion share buyback program, which was reinstated by
the Company's board of directors in the third quarter of 2008.
Five-Year Net Operating Loss Carryback
On November 6, 2009, as part of The Worker, Homeownership, and Business
Assistance Act of 2009, the Net Operating Loss (NOL) carryback provision
within the U.S. income tax law was amended to allow, through an
election, all businesses with NOLs in either 2008 or 2009 (but not both)
to claim refunds of taxes paid within the prior five years.
Based on the Company's results of operations for the year ended December
31, 2009, the Company expects to make the election under the new 5-year
NOL carryback provision and fully recover the available amount of
approximately $500 million in taxes paid in the carryback period. In
accordance with the Company's tax sharing agreement, MBIA Corp. and MBIA
Inc. are expected to receive approximately $277 million and $222
million, respectively, of the total tax refund.
Summary of Fourth Quarter 2009 Results
$ in millions U.S. Public Structured Investment
except per Finance Finance and Management Corporate Consolidated
share data International Services
Q4 Pre-tax $ 186 $ (430 ) $ 6 $ 35 $ (205 )
Income
For the fourth quarter of 2009, the net loss to common shareholders was
$242.0 million, or $1.16 per share, compared with a net loss of $1.2
billion, or $5.21 per share, for the fourth quarter of 2008. The net
loss in the fourth quarter of 2009 was driven by $661.0 million in
pre-tax loss and loss adjustment expenses primarily related to the
Company's insured exposures to second-lien mortgage loan securitizations
and $199.6 million in pre-tax realized losses and other settlements on
insured derivatives. These amounts were partially offset by a $427.6
million pre-tax unrealized gain (mark-to-market) on insured derivatives.
The U.S. Public Finance Insurance segment recorded $185.7 million in
pre-tax income in the fourth quarter driven primarily by $137.0 million
in scheduled and refunding premiums earned from its embedded book of
business and $65.1 million in net investment income.
The fourth quarter 2009 pre-tax loss for the Structured Finance and
International Insurance segment was $429.8 million. The pre-tax loss for
the quarter was primarily attributable to $658.8 million in pre-tax loss
and loss adjustment expenses and $200.2 million in realized losses and
other settlements on insured derivatives. These amounts were partially
offset by the $427.6 million pre-tax unrealized gain (mark-to-market) on
insured derivatives and $101.2 million in fees and other reimbursements.
Included in the fees and reimbursements in the quarter were $67.0
million in payments from reinsurers in connection with commutation
agreements.
Pre-tax income for the Investment Management Services segment was $5.6
million in the fourth quarter of 2009. Negative net interest spread for
the period resulting from sales of assets and reinvestment in cash to
meet termination payments and collateralization requirements and
impairments to assets in the ALM portfolio were more than offset by net
gains on financial instruments at fair value and foreign exchange and
net gains resulting from the repurchase of medium term notes at
discounts.
The Corporate segment recorded $34.8 million in pre-tax income in the
fourth quarter primarily as a result of a $46.6 million pre-tax net gain
on financial instruments at fair value and foreign exchange.
Conference Call
The Company will host a webcast and conference call for investors
tomorrow, Tuesday, March 2, 2010 at 8:00 AM (EST) to discuss its full
year and fourth 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 53441334. 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 March 2 until 5:00 p.m. on March 16 by dialing
(800) 642-1687 in the U.S. or (706) 645-9291 from outside the U.S. The
replay call code is also 53441334. 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; the
Company's ability to favorably resolve regulatory proceedings and
litigation claims against the Company and legal actions initiated by the
Company in connection with potential insurance loss recoveries; an
inability to achieve high, stable 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.
MBIA INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
December 31, 2009 December 31, 2008
Assets
Investments:
Fixed-maturity securities held as
available-for-sale, at fair value
(amortized cost $11,120,833 and $ 9,846,791 $ 11,223,716
$13,245,574) (includes hybrid financial
instruments at fair value $30,690 and
$25,498)
Fixed-maturity securities held as trading, 128,112 -
at fair value (amortized cost $120,457)
Investments held-to-maturity, at amortized
cost (fair value $2,442,003 and 2,777,025 3,156,969
$3,109,248)
Investments pledged as collateral, at fair
value (amortized cost $587,648 and 557,245 845,887
$1,101,929)
Short-term investments held as
available-for-sale, at fair value 2,688,208 4,693,283
(amortized cost $2,696,724 and $4,728,090)
Short-term investments held-to-maturity,
at amortized cost (fair value $358,397 and 354,740 498,865
$485,857)
Other investments (includes investments at 255,491 220,412
fair value $252,608 and $216,805)
Total investments 16,607,612 20,639,132
Cash and cash equivalents 803,243 2,279,783
Accrued investment income 99,261 201,688
Premiums receivable 2,020,619 7,744
Deferred acquisition costs 469,550 560,632
Prepaid reinsurance premiums 357,773 216,609
Insurance loss recoverable 2,444,754 458,512
Reinsurance recoverable on paid and unpaid 61,996 173,548
losses
Goodwill 31,371 76,938
Property and equipment (net of accumulated 76,834 105,364
depreciation)
Receivable for investments sold 18,088 77,464
Derivative assets 865,708 911,188
Current income taxes 532,351 240,871
Deferred income taxes, net 768,142 2,374,164
Other assets 527,397 706,812
Total assets $ 25,684,699 $ 29,030,449
Liabilities and Equity
Liabilities:
Unearned premium revenue $ 4,955,256 $ 3,424,402
Loss and loss adjustment expense reserves 1,580,021 1,557,884
Reinsurance premiums payable 239,154 8,672
Investment agreements 2,725,958 4,666,944
Medium-term notes (includes financial
instruments carried at fair value $109,768 3,686,233 6,339,527
and $176,261)
Variable interest entity notes 1,770,098 1,791,597
Securities sold under agreements to 501,871 802,938
repurchase
Short-term Debt 18,112 -
Long-term debt 2,656,668 2,396,059
Deferred fee revenue 11,061 44,989
Payable for investments purchased 16,432 239
Derivative liabilities 4,602,864 6,470,874
Other liabilities 314,095 504,306
Total liabilities 23,077,823 28,008,431
Equity:
Common stock 274,827 273,200
Additional paid-in capital 3,057,733 3,050,506
Retained earnings 2,393,282 1,629,187
Accumulated other comprehensive loss (940,871 ) (1,775,954 )
Treasury stock (2,194,873 ) (2,182,519 )
Total shareholders' equity of MBIA Inc. 2,590,098 994,420
Preferred stock of subsidiary 16,778 27,598
Total equity 2,606,876 1,022,018
Total liabilities and equity $ 25,684,699 $ 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
December 31, 2009
(National) (MBIA Corp.) Services Corporate Subtotal Eliminations Consolidated
Revenues:
Premiums earned:
Scheduled premiums $ 95,066 $ 49,226 $ - $ - $ 144,292 $ (27,596 ) $ 116,696
earned
Refunded premiums 41,949 8,191 - - 50,140 (8,365 ) 41,775
earned
Total premiums 137,015 57,417 - - 194,432 (35,961 ) 158,471
earned
Net investment 65,075 31,894 46,441 5,669 149,079 (18,578 ) 130,501
income
Fees and 13,990 101,224 9,803 - 125,017 (34,844 ) 90,173
reimbursements
Change in fair value
of insured
derivatives:
Realized gains
(losses) and other 543 (200,181 ) - - (199,638 ) - (199,638 )
settlements on
insured derivatives
Unrealized gains
(losses) on insured 35 427,649 - - 427,684 - 427,684
derivatives
Net change in fair
value of insured 578 227,468 - - 228,046 - 228,046
derivatives
Net gains (losses)
on financial
instruments at fair - (2,197 ) 47,750 46,567 92,120 - 92,120
value and foreign
exchange
Net realized gains 16,534 (37,444 ) (13,354 ) 1,560 (32,704 ) - (32,704 )
(losses)
Investment losses
related to
other-than-temporary
impairments:
Investment losses
related to - (8,767 ) (10,414 ) - (19,181 ) - (19,181 )
other-than-temporary
impairments
Other-than-temporary
impairments
recognized in - (2,686 ) (8,439 ) - (11,125 ) - (11,125 )
accumulated other
comprehensive loss
Net investment
losses related to - (11,453 ) (18,853 ) - (30,306 ) - (30,306 )
other-than-temporary
impairments
Net gains (losses)
on extinguishment of - (30 ) 15,245 1,159 16,374 (12 ) 16,362
debt
Total revenues 233,192 366,879 87,032 54,955 742,058 (89,395 ) 652,663
Expenses:
Loss and LAE 2,195 658,768 - - 660,963 - 660,963
incurred
Amortization of
deferred acquisition 26,275 47,650 - - 73,925 (58,845 ) 15,080
costs
Operating 19,024 29,466 21,551 3,388 73,429 (6,800 ) 66,629
Interest - 60,840 59,921 16,814 137,575 (22,436 ) 115,139
Total expenses 47,494 796,724 81,472 20,202 945,892 (88,081 ) 857,811
Pre-tax income 185,698 (429,845 ) 5,560 34,753 (203,834 ) (1,314 ) (205,148 )
(loss)
Provision for income 34,921
taxes
Net loss (240,069 )
Preferred stock
dividends of 1,956
subsidiary
Net loss available
to common $ (242,025 )
shareholders
Investment
Three months ended December 31, Management Intercompany
2008
Insurance Services Corporate Subtotal Eliminations Consolidated
Revenues:
Premiums earned:
Scheduled premiums $ 176,105 $ - $ - $ 176,105 $ (5,529 ) $ 170,576
earned
Refunded premiums 56,415 - - 56,415 - 56,415
earned
Total premiums 232,520 - - 232,520 (5,529 ) 226,991
earned
Net investment 137,000 129,470 8,826 275,296 (10,827 ) 264,469
income
Fees and 3,559 10,414 - 13,973 (3,403 ) 10,570
reimbursements
Change in fair value
of insured
derivatives:
Realized gains
(losses) and other (499,696 ) - - (499,696 ) - (499,696 )
settlements on
insured derivatives
Unrealized gains
(losses) on insured (1,674,707 ) - - (1,674,707 ) - (1,674,707 )
derivatives
Net change in fair
value of insured (2,174,403 ) - - (2,174,403 ) - (2,174,403 )
derivatives
Net gains (losses)
on financial
instruments at fair 53,280 173,330 105,110 331,720 - 331,720
value and foreign
exchange
Net realized gains (94,342 ) (85,523 ) 5,447 (174,418 ) - (174,418 )
(losses)
Investment losses
related to
other-than-temporary
impairments:
Investment losses
related to (8,902 ) (155,956 ) - (164,858 ) - (164,858 )
other-than-temporary
impairments
Other-than-temporary
impairments
recognized in - - - - - -
accumulated other
comprehensive loss
Net investment
losses related to (8,902 ) (155,956 ) - (164,858 ) - (164,858 )
other-than-temporary
impairments
Net gains on
extinguishment of 28,947 56,454 5,829 91,230 - 91,230
debt
Total revenues (1,822,341 ) 128,189 125,212 (1,568,940 ) (19,759 ) (1,588,699 )
Expenses:
Loss and LAE 25,535 - - 25,535 - 25,535
incurred
Amortization of
deferred acquisition 11,658 - - 11,658 - 11,658
costs
Operating 57,102 18,242 8,556 83,900 (2,493 ) 81,407
Interest 48,728 161,351 16,203 226,282 (17,266 ) 209,016
Total expenses 143,023 179,593 24,759 347,375 (19,759 ) 327,616
Pre-tax income (1,965,364 ) (51,404 ) 100,453 (1,916,315 ) - (1,916,315 )
(loss)
Benefit for income (756,474 )
taxes
Net loss $ (1,159,841 )
MBIA INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS (Unaudited)
(in thousands)
Structured
U.S. Finance and
Public International Investment
Finance
Twelve months ended Insurance Insurance Management Intercompany
December 31, 2009
(National) (MBIA Corp.) Services Corporate Subtotal Eliminations Consolidated
Revenues:
Premiums earned:
Scheduled premiums $ 409,101 $ 322,554 $ - $ - $ 731,655 $ (122,444 ) $ 609,211
earned
Refunded premiums 153,618 10,369 - - 163,987 (26,862 ) 137,125
earned
Total premiums 562,719 332,923 - - 895,642 (149,306 ) 746,336
earned
Net investment 217,116 287,209 215,899 22,919 743,143 (87,677 ) 655,466
income
Fees and 15,568 234,121 45,676 - 295,365 (149,875 ) 145,490
reimbursements
Change in fair value
of insured
derivatives:
Realized gains
(losses) and other 929 (167,031 ) - - (166,102 ) - (166,102 )
settlements on
insured derivatives
Unrealized gains
(losses) on insured (143 ) 1,650,588 - - 1,650,445 - 1,650,445
derivatives
Net change in fair
value of insured 786 1,483,557 - - 1,484,343 - 1,484,343
derivatives
Net gains (losses)
on financial
instruments at fair - 36,794 139,467 (9,679 ) 166,582 - 166,582
value and foreign
exchange
Net realized gains 23,223 (73,162 ) (3,140 ) 6,665 (46,414 ) - (46,414 )
(losses)
Investment losses
related to
other-than-temporary
impairments:
Investment losses
related to - (269,900 ) (535,782 ) - (805,682 ) - (805,682 )
other-than-temporary
impairments
Other-than-temporary
impairments
recognized in - 167,683 170,758 - 338,441 - 338,441
accumulated other
comprehensive loss
Net investment
losses related to - (102,217 ) (365,024 ) - (467,241 ) - (467,241 )
other-than-temporary
impairments
Net gains on
extinguishment of - 13,517 247,095 3,701 264,313 5,146 269,459
debt
Total revenues 819,412 2,212,742 279,973 23,606 3,335,733 (381,712 ) 2,954,021
Expenses:
Loss and LAE 93,901 770,236 - - 864,137 - 864,137
incurred
Amortization of
deferred acquisition 116,130 216,477 - - 332,607 (250,864 ) 81,743
costs
Operating 58,403 178,439 82,073 24,373 343,288 (27,056 ) 316,232
Interest - 224,001 288,086 68,949 581,036 (106,008 ) 475,028
Total expenses 268,434 1,389,153 370,159 93,322 2,121,068 (383,928 ) 1,737,140
Pre-tax income 550,978 823,589 (90,186 ) (69,716 ) 1,214,665 2,216 1,216,881
(loss)
Provision for income 582,821
taxes
Net income 634,060
Preferred stock
dividends of 10,823
subsidiary
Net income available
to common $ 623,237
shareholders
Investment
Twelve months ended December 31, Management Intercompany
2008
Insurance Services Corporate Subtotal Eliminations Consolidated
Revenues:
Premiums earned:
Scheduled premiums $ 634,523 $ - $ - $ 634,523 $ (29,742 ) $ 604,781
earned
Refunded premiums 245,663 - - 245,663 - 245,663
earned
Total premiums 880,186 - - 880,186 (29,742 ) 850,444
earned
Net investment 584,388 931,763 31,141 1,547,292 4,006 1,551,298
income
Fees and 9,471 46,654 - 56,125 (13,587 ) 42,538
reimbursements
Change in fair value
of insured
derivatives:
Realized gains
(losses) and other (397,371 ) - - (397,371 ) - (397,371 )
settlements on
insured derivatives
Unrealized gains
(losses) on insured (1,822,679 ) - - (1,822,679 ) - (1,822,679 )
derivatives
Net change in fair
value of insured (2,220,050 ) - - (2,220,050 ) - (2,220,050 )
derivatives
Net gains (losses)
on financial
instruments at fair 208,519 55,395 (3,047 ) 260,867 - 260,867
value and foreign
exchange
Net realized gains (26,236 ) (769,591 ) 2,477 (793,350 ) - (793,350 )
(losses)
Investment losses
related to
other-than-temporary
impairments:
Investment losses
related to (8,902 ) (949,793 ) - (958,695 ) - (958,695 )
other-than-temporary
impairments
Other-than-temporary
impairments
recognized in - - - - - -
accumulated other
comprehensive loss
Net investment
losses related to (8,902 ) (949,793 ) - (958,695 ) - (958,695 )
other-than-temporary
impairments
Net gains on
extinguishment of 38,927 341,065 30,353 410,345 - 410,345
debt
Total revenues (533,697 ) (344,507 ) 60,924 (817,280 ) (39,323 ) (856,603 )
Expenses:
Loss and LAE 1,318,001 - - 1,318,001 - 1,318,001
incurred
Amortization of
deferred acquisition 74,805 - - 74,805 - 74,805
costs
Operating 207,610 84,337 31,405 323,352 (17,155 ) 306,197
Interest 190,222 928,948 74,781 1,193,951 (22,168 ) 1,171,783
Total expenses 1,790,638 1,013,285 106,186 2,910,109 (39,323 ) 2,870,786
Pre-tax loss $ (2,324,335 ) $ (1,357,792 ) $ (45,262 ) $ (3,727,389 ) $ - (3,727,389 )
Benefit for income (1,054,696 )
taxes
Net loss $ (2,672,693 )
MBIA INC. AND SUBSIDIARIES
Components of Adjusted Book Value per Share
December 31, 2009
National
Public MBIA Investment
Finance Insurance Management Corporate Consolidated
Guarantee Corporation Services
Corporation
Reported Book Value $ 13.52 $ 7.75 ($7.59 ) ($1.02 ) $ 12.66
Cumulative
unrealized loss
Plus: on insured 0.00 12.09 0.00 0.00 12.09
credit
derivatives,
after tax
Cumulative
impairments on
Less: insured credit 0.00 (5.89 ) 0.00 0.00 (5.89 )
derivatives,
after tax
Unrealized
Reverse: (gains) losses (0.05 ) 1.03 4.08 0.00 5.06
included in OCI
Analytic Book Value 13.47 14.98 (3.51 ) (1.02 ) 23.92
Net unearned
Plus: premium 8.32 6.70 0.00 0.00 15.02
revenue, after
tax (1)(2)
Asset/Liability
Plus: products 0.00 0.00 (0.61 ) 0.00 (0.61 )
adjustment (2)
Plus: Loss provision (1.09 ) (0.89 ) 0.00 0.00 (1.98 )
(3)
Adjusted Book Value(4) $ 20.70 $ 20.79 ($4.12 ) ($1.02 ) $ 36.35
December 31, 2008
National
Public MBIA Investment
Finance Insurance Management Corporate Consolidated
Guarantee Corporation Services
Corporation
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 (2)
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 December 31, 2009 the discount rate on Financial Guarantee installment premiums was the
risk free rate as defined by accounting principles for Financial Guarantee insurance contracts
(2) and the discount rate was 5.00% on Insured Derivative installment revenue, impairments and the
Asset/Liability products adjustment. 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 Twelve Months Ended
December 31 December 31
2009 2008 2009 2008
Basic ($1.16 ) ($5.21 ) $ 2.99 ($12.11 )
Diluted ($1.16 ) ($5.21 ) $ 2.99 ($12.11 )
Weighted-Average Number of Common Shares Outstanding:
Basic 207,756,174 222,718,170 208,156,622 220,786,378
Diluted 207,756,174 222,718,170 208,156,622 220,786,378
INSURANCE OPERATIONS
Selected Financial Data Computed on a Statutory Basis
(dollars in millions)
National Public Finance Guarantee Corporation
Proforma
December 31, 2009 December 31, 2008
Policyholders' surplus $ 653.4 $ 416.0
Contingency reserve 1,356.0 1,357.0
Statutory capital 2,009.4 1,773.0
Unearned premium reserve 3,125.5 3,479.0
Present value of installment premiums 270.2 298.0
(1)
Premium resources (2) 3,395.7 3,777.0
Loss and loss adjustment expense 136.0 179.0
reserves
Total claims-paying resources $ 5,541.1 $ 5,729.0
Net debt service outstanding $ 821,687.6 $ 908,087.0
Capital ratio (3) 409:1 512:1
Claims-paying ratio (4) 189:1 206:1
MBIA Insurance Corporation Proforma
December 31, 2009 December 31, 2008
Policyholders' surplus $ 2,053.0 $ 3,087.0
Contingency reserve 1,447.6 1,238.0
Statutory capital 3,500.6 4,325.0
Unearned premium reserve 726.2 691.0
Present value of installment premiums 1,739.5 2,088.0
(5)
Premium resources (2) 2,465.7 2,779.0
Loss and loss adjustment expense 561.0 1,692.0
reserves
Total claims-paying resources $ 6,527.3 $ 8,796.0
Net debt service outstanding $ 264,562.5 $ 290,261.0
Capital ratio (3) 76:1 67:1
Claims-paying ratio (4) 47:1 37:1
(1) At December 31, 2009 and December 31, 2008 the discount rate was 5.09% and
5.03%, respectively.
(2) The amounts consist of Financial Guarantee premiums and Insured Derivative
premiums.
(3) Net debt service outstanding divided by statutory capital.
Net debt service outstanding divided by the sum of statutory capital,
(4) unearned premium reserve (after-tax), present value of installment premiums
(after-tax) and loss and loss adjustment expense.
(5) At December 31, 2009 and December 31, 2008 the discount rate was 6.51% and
5.03%, respectively.
Source: MBIA Inc.
Contact: MBIA Inc.
Media:
Kevin Brown, +1-914-765-3648
or
Elizabeth James, +1-914-765-3889
or
Investor Relations:
Greg Diamond, +1-914-765-3190