Bloomberg News

MBIA Posts Narrower $242 Million Fourth-Quarter Loss (Update1)

March 01, 2010

MBIA Inc. (MBI:US), the world’s largest bond insurer, reported a $242 million fourth-quarter loss.

The result, which equals $1.16 a share, compares with a loss of $5.21 a share in the year-earlier period, the Armonk, New York-based company said today in a statement distributed by Business Wire. Its expectations for claims and other payments on structured-finance securities, including bonds backed by second- line mortgages, rose by $861 million more in the fourth quarter.

MBIA was stripped of its top financial-guarantee credit ratings in 2008 as claims on securities backed by mortgages and home-equity loans surged. Chief Executive Officer Jay Brown has sought to revive MBIA’s business by splitting off the company’s municipal-bond insurance operations, a move that is being fought in court by financial institutions and investors.

“In 2009, MBIA continued to honor all its commitments,” MBIA’s Chief Financial Officer Chuck Chaplin said in a statement. “Our structured finance and international insurance business continued to be adversely impacted by large volumes of ineligible mortgages in our insured securitizations.”

MBIA is suing several mortgage originators, claiming that they packaged improperly underwritten home loans into bonds that it insured. MBIA has reduced its expected losses on bonds by $1.5 billion to account for expected legal recoveries related to these loans.

MBIA fell 2 cents, or 0.4 percent, to $4.80 in New York Stock Exchange composite trading (MBI:US). The shares, up 21 percent this year, have plunged 93 percent from their late-2006 high.

Investor Lawsuits

In 2009, MBIA said it would move its municipal bond guarantees and more than $5 billion of its assets from MBIA Insurance Corp. into a newly created company called National Public Guarantee Corp. Lawsuits by financial institutions and investors with obligations backed by MBIA Insurance Corp. will move forward after judges in federal and state courts ruled against MBIA’s request to halt the proceedings.

The municipal insurer “is ready and willing to wrap new domestic public finance business and expects to do so once litigation around its formation is resolved,” Chaplin said in the statement.

In February, MBIA announced plans to restructure an asset- management unit that oversees $42 billion of assets, including $16.7 billion for MBIA. The newly created company, called Cutwater Asset Management, will operate and report results as a separate unit, the company said.

The insurer also established Optinuity Alliance Resources to provide information technology, tax preparation, legal, claims management and other services to MBIA, according to its Web site.

‘Suspended State’

“Despite some encouraging signs, most notably the resilient demand for bond insurance in some segments of the market, we think it is too early to call a re-emergence of the sector,” Moody’s Investors Service analysts led by Helen Remeza, wrote in a report last month.

MBIA, along with Ambac Financial Group Inc. (ABKFQ:US)’s bond- insurance unit and CIFG Assurance North America remain “in a suspended state of operations,” Moody’s said in its report. “To a large extent, their recoveries will depend on ultimate losses.”

MBIA will hold a conference call to discuss its earnings on March 2 at 8 a.m. New York time.

To contact the reporter on this story: Christine Richard in New York at

To contact the editor responsible for this story: Alan Goldstein at

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