MBIA Reports 2Q Loss of $160 Million

MBIA Inc. said its adjusted pre-tax loss widened to $160 million in the second quarter, from $152 million a year earlier and a $20 million loss in the first quarter. The insurer’s adjusted book value, a non-generally accepted accounting practices measure, fell to $29.28 per share at March 31, from $30.56 per share on March 31 and $30.68 per share on December 31.

MBIA, which spent much of the second quarter reaching settlements with banks, recorded a net loss of $178 million, or $0.92 per diluted share, compared with net income of $581 million, or $2.98 per diluted share, for the second quarter of 2012.

In an effort to recoup losses on payments for defaulted loans, MBIA become embroiled in litigation and reached settlements this May with Flagstar Bank, Bank of America and Societe Generale. MBIA received $110 million from Flagstar and $1.7 billion from Bank of America. An agreement with Societe Generale commuted $4.2 billion of insured exposure.

Losses on the fair value of insured derivatives were $182 million, compared with a net gain of $775 million for the same period of 2012. This was largely due to the effects of MBIA Corp.’s nonperformance risk on its derivative liabilities which resulted from a narrowing of its own credit spreads, MBIA said in a press release.

“There is risk remaining in our structured finance book, but we are much closer to achieving stability there,” Chuck Chaplin, president of MBIA, said in the release. “Meanwhile, we continue to work with the rating agencies and other parties to lay the foundation for the re-launch of our U.S. muni-only insurer, National Public Finance Guarantee Corp.”

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