MBIA Inc. Reports $1.5B Net Loss in First Quarter

Insurance holding company MBIA Inc. reported a net loss to shareholders of $1.5 billion in the first quarter, as a $2.2 billion loss on insured credit derivatives exceeded earnings from all other sources. That compares with first-quarter 2009 net income of $696.7 million.

Company stock closed down 58 cents, or 6.22%, to $8.75 Tuesday after falling more than 10% in pre-market trading.

The adjusted book value of MBIA’s public finance business, operated by National Public Finance Guarantee Corp., grew by 17 cents per share in the three months ending March 31 to $20.87. Its structured finance and international business, run by MBIA Insurance Corp., declined 20 cents to $20.59 per share.

NPFG’s statutory capital, defined as assets over liabilities, was $2.1 billion at the end of the quarter, while claims-paying resources were $5.6 billion.

The bond insurer, rated Baa1 by Moody’s Investors Service and A by Standard & Poor’s, has not written business in over a year. However, it maintains the largest public finance portfolio with $499.2 billion net par outstanding.

MBIA earned $87.5 million in scheduled premiums, a 23% decrease from the first quarter of 2009, which the company attributed to the high refunding volume in recent years.

Meanwhile, MBIA Insurance, which holds junk ratings from both agencies, held statutory capital of $3.5 billion and claims-paying resources of $6.1 billion. The insurer said those amounts are enough to pay anticipated claims associated with derivatives, such as mortgage-backed securities.

MBIA’s $2.2 billion derivatives loss caused total book value to sink from $12.66 per share to $6.61 in the quarter.

“Our structured finance insured portfolio continued to be impacted by claims associated with ineligible mortgages in our insured [residential mortgage-backed securities] transactions and our wind-down operations realized losses as a result of the adverse credit conditions of the last two-and-a-half years,” said Chuck Chaplin, president and chief financial officer.

For over a year, MBIA has been involved in a series of lawsuits to recover billions of dollars from a number of financial institutions it said purposely misled the insurer into guaranteeing assets that turned toxic.

“We continued our efforts to hold seller/servicers and investment banks accountable for including ineligible and misrepresented collateral in transactions we insured,” Chaplin said. “While the damage done to our balance sheet and franchise is severe, our contractual rights and litigation claims are strong and we are confident that we will ultimately realize substantial recoveries.”

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