MBIA Reports Profit Gain for 2014

MBIA INC.’s net income for the fourth quarter of 2014 decreased from a year earlier as the insurance company completed its first full year of positive earnings since the financial crisis.

The company’s National Public Finance Guarantee Corp. added new business slower than the company had expected.

Consolidated net income under generally accepted accounting principles fell to $20 million, or 10 cents a share, for the fourth quarter from $132 million, or 68 cents a share, a year earlier. MBIA recorded consolidated net income of $569 million, or $2.76 a share for the year, compared with consolidated net income of $250 million, or $1.29 a share, for 2013.

The decrease in reported consolidated net income in the fourth quarter of 2014 was primarily due to lower unrealized gains on insured derivatives, partially offset by a lower provision for income taxes, the company said in a statement. The increase in consolidated net income for the full year 2014 was primarily attributable to higher net gains on insured derivatives and a reduction in operating expenses.

MBIA also reported combined operating income of $185 million for the year 2014 compared with a combined operating loss of $15 million in 2013. According to the report, the improvement in combined operating income for the year 2014 was primarily the result of decreases in insurance losses and loss adjustment expense and lower operating expenses partially offset by lower premiums earned, a decline in net investment income and reduced fees and reimbursements.

“This is the third quarter in a row in which we saw positive operating income, cash flow and ABV growth, and the first full year of positive earnings since before the financial crisis,” said Chuck Chaplin, president and chief financial officer. “Our expense reduction efforts are paying off.”

The company’s combined operating income for the fourth quarter was $22 million compared with a combined operating loss of $383 thousand for the same period of 2013. The increase in combined operating income for the three months ended Dec. 31, 2014 compared with the same period of 2013 was driven primarily by a lower provision for income taxes.

The adjusted book value per share increased to $24.87 as of Dec. 31, from $24.05 at the end of 2013. The increase in ABV per share was primarily driven by combined operating income and a decrease in common shares outstanding resulting from share repurchases, MBIA said. The company also reported it repurchased 3.3 million of its common shares during 2014.

“National Public Finance is again competing for new municipal bond insurance business, although new business production to date has been lower than we expected, primarily due to the low interest rate environment and competitive pricing levels,” Chaplin said. “Low yields also limit our investment income. However, National’s capital position continues to strengthen, leaving us well-positioned when rates begin to increase. The capital position of MBIA Insurance Corp. also improved.”

MBIA’s U.S. public finance insurance business is conducted through the National subsidiary, which recorded $56 million of operating income in the fourth quarter, compared with $60 million in the same period of 2013.

According to the report, total premiums earned in the U.S. public finance insurance segment were $82 million in the fourth quarter of 2014, down 5% from $86 million a year earlier, reflecting a 5% decline in scheduled premiums earned and a 4% decline in refunded premiums earned. The decline in scheduled premiums earned resulted from portfolio amortization and high refunding volume over the past several years.

The report also stated that in addition to $300 million in the third quarter of 2014, National wrote approximately $43 million par amount of primary new insurance during the fourth quarter of 2014, and $26 million in January and February of 2015. Low interest rates, narrow spreads and competitive pricing levels continue to limit new business opportunities.

“Net investment income for National was $29 million in the fourth quarter of 2014, down from $33 million in the fourth quarter of 2013 primarily due to lower average investment yields,” the report said.

National also had qualified statutory capital of $3.3 billion and claims-paying resources totaling $5.0 billion as of Dec. 31. During the fourth quarter , National paid a dividend of $220 million to the holding company, MBIA Inc.

MBIA will host a webcast and conference call for investors on Tuesday, March 3, at 8:00 AM EST to discuss the results.

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