MBIA Inc. said fourth-quarter profit of its U.S. public finance business fell as premiums from refunding transactions declined.
MBIA's National Public Finance Guarantee Corp. unit recorded net income under generally accepted accounting principles of $41 million for the fourth quarter of 2016 down from $51 million for the fourth quarter of 2015, according to a
"We are pleased with the growing acceptance of National as its new business production nearly tripled for 2016 versus last year," said Bill Fallon, MBIA's president and chief operating officer and chief executive officer at National. "Regarding our financial results, while the sale of MBIA UK adversely impacted our consolidated GAAP results, it had no impact on our combined operating income. The reduction in combined operating income was primarily due to additions to our loss reserves and lower premium earnings that resulted from lower refunding activity and our decreasing unearned premiums at National."
The parent company reported a 2016 net loss under general accepted accounting principles of $338 million, or $2.54 a share, compared with net income of $180 million or $1.06 a share in 2015. MBIA said the unfavorable variance from the prior year was primarily due to a pretax impairment of $278 million on the carrying value of MBIA UK Insurance Limited (MBIA UK) associated with its sale in the first quarter of 2017. MBIA also cited a $148 million reduction of net gains of insured credit derivatives.
The favorable variance of the tax provision at National was primarily due to a tax basis balance sheet adjustment associated with the reversal of a deferred tax liability in the fourth quarter of 2016. National's book value per share was $23.87 as of Dec. 31, compared with $24.61 a year earlier. The decrease in book value per share since year-end 2015 was primarily due to the $324 million or $2.40 per share after-tax impairment recorded during the fourth quarter of 2016 associated with the sale of MBIA UK, partially offset by share repurchases that decreased common shares outstanding, they said.
MBIA's combined operating income for the full year 2016 was $30 million or $0.23 per diluted share compared to $87 million or $0.52 per diluted share for the full year 2015. According to the report, the decline in combined operating income for 2016 compared to 2015 was driven primarily by $69 million of higher loss and loss adjustment expenses and a $68 million reduction of net premiums earned, partially offset by a favorable variance in the provision for income taxes.
The company also said that the calculation of adjusted book value per share was refined in the fourth quarter of 2016 to exclude MBIA Insurance Corp. as a separate stand-alone legal entity, and that previously, the calculation of ABV excluded the international and structured finance insurance segment, which is not the same as the legal entity MBIA Insurance Corp..
As of Dec. 31 MBIA's ABV was $31.88 compared to $28.98 as of Dec. 31, 2015, which was revised from the amount previously reported due to the subsequent change of the calculation of ABV.
MBIA said that the largest factor contributing to the increase in ABV per share since year-end 2015 was the decrease in common shares outstanding due to share repurchases. During 2016, the company repurchased 16.6 million shares of its common stock, which reduced its common shares outstanding to 135 million as of year-end 2016.
