MBIA, Inc. had a better quarter during the last three months of 2012, reporting an adjusted pre-tax income of $110 million, compared with an adjusted pre-tax loss of $118 million during the third quarter, and a loss of $252 million during the fourth quarter of 2011.

The bond insurer parent company mainly attributes the improvements to continued lower net losses on insured exposures during the quarter.

“Our ongoing objective is to put our firm on a stable financial footing so that we can pursue growth in the future,” said MBIA president and chief financial officer Chuck Chaplin. “In the fourth quarter we were able to amend our senior debt indentures to reduce risk and permit the holding company greater financial flexibility going forward.”

MBIA’s adjusted book value, a non-generally accepted accounting practices measure, also saw a slight improvement from the third quarter at $30.68 per share on Dec. 31, compared with $30.64 on Sept. 30. The ABV per share was down from the same period last year, however, when it ended at $34.50.

Book value per share was $16.22 as of Dec. 31.

Net income available to common shareholders for the fourth quarter of 2012 was $636 million, or $3.26 per share, compared with a net loss of $626 million, or $3.23 per share, during 2011. The company said the improvement is a result of changes in the fair value of insured credit derivatives.

The company recorded a $411 million net gain on insured credit derivatives compared with a $1.7 billion net loss on insured credit derivatives last year.

“The net gain on insured credit derivatives in the fourth quarter of 2012 resulted from unrealized gains driven by a less favorable market perception of MBIA Insurance Corporation’s credit quality, favorable movements in credit spreads and pricing on collateral within the transactions and shorter weighted-average lives due to the passage of time, partially offset by collateral erosion,” the company said in a statement.

Chaplin said the company will focus its attention on continuing to collect outstanding recoverables arising from ineligible mortgages on insured securitizations, remediating and reducing potentially volatile insured exposures, and resolving litigation over the formation of its subsidiary, National Public Finance Guarantee Corp.

MBIA’s public finance insurance business, which is primarily conducted through National, recorded $202 million of pre-tax income in the fourth quarter of 2012, compared with $163 million of pre-tax income in 2011.

In a conference call with investors on Thursday morning, MBIA’s chief executive officer, Jay Brown, said National still faces three major hurdles before it will be positioned to reenter the bond insurance marketplace: transformation litigation, reduction or retirement of intercompany facilities, and achievement of high, stable ratings.

The first hurdle will be determined by the outcome of the company’s four-year-old Article 78 proceeding challenging the New York State Department of Financial Services’ approval of the creation of National.

The company is also waiting to hear a decision on its lawsuit against Bank of America regarding mortgage putback obligations.

Brown said he expects some decisions in the next few months and after that, MBIA’s path forward is likely to become much clearer.

“I am confident that while justice has been delayed it will not ultimately be denied,” he told investors. “Therefore we have our vision fixed on a future where MBIA Corp. exhibits significantly less volatility and National can reenter the muni bond insurance market place.”

BTIG analyst Mark Palmer expects that both cases will be decided in MBIA’s favor, and suggests that investors take advantage of the current dip in MBIA shares.

“In our view, we are just a few weeks away from the point at which those who can see through the noise and distortion and embrace the MBIA story will receive the benefit of such an outcome,” he said in a research note.

Following the quarterly report, MBIA shares dropped 2.81% by midday Thursday to $9.70.

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