Bond insurer parent company MBIA Inc. had an adjusted pre-tax loss of $118 million in the third quarter of 2012.
The performance compares to an adjusted pre-tax $430 million loss in the third quarter of 2011.
MBIA’s adjusted book value, a non-generally accepted accounting practices measure, was $30.64 per share on Sept. 30, compared to $31.23 per share on June 30.
While adjusted pre-tax income/loss is not a GAAP measure, some analysts say it is the best measure of a bond insurer’s quarterly performance.
“The reduction in adjusted book value and the adjusted pre-tax loss for the three months ended Sept. 30, 2012, were driven primarily by losses on insured exposures,” MBIA stated in a press release. “The lower adjusted pre-tax loss for the third quarter of 2012 compared with the third quarter of 2011 was primarily the result of decreases in impairments on insured credit derivatives, insurance losses and loss-adjustment expenses, partially offset by a decrease in net gains related to unfavorable changes in foreign exchange results.”
The net income available to common shareholders for the third quarter of 2012 was $7 million, or $0.04 per share, compared with net income of $444 million, or $2.26 per share, for the third quarter of 2011. “The decline in net income was primarily the result of pre-tax unrealized changes in the fair value of insured derivatives,” MBIA said.
"Deterioration in the performance of commercial real-estate exposures and losses on insured RMBS transactions from ineligible mortgages drove our adjusted pre-tax loss this quarter," said MBIA president Chuck Chaplin. "The path forward for our structured finance subsidiary, MBIA Corp., requires that we collect our put-back recoverables, principally from Countrywide and Bank of America, who continue to renege on their contractual obligation to repurchase billions of dollars in ineligible mortgages. Their default has put substantial pressure on MBIA Corp.'s liquidity position. We remain confident that we will ultimately resolve our litigation with Bank of America and collect the put-back recoverables, which will improve MBIA Corp.'s stability."
MBIA’s public finance subsidiary, National Public Finance Guarantee Corp., had $164 million in pre-tax income in the third quarter of 2012, compared with $157 million of pre-tax income in the third quarter of 2011.
As of Sept. 30 National’s claims-paying resources totaled $5.6 billion.
In other MBIA news, the company Wednesday announced that it has commenced a consent solicitation relating to the indentures governing its 6.4% senior notes due in 2022, 7% debentures due in2025, 7.15% debentures due in 2027, 6.625% debentures due in 2028 and 5.7% senior notes due in 2034.
The company is proposing to substitute National for another subsidiary, MBIA Insurance Corp., in the definitions of "restricted subsidiary" in the indenture, dated Aug. 1, 1990, and "principal subsidiaries" in the senior indenture, dated Nov. 24, 2004, pursuant to which the notes were issued.
MBIA said it believes the proposed amendments will be beneficial to both the company and its noteholders
In the event that the proposed amendments become operative, MBIA will pay a consent fee of $10 per $1,000 principal amount of the notes to all consenting noteholders, on terms and conditions described in the consent solicitation documentation.
In a press release on Wednesday evening, Standard & Poor’s said the solicitation did not change its rating on MBIA Inc., which is B-minus with a negative outlook. S&P has rated National BBB with a developing outlook.