MBIA Inc. started the year off much better this year than it did last year, with an adjusted pre-tax loss of only $20 million for the first quarter, compared to $548 million in 2012.
The company’s adjusted book value, a non-generally accepted accounting practices measure, was $30.56 per share at March 31, compared with $30.68 per share at December 31.
The lower adjusted pre-tax loss for the first quarter was driven primarily by lower net losses on insured exposures, the absence of net investment losses related to other-than-temporary impairments, gains on sales of investments, and lower operating expenses due to significantly lower litigation-related costs, MBIA said in a press release.
“This quarter’s financial results and subsequent settlements reflect a continued trend toward risk reduction in our businesses,” said MBIA Inc. president and chief executive officer, Chuck Chaplin. “Our settlements with Bank of America, Société Générale, Flagstar and a secondary program have improved the liquidity profile and volatility of economic losses of MBIA Corp. and substantially reduced the risk of regulatory intervention against it, while at the same time allowing it to repay its secured loan from National.”
The company announced in the press release that the loan has been repaid in full.
Net income available to common shareholders for the first quarter was $164 million, or $0.84 per share, up from $10 million, or $0.05 per share, during the first quarter of 2012. MBIA recorded a $194 million reduction in losses incurred during the first the months of 2013.
The positive drivers of the improvement in net income were partially offset by $73 million of unrealized losses on insured derivatives in the first quarter of 2013 compared with $303 million of unrealized gains on insured derivatives in the first quarter of 2012,” according to the release.
The unrealized net loss resulted from a more favorable market perception of MBIA Corp.’s credit quality, partially offset by the effects of changes in the weighted average life of the portfolio and favorable movements in spreads and pricing on collateral within the transaction, the company said.
“Although there are yet volatile structured exposures that we expect to commute, and litigations with investors and mortgage originators that need to be settled or adjudicated, the risk profile of the company has been substantially improved since we last reported,” Chaplin said.
The company’s municipal-only insurer, National Public Finance Guarantee Corp., recorded $142 million of pre-tax income in the first quarter, up from $55 million last year.
Its total premiums earned were $103 million, down 3% reflecting a decrease in scheduled premiums earned, the company said.
As of March 31, National’s statutory capital was $3.3 billion and its claims-paying resources totaling $5.7 billion.
The earnings report follows several favorable legal outcomes for the company, including a $1.7 billion settlement with Bank of America Corp., a $110 million settlement with Flagstar Bank, and a settlement with Societe Generale, which ends all of the company’s transformation-related litigation.
On Wednesday following the B of A settlement, Standard & Poor’s upgraded MBIA subsidiaries, MBIA Insurance Corp. to B from CCC, and National to BBB from BB.
The company will host a conference call for investors to discuss first quarter results Friday at 8:00 a.m. Eastern Standard Time.
MBIA shares rose 1.23% to close at $15.67 Thursday before the results were released.