Bond insurer MBIA Inc. failed to match earnings expectations in the third quarter on Monday. The Armonk, N.Y.-based company reported a net loss to common shareholders of $727.8 million from July to September, or $3.50 per share.

The loss follows back-to-back quarterly gains but is broadly in line with results from the third quarter of 2008, when the insurer shed $806.5 million, or $3.42 per share.

“The third quarter’s loss is a reminder that the impact of this recession continues to be felt throughout the economy,” said Chuck Chaplin, president and chief financial officer, in a press release.

Markets had been expecting a loss of only 70 cents per share. Trading had been optimistic before the statement, with MBIA stocks climbing more than 10% in Monday’s session — within 10 minutes of the release, after-hours trading knocked the shares down nearly 14%.

Chaplin said losses in the insurance business were “above expectations” and were only partially offset by gains on debt repurchases in the quarter.

The company said $810.2 million was lost from insured credit derivatives, while $238.8 million vanished from pre-tax losses. Moreover, the company shed $171.4 million in pretax realized losses and it paid out $638.4 million in claims.

MBIA hopes to re-enter the public finance insurance market through its newly formed public finance arm called National Public Finance Guarantee Corp., pending the outcome of ongoing litigation.

National “wrote virtually no new business” in the first three quarters of 2009, the earnings statement said, yet it earned premiums of $96.4 million in the third quarter — and $314.0 million in the first nine months of 2009 — as a result of a reinsurance transaction with Financial Guaranty Insurance Corp. in 2008.

“We continue to be highly confident that the New York State Insurance Department’s decision to permit the creation of National will ultimately be upheld,” Chaplin said. “Our litigation against sponsors of structured finance vehicles where the nature of collateral was misrepresented is ongoing and we continue to expect substantial recoveries from our contractual right to put back ineligible mortgages.”

Last Wednesday, MBIA competitor Ambac Financial Group posted a quarterly profit of $2.19 billion. Credit derivatives gave Ambac a net $2.87 billion unrealized gain, which helped to push its net income up by $7.58 per share.

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