Management reshuffling continued at bond insurance firms last week, capped off by Friday’s announcement that Neil Budnick, president of MBIA Insurance Corp., would leave the company.
In this industry, which includes just a handful of rival companies, it is not uncommon for there to be shifting at the top, sources said.
Budnick’s is the marquee move so far, though, as he has long been a pillar at one of the largest, longest-running companies in the business. His announcement also comes just weeks after MBIA Inc., the guarantor’s parent company, said it had agreed to pay $75 million to settle a two-year regulatory investigation.
Chief executive officer Gary Dunton will assume Budnick’s responsibilities, according to a statement MBIA released Friday morning. Budnick joined MBIA in 1983 and was the chief financial officer from 1999 to 2004, when he became the firm’s president.
The company also said Mark Zucker, managing director and head of MBIA’s global structured finance group, would be leaving the firm. Zucker will be replaced by William Fallon, who is now a managing director and head of corporate strategy and was previously a partner at McKinsey & Co.
“From our point of view it’s a reflection of the consequences of the regime change since Gary Dunton took over as CEO of the company,” said Stanislas Rouyer, senior vice president at Moody’s Investor Service. “It may also reflect some greater focus of the company on expense control — maybe through a leaner management structure.”
Budnick has been paid handsomely during the last few years, and not having to pay his salary in the coming years will most likely save MBIA some money.
For 2005, the most recent year recounted in filings with the Securities and Exchange Commission, MBIA paid Budnick $600,000 in base salary, second only to Dunton’s $825,000 base. With his annual bonus, restricted stock award, and other compensation added in, Budnick made $4.3 million in 2005, MBIA’s filings show.
His base salary has been $525,000 or higher during each year since 2002. Though he received no bonus in 2004, he was paid a $500,000 bonus in 2003 and $295,000 in 2002.
MBIA typically releases its annual proxy statement, recapping the year before, at the end of each March.
The departures come less than three weeks since MBIA said it had reached a settlement with the SEC, along with New York state regulators, regarding its use of retroactive reinsurance contracts. As a result of the agreement, MBIA was also required to hire a third-party consultant to scrutinize several specific deals and certain parts of its business.
MBIA spokesman Michael Ballinger said the departures are not related to the settlement. The consultant, John Siffert of the law firm Lankler Siffert & Wohl LLP, did not return calls for comment.
“I’ve had a great career in a great company during a time of dynamic growth and change,” Budnick said in a statement. “We have a superb team in place, and I’m confident that they will take the business forward to the next level of opportunity.” Budnick and Dunton were not available for further comment because they were both out on vacation for the long weekend.
Analysts who follow MBIA and the other bond insurers for the three major credit rating agencies said they saw no reason to be suspicious of the departures’ timing.
“This is more just the orderly movement of the executive ranks over time,” said Tom Abruzzo of Fitch Ratings. He said other recent reshufflings are a testament to how often management moves around in the industry.
“Over the last couple of years, I think, there has clearly been more movement across companies — it’s not just an MBIA phenomenon,” Rouyer said. “A few years ago, [Ambac Assurance Corp.] saw a lot of its senior management going in different directions — some of them ending up at [Assured Guaranty Corp.], some of them ending up at [Financial Guaranty Insurance Co.]
“It’s a mature industry, so it seems normal that senior people try to look for opportunities for additional growth when there are already a lot of people about them that have no intentions of retiring or going anywhere else.”
Earlier in the week, ACA Capital Holdings Ltd. announced that it was bringing in former JPMorgan manager Peter Hill to reinvigorate its public finance insurance business. Before the week was out, Hill said on Friday that he had hired two former JPMorgan employees — Sandra Brinkert and Kristin Stephens — to work with him at ACA.
John Pizzarelli, who was MBIA’s head of global public finance until February 2005, was appointed head of U.S. public finance at CIFG NA on Feb. 8.
MBIA, itself, announced in mid-January that its executive chairman and former chief executive, would step down from its board in May.
“This part of the year is probably the most heavily trafficked in terms of people changing jobs and career paths because it’s the logical end of a pay and performance cycle,” Hill said.
