National Public Finance Guarantee, the muni-only arm of MBIA Inc. that started to insure new deals last year, said the business is starting to gain momentum.
National wrapped $38 million in par amount of primary new issuance in the first quarter and wrote or made commitments to write $241 million since then, MBIA said in its first quarter earnings report. The unit has totaled $8 million in premiums written since the third quarter of 2014.
"We continue to make progress toward more normal operations," said Chuck Chaplin, president and chief financial officer at MBIA Inc. "Since National began writing new business in the third quarter of 2014, we have wrapped $614 million of par and its earnings have been stable. We also made progress at the holding company on debt reduction and repurchased over 10 million of our shares since the beginning of the year at prices we consider advantageous. MBIA Corp.'s statutory net income was positive and capital was stable as loss volatility continued its decline."
National plans to expand the group, and may announce additions to its staff in the next week or so.
"We are going to be bringing in more senior people," said Tom Weyl, head of new business development, adding that National also plans to staff its office in San Francisco with four people by year's end.
"We are taking our time and being very selective," he said. "We have a lot of high quality people of interest and feel as though there is no particular reason to hurry a hire."
According to MBIA's earnings report, released after market close on Monday, National recorded $56 million of operating income in the first quarter of 2015 compared with $61 million of operating income in the same period of 2014.
"Overall bond insurance has gained traction, but low rates and low spreads in the market continue to be the biggest challenge," Weyl said. "Given the choice, institutional investors with low yields go with un-enhanced paper, but despite that we are seeing penetration pick up. We have modest numbers written to date but we have a patient plan and we are on pace for the plan."
Total premiums earned by National were $85 million in the first quarter of 2015, up 31% from $65 million of total premiums earned in the same period of 2014, reflecting a 123% increase in refunded premiums earned offset by a 17% decline in scheduled premiums earned. The decline in scheduled premiums earned resulted from portfolio amortization and high refunding volume over the past several years, according to the release.
National's operating expenses were $16 million in the first quarter of 2015, compared with $13 million in the same period of 2014. The increase in operating expenses in the first quarter of 2015 was driven by increased headcount and higher allocated compensation expenses as National expands its new business activities.
National had qualified statutory capital of $3.3 billion and claims-paying resources totaling $4.9 billion as of March 31, 2015.
"We feel as though we have momentum, not measuring by the new business policies written but by the increasing volume of deals we're seeing," Weyl said.
