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Big Loss For MBIA In 1Q
MBIA said it had very little new business production until its AAA ratings were affirmed with negative outlooks by S&P and Moody's in the last week of February.
May 12, 2008
US bond insurer MBIA Monday reported a first-quarter loss of $2.4 billion, or $13.03 a share, compared with net income of $198.6 million or $1.46, in the first quarter of 2007.
The Armonk, NY, company said much of the net loss in the quarter was the result of a pre-tax $3.6 billion unrealized loss on insured credit derivatives, which included $800 million of credit impairments. MBIA said it does not believe this is representative of actual expected impairments.
MBIA said a review of housing related exposures found prompted it to recognize of $1.34 billion of pre-tax impairments and loss reserves on its housing-related insured portfolio in the quarter. The cumulative total of pre-tax credit losses for housing-related exposures incurred by the bond insurer over the last two quarters is now at $2.15 billion.
MBIA said the impairments and loss reserves are expressed on a net present value basis and are expected to be paid out over the next four years for direct and multi-sector CDO squared exposures, and up to 30 to 40 years for the company's insured multi-sector collateralized debt obligations. The bond insurer said it does not anticipate material additional impairment for these exposures in the foreseeable future, unless the US housing and mortgage markets perform materially worse than MBIA projections.
MBIA's insured portfolio totaled $668 billion at quarter-end. Total revenue was $741.7 million - before realized and unrealized gains and losses -- compared to $738.3 million in last year's first quarter.
Total revenue for the first quarter of 2008 was $711.4 million -- before realized and unrealized gains and losses -- down 4% from $741.7 million in last year's first quarter. MBIA generated operating cash flow of $257.4 million for the three months ended March 31, 2008 compared with $142.1 million for the three months ended March 31, 2007.
"We have ample liquidity, our balance sheet is built to withstand credit stress levels many multiples of what we're experiencing now, and our business model is proving that we are adequately capitalized to satisfy any potential claims on our insured portfolio," Jay Brown, MBIA’s chief executive, said in a statement accompanying the company’s earnings.
Meanwhile, MBIA said it had very little new business production until its AAA ratings were affirmed with negative outlooks by S&P and Moody's in the last week of February.
Since March 1, the bond insurer wrapped 24 new public finance issues totaling $9.1 million in adjusted direct premium. It insured 222 bonds previously purchased by investors -- secondary market -- for a total of $17.9 million of adjusted direct premium.
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