MBIA Inc. Reports Second Quarter Financial Results

MBIA Inc. (NYSE: MBI) (the Company) today reported Adjusted Book Value (ABV) per share (a non-GAAP measure defined in the attached Explanation of Non-GAAP Financial Measures) of $35.76 as of June 30, 2010, compared with $36.01 as of March 31, 2010. The decrease was driven by losses on insured exposures. Book value per share was $13.16 as of June 30, 2010.

Net income available to common shareholders for the second quarter of 2010 was $1.3 billion, or $6.32 per share, compared with net income of $895 million, or $4.30 per share, in the second quarter of 2009. Pre-tax income was $2.0 billion in the second quarter, driven primarily by a $1.5 billion pre-tax unrealized gain on insured credit derivatives. The mark-to-market gain on insured credit derivatives resulted primarily from the impact of reduced market prices on recovery rate and credit default swap derivatives in the mark-to-market model, which increases the non-performance risk components associated with MBIA Corp. Adjusting second quarter pre-tax income of $2.0 billion by excluding the $1.5 billion pre-tax mark-to-market on insured credit derivatives and a $270 million positive change in the fair value of MBIA Corp.’s insured VIEs, while including $268 million of credit impairments on insured credit derivatives and a $120 million net benefit to impairments on insured VIEs, results in adjusted pre-tax income of $14 million. The Company believes this measure presents an additional view of its operating performance in the quarter.

"In the second quarter, we saw both our paid losses and new delinquencies on insured RMBS exposures continue to decline,” said MBIA Inc. President and Chief Financial Officer Chuck Chaplin. "In addition, more market participants are recognizing that many of the loans in these securitizations should never have been in them in the first place, and that the seller/servicers must repurchase them. After the quarter’s close, we reduced our exposure to multi-sector CDO-squareds by about 50 percent, and settled a small portion of outstanding putback receivables. The net incurred loss on insured exposures demonstrates that credit stress continues to be a reality, but the volatility of losses appears to be declining.”

Second Quarter 2010 Segment Results

The following is a summary of book value and ABV per share data and results by segment for the second quarter of 2010:

$ in millions except					Structured				Advisory
per share		U.S. Public			Finance and				Services								Wind-
data		Finance			International				(Cutwater)				Corporate				down				Consolidated
06/30/10 ABV per share		$	21.43		$	19.42			$	0.15			$	(1.26	)		$	(3.98	)		$	35.76
03/31/10 ABV per share		$	20.87		$	20.59			$	0.34			$	(1.13	)		$	(4.66	)		$	36.01
Change in ABV per share		$	0.56		$	(1.17	)		$	(0.19	)		$	(0.13	)		$	0.68			$	(0.25	)
06/30/10 BV per share		$	14.97		$	6.44			$	0.15			$	(1.26	)		$	(7.14	)		$	13.16
03/31/10 BV per share		$	14.05		$	0.72			$	0.34			$	(1.13	)		$	(7.37	)		$	6.61
Change in BV per share		$	0.92		$	5.72			$	(0.19	)		$	(0.13	)		$	0.23			$	6.55
2Q 2010 Pre-tax Income		$	128		$	1,829			$	0			$	(9	)		$	11			$	1,968
2Q 2009 Pre-tax Income		$	146		$	1,260			$	1			$	(19	)		$	114			$	1,503
2Q 2010 Adj. Pre-tax Income		$	128		$	(120	)		$	0			$	(9	)		$	11			$	14
2Q 2009 Adj. Pre-tax Income		$	146		$	547			$	1			$	(19	)		$	114			$	790

U.S. Public Finance Results

The Company’s U.S. public finance insurance business is conducted in its National subsidiary. National’s existing book of business generated total premiums earned of $119 million in the second quarter of 2010, down 10 percent from $133 million in the comparable period of 2009. The decline in total premiums earned was the result of refunding activity and amortization in National’s insured portfolio.

Pre-tax net investment income for National declined 7 percent to $56 million in the second quarter of 2010 from $60 million in the comparable period of 2009 due to lower average yields. Over the same period, National’s investment portfolio increased in size by 4 percent, from $5.0 billion at June 30, 2009 to $5.2 billion at June 30, 2010. National’s investment portfolio remains liquid, averaging Double-A credit quality.

Pre-tax fee income for the second quarter of 2010 was $3 million, up from $0.3 million in the second quarter of 2009.

National’s pre-tax loss and loss adjustment expenses totaled $10 million in the second quarter, compared with $5 million in the second quarter of 2009. Loss and loss adjustment expenses in the second quarter of 2010 were primarily due to additional estimated losses on insured health care, housing and student loan transactions.

National’s pre-tax amortization of deferred acquisition costs totaled $24 million in the second quarter of 2010, down 15 percent from $29 million in the second quarter of 2009, reflecting the amortization of its insured portfolio. Operating expenses were $17 million in the second quarter, down 18 percent from $21 million in the comparable period of 2009.

During the second quarter National received approval from the New York State Insurance Department to reset its unassigned surplus to zero as of January 1, 2010. Previously, National had an unassigned surplus deficit principally as a result of recording contingency reserves in connection with the 2009 reinsurance transaction between National and MBIA Corp. whereby National reinsured MBIA Corp.’s U.S. public finance business. National’s unassigned surplus as of the end of the second quarter was $171 million. The reset had no impact on total statutory capital, but it allows for the creation of dividend capacity through retained earnings. National does not anticipate paying dividends in the near future. As of June 30, 2010, National’s statutory capital was $2.2 billion and claims-paying resources totaled $5.5 billion.

Structured Finance and International Insurance Results

The Structured Finance and International Insurance segment is operated in MBIA Corp. and its subsidiaries. Pre-tax income for the Structured Finance and International Insurance segment totaled $1.8 billion in the second quarter of 2010 driven primarily by a $1.5 billion pre-tax unrealized gain on insured credit derivatives. Adjusting second quarter pre-tax income by excluding the $1.5 billion pre-tax mark-to-market on insured credit derivatives and a $264 million positive change in fair value on insured VIEs, while including $268 million of credit impairments on insured credit derivatives and a $120 million net benefit to impairments on insured VIEs, results in an adjusted pre-tax loss of $120 million for the segment.

During the second quarter of 2010, the Company increased its expectations for losses on insured exposures in the Structured Finance and International Insurance segment. The following is a summary of all insured portfolio economic loss activity in the second quarter, without regard to how such losses are presented in the Company’s financial statements:

$ in thousands		RMBS				ABS CDOs (CDS)				CMBS (CDS)			All Other Insured Exposures				Total
Change in Expected Payments		$	93,333			$	130,663			$	229,875		$	62,626			$	516,497
Change in Expected Salvage			($322,046	)			($1,171	)			0			($37,130	)			($360,347	)
Net Activity			($228,713	)		$	129,492			$	229,875		$	25,496			$	156,150

Under GAAP, these economic losses incurred by the Company with respect to its insured portfolio are not fully discernable in its financial statements. Some of these economic losses are reflected in loss and loss adjustment expenses in the Company’s income statement and some are reflected in realized losses and other settlements on insured derivatives. The remaining losses are reflected in the Company’s supplemental disclosures of the economic losses affecting insured credit derivatives and consolidated variable interest entities (VIEs), which it refers to as "credit impairments”, a non-GAAP measure (defined in the attached Explanation of Non-GAAP Financial Measures). The estimated insured credit derivative and insured consolidated VIE impairments are analogous to loss and loss adjustment expenses for policies not subject to fair value accounting. The credit impairments are included as case loss reserves in the statutory results of the Company’s insurance subsidiaries. The following is a summary of second quarter loss and loss adjustment expenses, credit impairments on insured VIEs and credit impairments on insured credit derivatives:

Losses and Credit Impairments
$ in thousands
Change in Expected Payments		$	90,381
Change in Insurance Recoveries			($173,184	)
Loss & LAE Incurred			($82,803	)
Realized Losses and Other Settlements on Insured Derivatives		$	91,853
Change in Credit Impairments on Insured VIEs			($120,414	)
Change in Credit Impairments on Insured Credit Derivatives		$	267,514
Total Losses Excluding Changes in Fair Value		$	156,150

The Structured Finance and International Insurance segment recorded a benefit of $83 million to loss and loss adjustment expenses on non-consolidated VIE exposures in the second quarter of 2010 as an increase of $90 million in expected future loss payments on RMBS and CDO exposures was more than offset by a $173 million salvage benefit from additional estimated recoveries on ineligible mortgages. Similarly, insured consolidated VIE credit impairments were a negative $120 million in the second quarter as the increase in salvage, primarily from additional estimated recoveries on ineligible mortgages related to these exposures, exceeded the increase in case loss reserves.

During the second quarter, MBIA Corp. paid a total of $421 million in net claims in connection with its second-lien residential mortgage exposures. Net claims on insured RMBS have been trending downward each quarter since peaking at $636 million in the second quarter of 2009.

As noted above, the Company increased its expected recoveries recorded in connection with ineligible mortgages in certain insured second-lien residential mortgage loan securitizations that are subject to contractual obligations by the seller/servicers to repurchase or replace the mortgages. The Company’s estimates for expected recoveries related to these ineligible mortgages increased from $1.9 billion as of March 31, 2010 to $2.1 billion as of June 30, 2010. The $2.1 billion estimated recovery amount includes $1.3 billion recorded as an insurance loss recoverable, and $792 million that is associated with consolidated VIEs which are subject to fair value accounting. The recoveries related to consolidated VIEs increased by $78 million in the quarter. The estimates are the expected values of a probability distribution of net cash inflows resulting from the repurchase of the ineligible mortgages by the seller/servicers that takes into account the probability that such expected recoveries may not be fully realized. The Company is continuing to review and evaluate additional mortgage loans in its insured RMBS pools and expects that there will be a substantial number of additional mortgages in these or in other transactions that are subject to repurchase or replacement obligations by the seller/servicers. These recoveries affect the Company’s loss and loss adjustment expense, insurance recoveries and the fair value of assets of the consolidated VIEs.

While the Company believes that these ineligible mortgage loans must be repurchased or replaced, a substantial majority of the Company’s representation and warranty claims have been disputed by the loan seller/servicers and are currently subject to litigations. In addition, there is some risk that the seller/servicers or other responsible parties might not be able to satisfy any judgments the Company secures in the litigations. While the Company believes that it will prevail in the litigations, there is uncertainty with respect to the outcomes. There can be no assurance that the Company will be completely successful, or that it will not be delayed, in realizing these recoveries. Alternatively, prevailing in litigation could result in estimated recoveries that are substantially higher than the amounts currently recognized as recoveries.

On July 16, 2010, MBIA Corp. and the sponsor of several MBIA Corp.-insured mortgage loan securitizations entered into a settlement agreement in which MBIA Corp. received a payment in exchange for a release relating to its representation and warranty claims against the sponsor. The agreement resolves the dispute on mutually beneficial terms and is substantially consistent with the recoveries previously recorded by the Company related to these exposures.

The Company estimated $359 million in additional credit impairments on insured credit derivatives in the second quarter of 2010. Approximately $230 million of the credit impairments in the second quarter related to certain insured transactions backed by pools of commercial mortgage backed securities (CMBS). The Company observed deterioration in the performance of the assets underlying these insured transactions, and modeled losses increased, even though the Company has observed very few actual liquidations or property sales within the underlying CMBS securities. Multi-sector CDO exposures accounted for $92 million of payments in the quarter and $37 million of incremental impairments, reflecting additional deterioration in the performance of the securities underlying these transactions.

Subsequent to the end of the second quarter, MBIA Corp. reached an agreement with a CDS counterparty for the commutation of three multi-sector CDO-squareds representing approximately half of its overall insured exposure to CDO-squared transactions. The agreement eliminated $4.4 billion in gross insured exposure in exchange for a one-time payment by MBIA Corp. of $72 million. Of the $4.4 billion commuted, $2.9 billion was commuted immediately. The remaining gross exposure of $1.5 billion will be commuted by no later than November 1, 2010. The impact of the $72 million payment, which is $34 million after reinsurance, will be reflected in the Company’s results for the third quarter of 2010.

The Company records the changes in fair value of the insured CDS and insured consolidated VIEs to its income statement. The following is a summary of the changes in fair value to insured credit derivatives and insured consolidated VIEs:

$ in thousands
Changes in Fair Value
Unrealized gain on insured derivatives	$1,537,880
Net gains on financial instruments at fair value and foreign exchange (VIEs)	$264,144

Pre-tax unrealized net gains (marks-to-market) on insured credit derivatives were $1.5 billion in the second quarter of 2010 driven by the impact of reduced market prices on recovery rate and credit default swap derivatives in the mark-to-market model, which increased the non-performance risk components associated with MBIA Corp. The changes in market prices of these derivatives implied a more negative market perception of MBIA Corp.’s credit risk at June 30, 2010 relative to March 31, 2010.

Pre-tax net gains on financial instruments at fair value and foreign exchange attributable to insured consolidated VIEs totaled $264 million in the second quarter of 2010, driven by an increase in the fair value of net assets resulting from the more negative market perception of MBIA Corp’s credit risk referenced above, as well as by an increase in expected recoveries on ineligible mortgage loans.

As of June 30, 2010, the Company’s net derivative liability (the cumulative negative mark-to-market) with respect to insured credit derivatives was $4.4 billion for all non-consolidated VIE insured credit derivatives. The Company considers approximately $2.1 billion of the $4.4 billion net derivative liability to be credit impaired. The Company expects the unimpaired portion of the unrealized gains and losses in fair value (marks-to-market) to be reversed prior to or upon the maturities of the insured credit derivatives.

MBIA Corp. had statutory capital of $3.3 billion and claims-paying resources totaling $5.5 billion at June 30, 2010. As of June 30, 2010, MBIA Corp.’s statutory balance sheet reflected $3.7 billion in cash and invested assets including $1.1 billion of cash and short-term investments available to meet demands on its liquidity. The $1.1 billion of cash and short-term investments excludes amounts held by subsidiaries. The Company believes that MBIA Corp.’s liquidity resources will adequately provide for anticipated cash outflows.

Subsequent to June 30, 2010, MBIA Corp. acquired the 83 percent of Channel Re Holdings Ltd. and Channel Reinsurance Ltd. that it did not previously own for $40 million. Channel Re is a financial guarantee reinsurer founded in 2004, which assumed business only from MBIA Corp. and its affiliates. The Company subsequently commuted all of its reinsurance with Channel Re and intends to liquidate the company in the third quarter. As a result of the reinsurance commutations, MBIA Corp., National and MBIA UK reassumed exposure of approximately $22 billion, $8 billion and $2 billion, respectively. The transaction will result in an increase in MBIA Corp.’s statutory capital and will be accretive to its current liquidity position.

Advisory Services

The Company’s Advisory Services business is conducted in its Cutwater Asset Management subsidiary. Cutwater recorded a pre-tax loss of $0.3 million in the second quarter driven by expenses associated with infrastructure enhancements to support its growth plans. Cutwater paid a $10 million dividend to MBIA Inc. during the second quarter, relating to the legal entity reorganization that occurred in the first quarter. In the future Cutwater is expected to pay regular dividends out of its after-tax income.

Cutwater’s average assets under management in the second quarter were $42.7 billion, down marginally from $42.9 billion in the first quarter of 2010. Average assets under management in the second quarter comprised $26.2 billion of third-party assets and $16.5 billion of assets managed for MBIA Inc. and its subsidiaries. Third-party average assets under management increased 1 percent from the first quarter of 2010 and 13 percent from the second quarter of 2009.

Corporate Segment

As of June 30, 2010, the Corporate segment of the holding company had $390 million in cash and short-term investments. Existing cash and expected cash flows to the holding company are anticipated to be sufficient to cover its cash needs through 2015, even if no further dividends are received from the Company’s insurance, asset management or advisory subsidiaries.

During the second quarter of 2010, the Company repurchased $2 million par amount of the preferred shares of MBIA Corp. for approximately $160 thousand and approximately $17 million of its 9.375% Notes due February 2011 at par.

The Company repurchased approximately 3.2 million shares of its common stock at an average price of $6.10 during the second quarter. As of June 30, 2010, approximately $84 million of repurchase authorization remained available under the Company's $1.0 billion share buyback program.

Wind-Down Operations

Wind-Down Operations comprise the Company’s Asset Liability Management and Conduit businesses, both of which are in run-off.

The Company repurchased $75 million par amount of medium-term notes at discounts during the second quarter, resulting in pre-tax net gains on the extinguishment of debt that totaled $18 million.

During the second quarter, the ALM business repaid $355 million of its original $2.0 billion secured loan from MBIA Corp. due in November 2011. The outstanding balance was reduced to $1.1 billion as of June 30, 2010 from $1.5 billion at March 31, 2010.

Conduit assets totaled $1.8 billion as of June 30, 2010, down slightly from $1.9 billion at March 31, 2010. The book value of conduit equity at June 30, 2010 was $98 million, up from $90 million at March 31, 2010.

Conference Call

The Company will host a webcast and conference call for investors tomorrow, Tuesday, August 10, 2010 at 8:00 AM (EDT) to discuss its second quarter 2010 financial results and other matters relating to the Company. The webcast and conference call will consist of brief remarks followed by a question and answer session.

The dial-in number for the call is (877) 694-4769 in the U.S. and (404) 665-9935 from outside the U.S. The conference call code is 89814633. A live webcast of the conference call will also be accessible on www.mbia.com.

A replay of the call will be available approximately two hours after the completion of the call on August 10 until 11:59 p.m. on August 24 by dialing (800) 642-1687 in the U.S. or (706) 645-9291 from outside the U.S. The replay call code is also 89814633. In addition, a recording of the call will be available on the Company's website approximately two hours after the completion of the call.

Forward-Looking Statements

This release includes statements that are not historical or current facts and are "forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words "believe,” "anticipate,” "project,” "plan,” "expect,” "intend,” "will likely result,” "looking forward” or "will continue,” and similar expressions identify forward-looking statements. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected, including, among other risks, the possibility that the Company will experience severe losses due to increased deterioration in its insurance portfolios; significant fluctuations in liquidity and asset values with the global credit markets; the Company’s ability to fully implement its Strategic Plan as outlined in the Company’s most recent Annual Report on Form 10-K; the Company’s ability to favorably resolve regulatory proceedings and litigation claims against the Company and legal actions initiated by the Company in connection with potential insurance loss recoveries; an inability to achieve high, stable credit ratings; and changes in general economic and competitive conditions. These and other factors that could affect financial performance or could cause actual results to differ materially from estimates contained in or underlying the Company’s forward-looking statements are discussed under the "Risk Factors” section in MBIA Inc.’s most recent Annual Report on Form 10-K, which may be updated or amended in the Company’s subsequent filings with the Securities and Exchange Commission. The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only to their respective dates. The Company undertakes no obligation to publicly correct or update any forward-looking statement if it later becomes aware that such result is not likely to be achieved.

MBIA Inc., headquartered in Armonk, New York is a holding company whose subsidiaries provide financial guarantee insurance, fixed-income asset management, and other specialized financial services. The Company services its clients around the globe, with offices in New York, Denver, San Francisco, Paris, London, Madrid, Mexico City and Sydney. Please visit MBIA's Web site at www.mbia.com.

Explanation of Non-GAAP Financial Measures

The following are explanations of why MBIA believes that the non-GAAP financial measures used in this press release, which serve to supplement GAAP information, are meaningful to investors.

Adjusted Book Value ("ABV”): In addition to book value per share, the Company also analyzes adjusted book value ("ABV”) per share when evaluating the financial performance and value of the Company. ABV is a non-GAAP measure which includes the net present value of expected future cash inflows and outflows and eliminates certain GAAP timing differences. The Company has presented ABV to allow investors and analysts to evaluate the Company using the same measure that MBIA’s management regularly uses to measure financial performance and value. ABV is not a substitute for and should not be viewed in isolation from GAAP book value.

Credit Impairments: Although the changes in fair value of insured credit derivatives and financial assets and financial liabilities of consolidated VIEs are included in MBIA’s income statement, the Company believes the supplemental disclosure of credit impairments, which are the present value of future expected loss and loss adjustment expense payments, net of recoveries, of insured credit derivatives and of insured obligations issued by consolidated VIEs, provides additional important information for investors. The Company expects the gains and losses in fair value of insured credit derivatives, other than credit impairments, to reverse over time, and believes credit impairments provide an estimate of loss and loss adjustment expense payments, net of recoveries.

Adjusted Pre-tax income: Adjusted pre-tax income excludes the impact of pre-tax mark-to-market changes in the fair value of insured credit derivatives and changes in the fair value of MBIA Corp.’s insured variable interest entities (VIEs), while including credit impairments on insured credit derivatives and insured VIEs. The Company believes this measure presents an additional view of its operating performance.

MBIA INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands)
							June 30, 2010				December 31, 2009
Assets
	Investments:
		Fixed-maturity securities held as available-for-sale, at fair value (amortized cost     $9,095,649 and $10,366,737)(includes hybrid financial instruments     at fair value $31,233 and $30,690)					$	8,579,894			$	9,330,413
		Fixed-maturity securities held as trading, at fair value (amortized cost $15,521)						15,765				-
		Investments pledged as collateral, at fair value (amortized cost $584,520 and $587,648)						580,407				557,245
		Short-term investments held as available for sale, at fair value (amortized     cost $2,648,228 and $2,696,724)						2,648,405				2,688,208
		Other investments (includes investments at fair value of $257,825 and $252,608)						260,354				255,491
			Total investments					12,084,825				12,831,357
	Cash and cash equivalents							1,051,657				803,243
	Accrued investment income							90,632				94,821
	Premiums receivable							1,660,248				2,020,619
	Deferred acquisition costs							420,397				469,550
	Prepaid reinsurance premiums							285,638				357,773
	Insurance loss recoverable							2,050,849				2,444,754
	Reinsurance recoverable on paid and unpaid losses							73,928				61,996
	Goodwill							31,371				31,371
	Property and equipment, at cost (less accumulated depreciation of $135,349 and $139,076)							74,646				76,834
	Receivable for investments sold							48,677				18,088
	Derivative assets							704,078				865,708
	Current income taxes							13,431				545,883
	Deferred income taxes, net							841,314				716,615
	Other assets							40,498				50,448
	Assets of consolidated VIEs:
		Cash						443,589				-
		Investments held-to-maturity, at amortized cost (fair value $4,281,605 and $2,800,400)						4,695,714				3,131,765
		Fixed-maturity securities held as available-for-sale, at fair value     (amortized cost $754,096)						-				516,369
		Fixed-maturity securities at fair value						5,390,769				128,112
		Loans receivable at fair value						2,608,151				481,622
		Loan repurchase commitments						792,169				-
		Derivative assets						12,273				-
		Other assets						49,376				53,844
			Total assets				$	33,464,230			$	25,700,772
Liabilities and Equity
	Liabilities:
		Unearned premium revenue					$	4,412,017			$	4,955,256
		Loss and loss adjustment expense reserves						1,046,094				1,580,021
		Reinsurance premiums payable						194,252				239,154
		Investment agreements						2,382,045				2,725,958
		Medium-term notes (includes financial instruments carried at     fair value $108,878 and $109,768)						1,969,591				2,285,047
		Securities sold under agreements to repurchase						486,915				501,871
		Short-term debt						82,070				18,112
		Long-term debt						1,933,522				2,223,536
		Deferred fee revenue						10,307				11,061
		Payable for investments purchased						34,630				15,780
		Derivative liabilities						5,405,003				4,593,760
		Other liabilities						285,683				304,066
		Liabilities of consolidated VIEs:
		Variable interest entity notes (includes financial instruments carried at     fair value $6,938,576 and $0)						11,046,391				3,179,712
		Long-term debt						431,637				433,132
		Derivative liabilities						1,056,075				9,104
		Other liabilities						22,590				18,326
			Total liabilities					30,798,822				23,093,896
	Equity:
		Common stock						274,821				274,827
		Additional paid-in capital						3,059,376				3,057,733
		Retained earnings						1,886,117				2,393,282
		Accumulated other comprehensive loss						(356,266	)			(940,871	)
		Treasury stock						(2,212,799	)			(2,194,873	)
			Total shareholders' equity of MBIA Inc.					2,651,249				2,590,098
		Preferred stock of subsidiary						14,159				16,778
			Total equity					2,665,408				2,606,876
			Total liabilities and equity				$	33,464,230			$	25,700,772

MBIA INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS (Unaudited)
(in thousands)
										Structured
						U.S.				Finance
						Public				and
						Finance				International					Advisory										Wind-
Three Months Ended June 30, 2010						Insurance				Insurance					Services										down										Intercompany
						(National)				(MBIA Corp.)					(Cutwater)					Corporate					Operations					Subtotal					Eliminations					Consolidated
Revenues:
	Premiums earned:
		Scheduled premiums earned				$	86,261			$	64,273				$	-				$	-				$	-				$	150,534				$	(19,715	)			$	130,819
		Refunding premiums earned					33,026				99					-					-					-					33,125					(7,619	)				25,506
			Total premiums earned				119,287				64,372					-					-					-					183,659					(27,334	)				156,325
	Net investment income						55,712				23,618					(115	)				2,164					25,424					106,803					625					107,428
	Fees and reimbursements						2,790				26,644					17,611					20,979					-					68,024					(56,919	)				11,105
	Change in fair value of insured derivatives:
		Realized gains (losses) and other settlements on insured derivatives					103				(64,251	)				-					-					-					(64,148	)				-					(64,148	)
		Unrealized gains on insured derivatives					46				1,537,880					-					-					-					1,537,926					-					1,537,926
			Net change in fair value of insured derivatives				149				1,473,629					-					-					-					1,473,778					-					1,473,778
	Net gains (losses) on financial instruments at fair value and foreign exchange						-				(16,006	)				55					10,161					4,703					(1,087	)				-					(1,087	)
	Net realized gains (losses)						1,311				19,101					(143	)				(1,648	)				(84	)				18,537					-					18,537
	Net investment losses related to other-than-temporary impairments:
		Investment losses related to other-than-temporary impairments					-				(94	)				-					-					(21,668	)				(21,762	)				-					(21,762	)
		Other-than-temporary impairments recognized in accumulated other comprehensive loss					-				(1,267	)				-					-					9,907					8,640					-					8,640
			Net investment losses related to other-than-temporary impairments				-				(1,361	)				-					-					(11,761	)				(13,122	)				-					(13,122	)
	Net gains (losses) on extinguishment of debt						-				-					-					(10	)				17,553					17,543					-					17,543
	Revenues of consolidated VIEs:
		Net investment income					-				10,392					-					-					2,267					12,659					-					12,659
		Net gains on financial instruments at fair value and foreign exchange					-				264,144					-					-					20,916					285,060					5,806					290,866
		Net realized gains (losses)					-				-					-					-					-					-					-					-
		Net investment losses related to other-than-temporary impairments:
			Investment losses related to other-than-temporary impairments				-				-					-					-					-					-					-					-
			Other-than-temporary impairments recognized in accumulated other comprehensive loss				-				-					-					-					-					-					-					-
			Net investment losses related to other-than-temporary impairments				-				-					-					-					-					-					-					-
		Net gains on extinguishment of debt					-				-					-					-					3,530					3,530					-					3,530
		Total revenues					179,249				1,864,533					17,408					31,646					62,548					2,155,384					(77,822	)				2,077,562
Expenses:
	Losses and loss adjustment						10,263				(82,803	)				-					-					-					(72,540	)				-					(72,540	)
	Amortization of deferred acquisition costs						24,252				38,419					-					-					-					62,671					(48,641	)				14,030
	Operating						16,855				32,257					17,698					24,969					4,462					96,241					(27,736	)				68,505
	Interest						-				33,844					-					16,168					42,926					92,938					(12,043	)				80,895
	Expenses of consolidated VIEs:
		Operating					-				3,503					-					-					578					4,081					147					4,228
		Interest					-				10,275					-					-					3,686					13,961					-					13,961
		Total expenses					51,370				35,495					17,698					41,137					51,652					197,352					(88,273	)				109,079
Pre-tax income (loss)						$	127,879			$	1,829,038				$	(290	)			$	(9,491	)			$	10,896				$	1,958,032				$	10,451					1,968,483
	Provision for income taxes																																								673,167
Net income																																									1,295,316
	Preferred stock dividends of subsidiary																																								-
Net income available to common shareholders																																								$	1,295,316

MBIA INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS (Unaudited)
(in thousands)
										Structured
						U.S.				Finance
						Public				and
						Finance				International					Advisory										Wind-
Three Months Ended June 30, 2009						Insurance				Insurance					Services										down										Intercompany
						(National)				(MBIA Corp.)					(Cutwater)					Corporate					Operations					Subtotal					Eliminations					Consolidated
Revenues:
	Premiums earned:
		Scheduled premiums earned				$	103,973			$	79,544				$	-				$	-				$	-				$	183,517				$	(30,391	)			$	153,126
		Refunding premiums earned					29,028				1,289					-					-					-					30,317					(5,495	)				24,822
			Total premiums earned				133,001				80,833					-					-					-					213,834					(35,886	)				177,948
	Net investment income						60,028				58,658					9					3,789					48,201					170,685					(21,079	)				149,606
	Fees and reimbursements						333				48,442					13,043					-					476					62,294					(40,489	)				21,805
	Change in fair value of insured derivatives:
		Realized gains and other settlements on insured derivatives					130				31,906					-					-					-					32,036					-					32,036
		Unrealized gains on insured derivatives					188				423,598					-					-					-					423,786					-					423,786
			Net change in fair value of insured derivatives				318				455,504					-					-					-					455,822					-					455,822
	Net gains (losses) on financial instruments at fair value and foreign exchange						-				12,298					(601	)				(2,639	)				116,245					125,303					-					125,303
	Net realized gains						7,019				604					13					3,853					18,733					30,222					-					30,222
	Net investment losses related to other-than-temporary impairments:
		Investment losses related to other-than-temporary impairments					-				-					-					-					(265,832	)				(265,832	)				-					(265,832	)
		Other-than-temporary impairments recognized in accumulated other comprehensive loss					-				-					-					-					158,383					158,383					-					158,383
			Net investment losses related to other-than-temporary impairments				-				-					-					-					(107,449	)				(107,449	)				-					(107,449	)
	Net gains on extinguishment of debt						-				-					-					1,165					94,596					95,761					-					95,761
	Revenues of consolidated VIEs:
		Net investment income					-				25,810					-					-					3,872					29,682					-					29,682
		Net losses on financial instruments at fair value and foreign exchange					-				-					-					-					(924	)				(924	)				-					(924	)
		Net investment losses related to other-than-temporary impairments:
			Investment losses related to other-than-temporary impairments				-				(91,586	)				-					-					-					(91,586	)				-					(91,586	)
			Other-than-temporary impairments recognized in accumulated other comprehensive loss				-				85,369					-					-					-					85,369					-					85,369
			Net investment losses related to other-than-temporary impairments				-				(6,217	)				-					-					-					(6,217	)				-					(6,217	)
		Net gains on extinguishment of debt					-				-					-					-					20,542					20,542					-					20,542
		Total revenues					200,699				675,932					12,464					6,168					194,292					1,089,555					(97,454	)				992,101
Expenses:
	Losses and loss adjustment						5,250				(734,561	)				-					-					-					(729,311	)				-					(729,311	)
	Amortization of deferred acquisition costs						28,477				58,484					-					-					-					86,961					(60,894	)				26,067
	Operating						20,574				39,212					11,269					7,203					10,013					88,271					(8,609	)				79,662
	Interest						-				33,745					-					17,838					65,713					117,296					(27,544	)				89,752
	Expenses of consolidated VIEs:
		Operating					-				98					-					-					890					988					(700	)				288
		Interest					-				19,277					-					-					3,445					22,722					-					22,722
		Total expenses					54,301				(583,745	)				11,269					25,041					80,061					(413,073	)				(97,747	)				(510,820	)
Pre-tax income (loss)						$	146,398			$	1,259,677				$	1,195				$	(18,873	)			$	114,231				$	1,502,628				$	293					1,502,921
	Provision for income taxes																																								604,907
Net income																																									898,014
	Preferred stock dividends of subsidiary																																								3,271
Net income available to common shareholders																																								$	894,743

MBIA INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS (Unaudited)
(in thousands)
											Structured
						U.S.					Finance
						Public					and
						Finance					International					Advisory										Wind-
Six Months Ended June 30, 2010						Insurance					Insurance					Services										down										Intercompany
						(National)					(MBIA Corp.)					(Cutwater)					Corporate					Operations					Subtotal					Eliminations					Consolidated
Revenues:
	Premiums earned:
		Scheduled premiums earned				$	173,799				$	131,336				$	-				$	-				$	-				$	305,135				$	(42,014	)			$	263,121
		Refunding premiums earned					59,779					4,340					-					-					-					64,119					(14,098	)				50,021
			Total premiums earned				233,578					135,676					-					-					-					369,254					(56,112	)				313,142
	Net investment income						117,453					57,667					(304	)				7,419					51,912					234,147					(4,795	)				229,352
	Fees and reimbursements						17,402					150,952					33,717					44,466					-					246,537					(113,453	)				133,084
	Change in fair value of insured derivatives:
		Realized gains (losses) and other settlements on insured derivatives					205					(98,483	)				-					-					-					(98,278	)				-					(98,278	)
		Unrealized losses on insured derivatives					(38	)				(673,461	)				-					-					-					(673,499	)				-					(673,499	)
			Net change in fair value of insured derivatives				167					(771,944	)				-					-					-					(771,777	)				-					(771,777	)
	Net losses on financial instruments at fair value and foreign exchange						-					(18,925	)				(15	)				(18,188	)				(9,159	)				(46,287	)				-					(46,287	)
	Net realized gains (losses)						3,784					24,370					851					267					(11,196	)				18,076					-					18,076
	Net investment losses related to other-than-temporary impairments:
		Investment losses related to other-than-temporary impairments					-					(285	)				-					-					(186,887	)				(187,172	)				-					(187,172	)
		Other-than-temporary impairments recognized in accumulated other comprehensive loss					-					(3,604	)				-					-					147,922					144,318					-					144,318
			Net investment losses related to other-than-temporary impairments				-					(3,889	)				-					-					(38,965	)				(42,854	)				-					(42,854	)
	Net gains (losses) on extinguishment of debt						-					-					-					(10	)				17,551					17,541					-					17,541
	Revenues of consolidated VIEs:
		Net investment income					-					20,772					-					-					7,057					27,829					-					27,829
		Net gains on financial instruments at fair value and foreign exchange					-					370,237					-					-					31,068					401,305					12,496					413,801
		Net realized losses					-					(74,244	)				-					-					-					(74,244	)				-					(74,244	)
		Net investment losses related to other-than-temporary impairments:
			Investment losses related to other-than-temporary impairments				-					-					-					-					-					-					-					-
			Other-than-temporary impairments recognized in accumulated other comprehensive loss				-					-					-					-					-					-					-					-
			Net investment losses related to other-than-temporary impairments				-					-					-					-					-					-					-					-
		Net gains on extinguishment of debt					-					-					-					-					3,530					3,530					-					3,530
		Total revenues					372,384					(109,328	)				34,249					33,954					51,798					383,057					(161,864	)				221,193
Expenses:
	Losses and loss adjustment						36,158					105,701					-					-					-					141,859					-					141,859
	Amortization of deferred acquisition costs						46,671					86,841					-					-					-					133,512					(96,734	)				36,778
	Operating						29,804					58,270					31,403					51,986					8,108					179,571					(48,568	)				131,003
	Interest						-					68,581					-					33,049					90,834					192,464					(27,243	)				165,221
	Expenses of consolidated VIEs:
		Operating					-					9,700					-					-					1,112					10,812					(1,161	)				9,651
		Interest					-					20,655					-					-					6,969					27,624					-					27,624
		Total expenses					112,633					349,748					31,403					85,035					107,023					685,842					(173,706	)				512,136
Pre-tax income (loss)						$	259,751				$	(459,076	)			$	2,846				$	(51,081	)			$	(55,225	)			$	(302,785	)			$	11,842					(290,943	)
	Benefit for income taxes																																									(106,023	)
Net loss																																										(184,920	)
	Preferred stock dividends of subsidiary																																									-
Net loss available to common shareholders																																									$	(184,920	)

MBIA INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS (Unaudited)
(in thousands)
											Structured
						U.S.					Finance
						Public					and
						Finance					International					Advisory										Wind-
Six Months Ended June 30, 2009						Insurance					Insurance					Services										down										Intercompany
						(National)					(MBIA Corp.)					(Cutwater)					Corporate					Operations					Subtotal					Eliminations					Consolidated
Revenues:
	Premiums earned:
		Scheduled premiums earned				$	217,672				$	198,578				$	-				$	-				$	-				$	416,250				$	(68,149	)			$	348,101
		Refunding premiums earned					65,175					2,035					-					-					-					67,210					(8,694	)				58,516
			Total premiums earned				282,847					200,613					-					-					-					483,460					(76,843	)				406,617
	Net investment income						91,128					144,637					(2	)				11,036					108,979					355,778					(47,578	)				308,200
	Fees and reimbursements						577					90,368					26,214					-					966					118,125					(77,099	)				41,026
	Change in fair value of insured derivatives:
		Realized gains and other settlements on insured derivatives					186					63,632					-					-					-					63,818					-					63,818
		Unrealized gains (losses) on insured derivatives					(167	)				2,033,117					-					-					-					2,032,950					-					2,032,950
			Net change in fair value of insured derivatives				19					2,096,749					-					-					-					2,096,768					-					2,096,768
	Net gains (losses) on financial instruments at fair value and foreign exchange						-					12,496					(565	)				(11,443	)				170,730					171,218					-					171,218
	Net realized gains						7,019					8,926					25					2,894					45,547					64,411					-					64,411
	Net investment losses related to other-than-temporary impairments:
		Investment losses related to other-than-temporary impairments					-					-					-					-					(461,677	)				(461,677	)				-					(461,677	)
		Other-than-temporary impairments recognized in accumulated other comprehensive loss					-					-					-					-					158,383					158,383					-					158,383
			Net investment losses related to other-than-temporary impairments				-					-					-					-					(303,294	)				(303,294	)				-					(303,294	)
	Net gains on extinguishment of debt						-					488					-					1,940					98,273					100,701					5,158					105,859
	Revenues of consolidated VIEs:
		Net investment income					-					46,611					-					-					13,379					59,990					-					59,990
		Net losses on financial instruments at fair value and foreign exchange					-					-					-					-					(9,460	)				(9,460	)				-					(9,460	)
		Net investment losses related to other-than-temporary impairments:
			Investment losses related to other-than-temporary impairments				-					(125,730	)				-					-					-					(125,730	)				-					(125,730	)
			Other-than-temporary impairments recognized in accumulated other comprehensive loss				-					85,369					-					-					-					85,369					-					85,369
			Net investment losses related to other-than-temporary impairments				-					(40,361	)				-					-					-					(40,361	)				-					(40,361	)
		Net gains on extinguishment of debt					-					-					-					-					20,542					20,542					-					20,542
		Total revenues					381,590					2,560,527					25,672					4,427					145,662					3,117,878					(196,362	)				2,921,516
Expenses:
	Losses and loss adjustment						62,998					(98,584	)				-					-					-					(35,586	)				-					(35,586	)
	Amortization of deferred acquisition costs						56,733					116,021					-					-					-					172,754					(125,987	)				46,767
	Operating						28,364					104,672					20,887					15,545					18,311					187,779					(15,778	)				172,001
	Interest						-					67,302					-					35,574					155,008					257,884					(58,237	)				199,647
	Expenses of consolidated VIEs:
		Operating					-					187					-					-					2,113					2,300					(1,811	)				489
		Interest					-					40,670					-					-					9,436					50,106					-					50,106
		Total expenses					148,095					230,268					20,887					51,119					184,868					635,237					(201,813	)				433,424
Pre-tax income (loss)						$	233,495				$	2,330,259				$	4,785				$	(46,692	)			$	(39,206	)			$	2,482,641				$	5,451					2,488,092
	Provision for income taxes																																									889,430
Net income																																										1,598,662
	Preferred stock dividends of subsidiary																																									7,213
Net income available to common shareholders																																									$	1,591,449

MBIA INC. AND SUBSIDIARIES
Components of Adjusted Book Value per Share
					June 30, 2010
					National
					Public
					Finance		MBIA		Cutwater				Wind-
					Guarantee		Insurance		Asset				down
					Corporation		Corporation		Management		Corporate		Operations		Consolidated
Reported Book Value					$14.97		$6.44		$0.15		($1.26)		($7.14)		$13.16
Plus:	Cumulative unrealized loss on insured credit derivatives, after tax				0.00		14.45		0.00		0.00		0.00		14.45
Less:	Cumulative impairments on insured credit derivatives, after tax				0.00		(8.25)		0.00		0.00		0.00		(8.25)
Reverse:	Unrealized (gains) losses included in OCI				(0.35)		0.25		0.00		0.00		2.61		2.51
Reverse:	Impact of consolidating certain VIEs (1)				0.00		1.00		0.00		0.00		0.00		1.00
Analytic Book Value (2)					14.62		13.89		0.15		(1.26)		(4.53)		22.87
Plus:	Net unearned premium revenue, after tax (3) (4)				7.85		6.36		0.00		0.00		0.00		14.21
Plus:	Wind-down Operations future spread adjustment (4)				0.00		0.00		0.00		0.00		0.55		0.55
Plus:	Loss provision (5)				(1.04)		(0.83)		0.00		0.00		0.00		(1.87)
Adjusted Book Value (2)					$21.43		$19.42		$0.15		($1.26)		($3.98)		$35.76
					December 31, 2009
					National
					Public
					Finance		MBIA		Cutwater				Wind-
					Guarantee		Insurance		Asset				down
					Corporation		Corporation		Management		Corporate		Operations		Consolidated
Reported Book Value					$13.52		$7.75		$0.37		($1.02)		($7.96)		$12.66
Plus:	Cumulative unrealized loss on insured credit derivatives, after tax				0.00		12.09		0.00		0.00		0.00		12.09
Less:	Cumulative impairments on insured credit derivatives, after tax				0.00		(5.89)		0.00		0.00		0.00		(5.89)
Reverse:	Unrealized (gains) losses included in OCI				(0.05)		1.03		0.00		0.00		4.08		5.06
Analytic Book Value (2)					13.47		14.98		0.37		(1.02)		(3.88)		23.92
Plus:	Net unearned premium revenue, after tax (3) (4)				8.32		6.70		0.00		0.00		0.00		15.02
Plus:	Wind-down Operations future spread adjustment (4)				0.00		0.00		0.00		0.00		(0.61)		(0.61)
Plus:	Loss provision (5)				(1.09)		(0.89)		0.00		0.00		0.00		(1.98)
Adjusted Book Value (2)					$20.70		$20.79		$0.37		($1.02)		($4.49)		$36.35

(1)		Represents the impact on consolidated total equity of VIEs that are not considered a business enterprise of the Company.
(2)		A non-GAAP measure.
(3)		The amounts consist of Financial Guarantee premiums, Insured Derivative revenue and deferred commitment/structuring fees.
(4)		At June 30, 2010 and December 31, 2009 the discount rate on Financial Guarantee installment premiums was the risk free rate as defined by accounting principles for Financial Guarantee insurance contracts and the discount rate was 5.00% on Insured Derivative installment revenue, impairments and Wind-down Operations future spread adjustment.
(5)		The loss provision is calculated by applying 12% to net unearned premiums and net unearned Insured Derivative revenue on an after-tax basis.

Net Income (Loss) per Common Share:
						Three Months Ended								Six Months Ended
						June 30								June 30
						2010				2009				2010				2009
				Basic		$6.34				$4.30				($0.90)				$7.64
				Diluted		$6.32				$4.30				($0.90)				$7.64
Weighted-Average Number of Common Shares Outstanding:
				Basic		204,377,833				208,097,729				204,639,226				208,287,929
				Diluted		204,921,673				208,097,729				204,639,226				208,287,929

INSURANCE OPERATIONS
Selected Financial Data Computed on a Statutory Basis
(dollars in millions)
	National Public Finance Guarantee Corporation
						June 30, 2010			December 31, 2009 (6)
	Policyholders' surplus					$ 762.0			$ 591.2
	Contingency reserve					1,427.5			1,403.9
	Statutory capital					2,189.5			1,995.1
	Unearned premium reserve					2,959.1			3,125.5
	Present value of installment premiums (1)					261.1			270.3
	Premium resources (2)					3,220.2			3,395.8
	Loss and loss adjustment expense reserves (1)					134.9			136.0
	Total claims-paying resources					$ 5,544.6			$ 5,526.9
	Net debt service outstanding					$780,971.1			$821,687.6
	Capital ratio (3)					356:1			412:1
	Claims-paying ratio (4)					177:1			189:1
	MBIA Insurance Corporation
						June 30, 2010			December 31, 2009 (6)
	Policyholders' surplus					$ 1,747.3			$ 1,885.1
	Contingency reserve					1,519.3			1,447.7
	Statutory capital					3,266.6			3,332.8
	Unearned premium reserve					665.1			726.1
	Present value of installment premiums (5)					1,597.8			1,739.5
	Premium resources (2)					2,262.9			2,465.6
	Loss and loss adjustment expense reserves (5)					(70.8)			561.0
	Total claims-paying resources					$ 5,458.7			$ 6,359.4
	Net debt service outstanding					$244,834.3			$264,562.5
	Capital ratio (3)					75:1			79:1
	Claims-paying ratio (4)					52:1			48:1

(1)		At June 30, 2010 and December 31, 2009 the discount rate was 5.09%.
(2)		The amounts consist of Financial Guarantee premiums and Insured Derivative premiums.
(3)		Net debt service outstanding divided by statutory capital.
(4)		Net debt service outstanding divided by the sum of statutory capital, unearned premium reserve (after-tax), present value of installment premiums (after-tax) and loss and loss adjustment expense.
(5)		At June 30, 2010 and December 31, 2009 the discount rate was 6.51%.
(6)		Changed as a result of certain updates described in the Company’s Current Report on Form 8-K filed on June 4, 2010.