MBIA Slips To Loss In Q2 On Derivatives

(RTTNews) - Bond insurer MBIA Inc. (MBI) on Wednesday reported a loss for the second quarter, hurt by losses on the value of its insured derivatives. Looking ahead, the company said it is working on the re-launch of its U.S. municipal bond insurance unit, National Public Finance Guarantee Corp.

Chuck Chaplin, President and Chief Financial Officer of MBIA said, "The second quarter brought a close to the challenges to the formation of National brought by a bank group, the elimination of nearly $18 billion of insured exposure, which included $11 billion of highly potentially volatile CMBS and ABS CDO exposures, the collection of almost three quarters of the put-back recoverables on our balance sheet at year-end 2012, and an agreement that should result in the eventual receipt of approximately $796 million of additional put-back recoverables related to our ResCap exposure."

MBIA's net premiums earned in the second quarter were $124 million, down 27 percent from 171 million in the previous-year quarter. Net-investment income declined 37 percent to $38 million from $60 million in the year-ago period.

The company's second-quarter net loss was $178 million or $0.92 per share, compared to net income of $581 million or $2.98 per share in the same period last year.

Adjusted pre-tax loss for the quarter was $160 million, compared to adjusted pre-tax loss of $152 million in the comparable quarter last year.

The pre-tax loss for the latest quarter reflects lower premiums earned, variable interest entity or VIE revenues, and net investment income. These were partially offset by decreases in impairments on insured credit derivatives and lower net losses on insured exposures.

Revenues for the quarter plunged 93 percent to $112 million from $1.04 billion in the same period last year.

The latest quarter's revenues include $182 million of net losses on the fair value of insured derivatives, compared with $775 million of net gains for the same period last year.

The net losses on the fair value of insured derivatives were principally due to the effects of MBIA's non-performance risk on its derivative liabilities which resulted from a narrowing of its own credit spreads, partially offset by commuting derivatives at prices below fair value.

MBIA's adjusted book value or ABV was $29.28 per share at the end of the second quarter, compared to $30.68 per share at the end of December 2012.

Looking ahead, Chuck Chaplin said, "There is risk remaining in our structured finance book, but we are much closer to achieving stability there. Meanwhile, we continue to work with the rating agencies and other parties to lay the foundation for the re-launch of our U.S. muni-only insurer, National Public Finance Guarantee Corp."

MBIA closed Wednesday's regular trading session at $13.43, down $0.23 or 1.68 percent on a volume of 3.71 million shares. In after-hours, the stock further declined $0.09 or 0.67 percent to $13.34.