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MBIA Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 10, 2012 04:49PM
MBIA Inc. (MBI) filed Quarterly Report for the period ended 2012-03-31.
Highlight of Business Operations:For the three months ended March 31, 2012, we recorded consolidated net income of $10 million, or $0.05 per share, compared with a consolidated net loss of $1.3 billion, or $6.37 per share, for the same period of 2011. Weighted average diluted common shares outstanding totaled 195 million for the three months ended March 31, 2012, down 3% from the same period of 2011 as a result of share repurchases by the Company during 2011. Consolidated total revenues (losses) for the three months ended March 31, 2012 included $299 million of net gains on insured derivatives compared with $1.8 billion of net losses for the same period of 2011. The net gains on insured derivatives in 2012 were principally the result of commuting derivatives at prices below fair value and favorable movements in spreads and pricing on collateral within transactions, partially offset by the effects of MBIAs nonperformance risk on its derivative liabilities which resulted from a tightening of its own credit spreads and an improvement in the Companys recovery rate. The net losses on insured derivatives in 2011 principally resulted from favorable changes in the market perception of MBIA Corp.s credit risk, which resulted in a tightening of the Companys credit spreads and an improvement in the Companys recovery rate, partially offset by improved collateral pricing. Consolidated total expenses for the three months ended March 31, 2012 included $97 million of net insurance loss and LAE compared with a benefit of $36 million for the same period of 2011. The net insurance loss and LAE in 2012 and benefit in 2011 were principally related to our insured RMBS exposure.
Included in our consolidated net income for the three months ended March 31, 2012 was $31 million of losses before income taxes related to consolidated VIEs, after the elimination of intercompany revenues and expenses, compared with losses before income taxes of $115 million for the same period of 2011. The net effect of consolidated VIEs on our financial results will vary over time as VIEs are consolidated or deconsolidated by the Company, and as the values of consolidated VIE assets and liabilities change.
NET PREMIUMS EARNED Net premiums earned on non-derivative financial guarantees represent gross premiums earned net of premiums ceded to reinsurers, and include scheduled premium earnings and premium earnings from refunded issues. For the three months ended March 31, 2012, U.S. public finance net premiums earned were $106 million compared with $89 million for the same period of 2011. The increase in 2012 resulted from an increase in refunded premiums earned of $34 million offset by a decline in scheduled premiums earned of $17 million. Scheduled premium earnings declined due to the maturity of insured issues within our U.S. public finance portfolio with no material new insurance writings. Additionally, refunding activity over the past several years has accelerated premium earnings in prior periods and reduced the amount of premiums that would have been earned in the current period.
NET INVESTMENT INCOME For the three months ended March 31, 2012, our structured finance and international insurance investment portfolio generated $8 million of net investment income compared with $31 million for the same period of 2011. The decrease in net investment income was primarily due to lower average asset balances in 2012 as a result of claim and commutation payments, and reinvesting proceeds from sales and maturities of high-yielding securities in lower yielding liquid securities.
REVENUES OF CONSOLIDATED VIEs For the three months ended March 31, 2012, total revenues of consolidated VIEs within our structured finance and international insurance segment were a loss of $18 million compared with a loss of $117 million for the same period of 2011. The fluctuation in revenues of consolidated VIEs was principally driven by a decrease in net losses on financial instruments at fair value and foreign exchange due to the deconsolidation of VIEs resulting from commutations in 2011.
Stocks Discussed: MBI,