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http://www.bloomberg.com/apps/news?pid=conewsstory&tkr=MBI%3AUS&sid=a4tN1BxULgLc
MBIA Posts $1.5 Billion Loss as Default Risk Drops (Update2)
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By Christine Richard
May 10 (Bloomberg) -- MBIA Inc., the world’s largest bond insurer, reported a first-quarter loss of $1.5 billion, largely the result of an accounting rule that required the company to revalue some of its obligations.
The loss, equivalent to $7.22 a share, compares with a gain of $696.7 million, or $3.34 a share, a year earlier, the Armonk, New York-based company said today in a statement distributed by Business Wire. Last year’s gain resulted from the flip-side of an accounting rule that requires companies to value their assets and liabilities at market prices. A revaluing of the company’s liabilities in the first quarter contributed $2.2 billion of MBIA’s $2.3 billion pretax loss.
“Our businesses operated near breakeven on an adjusted book value basis this quarter,” MBIA Chief Financial Officer Chuck Chaplin said in the statement. Adjusted book value is a measure of the company’s worth that is not recognized under generally accepted accounting principles.
MBIA backed certain securities via credit default swaps, derivative contracts that are subject to the mark-to-market accounting. A narrowing of the risk premiums on MBIA Insurance Corp. swaps during the first quarter indicated that the company was perceived as more likely to honor the contracts. That increased the value of its obligations and drove the $2.2 billion loss.
Recoveries Expected
MBIA was stripped of its top financial-guarantee credit ratings in 2008 as claims on securities backed by mortgages and home-equity loans surged. Chief Executive Officer Jay Brown has sought to revive MBIA’s business by splitting off the company’s municipal-bond insurance operations, a move investors are fighting in court.
The company said in the statement it expected further claims on securities backed by residential mortgages. Those losses will be offset by expected recoveries from mortgage originators of $1.9 billion, up from $1.5 billion at the end of 2009.
MBIA has sued mortgage originators, including Countrywide Financial Corp., which was purchased by Bank of America Corp., to get them to honor agreements to buy back mortgages backing MBIA-insured bonds. MBIA says the companies deviated from their stated underwriting guidelines in approving many of the loans which have defaulted.
National Public Finance Guarantee Corp., MBIA’s municipal insurer, had $2.1 billion of regulatory capital at the end of March, the company said. MBIA Corp., which guarantees structured finance securities, had $3.5 billion.
To contact the reporter on this story: Christine Richard in New York at Crichard5@bloomberg.net
Last Updated: May 10, 2010 18:56 EDT
http://www.bloomberg.com/apps/news?pid=conewsstory&tkr=MBI%3AUS&sid=a4tN1BxULgLc
MBIA Posts $1.5 Billion Loss as Default Risk Drops (Update2)
Share Business ExchangeTwitterFacebook| Email | Print | A A A
By Christine Richard
May 10 (Bloomberg) -- MBIA Inc., the world’s largest bond insurer, reported a first-quarter loss of $1.5 billion, largely the result of an accounting rule that required the company to revalue some of its obligations.
The loss, equivalent to $7.22 a share, compares with a gain of $696.7 million, or $3.34 a share, a year earlier, the Armonk, New York-based company said today in a statement distributed by Business Wire. Last year’s gain resulted from the flip-side of an accounting rule that requires companies to value their assets and liabilities at market prices. A revaluing of the company’s liabilities in the first quarter contributed $2.2 billion of MBIA’s $2.3 billion pretax loss.
“Our businesses operated near breakeven on an adjusted book value basis this quarter,” MBIA Chief Financial Officer Chuck Chaplin said in the statement. Adjusted book value is a measure of the company’s worth that is not recognized under generally accepted accounting principles.
MBIA backed certain securities via credit default swaps, derivative contracts that are subject to the mark-to-market accounting. A narrowing of the risk premiums on MBIA Insurance Corp. swaps during the first quarter indicated that the company was perceived as more likely to honor the contracts. That increased the value of its obligations and drove the $2.2 billion loss.
Recoveries Expected
MBIA was stripped of its top financial-guarantee credit ratings in 2008 as claims on securities backed by mortgages and home-equity loans surged. Chief Executive Officer Jay Brown has sought to revive MBIA’s business by splitting off the company’s municipal-bond insurance operations, a move investors are fighting in court.
The company said in the statement it expected further claims on securities backed by residential mortgages. Those losses will be offset by expected recoveries from mortgage originators of $1.9 billion, up from $1.5 billion at the end of 2009.
MBIA has sued mortgage originators, including Countrywide Financial Corp., which was purchased by Bank of America Corp., to get them to honor agreements to buy back mortgages backing MBIA-insured bonds. MBIA says the companies deviated from their stated underwriting guidelines in approving many of the loans which have defaulted.
National Public Finance Guarantee Corp., MBIA’s municipal insurer, had $2.1 billion of regulatory capital at the end of March, the company said. MBIA Corp., which guarantees structured finance securities, had $3.5 billion.
To contact the reporter on this story: Christine Richard in New York at Crichard5@bloomberg.net
Last Updated: May 10, 2010 18:56 EDT
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