Subs: MBIA

I still think this is going to come down to the wire for the 12/6 hearing…..

The tone of these releases is beginning to sound more like barring a save from the Judge, $MBI is going to have to settle sooner rather than later with $BAC.  The thesis remains the same. BAC cannot afford to go forward legally as a negative ruling would be very bad for it in other suits. MBI cannot afford to go forward legally as they do not have that kind of time. So, they’ll settle.  Nothing in this release changes any of that.

 

Highlights

  • MBIA Inc.’s (the Company’s) Adjusted Book Value (ABV), a non-GAAP measure, was $30.64 per share at September 30, 2012 compared with $31.23 per share at June 30, 2012.
  • MBIA Inc.’s adjusted pre-tax loss, a non-GAAP measure, was $118 million for the third quarter of 2012 compared with an adjusted pre-tax loss of $430 million for the third quarter of 2011.
  • MBIA Inc. recorded net income available to common shareholders of $7 million, or $0.04 per share, for the third quarter of 2012, compared with net income of $444 million, or $2.26 per share, for the third quarter of 2011.

ARMONK, N.Y.–(BUSINESS WIRE)– MBIA Inc. (NYSE: MBI) today reported Adjusted Book Value (ABV) per share (a non-GAAP measure defined in the attached Explanation of Non-GAAP Financial Measures) of $30.64 per share at September 30, 2012 compared with $31.23 per share at June 30, 2012. Book value per share was $13.25 as of September 30, 2012.

MBIA Inc.’s adjusted pre-tax loss (a non-GAAP measure defined in the attached Explanation of Non-GAAP Financial Measures) for the third quarter of 2012 was $118 million compared with an adjusted pre-tax loss of $430 million for the third quarter of 2011. The reduction in ABV and the adjusted pre-tax loss for the three months ended September 30, 2012 were driven primarily by losses on insured exposures. The lower adjusted pre-tax loss for the third quarter of 2012 compared with the third quarter of 2011 was primarily the result of decreases in impairments on insured credit derivatives, insurance losses and LAE, partially offset by a decrease in net gains related to unfavorable changes in foreign exchange rates. ABV and adjusted pre-tax income (loss) provide investors with additional views of the Company’s operating results that management finds useful in measuring financial performance.

Net income available to common shareholders for the third quarter of 2012 was $7 million, or $0.04 per share, compared with net income of $444 million, or $2.26 per share, for the third quarter of 2011. The decline in net income was primarily the result of pre-tax unrealized changes in the fair value of insured derivatives. In the three months ended September 30, 2012, the Company recorded a $33 million unrealized loss on insured credit derivatives compared with a $776 million unrealized gain on insured credit derivatives in the comparable period of 2011. The unrealized gain on insured credit derivatives in the third quarter of 2011 resulted from a reduced market perception of MBIA Insurance Corporation’s (MBIA Corp.) credit quality and commutations of insured exposures. The Company is required to adjust the values of its derivative liabilities for the market’s perception of its non-performance risk. The decrease in the value of the derivative liabilities attributable to the change in non-performance risk is reflected as an unrealized gain on the income statement.

“Deterioration in the performance of commercial real estate exposures and losses on insured RMBS transactions from ineligible mortgages drove our adjusted pre-tax loss this quarter,” said MBIA Inc. President and Chief Financial Officer Chuck Chaplin. “The path forward for our structured finance subsidiary, MBIA Corp., requires that we collect our put-back recoverables, principally from Countrywide and Bank of America, who continue to renege on their contractual obligation to repurchase billions of dollars in ineligible mortgages. Their default has put substantial pressure on MBIA Corp.’s liquidity position. We remain confident that we will ultimately resolve our litigation with Bank of America and collect the put-back recoverables, which will improve MBIA Corp.’s stability.”

Year-to-Date Results

Net income available to common shareholders for the nine months ended September 30, 2012 was $598 million, or $3.07 per share, compared with a net loss of $693 million, or $3.50 per share, for the nine months ended September 30, 2011. The improvement in net income was primarily the result of pre-tax unrealized changes in the fair value of insured derivatives. In the first nine months of 2012, the Company recorded a $1.5 billion unrealized gain on insured credit derivatives compared with an unrealized loss of $531 million in the first nine months of 2011.

The adjusted pre-tax loss for the nine months ended September 30, 2012 was $818 million compared with an adjusted pre-tax loss of $244 million in the comparable period of 2011. The unfavorable change for the nine months ended September 30, 2012 was primarily due to increased losses on insured credit derivatives and financial guarantee policies, an increase in operating expenses due to a significant increase in legal and litigation related costs, and lower net investment income.

 

Earnings call:

  • Both suits with $BAC are awaiting decision
  • US lawsuit vs $BAC “bolsters” confidence in eventual outcome
  • Flow of new delinquencies not abated as fast as projected
  • New CMBS deliquencies attributed to Merrill unit, deductible exhausted, claim paying will begin
  • Timing of the events could cause liquidity shortfall. $BAC could end up both the largest creditor and debtor. Such an event is in the best interest of neither BAC or MBI
  • Searching a “global settlement” but will not accept a non economic outcome
  • Clearly getting closer to solving legal issues
  • when asked. “are you contemplating a settlement?”  answer: “Yes”
  • Virtually all exposure the BAC CMBS is in the form of derivatives



To see more posts on any of the companies mentioned in this article, enter their stock ticker symbol in the search box.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

comments powered by Disqus
Value Plays Blog
  • Todd Sullivan

    Todd's investing strategy is essentially long with the rare short. He seeks to buy undervalued issues with an upcoming catalyst that will help them realized.... More »

  • StockTwits Follow Todd Sullivan on StockTwits Follow Todd Sullivan on Twitter Subscribe to ValuePlays RSS via Email Subscribe to ValuePlays RSS
  • Archives

  • Tag Cloud