MBIA Inc (MBI)

[Enterprising Investor]

MBIA Inc. Reports First Quarter 2017 Financial Results (5/10/17)

PURCHASE, N.Y.--(BUSINESS WIRE)--MBIA Inc. (NYSE:MBI) (the Company) today reported a consolidated GAAP net loss of $72 million, or $(0.55) per share, for the first quarter of 2017 compared to a consolidated GAAP net loss of $78 million, or $(0.58) per share, for the first quarter of 2016. The reduction in year-over-year consolidated GAAP net loss was primarily due to fair value gains associated with interest rate swaps and common stock warrants and lower foreign exchange losses, largely offset by greater loss and loss adjustment expenses, primarily at MBIA Insurance Corporation, and lower net premiums earned.

Book value per share was $24.73 as of March 31, 2017 compared with $23.87 as of December 31, 2016. The increase in book value per share was primarily due to a reduction in shares outstanding due to the repurchase of 4.8 million MBIA common shares during the first quarter of 2017.

Combined Operating Income (a non-GAAP measure defined in the attached Explanation of Non-GAAP Financial Measures) was $9 million for the three months ended March 31, 2017 compared with Combined Operating Income of $16 million in the same period of 2016. The $7 million decline in quarter-over-quarter Combined Operating Income was primarily due to a $17 million decrease in net premiums earned.

Adjusted Book Value (ABV) per share (a non-GAAP measure defined in the attached Explanation of Non-GAAP Financial Measures) increased to $33.69 as of March 31, 2017 from $31.88 as of December 31, 2016. The increase in ABV per share was driven primarily by a decrease in common shares outstanding resulting from the above-referenced share repurchases during the first quarter of 2017.

Operating Income and ABV per share provide investors with views of the Company’s operating results that management uses in measuring financial performance. Reconciliations of ABV per share to book value per share, and Operating Income to net income, calculated in accordance with GAAP, are attached.

Statements from Company Representative

“National continues to execute on a disciplined and measured expansion of its business activities,” said Bill Fallon, MBIA’s Chief Operating Officer. “Since re-entering the market in 2014, National has now insured business in 27 states, having insured transactions in 5 new states in 2016 and in another 7 new states in the first quarter of 2017. National’s business production in the first quarter of 2017 was its second-highest quarter by policies issued since it re-entered the market.” Mr. Fallon added, “More significantly, National’s capital position continues to strengthen, driven by an $8 billion net reduction of insured exposure during the quarter, which further improves its capacity for its first special dividend payment.”

U.S. Public Finance Insurance Segment Results

The Company’s U.S. public finance insurance business is conducted through National Public Finance Guarantee Corporation (National).

The U.S. Public Finance Insurance segment recorded GAAP net income of $27 million for the first quarter of 2017 versus $41 million for the first quarter of 2016. The decline in GAAP net income was primarily due to a $17 million decline in net premiums earned.

The U.S. Public Finance Insurance segment recorded $25 million of Operating Income in the first quarter of 2017 compared with $37 million of Operating Income in the same period of 2016. The decline in Operating Income was also primarily due to the decline in net premiums earned.

Total net premiums earned in the U.S. Public Finance Insurance segment were $41 million in the first quarter of 2017, down 29 percent from $58 million of total premiums earned in the same period of 2016. Premiums earned from refunded transactions decreased 35 percent and scheduled premiums earned declined by 20 percent. The decline in scheduled premiums earned resulted from the continued decrease of National’s insured portfolio.

National wrote $252 million gross par of new insurance during the first quarter of 2017, up from $158 million written during the first quarter of 2016. National wrote $1.7 billion of gross par for the four quarters ending March 31, 2017 versus $0.7 billion for the four quarters ending March 31, 2016.

Net investment income for the U.S. Public Finance Insurance segment was $31 million in the first quarters of 2017 and 2016 on average assets of $4.2 billion and $4.4 billion, for the respective quarters.

The U.S. Public Finance Insurance segment recorded loss and loss adjustment expenses of $11 million in the first quarter of 2017 compared to $9 million in the first quarter of 2016. The increase in losses and loss adjustment expenses was primarily due to additions for certain Puerto Rico credits in the first quarter of 2017.

The amortization of deferred acquisition costs totaled $8 million in the first quarter of 2017 compared with $12 million in the same period of 2016. The decrease in the amortization of deferred acquisition costs corresponds to lower premiums earned.

National’s operating expenses were $17 million in the first quarter of 2017 versus $15 million in the same period of 2016.

National had statutory capital of $3.5 billion and claims-paying resources totaling $4.6 billion as of March 31, 2017. National’s insured portfolio declined by $8 billion during the quarter, ending the quarter with $102 billion of gross par outstanding. National ended the quarter with a leverage ratio of gross par outstanding to statutory capital of 29 to 1, down from 32 to 1 as of year-end 2016.

Corporate Segment Results

The corporate segment includes general corporate activities and also provides support services, including asset and capital management services, to MBIA’s other operating businesses.

The corporate segment recorded GAAP net income of $10 million in the first quarter of 2017 versus a net loss of $84 million in the first quarter of 2016. The favorable variance was primarily due to fair value gains on interest rate swaps and common stock warrants, as well as lower foreign exchange losses.

The corporate segment recorded an Operating Loss of $16 million in the first quarter of 2017 compared with an Operating Loss of $21 million in the same period of 2016.

As of March 31, 2017, MBIA Inc. held cash and liquid assets of $340 million. In addition, there were assets with a market value of $216 million held in its tax escrow account as of March 31, 2017. During the first quarter of 2017, National’s 2014 tax payment of $94 million was released to MBIA Inc. from the tax escrow account in accordance with the Company’s tax sharing agreement.

The Company’s consolidated net operating loss carryforward for income tax purposes as of March 31, 2017 was approximately $2.6 billion.

During the first quarter of 2017, the Company repurchased 4.8 million of its common shares at an average price of $8.31 per share. Subsequent to March 31, 2017 through May 4, 2017, the Company has repurchased an additional 522 thousand shares. As of May 4, 2017, there was $44 million of remaining authorized capacity under the Company’s current share repurchase program and there were 129 million of the Company’s common shares outstanding. During the first quarter of 2017, the Company also retired $74 million par value of MBIA Global Funding MTNs through debt repurchases and maturity payments.

International and Structured Finance Insurance Segment Results

The international and structured finance insurance business is conducted primarily through MBIA Corp. and includes the results of MBIA Insurance Corporation, the New York-regulated insurer on a stand-alone basis, and its subsidiary, MBIA Mexico S.A. de C.V.

The Company uses statutory accounting to measure the financial performance of MBIA Insurance Corporation, which had statutory net income of $178 million for the first quarter of 2017 and a statutory net loss of $55 million for the first quarter of 2016. The favorable variance is primarily due to $263 million of net gains associated with the completed sale of MBIA UK, partially offset by greater loss and loss adjustment expense incurred. The sale of MBIA UK increased MBIA Insurance Corporation’s statutory capital by $133 million for the first quarter of 2017. The net impact of the sale of MBIA UK, after giving full effect in MBIA Insurance Corporation’s statutory financial statements over the last two quarters, resulted in a net increase of $32 million to MBIA Insurance Corporation’s statutory capital. As of March 31, 2017, the statutory capital of MBIA Insurance Corporation was $524 million and claims-paying resources totaled $1.6 billion.

As of March 31, 2017, the liquidity position of MBIA Insurance Corporation (excluding its subsidiaries and branch) totaled $111 million consisting of cash and invested assets.

Conference Call

The Company will host a webcast and conference call for investors tomorrow, Thursday, May 11, 2017 at 8:00 AM (EDT) to discuss its first quarter 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 [phone] in the U.S. and [phone] from outside the U.S. The conference call code is 11362727. 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 May 11 until 11:59 p.m. on May 25 by dialing [phone] in the U.S. or [phone] from outside the U.S. The replay call code is also 11362727. In addition, a recording of the call will be available on the Company's website approximately two hours after the completion of the call.

MBIA Inc., headquartered in Purchase, New York is a holding company whose subsidiaries provide financial guarantee insurance for the public and structured finance markets. Please visit MBIA's website at www.mbia.com.

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