MBIA Inc (MBI)

[Enterprising Investor]

MBIA Inc. Reports Third Quarter 2017 Financial Results (11/07/17)

PURCHASE, N.Y.--(BUSINESS WIRE)--MBIA Inc. (NYSE:MBI) (the Company) today reported a consolidated GAAP net loss of $267 million, or $(2.17) per diluted common share, for the third quarter of 2017 compared to consolidated GAAP net income of $31 million, or $0.23 per diluted common share, for the third quarter of 2016. The adverse year-over-year comparison was primarily due to increased losses and loss adjustment expenses at National Public Finance Guarantee Corporation (National) that were primarily associated with Puerto Rico insured credits, and National’s investment portfolio credit impairments that were primarily associated with uninsured Puerto Rico debt.

Book value per share was $13.88 as of September 30, 2017 compared with $23.87 as of December 31, 2016. The decrease in book value per share since year-end 2016 was mainly due to the full valuation allowance on the Company’s deferred tax asset that was established in the second quarter of 2017 and additional loss and loss adjustment expense reserves, partially offset by the reduction of shares outstanding resulting from the repurchase of 11.7 million MBIA common shares during the first nine months of 2017. Subsequent to quarter-end, the Company exhausted its $250 million share repurchase authorization that was approved in June 2017 by acquiring, through its subsidiary, National, an additional 31.3 million of MBIA Inc. common shares at an average price of $7.17 per share.

The Company also reported a Combined Operating Loss (a non-GAAP measure defined in the attached Explanation of Non-GAAP Financial Measures) of $113 million or $(0.91) per diluted share for the third quarter of 2017 compared with Combined Operating Income of $5 million or $0.04 per diluted share for the third quarter of 2016. The negative result for the third quarter of 2017 was primarily due to increased losses and loss adjustment expenses at National, primarily due to its Puerto Rico exposures.

Adjusted Book Value (ABV) per share (a non-GAAP measure defined in the attached Explanation of Non-GAAP Financial Measures) was $24.81 as of September 30, 2017 compared with $31.88 as of December 31, 2016. The decrease in ABV per share since year-end 2016 was primarily due to the full valuation allowance on the Company’s deferred tax asset that was established in the second quarter of 2017 and additional loss and loss adjustment expense reserves, partially offset by the reduction of shares outstanding resulting from the repurchase of 11.7 million MBIA common shares during the first nine months 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.

Statement from Company Representative

Bill Fallon, MBIA’s Chief Executive Officer noted, “The damage caused to Puerto Rico’s infrastructure by Hurricane Maria will require significant time and effort to repair and remediate, which led us to withdraw two of our adversary complaints and further increase our Puerto Rico loss reserves. The ultimate resolution of our Puerto Rico credits will depend largely on the island’s economic activity over the many years to come. In the meanwhile, we believe that lower MBIA stock prices provides the Company with an opportunity to further enhance value to our shareholders through our share repurchase activities.”

Year-to-Date Results

The Company recorded a consolidated GAAP net loss of $1.6 billion, or $(12.38) per diluted common share, for the nine months ended September 30, 2017 compared with a consolidated net loss of $73 million, or $(0.55) per diluted common share, for the first nine months of 2016. The greater loss this year was primarily driven by the valuation allowance established on the Company’s deferred tax asset during the second quarter of 2017.

The Company’s Combined Operating Loss for the nine months ended September 30, 2017 was $243 million or $(1.93) per diluted share compared with Combined Operating Income of $36 million or $0.28 per diluted share for the first nine months of 2016. The $279 million adverse comparison for the year-to-date results for each year was primarily due to National’s $264 million of greater losses and loss adjustment expenses, primarily related to its insurance exposures on Puerto Rico debt.

MBIA Inc.

As of September 30, 2017, MBIA Inc.’s liquidity position totaled $294 million consisting primarily of cash and cash equivalents and liquid short-term invested assets. Subsequent to quarter end, MBIA Inc.’s liquidity position was increased by a $118 million dividend paid by National and National’s purchase from MBIA Inc. of approximately $130 million of MBIA Inc. 5.70% Senior Notes due 2034, which had previously been repurchased by MBIA Inc., but not retired. This transaction had no impact on MBIA Inc.’s consolidated outstanding debt obligations.

During the third quarter of 2017, National purchased 2.7 million of MBIA Inc. common shares at an average price of $9.48 per share.

As of September 30, 2017, there was $225 million remaining under the Company’s June 27, 2017 share repurchase authorization. Subsequent to quarter end, the remaining authorization was fully exhausted by National purchasing an additional 31.3 million shares at an average price of $7.17 per share. As of November 3, 2017, 91.8 million of the Company’s common shares were outstanding.

On November 3, 2017, the Company’s Board of Directors approved a new share repurchase authorization for MBIA Inc. or National to repurchase up to $250 million of the Company’s outstanding common shares.

National Public Guarantee Financial Corporation

National had statutory capital of $3.2 billion and claims-paying resources totaling $4.5 billion as of September 30, 2017. National’s total investment portfolio had a market value of $3.9 billion as of September 30, 2017. National’s insured portfolio declined by $12 billion during the quarter, ending the quarter with $82 billion of gross par outstanding. National ended the quarter with a leverage ratio of gross par to statutory capital of 26 to 1, down from 32 to 1 as of year-end 2016.

MBIA Insurance Corporation

The statutory capital of MBIA Insurance Corporation as of September 30, 2017 was $473 million and claims-paying resources totaled $1.5 billion. As of September 30, 2017, MBIA Insurance Corporation’s liquidity position (excluding resources from its subsidiaries and branches) totaled $93 million consisting primarily of cash and cash equivalents and liquid short-term invested assets.

Conference Call

The Company will host a webcast and conference call for investors tomorrow, Wednesday, November 8, 2017 at 8:00 AM (ET) to discuss its third quarter 2017 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 8779938. A live webcast of the conference call will also be accessible on www.mbia.com.

A replay of the conference call will become available approximately two hours after the completion of the call on November 8 and will remain available until 11:59 p.m. on November 22 by dialing [phone] in the U.S. or [phone] from outside the U.S. The code for the replay of the call is 8779938. In addition, a recorded replay of the call will become available on the Company's website approximately two hours after the completion of the call.

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