MBIA Inc (MBI)

[Enterprising Investor]

MBIA Inc. Reports Second Quarter 2018 Financial Results (8/08/18)

PURCHASE, N.Y.--(BUSINESS WIRE)--MBIA Inc. (NYSE:MBI) (the Company) today reported a consolidated GAAP net loss of $146 million, or $(1.64) per share, for the second quarter of 2018 compared to a consolidated GAAP net loss of $1.2 billion, or $(9.78) per share, for the second quarter of 2017. The net loss for the second quarter of 2018 was driven by the losses associated with the deconsolidation of certain variable interest entities (VIEs) and the additional losses and loss adjustment expenses related to our Puerto Rico exposures. The decrease in year-over-year consolidated GAAP net loss was primarily due to the full valuation allowance on the Company’s deferred tax asset for the second quarter of 2017. On a pretax basis, net losses were lower by $64 million, primarily due to lower loss and loss adjustment expenses, favorable gains for the fair value of interest rate swaps as a result of higher interest rates in 2018 and foreign exchange gains in 2018 versus foreign exchange losses in 2017, partially offset by losses associated with the deconsolidation of certain VIEs.

Book value per share was $12.16 as of June 30, 2018 compared with $15.44 as of December 31, 2017. The decrease in book value per share since year-end 2017 was primarily due to the year-to-date net loss and unrealized losses on investments and debt carried at fair value that is included in accumulated other comprehensive loss.

The Company also reported Adjusted Net Loss (a non-GAAP measure defined in the attached Explanation of Non-GAAP Financial Measures) of $51 million or $(0.58) per diluted share for the second quarter of 2018 compared with Adjusted Net Loss of $139 million or $(1.12) per diluted share for the second quarter of 2017. The reduced Adjusted Net Loss for the second quarter of 2018 versus the second quarter of 2017 was primarily due to lower losses and loss adjustment expenses at National, primarily related 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 $27.24 compared with $28.77 as of December 31, 2017. Those amounts reflect an adjustment made in the second quarter of 2018 to remove the unearned premium revenue that is netted from GAAP loss reserves. (The previously reported ABV as of December 31, 2017 of $29.32 has been revised to conform to the current presentation.) The decrease in ABV per share since year-end 2017 was primarily due to additional loss and loss adjustment expense reserves at National that are primarily related to its Puerto Rico exposures.

Adjusted Net Income (Loss) 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 Adjusted Net Income (Loss) to net income, calculated in accordance with GAAP, are attached.

Statement from Company Representative

Bill Fallon, MBIA’s Chief Executive Officer noted, “This quarter’s increase of National’s loss and loss adjustment expenses associated with its Puerto Rico exposures contributed significantly to the Adjusted Net Loss for the quarter.” Mr. Fallon added, “While resolving our Puerto Rico exposures is our most significant corporate objective, we have also made progress on other objectives, such as reducing our consolidated operating expenses, which are down 37% for the six months of this year compared to last year’s first six months.”

Year-to-Date Results

The Company recorded a consolidated GAAP net loss of $244 million, or $(2.75) per diluted common share, for the six months ended June 30, 2018 compared with a consolidated net loss of $1.3 billion, or $(10.13) per diluted common share, for the first six months of 2017. The lower loss this year was primarily driven by the valuation allowance established on the Company’s deferred tax asset for the second quarter of 2017.

The Company’s non-GAAP Adjusted Net Loss for the six months ended June 30, 2018 was $112 million or $(1.27) per diluted share compared with Adjusted Net Loss of $130 million or $(1.02) per diluted share for the first six months of 2017. The reduced adjusted net loss for the first six months of 2018 was primarily due to lower losses and loss adjustment expenses at National and lower operating expenses for National and the Corporate segment, partially offset by lower premium earnings at National.

MBIA Inc.

As of June 30, 2018, MBIA Inc.’s liquidity position totaled $389 million, down $30 million from March 31, 2018, consisting primarily of cash and cash equivalents and other liquid invested assets. The decrease in liquidity primarily relates to MBIA Inc. debt service payments and operating expenses.

There were no purchases of MBIA Inc. shares during the second quarter of 2018. As of August 2, 2018, there was $236 million remaining under the Company’s $250 million share repurchase authorization that was approved on November 3, 2017 and 90.7 million of the Company’s common shares were outstanding. During the second quarter, MBIA Inc. issued 1.3 million shares of MBIA common shares, which includes 1.2 million shares that were issued in April and 0.1 million shares that were issued in June, in accordance with the net settlement exercise provisions of warrants related to 11.9 million of MBIA common shares. As of June 30, 2018, no warrants related to MBIA Inc. shares remained outstanding.

National Public Guarantee Financial Corporation

National had statutory capital of $2.7 billion and claims-paying resources totaling $4.1 billion as of June 30, 2018. National’s total fixed income investments plus cash and cash equivalents had a book/adjusted carrying value of $3.4 billion as of June 30, 2018. National’s insured portfolio declined by $3 billion during the quarter, ending the quarter with $64 billion of gross par outstanding. National ended the quarter with a leverage ratio of gross par to statutory capital of 24 to 1, down from 26 to 1 as of year-end 2017.

MBIA Insurance Corporation

The statutory capital of MBIA Insurance Corporation as of June 30, 2018 was $489 million and claims-paying resources totaled $1.4 billion. As of June 30, 2018, MBIA Insurance Corporation’s liquidity position (excluding resources from its subsidiaries and branches) totaled $105 million consisting primarily of cash and cash equivalents and other liquid invested assets. In May 2018, a settlement agreement was entered into regarding the bankruptcy of the Zohar CDOs that outlines processes and procedures for monetizing the assets of the Zohar CDOs.

Conference Call

The Company will host a webcast and conference call for investors tomorrow, Thursday, August 9, 2018 at 8:00 AM (ET) to discuss its second quarter 2018 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 2777679. 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 end of the call on August 9 and will remain available until 11:59 p.m. on August 23 by dialing [phone] in the U.S. or [phone] from outside the U.S. The code for the replay of the call is also 2777679. 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.

Forward-Looking Statements

This release includes statements that are not historical or current facts and are “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words “believe,, “anticipate,” “project,” “plan,” “expect,” “estimate,” “intend,” “will,” “will likely result,” “looking forward,” or “will continue,” and similar expressions identify forward-looking statements. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected, including, among other factors, the possibility that MBIA Inc. or National will experience increased credit losses or impairments on public finance obligations issued by state, local and territorial governments and finance authorities that are experiencing unprecedented fiscal stress; the possibility that loss reserve estimates are not adequate to cover potential claims; MBIA Inc.’s or National’s ability to fully implement their strategic plan; and changes in general economic and competitive conditions. These and other factors that could affect financial performance or could cause actual results to differ materially from estimates contained in or underlying MBIA Inc.’s or National’s forward-looking statements are discussed under the “Risk Factors” section in MBIA Inc.’s most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q, which may be updated or amended in MBIA Inc.’s subsequent filings with the Securities and Exchange Commission. MBIA Inc. and National caution readers not to place undue reliance on any such forward-looking statements, which speak only to their respective dates. National and MBIA Inc. undertake no obligation to publicly correct or update any forward-looking statement if it later becomes aware that such result is not likely to be achieved.

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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