![](http://investorshub.advfn.com/images/default_ih_profile2_4848.jpg?cb=0)
Tuesday, December 07, 2010 7:23:51 PM
MBIA Inc.
$9.88
-0.17-1.69%12/07/2010
David Einhorn, President of Greenlight Capital, speaks at the Reuters Investment Outlook Summit in New York December 7, 2010.
Credit: Reuters/Brendan McDermid
By Dan Wilchins
NEW YORK | Tue Dec 7, 2010 11:26pm GMT
NEW YORK (Reuters) - Bond insurer MBIA Inc (MBI.N) still faces problems, and it is hard to tell whether the company has enough assets to meet its obligations, hedge fund manager David Einhorn said on Tuesday.
Einhorn, the president of Greenlight Capital, questioned the big gains that MBIA has recorded from the declining value of its liabilities, as credit markets have grown more concerned about its ability to pay its obligations.
Whether or not that's allowed by accounting rules, it doesn't make sense from an economic perspective, Einhorn told the Reuters 2011 Investment Outlook Summit.
"To say your equity has value because your liabilities can't be satisfied is a questionable proposition," he said.
Chuck Chaplin, chief financial officer at MBIA, said the company is following accounting rules regarding gains on liabilities.
"I take his comment that it's confusing and maybe counterintuitive, but it is required," Chaplin told Reuters.
Einhorn declined to comment whether Greenlight Capital has bet that MBIA'S shares will drop by selling it short. Einhorn was among the investors that shorted MBIA for years before the financial crisis began, in part because he did not think the company was being forthright about its potential losses.
"I think MBIA has a lot of problems still," Einhorn said on Tuesday.
MBIA's shares peaked in early 2007 at more than $70, but later that year began a headlong descent as the U.S. mortgage crisis created huge potential losses for the company.
The insurer had guaranteed that complicated bonds linked to mortgages would not default, but as the subprime crisis widened, that proved to be a bad bet. MBIA's biggest rival, Ambac Financial Group Inc ABKFQ.PK ,also laid low by the mortgage crisis, filed for bankruptcy last month.
MBIA has soldiered on. Its shares trade at about $10, giving the company a market value of $2 billion. By the company's own accounts, it is worth about $2.5 billion, based on the value of its assets minus its liabilities.
A DIFFERENT STANDARD?
In addition to the gains it has recorded as its liabilities have fallen, MBIA has recorded more than $2 billion of assets from expected proceeds from legal action against banks that sold bad mortgages to bond investors. MBIA guaranteed those bonds against default, and now says it should not have to make good on those guarantees because it was duped.
Generally, companies can only record gains from lawsuits when the outcome of the litigation is both "probable" and "estimable."
But MBIA has historically refrained from taking losses on insured bonds because it claims the losses are neither probable nor estimable, Einhorn said.
Einhorn says MBIA still faces trouble
Tweet ThisShare on LinkedIn Share on Facebook0diggsdiggFactboxTop investors' 2011 trade picks
Tue, Dec 7 2010Quotes
MBIA Inc.
MBI.N
$9.88
-0.17-1.69%12/07/2010
By Dan Wilchins
NEW YORK | Tue Dec 7, 2010 11:26pm GMT
"So I wonder if there is a different standard MBIA uses for probable and estimable on things that they've insured versus for recovering litigation," he said.
Einhorn said that because MBIA is not writing much new business, a key part of analyzing the company is determining whether its assets are sufficient to cover its obligations.
"It's hard to tell," he added.
MBIA's Chaplin said one of the company's main insurance units has equity by one standard of nearly $1 billion, and by the standards of insurance regulators, about $3 billion.
"It's not appropriate to say that it's hard to tell, because the number's printed on the page. But if someone says the GAAP accounting is very complex for this relatively simple business, I'd have to say, 'yes, it is,'" Chaplin said.
Said Einhorn, "I think MBIA's accounting is very hard to follow."
(Reporting by Dan Wilchins; Editing by Leslie Adler)
http://uk.reuters.com/article/idUKTRE6B66VN20101207?pageNumber=1
Recent MBI News
- Form 11-K - Annual report of employee stock purchase, savings and similar plans • Edgar (US Regulatory) • 06/20/2024 05:42:57 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 06/17/2024 08:18:42 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 05/16/2024 08:33:11 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 05/16/2024 08:28:59 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 05/16/2024 08:23:26 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 05/16/2024 08:17:39 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 05/16/2024 08:11:58 PM
- Form SC 13G - Statement of acquisition of beneficial ownership by individuals • Edgar (US Regulatory) • 05/15/2024 06:34:24 PM
- Form 8-K - Current report • Edgar (US Regulatory) • 05/09/2024 08:25:11 PM
- MBIA Inc. Reports First Quarter 2024 Financial Results • Business Wire • 05/09/2024 08:15:00 PM
- Form 8-K - Current report • Edgar (US Regulatory) • 05/07/2024 08:15:18 PM
- MBIA Inc. Investor Conference Call to Discuss First Quarter 2024 Financial Results Scheduled for Friday, May 10 at 8:00 A.M. Eastern Time • Business Wire • 05/02/2024 08:15:00 PM
- Form 8-K - Current report • Edgar (US Regulatory) • 03/07/2024 09:05:34 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 03/06/2024 10:09:01 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 03/06/2024 09:51:37 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 03/06/2024 09:45:13 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 03/06/2024 09:38:37 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 03/06/2024 09:31:06 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 03/06/2024 09:12:48 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 03/05/2024 09:54:12 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 03/05/2024 09:47:25 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 03/05/2024 09:43:56 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 03/05/2024 09:38:05 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 03/05/2024 09:33:44 PM
Last Shot Hydration Drink Announced as Official Sponsor of Red River Athletic Conference • EQLB • Jun 20, 2024 2:38 PM
ATWEC Announces Major Acquisition and Lays Out Strategic Growth Plans • ATWT • Jun 20, 2024 7:09 AM
North Bay Resources Announces Composite Assays of 0.53 and 0.44 Troy Ounces per Ton Gold in Trenches B + C at Fran Gold, British Columbia • NBRI • Jun 18, 2024 9:18 AM
VAYK Assembling New Management Team for $64 Billion Domestic Market • VAYK • Jun 18, 2024 9:00 AM
Fifty 1 Labs, Inc Announces Acquisition of Drago Knives, LLC • CAFI • Jun 18, 2024 8:45 AM
Hydromer Announces Attainment of ISO 13485 Certification • HYDI • Jun 17, 2024 9:22 AM