Replies to post #75 on MBIA Inc (MBI)

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UPDATE: MBIA: 3Q Loss A Reminder Of Recession's Impact

(Updates with statement for company official, stock price, comment and background)


By Lavonne Kuykendall and Kathy Shwiff
Of DOW JONES NEWSWIRES


MBIA Inc.'s (MBI) third-quarter loss narrowed slightly as the housing downturn continued to weigh on its business of insuring securities backed by mortgage loans.

Shares sank 15.6% to $4.05 in after-hours trading as the bond insurer posted its fifth quarterly loss in the past two years. The stock has lost almost half its value from its 52-week high in September.

In late September, Standard & Poor's Ratings Service cut MBIA's rating to junk status. The company is writing almost no new business after forming National Public Finance Guarantee Corp. earlier this year to hold its public finance business. "Incurred losses in our insurance business were above expectations," said Chuck Chaplin, MBIA's president and chief financial officer, in a press release. "The third quarter's loss is a reminder that the impact of this recession continues to be felt throughout the economy."

For the latest quarter, MBIA reported a loss of $727.8 million, or $3.50 a share, compared with a year-earlier loss of $806.5 million, or $3.42 a share. The latest results included an $810.2 million pretax unrealized loss on insured credit derivatives, $238.8 million in pretax loss and loss adjustment expenses related to second-lien mortgage loan securitizations, and $171.4 million in pre-tax realized losses and other-than-temporary impairments on investments.

MBIA paid $638.4 million in claims in the third quarter.

Ambac Financial Group Inc. (ABK), the second-largest U.S. bond insurer, last week swung to a third-quarter profit, but analysts said its bond-insurance business is in danger of falling below legally required capital levels.

Rob Haines of CreditSights Inc. said that overall, MBIA has been performing much better than rival Ambac.

To Haines, statutory capital levels "are the more important factor at this time," he said in an email. He called it "curious" that MBIA has performed so much better than Ambac.

Both insurers have been embroiled in efforts to get lenders to replace bad loans that were bundled into insured securities, but so far, both MBIA and Ambac have had trouble getting repaid on loans that they identify as ineligible.

In the second quarter, MBIA said it expected to recover $1.1 billion from ineligible mortgages in some insured second mortgage-backed securities it insured. MBIA said it found a further $75.6 million in bad loans in the third quarter and expects to find even more.

MBIA said that 16 insured credit derivatives transactions representing $11.7 billion in net exposure either matured or were terminated without payments by MBIA.

After the end of the quarter, MBIA said it negotiated terminations of two more insured credit derivatives transactions that resulted in the elimination of $1.2 billion in exposure for a one-time payment of $93.8 million net of reinsurance, which MBIA said was less than the impairment it had already taken on the transactions.

It also terminated a financial guarantee on $839.9 million of exposure for a payment of $65.3 million. MBIA said it had not previously taken any impairment on that transaction.

-By Lavonne Kuykendall and Kathy Shwiff, Dow Jones Newswires; [phone]; [e-mail]