“The fourth quarter brought the largest quarterly reduction in risk in our structured finance portfolio since the beginning of the financial crisis,” said MBIA Inc. President and Chief Financial Officer Chuck Chaplin. “Including 2012 to date, we have commuted or agreed to commute almost $24 billion of potentially volatile liabilities since the end of the third quarter. In January, a significant ruling from the New York State Supreme Court reinforced our expectation that we will ultimately recover the contractual amounts due to us from the banks and other financial institutions that sold ineligible mortgages into our insured securitizations. These developments support our view that our MBIA Corp. subsidiary will be able to meet all future expected claims as they come due.”
“Since the third quarter of 2011, five banks have exited the litigation challenging our Transformation, leaving four of the original 18 plaintiffs,” Mr. Chaplin continued. “We look forward to the resolution of this action in 2012, which will remove a major obstacle to National Public Finance’s re-entry into the municipal bond insurance market.”
Full Year 2011 Results
The net loss to common shareholders for the full year 2011 was $1.3 billion, or $6.69 per share, compared with net income of $53 million, or $0.26 per share, for the full year 2010. The net loss for 2011 was driven primarily by $2.8 billion of pre-tax losses on the fair value of insured derivatives resulting from an improved market perception of MBIA Corp.’s credit quality and wider credit spreads on the collateral underlying the insured transactions, partially offset by net gains from the early settlement of certain transactions at a cost below their fair value. Net income in 2010 was impacted primarily by a $769 million pre-tax net loss on the fair value of insured derivatives resulting primarily from an improvement in the market perception of MBIA Corp.'s credit risk. The adjusted pre-tax loss for the full year 2011 was $497 million compared with an adjusted pre-tax loss of $377 million in 2010. The adjusted pre-tax losses in both 2011 and 2010 were driven by increased reserves and impairments on insured exposures.