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MBIA Inc. (NYSE: MBI) today reported Adjusted Book Value (ABV) per share (a non-GAAP measure defined in the attached Explanation of Non-GAAP Financial Measures) of $31.23 per share at June 30, 2012 compared with $32.00 per share at March 31, 2012. Book value per share was $12.92 as of June 30, 2012.
MBIA Inc.’s adjusted pre-tax loss (a non-GAAP measure defined in the attached Explanation of Non-GAAP Financial Measures) for the second quarter of 2012 was $152 million compared with adjusted pre-tax income of $161 million for the second quarter of 2011. The reduction in ABV and the adjusted pre-tax loss for the three months ended June 30, 2012 were driven primarily by losses on insured exposures. ABV and adjusted pre-tax income provide investors with additional views of the Company’s operating results that management finds useful in measuring financial performance.
Net income available to common shareholders for the second quarter of 2012 was $581 million, or $2.98 per share, compared with net income of $137 million, or $0.68 per share, for the second quarter of 2011. The Company’s results for the second quarter of 2012 were driven by $1.2 billion in pre-tax unrealized gains on insured credit derivatives. The unrealized gains on insured credit derivatives resulted from a combination of gains associated with commutations of insured exposures and the impact of a worsened market perception of MBIA Corp.’s credit quality. The Company is required to adjust the values of its derivative liabilities for the market's perception of its non-performance risk. The decrease in the value of the derivative liabilities attributable to the change in non-performance risk is reflected as a pre-tax unrealized gain on the income statement.
“In the second quarter, we continued to see reductions in potential risks and sources of volatility in our business,” said MBIA Inc. President and Chief Financial Officer Chuck Chaplin. “As a result of commutation activity, our exposures to the riskiest CMBS pools and ABS CDOs have been reduced substantially. At this point, the CMBS exposures with the most significant potential future claims are with a single counterparty – a Bank of America subsidiary – whose affiliate, Countrywide, is currently in default of its contractual obligations to repurchase billions of dollars of ineligible mortgages from securitizations insured by MBIA Corp.