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MBIA Inc. Reports Third Quarter 2012 Financial Results

Structured Finance and International Insurance Results

The structured finance and international insurance business is primarily conducted through MBIA Corp. and its subsidiaries.

The structured finance and international insurance segment had an adjusted pre-tax loss of $224 million for the third quarter of 2012 compared with an adjusted pre-tax loss of $556 million for the third quarter of 2011. Premiums earned, net investment income, fees and reimbursements, and premiums and fees on insured derivatives totaled $132 million in the third quarter of 2012. All other line items in the aggregate, except losses and credit impairments (a non-GAAP measure defined in the attached Explanation of Non-GAAP Financial Measures) and loss-related expenses, had a net $104 million negative impact on the adjusted pre-tax loss. Losses, credit impairments and loss-related expenses on insured exposures totaled $252 million in the third quarter of 2012, compared with $631 million in the third quarter of 2011.

The following is a summary of MBIA Corp.’s insured portfolio economic loss activity in the third quarter. Economic losses for a reporting period represent the change in the Company’s estimate of the present value of expected net future claims payments without regard to the manner in which they are presented in the Company’s financial statements.

3Q 2012 Economic Loss (Benefit) Activity

 
   

Second-Lien

               
($ in millions)    

RMBS

    ABS CDOs     CMBS     Other*     Total
Change in Expected Payments $ 60 $ 21 $ 131 $ 49 $ 261
Change in Expected Salvage       (2 )       5         (8 )       (4 )       (9 )
Total Economic Losses (Benefit)     $ 58       $ 26       $ 123       $ 45       $ 252  

* includes first-lien RMBS

 

In the third quarter, the Company increased its expectations of future payments on second-lien RMBS exposures by $60 million reflecting slower than expected declines in early stage delinquencies and faster than expected prepayment speeds within these transactions. Expected salvage increased by $2 million reflecting an increase in expected recoveries from contractual claims related to ineligible mortgage loans improperly included in the insured securitizations largely offset by a decrease in expected recoveries from excess spread due to faster principal repayment on the underlying loans. The Company’s estimates for expected recoveries related to “put-backs” of ineligible mortgage loans totaled $3.2 billion as of September 30, 2012. However, based on its assessment of the strength of its contract claims, the Company continues to believe it is entitled to collect the full amount of its cumulative incurred losses on these transactions, which totaled $5.0 billion as of September 30, 2012. In addition, the Company believes it is entitled to receive interest on any judgment it obtains in any litigation seeking to collect these unpaid contract claims.

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