MBIA Inc. (NYSE: MBI) (the Company) today reported Adjusted Book Value (ABV) per share (a non-GAAP measure defined in the attached Explanation of Non-GAAP Financial Measures) of $28.68 per share at September 30, 2013 compared with $30.68 per share at December 31, 2012. Book Value (BV) per share was $16.54 as of September 30, 2013, compared to $16.22 as of December 31, 2012.
MBIA Inc.’s adjusted pre-tax loss (a non-GAAP measure defined in the attached Explanation of Non-GAAP Financial Measures) for the third quarter of 2013 was $188 million compared with an adjusted pre-tax loss of $118 million for the third quarter of 2012. The greater adjusted pre-tax loss for the three months ended September 30, 2013 compared to the same period of 2012 was driven primarily by decreases in premiums earned and net investment income, an increase in impairments on insured credit derivatives, loss and loss adjustment expenses (LAE) related to a gaming revenue transaction, and an impairment charge on the Company’s headquarters building, partially offset by decreases in other insurance losses and LAE. ABV and adjusted pre-tax income (loss) provide investors with alternative views of the Company’s operating results that management finds useful in measuring financial performance. Reconciliations of ABV to BV calculated in accordance with GAAP and adjusted pre-tax income (loss) to pre-tax income (loss) calculated in accordance with GAAP are attached.
The Company recorded consolidated net income of $132 million, or $0.67 per diluted share, for the third quarter of 2013 compared with consolidated net income of $7 million, or $0.04 per diluted share, for the third quarter of 2012. Consolidated total revenues for the three months ended September 30, 2013 included $257 million of net gains on the fair value of insured derivatives compared with $21 million of net losses for the same period of 2012. The net gains on the fair value of insured derivatives in 2013 were principally the result of the effects of improvements in the value of underlying reference obligations and shorter transaction lives combined with the effects of an unfavorable change in the market’s perception of MBIA Insurance Corporation’s (MBIA Corp.’s) nonperformance risk on its insured credit derivatives. The net losses on the fair value of insured derivatives in 2012 were principally due to the effects of unfavorable changes in spreads and pricing of underlying reference obligations and erosion of subordination, partially offset by the effects of unfavorable changes in the market perception of MBIA Corp.’s nonperformance risk on its insured credit derivatives. The Company is required to adjust the values of its insured credit derivatives for the market's perception of its nonperformance risk. A decrease in the value of the insured credit derivatives attributable to an increase in nonperformance risk is reflected as an unrealized gain, while an increase in the value of the insured credit derivatives attributable to a decline in nonperformance risk is reflected as an unrealized loss in the income statement. Consolidated total expenses for the three months ended September 30, 2013 included $98 million of net insurance loss and loss adjustment expenses compared with $171 million for the same period of 2012. The decrease in net insurance loss and loss adjustment expenses in 2013 when compared to 2012 was principally the result of lower increases in expected payments related to CMBS and first-lien RMBS transactions, partially offset by an increase in losses related to a gaming revenue transaction.
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