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reported a roughly 800% rise in second quarter net income, though the spike is due more to an accounting gain than any improvement in its main business of insuring bondholders in the event of default.

The $1.7 billion in second quarter net income was driven by $3.3 billion in pretax, unrealized gains on insured credit derivatives, the company said in a press release issued Friday. The earnings of $7.14 per share compares to $1.61 per share in the second quarter of 2007.

Excluding the accounting gains, MBIA posted after-tax operating income of $228.9 million, or 96 cents a share in the second quarter, vs. $206.9 million, or $1.57 a share in the same period last year. Analysts polled by Thomson Reuters had expected a loss of $1.37 a share.

"While the deterioration in the housing and mortgage markets continued over the past three months, it has been consistent with what we projected when we established reserves and impairments for our housing-related portfolio in the first quarter," said Chairman and CEO Jay Brown in the press release.

The accounting gain was similar to one

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earlier this week.

The two bond insurers have been hammered by credit downgrades by all three major credit rating agencies this year, amid fears they are no well-capitalized enough to cover the potential defaults of structured finance products they insure amid the credit crisis. Less than pristine credit makes it all but impossible for the company to win new business.

The ratings downgrades, however, led to a widening of spreads in credit default swaps insuring its insurance units, leading to the $3.3 billion writedown of its liabilities in those portfolios, benefitting earnings for the quarter.

MBIA shares recently were rising 7.6% to $8.91.