MBIA Inc. (NYSE:MBI) (the Company) today reported a consolidated
GAAP net loss of $267 million, or $(2.17) per diluted common share,
for the third quarter of 2017 compared to consolidated GAAP net
income of $31 million, or $0.23 per diluted common share, for the
third quarter of 2016. The adverse year-over-year comparison was
primarily due to increased losses and loss adjustment expenses at
National Public Finance Guarantee Corporation (National) that were
primarily associated with Puerto Rico insured credits, and
National’s investment portfolio credit impairments that were
primarily associated with uninsured Puerto Rico debt.
Book value per share was $13.88 as of September 30, 2017
compared with $23.87 as of December 31, 2016. The decrease in book
value per share since year-end 2016 was mainly due to the full
valuation allowance on the Company’s deferred tax asset that was
established in the second quarter of 2017 and additional loss and
loss adjustment expense reserves, partially offset by the reduction
of shares outstanding resulting from the repurchase of 11.7 million
MBIA common shares during the first nine months of 2017. Subsequent
to quarter-end, the Company exhausted its $250 million share
repurchase authorization that was approved in June 2017 by
acquiring, through its subsidiary, National, an additional 31.3
million of MBIA Inc. common shares at an average price of $7.17 per
share.
The Company also reported a Combined Operating Loss (a non-GAAP
measure defined in the attached Explanation of Non-GAAP Financial
Measures) of $113 million or $(0.91) per diluted share for the
third quarter of 2017 compared with Combined Operating Income of $5
million or $0.04 per diluted share for the third quarter of 2016.
The negative result for the third quarter of 2017 was primarily due
to increased losses and loss adjustment expenses at National,
primarily due to its Puerto Rico exposures.
Adjusted Book Value (ABV) per share (a non-GAAP measure defined
in the attached Explanation of Non-GAAP Financial Measures) was
$24.81 as of September 30, 2017 compared with $31.88 as of December
31, 2016. The decrease in ABV per share since year-end 2016 was
primarily due to the full valuation allowance on the Company’s
deferred tax asset that was established in the second quarter of
2017 and additional loss and loss adjustment expense reserves,
partially offset by the reduction of shares outstanding resulting
from the repurchase of 11.7 million MBIA common shares during the
first nine months of 2017.
Operating Income and ABV per share provide investors with views
of the Company’s operating results that management uses in
measuring financial performance. Reconciliations of ABV per share
to book value per share, and Operating Income to net income,
calculated in accordance with GAAP, are attached.
Statement from Company Representative
Bill Fallon, MBIA’s Chief Executive Officer noted, “The damage
caused to Puerto Rico’s infrastructure by Hurricane Maria will
require significant time and effort to repair and remediate, which
led us to withdraw two of our adversary complaints and further
increase our Puerto Rico loss reserves. The ultimate resolution of
our Puerto Rico credits will depend largely on the island’s
economic activity over the many years to come. In the meanwhile, we
believe that lower MBIA stock prices provides the Company with an
opportunity to further enhance value to our shareholders through
our share repurchase activities.”
Year-to-Date Results
The Company recorded a consolidated GAAP net loss of $1.6
billion, or $(12.38) per diluted common share, for the nine months
ended September 30, 2017 compared with a consolidated net loss of
$73 million, or $(0.55) per diluted common share, for the first
nine months of 2016. The greater loss this year was primarily
driven by the valuation allowance established on the Company’s
deferred tax asset during the second quarter of 2017.
The Company’s Combined Operating Loss for the nine months ended
September 30, 2017 was $243 million or $(1.93) per diluted share
compared with Combined Operating Income of $36 million or $0.28 per
diluted share for the first nine months of 2016. The $279 million
adverse comparison for the year-to-date results for each year was
primarily due to National’s $264 million of greater losses and loss
adjustment expenses, primarily related to its insurance exposures
on Puerto Rico debt.
MBIA Inc.
As of September 30, 2017, MBIA Inc.’s liquidity position totaled
$294 million consisting primarily of cash and cash equivalents and
liquid short-term invested assets. Subsequent to quarter end, MBIA
Inc.’s liquidity position was increased by a $118 million dividend
paid by National and National’s purchase from MBIA Inc. of
approximately $130 million of MBIA Inc. 5.70% Senior Notes due
2034, which had previously been repurchased by MBIA Inc., but not
retired. This transaction had no impact on MBIA Inc.’s consolidated
outstanding debt obligations.
During the third quarter of 2017, National purchased 2.7 million
of MBIA Inc. common shares at an average price of $9.48 per
share.
As of September 30, 2017, there was $225 million remaining under
the Company’s June 27, 2017 share repurchase authorization.
Subsequent to quarter end, the remaining authorization was fully
exhausted by National purchasing an additional 31.3 million shares
at an average price of $7.17 per share. As of November 3, 2017,
91.8 million of the Company’s common shares were outstanding.
On November 3, 2017, the Company’s Board of Directors approved a
new share repurchase authorization for MBIA Inc. or National to
repurchase up to $250 million of the Company’s outstanding common
shares.
National Public Guarantee Financial Corporation
National had statutory capital of $3.2 billion and claims-paying
resources totaling $4.5 billion as of September 30, 2017.
National’s total investment portfolio had a market value of $3.9
billion as of September 30, 2017. National’s insured portfolio
declined by $12 billion during the quarter, ending the quarter with
$82 billion of gross par outstanding. National ended the quarter
with a leverage ratio of gross par to statutory capital of 26 to 1,
down from 32 to 1 as of year-end 2016.
MBIA Insurance Corporation
The statutory capital of MBIA Insurance Corporation as of
September 30, 2017 was $473 million and claims-paying resources
totaled $1.5 billion. As of September 30, 2017, MBIA Insurance
Corporation’s liquidity position (excluding resources from its
subsidiaries and branches) totaled $93 million consisting primarily
of cash and cash equivalents and liquid short-term invested
assets.
Conference Call
The Company will host a webcast and conference call for
investors tomorrow, Wednesday, November 8, 2017 at 8:00 AM (ET) to
discuss its third quarter 2017 financial results and other matters
relating to the Company. The webcast and conference call will
consist of brief remarks followed by a question and answer
session.
The dial-in number for the call is (877) 694-4769 in the U.S.
and (404) 665-9935 from outside the U.S. The conference call code
is 8779938. A live webcast of the conference call will also be
accessible on www.mbia.com.
A replay of the conference call will become available
approximately two hours after the completion of the call on
November 8 and will remain available until 11:59 p.m. on November
22 by dialing (800) 585-8367 in the U.S. or (404) 537-3406 from
outside the U.S. The code for the replay of the call is 8779938. In
addition, a recorded replay of the call will become available on
the Company's website approximately two hours after the completion
of the call.
Forward-Looking Statements
This release includes statements that are not historical or
current facts and are “forward-looking statements” made pursuant to
the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. The words “believe,, “anticipate,” “project,”
“plan,” “expect,” “estimate,” “intend,” “will,” “will likely
result,” “looking forward,” or “will continue,” and similar
expressions identify forward-looking statements. These statements
are subject to certain risks and uncertainties that could cause
actual results to differ materially from historical earnings and
those presently anticipated or projected, including, among other
factors, the possibility that MBIA Inc. or National will experience
increased credit losses or impairments on public finance
obligations issued by state, local and territorial governments and
finance authorities that are experiencing unprecedented fiscal
stress; the possibility that loss reserve estimates are not
adequate to cover potential claims; MBIA Inc.’s or National’s
ability to fully implement their strategic plan; and changes in
general economic and competitive conditions. These and other
factors that could affect financial performance or could cause
actual results to differ materially from estimates contained in or
underlying MBIA Inc.’s or National’s forward-looking statements are
discussed under the “Risk Factors” section in MBIA Inc.’s most
recent Annual Report on Form 10-K, which may be updated or amended
in MBIA Inc.’s subsequent filings with the Securities and Exchange
Commission. MBIA Inc. and National caution readers not to place
undue reliance on any such forward-looking statements, which speak
only to their respective dates. National and MBIA Inc. undertake no
obligation to publicly correct or update any forward-looking
statement if it later becomes aware that such result is not likely
to be achieved.
MBIA Inc., headquartered in Purchase, New York is a holding
company whose subsidiaries provide financial guarantee insurance
for the public and structured finance markets. Please visit MBIA's
website at www.mbia.com.
Explanation of Non-GAAP Financial Measures
The following are explanations of why the Company believes that
the non-GAAP financial measures used in this press release, which
serve to supplement GAAP information, are meaningful to
investors.
Adjusted Book Value: Adjusted Book Value (ABV), a
non-GAAP measure, is used by the Company to supplement its analysis
of GAAP book value. The Company uses ABV as a measure of
fundamental value and considers the change in ABV an important
measure of periodic financial performance. ABV adjusts GAAP book
value by removing the GAAP book value amounts for items that are
not expected to impact shareholder value and to add in the impact
of certain items which the Company believes will be realized in
GAAP book value in future periods. The Company has limited such
adjustments to those items that it deems to be important to
fundamental value and performance and which the likelihood and
amount can be reasonably estimated. ABV assumes no new business
activity. The Company has presented ABV to allow investors and
analysts to evaluate the Company using the same measure that MBIA’s
management regularly uses to measure financial performance. ABV is
not a substitute for and should not be viewed in isolation from
GAAP book value.
ABV per share represents that amount of ABV allocated to each
common share outstanding at the measurement date.
Claims-paying Resources (CPR): CPR is a key measure of
the resources available to National and MBIA Corp. to pay claims
under their respective insurance policies. CPR consists of total
financial resources and reserves calculated on a statutory basis.
CPR has been a common measure used by financial guarantee insurance
companies to report and compare resources and continues to be used
by MBIA’s management to evaluate changes in such resources. The
Company has provided CPR to allow investors and analysts to
evaluate National and MBIA Corp. using the same measure that MBIA’s
management uses to evaluate their resources to pay claims under
their respective insurance policies. There is no directly
comparable GAAP measure.
Combined Operating Income (Loss): The sum of Operating
Income (Loss) of the U.S. public finance insurance (National) and
corporate segments net of eliminations. See “Operating Income
(Loss)” definition.
Operating Income (Loss): Operating Income (Loss) is a
useful measurement of performance because it measures income from
the Company’s core operating segments, unaffected by investment
portfolio realized gains and losses, gains and losses on financial
instruments at fair value and foreign exchange, and realized gains
and losses on extinguishment of debt. Operating Income (Loss) also
excludes net income of the Company’s international and structured
finance insurance. Trends in the underlying profitability of the
Company’s businesses can be more clearly identified without the
fluctuating effects of the excluded items noted above. Operating
Income (Loss) is disclosed on an after-tax basis and adjustments to
net income are typically tax-effected at 35% unless a specific
adjustment, or component thereof, is not taxable. Operating Income
(Loss) as defined by the Company does not include all revenues and
expenses required by GAAP. Operating Income (Loss) is not a
substitute for and should not be viewed in isolation from GAAP net
income.
Operating Income (Loss) per share represents that amount of
Operating Income (Loss) allocated to each fully diluted
weighted-average common share outstanding for the measurement
period.
MBIA INC. AND SUBSIDIARIES CONSOLIDATED BALANCE
SHEETS (Unaudited) (In millions except share and per share
amounts)
September 30,
2017 December 31, 2016 Assets Investments:
Fixed-maturity securities held as available-for-sale, at fair value
(amortized cost $4,203 and $4,713) $ 4,234 $ 4,694 Investments
carried at fair value 164 146 Investments pledged as collateral, at
fair value (amortized cost $169 and $234) 170 233 Short-term
investments held as available-for-sale, at fair value (amortized
cost $452 and $552) 452 552
Other investments (includes investments at
fair value of $4 and $5)
6 8 Total investments 5,026 5,633
Cash and cash equivalents 116 163 Premiums receivable 382
409 Deferred acquisition costs 96 118 Insurance loss recoverable
611 504 Assets held for sale - 555 Deferred income taxes, net - 970
Other assets 146 113 Assets of consolidated variable interest
entities: Cash 20 24 Investments held-to-maturity, at amortized
cost (fair value $897 and $876) 890 890 Investments carried at fair
value 189 255 Loans receivable at fair value 1,632 1,066 Loan
repurchase commitments 406 404 Other assets 30
33
Total assets $
9,544 $
11,137
Liabilities and Equity Liabilities: Unearned
premium revenue $ 808 $ 958 Loss and loss adjustment expense
reserves 818 541 Long-term debt 2,093 1,986 Medium-term notes
(includes financial instruments carried at fair value of $127 and
$101) 898 895 Investment agreements 350 399 Derivative liabilities
284 299 Liabilities held for sale - 346 Other liabilities 221 233
Liabilities of consolidated variable interest entities: Variable
interest entity notes (includes financial instruments carried at
fair value of $1,140 and $1,351) 2,352 2,241
Total liabilities 7,824
7,898 Equity: Preferred stock, par value $1
per share; authorized shares--10,000,000; issued and
outstanding--none - - Common stock, par value $1 per share;
authorized shares--400,000,000; issued shares--283,967,973 and
283,989,999 284 284 Additional paid-in capital 3,170 3,160 Retained
earnings 1,132 2,700 Accumulated other comprehensive income (loss),
net of tax of $6 and $37 15 (128 ) Treasury stock, at
cost--160,858,509 and 148,789,168 shares (2,893 )
(2,789 ) Total shareholders' equity of MBIA Inc. 1,708 3,227
Preferred stock of subsidiary 12 12
Total equity 1,720 3,239
Total liabilities and equity $
9,544 $
11,137 MBIA INC. AND
SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) (In millions except share and per share amounts)
Three Months Ended September 30, Nine Months Ended
September 30, 2017 2016 2017 2016
Revenues: Premiums earned: Scheduled premiums earned
$ 26 $ 42 $ 82 $ 131 Refunding premiums earned 27
35 64 94 Premiums earned
(net of ceded premiums of $1, $2, $4 and $5) 53 77 146 225 Net
investment income 33 39 122 115 Fees and reimbursements 1 22 9 24
Change in fair value of insured derivatives: Realized gains
(losses) and other settlements on insured derivatives (7 ) (4 ) (41
) (20 ) Unrealized gains (losses) on insured derivatives 6
20 (10 ) - Net change in
fair value of insured derivatives (1 ) 16 (51 ) (20 ) Net gains
(losses) on financial instruments at fair value and foreign
exchange (11 ) 38 (55 ) (17 ) Net investment losses related to
other-than-temporary impairments: Investment losses related to
other-than-temporary impairments (26 ) - (80 ) (1 )
Other-than-temporary impairments recognized in accumulated other
comprehensive income (loss) (45 ) - (4
) - Net investment losses related to
other-than-temporary impairments (71 ) - (84 ) (1 ) Net gains
(losses) on extinguishment of debt 1 - 9 5 Other net realized gains
(losses) (1 ) (2 ) 36 (3 ) Revenues of consolidated variable
interest entities: Net investment income 8 5 20 25 Net gains
(losses) on financial instruments at fair value and foreign
exchange 21 8 2 - Other net realized gains (losses) -
- 28 - Total revenues 33
203 182 353
Expenses: Losses and loss adjustment 205
50 469 149 Amortization of deferred acquisition costs 8 10 23 30
Operating 21 32 82 97 Interest 50 49 148 148 Expenses of
consolidated variable interest entities: Operating 3 3 8 10
Interest 19 4 55
20 Total expenses 306 148
785 454 Income (loss) before income taxes (273
) 55 (603 ) (101 ) Provision (benefit) for income taxes (6 )
24 965 (28 )
Net income
(loss) $
(267 ) $
31 $
(1,568 ) $
(73 ) Net income
(loss) per common share: Basic $ (2.17 ) $ 0.23 $ (12.38 ) $
(0.55 ) Diluted $ (2.17 ) $ 0.23 $ (12.38 ) $ (0.55 )
Weighted average number of common shares outstanding: Basic
122,967,924 131,633,411 126,643,642 133,368,752 Diluted 122,967,924
132,042,067 126,643,642 133,368,752
COMBINED
OPERATING INCOME
(LOSS) RECONCILIATION(1)
(In millions)
Three Months Ended Nine Months Ended
September 30, September 30, 2017 2016
2017 2016 Net income (loss) $ (267 ) $ 31 $ (1,568 )
$ (73 ) Less: operating income adjustments: Income (loss) before
income taxes of the international and structured finance insurance
segment and eliminations (83 ) 12 (268 ) (136 ) Adjustments to
income before income taxes of the U.S. public finance insurance and
corporate segments: Mark-to-market gains (losses) on financial
instruments(2) 13 10 29 (50 ) Foreign exchange gains (losses)(2)
(18 ) (6 ) (57 ) (24 ) Net gains (losses) on sales of
investments(2) (1 ) 32 14 51 Net investment losses related to OTTI
(71 ) - (84 ) (1 ) Net gains (losses) on extinguishment of debt 1 -
9 5 Other net realized gains (losses) (1 ) (2 ) (3 ) (4 ) Operating
income adjustment to the (provision) benefit for income tax(3)
6 (20 ) (965 ) 50
Operating income (loss) $ (113 ) $ 5 $ (243 ) $ 36
(1) A non-GAAP measure; please see
Explanation of Non-GAAP Financial Measures. (2) Reported within
"Net gains (losses) on financial instruments at fair value and
foreign exchange" on the Company's consolidated statements of
operations. (3) Reported within "Provision (benefit)
for income taxes" on the Company's consolidated statements of
operations.
COMPONENTS OF
ADJUSTED BOOK VALUE PER SHARE(1)
As ofSeptember 30, 2017
As of December 31, 2016
Reported Book Value per Share $ 13.88 $ 23.87 Reverse book
value of the MBIA Corp. legal entity (2) 7.21
5.07 Book value after MBIA Corp. legal entity adjustment
21.09 28.94 Other book value adjustments: Reverse net unrealized
(gains) losses included in other comprehensive income (loss) (0.16
) 0.24 Add net unearned premium revenue (3) 3.88 4.31 Add tax
effect on unrealized (gains) losses and unearned premium revenue
(4) - (1.61 ) Total other book value
adjustments per share 3.72 2.94
Adjusted book value per share $ 24.81 $ 31.88
(1) A non-GAAP measure; please
see Explanation of Non-GAAP Financial Measures. (2) The book value
of the MBIA Corp. legal entity does not provide significant
economic or shareholder value to MBIA Inc. (3) Consists of
financial guarantee premiums, net of deferred acquisition costs.
The discount rate on financial guarantee installment premiums was
the risk-free rate as defined by the accounting principles for
financial guarantee insurance contracts. (4) As of September 30,
2017, ABV per share was adjusted by applying a zero effective tax
rate to the book value adjustments.
INSURANCE
OPERATIONS
Selected
Financial Data Computed on a Statutory Basis
(Dollars in millions)
National Public
Finance Guarantee Corporation
September 30, 2017 December 31, 2016
Policyholders' surplus $ 2,575 $ 2,731 Contingency reserves
641 745 Statutory capital 3,216 3,476
Unearned premiums 643 786 Present value of installment premiums (1)
171 187 Premium resources (2) 814 973
Net loss and loss adjustment expense reserves (1) 61 (98 )
Salvage reserves 407 256 Gross loss and
loss adjustment expense reserves 468 158
Total claims-paying resources $ 4,498 $ 4,607
Net debt service outstanding $ 144,168 $ 185,099 Capital
ratio (3) 45:1 53:1 Claims-paying ratio (4) 34:1 43:1
MBIA Insurance
Corporation (5)
September 30, 2017 December 31, 2016
Policyholders’ surplus $ 252 $ 238 Contingency reserves 221
254 Statutory capital 473 492 Unearned
premiums 213 319 Present value of installment premiums (6) (8)
201 424 Premium resources (2) 414 743
Net loss and loss adjustment expense reserves (6) (864 )
(207 ) Salvage reserves (7) 1,498 917
Gross loss and loss adjustment expense reserves 634
710 Total claims-paying resources $ 1,521 $
1,945 Net debt service outstanding $ 22,325 $ 43,215
Capital ratio (3) 47:1 88:1 Claims-paying ratio (4) 15:1 22:1
(1) Calculated using a discount rate of
3.18% as of September 30, 2017 and December 31, 2016. (2) Includes
financial guarantee and insured credit derivative related premiums.
(3) Net debt service outstanding divided by statutory capital. (4)
Net debt service outstanding divided by the sum of statutory
capital, unearned premium reserve (after-tax), present value of
installment premiums (after-tax), net loss and loss adjustment
expense reserves and salvage reserves. (5) The table reflects MBIA
Insurance Corporation including its subsidiary MBIA UK Insurance
Limited for December 31, 2016 only. (6) Calculated using a discount
rate of 5.15% as of September 30, 2017 and December 31, 2016. (7)
This amount primarily consists of expected recoveries related to
the Company's excess spread, put-backs and CDOs. (8) Based on the
Company's estimate of the remaining life for its insured exposures.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171107006574/en/
MBIA Inc.Greg Diamond, 914-765-3190Investor and Media
Relationsgreg.diamond@mbia.com
MBIA (NYSE:MBI)
Historical Stock Chart
From Mar 2024 to Apr 2024
MBIA (NYSE:MBI)
Historical Stock Chart
From Apr 2023 to Apr 2024