MBIA Misses Estimates

MBIA Inc. (NYSE:MBI) reported fourth quarter operating loss of $311 million or $1.56 per share, which was much below the Zacks Consensus Estimate of a loss of 23 cents per share. Results, however, compared favorably with a loss of $541 million or $2.60 per share in the prior-year period. 

Total revenue of $863.9 million was up 32% year over year due to higher unrealized gains on insured derivatives, higher net gains on financial instruments and foreign exchange.

Premiums earned during the quarter increased 8.8% year over year to $144.5 million while net investment income fell 6.5% to $115.4 million.

Segmental Performance

U.S. Public Finance Insurance is carried out by its subsidiary, National Public Finance, which was set up 18 months ago to write only U.S. Public Finance. However, the unit is facing legal action, the outcome of which has prevented rating agencies (S&P and Moody’s) to confer strong ratings on the company, considered vital for the bond insurance business.

Therefore, National Public Finance virtually wrote no new business. The scheduled net premiums earned were $112 million, down 18% year over year. Adjusted pre-tax income was $103 million, down 45%, led by increased loss and loss adjustment expenses as well as declines in premiums earned, fees and reimbursements and net investment income. Investment income was $54 million; 17% lower than $61 million last year due to lower investment yields.

Structured Finance and International Insurance business is carried out by MBIA Corp. While there was no new business written in this segment, the existing book of business generated $56 million in scheduled premiums earned during the quarter, which was up 14% year over year. Adjusted pre-tax loss was $487 million compared with an adjusted pre-tax loss of $766 million in the fourth quarter of 2009.

Advisory Services is carried out by Cutwater Asset Management. This segment earned fees and reimbursements of $17.6 million up 14% year over year. The assets under management were $41.6 million at the end of December 31, 2010, down 4% year over year. However, the segment recorded a pre-tax loss of $300,000 compared with pre-tax profit of $477,000 in the prior-year quarter.

The Corporate segment had a pretax income of $34 million in the quarter compared with $35 million in the year-ago quarter.

The Wind down operations had adjusted a pre-tax income of $42 million, compared with pre-tax income of $5 million in the prior-year period, driven by a $62 million net gain on financial instruments at fair value and foreign exchange resulting primarily from increased values of interest rate swaps not designated as hedges.

Adjusted book value (a non-GAAP measure) was up to $36.81 per share as of December 31, 2010, down from $38.94 as of December 31, 2009.

The stock maintains a Zacks #3 Rank, which translates into Hold recommendation over the short term. Further, over the long term (6+ months) we are maintaining a Neutral recommendation on the shares.

 
MBIA INC (MBI): Free Stock Analysis Report
 

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