Following the positive earnings released Tuesday by surety provider MBIA, some remain skeptical over the firm's CDO exposure. In its most recent daily, unsecured debt research firm Gimme Credit states that it doesn't "view MBIA (Aa2/AA/AA) as currently attractive." Yesterday MBIA reported $223 million in earnings, up from $152 million in 1Q02.

Specifically, analyst Kathy Shanley points out the $60 million gain in its CDO portfolio, which is up from a $82 million loss in the entire year 2002. The gain is primarily attributed to a change in its valuation method and the addition of a new data vendor, Shanley notes. "Although the mark-to-market this period was positive, the adjustment raises questions about future earnings volatility," she writes. Tighter spreads in the CDO market were also credited for the gain.

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