MBIA lost more than a half billion dollars in the 1Q12. The company’s adjusted pre-tax loss was $548 million in the quarter, compared to a $25 million profit in the first quarter of 2011. Its adjusted book value slipped to $32 a share from $34.50.
“The reduction in ABV and the adjusted pre-tax loss for the three months ended March 31, 2012, resulted from losses on insured exposures, realized losses from sales and impairments of investments, and legal and litigation-related costs and expenses,” the company reported in its quarterly statement.
“Our first quarter 2012 operating results were a disappointment due to the significant actions we took to reduce future volatility in our insured portfolio and lower liquidity risk at the holding company,” said president and chief financial officer Chuck Chaplin. “A combination of additional losses on insured exposures, realized losses and impairments on invested assets and legal and litigation-related expenses led to the adjusted pre-tax loss in the quarter.”
“However, we did see a continuation of the trend toward reduced future volatility in our insured portfolio and lower liquidity risk at the holding company, Chaplin said. “Early stage delinquencies on second-lien residential mortgage-backed securities — the driver of our near-term expected claims payments — continued to decline, albeit at a slower rate than we anticipated. We commuted additional volatile exposures both during and after the end of the first quarter. We’ve also engaged in asset sales that strengthen the cash position and lower the spread risk in our holding company.”
“Our lower adjusted book value reflects the costs of these developments, which are helping to stabilize the company so that it can grow in the future,” he added.
MBIA recorded net income available to common shareholders of $10 million, or 5 cents per share. This compares to a net loss of $1.3 billion or $6.37 per share in the first quarter of 2011.
The company’s “results for the first quarter of 2012 were driven by $303 million in pre-tax unrealized gains on insured credit derivatives, $137 million in total premiums earned and $62 million in net investment income, partially offset by $158 million in operating expenses, $97 in loss and loss adjustment expenses and $94 million in net investment losses related to other-than-temporary impairments,” it said.
“The $303 million in pre-tax unrealized gains on insured credit derivatives resulted from a combination of gains associated with commutations of insured exposures and tighter credit spreads on the underlying collateral, partially offset by the impact of an improved perception of MBIA Corp.’s credit quality,” it said.
MBIA’s stock ended trading at $9.82 on Thursday, before the quarterly earning statement was released.