More details are highlighted on bond insurer MBIA's reported losses in the fourth quarter of 2011 from yesterday's article from ASR sister publication The Bond Buyer.
In a report released Wednesday afternoon, MBIA said that it had an adjusted pre-tax loss, a non-GAAP measure, of $252 million in the fourth quarter. That compares to an adjusted pre-tax loss of $311 million in the fourth quarter of 2010.
MBIA also reported a net loss to common shareholders of $626 million for the fourth quarter of 2011. That follows a gain for the fourth quarter in 2010 of $451 million.
The company’s adjusted book value fell to $34.50 per share on Dec. 31, 2011, from $36.81 per share on Dec. 31, 2010.
On a brighter note, since Oct. 1, 2011, MBIA has commuted or agreed to commute $23.9 billion in insured exposure primarily comprised of commercial mortgage-backed securities.
In contrast with the parent company, the public finance branch of MBIA, National Public Finance Guarantee Corp., had healthy financial results in the fourth quarter. Its pre-tax income rose to $163 million from $103 million in the fourth quarter of 2010.
In a Thursday morning conference call, MBIA chief executive officer Joseph Brown said: “We made significant progress on a number of fronts during the year, particularly as we reduced volatility and potential future losses in our insured portfolio through negotiated settlements of [asset-backed securities, collateralized debt obligations] and commercial real estate exposures. At the same time, we advanced our putback suits toward trial while receiving several very favorable rulings along the way.”
MBIA has reduced its gross par outstanding exposure to structured finance and non-U.S. public finance by 57% since December 31, 2007, said chief financial officer C. Edward Chaplin.
Gross second-lien RMBS claim payments made by MBIA have steadily declined on a quarterly basis since the second quarter of 2009, Chaplin pointed out.
There has been “measurable progress” in resolving lawsuits filed against MBIA concerning its 2009 transformation into two separate companies, according to Brown. “Seven banks dropped out during  and one more this past January, which leaves only four of the original 18 plaintiffs,” he said.
Responding to the results and the conference call, CreditSights senior analyst Rob Haines said, “I’m bullish on MBIA’s credit fundamentals and on their equity.” He noted that MBIA commuted a substantial amount of commercial mortgage-backed securities in the fourth quarter, many times at “pennies on the dollar.”
The general consensus is that MBIA will prevail both in the transformation suits and in its suit against Bank of America Merrill Lynch regarding mortgage-backed securities MBIA insured, if they go to trial, he said.
“We’re looking at a 12 month window to get some clarity on this,” Haines said.
Another analyst also remained positive about MBIA. “MBIA Insurance reported liquidity of $534 million at Dec. 31, 2011, which is within striking distance of our estimate of $569 million. Moreover, the subsidiary reported statutory capital of $2.3 billion and claims-paying resources of $6.1 billion, so we see no near-term threat of insolvency or seizure,” said Mark Palmer, managing director of BTIG.
Despite these analysts’ opinions, as of 2:51 p.m. Eastern Standard Time MBIA’s stock had fallen 2.9% from its opening levels for the day.