MBIA slides to huge 1Q loss on hefty charges Monday May 12, 7:03 am ET MBIA falls to $2.41 billion loss on 1st quarter, writes down $3.58B derivative liabilities ARMONK, N.Y. (AP) -- MBIA is posting a large first-quarter loss, as the struggling bond insurer took heavy charges to write down the value of certain liabilities amid continued deterioration in the credit markets. Armonk, N.Y.-based MBIA Inc. lost $2.41 billion, or $13.03 per share, compared with year-ago earnings of $198.6 million, or $1.46 per share. Revenue totaled a loss of $2.96 billion compared with revenue of $729.9 million a year ago, as net premiums written fell by nearly half and losses on insured derivatives soared to $3.58 billion. Level 3 assets totaled $7.33 billion at March 31, representing about 22.5 percent of total assets. AP Business Writer Jennifer Malloy
The latest quarter included a $3.6 billion mark-to-market writedown on MBIAâs insured credit default swap portfolio. The news, which follows a $2.3 billion fourth-quarter loss, comes a week after CEO Jay Brown insisted the company doesnât need new capital and warned shareholders that the company was struggling to arrive at a valuation for the insured credit default swap portfolio. âI can tell you with great certainty that no two people could ever agree on this calculation,â he wrote, âso donât be surprised when external sources propose wildly different possibilities for MBIA.â Brown is due to host a conference call at 2 p.m. EST, so the external sources may have their say then.
"the company net loss reserves of $1.4B represent 0.14% of its oustanding debt service insured of $1,000 billion(one trillion). We believe that the reserves are adequate to cover ultimate net losses" thats about 1% of their CDO book
heres what tilson wrote about ambac " Ambac is reserving $636 million on $5 billion of exposure to CES, $432 million on $11.4 billion of HELOCs, $200 million on $6.5 billion of mid-prime RMBSs and $16 million on $8.1 billion of subprime RMBSs. I think the HELOC number is the most absurd: 3.8% losses?!" mbia is also thinking their helocs, close end seconds and cdo squareds(http://www.mbia.com/faq/faq_read_answer.jsp?FAQ_ID=338) are golden and everything will be fine. $1.4B in reserves against $20b of garbage plus almost no losses on CDOs and non-tax payer public bonds
MBIA Posts Loss of $2.4 Billion as CDO Slump Deepens (Update1) By Christine Richard May 12 (Bloomberg) -- MBIA Inc., the bond insurer that lost 87 percent of its market value in the past year, posted a net loss of $2.4 billion as the slump in mortgage securities deepened. The first-quarter net loss was $13.03 a share, compared with a profit of $198.6 million, or $1.46 a share, a year earlier, Armonk, New York-based MBIA said in a regulatory filing today. Unrealized losses from derivatives were $3.58 billion. The loss was MBIA's third straight and comes less than three months after the bond insurer successfully retained its AAA credit rating. MBIA, Ambac Financial Group Inc. and the rest of the industry have posted record losses after misjudging the value of collateralized debt obligations and securities backed by home- equity loans they guaranteed. MBIA, once a dominant provider of municipal bond insurance, had 2.5 percent of the market in the quarter, according to Thomson Financial data. ``We're not out of the woods yet,'' said Richard Larkin, senior vice president at Herbert J. Sims & Co. in Iselin, New Jersey. ``I'm not sure AAA bond insurers will ever be viewed the same way as in the past.'' MBIA raised $2.6 billion in capital to help convince Moody's Investors Service and Standard & Poor's to preserve its AAA rating. Chief Executive Officer Jay Brown said this week the company won't need to raise more. ``We have adequate equity capital to get through this crisis,'' Brown wrote in a letter to shareholders published May 6. MBIA fell 21 cents to $9.22 in early New York Stock Exchange composite trading. The stock traded above $70 a year ago. MBIA's book value slumped to $8.70 a share on March 31 from $29.16 at Dec. 31, in part because of new shares sold in the capital raising. `No Longer' AAA MBIA estimates it will have $827 million of actual losses from paying claims on nine CDO transactions. ``Earnings pressure will remain for several quarters as writedowns continue,'' Peter Plaut, senior vice president at Imperial Capital, wrote in an e-mail today. ``This is no longer a AAA industry for the players that diversified into volatile financial derivatives.'' MBIA took $3.5 billion of writedowns in the fourth quarter of last year, mainly on CDOs it guaranteed through derivative contracts. Those contracts, backed by the repayment of subprime mortgages, have contributed to $323 billion of losses at banks since the beginning of 2007. Derivatives are financial instruments linked to stocks, bonds, loans, currencies and commodities, or linked to specific events such as changes in interest rates or weather. `Mere Mortals' ``This valuation task is clearly one that stretches the ability of mere mortals,'' Brown said in the letter. New York-based Ambac, the second-largest bond insurer, reported on April 23 a first quarter net loss of $1.66 billion, wider than analysts estimated, after $3.1 billion of charges related to mortgage securities. New business at Ambac slumped 87 percent after municipalities balked at buying its insurance and sales of CDOs dried up. Ambac shares tumbled 43 percent on the day of the announcement. The bond insurers faltered after expanding beyond municipal debt into subprime-mortgage securities and CDOs, which package pools of debt into new pieces with varying ratings and risk. As subprime defaults soared to records, MBIA and Ambac were forced to write down their value. Home-Equity Rising defaults on home-equity loans have also dragged down bond insurers' results. Ambac set aside $1 billion during the first quarter to cover claims on second lien mortgages. Hamilton- Bermuda-based Assured Guaranty Ltd. reserved $59 million, largely for two deals backed by Countrywide Financial Corp. loans. MBIA had insured bonds backed by home equity lines of credit and closed-end second loans totaling $21 billion at the end of 2007, according to the company's Web site. Almost $9 billion of those securities were originated in 2007. The company said today it had $265 million in additional loss expenses related to home loans. Billionaire Warren Buffett, who created a bond insurance company to insure municipal securities, told attendees at Berkshire Hathaway Inc.'s annual meeting earlier this month that an insurer forced to borrow at a 14 percent yield doesn't deserve AAA credit ratings. MBIA sold $1 billion of surplus notes with a 14 percent yield to raise capital in January. Competition from companies with stable AAA credit ratings has eaten into MBIA's municipal bond business. Financial Security Assurance Holdings Ltd., owned by Dexia SA, insured 65 percent of the $22.2 billion of municipal bonds sold in the first quarter, according to data from Thomson Financial. Assured Guaranty had a 30 percent share. ``It's up to the market,'' Larkin said. ``Either it's going to give MBIA another shot or not.''
Did you listen to MBIA call? Those guys were touting a best case(credit crisis over, housing mkt bottom) for their loss estimates. Looks like the market saw through it.
it seems that they are on a reserve as you go rule. they wait for the delinquencies to start to happen on their helocs and ces before starting to reserve cash against them, they say most of the 2nd lien garbage is from countrywide with 85%+ ltv in CA and FL, i think if they were on a more forward looking system their reserves would be huge. its like the entire stock market is seeing this stuff and decided to ignore it, city meryl all these guys are reserving as they go yet people think everything is fine, they just close their eyes and keep buying
speaking of 2nd lien garbage, looks like the guys at moodys are beginning to wake up "Moody's: second lien RMBS woes may dent bond insurer ratings " http://www.marketwatch.com/news/sto...3AE-B677-DC8AE7916A48}&tool=1&dist=bigcharts&