0000814585-95-000005.txt : 19950815
0000814585-95-000005.hdr.sgml : 19950815
ACCESSION NUMBER: 0000814585-95-000005
CONFORMED SUBMISSION TYPE: 10-Q
PUBLIC DOCUMENT COUNT: 4
CONFORMED PERIOD OF REPORT: 19950630
FILED AS OF DATE: 19950814
SROS: NYSE
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: MBIA INC
CENTRAL INDEX KEY: 0000814585
STANDARD INDUSTRIAL CLASSIFICATION: SURETY INSURANCE [6351]
IRS NUMBER: 061185706
STATE OF INCORPORATION: CT
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-Q
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-09583
FILM NUMBER: 95563565
BUSINESS ADDRESS:
STREET 1: 113 KING ST
CITY: ARMONK
STATE: NY
ZIP: 10504
BUSINESS PHONE: 9142734545
MAIL ADDRESS:
STREET 1: 113 KING ST
CITY: ARMONK
STATE: NY
ZIP: 10504
10-Q
1
2ND QTR 10Q 95
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1995
OR
( ) TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15
(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from __________ to __________
Commission File No. 1-9583 I.R.S. Employer Identification No. 06-1185706
MBIA INC.
A Connecticut Corporation
113 King Street, Armonk, N. Y. 10504
(914) 273-4545
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Sections 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes__X__
NO_____
As of July 31, 1995 there were outstanding 41,740,371 shares
of Common Stock, par value $1 per share, of the registrant.
INDEX
-----
PAGE
----
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
MBIA Inc. and Subsidiaries
Consolidated Balance Sheets - June 30, 1995
and December 31, 1994 (Audited) 3
Consolidated Statements of Income - Three months and
six months ended June 30, 1995 and 1994 4
Consolidated Statement of Changes in Shareholders' Equity
- Six months ended June 30, 1995 5
Consolidated Statements of Cash Flows
- Six months ended June 30, 1995 and 1994 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8 - 15
PART II OTHER INFORMATION, AS APPLICABLE
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
(2)
MBIA INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except per share amounts)
June 30, 1995 December 31, 1994
------------- -----------------
(Unaudited) (Audited)
ASSETS
Investments:
Fixed maturity securities held
as available-for-sale at market
(amortized cost $3,259,157 and
$3,123,838) $3,372,554 $3,051,906
Short-term investments, at
amortized cost (which
approximates market value) 207,140 121,384
Other investments 20,170 17,550
---------- ----------
3,599,864 3,190,840
Municipal investment agreement
portfolio, held as available-
for-sale at market (amortized
cost $2,250,676 and $1,738,375) 2,288,653 1,675,935
---------- ----------
TOTAL INVESTMENTS 5,888,517 4,866,775
Cash and cash equivalents 7,374 7,940
Accrued investment income 78,722 68,486
Deferred acquisition costs 137,129 133,048
Prepaid reinsurance premiums 190,969 186,492
Goodwill (less accumulated
amortization of $38,675 and $36,115) 109,192 111,252
Property and equipment, at cost (less
accumulated depreciation of $15,694
and $13,917) 46,012 45,069
Receivable for investments sold 734 945
Other assets 35,217 36,432
---------- ----------
TOTAL ASSETS $6,493,866 $5,456,439
========== ==========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Liabilities:
Deferred premium revenue $1,571,334 $1,512,211
Loss and loss adjustment
expense reserves 44,020 40,148
Municipal investment agreements 2,096,334 1,526,133
Long-term debt 298,845 298,790
Short-term debt 23,000 17,000
Deferred income taxes 183,588 76,843
Payable for investments purchased 105,833 209,966
Securities sold under agreements
to repurchase 84,700 ---
Other liabilities 79,256 70,632
---------- ----------
TOTAL LIABILITIES 4,486,910 3,751,723
---------- ----------
Shareholders' Equity:
Preferred stock, par value $1 per
share; authorized shares--10,000,000;
issued and outstanding--none --- ---
Common stock, par value $1 per share;
authorized shares--200,000,000;
issued shares--42,077,387 42,077 42,077
Additional paid-in capital 721,120 719,750
Retained earnings 1,160,515 1,057,092
Cumulative translation adjustment 3,641 503
Unrealized appreciation (depreciation)
of investments, net of deferred
income tax provision (benefit) of
$54,361 and $(46,292) 100,118 (86,560)
Treasury stock, at cost;
shares--342,766 and 461,763 (20,515) (28,146)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 2,006,956 1,704,716
---------- ----------
TOTAL LIABILITIES
AND SHAREHOLDERS' EQUITY $6,493,866 $5,456,439
========== ==========
The accompanying notes are an integral part of the consolidated
financial statements.
(3)
MBIA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands except per share amounts)
Three months ended Six months ended
June 30 June 30
---------------------- ----------------------
1995 1994 1995 1994
---------- ---------- --------- ----------
Revenues:
Insurance:
Gross premiums written $106,343 $109,975 $177,177 $194,286
Ceded premiums (12,049) (18,877) (19,129) (26,675)
---------- ---------- --------- ----------
Net premiums written 94,294 91,098 158,048 167,611
Increase in deferred
premium revenue (40,406) (37,410) (53,086) (59,471)
---------- ---------- --------- ----------
Premiums earned (net
of ceded premiums of
$6,814, $7,114,
$14,652 and $14,368) 53,888 53,688 104,962 108,140
Net investment income 53,991 47,806 106,828 94,690
Net realized gains 1,698 2,537 3,422 8,907
Investment management
services:
Income 4,339 5,579 8,541 7,797
Net realized gains
(losses) (207) 159 (174) (458)
Other 224 305 1,134 625
---------- ---------- --------- ----------
Total revenues 113,933 110,074 224,713 219,701
---------- ---------- --------- ----------
Expenses:
Insurance:
Losses and loss
adjustment 2,710 2,114 4,743 4,039
Policy acquisition
costs, net 5,130 5,101 10,270 11,060
Operating 9,245 10,295 18,992 19,637
Investment management
services 3,419 2,612 6,290 4,946
Interest 7,109 6,720 14,159 13,455
Other 554 210 971 633
---------- ---------- --------- ----------
Total expenses 28,167 27,052 55,425 53,770
---------- ---------- --------- ----------
Income before income
taxes 85,766 83,022 169,288 165,931
Provision for income
taxes 18,459 18,071 35,975 35,239
---------- ---------- --------- ----------
NET INCOME $ 67,307 $ 64,951 $ 133,313 $ 130,692
========== ========== ========= ==========
NET INCOME PER
COMMON SHARE $ 1.60 $ 1.54 $ 3.17 $ 3.10
========== ========== ========= ==========
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES AND
COMMON STOCK
EQUIVALENTS
OUTSTANDING 42,160,506 42,074,096 42,110,048 42,114,939
========== ========== ========== ==========
The accompanying notes are an integral part of the consolidated
financial statements.
(4)
MBIA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)
FOR THE SIX MONTHS ENDED June 30, 1995
(In thousands except per share amounts)
Unrealized
Common Stock Additional Cumulative Appreciation Treasury Stock
-------------- Paid-in Retained Translation (Depreciation) --------------
Shares Amount Capital Earnings Adjustment of Investments Shares Amount
------ ------- --------- ---------- ----------- -------------- ------ -------
Balance,
January 1,
1995 42,077 $42,077 $719,750 $1,057,092 $ 503 $(86,560) 462 $28,146
Exercise
of stock
options --- --- 1,370 (4,043) --- --- (119) (7,631)
Net income --- --- --- 133,313 --- --- --- ---
Change in
foreign
currency
translation --- --- --- --- 3,138 --- --- ---
Change in
unrealized
appreciation
of investments
net of change
in deferred
income taxes
of $100,653 --- --- --- --- --- 186,678 --- ---
Dividends
(declared
and paid
per common
share $.62) --- --- --- (25,847) --- --- --- ---
------ ------- -------- ---------- ------ -------- ---- -------
Balance,
June 30,
1995 42,077 $42,077 $721,120 $1,160,515 $3,641 $100,118 343 $20,515
======= ======= ======== ========== ====== ======== ===== =======
The accompanying notes are an integral part of the consolidated financial
statements.
(5)
MBIA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
Six months ended
June 30
-----------------------
1995 1994
--------- -----------
Cash flows from operating activities:
Net income $ 133,313 $ 130,692
Adjustments to reconcile net income to net
cash provided by operating activities:
Increase in accrued investment income (10,236) (8,150)
Increase in deferred acquisition costs (4,081) (5,580)
Increase in prepaid reinsurance premiums (4,477) (12,307)
Increase in deferred premium revenue 57,563 71,778
Increase in loss and loss adjustment
expense reserves 3,872 3,842
Depreciation 1,881 1,531
Amortization of goodwill 2,560 2,513
Amortization of bond (discount) premium, net (620) 54
Net realized gains on sale of investments (3,248) (8,449)
Deferred income taxes 6,092 8,447
Other, net 103,402 11,936
---------- ----------
Total adjustments to net income 152,708 65,615
---------- ----------
Net cash provided by operating activities 286,021 196,307
---------- ----------
Cash flows from investing activities:
Purchase of fixed maturity securities, net
of payable for investments purchased (381,824) (603,085)
Sale of fixed maturity securities, net of
receivable for investments sold 237,019 309,219
Redemption of fixed maturity securities, net
of receivable for investments redeemed 31,546 68,414
Purchase of short-term investments, net (60,631) (6,949)
(Purchase) sale of other investments, net (807) 87,743
Purchases for municipal investment agreement
portfolio, net of payable for investments
purchased (1,325,209) (1,022,331)
Sales from municipal investment agreement
portfolio, net of receivable for
investments sold 673,343 245,367
Capital expenditures, net of disposals (2,784) (1,655)
--------- ---------
Net cash used by investing activities (829,347) (923,277)
--------- ---------
Cash flows from financing activities:
Dividends paid (25,811) (21,743)
Purchase of treasury stock --- (8,886)
Proceeds from issuance of municipal
investment agreements 1,059,574 1,072,779
Payments for drawdowns of municipal
investment agreements (495,961) (306,384)
Exercise of stock options 4,958 984
--------- ---------
Net cash provided by financing activities 542,760 736,750
--------- ---------
Net (decrease) increase in cash and
cash equivalents (566) 9,780
Cash and cash equivalents - beginning of period 7,940 2,492
--------- ---------
Cash and cash equivalents - end of period $ 7,374 $ 12,272
========= =========
Supplemental cash flow disclosures:
Income taxes paid $ 26,483 $ 30,099
Interest paid:
Municipal investment agreements $ 50,109 $ 11,467
Long-term debt 13,288 13,288
Short-term debt 556 16
The accompanying notes are an integral part of the consolidated
financial statements.
(6)
MBIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited consolidated financial statements
have been prepared in accordance with the instructions to
Form 10-Q and, accordingly, do not include all of the
information and disclosures required by generally accepted
accounting principles. These statements should be read in
conjunction with the consolidated financial statements and
notes thereto included in the Form 10-K for the year ended
December 31, 1994 for MBIA Inc. and Subsidiaries (the
"Company"). The accompanying unaudited consolidated
financial statements have not been audited by independent
accountants in accordance with generally accepted auditing
standards but in the opinion of management such financial
statements include all adjustments, consisting only of
normal recurring adjustments, necessary to summarize fairly
the Company's financial position and results of operations.
The results of operations for the six months ended June 30,
1995 may not be indicative of the results that may be
expected for the year ending December 31, 1995. The
December 31, 1994 condensed balance sheet data was derived
from audited financial statements, but does not include all
disclosures required by generally accepted accounting
principles.
2. Dividends Declared
Dividends declared by the Company during the six months
ended June 30, 1995 were $25.8 million.
(7)
MBIA INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
---------------------
1995 AND 1994 - SECOND QUARTER RESULTS
--------------------------------------
MBIA Inc.'s (the "Company") 1995 second quarter net income
was $67.3 million compared to $65.0 million in 1994.
Earnings per share grew 4% to $1.60 from $1.54 in the second
quarter of 1994.
The Company also measures its performance in terms of core
earnings, which exclude the effects of the relatively less
predictable elements of net income, premiums earned from
refundings and calls of previously insured issues, realized
gains or losses and non-recurring accounting changes. Core
earnings increased by 11% to $1.45 per share compared with
$1.31 in the second quarter of last year, reflecting the
Company's continuing ability to produce consistent growth
from its expanding portfolio of insured issues, its
investment portfolio and its investment management services
businesses.
Insurance Operations:
--------------------
Total long-term new issue municipal bond par value volume
was $37.0 billion in the second quarter of 1995, down
modestly from $39.0 billion in the same period last year.
The insured portion of the market was a record 50% compared
with 42% in the second quarter of 1994. In the second
quarter of 1995, the Company's principal operating
subsidiary, MBIA Insurance Corporation (formerly, Municipal
Bond Investors Assurance Corporation) ("MBIA Corp."),
continued to lead the industry in market share, guaranteeing
46% of the insured long-term new issue municipal bond
volume.
In its structured finance business, the Company insured
$1.4 billion of par value compared with $3.6 billion insured
in the same period last year. Last year's amounts included
$2.3 billion from two unusually large international
transactions.
Gross premiums written by MBIA Corp. decreased 3% to
$106.3 million during the second quarter, from $110.0
million during the second quarter of 1994. New issue and
secondary market municipal and asset-backed premiums, the
major components of gross premiums written, decreased 5% to
$96.3 million compared with $101.8 million in the same
period last year. Installment premiums received for
policies issued in prior years, including net amounts
assumed related to the installment business of the
Association, were $10.0 million and $8.2 million for the
second quarters of 1995 and 1994, respectively. MBIA
Assurance S.A., a subsidiary of
(8)
MBIA INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
MBIA Corp. contributed $3.0 million of gross premium written
in both the second quarter of 1995 and 1994.
Premiums ceded to reinsurers declined 36% to $12.0 million
during the second quarter of 1995 compared with $18.9
million in the same period last year. This was due
partially to the overall decrease in the volume of gross
premiums this quarter, as well as to the impact of the
cessions on the large international transactions last year.
Premiums ceded as a percentage of gross premiums written
were at 11% for the second quarter of 1995 compared with 17% in
the second quarter of 1994.
Typically, insurance premiums are paid in full at the time
the insurance policy is issued and are earned pro rata over
the period of risk. Premiums are allocated to each bond
maturity based on par amount and are earned on a straight-
line basis over the term of each maturity. Accordingly, the
portion of net premiums earned on each policy in any given
year represents a relatively small percentage of the total
net upfront premium received. The balance represents
deferred premium revenue to be earned in the future over the
remaining life of the bond.
Approximately 10% of MBIA's premiums are collected on an
installment basis. Installment premiums are not recorded as
a component of deferred premium revenue until received and
therefore represent an off-balance sheet value which will
contribute to future earned premiums and cash flow. As of
June 30, 1995, MBIA estimates the present value of this
future stream of payments to be $181.4 million. The present
value of installment premiums related to MBIA's asset-backed
and UIT businesses written in the second quarter of 1995
increased 22% to $11.8 million from $9.7 million in the
second quarter of 1994.
Premiums earned in the second quarter were relatively
unchanged from the second quarter 1995 at $53.9 million.
The growth in the deferred premium revenue of the addition
of new business in 1995 was offset by the decline in earned
premiums associated with bond refundings and calls during
second quarter of 1995, which were significantly lower than in
the same period last year.
When an MBIA-insured bond issue is refunded or retired
prior to the end of the expected period of coverage, the
outstanding liability associated with the refunded or called
portion is extinguished and the remaining deferred premium
revenue is earned immediately, except for any
(9)
MBIA INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
portion which may be applied as a credit toward the premium
charged on the refunding bond issue if such refunding issue
is insured by MBIA Corp. Earned premiums generated by
refunded and called bonds in the second quarter of 1995
declined to $9.1 million from $11.5 million. The amount of
bond refundings and calls is difficult to predict since it
is influenced by a variety of factors such as prevailing
interest rates relative to the coupon rates of the original
issue, the issuer's desire to modify restrictive covenants
and changing requirements under the Internal Revenue Code.
The Company's investment portfolio related to its
insurance operations was $3.6 billion as of June 30, 1995.
This portfolio generated net investment income of $54.0
million in the second quarter of 1995, a 13% increase over
$47.8 million generated in the corresponding period of 1994.
The increase was primarily the result of the growth of
investments from continued positive operating cash flows.
Average invested assets during the second quarter of 1995
were $3.39 billion at amortized cost compared with $3.08
billion for the same period last year. Tax-exempt
securities represented 73% of the portfolio at June 30, 1995
compared with 76% at June 30, 1994. The average quality of
the fixed income investments is double-A. Net realized
capital gains for the second quarter of 1995 decreased to
$1.7 million from $2.5 million in the same period of 1994.
The provision for losses and loss adjustment expenses for
the second quarter of 1995 was $2.7 million, compared with
$2.1 million in 1994, representing additions to the loss
reserves consistent with the Company's reserve methodology.
At June 30, 1995, $20.0 million of the $44.0 million loss
and loss adjustment expense reserve was allocated on a case
basis, compared with $23.2 million of the $37.6 million
reserve at June 30, 1994. During the second quarter of 1995
there were no new case reserves nor any material adjustments
made to those reserves currently outstanding.
For the second quarter of 1995, policy acquisition costs
net of deferrals were $5.1 million, essentially unchanged
from 1994. Other insurance operating expenses declined to
$9.2 million from $10.3 million in the second quarter of
1994.
For the second quarter of 1995, the Company's interest
expense increased to $7.1 million from $6.7 million in the
second quarter 1994. The increase resulted from utilization
of short-term bank borrowings
(10)
MBIA INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
under existing lines of credit during the second quarter of
1995 for investment management services' capital needs.
Investment Management Services:
------------------------------
MBIA has undertaken the development of investment
management services which capitalize on its capabilities,
reputation and marketplace relationships. In aggregate
for the second quarter 1995, these businesses contributed
$4.1 million in revenue, a decline from second quarter 1994
revenues of $5.7 million. Included in 1994's second quarter
aggregate revenues was $2.2 million related to the net
proceeds from the sale of MBIA's 49% interest in a joint
venture. Excluding this amount, investment management
services' revenues would have increased 16% over last year.
MBIA Municipal Investors Services Corporation
("MBIA/MISC"), a subsidiary of the Company, provides cash
management services for local governments, school districts
and similar authorities. As of June 30, 1995 MBIA/MISC had
over 1,100 clients and over $1.8 billion of client assets
under management. MBIA/MISC is operating in nine states and
plans to continue its expansion into additional states.
MBIA/MISC provides fund administration services to over 200
clients.
MBIA Investment Management Corp. ("IMC"), another
subsidiary of the Company, provides investment agreements
guaranteed as to principal and interest, for states,
municipalities and municipal authorities. At June 30, 1995,
IMC managed outstanding investment agreements of $2.1
billion compared with $1.3 billion at June 30, 1994. The
related assets are high quality securities and are recorded
as a component of the Company's total investments as the
municipal investment agreement portfolio.
Municipal investment agreements are recorded as
liabilities at the time such agreements are executed. The
liability for a municipal investment agreement is carried at
the principal value of the obligation plus accrued interest
due. Interest expense on municipal investment agreements is
computed daily based upon the outstanding liability balance
at rates specified in the agreements. Such expense is
deducted from the investment income arising from the related
investment agreement assets, and the net amount is included
in investment management services income.
Expenses of MBIA's investment management services
businesses increased to $3.4 million from $2.6 million last
year due to increased costs
(11)
MBIA INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
associated with the expansion of these new businesses. The
1995 increase in expenses was more than offset by increased
investment management services income.
RESULTS OF OPERATIONS
---------------------
1995 AND 1994 - FIRST SIX MONTHS RESULTS
----------------------------------------
The Company's 1995 first six months net income and earnings
per share were $133.3 million and $3.17, respectively,
compared with $130.7 million and $3.10 in the first half of
1994.
For the first half of 1995, core earnings increased by 12%
to $2.88 per share compared with $2.58 per share in the
first half of last year, reflecting the Company's continuing
ability to produce consistent growth from its expanding
portfolio of insured issues and investment portfolio.
Insurance Operations:
--------------------
Total long-term new issue municipal bond volume for the
first half of 1995 was $63.2 billion of par value, down from
$87.4 billion in the first half of 1994. The insured
portion of new issue volume increased slightly to 42% versus
40% in the comparable period last year. In the first half
of 1995, MBIA Corp. led the industry in market share,
guaranteeing 44% of the insured long-term new issue
municipal bond volume compared with 41% in the first half of
1994.
In its structured finance business, for the first six
months of 1995, MBIA insured $3.5 billion of par value
compared with $4.6 billion in the first half of last year.
Gross premiums written by MBIA Corp. decreased 9% to
$177.2 million during the first half of 1995 from $194.3
million during the first half of 1994. New issue and
secondary market municipal and asset-backed premiums, the
major components of gross premiums written, decreased 11% to
$159.3 million compared with $178.6 million in the same
period last year. Installment premiums received for
policies issued in prior years, including net amounts
assumed related to the installment business of the
Association, were $17.9 million and $15.5 million for the
first half of 1995 and 1994, respectively.
(12)
MBIA INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
With the decrease in the volume of gross premiums written,
premiums ceded to reinsurers declined 28% to $19.1 million
during the first half of 1995 compared to $26.7 million in
the same period last year. In the first half of 1995,
premiums ceded as a percentage of gross premiums written
decreased to 11% from 14% last year.
For the first six months of 1995, net premium writings
were $158.0 million reflecting a 6% decrease from $167.6
million in the same period last year.
Premiums earned in the first half of 1995 decreased 3% to
$105.0 million from $108.1 million in the first half of
1994. This decrease reflected the decline in earned
premiums resulting from lower bond refundings and calls
during 1995, partially mitigated by the growth in deferred
premium revenues from the addition of new business in 1994.
Earned premiums generated by refunded and called bonds in
the first half of 1995 and 1994 were $17.1 million and $26.0
million, respectively.
Net investment income increased 13% to $106.8 million in
the first half of 1995 compared with $94.7 million in the
corresponding period of 1994. The increase was a result of
the growth of invested assets from continued positive
operating cash flows. Average invested assets during the
first half of 1995 were $3.35 billion at amortized cost
compared with $3.05 billion for the same period last year.
Net realized capital gains in the first half of 1995
decreased to $3.4 million from $8.9 million in the same
period of 1994.
The provision for losses and loss adjustment expenses for
the first half of 1995 was $4.7 million, compared with $4.0
million in 1994, representing additions to the loss reserves
consistent with the Company's reserve methodology. There
were no additions to the case reserves in the first six
months of 1995. During the first half of 1994, the
Company's case reserves increased by $15.7 million of which
$14.1 million related to five issues added to the case
specific portion of the total reserve. None of these issues
are currently in default. The increase in case reserves had
no impact on net income, since the increase in the Company's
case-specific reserve was offset by a corresponding decrease
in the unallocated portion of its general loss reserve.
(13)
MBIA INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Other insurance related expenses which are composed of net
policy acquisition costs and operating expenses were $29.3
million compared with $30.7 million in the previous year.
The Company's interest expense increased to $14.2 million
for the first half of 1995 from $13.5 million in 1994, due
to short-term borrowings.
Investment Management Services:
------------------------------
In aggregate, MBIA's investment management services
contributed $8.4 million in revenues in the first half of
1995, up from $7.3 million for the first half 1994.
Included in 1994's first half was $1.8 million of net
proceeds from the sale of MBIA's 49% interest in a joint
venture. Investment management services' aggregate revenues,
exluding the sale, increased 51% over the first half of 1994.
Expenses of MBIA's investment management services
businesses increased to $6.3 million in the first half of
1995 from $4.9 million in the first half of 1994 due to the
expansion of these new businesses.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
At June 30, 1995, the market value of the Company's
consolidated investment portfolio was $5.89 billion, an
increase of 21% from $4.87 billion at year-end 1994. The
increase was substantially due to continued positive
operating cash flow from the Company's insurance and
municipal investment agreement operations, as well as a
$287.3 million increase in the market value of its
investments from year end 1994.
The Company's liquidity is in part dependent upon MBIA
Corp.'s ability to pay dividends to the Company. MBIA
Corp.'s net income, consisting of premium earnings and
investment income less losses and expenses, is a source of
continuing additions to earned surplus and dividend paying
capability. Under New York insurance law, without prior
approval of the Superintendent of the New York State
Insurance Department, MBIA Corp. may pay a dividend only
from earned surplus subject to the maintenance of a minimum
capital requirement, and the dividends in any 12-month
period may not exceed the lesser of 10% of its
policyholders' surplus as shown on its last filed statutory-
based financial statements or adjusted net investment
income, as defined, for such 12-month period. MBIA Corp.
paid dividends of $21.0 million in the
(14)
MBIA INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
second quarter of 1995 and at June 30, 1995 had in excess of
$34 million available for payment of further dividends to
the Company without prior approval.
MBIA Corp. has an irrevocable standby line of credit of
$600 million with a group of major banks to provide funds
for the payment of claims in the event that severe losses
should occur. The agreement is for a seven-year term
expiring on September 30, 2001 but, subject to approval by
the banks, the agreement may be renewed annually to extend
the term to seven years beyond the renewal date. The
Company and MBIA Corp. maintain short-term liquidity
facilities totaling $250 million with major banks for
general corporate purposes including immediate liquidity for
payment of claims should they occur. At June 30, 1995, $23
million was outstanding under these facilities to fund
investment management services' capital requirements.
MBIA Corp. also maintains a high degree of liquidity
within its investment portfolio in the form of readily
marketable high quality fixed income securities and short-
term investments. In management's opinion, the capital
resources of MBIA Corp., represented by the liquidity of its
investment portfolio, its cash flows from operations and
bank lines of credit, are more than adequate to meet the
Company's expected cash requirements.
At June 30, 1995, MBIA Corp. had $20.0 million in case
specific loss reserves. Any related payments are expected
to be funded from operating cash flows.
(15)
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
11. Computation of Earnings Per Share Assuming
Full Dilution
27. Financial Data Schedule
99. Additional Exhibits - MBIA Insurance Corporation
and Subsidiaries Consolidated Financial Statements
(b) Reports on Form 8-K - No Reports on Form 8-K were filed
in this quarter.
(16)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
MBIA INC.
-----------------------------
Registrant
Date: August 14, 1995 /s/ ARTHUR M. WARREN
--------------------- -----------------------------
Arthur M. Warren
Senior Vice President,
Chief Financial Officer
Date: August 14, 1995 /s/ JULLIETTE S. TEHRANI
--------------------- -----------------------------
Julliette S. Tehrani
Senior Vice President,
Director of Finance
(Principal Accounting Officer)
(17)
EX-11
2
2ND QTR 95 EXHIBIT 11
EXHIBIT 11
MBIA INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE ASSUMING FULL DILUTION
(In thousands except per share amounts)
Three months ended Six months ended
June 30 June 30
----------------- --------------------
1995 1994 1995 1994
------- ------- -------- --------
Net income $67,307 $64,951 $133,313 $130,692
======= ======= ======== ========
Fully diluted shares:
Average number of common
shares outstanding 41,705 41,684 41,667 41,701
Assumed exercise of dilutive
stock options 502 414 515 416
------- ------- -------- --------
42,207 42,098 42,182 42,117
======= ======= ======== ========
Earnings per share assuming
full dilution $1.59 $1.54 $3.16 $3.10
======= ======= ======== ========
EX-27
3
2ND QTR 95 EX.27 (FDS)
7
1,000
6-MOS
DEC-31-1995
JAN-01-1995
JUN-30-1995
3,372,554
0
0
0
0
0
5,888,517
7,374
0
137,129
6,493,866
44,020
1,571,334
0
0
321,845
42,077
0
0
1,964,879
6,493,866
104,962
106,828
3,422
9,501
4,743
10,270
18,992
169,288
35,975
133,313
0
0
0
133,313
3.17
3.16
0
0
0
0
0
0
0
EX-99
4
2ND QTR 95 CORP GAAP
MBIA INSURANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 1995 AND DECEMBER 31, 1994
AND FOR THE PERIODS ENDED JUNE 30, 1995 AND 1994
MBIA INSURANCE CORPORATION
AND SUBSIDIARIES
I N D E X
PAGE
----
Consolidated Balance Sheets - June 30, 1995 (Unaudited)
and December 31, 1994 (Audited) 3
Consolidated Statements of Income - Three months and
six months ended June 30, 1995 and 1994 (Unaudited) 4
Consolidated Statement of Changes in Shareholder's
Equity - Six months ended June 30, 1995 (Unaudited) 5
Consolidated Statements of Cash Flows
- Six months ended June 30, 1995 and 1994 (Unaudited) 6
Notes to Consolidated Financial Statements (Unaudited) 7
-2-
MBIA INSURANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except per share amounts)
June 30, 1995 December 31, 1994
------------- -----------------
(Unaudited) (Audited)
ASSETS
Investments:
Fixed maturity securities held
as available-for-sale at market
(amortized cost $3,259,157
and $3,123,838) $3,372,554 $3,051,906
Short-term investments,
at amortized cost
(which approximates market value) 207,140 121,384
Other investments 12,914 11,970
---------- ----------
TOTAL INVESTMENTS 3,592,608 3,185,260
Cash and cash equivalents 2,249 1,332
Accrued investment income 57,476 55,347
Deferred acquisition costs 137,129 133,048
Prepaid reinsurance premiums 190,969 186,492
Goodwill (less accumulated
amortization of
$34,902 and $32,437) 108,078 110,543
Property and equipment, at cost
(less accumulated depreciation
of $10,805 and $9,501) 40,718 39,648
Receivable for investments sold 706 945
Other assets 42,671 46,552
---------- ----------
TOTAL ASSETS $4,172,604 $3,759,167
========== ==========
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities:
Deferred premium revenue $1,571,334 $1,512,211
Loss and loss adjustment expense
reserves 44,020 40,148
Deferred income taxes 168,839 97,828
Payable for investments purchased 50,024 6,552
Other liabilities 53,936 46,925
---------- ----------
TOTAL LIABILITIES 1,888,153 1,703,664
---------- ----------
Shareholder's Equity
Common stock, par value $150 per
share; authorized, issued and
outstanding - 100,000 shares 15,000 15,000
Additional paid-in capital 959,866 953,655
Retained earnings 1,233,433 1,134,061
Cumulative translation adjustment 3,474 427
Unrealized appreciation
(depreciation) of investments,
net of deferred income tax provision
(benefit) of $39,585 and $(25,334) 72,678 (47,640)
---------- ----------
TOTAL SHAREHOLDER'S EQUITY 2,284,451 2,055,503
---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDER'S EQUITY $4,172,604 $3,759,167
========== ==========
The accompanying notes are an integral part of the consolidated
financial statements.
- 3 -
MBIA INSURANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands)
Three months ended Six months ended
June 30 June 30
------------------ -------------------
1995 1994 1995 1994
-------- -------- -------- --------
Revenues:
Gross premiums written $106,665 $110,126 $177,777 $194,528
Ceded premiums (12,049) (18,877) (19,129) (26,675)
-------- -------- -------- --------
Net premiums written 94,616 91,249 158,648 167,853
Increase in deferred
premium revenue (40,406) (37,410) (53,086) (59,471)
-------- -------- -------- --------
Premiums earned
(net of ceded premiums
of $6,814, $7,114, $14,652
and $14,368) 54,210 53,839 105,562 108,382
Net investment income 53,783 47,865 106,848 94,394
Net realized gains 1,698 2,538 3,422 8,908
Other income 224 305 1,132 618
-------- -------- -------- --------
Total revenues 109,915 104,547 216,964 212,302
-------- -------- -------- --------
Expenses:
Losses and loss
adjustment expenses 2,710 2,114 4,743 4,039
Underwriting and operating
expenses 9,247 10,300 18,999 19,646
Policy acquisition costs, net 5,130 5,101 10,270 11,060
-------- -------- -------- --------
Total expenses 17,087 17,515 34,012 34,745
-------- -------- -------- --------
Income before income taxes 92,828 87,032 182,952 177,557
Provision for income taxes 20,604 20,311 40,080 39,777
-------- -------- -------- --------
Net income $72,224 $66,721 $142,872 $137,780
======== ======== ======== ========
The accompanying notes are an integral part of the consolidated
financial statements.
-4-
MBIA INSURANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY (Unaudited)
For the six months ended June 30, 1995
(Dollars in thousands except per share amounts)
Unrealized
Common Stock Additional Cumulative Appreciation
-------------- Paid-in Retained Translation (Depreciation)
Shares Amount Capital Earnings Adjustment of Investments
------- ------- --------- -------- ----------- --------------
Balance,
January 1, 1995 100,000 $15,000 $953,655 $1,134,061 $ 427 $(47,640)
Net income --- --- --- 142,872 --- ---
Change in
foreign
currency
translation --- --- --- --- 3,047 ---
Change in
unrealized
appreciation
of investments
net of change
in deferred
income taxes
of $(64,919) --- --- --- --- --- 120,318
Dividends
declared (per
common share
$435) --- --- --- (43,500) --- ---
Tax reduction
related to tax
sharing agree-
ment with
MBIA Inc. --- --- 6,211 --- --- ---
------- ------- -------- ---------- ------ --------
Balance,
June 30, 1995 100,000 $15,000 $959,866 $1,233,433 $3,474 $ 72,678
======= ======= ======== ========== ====== ========
The accompanying notes are an integral part of the consolidated
financial statements.
-5-
MBIA INSURANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands)
Six Months Ended
June 30
----------------------
1995 1994
-------- ---------
Cash flows from operating activities:
Net income $142,872 $137,780
Adjustments to reconcile net income to net
cash provided by operating activities:
Decrease in accrued investment income (2,129) (2,377)
Increase in deferred acquisition costs (4,081) (5,580)
Increase in prepaid reinsurance premiums (4,477) (12,307)
Increase in deferred premium revenue 59,123 71,778
Increase in loss and loss adjustment
expense reserves 3,872 3,842
Depreciation 1,295 682
Amortization of goodwill 2,465 2,481
Amortization of bond (discount) premium, net (620) 57
Net realized gains on sale of investments (3,422) (8,907)
Deferred income taxes 6,092 8,447
Other, net 20,094 (10,296)
-------- --------
Total adjustments to net income 78,212 47,820
-------- --------
Net cash provided by operating activities 221,084 185,600
-------- --------
Cash flows from investing activities:
Purchase of fixed maturity securities, net
of payable for investments purchased (381,468) (645,813)
Sale of fixed maturity securities, net of
receivable for investments sold 237,019 309,219
Redemption of fixed maturity securities,
net of receivable for investments redeemed 31,546 68,414
Purchase of short-term investments, net (60,631) (6,949)
(Purchase) sale of other investments (807) 87,743
Capital expenditures, net of disposals (2,326) (76)
-------- --------
Net cash used in investing activities (176,667) (187,462)
-------- --------
Cash flows from financing activities:
Dividends paid (43,500) ---
Capital contributions --- 4,915
-------- --------
Net cash (used) provided by financing
activities (43,500) 4,915
-------- --------
Net increase in cash and cash equivalents 917 3,053
Cash and cash equivalents - beginning of period 1,332 747
-------- --------
Cash and cash equivalents - end of period $ 2,249 $ 3,800
======== ========
Supplemental cash flow disclosures:
Income taxes paid $ 26,201 $ 29,969
The accompanying notes are an integral part of the consolidated
financial statements.
-6-
MBIA INSURANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
-------------------------
The accompanying consolidated financial statements are
unaudited and include the accounts of MBIA Insurance
Corporation and its Subsidiaries (the "Company"). The
statements do not include all of the information and
disclosures required by generally accepted accounting
principles. These statements should be read in conjunction
with the consolidated financial statements and notes thereto
for the year ended December 31, 1994 for the Company. The
accompanying consolidated financial statements have not been
audited by independent accountants in accordance with
generally accepted auditing standards but in the opinion of
management such financial statements include all
adjustments, consisting only of normal recurring
adjustments, necessary to summarize fairly the Company's
financial position and results of operations. The results
of operations for the six months ended June 30, 1995 may not
be indicative of the results that may be expected for the
year ending December 31, 1995. The December 31, 1994
condensed balance sheet data was derived from audited
financial statements, but does not include all disclosures
required by generally accepted accounting principles.
2. DIVIDENDS DECLARED
----------------------
Dividends declared by the Company during the six months
ended June 30, 1995 were $43.5 million.
-7-