-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ok2ENzhY8wMG/j4ivykQX2mUuArLbkZs7ioEgDwRpPWL+OG0YU7TYb6ru4g+mHUW R8qV0AF1u+T28YBSjpJ9Zg== 0000814585-98-000005.txt : 19981105 0000814585-98-000005.hdr.sgml : 19981105 ACCESSION NUMBER: 0000814585-98-000005 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981103 ITEM INFORMATION: FILED AS OF DATE: 19981104 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: 8-K SEC ACT: SEC FILE NUMBER: 001-09583 FILM NUMBER: 98737458 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 8-K 1 PRESS RELEASE OF 11/03/98 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------- Form 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report: November 3, 1998 Date of Earliest Event Reported: November 3, 1998 MBIA Inc. ----------------------------------------------------- (Exact name of registrant as specified in its charter) Connecticut 1-9583 06-1185706 -------------- ------------------------ ------------ (State of (Commission File Number) (IRS Employer Incorporation) Identification No.) 113 King Street, Armonk, New York 10504 - -------------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) (914) 273-4545 --------------------------------------------------- (Registrant's telephone number, including area code) Page 1 of 4 ITEMS 1-4. Not applicable. ITEM 5. OTHER EVENTS ------------ On November 3, 1998, the Company announced its earnings for the third quarter ended September 30, 1998. The press release making such announcement is filed herewith as an exhibit. ITEM 6. Not applicable. ITEM 7. FINANCIAL STATMENTS AND EXHIBITS -------------------------------- (c) Exhibits 20.1 MBIA Inc. Press Release dated November 3, 1998. ITEM 8. Not applicable. Page 2 of 4 SIGNATURE 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 hereunto duly authorized. MBIA Inc. ------------------------------ (Registrant) Date: November 3, 1998 By /s/ Julliette S. Tehrani ------------------ ------------------------------- Name: Julliette S. Tehrani Title: Executive Vice President Chief Financial Officer Treasurer Page 3 of 4 EXHIBIT INDEX ------------- Exhibit No. Description ----------- ----------- 20.1 MBIA Inc. Press Release dated November 3, 1998 Page 4 of 4 EX-20.1 2 MBIA INC. 3RD QTR 1998 PRESS RELEASE EXHIBIT 20.1 MBIA MBIA INC. NEWS RELEASE 113 King Street Armonk, NY 10504 914 273 4545 contact: Michael C. Ballinger FOR IMMEDIATE RELEASE (914) 765-3893 --------------------- MBIA INC. REPORTS 17 PERCENT INCREASE IN THIRD QUARTER NET INCOME, EXCLUDING - -------------------------------------------------------------------------------- $16.9 MILLION AFTER-TAX CHARGE FOR MERGER-RELATED EXPENSES - ---------------------------------------------------------- ARMONK, New York -- November 3, 1998 -- MBIA Inc. (NYSE: MBI), holding company for MBIA Insurance Corporation, reported today that third quarter net income increased 17 percent to $125.1 million, excluding a $16.9 million after-tax charge for merger-related expenses for 1838 Investment Advisors, the remaining costs of other merger-related activities and reorganization expenses to streamline operations and reduce future operating costs. Including the charge, third quarter net income increased 2 percent to $108.2 million from $106.6 million in last year's third quarter. Diluted earnings per share, excluding the $0.17 per share merger-related charge, were $1.25, an increase of 17 percent from $1.07. Including the charge, third quarter diluted earnings per share were $1.08, up 1 percent. Diluted operating earnings were $1.16 per share, up 13 percent from $1.03 per share. On July 31, MBIA Inc. announced that it completed the merger of its investment business with 1838 Investment Advisors, an asset management firm with over $6 billion of assets under management. Accordingly, 1997 and 1998 financial results have been restated to reflect the merger, which has been accounted for as a "pooling of interests." For the first nine months of 1998, net income increased 9 percent to $329.4 million from $303.2 million in the same 1997 period. Diluted earnings per share grew 6 percent to $3.29 from $3.10. Excluding one-time after-tax charges of $36.1 million, or $0.36 per share, net income increased 21 percent to $365.5 Page 1 of 10 MBIA million and diluted earnings per share rose 18 percent to $3.65. Diluted operating earnings were $3.42 per share, a 14 percent increase from $3.01. Third quarter core diluted earnings, which exclude the net income effects of capital gains, premiums earned from refunded issues and non-recurring items such as merger-related charges were $1.07 per share, an 11 percent increase over $0.96 in the same quarter last year. Core diluted earnings for the first nine months of 1998 rose 13 percent to $3.14 per share from $2.78. Book value per share as of September 30 grew 16 percent to $38.06 from $32.68 a year ago. Adjusted book value per share for the same period increased 13 percent to $52.71 from $46.53. Adjusted book value includes the after-tax effects of deferred premiums, less deferred acquisition costs, the present value of future installment premiums, and unrealized gains/losses on investment contract liabilities. David H. Elliott, chairman and chief executive officer, said, "We are pleased with our third quarter performance as the company continues to report strong financial and operating results. Global turmoil in the credit markets has resulted in a flight to quality and record demand for our guarantee in the municipal, structured finance and international markets. We are well positioned to capitalize on strong growth opportunities in our financial guarantee and financial services businesses." Regarding MBIA's exposure to a Philadelphia hospital group which filed for bankruptcy, MBIA expects that any anticipated losses arising from the Delaware Valley Obligated Group (DVOG) will be fully covered by reinsurance. As a result, the company's third quarter earnings have not been affected by the bankruptcy. INSURANCE OPERATIONS MBIA insurance operations guaranteed $32.9 billion of par value in the third quarter, an increase of 23 percent over the $26.8 billion of par insured in the 1997 third quarter. For the first nine months, MBIA insured par value rose 38 percent to $91.1 billion compared with $65.9 billion in the same period last year. Page 2 of 10 MBIA Total new issue municipal volume in the third quarter was $57.3 billion, a 10 percent increase from $52.4 billion in last year's third quarter. The insured portion of the new issue market was a record 62 percent. MBIA's share of the insured new issue market was 40 percent. For the third quarter, MBIA insured $16.4 billion of par value in the domestic new issue and secondary municipal markets, a 40 percent increase from $11.8 billion insured in the 1997 third quarter. For the first nine months of 1998, total new issue municipal volume was $195.4 billion, a 42 percent increase from $137.9 billion in the same 1997 period. The insured portion of the new issue market in this period was 56 percent. MBIA was the market share leader in the period with a 37 percent share. For the first nine months, MBIA insured $45.0 billion of municipal bonds in the domestic new issue and secondary markets, a 29 percent increase from the $34.8 billion of a year ago. In the domestic new issue and secondary structured finance markets, which include mortgage-backed and asset-backed transactions, MBIA insured $13.4 billion of par value in the third quarter, an increase of 13 percent from the $11.9 billion insured in the same period last year. For the first nine months of 1998, MBIA's structured finance volume rose 39 percent to $34.6 billion compared with $25.0 billion in the first nine months of 1997. In addition, MBIA insured $1.5 billion of securities internationally in the third quarter compared with $2.4 billion in last year's third quarter. For the first nine months, MBIA's international volume was $8.3 billion compared with $4.3 billion in the same period last year, an increase of 94 percent. Page 3 of 10 MBIA Gross premiums written for the third quarter were $167.4 million compared with $146.9 million in the year ago quarter, a 14 percent increase. For the first nine months, gross premiums written increased 11 percent to $486.7 million from $439.8 million in the same period in 1997. Gross premiums written consist of premiums received for business originated in the current period, assumed premiums for international and other reinsurance transactions, and installment premiums received for current- and prior-period business. Adjusted gross premiums, which consist of both upfront premiums written and the present value of estimated installment premiums for new business writings, were $203.4 million in the third quarter, a 10 percent increase over $185.5 million in the same 1997 period. Adjusted gross premiums for the first nine months increased 15 percent to $587.5 million from $510.8 million last year. Premiums earned during the third quarter were $105.6 million compared with $87.7 million in the same period in 1997. These amounts include $16.3 million and $12.5 million, respectively, of premiums earned from refundings. For the first nine months of 1998, premiums earned were $308.9 million compared with $256.5 million in last year's comparable period, including $48.9 million and $38.3 million, respectively, of premiums earned from refundings. On a per share basis, the net income effect of refunding activity, including related expense recognition, was $0.09 for the 1998 third quarter compared with $0.07 in the 1997 third quarter. This impact was $0.28 for the first nine months of 1998 compared with $0.23 in the same period last year. In the third quarter of 1998, fee revenues recognized rose 6 percent to $4.7 million from $4.4 million. For the first nine months, fee revenues recognized increased 43 percent to $18.1 million from $12.6 million in last year's comparable period. INVESTMENT MANAGEMENT SERVICES For the third quarter, investment management services revenues, excluding realized gains and losses, increased 38 percent to $16.0 million from $11.6 million. For the first nine months, revenues from investment management services Page 4 of 10 MBIA were $44.3 million compared with $35.0 million, a 27 percent increase. These amounts include the results of 1838 Investment Advisors. The market value of average assets under management for the company's investment management businesses was $22.1 billion in the third quarter. These amounts include assets owned by MBIA Inc. and it subsidiaries, MBIA Insurance Corporation and MBIA Investment Management Corp., as well as assets managed for pooled public funds and for institutional client portfolios. CONSOLIDATED FINANCIAL RESULTS Net investment income, excluding net realized capital gains and amounts earned from the company's municipal investment agreement business, increased 9 percent for the third quarter to $84.1 million from $77.0 million in 1997's third quarter. For the first nine months of 1998, net investment income increased 12 percent to $247.2 million from $221.4 million in the same period in 1997. As of September 30, MBIA's investment portfolio, including fixed-income securities related to its municipal investment agreement business, increased 14 percent to $9.8 billion compared with $8.6 billion a year ago. As of September 30, assets supporting the investment agreement business grew to $3.6 billion from $3.2 billion a year ago. The average quality of all fixed-income investments continues to be Double-A. Third quarter total revenues rose 21 percent to $236.0 million from $195.3 million in the third quarter of 1997. For the first nine months, total revenues were $685.0 million, up 24 percent from $553.8 million in the first nine months of 1997. Revenues are the sum of premiums earned, total investment income, investment management services fees and other revenues. Total expenses for the third quarter and first nine months were $92.4 million and $252.3 million, respectively, compared with $58.1 million and $166.0 million in the same periods last year. The increase in expenses for 1998 is primarily due to the pre-tax merger-related charges of $26.0 million and $55.5 million taken in the third quarter and nine month periods. Page 5 of 10 MBIA Computed on a statutory basis as of September 30, MBIA Insurance Corporation's unearned premium reserve was $2.3 billion, and its capital base (consisting of capital, surplus and contingency reserve) was $3.6 billion. Aggregate policyholders' reserves were $5.9 billion compared with $5.2 billion a year ago. OTHER CORPORATE DEVELOPMENTS On September 3, MBIA Inc. announced that its joint venture, MBIA-AMBAC International, intends to form a strategic alliance with two of Japan's largest non-life insurance companies, Mitsui Marine and Fire Insurance Co. Ltd. and The Yasuda Fire and Marine Insurance Co. Ltd. The alliance will provide financial guarantee insurance to Japanese issuer and investor clients. To support this effort, MBIA-AMBAC announced that it has opened a representative office in Tokyo. MBIA Inc., through its subsidiaries, is the world's preeminent financial guarantor and a leading provider of specialized financial services. MBIA provides innovative and cost-effective products and services that meet the credit enhancement, financial and investment needs of its public and private sector clients, domestically and internationally. MBIA Insurance Corporation has a claims-paying rating of Triple-A from Moody's Investors Service, Standard & Poor's Ratings Services, Fitch IBCA, and Japan Rating and Investment Information, Inc. Please visit MBIA's web site at http://www.mbia.com. # # This news release contains forward-looking statements. Important factors such as general market conditions and the competitive environment could cause actual results to differ materially from those projected in these forward-looking statements. The company undertakes no obligation to revise or update any forward-looking statements to reflect changes in events or expectations or otherwise. Page 6 of 10 MBIA INC. AND SUBSIDIARIES (1)(2) CONSOLIDATED STATEMENTS OF INCOME --------------------------------- (dollars in thousands except per share amounts)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 ------------------------------------------------------------------------ 1998 1997 1998 1997 --------------- -------------- ---------------- -------------- REVENUES Insurance: Gross premiums written $167,355 $146,941 $ 486,745 $ 439,791 Ceded premiums (27,498) (23,632) (69,111) (63,066) --------------- -------------- ---------------- -------------- Net premiums written 139,857 123,309 417,634 376,725 Increase in deferred premium revenue (34,214) (35,622) (108,773) (120,206) --------------- -------------- ---------------- -------------- Premiums earned 105,643 87,687 308,861 256,519 Net investment income 84,067 77,027 247,195 221,421 Net realized gains 9,089 6,119 22,981 11,776 Advisory fees 4,696 4,411 18,135 12,640 Investment management services: Income 16,047 11,619 44,332 34,954 Net realized gains 4,787 391 11,879 2,043 Other 11,657 8,063 31,602 14,432 --------------- -------------- ---------------- -------------- Total revenues 235,986 195,317 684,985 553,785 --------------- -------------- ---------------- -------------- EXPENSES Insurance: Losses and loss adjustment 9,028 6,420 24,613 17,554 Policy acquisition costs, net 6,869 8,377 25,324 26,205 Operating 20,762 19,508 54,223 56,398 Investment management services 8,614 7,234 25,401 21,494 Interest 10,974 10,303 31,959 28,216 Other 36,159 6,281 90,745 16,142 --------------- -------------- ---------------- -------------- Total expenses 92,406 58,123 252,265 166,009 --------------- -------------- ---------------- -------------- Income before income taxes 143,580 137,194 432,720 387,776 Provision for income taxes 35,337 30,642 103,343 84,575 --------------- -------------- ---------------- -------------- NET INCOME $108,243 $ 106,552 $329,377 $303,201 =============== ============== ================ ============== NET INCOME PER COMMON SHARE: BASIC $ 1.09 $ 1.09 $ 3.33 $ 3.15 DILUTED $ 1.08 $ 1.07 $ 3.29 $ 3.10 Weighted average number of common shares outstanding: Basic 99,098,611 98,008,870 98,882,373 96,398,516 Diluted 100,230,622 99,329,666 100,171,148 97,839,020
(1) All data retroactively adjusted to reflect the mergers with CapMAC Holdings, Inc. effective February 17, 1998 and 1838 Investment Advisors effective July 31, 1998. (2) Common share data retroactively adjusted to reflect the two-for-one stock split effective October 1, 1997 and FAS 128. Page 7 of 10 MBIA INC. AND SUBSIDIARIES (1)(2) CONSOLIDATED BALANCE SHEETS --------------------------- (dollars in thousands except per share amounts)
SEPTEMBER 30, 1998 DECEMBER 31, 1997 SEPTEMBER 30, 1997 ------------------- ------------------ ------------------- ASSETS Investments: Fixed-maturity securities held as available-for-sale at fair value (amortized cost $5,454,390, $4,936,760 and $4,846,416) $ 5,842,968 $ 5,211,311 $5,063,222 Short-term investments 318,335 303,898 249,875 Other investments 67,468 51,693 52,276 ------------- ------------- ------------- 6,228,771 5,566,902 5,365,373 Municipal investment agreement portfolio held as available-for-sale at fair value (amortized cost $3,400,764, $3,241,703 and $3,149,589) 3,572,835 3,341,394 3,213,175 ------------- ------------- ------------- Total investments 9,801,606 8,908,296 8,578,548 Cash and cash equivalents 35,330 26,296 16,773 Securities borrowed or purchased under agreements to resell 561,763 472,963 369,401 Accrued investment income 114,094 121,090 111,752 Deferred acquisition costs 236,768 216,165 210,215 Prepaid reinsurance premiums 295,175 289,508 253,907 Reinsurance recoverable on unpaid losses 170,000 --- --- Goodwill - net 135,478 121,642 123,600 Property and equipment - net 73,565 66,709 63,520 Receivable for investments sold 23,961 13,435 54,023 Other assets 218,887 148,887 133,932 ------------- ------------- ------------- Total assets $11,666,627 $10,384,991 $9,915,671 ============= ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Deferred premium revenue $ 2,205,690 $ 2,090,460 $1,989,628 Loss and loss adjustment expense reserves (3) 282,044 103,061 88,635 Municipal investment agreements 2,412,500 1,974,165 1,937,162 Municipal repurchase agreements 991,519 1,177,022 1,119,528 Long-term debt 638,967 488,878 488,849 Short-term debt --- 20,000 20,000 Securities loaned or sold under agreements to repurchase 579,363 606,263 502,301 Deferred income taxes 376,091 298,498 268,574 Deferred fee revenue 45,558 48,126 44,154 Payable for investments purchased 126,514 44,007 70,361 Other liabilities 234,563 172,999 167,519 ------------- ------------- ------------- Total liabilities 7,892,809 7,023,479 6,696,711 ------------- ------------- ------------- Shareholders' Equity: Common stock 99,324 98,754 98,650 Additional paid-in capital 1,159,024 1,133,950 1,133,524 Retained earnings 2,162,768 1,901,608 1,819,006 Accumulated other comprehensive income-net 362,015 236,095 176,080 Unallocated ESOP shares (4,083) (4,083) (4,550) Unearned compensation - restricted stock (4,595) (4,812) (3,750) Treasury stock (635) --- --- ------------- ------------- ------------- Total shareholders' equity 3,773,818 3,361,512 3,218,960 ------------- ------------- ------------- Total liabilities and shareholders' equity $11,666,627 $10,384,991 $9,915,671 ============= ============= ============= Book value per share $ 38.06 $ 34.09 $ 32.68 ============= ============= ============= (1) All data retroactively adjusted to reflect the mergers with CapMAC Holdings, Inc. effective February 17, 1998 and 1838 Investment Advisors effective July 31, 1998. (2) Common share data retroactively adjusted to reflect the two-for-one stock split effective October 1, 1997 and FAS 128. (3) Includes net case reserves $ 198,473 $ 25,215 $ 20,817
Page 8 of 10 MBIA INC. AND SUBSIDIARIES (1) (2) COMPONENTS OF CORE EARNINGS PER SHARE (3) THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 ---------------------- -------------------- 1998 1997 1998 1997 -------- -------- -------- -------- Reported earnings per share $1.08 $1.07 $3.29 $3.10 Realized gains 0.09 0.04 0.23 0.09 One-time merger charge (0.17) --- (0.36) --- -------- --------- ------ -------- Operating earnings per share (4) 1.16 1.03 3.42 3.01 Earnings from refunded issues 0.09 0.07 0.28 0.23 -------- -------- ------- -------- Core earnings per share(4) $1.07 $0.96 $3.14 $2.78 ======== ======== ======= ======== COMPONENTS OF ADJUSTED BOOK VALUE PER SHARE SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, 1998 1997 1997 ------------ ------------ ------------- Book value $38.06 $34.09 $32.68 After-tax value of: Net deferred premium revenue, net of DAC 10.97 10.45 10.07 Present value of future installment premiums 4.09 3.54 3.52 Unrealized (loss) gain on investment contract liabilities (0.41) 0.11 0.26 -------- -------- ----------- Adjusted book value $52.71 $48.19 $46.53 ======== ======== =========== (1) All data retroactively adjusted to reflect the mergers with CapMAC Holdings, Inc. effective February 17, 1998 and 1838 Investment Advisors effective July 31, 1998. (2) Common share data retroactively adjusted to reflect the two-for-one stock split effective October 1, 1997 and FAS 128. (3) Based on weighted average diluted common shares. (4) Amounts may not add due to rounding. Page 9 of 10 MBIA INC. AND SUBSIDIARIES COMBINED INSURANCE OPERATIONS (1) SELECTED FINANCIAL DATA COMPUTED ON A STATUTORY BASIS: (dollars in millions)
SEPTEMBER 30, 1998 DECEMBER 31, 1997 SEPTEMBER 30, 1997 ------------------ ----------------- ------------------ Capital and surplus $ 2,203.7 $ 1,951.5 $ 1,902.9 Contingency reserve 1,374.7 1,187.9 1,123.8 ------------- -------------- -------------- Capital base 3,578.4 3,139.4 3,026.7 Unearned premium reserve 2,331.1 2,193.4 2,130.2 Loss and loss adjustment expense reserves 28.3 15.2 10.7 ------------- -------------- -------------- Total policyholders' reserves 5,937.8 5,348.0 5,167.6 Present value of installment premiums 624.0 536.9 533.8 Standby line of credit/stop loss 900.0 900.0 900.0 ------------- -------------- -------------- Total claims-paying resources $ 7,461.8 $ 6,784.9 $ 6,601.4 ============= ============== ============== Net debt service outstanding $597,350.1 $513,735.9 $493,642.5 Capital ratio (2) 167:1 164:1 163:1 Claims-paying ratio (3) 93:1 88:1 87:1
(1) 1997 represents MBIA Insurance Corporation Consolidated and Capital Markets Assurance Corporation combined. (2) Net debt service outstanding divided by capital base. (3) Net debt service outstanding divided by the sum of capital base, unearned premium reserve (after tax), loss and loss adjustment expense reserves, present value of installment premiums (after-tax) and standby line of credit/stop loss. Page 10 of 10 -----END PRIVACY-ENHANCED MESSAGE-----