-----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, H4Yf1CkbDVTUFUqZwCibBSWkm7ddeCtb3SWZmc+mN2mrE7dTlAefqKCxXiWk2u9z t3lOgobo7WQ9tZblso7UMA== 0001157523-03-003650.txt : 20030805 0001157523-03-003650.hdr.sgml : 20030805 20030805115547 ACCESSION NUMBER: 0001157523-03-003650 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20030805 ITEM INFORMATION: Regulation FD Disclosure FILED AS OF DATE: 20030805 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: 1934 Act SEC FILE NUMBER: 001-09583 FILM NUMBER: 03822771 BUSINESS ADDRESS: STREET 1: 113 KING ST CITY: ARMONK STATE: NY ZIP: 10504 BUSINESS PHONE: 914-273-4545 MAIL ADDRESS: STREET 1: 113 KING ST CITY: ARMONK STATE: NY ZIP: 10504 8-K 1 a4448687.txt MBIA 8-K 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 (date of earliest event reported): August 5, 2003 MBIA INC. (Exact name of registrant as specified in its charter) Connecticut 1-9583 06-1185706 (State or other jurisdiction of (Commission File Number) (IRS Employer incorporation) Identification No.) 113 King Street, Armonk, New York 10504 (Addresses of principal executive offices) (Zip or Postal Codes) Registrant's telephone number in the United States, including area code: (914) 273-4545 Table of Contents Item 9. Regulation FD Disclosure SIGNATURE EXHIBIT INDEX Exhibit 99.1 PRESS RELEASE Item 9. REGULATION FD DISCLOSURE The following information, including the Exhibit to this Form 8-K, is being furnished pursuant to Item 12 - Results of Operations and Financial Condition of Form 8-K and is being presented under Item 9 of Form 8-K in accordance with interim guidance issued by the Securities and Exchange Commission in Release Nos. 33-8216 and 34-47583. This information is not deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934 and is not incorporated by reference into any Securities Act registration statements. On August 5, 2003, MBIA Inc. issued a press release announcing its results for the six months ended June 30, 2003. A copy of the press release is attached as Exhibit 99.1 to this Form 8-K and incorporated by reference to this Item 9 and Item 12 as if fully set forth herein. 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. By: /s/ Ram D. Wertheim ------------------- Ram D. Wertheim General Counsel Date: August 5, 2003 EXHIBIT INDEX TO CURRENT REPORT ON FORM 8-K Dated August 5, 2003 Exhibit 99.1 Press Release issued by MBIA, Inc. dated August 5, 2003. EX-99 3 a4448687ex99.txt EXHIBIT 99.1 PRESS RELEASE Exhibit 99.1 MBIA Inc. Reports 54 Percent Increase in First Half Net Income Per Share; Operating Earnings Per Share up 15 Percent in First Half of 2003 ARMONK, N.Y.--(BUSINESS WIRE)--Aug. 5, 2003--MBIA Inc. (NYSE: MBI), the holding company for MBIA Insurance Corporation, reported today that diluted earnings per share increased 54 percent in the first six months to $3.04 from $1.98 in last year's first half. Net income for the first half was $441.2 million compared with $295.0 million in the same period last year, a 50 percent increase. Second quarter diluted earnings per share increased 57 percent to $1.51 from $0.96. Net income for the second quarter rose 53 percent to $217.9 million from $142.6 million in last year's second quarter. Diluted earnings per share information - -------------------------------------- Three Months Six Months Ended Ended June 30 June 30 2003 2002 2003 2002 ------ ------ ------ ------ Net income $1.51 $0.96 $3.04 $1.98 Cumulative effect of accounting change 0.00 0.00 0.00 (0.05) ------ ------ ------ ------ Net income before accounting change 1.51 0.96 3.04 2.03 Net realized gains 0.09 0.00 0.23 0.00 Change in fair value of derivative instruments 0.19 (0.06) 0.46 (0.01) ------ ------- ----- ------ Operating income (1) $1.22 $1.02 $2.35 $2.04 (1) Comparable to First Call estimates. Net income and the unrealized appreciation on the company's investment portfolio increased MBIA's book value per share at June 30, 2003 to $42.19 from $37.95 at December 31, 2002, up 11 percent. Adjusted book value (ABV) per share, a non-GAAP measure, at June 30, 2003 rose 7 percent to $55.44 from $51.77 at December 31, 2002. ABV includes the after-tax effects of deferred premium revenue less prepaid reinsurance premiums and deferred acquisition costs, the present value of installment premiums, unrealized gains or losses on investment contract liabilities and a provision for loss and loss adjustment expenses. Neil G. Budnick, MBIA Chief Financial Officer, said, "MBIA recorded strong financial results for the first half of 2003, driven by increased insurance revenues. Earned premiums grew a very healthy 25 percent, reflecting strong top line production at very attractive pricing levels over the past few years. Demand for MBIA's guarantee across all sectors of the global capital markets continues to be strong and our insured portfolio has held up well in a stressful economic environment." Insurance Operations Strong growth in adjusted direct premium (ADP) for the first half of 2003 was driven by MBIA's public finance business. ADP, a non-GAAP measure, includes both upfront premiums written and the present value of estimated installment premiums for new business writings and excludes premiums assumed or ceded, increased 33 percent to $612.4 million from $459.9 million in the first half of 2002. Adjusted Direct Premium (in millions) - ----------------------- Three Months Six Months Ended Ended June 30 June 30 2003 2002 % Change 2003 2002 % Change ------- ------- --------- ------- ------- --------- Public Finance United States $217.2 $92.0 136 $349.4 $186.3 88 Non-United States 28.8 6.1 n/m 59.9 9.7 n/m ------- ------- --------- ------- ------- --------- Total 246.0 98.1 151 409.3 196.0 109 Structured Finance United States 72.6 154.9 (53) 113.1 206.6 (45) Non-United States 50.3 51.5 (2) 90.0 57.3 57 ------- ------- ---------- ------ ------- --------- Total 122.9 206.4 (40) 203.1 263.9 (23) Total $368.9 $304.5 21 $612.4 $459.9 33 Public finance showed strong growth for the first half of the year with a 109 percent increase in ADP over last year's first half due to strong business production in both U. S. and international operations, compared to minimal international production in the first half of last year. Credit quality for public finance remained very high, with 91 percent of insured business written rated Single-A or above in the first half of 2003 compared with 93 percent in the same period of 2002. New U.S. municipal issuance in the first half of 2003 totaled $199 billion, a 21 percent increase, as a result of states and municipalities taking advantage of the low interest rate environment and their growing infrastructure needs. A flight to quality by fixed-income investors helped drive insured penetration to 53 percent of the new issue market as insured volume reached a record $106 billion for the first half of 2003. Structured finance ADP declined 23 percent due to a sharp drop in U.S. business, which was partially offset by a strong performance in international structured finance operations. The company was very selective in insuring mortgage and consumer asset-backed transactions due to generally unattractive market pricing and credit terms in those sectors as the senior subordinated market offered more favorable economic and structural terms than insured transactions. In addition, there was less available attractive CDO product in the marketplace during the first half of 2003. In structured finance, 60 percent of insured business written in the first half of 2003 was rated Single-A or higher, down from 71 percent in the same period last year. The decline in credit quality was a result of the company insuring fewer highly-rated CDO transactions in the first half of this year. Worldwide securitization volume was very strong in the first half of 2003, increasing 27 percent over the same period last year due to strong growth in the mortgage-backed securities market. In the U. S. asset-backed and mortgage-backed market, overall volume increased 31 percent while insured volume dropped 40 percent as a result of a sharp decline in insured mortgage-backed transactions as more issuers utilized a senior subordinated structure in the first half of 2003. Net premiums written for the first half of 2003 rose 63 percent to $495.6 million from $304.1 million due to increased new business activity, particularly in public finance, as well as a lower reinsurance cession rate. Total earned premium rose 25 percent to $346.9 million from $276.8 million. Strong levels of new business written over the last 12 months resulted in a 17 percent increase in scheduled premiums earned over last year's first half. Earned premiums from refundings were up 97 percent to $54.6 million in the first half of 2003 due to a large increase in municipal issuance driven by the low interest rate environment. Pre-tax net investment income in the first half of 2003, excluding net realized gains, was $214.1 million compared with $214.6 million in the same period of 2002. Investment income continued to be impacted by the low-yield environment as well as the ongoing implementation of the company's duration-shortening strategy. In the first six months of 2003, lower yields were offset by a 9 percent increase in invested assets. After-tax net investment income in the first half of 2003 decreased by 2 percent to $171.4 million, compared with $175.3 million in the first half of last year, due to a shift in asset allocation towards a greater proportion of taxable investments. MBIA's advisory fees in the first six months of 2003 were up 58 percent to $30.6 million from $19.3 million during the same period of 2002. The increase was a result of greater new business production, including an Italian toll road transaction in the second quarter, as well as fees related to the activities of MBIA's Insured Portfolio Management Division. Insurance operating expenses were up 25 percent for the first half of 2003. The increase was a result of costs associated with higher levels of new business activity, a previously announced reallocation of certain expenses between the company's various business segments, and a non-recurring expense to establish a new conduit, Toll Road Funding Plc. (TRF). Although the $3.4 million of expenses incurred to establish TRF significantly increased the company's expenses, the conduit generated substantially greater revenues. Excluding the change in the allocation of expenses among business segments and the nonrecurring conduit expenses, operating expenses increased 9 percent for the first six months of 2003, modestly above the company's 5-7 percent long-term goal. The statutory expense ratio for insurance operations was 12.8 percent for the first half, compared to 21.3 percent in the first half of 2002 due to greater ceding commissions and a significant increase in net premiums written. MBIA's pre-tax operating income from insurance operations rose 14 percent to $476.2 million from $416.4 million in last year's first half. Risk Management and Loss Reserves The company incurred $35.1 million in loss and loss adjustment expenses in the first half of 2003, a 17 percent increase compared with $29.9 million in last year's first half due to the growth in scheduled earned premium. Total case-incurred activity was $28.2 million in the first half of 2003, which primarily included additional case reserves for MBIA's guaranteed tax lien portfolios and Allegheny Health, Education and Research Foundation (AHERF) accretion. There has been no material change in the company's previously disclosed exposure to a defaulted obligation issued by Trenwick America Corporation. MBIA is continuing to work closely with management and regulatory authorities to ensure the orderly run-off of the underlying insurance operations over the next three to six years. In addition, there have been no significant developments in the litigation in the Federal District Court in Delaware with Royal Indemnity Company as MBIA's motion for summary judgment is still pending following the hearing in June 2003. MBIA expects to prevail in the litigation and to incur no ultimate losses. The company expects that there will be continuing budget stress in the municipal sector over the next 12-18 months, driven by lower tax revenues and the weaker economy. However, the ability of state and municipal governments to raise revenues and cut expenses in order to meet debt service obligations has enabled them to weather economic slowdowns very successfully in the past. The probability of default remains extremely low among state and municipal borrowers due to the essential nature of the services which they provide. The political process can also exacerbate short-term uncertainty as most recently reflected in the downgrade by Standard & Poor's of California's general obligation bonds. Although economic uncertainty can create stress in MBIA's existing insured portfolio, it also typically translates into higher pricing and increased demand for insured securities. In examining the outstanding MBIA-insured structured finance portfolio, transaction performance in the second quarter of 2003 was generally stable compared to deal performance in the first quarter. As the economic outlook seemed to be trending toward an improved environment, overall corporate default rates declined from levels of the recent past, and consumer payment patterns generally improved. Even for those transactions that have been experiencing performance issues, the second quarter generally did not see increased deterioration in loss data. The structure of these underlying transactions, which include performance triggers and servicer transfer rights, continue to protect MBIA as the insurer of senior tranches of structured finance transactions. Investment Management Services MBIA's asset management business in the first half of 2003 showed a modest improvement on a sequential basis as a result of a solid performance by the company's fixed-income businesses. The market value of average assets under management was $35.8 billion in the second quarter of 2003, up 1 percent from $35.3 billion in the first quarter of 2003. Average assets supporting the investment agreement and medium-term note businesses grew to $8.8 billion in the second quarter of 2003 from $8.2 billion in the first quarter, a 7 percent increase. Average third party fixed-income assets under management were $14.4 billion in the second quarter of 2003, down slightly from the $14.7 billion of assets under management in this year's first quarter. Pre-tax operating income from investment management services for the first half of 2003 decreased 9 percent to $23.5 million from $25.9 million in last year's first half. Based on the continued solid performance of the company's fixed-income businesses, the company expects this segment to match or exceed 2002's full year results. Municipal Services For the first half of 2003, municipal services operations reported a $179,000 pre-tax operating profit compared with $193,000 in the same period last year. Corporate The corporate segment includes net investment income, interest expense and corporate expenses. Net corporate segment expenses in the first half increased 26 percent to $36.3 million from $28.8 million in the same period last year. A 31 percent increase in interest expense resulting from additional debt issued in the third quarter of 2002 was only partially offset by an increase in investment income and a reduction in corporate expenses. Gains and Losses In the first half of 2003, MBIA recorded net realized gains of $51.0 million, compared with a net realized loss of $0.4 million in the first half of 2002, as the company reduced the duration of its investment portfolio in 2003. The company recorded a pre-tax net unrealized gain of $103.3 million for the first half of 2003 on its derivative exposure, compared with a pre-tax net unrealized loss of $2.7 million for the first half of 2002. This $0.46 per share mark-to-market unrealized gain was primarily attributable to insured synthetic CDOs, reflecting the impact of tighter credit spreads in the investment grade bond market in the first half of 2003. Share Repurchase The company repurchased 1.4 million shares during the first half of the year at an average cost of $38.28 per share. Approximately 2.2 million shares remain in the company's 11.3 million share buyback program. Corporate Developments The dynamics of the reinsurance market have changed considerably over the last year with many of MBIA's traditional reinsurers experiencing downgrades or choosing to exit the financial guarantee reinsurance business entirely. While these developments will not significantly impact MBIA's capital position and the company believes that reinsurance availability remains adequate to satisfy its business needs, MBIA has launched several strategic initiatives designed to maximize its financial flexibility and Triple-A reinsurance capacity. As previously disclosed, MBIA invested $25 million in RAM Reinsurance Company Ltd., a Triple-A rated financial guarantee reinsurance company based in Bermuda. In addition, MBIA is working closely with other potential investors on the formation of a new financial guarantee reinsurance company. In addition, during the second quarter, the company established a new single-seller conduit, TRF, in order to participate in a financing facility for a toll road system in Italy. TRF issued approximately $1.4 billion in Euro-denominated medium-term notes insured by MBIA Insurance Corporation, the proceeds of which were used as part of the financing. As a newly created conduit, TRF is subject to consolidation in MBIA's financial statements under applicable accounting rules. The consolidation of TRF resulted in the addition of approximately $1.4 billion in both assets and liabilities to MBIA's balance sheet during the second quarter. As of June 30, 2003, the outstanding balance of commercial paper and medium-term notes issued by the unconsolidated conduits administered by MBIA was approximately $7.4 billion. The assets and liabilities of these conduits will be consolidated on the company's balance sheet in the third quarter. Conference Call MBIA will host a conference call for investors today at 11 a.m. EDT. The conference call will consist of brief comments by Neil G. Budnick, the company's chief financial officer, followed by a question and answer session. The conference call will be web cast live on MBIA's Web site at http://investor.mbia.com (then click "Conference Call"). Those who are unable to participate in the conference call may listen to a replay by dialing 1-800-396-1244 in the United States and 1-402-998-1607 for international calls. A recording will also be available on MBIA's Web site approximately two hours after the end of the conference call. MBIA Inc., through its subsidiaries, is a leading financial guarantor and provider of specialized financial services. MBIA's innovative and cost-effective products and services meet the credit enhancement, financial and investment needs of its public and private sector clients, domestically and internationally. MBIA Inc.'s principal operating subsidiary, MBIA Insurance Corporation, has a financial strength rating of Triple-A from Moody's Investors Service, Standard & Poor's Ratings Services, Fitch Ratings, and 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. MBIA INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (dollars in thousands) June 30, December 31, 2003 2002 ---------- ------------ Assets - ------ Investments: Fixed-maturity securities held as available-for-sale at fair value (amortized cost $7,710,958 and $7,555,978) $ 8,402,450 $ 8,093,650 Short-term investments 834,976 687,238 Other investments 269,605 212,673 ----------- ----------- 9,507,031 8,993,561 Investment agreement and medium-term note portfolios held as available-for-sale at fair value (amortized cost $7,546,332 and $7,080,870) 8,019,458 7,433,615 Investment agreement portfolio pledged as collateral at fair value (amortized cost $853,404 and $646,287) 898,075 667,854 Conduit investments held-to-maturity 1,417,079 --- ----------- ----------- Total investments 19,841,643 17,095,030 Cash and cash equivalents 127,004 83,218 Accrued investment income 222,856 215,265 Deferred acquisition costs 310,278 302,222 Prepaid reinsurance premiums 528,013 521,641 Reinsurance recoverable on unpaid losses 42,030 43,828 Goodwill 90,041 90,041 Property and equipment (net of accumulated depreciation) 124,923 128,441 Receivable for investments sold 368,968 91,767 Derivative assets 188,313 191,755 Other assets 101,337 88,893 ----------- ----------- Total assets $21,945,406 $18,852,101 =========== =========== Liabilities and Shareholders' Equity - ------------------------------------ Liabilities: Deferred premium revenue $ 2,920,240 $ 2,755,046 Loss and loss adjustment expense reserves 525,860 573,275 Investment agreement and medium-term note obligations 7,604,564 7,230,562 Securities sold under agreements to repurchase 764,441 539,561 Conduit debt obligations 1,416,398 --- Short-term debt 13,597 --- Long-term debt 1,032,883 1,033,070 Current income taxes 46,795 17,648 Deferred income taxes 589,347 471,534 Deferred fee revenue 23,090 24,838 Payable for investments purchased 380,174 58,436 Derivative liabilities 218,620 309,749 Other liabilities 336,735 345,031 ----------- ----------- Total liabilities 15,872,744 13,358,750 Shareholders' Equity: Common stock 153,068 152,555 Additional paid-in capital 1,266,280 1,239,313 Retained earnings 4,278,726 3,895,112 Accumulated other comprehensive income 764,009 541,250 Unallocated ESOP shares (3) (653) Unearned compensation - restricted stock (15,468) (12,646) Treasury stock (373,950) (321,580) ----------- ----------- Total shareholders' equity 6,072,662 5,493,351 Total liabilities and shareholders' equity $21,945,406 $18,852,101 =========== =========== MBIA INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (dollars in thousands except per share amounts) Three Months Ended Six Months Ended June 30 June 30 ----------------------- ----------------------- 2003 2002 2003 2002 --------- -------- --------- --------- Insurance operations Revenues: Gross premiums written $ 327,094 $ 205,812 $ 615,241 $ 392,584 Ceded premiums (55,571) (36,155) (119,690) (88,470) --------- --------- --------- --------- Net premiums written 271,523 169,657 495,551 304,114 Scheduled premiums earned 151,588 124,582 292,241 249,068 Refunding premiums earned 34,083 13,187 54,610 27,739 --------- --------- --------- --------- Premiums earned 185,671 137,769 346,851 276,807 Net investment income 107,728 108,370 214,149 214,569 Advisory fees 17,342 12,255 30,644 19,344 --------- --------- --------- --------- Total insurance revenues 310,741 258,394 591,644 510,720 Expenses: Losses and LAE incurred 18,192 14,950 35,070 29,888 Amortization of deferred acquisition costs 14,619 11,022 27,401 22,145 Operating 29,318 22,080 52,961 42,292 --------- --------- --------- --------- Total insurance expenses 62,129 48,052 115,432 94,325 Insurance income 248,612 210,342 476,212 416,395 --------- --------- --------- --------- Investment management services Revenues 26,368 25,727 55,608 55,578 Expenses 16,274 14,730 32,073 29,708 --------- --------- --------- --------- Investment management services income 10,094 10,997 23,535 25,870 --------- --------- --------- --------- Municipal services Revenues 7,419 5,908 13,461 11,599 Expenses 7,292 5,802 13,282 11,406 --------- --------- --------- --------- Municipal services income 127 106 179 193 --------- --------- --------- --------- Corporate Net investment income 2,208 2,043 4,581 4,260 Interest expense 16,932 12,956 33,881 25,790 Corporate expenses 3,384 3,056 7,047 7,261 --------- --------- --------- --------- Corporate loss (18,108) (13,969) (36,347) (28,791) --------- --------- --------- --------- Gains and losses Net realized gains (losses) 20,822 439 50,979 (397) Change in fair value of derivative instruments 43,132 (14,530) 103,341 (2,663) --------- --------- --------- --------- Net gains and losses 63,954 (14,091) 154,320 (3,060) --------- --------- --------- --------- Income before income taxes 304,679 193,385 617,899 410,607 Provision for income taxes 86,825 50,798 176,719 107,908 --------- --------- --------- --------- Income before cumulative effect of accounting change 217,854 142,587 441,180 302,699 Cumulative effect of accounting change --- --- --- (7,731) --------- --------- --------- --------- Net income $ 217,854 $ 142,587 $ 441,180 $ 294,968 ========= ========= ========= ========= Net income per common share: Basic $ 1.52 $ 0.97 $ 3.07 $ 2.00 Diluted $ 1.51 $ 0.96 $ 3.04 $ 1.98 Weighted- average common shares outstanding: Basic 143,132,545 147,568,448 143,584,818 147,809,271 Diluted 144,628,641 148,761,391 144,999,949 149,033,999 MBIA INC. AND SUBSIDIARIES Reconciliation of Adjusted Direct Premiums to Gross Premiums Written (in millions) - -------------------------------------------------------------- Three Months Six Months Ended Ended June 30 June 30 --------------- --------------- 2003 2002 2003 2002 ------- ------- ------- ------- Adjusted direct premiums (1) $368.9 $304.5 $612.4 $459.9 Adjusted premiums assumed 26.4 0.1 31.8 6.1 ------- ------- ------- ------- Adjusted gross premiums 395.3 304.6 644.2 466.0 Present value of estimated future installment premiums (2) (202.4) (200.1) (300.3) (292.2) ------- ------- ------- ------- Gross upfront premiums written 192.9 104.5 343.9 173.8 Gross installment premiums received 134.2 101.3 271.3 218.8 ------- ------- ------- ------- Gross premiums written $327.1 $205.8 $615.2 $392.6 ======= ======= ======= ======= (1) Management believes adjusted direct premiums are a meaningful measure of the total value of the insurance business written since they represent the present value of all premiums expected to be collected on policies closed during the period. (2) The first and second quarters of 2003 were discounted at 5.6% and 5.3%, respectively, while 2002 was discounted at 9.0%. Components of Net Income per Share - -------------------------------------- Three Months Six Months Ended Ended June 30 June 30 --------------- --------------- 2003 2002 2003 2002 ------- ------- ------- ------- Net income $1.51 $0.96 $3.04 $1.98 Cumulative effect of accounting change 0.00 0.00 0.00 (0.05) ------- ------- ------- ------- Net income before accounting change 1.51 0.96 3.04 2.03 Net realized gains 0.09 0.00 0.23 0.00 Change in fair value of derivative instruments 0.19 (0.06) 0.46 (0.01) ------- ------- ------- ------- Operating income (1) (2) $1.22 $1.02 $2.35 $2.04 ======= ======= ======= ======= (1) Management believes operating income is a useful measurement of performance because it provides income from operations, unaffected by investment portfolio realized gains and losses, and unrealized gains and losses on derivatives contracts. (2) May not add due to rounding. MBIA INC. AND SUBSIDIARIES Components of Adjusted Book Value per Share (1) - ----------------------------------------------- June 30, 2003 December 31, 2002 ----------------- ----------------- Book value $42.19 $37.95 After-tax value of: Deferred premium revenue 13.18 12.38 Prepaid reinsurance premiums (2.38) (2.34) Deferred acquisition costs (1.40) (1.36) ------ ------ Net deferred premium revenue 9.40 8.68 Present value of installment premiums (2) 7.14 5.84 Unrealized losses on investment contract liabilities (1.14) (0.70) Loss provision (3) (2.15) -- ----------- ----------- Adjusted book value $55.44 $51.77 =========== =========== (1) Management believes the presentation of adjusted book value, which includes items that will not be realized until future periods, provides additional information that gives a comprehensive measure of the value of the company. (2) The first and second quarters of 2003 were discounted at 5.6% and 5.3%, respectively, while 2002 was discounted at 9.0%. (3) The loss provision is calculated by applying 12% to the following items on an after-tax basis: (a) deferred premium revenue; (b) prepaid reinsurance premiums; and, (c) the present value of installment premiums. CONSOLIDATED INSURANCE OPERATIONS - ---------------------------------------------------------------------- Selected Financial Data Computed on a Statutory Basis - -------------------------------------------------------- (dollars in millions) June 30, December 2003 31, 2002 ------------ ----------- Capital and surplus $3,381.6 $3,158.0 Contingency reserve 2,322.0 2,276.8 ----------- ----------- Capital base 5,703.6 5,434.8 Unearned premium reserve 2,954.3 2,774.1 Present value of installment premiums (1) 1,579.9 1,300.1 ----------- ----------- Premium resources 4,534.2 4,074.2 Loss and loss adjustment expense reserves 192.4 244.9 Standby line of credit/stop loss 1,460.7 1,260.8 ----------- ----------- Total claims-paying resources $11,890.9 $11,014.7 =========== =========== Net debt service outstanding $805,481.4 $781,589.4 Capital ratio (2) 141:1 144:1 Claims-paying ratio (3) 78:1 82:1 (1) The first and second quarters of 2003 were discounted at 5.6% and 5.3%, respectively, while 2002 was discounted at 9.0%. (2) Net debt service outstanding divided by the capital base. (3) Net debt service outstanding divided by the sum of the capital base, unearned premium reserve (after-tax), present value of installment premiums (after-tax), loss and loss adjustment expense reserves and standby line of credit/stop loss. CONTACT: MBIA Inc. Michael C. Ballinger, 914-765-3893 -----END PRIVACY-ENHANCED MESSAGE-----