EX-99.1 2 a5015070ex99-1.txt EXHIBIT 99.1 Exhibit 99.1 MBIA Inc. Reports a 9 Percent Decrease in Earnings Per Share in First Nine Months; Operating Earnings Per Share up 5 Percent ARMONK, N.Y.--(BUSINESS WIRE)--Nov. 8, 2005-- Company to Restate Earnings for 1998 and Subsequent Years in Connection with Potential AHERF Settlement with Regulators and also for Certain Derivative Transactions under SFAS 133 MBIA Inc. (NYSE:MBI), the holding company for MBIA Insurance Corporation, reported today that diluted net income per share for the first nine months of 2005 was $3.84, down 9 percent, compared to $4.23 per share in the same period last year. Net income for the first nine months of 2005 was $528.3 million, compared to $616.3 million in the same period last year, a 14 percent decrease. Third quarter diluted net income per share declined 18 percent to $1.04 from $1.27 in last year's third quarter. Net income for the third quarter was $141.8 million, compared to $183.2 million in last year's third quarter, a 23 percent decrease. Results for the quarter and the year to date include the effects of a $75 million accrual for the total amount that the Company estimates, based on discussions to date, it will have to pay in connection with any settlements of investigations by the SEC, the New York Attorney General's Office and the New York State Insurance Department (the regulatory agencies) regarding agreements entered into by its subsidiary, MBIA Insurance Corporation, in 1998 with AXA Re Finance S.A. (AXA Re), Muenchener Rueckversicherungs-Gesellshaft (Munich Re) and Converium Re (previously known as Zurich Reinsurance North America). Excluding the effects of the accrual, year-to-date net income per share would have been $4.36, a 3 percent increase over the same period in 2004. Net income for the first three quarters of 2005 would have been $599.8 million, a 3 percent decrease from the prior year. The results also reflect a restatement of the Company's financial statements, made in connection with the potential settlements, for the Munich Re and AXA Re agreements to correct and restate its GAAP and statutory accounting for these agreements. As a result, the Company will account for these agreements as deposits because they did not satisfy the risk transfer requirements for reinsurance accounting under SFAS 113, "Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts" and under Regulation 108 of the New York State Insurance Department. The restatement does not have a significant effect on the Company's financial position. As a result of this restatement, MBIA's financial results for 1998 will reflect an additional pre-tax charge in the third quarter of $100 million, which is related to the $170 million incurred loss on the MBIA-insured AHERF bonds. The estimated reduction of after-tax net income for 1998 related to the restatement will be approximately $69 million, resulting in net income for 1998 of approximately $317 million, or $2.11 per share, down 18 percent from $386 million, or $2.57 per share, as previously reported. In addition, as a result of the restatement, MBIA estimates that its earnings will be reduced by approximately $4 million (or 3 cents per share) in 1999 and increased by approximately: $0.3 million (or 0 cents per share) in 2000; $2 million (or 1 cent per share) in 2001; $5 million (or 3 cents per share) in 2002; $15 million (or 10 cents per share) in 2003; $30 million (or 21 cents per share) in 2004; and $5 million (or 3 cents per share) for the first nine months of 2005. As announced on March 8, 2005, the Company has already restated its financial statements with respect to its agreements with Converium Re. The quota share agreements with Munich Re, which were entered into in connection with the Munich Re excess-of-loss agreement, remain in effect and obligate Munich Re to reimburse MBIA on a quota share basis for any losses incurred on approximately $11.8 billion of debt service ceded. As previously reported, MBIA's quota share agreements with AXA Re, which were entered into in connection with the AXA Re excess-of-loss agreement, were commuted in the fourth quarter of 2004. To date, no settlements have been approved by the regulatory agencies. Any settlements may have additional or different terms. In addition, MBIA is restating results from 2001 to 2005 for derivative transactions that do not technically comply with SFAS 133, "Accounting for Derivative Instruments and Hedging Activities," even though these transactions were highly effective from an economic standpoint. The effect of the mark-to-market restatement is an increase to net income of $14.7 million for the first nine months of 2005 and $19.7 million for the third quarter of 2005. The cumulative effect of these changes, from 2001 through September 2005, is a non-cash earnings increase of $6.8 million. Although the cumulative effect of $6.8 million is not material, since the Company is restating its financial results for the Munich Re and AXA Re agreements, it will restate each quarter and year affected by the prior method of accounting. In light of the restatements described above, the Company expects to file its Quarterly Report on Form 10-Q for the third quarter with the SEC by no later than Monday November 14, 2005 and will also file with the SEC an amended Annual Report on Form 10-K for the year ended December 31, 2004 as soon as practicable. Operating income per share, which excludes the effects of net realized gains, net gains and losses on derivative instruments and foreign exchange, and income from discontinued operations, and excluding the accrual for penalties and disgorgement, rose 5 percent to $4.19 per share for the first nine months of 2005, compared with $3.99 per share in the same period last year. Excluding refundings, which represent the acceleration of earned premium when an issue is defeased, operating income per share for the first nine months of 2005 rose 7 percent to $3.75 from $3.52 during the same period of 2004. For the third quarter of 2005, operating income per share increased 5 percent to $1.40 from $1.33 in the third quarter of 2004. Excluding refundings, third quarter 2005 operating income per share rose 6 percent to $1.26 from $1.19 during the same period of 2004. Diluted earnings per share information -------------------------------------- Three Months Nine Months Ended Ended September 30 September 30 ------------ ------------ (Restated) (Restated) -------- -------- 2005 2004 2005 2004 --------- -------- -------- -------- Net income $ 1.04 $ 1.27 $ 3.84 $ 4.23 Income from discontinued operations (0.01) 0.00 (0.01) 0.02 --------- -------- -------- -------- Net income from continuing operations $ 1.05 1.27 $ 3.84 4.21 Accrual for penalties and disgorgement (0.53) 0.00 (0.52) 0.00 Net realized gains (0.03) 0.00 (0.02) 0.27 Net unrealized gains (losses) on derivative instruments and foreign exchange 0.21 (0.06) 0.20 (0.05) --------- -------- -------- -------- Operating income (1) $ 1.40 $ 1.33 $ 4.19 $ 3.99 (1) Presented on the same basis as analysts' estimates. Gary C. Dunton, MBIA Chief Executive Officer, said, "MBIA posted acceptable business results for the first nine months of 2005 in what can only be described as a challenging operating environment. Steady demand for our insurance and investment management products continued, and we remain determined to pursue high quality, profitable business without compromising our underwriting and pricing standards." Insurance Operations Adjusted direct premium (ADP), a non-GAAP measure, which includes both upfront premiums written and the present value of estimated installment premiums for new business writings and excludes premiums assumed or ceded, increased 15 percent to $879.8 million in the first nine months from $762.2 million in the first nine months of 2004. In the third quarter of 2005, ADP increased 8 percent to $233.2 million. Adjusted Direct Premium ----------------------- (dollars in millions) Three Months Nine Months Ended Ended September 30 September 30 ------------ ------------ 2005 2004 % Change 2005 2004 % Change ------ ------ -------- ------ ------ -------- Public Finance United States $ 96.1 $ 92.2 4 $381.7 $341.7 12 Non-United States 3.5 35.1 (90) 68.6 141.8 (52) ------ ------ -------- ------ ------ -------- Total 99.6 127.3 (22) 450.3 483.5 (7) Structured Finance United States 59.8 62.6 (5) 231.3 167.4 38 Non-United States 73.8 26.0 184 198.2 111.3 78 ------ ------ -------- ------ ------ -------- Total 133.6 88.6 51 429.5 278.7 54 Total $233.2 $215.9 8 $879.8 $762.2 15 Global public finance ADP declined 7 percent in the first nine months of 2005 compared with the same period last year. Domestic public finance production increased 12 percent for the first nine months of 2005, reflecting strong volume of flow business, particularly in the military housing and transportation sectors, rather than any individual, large transactions. This increase was offset by a decline in non-U.S. production, which dropped 52 percent as business in Europe slowed and significantly fewer transactions came to market during this period. Credit quality for global public finance transactions remained very high, with 91 percent of insured business written rated Single-A or above in the first nine months of 2005. Global structured finance ADP in the first nine months of 2005 grew 54 percent over the same period in 2004, driven by a strong flow of business. Despite continued tight spreads and investor demand for uninsured transactions, the global structured finance business remains robust. Year-to-date structured finance ADP was $430 million, with 72 percent of insured business written rated Single-A or higher. Premiums earned in the first nine months of 2005 declined 2 percent to $628.3 million from $639.2 million in last year's first nine months, due in part to some early policy terminations in the structured finance book of business as well as continued refunding activity, which results in any unearned premiums that would have been earned over time to be earned immediately, and reduces the growth rate of scheduled earned premiums. Earned premiums from refundings declined 12 percent to $100.3 million in the first nine months of 2005, but were still a considerable amount. Scheduled earned premiums were flat for the first nine months of the year. Pre-tax net investment income in the first nine months of 2005, excluding net realized gains, was $362.6 million, a 2 percent increase from $354.1 million in the same period of 2004. The increase was due to the increase in the Company's average asset base. MBIA's advisory fees in the first nine months of 2005 were down 31 percent to $20.2 million from $29.2 million during the same period of 2004, primarily reflecting a decline in business that requires advisory services. Total insurance expenses, which include the amortization of deferred acquisition costs and operating expenses, were up 11 percent for the first nine months of 2005 to $153.1 million from $137.5 million in last year's first nine months, due to a 17 percent increase in operating expenses over the same period last year. The jump in operating expenses partially relates to a decrease in the percentage of expenses recorded and deferred as policy acquisition costs. The change, which was effective in the third quarter of 2005, resulted in fewer expenses being classified as policy acquisition costs and deferred, and therefore, a corresponding increase in operating expenses. Another factor contributing to the increase in operating expenses is an increase in loss prevention expenses. MBIA's pre-tax operating income from insurance operations decreased 3 percent to $794.6 million in the first nine months of 2005 from $821.9 million in last year's first nine months. Risk Management and Loss Reserves The Company incurred $63.4 million in loss and loss adjustment expenses in the first nine months of 2005, compared with $63.1 million in last year's first nine months. Total case-incurred activity was $89.4 million for the first nine months of 2005, related to transactions in the CDO, manufactured housing and mortgage-backed sectors, and tax liens. Unallocated reserves as of September 30, 2005 stand at $287.1 million. During the third quarter, MBIA did not establish specific reserves for its exposure to the regions impacted by hurricanes Katrina, Rita and Wilma. While there continues to be uncertainty in the region affected by Hurricane Katrina, the Company does not currently expect material cases of prolonged nonpayment which would result in unreimbursed losses. To date, MBIA has paid out $2.1 million in claims payments, for which it has been fully reimbursed. The Company continues to work closely with affected issuers, their financial advisors and legal counsel, and state officials to monitor the situation. In early October, the Court of Appeals for the Third Circuit upheld the previously announced decision of the United States District Court for the District of Delaware enforcing insurance policies issued by Royal Indemnity that guarantee vocational loans originated by Student Finance Corporation, which backed securities insured by MBIA. The Appeals Court also remanded the case to the District Court for a determination of the amount of losses covered by the Royal policies. MBIA expects Royal to be required to pay all or substantially all of the claims made under its policies and to be reimbursed for any payments MBIA made under its policies. As of September 30, 2005, total claims made under the Royal insurance policies were $351.4 million. Royal has filed a petition for a rehearing with the Circuit Court of Appeals. Investment Management Services The market value of quarterly average fixed-income assets under management was $44.2 billion in the third quarter of 2005, up 18 percent from $37.4 billion in last year's third quarter. Pre-tax operating income from MBIA's investment management businesses, which excludes the effects of net realized gains and losses, and net gains and losses on derivative instruments and foreign exchange, increased 52 percent in the first nine months of 2005 to $65.7 million from $43.2 million during the same period of 2004. Solid demand for investment agreements drove growth in the asset liability products segment, as well as improved volume in advisory services where the Company manages money for third parties. Corporate The corporate segment includes net investment income, interest expense and corporate expenses. Net corporate segment expenses in the first nine months increased to $141.5 million from $61.0 million in the same period last year. The increase reflects the $75 million accrual for penalties and disgorgement, and incremental legal and consulting expenses related to regulatory investigations. Excluding the accrual, net corporate expenses increased 9 percent. Gains and Losses In the first nine months of 2005, MBIA recorded net losses of $4.8 million, compared with net gains of $60.0 million in the first nine months of 2004. In 2005, net realized gains and losses were impacted by a $16.1 million write-down of a receivable balance that the Company obtained under salvage and subrogation rights. In 2004, net realized gains were primarily the result of the sale of a common stock investment that the Company purchased in 2002. The Company recorded pre-tax net unrealized gains of $42.2 million for the first nine months of 2005 on its derivative exposure and foreign exchange, of which $22.6 million is attributable to the SFAS 133 restatement, compared with a pre-tax net unrealized loss of $11.2 million for the first nine months of 2004. Net gains and losses on derivative exposure for the periods 2001 through year-to-date 2005 have been restated due to derivative transactions that did not technically comply with SFAS 133, even though they were highly effective from an economic perspective. MBIA had applied the shortcut method of accounting for certain derivative contracts, primarily used to hedge certain of its long-term fixed-rate investments from changes in interest rates. Under the shortcut method of accounting, as provided for under SFAS 133, the Company can assume that the change in fair value of a hedged item exactly offsets the change in value of the related derivative. After completing a detailed review, however, the Company determined that certain derivative instruments did not meet all of the technical requirements to permit it to use the shortcut method and, therefore, these transactions should have been accounted for under the "long-haul" method. Since shortcut method documentation has existed instead of long-haul documentation, the Company must treat these transactions as if hedge accounting had not been applied. The long-haul method of accounting requires the calculation of the change in fair value of the derivative and the change in fair value of the hedged item to be calculated independently. All of the subject hedges have been redesignated to meet the long-haul method as of October 1, 2005. It is anticipated that the mark-to-market of these derivative contracts and hedged items will substantially offset each other in the income statement prospectively. Book Value and Adjusted Book Value MBIA's book value per share at September 30, 2005 was $48.45, up 3 percent from $47.05 at December 31, 2004. The increase was principally driven by net income from operations offset by a decrease in the unrealized appreciation of the Company's investment portfolio and a significant increase in treasury stock resulting from share repurchases. Adjusted book value (ABV) per share, a non-GAAP measure, at September 30, 2005 rose 5 percent to $69.89 from $66.34 at December 31, 2004. ABV includes the after-tax effects of deferred premium revenue less prepaid reinsurance premiums and deferred acquisition costs, the present value of installment premiums, the present value of the net spread of asset/liability products, and a provision for loss and loss adjustment expenses. Share Repurchase The Company did not repurchase any shares in the third quarter of 2005. Through the first six months of the year, the Company repurchased approximately 5.9 million shares at an average cost of $57.77 per share. Approximately 5 million shares remain in the Company's share buyback program, which was authorized in August 2004. Conference Call MBIA will host a conference call for investors today at 11 a.m. ET. The conference call will consist of brief comments by Nicholas Ferreri, 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. Explanation of Non-GAAP Financial Measures The following are explanations of why MBIA believes that the non-GAAP financial measures used in this press release, which serve to supplement GAAP information, are meaningful to investors. Operating Income: The Company believes operating income is a useful measurement of performance because it measures income from operations, unaffected by investment portfolio realized gains and losses, gains and losses on derivative instruments and foreign exchange and non-recurring items. Operating income is also provided to assist research analysts and investors who use this information in their analysis of the company. Adjusted Direct Premiums: The Company believes adjusted direct premiums are a meaningful measure of the total value of the insurance business written during a reporting period since they represent the present value of all premiums collected and expected to be collected on policies closed during the period. As such, it gives investors an opportunity to measure the value of new business activities in a given period and compare it to new business activities in other periods. Other measures, such as premiums written and premiums earned, include the value of premiums resulting from business closed in prior periods and do not provide the same information to investors. Adjusted Book Value: The Company believes the presentation of adjusted book value, which includes items that are expected to be realized in future periods, provides additional information that gives a comprehensive measure of the value of the Company. Since the Company expects these items to affect future results and, in general, they do not require any additional future performance obligation on the Company's part, ABV provides an indication of the Company's value in the absence of any new business activity. ABV is not a substitute for GAAP book value but does provide investors with additional information when viewed in conjunction with GAAP book value. MBIA INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS --------------------------- (dollars in thousands) September December 30, 2005 31, 2004 ------------ ------------ Assets Restated ------ Investments: Fixed-maturity securities held as available-for-sale, at fair value (amortized cost $22,715,894 and $18,802,894) $23,388,776 $19,679,905 Investments held-to-maturity, at amortized cost (fair value $6,343,585 and $7,535,787) 6,374,234 7,540,218 Investment agreement portfolio pledged as collateral, at fair value (amortized cost $391,173 and $713,704) 409,481 730,870 Short-term investments, at amortized cost (which approximates fair value) 1,987,668 2,405,192 Other investments 243,845 261,865 ------------ ------------ Total investments 32,404,004 30,618,050 Cash and cash equivalents 311,486 366,236 Accrued investment income 378,895 312,208 Deferred acquisition costs 431,010 406,035 Prepaid reinsurance premiums 417,293 434,968 Reinsurance recoverable on unpaid losses 45,677 34,610 Goodwill 79,406 79,406 Property and equipment (net of accumulated depreciation) 109,050 114,692 Receivable for investments sold 191,315 67,205 Derivative assets 292,255 288,564 Other assets 269,669 314,321 ------------ ------------ Total assets $34,930,060 $33,036,295 ============ ============ Liabilities and Shareholders' Equity ------------------------------------ Liabilities: Deferred premium revenue $ 3,208,059 $ 3,211,181 Loss and loss adjustment expense reserves 711,423 748,869 Investment agreements 10,061,756 8,678,768 Commercial paper 1,745,767 2,598,655 Medium-term notes 7,905,890 6,943,840 Variable interest entity floating rate notes 801,115 600,505 Securities sold under agreements to repurchase 603,652 647,104 Short-term debt 58,745 58,745 Long-term debt 1,313,375 1,332,540 Deferred income taxes, net 557,166 599,627 Deferred fee revenue 20,917 26,780 Payable for investments purchased 499,902 94,609 Derivative liabilities 421,918 527,455 Other liabilities 525,598 408,820 ------------ ------------ Total liabilities 28,435,283 26,477,498 Shareholders' Equity: Common stock 156,539 155,608 Additional paid-in capital 1,473,190 1,410,799 Retained earnings 5,601,993 5,187,484 Accumulated other comprehensive income 454,178 618,606 Unearned compensation - restricted stock (48,699) (34,686) Treasury stock (1,142,424) (779,014) ------------ ------------ Total shareholders' equity 6,494,777 6,558,797 Total liabilities and shareholders' equity $34,930,060 $33,036,295 ============ ============ MBIA INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME --------------------------------- (dollars in thousands except per share amounts) Three Months Ended Nine Months Ended September 30 September 30 ------------------------ ------------------------ 2005 2004 2005 2004 ----------- ----------- ----------- ----------- Restated Restated Insurance operations Revenues: Gross premiums written $220,970 $255,609 $752,554 $833,211 Ceded premiums (34,608) (42,289) (98,356) (107,340) ----------- ----------- ----------- ----------- Net premiums written 186,362 213,320 654,198 725,871 Scheduled premiums earned 173,302 177,808 527,964 525,756 Refunding premiums earned 30,770 33,186 100,338 113,486 ----------- ----------- ----------- ----------- Premiums earned 204,072 210,994 628,302 639,242 Net investment income 122,435 117,363 362,583 354,060 Advisory fees 9,529 6,156 20,168 29,211 Net realized gains (losses) (7,526) (416) (6,319) 62,812 Net gains (losses) on derivative instruments and foreign exchange 2,485 1,897 415 3,167 ----------- ----------- ----------- ----------- Total insurance revenues 330,995 335,994 1,005,149 1,088,492 Expenses: Losses and loss adjustment 20,796 21,336 63,355 63,090 Amortization of deferred acquisition costs 16,121 16,200 49,636 49,495 Operating 39,893 28,080 103,416 88,034 ----------- ----------- ----------- ----------- Total insurance expenses 76,810 65,616 216,407 200,619 Insurance income 254,185 270,378 788,742 887,873 ----------- ----------- ----------- ----------- Investment management services Revenues 225,671 142,323 618,449 390,039 Net realized gains (losses) 1,284 378 3,000 (2,565) Net gains (losses) on derivative instruments and foreign exchange 41,607 (14,324) 41,633 (14,373) ----------- ----------- ----------- ----------- Total investment management services revenues 268,562 128,377 663,082 373,101 Interest expense 184,397 106,431 500,979 289,904 Expenses 18,341 19,620 51,808 56,964 ----------- ----------- ----------- ----------- Total investment management services expenses 202,738 126,051 552,787 346,868 ----------- ----------- ----------- ----------- Investment management services income 65,824 2,326 110,295 26,233 ----------- ----------- ----------- ----------- Municipal services Revenues 5,611 8,245 16,545 19,956 Net realized gains (losses) (51) (48) (136) (90) Net gains (losses) on derivative instruments and foreign exchange 64 -- 200 -- ----------- ----------- ----------- ----------- Total municipal services revenues 5,624 8,197 16,609 19,866 Expenses 5,321 7,633 15,834 19,013 ----------- ----------- ----------- ----------- Municipal services income 303 564 775 853 ----------- ----------- ----------- ----------- Corporate Net investment income 3,411 1,934 17,114 6,511 Net realized gains (losses) 226 390 (1,301) (186) Interest expense 22,080 17,798 66,141 53,343 Corporate expenses 81,391 4,174 92,470 14,134 ----------- ----------- ----------- ----------- Corporate loss (99,834) (19,648) (142,798) (61,152) ----------- ----------- ----------- ----------- Income from continuing operations before income taxes 220,478 253,620 757,014 853,807 Provision for income taxes 77,601 70,409 227,656 240,206 ----------- ----------- ----------- ----------- Income from continuing operations 142,877 183,211 529,358 613,601 Income (loss) from discontinued operations, net of tax (1,093) -- (1,093) (481) Gain on sale of discontinued operations, net of tax -- -- -- 3,178 ----------- ----------- ----------- ----------- Income (loss) from discontinued operations (1,093) -- (1,093) 2,697 Net income $141,784 $183,211 $528,265 $616,298 =========== =========== =========== =========== Net income per common share: Basic $1.07 $1.30 $3.93 $4.32 Diluted $1.04 $1.27 $3.84 $4.23 Weighted-average common shares outstanding: Basic 132,622,848 141,408,855 134,589,606 142,819,366 Diluted 135,822,330 144,125,409 137,722,142 145,781,763 MBIA INC. AND SUBSIDIARIES Reconciliation of Adjusted Direct Premiums to Gross Premiums Written -------------------------------------------------------------------- (dollars in millions) Three Months Nine Months Ended Ended September 30 September 30 --------------- --------------- 2005 2004 2005 2004 ------ ------- ------ ------- Adjusted direct premiums(1) $233.2 $215.9 $879.8 $762.2 Adjusted premiums assumed 0.7 0.0 1.7 (2.9) ------ ------- ------ ------- Adjusted gross premiums 233.9 215.9 881.5 759.3 Present value of estimated future installment premiums(2) (148.2) (105.1) (524.8) (394.0) ------ ------- ------ ------- Gross upfront premiums written 85.7 110.8 356.7 365.3 Gross installment premiums received 135.3 144.8 395.9 467.9 ------ ------- ------ ------- Gross premiums written $221.0 $255.6 $752.6 $833.2 ====== ======= ====== ======= (1) A non-GAAP measure. (2) At September 30, 2005, June 30, 2005 and March 31, 2005 the discount rate was 5.0%, 5.0% and 4.8%, respectively, and at September 30, 2004, June 30, 2004 and March 31, 2004 the discount rate was 4.6%, 4.7% and 4.7%, respectively. Components of Net Income per Share(1) ------------------------------------ Three Months Nine Months Ended Ended September 30 September 30 --------------- --------------- 2005 2004 2005 2004 ------ ------- ------ ------- Restated Restated Net income $1.04 $1.27 $3.84 $4.23 Income (loss) from discontinued operations (0.01) --- (0.01) 0.02 ------ ------- ------ ------- Net income from continuing operations 1.05 1.27 3.84 4.21 Penalties and disgorgement (0.53) --- (0.52) --- Net realized gains (losses) (0.03) 0.00 (0.02) 0.27 Net gains (losses) on derivative instruments and foreign exchange 0.21 (0.06) 0.20 (0.05) ------ ------- ------ ------- Operating income(2) $1.40 $1.33 $4.19 $3.99 ====== ======= ====== ======= (1)May not add due to rounding. (2)A non-GAAP measure. MBIA INC. AND SUBSIDIARIES Components of Adjusted Book Value per Share ------------------------------------------- September 30, 2005 December 31, 2004 ------------------ ----------------- Restated Book value $48.45 $47.05 After-tax value of: Deferred premium revenue 15.55 14.97 Prepaid reinsurance premiums (2.02) (2.03) Deferred acquisition costs (2.09) (1.89) --------- -------- Net deferred premium revenue 11.44 11.05 Present value of installment premiums(1) 10.65 10.12 Asset/liability products adjustment 2.25 0.88 Loss provision(2) (2.90) (2.76) --------- --------- Adjusted book value(3) $69.89 $66.34 ========= ========= (1) At September 30, 2005 and December 31, 2004, the discount rate was 5.0% and 4.8%, respectively. (2) 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. (3) A non-GAAP measure. CONSOLIDATED INSURANCE OPERATIONS --------------------------------- Selected Financial Data Computed on a Statutory Basis ----------------------------------------------------- (dollars in millions) September 30, 2005 December 31, 2004 ------------------ ----------------- Restated Capital and surplus $3,763.4 $3,280.3 Contingency reserve 2,743.5 2,705.1 --------- --------- Capital base 6,506.9 5,985.4 Unearned premium reserve 3,458.9 3,390.9 Present value of installment premiums(1) 2,197.5 2,170.2 --------- --------- Premium resources 5,656.4 5,561.1 Loss and loss adjustment expense reserves 265.6 271.6 Soft capital credit facilities 850.0 1,100.0 --------- --------- Total claims-paying resources $13,278.9 $12,918.1 ========= ========= Net debt service outstanding $883,522.2 $890,222.1 Capital ratio(2) 136:1 149:1 Claims-paying ratio(3) 78:1 81:1 (1) At September 30, 2005 and December 31, 2004, the discount rate was 5.0% and 4.8%, respectively. (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 soft capital credit facilities. CONTACT: MBIA Inc. Michael C. Ballinger, 914-765-3893