-----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, AvP9xCpo3yS+NTm5HI/kWQW7OaAk6k71KZdQjt3udjBd1y2nEVlG7aN0wovAYkxr +XDRnLr5dyGGCP0Nx6tKPg== 0001157523-06-001336.txt : 20060209 0001157523-06-001336.hdr.sgml : 20060209 20060209111957 ACCESSION NUMBER: 0001157523-06-001336 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20060209 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060209 DATE AS OF CHANGE: 20060209 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: 06591405 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 a5076785.txt MBIA INC. 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): February 9, 2006 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 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 914-273-4545 Not Applicable (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION. The following information, including the Exhibit to this Form 8-K, is being furnished pursuant to Item 2.02 - Results of Operations and Financial Condition of Form 8-K. On February 9, 2006, MBIA Inc. issued a press release announcing its results of operations for the year ended December 31, 2005. A copy of the press release is attached as Exhibit 99.1 to this Form 8-K and is incorporated by reference to this Item 2.02 as if fully set forth herein. Item 9.01. FINANCIAL STATEMENTS AND EXHIBITS. 99.1 Press Release issued by MBIA Inc. dated February 9, 2006. 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. 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 hereunto duly authorized. MBIA INC. By: /s/ Ram D. Wertheim ---------------------------------- Ram D. Wertheim General Counsel Date: February 9, 2006 EXHIBIT INDEX TO CURRENT REPORT ON FORM 8-K Dated February 9, 2006 Exhibit 99.1 Press Release issued by MBIA Inc. dated February 9, 2006. EX-99.1 2 a5076785ex99_1.txt EXHIBIT 99.1 Exhibit 99.1 MBIA Inc. Reports 11 Percent Decrease in 2005 Earnings Per Share; Operating Earnings Per Share up 4 Percent in 2005 ARMONK, N.Y.--(BUSINESS WIRE)--Feb. 9, 2006--MBIA Inc. (NYSE: MBI), the holding company for MBIA Insurance Corporation, reported today that 2005 diluted earnings per share declined 11 percent to $5.18 per share compared with $5.82 in 2004. Net income for 2005 was $711.0 million compared with $843.0 million for 2004, a 16 percent decrease. The decrease was due to the effect of net realized losses of $0.04 per share in 2005, compared with net realized gains of $0.47 per share recorded in 2004, as well as a charge of $0.52 per share related to a $75 million accrual that the Company made in the third quarter of 2005 for estimated penalties and disgorgement related to any settlements of regulatory investigations. Operating income per share, which excludes the effects of net realized gains and losses, net unrealized gains and losses on derivative instruments and foreign exchange, income from discontinued operations, and the accrual for estimated penalties and disgorgement, rose 4 percent to $5.57 per share in 2005 compared to $5.35 per share in 2004. Fourth quarter diluted earnings per share in 2005 declined 16 percent to $1.34 from $1.60 in 2004. Net income for the fourth quarter decreased 19 percent to $182.7 million from $226.7 million in last year's fourth quarter. The decrease was the result of $0.01 per share of net realized losses in the fourth quarter of 2005, compared with net realized gains of $0.20 per share recorded during the same period of 2004. For the fourth quarter of 2005, operating income per share increased 1 percent to $1.38 compared with $1.36 in the fourth quarter of 2004. Excluding refundings, fourth quarter operating income per share declined 2 percent to $1.20 in 2005 from $1.23 in the same period of 2004. Diluted earnings per share information - -------------------------------------- Three Months Year Ended Ended December 31 December 31 ----------- ----------- (Restated) (Restated) -------- -------- 2005 2004 2005 2004 ---- ---- ---- ---- Net income $1.34 $1.60 $ 5.18 $ 5.82 Income (loss) from discontinued operations - - 0.00 (0.01) 0.02 ---- ---- ------ ---- Net income from continuing operations 1.34 1.60 5.19 5.80 Accrual for penalties and disgorgement - - - - (0.52) - - Net realized gains (losses) (0.01) 0.20 (0.04) 0.47 Net gains (losses) on derivative instruments and foreign exchange (0.02) 0.04 0.18 (0.01) ------ ---- ---- ------ Operating income (1) $1.38 $1.36 $ 5.57 $ 5.35 (1) Presented on the same basis as analysts' estimates Net income for 2005 includes the effects of a $75 million accrual in the third quarter for the total amount that the Company estimates 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 regarding agreements MBIA Insurance Corporation entered into 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). Gary Dunton, MBIA Chief Executive Officer, said, "We achieved acceptable operating financial results in a challenging marketplace, one in which we saw intense competition, tight credit spreads and investors awash in capital. Despite fewer opportunities in international public finance, business production in our other sectors was good, and very strong in the case of international structured finance. "Looking ahead, given our expectation that current market conditions will persist, it is unlikely that we will achieve our historical growth rates in 2006. Our underwriting standards and pricing discipline are designed for long-term profitability, and we simply won't compromise them for short-term gain. Our franchise remains solid, and our commitment to building long-term shareholder value is steadfast." 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 written in the period and excludes premiums assumed or ceded, declined 4 percent to $1.10 billion in 2005 from $1.15 billion in 2004. The decline is primarily due to tighter credit spreads, increased competition from the uninsured market and other monolines, and weak new business production in the Company's international public finance operations. In the fourth quarter of 2005, ADP declined 42 percent to $221.4 million from $383.9 million in the fourth quarter of last year. The decrease was the result of the factors cited above. Adjusted Direct Premium - ----------------------- (dollars in millions) Three Months Year Ended Ended December 31 December 31 ----------- ----------- % % 2005 2004 Change 2005 2004 Change ---- ---- ------ ---- ---- ------ Public Finance United States $105.9 $106.8 (1%) $ 487.6 $ 457.4 7% Non-United States 24.2 119.8 (80%) 92.8 261.6 (65%) ---- ----- ----- ---- ----- ----- Total 130.1 226.6 (43%) 580.4 719.0 (19%) Structured Finance United States 78.9 126.0 (37%) 310.2 284.5 9% Non-United States 12.4 31.3 (61%) 210.6 142.6 48% ---- ---- ----- ----- ----- --- Total 91.3 157.3 (42%) 520.8 427.1 22% Total $221.4 $383.9 (42%) $1,101.2 $1,146.1 (4%) Global public finance ADP declined 19 percent in 2005 compared with 2004. U.S. public finance production increased 7 percent in 2005, reflecting solid business in the transportation and military housing sectors. As fewer large infrastructure transactions in Europe came to market this year, non-U.S. production declined 65 percent, despite growth in the Latin American and Australian markets. Credit quality for global public finance transactions remained very high, with 91 percent of insured business written rated Single-A or higher in 2005. Despite continued tight spreads and investor demand for uninsured transactions, global structured finance ADP in 2005 increased 22 percent over 2004, characterized by strong business from repeat issuers across all sectors. The consumer asset-backed and CDO businesses had impressive production, while international structured ADP increased 48 percent, driven by solid future flow and whole company securitization activity. In 2005, 69 percent of business written in global structured finance was rated Single-A or higher. Premiums earned in 2005 declined 1 percent to $842.7 million from $849.7 million in 2004, due in part to some early policy terminations in the structured finance book of business as well as the effect of refunding activity in prior years, 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 remained strong given the continued low interest rate environment, declining a marginal 2 percent to $140.5 million in 2005. Pre-tax net investment income in 2005, excluding net realized gains, was $491.9 million, a 4 percent increase from $474.4 million in 2004, driven by a 3 percent increase in average invested assets. MBIA's advisory fees in 2005 were down 32 percent to $28.2 million from $41.5 million during 2004, primarily reflecting a decline in business that generates advisory services. Insurance expenses, consisting of the amortization of deferred acquisition costs and operating expenses, were up 11 percent for 2005 to $210.0 million from $188.7 million in 2004, due to a 17 percent increase in operating expenses over the same period last year. The increase in operating expenses partially relates to a reduction in the percentage of expenses recorded and deferred as policy acquisition costs, which became effective in the third quarter of 2005. Other factors contributing to the increase in operating expenses were an increase in loss prevention expenses and the cost of a soft capital facility. MBIA's pre-tax operating income from insurance operations, which excludes the effects of net realized gains and losses and net unrealized gains and losses on derivative instruments and foreign exchange, declined 2 percent to $1.07 billion in 2005 from $1.09 billion in 2004. Risk Management and Loss Reserves The Company incurred $84.3 million in loss and loss adjustment expenses in 2005, a 1 percent decrease compared to $84.8 million in 2004. Total case-incurred activity was $188.6 million in 2005, primarily related to transactions in the Enhanced Equipment Trust Certificate (EETC), CDO, tax lien, mortgage-backed, and manufactured housing sectors, as well as accretion on reserves previously established for the Company's AHERF exposure. The unallocated loss reserve as of December 31, 2005 stands at $208.6 million. MBIA established a case loss reserve of $76.3 million in the fourth quarter in connection with its $685.4 million in net par exposure under four insured EETCs secured by 64 aircraft financed by Northwest Airlines. Northwest filed for bankruptcy protection in September 2005 and, subsequently, did not make scheduled payments on leases supporting outstanding senior debt for 31 aircraft in three of the four MBIA-insured EETCs. MBIA established the case loss reserve based on projected lower lease income related to these leases, the projected revenue from the potential redeployment of certain aircraft and estimated valuations for the aircraft subject to the defaulted leases. Currently, the leases related to the remaining 33 aircraft are performing according to the original contract terms. Temporary extensions are in place to allow Northwest to continue flying the aircraft subject to the defaulted leases, and negotiations with the airline about resolving the lease non-compliance issues are continuing. Overall credit quality in the insured portfolio improved this year, with 81 percent of the total book of business rated A or better, up from 80 percent at the end of 2004. The percentage of the portfolio rated non-investment grade increased somewhat to 2.1 percent, up from 1.9 percent in 2004, driven by the addition of two consumer asset-backed financings. Investment Management Services The market value of annual average fixed-income assets under management was $43.5 billion in 2005, up 16 percent from $37.4 billion in 2004. 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 41 percent in 2005 to $86.6 million from $61.4 million in 2004. Solid demand for investment agreements drove growth in the asset/liability products segment. Corporate The corporate segment includes net investment income, interest expense and corporate expenses. In 2005, net corporate segment expenses increased to $171.8 million from $83.8 million. The increase reflects the $75 million accrual for estimated penalties and disgorgement, incremental legal and consulting expenses related to the regulatory investigations, and increased interest expenses due to higher average debt outstanding. Excluding the accrual for estimated penalties and disgorgement, and legal and consulting expenses associated with the investigations, net corporate expenses decreased 1 percent. Gains and Losses In 2005, MBIA recorded net realized losses of $7.9 million for all business operations, compared to net realized gains of $104.2 million in 2004. In 2005, net realized losses were impacted by a $19 million write-down of receivable balances 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 and gains resulting from the reassumption of portfolios from AXA Re and Converium, which were accounted for as deposits as a result of the restatements. The Company recorded pre-tax mark-to-market net unrealized gains of $38.4 million in 2005 on its derivative exposure and foreign exchange, compared with net unrealized loss of $3.3 million in 2004. Book Value and Adjusted Book Value MBIA's book value per share at December 31, 2005 was $49.17, up 5 percent from $47.05 at December 31, 2004. The increase was principally driven by net income from operations offset by an increase in treasury stock resulting from share repurchases. Adjusted book value (ABV) per share, a non-GAAP measure, at December 31, 2005 rose 6 percent to $70.62 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 During 2005, the Company repurchased approximately 5.9 million shares at an average cost of $57.77 per share. At December 31, 2005, approximately 5 million shares remained in the Company's share buyback program, which was authorized in August 2004. The Company did not repurchase any shares in the second half of 2005. Operating ROE For 2005, MBIA's operating return on equity, a non-GAAP measure, was 12.5 percent compared to 13.5 percent for 2004. Conference Call MBIA will host a conference call for investors today at 11 a.m. EST. The conference call will consist of brief comments by Mr. Dunton and Nicholas Ferreri, MBIA Chief Financial Officer, followed by a question and answer session with Mr. Dunton, Mr. Ferreri and Mitchell Sonkin, head of Insured Portfolio Management. The conference call will be Web cast live on MBIA's Web site at http://investor.mbia.com (then select "Conference Call"). Those who are unable to participate in the conference call may listen to a replay by dialing 1-866-356-4366 in the United States and 1-203- 369-0107 for outside the United States, which will 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. Operating Return on Equity (ROE): The Company believes operating return on equity is a useful measurement of performance because it measures return on equity based upon 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 return on equity 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 (ABV): 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) December December 31, 2005 31, 2004 ----------- ------------ Assets - ------ Investments: Fixed-maturity securities held as available- for-sale, at fair value (amortized cost $23,189,684 and $18,802,894) $23,747,204 $19,679,905 Investments held-to-maturity, at amortized cost (fair value $5,255,724 and $7,535,787) 5,286,571 7,540,218 Investment agreement portfolio pledged as collateral, at fair value (amortized cost $712,054 and $713,704) 729,072 730,870 Short-term investments, at amortized cost (which approximates fair value) 1,678,281 2,405,192 Other investments 234,927 261,865 ----------- ----------- Total investments 31,676,055 30,618,050 Cash and cash equivalents 233,046 366,236 Accrued investment income 396,048 312,208 Deferred acquisition costs 427,111 406,035 Prepaid reinsurance premiums 407,614 434,968 Reinsurance recoverable on unpaid losses 58,965 34,610 Goodwill 79,406 79,406 Property and equipment (net of accumulated depreciation) 109,275 114,692 Receivable for investments sold 74,787 67,205 Derivative assets 326,867 288,564 Other assets 293,609 314,321 ----------- ----------- Total assets $34,082,783 $33,036,295 =========== =========== Liabilities and Shareholders' Equity - ------------------------------------ Liabilities: Deferred premium revenue $ 3,185,200 $ 3,211,181 Loss and loss adjustment expense reserves 721,502 748,869 Investment agreements 10,806,277 8,678,768 Commercial paper 859,997 2,598,655 Medium-term notes 7,542,416 6,943,840 Variable interest entity floating rate notes 801,549 600,505 Securities sold under agreements to repurchase 646,343 647,104 Short-term debt 58,745 58,745 Long-term debt 1,210,405 1,332,540 Deferred income taxes, net 569,536 599,627 Deferred fee revenue 20,379 26,780 Payable for investments purchased 83,369 94,609 Derivative liabilities 384,611 527,455 Other liabilities 600,810 408,820 ----------- ----------- Total liabilities 27,491,139 26,477,498 Shareholders' Equity: Common stock 156,602 155,608 Additional paid-in capital 1,479,447 1,410,799 Retained earnings 5,747,171 5,187,484 Accumulated other comprehensive income 399,381 618,606 Unearned compensation - restricted stock (43,857) (34,686) Treasury stock (1,147,100) (779,014) ----------- ----------- Total shareholders' equity 6,591,644 6,558,797 Total liabilities and shareholders' equity $34,082,783 $33,036,295 =========== =========== MBIA INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME --------------------------------- (dollars in thousands except per share amounts) Three Months Ended Years Ended December 31 December 31 ---------------------- ----------------------- 2005 2004 2005 2004 ---- ---- ---- ---- Insurance operations Revenues: Gross premiums written $ 232,354 $ 283,704 $ 984,908 $1,116,915 Ceded premiums (28,751) (51,491) (127,107) (158,831) ----------- ----------- ----------- ----------- Net premiums written 203,603 232,213 857,801 958,084 Scheduled premiums earned 174,320 180,529 702,284 706,286 Refunding premiums earned 40,120 29,899 140,458 143,384 ----------- ----------- ----------- ----------- Premiums earned 214,440 210,428 842,742 849,670 Net investment income 129,274 120,355 491,857 474,415 Advisory fees 8,067 12,328 28,235 41,539 Net realized gains (losses) (1,756) 46,062 (8,075) 108,874 Net gains (losses) on derivative instruments and foreign exchange (4,851) 3,460 (4,436) 6,627 ----------- ----------- ----------- ----------- Total insurance revenues 345,174 392,633 1,350,323 1,481,125 Expenses: Losses and loss adjustment 20,919 21,663 84,274 84,753 Amortization of deferred acquisition costs 16,941 16,917 66,577 66,412 Operating 39,962 34,275 143,378 122,309 ----------- ----------- ----------- ----------- Total insurance expenses 77,822 72,855 294,229 273,474 Insurance income 267,352 319,778 1,056,094 1,207,651 ----------- ----------- ----------- ----------- Investment management services Revenues 247,705 161,887 866,154 551,926 Net realized gains (losses) (1,616) (1,555) 1,384 (4,120) Net gains (losses) on derivative instruments and foreign exchange 925 4,703 42,558 (9,670) ----------- ----------- ----------- ----------- Total investment management services revenues 247,014 165,035 910,096 538,136 Interest expense 204,361 123,711 705,340 413,615 Expenses 22,386 19,948 74,194 76,912 ----------- ----------- ----------- ----------- Total investment management services expenses 226,747 143,659 779,534 490,527 ----------- ----------- ----------- ----------- Investment management services income 20,267 21,376 130,562 47,609 ----------- ----------- ----------- ----------- Municipal services Revenues 7,843 7,637 24,388 27,593 Net realized gains (losses) (51) 9 (187) (81) Net gains (losses) on derivative instruments and foreign exchange 30 (279) 230 (279) ----------- ----------- ----------- ----------- Total municipal services revenues 7,822 7,367 24,431 27,233 Expenses 6,482 6,636 22,316 25,649 ----------- ----------- ----------- ----------- Municipal services income 1,340 731 2,115 1,584 ----------- ----------- ----------- ----------- Corporate Net investment income (468) 1,935 16,646 8,446 Net realized gains (losses) 312 (281) (989) (467) Interest expense 24,858 21,308 90,999 74,651 Corporate expenses 5,011 3,445 97,481 17,579 ----------- ----------- ----------- ----------- Corporate loss (30,025) (23,099) (172,823) (84,251) ----------- ----------- ----------- ----------- Income from continuing operations before income taxes 258,934 318,786 1,015,948 1,172,593 Provision for income taxes 76,213 91,917 303,869 332,123 ----------- ----------- ----------- ----------- Income from continuing operations 182,721 226,869 712,079 840,470 Income (loss) from discontinued operations, net of tax -- (121) (1,093) (602) Gain on sale of discontinued operations, net of tax -- -- -- 3,178 ----------- ----------- ----------- ----------- Income (loss) from discontinued operations -- (121) (1,093) 2,576 Net income $ 182,721 $ 226,748 $ 710,986 $ 843,046 =========== =========== =========== =========== Net income per common share: Basic $ 1.38 $ 1.63 $ 5.30 $ 5.94 Diluted $ 1.34 $ 1.60 $ 5.18 $ 5.82 Weighted-average common shares outstanding: Basic 132,640,767 139,007,629 134,098,392 141,861,225 Diluted 135,871,235 141,926,243 137,220,731 144,799,513 MBIA INC. AND SUBSIDIARIES Reconciliation of Adjusted Direct Premiums to Gross Premiums Written - -------------------------------------------------------------------- (dollars in millions) Three Months Ended Years Ended December 31 December 31 ------------------ --------------- 2005 2004 2005 2004 ---- ---- ---- ---- Adjusted direct premiums (1) $ 221.4 $ 383.9 $1,101.2 $1,146.1 Adjusted premiums assumed 5.0 --- 6.7 (2.9) ------- ------- -------- --------- Adjusted gross premiums 226.4 383.9 1,107.9 1,143.2 Present value of estimated future installment premiums (2) (108.5) (238.2) (633.4) (632.2) ------- ------- -------- --------- Gross upfront premiums written 117.9 145.7 474.5 511.0 Gross installment premiums received 114.5 138.0 510.4 605.9 ------- ------- -------- --------- Gross premiums written $ 232.4 $ 283.7 $ 984.9 $1,116.9 ======= ======= ======== ======== (1) A non-GAAP measure. (2) At December 31, 2005 and December 31, 2004 the discount rate was 5.0% and 4.8%, respectively. Components of Net Income per Share (1) - -------------------------------------- Three Months Ended Years Ended December 31 December 31 ------------------- ------------- 2005 2004 2005 2004 ---- ---- ---- ---- Net income $ 1.34 $ 1.60 $ 5.18 $ 5.82 Income (loss) from discontinued operations --- 0.00 (0.01) 0.02 ------- ------- ------- ------- Net income from continuing operations 1.34 1.60 5.19 5.80 Penalties and disgorgement --- --- (0.52) --- Net realized gains (losses) (0.01) 0.20 (0.04) 0.47 Net gains (losses) on derivative instrument and foreign exchange (0.02) 0.04 0.18 (0.01) ------- ------- ------- ------- Operating income (2) $ 1.38 $ 1.36 $ 5.57 $ 5.35 ======= ======= ======= ======= (1) May not add due to rounding. (2) A non-GAAP measure. MBIA INC. AND SUBSIDIARIES Components of Adjusted Book Value per Share - ------------------------------------------- December 31, December 31, 2005 2004 ---------------- ---------------- Book value $ 49.17 $ 47.05 After-tax value of: Deferred premium revenue 15.45 14.97 Prepaid reinsurance premiums (1.98) (2.03) Deferred acquisition costs (2.07) (1.89) ------ ------ Net deferred premium revenue 11.40 11.05 Present value of installment premiums (1) 10.53 10.12 Asset/liability products adjustment 2.40 0.88 Loss provision (2) (2.88) (2.76) -------- --------- Adjusted book value (3) $ 70.62 $ 66.34 ======== ======== (1) At December 31, 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) December December 31, 2005 31, 2004 ----------- ----------- Capital and surplus $ 3,800.4 $ 3,280.3 Contingency reserve 2,769.0 2,705.1 ---------- ---------- Capital base 6,569.4 5,985.4 Unearned premium reserve 3,508.1 3,390.9 Present value of installment premiums (1) 2,171.1 2,170.2 ---------- ---------- Premium resources 5,679.2 5,561.1 Loss and loss adjustment expense reserves 317.8 271.6 Soft capital credit facilities 850.0 1,100.0 ---------- ---------- Total claims-paying resources $ 13,416.4 $ 12,918.1 ========== ========== Net debt service outstanding $889,018.9 $890,222.1 Capital ratio (2) 135:1 149:1 Claims-paying ratio (3) 78:1 81:1 (1) At December 31, 2005 and December 31, 2 004 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: for MBIA Inc. Michael C. Ballinger, 914-765-3893 -----END PRIVACY-ENHANCED MESSAGE-----