-----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, S8XwPCZKW1G4b/rxcBoKJd+ua8h9jAtY9MNdW+OGZ02RdVV67bkvM3ibie7qEJ+U L/MKyzaEa7o2aIoo4FBEVA== 0001157523-06-010393.txt : 20061026 0001157523-06-010393.hdr.sgml : 20061026 20061026105749 ACCESSION NUMBER: 0001157523-06-010393 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20061026 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20061026 DATE AS OF CHANGE: 20061026 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: 061164672 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 a5258785.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): October 26, 2006 MBIA INC. (Exact name of registrant as specified in its charter) Connecticut 1-9583 06-1185706 (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) 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 October 26, 2006, MBIA Inc. issued a press release announcing its results of operations for the quarter ended September 30, 2006. 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 October 26, 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: October 26, 2006 EXHIBIT INDEX TO CURRENT REPORT ON FORM 8-K Dated October 26, 2006 Exhibit 99.1 Press Release issued by MBIA Inc. dated October 26, 2006. EX-99.1 2 a5258785ex99_1.txt EXHIBIT 99.1 Exhibit 99.1 MBIA Inc. Reports 22 Percent Increase in Nine Months Net Income Per Share; Operating Income Per Share up 8 Percent ARMONK, N.Y.--(BUSINESS WIRE)--Oct. 26, 2006--MBIA Inc. (NYSE: MBI), the holding company for MBIA Insurance Corporation, reported today that net income per share for the first nine months of 2006 increased 22 percent to $4.67, compared to $3.84 in the same period of 2005. Net income for the first nine months was $638.3 million, up 21 percent compared to $528.3 million in the same period last year. The increase was largely due to a favorable comparison with the same period of 2005, when results were impacted by a one-time, pre-tax accrual of $75 million made in the third quarter, or $0.52 per share on an after-tax basis, for the total amount that the Company estimated it will pay in connection with previously announced investigations by the Securities and Exchange Commission, the New York Attorney General's Office and the New York State Insurance Department. Diluted earnings per share information - --------------------------------------------------------------------- Three Months Nine Months Ended September 30 Ended September 30 ------------------------------------- 2006 2005 2006 2005 -------- -------- -------- --------- Net income $1.59 $1.04 $4.67 $3.84 Income (loss) from discontinued operations 0.01 (0.01) 0.02 (0.01) -------- -------- -------- --------- Net income from continuing operations 1.58 1.05 4.65 3.84 Accrual for penalties and disgorgement ----- (0.53) ----- (0.52) Net realized gains (losses) 0.02 (0.03) 0.10 (0.02) Net gains on derivative instruments and foreign exchange 0.00 0.21 0.05 0.20 -------- -------- -------- --------- Operating income (1) $1.55 $1.39 $4.50 $4.18 (1) A non-GAAP measure For the first nine months of 2006, operating income per share, which excludes the effects of net realized gains and losses, net gains and losses on derivative instruments and foreign exchange, accruals for penalties and disgorgement, and income and losses from discontinued operations, increased 8 percent to $4.50 from $4.18 in the first nine months of 2005. Excluding refundings, nine month 2006 operating income per share rose 5 percent to $3.94 from $3.75 in the same period of 2005. MBIA has signed a letter of intent to sell its MuniServices operations and the business is now being presented as a discontinued operation for financial reporting purposes. In the third quarter of 2006, net income per share increased 53 percent to $1.59 from $1.04 during the same period of 2005. Net income for the third quarter was $217.9 million, up 54 percent, compared with $141.8 million in the same period last year. Current results reflect a favorable comparison with the third quarter of 2005, when the Company made its $75 million settlement-related accrual. For the third quarter of 2006, operating income per share increased 12 percent to $1.55 from $1.39 in the third quarter of 2005. Excluding refundings, third quarter 2006 operating income per share rose 9 percent to $1.37 from $1.26 during the same period of 2005. Gary Dunton, MBIA Chief Executive Officer, said, "While market conditions remain challenging, we held to our underwriting and pricing disciplines and were pleased with the quality of transactions that we insured. Despite continuing tight credit spreads and a very benign credit risk environment, there continues to be steady demand for our insurance and investment management products." Insurance Operations Adjusted direct premiums (ADP), a non-GAAP measure, which includes both upfront premiums written and the present value of estimated future installment premiums for new business writings and excludes premiums assumed or ceded, decreased 31 percent to $609.6 million in the first nine months of 2006 from $879.8 million in the first nine months of 2005. Adjusted Direct Premiums - --------------------------------------------------------------------- (dollars in millions) Three Months Nine Months Ended September 30 Ended September 30 ------------------------- ------------------------- 2006 2005 % Change 2006 2005 % Change ------- ------- --------- ------- ------- --------- Global Public Finance United States $67.5 $96.1 (30%) $189.2 $381.7 (50%) Non-United States 31.6 3.5 803% 133.8 68.6 95% ------- ------- --------- ------- ------- --------- Total 99.1 99.6 (1%) 323.0 450.3 (28%) Global Structured Finance United States 73.8 59.8 23% 163.4 231.3 (29%) Non-United States 37.2 73.8 (50%) 123.2 198.2 (38%) ------- ------- --------- ------- ------- --------- Total 111.0 133.6 (17%) 286.6 429.5 (33%) Total $210.1 $233.2 (10%) $609.6 $879.8 (31%) MBIA's global public finance ADP decreased 28 percent in the first nine months of 2006 compared to the same period of 2005. Compared to last year's first three quarters, U.S. public finance production was down 50 percent impacted by a competitive bond insurance environment and the relative lack of large transactions. According to The Bond Buyer, insured volume declined 28 percent in the first nine months of 2006 compared with the same period last year. Non-U.S. public finance production during the first nine months increased 95 percent due to two significant international transactions that closed in the second quarter. In global public finance, 82 percent of insured business written in the first nine months of 2006 had underlying ratings of Single-A or higher. In the Company's global structured finance business, ADP decreased 33 percent in the first nine months of 2006. Non-U.S. structured finance production for the first nine months declined 38 percent, while U.S. structured finance ADP declined 29 percent compared with the same period of 2005. In global structured finance, 70 percent of insured business written in the first three quarters of 2006 had underlying ratings of Single-A or higher. For the third quarter of 2006, total ADP declined 10 percent to $210.1 million, compared to $233.2 million during the same period of 2005. In the third quarter, non-U.S. public finance ADP increased significantly over last year's third quarter, as did U.S. structured finance ADP. MBIA insured six non-U.S. public finance transactions totaling $31.6 million of ADP compared to only one deal last year of $3.5 million of ADP. Most of the Company's U.S. structured finance sectors reported higher ADP during the third quarter, which contributed to a 23 percent increase in ADP. Particularly favorable comparisons came from the CDOs, consumer asset-backed and real estate sectors. During the first nine months of 2006, scheduled earned premiums decreased 4 percent to $507.0 million from $528.0 million in the same period of 2005. Scheduled earned premiums were impacted by policy terminations of structured finance deals in the trailing three quarters as well as the effect of refunding activity in prior periods, which accelerated the earning of premiums into earlier periods. Earned premiums from refundings were $128.0 million for the first nine months of 2006, up 28 percent from $100.3 million in the first nine months of 2005. MBIA's earned premium from refunded issues was boosted by several international transactions that had significant unearned premium at the time of the refunding. Pre-tax net investment income in the first nine months of 2006, excluding net realized gains and losses, was $448.8 million, an 18 percent increase from $379.4 million in the same period of 2005. The increase was primarily due to interest received on Variable Interest Entities (VIEs), interest received on the Northwest Airlines 2000-1 Enhanced Equipment Trust Certificates (EETCs), and reimbursed expenses. Investment income for VIEs and similar items has been shown in net investment income since the first quarter of 2006, and the related interest expense is included in the interest expense line on the Company's income statement for the current and prior periods. Excluding the effects of the noted items, pre-tax net investment income would have increased by 6 percent for the nine months. MBIA's fees and reimbursements (which had been labeled Advisory Fees until the first quarter of 2006) were up 45 percent in the first nine months of 2006 to $29.2 million from $20.2 million during the same period of 2005, which includes reimbursements of $15.7 million for expenses related to two credits. Total insurance expenses were up 18 percent in the first nine months of 2006 to $275.0 million from $233.2 million in the first nine months of 2005. The increase resulted from higher interest expense for VIEs, interest expense related to the financing of the Northwest Airlines 2000-1 EETCs, and the lower deferral rate that the Company adopted during last year's third quarter for gross insurance expenses related to policy acquisition costs. Gross insurance expenses, which are prior to any expense deferrals, were down 3 percent for the first nine months of this year versus the same period last year. The Company incurred $60.8 million in loss and loss adjustment expenses (LAE) in the first nine months of 2006, a 4 percent decrease compared to $63.4 million in the same period last year. Loss and LAE for both periods is based on the Company's formula of reserving 12 percent of scheduled earned premium. During the first nine months of 2006, the net effect of MBIA's formula-based loss reserving and case loss reserve activity resulted in a $50.8 million increase to its unallocated loss reserve, boosting the Company's unallocated loss reserve to $259.4 million at September 30, 2006. Regarding the Eurotunnel transaction, in the third quarter MBIA made interest payments totaling approximately $900 thousand related to a small portion of the Company's exposure to the issue. MBIA expects to be fully reimbursed for these payments. MBIA's pre-tax operating income from insurance operations, which excludes the effects of net realized gains and losses and net gains and losses on derivative instruments and foreign exchange, increased 5 percent to $838.0 million in the first nine months of 2006 compared to $794.6 million in the same period of 2005. Investment Management Services The market value of year-to-date average fixed-income assets under management, excluding conduits, was $50.3 billion in the first nine months of 2006, up 16.4 percent from $43.3 billion in the first nine months of last year. Pre-tax operating income from MBIA's investment management business, which excludes the effects of net realized gains and net gains and losses on derivative instruments and foreign exchange, increased 15 percent in the first nine months of 2006 to $75.4 million from $65.7 million in the same period of 2005 driven by strong demand for the Company's asset/liability products. Corporate The pre-tax operating loss for the corporate segment decreased 57 percent for the first nine months of 2006 to $61.1 million from $141.5 million in the same period last year. The decrease was primarily due to the effects of the $75 million accrual taken in the third quarter of 2005 as well as a decline in associated legal and consulting costs within corporate expenses. Part of the decline was also due to lower interest expense because of lower debt levels, but was partially offset by reduced net investment income. Gains and Losses In the first nine months of 2006, MBIA recorded net realized gains of $22.0 million for all business operations, compared to net realized losses of $4.7 million in the same period of 2005. The increase in net realized gains for the first nine months of 2006 was a result of a $10.5 million gain during the second quarter related to the sale of the Company's common stock investment in Ram Re and gains in the Company's insurance investment portfolio. The Company recorded pre-tax net gains on derivative instruments and foreign exchange of $10.5 million for all business operations in the first nine months of 2006, compared to pre-tax net gains of $42.2 million in the same period of 2005. Discontinued Operations As noted earlier, MBIA has signed a letter of intent to sell its MuniServices operations to an investor group led by the management of MuniServices and this business is now being treated as a discontinued operation. In addition, the former municipal services segment has been eliminated from MBIA's financial segment reporting. Results for MBIA's Capital Asset operations, which were previously included in the presentation of the municipal services segment, are now being included in the corporate segment due to its immateriality. Book Value and Adjusted Book Value MBIA's book value per share at September 30, 2006 increased to $52.35, up 6 percent from $49.17 at December 31, 2005. The increase in book value per share was driven by an increase in retained earnings, which was partially offset by a reduction in unrealized appreciation of investment securities. Adjusted book value (ABV) per share, a non-GAAP measure, at September 30, 2006 rose 5 percent to $74.02 from $70.62 at December 31, 2005. 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. 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 Mr. C. Edward Chaplin, MBIA Chief Financial Officer, followed by a question and answer session with Mr. Chaplin. The dial-in number for the call is 877-694-4769 in the U.S. and 973-582-2849 from outside the U.S. The conference call code is 7953276. The call will also be broadcast live on MBIA's Web site at www.mbia.com. Those who are unable to participate in the conference call may listen to a replay by dialing 877-519-4471 in the U.S. and 973-341-3080 from outside the U.S. The replay code is also 7953276. The replay 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 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 typically used in the Company's press releases, which serve to supplement GAAP information, are meaningful to investors. Operating Income (Loss): 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 other non-operating items. Operating income (loss) 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) September 30, 2006 December 31, 2005 ------------------- ------------------ Assets - --------------------------- Investments: Fixed-maturity securities held as available-for-sale, at fair value (amortized cost $26,786,671 and $23,189,684) $ 27,209,053 $ 23,747,204 Investments held-to-maturity, at amortized cost (fair value $5,042,568 and $5,734,335) 5,070,668 5,765,182 Investment agreement portfolio pledged as collateral, at fair value (amortized cost $822,230 and $712,054) 821,417 729,072 Short-term investments, at amortized cost (which approximates fair value) 2,000,179 1,673,697 Other investments 200,963 234,927 ------------------- ------------------ Total investments 35,302,280 32,150,082 Cash and cash equivalents 341,330 230,965 Accrued investment income 497,668 396,048 Deferred acquisition costs 437,648 427,111 Prepaid reinsurance premiums 373,463 407,614 Reinsurance recoverable on unpaid losses 47,002 58,965 Goodwill 79,406 79,406 Property and equipment (net of accumulated depreciation) 106,015 107,938 Receivable for investments sold 127,136 74,787 Derivative assets 441,540 326,867 Other assets 186,096 301,611 ------------------- ------------------ Total assets $ 37,939,584 $ 34,561,394 =================== ================== Liabilities and Shareholders' Equity - ------------------------------ Liabilities: Deferred premium revenue $ 3,084,419 $ 3,185,200 Loss and loss adjustment expense reserves 725,629 721,502 Investment agreements 11,811,231 10,806,277 Commercial paper 755,234 859,997 Medium-term notes 9,005,718 7,542,416 Variable interest entity floating rate notes 1,475,750 1,280,160 Securities sold under agreements to repurchase 757,260 646,343 Short-term debt 40,898 58,745 Long-term debt 1,216,403 1,210,405 Current income taxes 38,610 --- Deferred income taxes, net 510,843 569,536 Deferred fee revenue 16,891 20,379 Payable for investments purchased 426,522 83,369 Derivative liabilities 390,435 384,611 Other liabilities 626,983 600,810 ------------------- ------------------ Total liabilities 30,882,826 27,969,750 Shareholders' Equity: Common stock 157,812 156,602 Additional paid-in capital 1,490,066 1,435,590 Retained earnings 6,260,164 5,747,171 Accumulated other comprehensive income 323,692 399,381 Treasury stock (1,174,976) (1,147,100) ------------------- ------------------ Total shareholders' equity 7,056,758 6,591,644 Total liabilities and shareholders' equity $ 37,939,584 $ 34,561,394 =================== ================== MBIA INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME - ---------------------------------------------------------------------- (dollars in thousands except per share amounts) Three Months Ended September 30 -------------------------- 2006 2005 -------------------------- Insurance operations Revenues: Gross premiums written $ 202,178 $ 220,970 Ceded premiums (26,461) (34,608) -------------------------- Net premiums written 175,717 186,362 Scheduled premiums earned 170,112 173,302 Refunding premiums earned 42,215 30,770 -------------------------- Premiums earned 212,327 204,072 Net investment income 164,418 129,848 Fees and re-imbursements 17,046 9,529 Net realized gains (losses) 4,021 (7,526) Net gains (losses) on derivative instruments and foreign exchange (4,706) 2,485 -------------------------- Total insurance revenues 393,106 338,408 Expenses: Losses and loss adjustment 20,414 20,796 Amortization of deferred acquisition costs 16,774 16,121 Operating 37,455 38,943 Interest expense 22,225 8,363 -------------------------- Total insurance expenses 96,868 84,223 Insurance income 296,238 254,185 -------------------------- Investment management services Revenues 308,473 225,671 Net realized gains (losses) 361 1,284 Net gains (losses) on derivative instruments and foreign exchange 5,415 41,607 -------------------------- Total investment management services revenues 314,249 268,562 Interest expense 263,804 184,397 Expenses 19,062 18,341 -------------------------- Total investment management services expenses 282,866 202,738 -------------------------- Investment management services income 31,383 65,824 -------------------------- Corporate Net investment income 3,297 3,492 Net realized gains (losses) 866 226 Net gains (losses) on derivative instruments and foreign exchange 268 65 Interest expense 20,270 22,148 Corporate expenses 5,260 81,414 -------------------------- Corporate loss (21,099) (99,779) -------------------------- Income from continuing operations before income taxes 306,522 220,230 Provision for income taxes 89,969 77,500 -------------------------- Income from continuing operations 216,553 142,730 Income (loss) from discontinued operations, net of tax 1,394 (946) -------------------------- Net income $ 217,947 $ 141,784 ========================== Net income per common share: Basic $ 1.64 $ 1.07 Diluted $ 1.59 $ 1.04 Weighted-average number of common shares outstanding: Basic 132,794,395 132,622,848 Diluted 136,739,403 135,822,330 Nine Months Ended September 30 --------------------------- 2006 2005 --------------------------- Insurance operations Revenues: Gross premiums written $ 626,526 $ 752,554 Ceded premiums (77,532) (98,356) --------------------------- Net premiums written 548,994 654,198 Scheduled premiums earned 506,957 527,964 Refunding premiums earned 128,005 100,338 --------------------------- Premiums earned 634,962 628,302 Net investment income 448,820 379,411 Fees and re-imbursements 29,239 20,168 Net realized gains (losses) 14,094 (6,319) Net gains (losses) on derivative instruments and foreign exchange 1,356 415 -------------------------- Total insurance revenues 1,128,471 1,021,977 Expenses: Losses and loss adjustment 60,835 63,355 Amortization of deferred acquisition costs 50,162 49,636 Operating 110,071 100,377 Interest expense 53,929 19,867 --------------------------- Total insurance expenses 274,997 233,235 Insurance income 853,474 788,742 --------------------------- Investment management services Revenues 860,978 618,449 Net realized gains (losses) 5,594 3,000 Net gains (losses) on derivative instruments and foreign exchange 8,723 41,633 --------------------------- Total investment management services revenues 875,295 663,082 Interest expense 730,472 500,979 Expenses 55,113 51,808 --------------------------- Total investment management services expenses 785,585 552,787 --------------------------- Investment management services income 89,710 110,295 --------------------------- Corporate Net investment income 10,724 17,217 Net realized gains (losses) 2,333 (1,388) Net gains (losses) on derivative instruments and foreign exchange 446 200 Interest expense 60,709 66,379 Corporate expenses 11,144 92,350 --------------------------- Corporate loss (58,350) (142,700) --------------------------- Income from continuing operations before income taxes 884,834 756,337 Provision for income taxes 248,855 227,381 --------------------------- Income from continuing operations 635,979 528,956 Income (loss) from discontinued operations, net of tax 2,324 (691) --------------------------- Net income $ 638,303 $ 528,265 =========================== Net income per common share: Basic $ 4.81 $ 3.93 Diluted $ 4.67 $ 3.84 Weighted-average number of common shares outstanding: Basic 132,759,336 134,589,606 Diluted 136,676,944 137,722,142 MBIA INC. AND SUBSIDIARIES Reconciliation of Adjusted Direct Premiums to Gross Premiums Written - ---------------------------------------------------------------------- (dollars in millions) Three Months Ended Nine Months Ended September 30 September 30 ------------------ --------------- 2006 2005 2006 2005 -------- -------- ------- ------- Adjusted direct premiums (1) $210.1 $233.2 $609.6 $879.8 Adjusted assumed premiums 5.7 0.7 5.7 1.7 -------- -------- ------- ------- Adjusted gross premiums 215.8 233.9 615.3 881.5 Present value of estimated future installment premiums (2) (157.0) (148.2) (381.3) (524.8) -------- -------- ------- ------- Gross upfront premiums written 58.8 85.7 234.0 356.7 Gross installment premiums written 143.4 135.3 392.5 395.9 -------- -------- ------- ------- Gross premiums written $202.2 $221.0 $626.5 $752.6 ======== ======== ======= ======= (1)A non-GAAP measure. (2)At September 30, 2006, June 30, 2006 and March 31, 2006 the discount rate was 5.03%, 5.00% and 5.02%, repsectively, and at September 30, 2005, June 30, 2005 and March 31, 2005 the discount rate was 4.99%, 4.99% and 4.84%, respectively. Components of Net Income per Share - ---------------------------------- Three Months Ended Nine Months Ended September 30 September 30 ------------------ ----------------- 2006 2005 2006 2005 --------- ------- -------- -------- Net income $1.59 $1.04 $4.67 $3.84 Income (loss) from discontinued operations 0.01 (0.01) 0.02 (0.01) --------- ------- -------- -------- Net income from continuing operations 1.58 1.05 4.65 3.84 Penalties and disgorgement -- (0.53) -- (0.52) Net realized gains (losses) 0.02 (0.03) 0.10 (0.02) Net gains on derivative instruments and foreign exchange 0.00 0.21 0.05 0.20 --------- ------- -------- -------- Operating income (1) $1.55 $1.39 $4.50 $4.18 ========= ======= ======== ======== (1)A non-GAAP measure. MBIA INC. AND SUBSIDIARIES Components of Adjusted Book Value per Share - ------------------------------------------- September 30, 2006 December 31, 2005 ------------------- ------------------ Book value $52.35 $49.17 After-tax value of: Deferred premium revenue 14.87 15.45 Prepaid reinsurance premiums (1.80) (1.98) Deferred acquisition costs (2.11) (2.07) ------------ ----------- Net deferred premium revenue 10.96 11.40 Present value of installment premiums (1) 10.45 10.53 Asset/liability products adjustment 3.08 2.40 Loss provision (2) (2.82) (2.88) ------- ------- Adjusted book value (3) $74.02 $70.62 ======= ======= (1)At September 30, 2006 and December 31, 2005 the discount rate was 5.03% and 5.00%, 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, 2006 December 31, 2005 ------------------- ------------------ Capital and surplus $ 4,460.6 $ 3,800.4 Contingency reserve 2,433.8 2,769.0 ----------------- ------------------ Capital base 6,894.4 6,569.4 Unearned premium reserve 3,435.0 3,508.1 Present value of installment premiums (1) 2,167.7 2,171.1 ----------------- ------------------ Premium resources 5,602.7 5,679.2 Loss and loss adjustment expense reserves 326.4 317.8 Soft capital credit facilities 850.0 850.0 ----------------- ------------------ Total claims-paying resources $ 13,673.5 $ 13,416.4 ================= ================== Net debt service outstanding $ 900,349.8 $ 889,018.9 Capital ratio (2) 131:1 135:1 Claims-paying ratio (3) 77:1 78:1 (1)At September 30, 2006 and December 31, 2005 the discount rate was 5.03% and 5.00%, 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 -----END PRIVACY-ENHANCED MESSAGE-----