MBIA Inc. Reports Second Quarter 2018 Financial Results
Book value per share was
The Company also reported Adjusted Net Loss (a non-GAAP measure defined in the attached Explanation of Non-GAAP Financial Measures) of
Adjusted Book Value (ABV) per share (a non-GAAP measure defined in the attached Explanation of Non-GAAP Financial Measures) was
Adjusted Net Income (Loss) and ABV per share provide investors with views of the Company’s operating results that management uses in measuring financial performance. Reconciliations of ABV per share to book value per share, and Adjusted Net Income (Loss) to net income, calculated in accordance with GAAP, are attached.
Statement from Company Representative
Year-to-Date Results
The Company recorded a consolidated GAAP net loss of
The Company’s non-GAAP Adjusted Net Loss for the six months ended
As of
There were no purchases of
National had statutory capital of
The statutory capital of
Conference Call
The Company will host a webcast and conference call for investors tomorrow,
The dial-in number for the call is (877) 694-4769 in the
A replay of the conference call will become available approximately two hours after the end of the call on
Forward-Looking Statements
This release includes statements that are not historical or current facts and are “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words “believe,, “anticipate,” “project,” “plan,” “expect,” “estimate,” “intend,” “will,” “will likely result,” “looking forward,” or “will continue,” and similar expressions identify forward-looking statements. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected, including, among other factors, the possibility that
Explanation of Non-GAAP Financial Measures
The following are explanations of why the Company believes that the non-GAAP financial measures used in this press release, which serve to supplement GAAP information, are meaningful to investors.
Adjusted Book Value: Adjusted Book Value (ABV), a non-GAAP measure, is used by the Company to supplement its analysis of GAAP book value. The Company uses ABV as a measure of fundamental value and considers the change in ABV an important measure of periodic financial performance. ABV adjusts GAAP book value by removing the GAAP book value amounts for items that are not expected to impact shareholder value and to add in the impact of certain items which the Company believes will be realized in GAAP book value in future periods. The Company has limited such adjustments to those items that it deems to be important to fundamental value and performance and which the likelihood and amount can be reasonably estimated. ABV assumes no new business activity. The Company has presented ABV to allow investors and analysts to evaluate the Company using the same measure that MBIA’s management regularly uses to measure financial performance. ABV is not a substitute for and should not be viewed in isolation from GAAP book value.
ABV per share represents that amount of ABV allocated to each common share outstanding at the measurement date.
Claims-Playing Resources (CPR): CPR is a key measure of the resources available to
Adjusted Net Income (Loss): Adjusted Net Income (Loss) is a useful measurement of performance because it measures income from the Company excluding its international and structured finance insurance segment, which is not part of our ongoing business strategy. Also excluded from Adjusted Net Income (Loss) are investment portfolio realized gains and losses, gains and losses on financial instruments at fair value and foreign exchange, and realized gains and losses on extinguishment of debt. Adjusted Net Income (Loss) eliminates the tax provision (benefit) as a result of the establishment of a full valuation allowance against the Company’s net deferred tax asset in 2017. Trends in the underlying profitability of the Company’s businesses can be more clearly identified without the fluctuating effects of the excluded items previously noted. Adjusted Net Income (Loss) as defined by the Company does not include all revenues and expenses required by GAAP. Adjusted Net Income (Loss) is not a substitute for and should not be viewed in isolation from GAAP net income.
Adjusted Net Income (Loss) per share represents that amount of Adjusted Net Income (Loss) allocated to each fully diluted weighted-average common share outstanding for the measurement period.
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CONSOLIDATED BALANCE SHEETS (Unaudited) |
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(In millions except share and per share amounts) |
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Assets | |||||||||||
Investments: | |||||||||||
Fixed-maturity securities held as available-for-sale, at fair value (amortized cost |
$ | 3,615 | $ | 3,712 | |||||||
Investments carried at fair value | 225 | 200 | |||||||||
Investments pledged as collateral, at fair value (amortized cost |
36 | 148 | |||||||||
Short-term investments, at fair value (amortized cost |
478 | 589 | |||||||||
Other investments (includes investments at fair value of $- and |
1 | 6 | |||||||||
Total investments | 4,355 | 4,655 | |||||||||
Cash and cash equivalents | 179 | 122 | |||||||||
Premiums receivable | 349 | 369 | |||||||||
Deferred acquisition costs | 87 | 95 | |||||||||
Insurance loss recoverable | 1,359 | 511 | |||||||||
Other assets | 167 | 128 | |||||||||
Assets of consolidated variable interest entities: | |||||||||||
Cash | 18 | 24 | |||||||||
Investments held-to-maturity, at amortized cost (fair value |
890 | 890 | |||||||||
Investments carried at fair value | 169 | 182 | |||||||||
Loans receivable at fair value | 683 | 1,679 | |||||||||
Loan repurchase commitments | 415 | 407 | |||||||||
Other assets | 28 | 33 | |||||||||
Total assets | $ | 8,699 | $ | 9,095 | |||||||
Liabilities and Equity | |||||||||||
Liabilities: | |||||||||||
Unearned premium revenue | $ | 678 | $ | 752 | |||||||
Loss and loss adjustment expense reserves | 1,035 | 979 | |||||||||
Long-term debt | 2,184 | 2,121 | |||||||||
Medium-term notes (includes financial instruments carried at fair value of |
761 | 765 | |||||||||
Investment agreements | 312 | 337 | |||||||||
Derivative liabilities | 189 | 262 | |||||||||
Other liabilities | 205 | 165 | |||||||||
Liabilities of consolidated variable interest entities: | |||||||||||
Variable interest entity notes (includes financial instruments carried at fair value of |
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and |
2,220 | 2,289 | |||||||||
Total liabilities | 7,584 | 7,670 | |||||||||
Equity: | |||||||||||
Preferred stock, par value |
- | - | |||||||||
Common stock, par value |
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and 283,717,973 | 284 | 284 | |||||||||
Additional paid-in capital | 3,154 | 3,171 | |||||||||
Retained earnings | 1,018 | 1,095 | |||||||||
Accumulated other comprehensive income (loss), net of tax of |
(255 | ) | (19 | ) | |||||||
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(3,098 | ) | (3,118 | ) | |||||||
Total shareholders' equity of |
1,103 | 1,413 | |||||||||
Preferred stock of subsidiary | 12 | 12 | |||||||||
Total equity | 1,115 | 1,425 | |||||||||
Total liabilities and equity | $ | 8,699 | $ | 9,095 | |||||||
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CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) | ||||||||||||||||||||
(In millions except share and per share amounts) | ||||||||||||||||||||
Three Months Ended |
Six Months Ended |
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2018 | 2017 | 2018 | 2017 | |||||||||||||||||
Revenues: | ||||||||||||||||||||
Premiums earned: | ||||||||||||||||||||
Scheduled premiums earned | $ | 29 | $ | 28 | $ | 52 | $ | 56 | ||||||||||||
Refunding premiums earned | 7 | 16 | 24 | 37 | ||||||||||||||||
Premiums earned (net of ceded premiums | ||||||||||||||||||||
of |
36 | 44 | 76 | 93 | ||||||||||||||||
Net investment income | 34 | 37 | 65 | 89 | ||||||||||||||||
Fees and reimbursements | - | 6 | 6 | 8 | ||||||||||||||||
Change in fair value of insured derivatives: | ||||||||||||||||||||
Realized gains (losses) and other settlements on insured | ||||||||||||||||||||
derivatives | (25 | ) | (3 | ) | (44 | ) | (34 | ) | ||||||||||||
Unrealized gains (losses) on insured derivatives | 18 | 6 | 32 | (16 | ) | |||||||||||||||
Net change in fair value of insured derivatives | (7 | ) | 3 | (12 | ) | (50 | ) | |||||||||||||
Net gains (losses) on financial instruments at fair value and | ||||||||||||||||||||
foreign exchange | 22 | (61 | ) | 13 | (44 | ) | ||||||||||||||
Net investment losses related to other-than-temporary impairments: | ||||||||||||||||||||
Investment losses related to other-than-temporary impairments | - | (54 | ) | - | (54 | ) | ||||||||||||||
Other-than-temporary impairments recognized in accumulated | ||||||||||||||||||||
other comprehensive income (loss) | (1 | ) | 43 | (2 | ) | 41 | ||||||||||||||
Net investment losses related to other-than-temporary | ||||||||||||||||||||
impairments | (1 | ) | (11 | ) | (2 | ) | (13 | ) | ||||||||||||
Net gains (losses) on extinguishment of debt | - | - | - | 8 | ||||||||||||||||
Other net realized gains (losses) | - | 34 | (1 | ) | 37 | |||||||||||||||
Revenues of consolidated variable interest entities: | ||||||||||||||||||||
Net investment income | 8 | 6 | 16 | 12 | ||||||||||||||||
Net gains (losses) on financial instruments at fair value and | ||||||||||||||||||||
foreign exchange | 13 | 14 | 17 | (19 | ) | |||||||||||||||
Other net realized gains (losses) | (93 | ) | - | (93 | ) | 28 | ||||||||||||||
Total revenues | 12 | 72 | 85 | 149 | ||||||||||||||||
Expenses: | ||||||||||||||||||||
Losses and loss adjustment | 59 | 170 | 131 | 264 | ||||||||||||||||
Amortization of deferred acquisition costs | 4 | 8 | 8 | 15 | ||||||||||||||||
Operating | 19 | 32 | 39 | 61 | ||||||||||||||||
Interest | 52 | 50 | 103 | 98 | ||||||||||||||||
Expenses of consolidated variable interest entities: | ||||||||||||||||||||
Operating | 3 | 3 | 5 | 5 | ||||||||||||||||
Interest | 21 | 19 | 41 | 36 | ||||||||||||||||
Total expenses | 158 | 282 | 327 | 479 | ||||||||||||||||
Income (loss) before income taxes | (146 | ) | (210 | ) | (242 | ) | (330 | ) | ||||||||||||
Provision (benefit) for income taxes | - | 1,019 | 2 | 971 | ||||||||||||||||
Net income (loss) | $ | (146 | ) | $ | (1,229 | ) | $ | (244 | ) | $ | (1,301 | ) | ||||||||
Net income (loss) per common share: | ||||||||||||||||||||
Basic | $ | (1.64 | ) | $ | (9.78 | ) | $ | (2.75 | ) | $ | (10.13 | ) | ||||||||
Diluted | $ | (1.64 | ) | $ | (9.78 | ) | $ | (2.75 | ) | $ | (10.13 | ) | ||||||||
Weighted average number of common shares outstanding: | ||||||||||||||||||||
Basic | 89,131,760 | 125,653,189 | 88,865,272 | 128,511,897 | ||||||||||||||||
Diluted | 89,131,760 | 125,653,189 | 88,865,272 | 128,511,897 | ||||||||||||||||
ADJUSTED NET INCOME (LOSS) RECONCILIATION(1) |
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(In millions except per share amounts) | ||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||
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2018 | 2017 | 2018 | 2017 | |||||||||||||||
Net income (loss) | $ | (146 | ) | $ | (1,229 | ) | $ | (244 | ) | $ | (1,301 | ) | ||||||
Less: adjusted net income (loss) adjustments: | ||||||||||||||||||
Income (loss) before income taxes of the international and structured | ||||||||||||||||||
finance insurance segment and eliminations | (120 | ) | (20 | ) | (156 | ) | (185 | ) | ||||||||||
Adjustments to income before income taxes of the |
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insurance and corporate segments: | ||||||||||||||||||
Mark-to-market gains (losses) on financial instruments(2) | 5 | (16 | ) | 27 | 16 | |||||||||||||
Foreign exchange gains (losses)(2) | 26 | (32 | ) | 13 | (39 | ) | ||||||||||||
Net gains (losses) on sales of investments(2) | (6 | ) | 13 | (11 | ) | 15 | ||||||||||||
Net investment losses related to OTTI | (1 | ) | (11 | ) | (2 | ) | (13 | ) | ||||||||||
Net gains (losses) on extinguishment of debt | - | - | - | 8 | ||||||||||||||
Other net realized gains (losses) | - | (1 | ) | (2 | ) | (2 | ) | |||||||||||
Adjusted net income adjustment to the (provision) benefit for | ||||||||||||||||||
income tax(3) | 1 | (1,023 | ) | (1 | ) | (971 | ) | |||||||||||
Adjusted net income (loss) | $ | (51 | ) | $ | (139 | ) | $ | (112 | ) | $ | (130 | ) | ||||||
Adjusted net income (loss) per diluted common share | $ | (0.58 | ) | $ | (1.12 | ) | $ | (1.27 | ) | $ | (1.02 | ) | ||||||
(1) - A non-GAAP measure; please see Explanation of non-GAAP Financial Measures. |
(2) - Reported within “Net gains (losses) on financial instruments at fair value and foreign exchange” on the Company’s consolidated statements of operations. |
(3) - Reported within “Provision (benefit) for income taxes” on the Company’s consolidated statements of operations. |
COMPONENTS OF ADJUSTED BOOK VALUE PER SHARE(1)(2) |
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As of |
As of |
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Reported Book Value per Share | $ | 12.16 | $ | 15.44 | |||
Book value per share adjustments: | |||||||
Remove negative book value of |
10.56 | 8.84 | |||||
Remove net unrealized (gains) losses on available-for-sale securities included in | |||||||
other comprehensive income (loss) | 0.63 | 0.26 | |||||
Add net unearned premium revenue in excess of expected losses (4)(5) | 3.89 | 4.23 | |||||
Total book value per share adjustments | 15.08 | 13.33 | |||||
Adjusted book value per share | $ | 27.24 | $ | 28.77 | |||
Shares outstanding in millions | 90.7 | 91.5 |
(1) | A non-GAAP measure; please see Explanation of Non-GAAP Financial Measures. | |
(2) | We have modified our calculation of ABV as of |
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The net unearned premium revenue component of ABV has been adjusted to remove the amount of unearned premium revenue that is used in | ||
the GAAP calculation of our insurance loss reserves. | ||
(3) | The book value of the |
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reversed exclude all deferred taxes available to |
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(4) | The discount rate on financial guarantee installment premiums was the risk-free rate as defined by GAAP for financial guarantee insurance | |
contracts. | ||
(5) | The amounts consist of financial guarantee premiums in excess of expected losses, net of the related deferred acquisition costs. | |
INSURANCE OPERATIONS | ||||||||||
Selected Financial Data Computed on a Statutory Basis |
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(Dollars in millions) | ||||||||||
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Policyholders' surplus | $ | 2,105 | $ | 2,166 | ||||||
Contingency reserves | 561 | 594 | ||||||||
Statutory capital | 2,666 | 2,760 | ||||||||
Unearned premiums | 543 | 585 | ||||||||
Present value of installment premiums (1) | 162 | 164 | ||||||||
Premium resources (2) | 705 | 749 | ||||||||
Net loss and loss adjustment expense reserves (1) | 250 | 227 | ||||||||
Salvage reserves | 430 | 387 | ||||||||
Gross loss and loss adjustment expense reserves | 680 | 614 | ||||||||
Total claims-paying resources | $ | 4,051 | $ | 4,123 | ||||||
Net debt service outstanding | $ | 118,158 | $ | 129,668 | ||||||
Capital ratio (3) | 44:1 | 47:1 | ||||||||
Claims-paying ratio (4) | 30:1 | 33:1 | ||||||||
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Policyholders’ surplus | $ | 275 | $ | 237 | ||||||
Contingency reserves | 214 | 227 | ||||||||
Statutory capital | 489 | 464 | ||||||||
Unearned premiums | 177 | 195 | ||||||||
Present value of installment premiums (5) (7) |
176 | 192 | ||||||||
Premium resources (2) |
353 | 387 | ||||||||
Net loss and loss adjustment expense reserves (5) | (855 | ) | (792 | ) | ||||||
Salvage reserves (6) | 1,419 | 1,428 | ||||||||
Gross loss and loss adjustment expense reserves | 564 | 636 | ||||||||
Total claims-paying resources | $ | 1,406 | $ | 1,487 | ||||||
Net debt service outstanding | $ | 18,501 | $ | 20,151 | ||||||
Capital ratio (3) | 38:1 | 43:1 | ||||||||
Claims-paying ratio (4) | 13:1 | 14:1 | ||||||||
(1) | Calculated using a discount rate of 3.25% as of |
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(2) | Includes financial guarantee and insured credit derivative related premiums. | |
(3) | Net debt service outstanding divided by statutory capital. | |
(4) | Net debt service outstanding divided by the sum of statutory capital, unearned premium reserve (after-tax), present | |
value of installment premiums (after-tax), net loss and loss adjustment expense reserves and salvage reserves. | ||
(5) | Calculated using a discount rate of 5.20% as of |
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(6) | This amount primarily consists of expected recoveries related to the Company's excess spread, put-backs and CDOs. | |
(7) | Based on the Company's estimate of the remaining life for its insured exposures. |
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Kingstone Announces 2018 Second Quarter Financial Results; Net income Rises 10% on Premium Growth of 21%
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