Custom Search

Monday, May 12, 2008

MBIA Reports Scary Earnings; NEGATIVE Revenues

MBIA Posts Loss of $2.4 Billion as CDO Slump Deepens (Update1): “MBIA Inc., the bond insurer that lost 87 percent of its market value in the past year, posted a net loss of $2.4 billion as the slump in mortgage securities deepened.

The first-quarter net loss was $13.03 a share, compared with a profit of $198.6 million, or $1.46 a share, a year earlier, Armonk, New York-based MBIA said in a regulatory filing today. Unrealized losses from derivatives were $3.58 billion.”

Let’s put these numbers into context. MBIA (MBI) closed at $9.43 on Friday, giving the company a market capitalization of $2.23 billion. The loss of $2.4 billion this quarter alone is greater than the value of the entire company…

Now get this… because this is rather cool: REVENUE for the quarter was NEGATIVE. Yeah. You read that correctly. Revenue was -$2.96 billion. How could this even be possible? Well, as net premiums written fell by nearly half and losses on insured derivatives soared to $3.58 billion, MBI had to record NEGATIVE revenues on a $668 billion portfolio.

Somebody tell me how do you make money when your revenues are negative? I think I skipped that class, or killed those particular brain cells out at the bar.

An executive summary and discussion of MBIA's results and balance sheet position follow:

-- Credit Impairment: During the first quarter, MBIA conducted a thorough analysis of its housing-related exposures in order to update its estimates for impairments and loss reserves. As a result of this review, the Company recognized a total of $1.34 billion of pre-tax impairments and loss reserves on its housing-related insured portfolio in the quarter, bringing the cumulative total of incurred pre-tax credit losses for housing-related exposures to $2.15 billion over the past two quarters. The impairments and loss reserves are expressed on a net present value basis and are expected to be paid out over the next four years for direct and multi-sector CDO squared exposures, and up to 30 to 40 years for the Company's insured multi-sector collateralized debt obligations ("CDOs"). The Company does not anticipate material additional impairment for these exposures in the foreseeable future, unless the U.S. housing and mortgage markets perform materially worse than MBIA is projecting.

My Comment: “MBIA had insured bonds backed by home equity lines of credit and closed-end second loans totaling $21 billion at the end of 2007, according to the company's Web site. Almost $9 billion of those securities were originated in 2007.”

Equity lines of credit and second loans are worth exactly ZERO on any home that goes into foreclosure. The guys holding the first mortgage end up taking about a 40% haircut now. That $21 billion in loans that they’ve insured are worth a lot less than they think they are, especially since $9 billion or 42.9% of that was written in 2007 just after home prices PEAKED. I also think it is safe to assume that the U.S. housing and mortgage markets will perform materially worse than MBIA is projecting.

-- Capital Position and Liquidity: MBIA successfully raised $2.6 billion in the quarter to support its Triple-A ratings, the most raised by any monoline insurer in the current troubled capital market. With the elimination of its shareholder dividend, the holding company, MBIA Inc., has enough cash on hand to cover a multiple of its required cash outflows in 2008, and the asset/liability management business has sufficient cash and assets to cover all of its maturing liabilities in 2008 and beyond. MBIA Insurance Corporation's liquid assets and operating cash flow are expected to be more than sufficient to cover both current and anticipated future claims payments.

My Comment: MBIA Inc, the parent company, is holding the last $1.1 billion raised. This means that the executives can keep paying themselves while MBIA the insurance unit goes bust.
MBIA Keeps $1.1 Billion, Raised to Save Insurer AAA (Update1): “MBIA was criticized by Fitch Ratings, which said on April 4 the decision raised the risk that the cash may not end up as capital for the insurance unit as MBIA had promised. While Fitch downgraded MBIA to AA from AAA, Moody's Investors Service and Standard & Poor's cited the capital raising as a reason for keeping the insurance unit at AAA.”

Maybe NOT? Ha! Guaranteed WON’T. This is how the big swinging dicks make sure they get paid. If you’ve got a pension, YOU’RE most probably the sucker taking the hit. If you see any MBIA executives or accountants in the street, think of the FinancialNinja and drop quick them real quick for me.

“Regulators are waiting for MBIA to contribute the funds, according to New York State Insurance Department Deputy Superintendent for Property and Capital Markets Michael Moriarty.

“It was never our expectation that the funds raised would go anywhere other than to the insurance subsidiary,” Moriarty said. MBIA spokesman Jim McCarthy declined to comment.”

That was the plan all along. Golden parachutes for the guys who messed it all up from their giant corner offices, and pink sheets for the innocents crammed into their cubicles who just followed orders and executed corporate policy.

-- Ratings Position: In late February, Standard & Poor's and Moody's affirmed MBIA's Triple-A ratings with negative outlooks. At year-end 2007, the Company exceeded Standard & Poor's target capital requirement by $400 million and met Moody's minimum requirements for a Triple-A rating but fellshort of Moody's target capital requirement by $1.7 billion. MBIA expects to meet this target over the next two quarters.

My Comment: Nobody cares about the Triple-A rating anymore. Standard & Poor's and Moody's have squandered all credibility. Even Warren Buffet couldn’t take it anymore.

Buffett Says Bond Insurers Don't Deserve AAA Rating (Update3): “Billionaire Warren Buffett, whose Berkshire Hathaway Inc. has begun competing with MBIA Inc. and Ambac Financial Group Inc. to insure municipal bonds, said some rivals don't deserve their AAA credit ratings.

Credit-rating firms shouldn't be giving top grades to bond insurers that borrow money at 14 percent or whose stock has dropped 95 percent, Buffett said at a press conference today in Omaha, Nebraska, a day after Berkshire's annual meeting.”

-- New Business Generation: The Company had very little new business production until its Triple-A ratings were affirmed with negative outlooks by S&P and Moody's in the last week of February. Since March 1, the Company wrapped 24 new public finance issues (primary market) totaling $9.1 million in Adjusted Direct Premium, or ADP, (a non-GAAP measure), and insured 222 bonds previously purchased by investors (secondary market) for a total of $17.9 million of ADP. The Company expects continued growth in opportunities to write profitable new business.

My Comment: Hahahaha. New business was $9.1 million plus $17.9 million. That will NOT feed the monster $668 billion portfolio that MBIA currently holds. New business wont’ be there to provide the cashflow to cover the losses on their existing portfolio. With solid, stable companies, such as Warren Buffett’s new insurer, why would anybody go to MBIA? MBIA would have to cut prices drastically to entice anybody. Translation: They would have to under price risk significantly to land new business… which is exactly what got them into this mess.

Its over. MBIA is dead.

-- Investment Management Services: MBIA's asset management business continued its new business activities in the quarter, growing its external fee-for-service advisory business by almost $1 billion in assets under management. It also continued to raise funds in the asset/liability management business at advantageous pricing levels, issuing approximately $700 million of investment agreements, signaling continuing strong demand for this product. Total average assets under management for the first quarter, including conduit assets, were $64.6 billion, down 1 percent from $65.4 billion for the first quarter of 2007.

My Comment: Total average assets under management continue to shrink, despite all the talk of growth.

-- Unrealized Losses: MBIA reported a pre-tax unrealized loss on insured credit derivatives (mark-to-market) of $3.6 billion in the first quarter, which includes $0.8 billion of credit impairments and which reflects the net present value basis of the amount of the mark-to-market that MBIA expects to pay as actual losses. While attention-getting, the mark-to-market loss is far less reflective of MBIA's business than credit impairments, and does not accurately indicate actual or expected losses. In addition, mark-to-market losses, except for the impairment, do not affect the insurance company's statutory capital or rating agency capital requirements. Unlike financial institutions with tradable, liquid portfolios of derivative assets and liabilities, MBIA's contingent insurance liabilities are not typically tradable, and are not subject to acceleration or collateralization. Fair value accounting, however, results in some inappropriate comparisons of MBIA's position to those of other financial institutions who must transact or collateralize at current market values or who could be subject to accelerated payments. This causes confusion about the true impact of mark-to-market losses on the value of the Company in the current environment. The Company does not expect the full amount of cumulative mark-to-market losses to be realized, except to the extent of the $1.0 billion in impairments estimated to date.

My Comment: What are they talking even talking about? They marked-to-market when things were good and when it pumped up their balance sheet. Now that they have to mark-to-market when things are bad ‘it doesn’t matter’ and ‘isn’t relevant’. Bullshit.

-- Disclosures: In order to further facilitate investors' understanding of its insured portfolio, the Company is substantially increasing its disclosures, including providing sensitivity analysis around key assumptions. With respect to estimates of loss due to the housing downturn, MBIA is providing certain stress estimates as well as the expected amount of losses as recorded in the financial statements.

My Comment: After a 90% drop in stock price management decides to become more TRANSPARENT. Brilliant.

-- Book Value: Financial institutions are typically valued by reference to their book values, as investors' confidence in the accounting for earnings ebbs and flows. However, in estimating MBIA's economic value, management believes that investors should adjust MBIA's GAAP book value to eliminate the impact of uneconomic factors like the unimpaired portion of the mark-to-market. MBIA's book value excluding the mark-to-market loss, but including all credit impairments, is approximately $24 per share. Adjustments, primarily representing deferred and contracted future premiums, net of a loss provision, add $18 to book value per share. With these adjustments, Analytical Adjusted Book Value(a non-GAAP measure) would be approximately $42 per share, and provides an economic basis for investors to reach their own conclusions about the fair value of the Company.

My Comment: Book value INCULDING mark-to-market losses is $8.70 for March 31st, 2008, down from $29.16 for December 31st, 2007. Mark-to-market is mark-to-market. When MBIA writes these values back up, THEN that will be reflected in book value. Analytical Adjusted Book Value is a non-GAAP measure for a reason. It is NOT a generally accepted accounting principle for the simple reason that it can be ADJUSTED as needed.

Monoline Related Posts:
Quiet, Sneaky Little Downgrades: CFC, MBI
Ambac ‘Bailout’: Why Bother?
Ambac Bailout: The Wheels Come Off
Monoline Bailouts: The Great Circle Jerk

Related Posts:
Fragile Banks: More Bailouts, More Capital
The Race To The Bottom Accelerates
The South Sea Bubble and Today’s Central Banks: FRB, BOE, ECB
Dammit, Why Won’t You Learn?
The TED Spread, LIBOR and EURIBOR = Scary Bad
Mortgage Insurers (Quietly) Downgraded: CDS Spreads Scream Trouble





26 comments:

Sudipta Das said...

I am going to pursue a career in Criminal Justice, and I’m looking to get a government grant. Does anyone know a website that can help me out and offer the assistance I need to pursue my career? I’m sure there are websites that don’t require any money and are willing to help people like me out. Is there a website that I can go to for a free government grant without paying for anything?


Sudipta Das
______________

grants for women

Free Grant Kit said...

Thanks for the info, you can also find Government Grants here,
or Free Grant Kit here,
Free Grant Kit Grant Kit

Federal Government Grants said...

Great Blog For Grants Free government grants here,
or more Free grant kit here

miyuki said...

chaussures pumaquelle paire de chaussures pour hommes choisir?!? La réponse est toute simple:chaussures nike une paire de baskets en partie vernies. du 17ème au 5ème rang, qui lui offre une place dans un top 5 largement tn requindominé par les sites de vente de produits high-tech. Le site de réservation d'hôtels Bookings.com gagne pour sa part 47 places et atteint le 8ème rang.

miyuki said...

mens clothing men's sweate, cheapcolumbia jackets, lacoste sweater, ralph lauren polo shirts,ski clothing. Free Shipping, PayPal Payment. Enjoy your shopping experience on mensclothingstore.Usnike max shoes, one of the world's three major brands of Puma shoes, will build its factory in Lanshan county next year, Hunan province. Taiwan Diamond Group of Footwear production chooses its base in Lanshan county, which is one of top 500 companies in the world.

miyuki said...

ralph Lauren polo shirts , Lacoste Polo Shirts, Burberry Polo Shirts.wholesale Lacoste polo shirts and polo ralph laurenwith great price. clothingol.com offers lot of 10 lacoste polo shirts and lot of 20 cheap polo shirts. clothingol.com offers classic fit polo shirts. polo clothingnike air max ltd is divided into sports life and NIKE NIKENIKE air shoes sports mark for a big hook (swoosh)NIKE life (NSW) mark is a hook NIKE swoosh (English) +Sometimes life will sell NIKE sports channel,cheap puma mens shoes , enjoy shopping!

miyuki said...

baskets puma future cat low engine noirBon March¨¦ Chaussure Sports Shop:puma future low catChaussure Puma Femme,Chaussure Puma Homme,Chaussure Nike Femme,Chaussure Nike homme,future cat low engineChaussure Sport et plus. Livraison Rapide.Paypal

miyuki said...

Paypal payment. Free shipping. cheap ugg boots ,UGG Online Store,australian cheap ugg boots ,ugg boots australia,UGG Online Store,black ugg boots,ugg boots on sale,cheap uggs. Very Cheap!Vente en ligne de discount chaussure sport : chaussure puma, chaussure nike, chaussure tn, nike tn,nike requin, puma future cat, nike shox torch, ugg boots et plus.

Personal Grants To Pay Off Debt said...

Great Blog For Grants Free government grants here,
or more Free grant kit here,For
College Grants click on link,as for
small business grants stop here.

how to get tall said...

Very nice blog

replica rolex said...

$75 Replica Rolex Watches sale, Our site provides Rolex replica, replica Rolex Watches, replica breitling, replica Cartier, replica Omega, Tag Heuer Watches. . .more than 100 famous rolex brands"
rolex air king
rolex datejust
rolex day date
rolex daytona
rolex gmt
rolex submariner
rolex yachtmaster
a lange sohne watches
alain silberstein watches
bell ross watches
breguet watches
breitling watches
bvlgari watches
cartier watches
omega watches
patek philippe watches
ロレックスレプリカ
ロレックスコピー

Sneakers hobbies said...

nice post!!
We do kinds of casual clothing wholesale online, welcome to visit!!
winter clothing
winter jackets
winter clothes
ski jackets
north face sale
discount north face jackets
north face coats
men's down jackets
cotton polo shirts
polo shirts
cheap polo shirts
ralph lauren polo shirts
discount polo shirts
polo shirts wholesale
columbia jackets
the north face jackets
columbia sportswear jackets

Coetsee said...

Affiliate Marketing is a performance based sales technique used by companies to expand their reach into the internet at low costs. This commission based program allows affiliate marketers to place ads on their websites or other advertising efforts such as email distribution in exchange for payment of a small commission when a sale results.

www.onlineuniversalwork.com

longge said...

louis vuitton handbags
brash abridged the bulk of international, but aswell makes the Louis vuitton bags
actualization absolute adapted from acclimatized brands, even louis vuitton
to match, can not bristles the lv"
out of the actualization the affectionate of takes away people's temperament.

janewangleilei said...

abercrombie and fitch
You can have a look at it.
abercrombie & fitch
beautiful!
Abercrombie and fitch outlet
You can have a look at it.
jordan shoes
Wonderful!
coats & jackets

Anonymous said...

What they acclimated for their louis vuitton wallets
are not covering or added accepted materials. There are abounding humans accustomed louis vuitton wallet
with them for louis vuitton replica handbags
of every kind.

dingdang said...

One of the ultimate appearance accessories in the apple is the hermes handbag
. Why is the Kelly bag
such a account of elitism?One of the affidavit is due to the superior of the Kelly bags
.
Currently supports and how to use open-source tools to construct a GOMER PYLE
that can play on almost every GOMER PYLE DVD
player. A GOMER PYLE DVD COLLECTION
is comprised of one or more video title sets.

dingdang said...

Tiffany co
produces their products with the same techniques, and high quality materials make Tiffany earrings
stand out above cheap imitations. Although original silver earrings
works can be expensive collector’s items, Tiffany necklaces
are affordable alternatives that are works of art in their own right.
Before buying lida
, you will have to consult with your doctor first. Ephedra was acclimated by lots of accepted lida daidaihua
aback in the day. daidaihua
is based on ancient Chinese formula. The lida slimming
stick to the basic theme. slimming capsule
is purely natural as it is made from plants no acids. slimming capsules
burns our fat naturally.

Sky said...

ugg boots are superior affidavit ugg that are not alone fashionable, they are aswell practical. Affidavit uggs abrasion well, are comfortable warm, and accomplish your anxiety feel good. They accept been beat for a abounding ancestors for a reason. People wouldn't go to the agitation authoritative and cutting these ugg slippers for so continued if they weren't good.Sheepskin ugg slippers boots and boots accept been about for a continued time because they are applied but are they cool?

Anonymous said...

watch next three days movie
watch tangled movie
watch red dawn free
love and other drugs online
watch faster 2010
watch burlesque
watch i love you phillip morris
wach chronicles of narnia free

Anonymous said...

How To Maintain And Store Your pandora bracelet jewellery As one of the most professional Pandora jewellery online stores, we offer our honorable customers a variety of Pandora jewellery. When it comes to fashion, women are constantly experimenting with their pandora jewellery charms, clothes and accessories. pandora beads jewellery online holds a lot of appeal to the fashionable woman because it is ethnic and speaks of a certain traditional culture and native language.
Fine workmanship, exquisite material, authentic pandora bead and Pandora charms are guaranteed by our website. This has madepandora silverthe most sought after jewellery in the world. When you own a huge collection of cheap pandora, it is a matter of pride, but when it comes to maintaining the collection, many women just don't know how to go about it.pandora beads will be your best choice for choosing pandora australia Jewelry!It is a delicate task that requires a lot of patience and knowledge.Pandora bracelets are special for their unique patented threaded system. Each bracelet is divided into three sections by small charms. If you are careless, you could end up with a pandora jewelry jewellery Austriala collection that is tarnished.
Each Pandora charms are equipped with interior a thread, which allows you to screw individual charms onto any bracelet segment in the order you desire. The beads move freely and rotate slightly with your wrist's movement, creating an undeniable eye catching and stunning effect.More than any other type of jewellery online uk, tribal jewellery needs a lot of care and attention. There are different kinds of tribal jewellery and each needs special care. They are made of metals like silver, copper, bronze, bone, resin and so on.

comprar puertas metalicas said...

Really helpful data, lots of thanks for the post.

cameo zhang said...

The planet PANDORA charms cheap ( space ) A new Track record
The planet pandora is renowned for it really is graceful overlook towards old classic elegance pendant (offered found in Late 90s). And yet lurking behind his or her path becoming a world-renowned rings clients are a painless report of one\'s Danish goldsmith with the exceptional lady eager to show the efforts considering the environment.

cameo zhang said...

For a way clearly these page, \"Addicted towards Charm just for Necklace and also Presently Exactly Looking for the best Charms\" ended up being gained I reckon it will be pretty sure there presently exist loads of you in that respect there concentrating on the same being addicted style recovering. For that reason, Let me proceed to solution that a great many of individuals give food an individual\'s desire by just amassing The planet Beads Pandora and charms. I will not pin the blame on most people, because you might and

price per head call center said...

Nice post once again. Thanks for sharing this kind of informative post.

Anonymous said...

This is done by attaching charms to the charm carrier and threading it on to almost any chain or THOMAS SABO Jewlery to transform it. Heavily influenced by rock and punk music, Thomas Sabo's personal style is reflected in his collections featuring skulls, tusks and snakes. Other collections reflect a more hippie vibe with Ban The Bombsymbols, camper vans and coloured sunglasses charms and pendants.THOMAS SABO is not afraid to push the boundaries and bring new, innovative and exciting designs to his collections, such as the green stone set frog on a pearl ring or the butterfly pendant with a skull face. It is this daring experimentation and the introduction of ideas different to the norm that makes the collections so popular and sought after. Design your own jewellery with the THOMAS SABO Charm . Steffans are official stockists of THOMAS SABO Jewellery is recognised the world over for producing jewellery that has a flair for detail and keeps an eye on design, trends and fashion-forward pop culture. Thomas Sabo Necklaces is now popular all over the world, with many a celebrity fan and ambassador to its name, including Katy Perry, Blue, Beth Ditto and Olivia Palermo to name but a few.