-----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, H8iQNQDi8ui1HjSTjvbzq4SUgLgpynY74nTrhfgQWcRsV5bUpFXZQoeI7M7eri0Y rW3FhIehFBdCMwn+ytOuwQ== 0001157523-04-007271.txt : 20040803 0001157523-04-007271.hdr.sgml : 20040803 20040803121205 ACCESSION NUMBER: 0001157523-04-007271 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20040803 ITEM INFORMATION: FILED AS OF DATE: 20040803 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: 04947335 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 a4694284.txt MBIA 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): August 3, 2004 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 (Addresses of principal executive offices) (Zip or Postal Codes) Registrant's telephone number in the United States, including area code: (914) 273-4545 - -------------------------------------------------------------------------------- Table of Contents - ----------------- Item 12. Results of Operations and Financial Condition SIGNATURE EXHIBIT INDEX Exhibit 99.1 PRESS RELEASE Item 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION The following information, including the Exhibit to this Form 8-K, is being furnished pursuant to Item 12 - Results of Operations and Financial Condition of Form 8-K. 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. On August 3, 2004, MBIA Inc. issued a press release announcing its results for the three months ended June 30, 2004. A copy of the press release is attached as Exhibit 99.1 to this Form 8-K and incorporated by reference to this Item 12 as if fully set forth herein. SIGNATURE 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: August 3, 2004 EXHIBIT INDEX TO CURRENT REPORT ON FORM 8-K Dated August 3, 2004 Exhibit 99.1 Press Release issued by MBIA Inc. dated August 3, 2004. EX-99.1 2 a4694284ex99.txt EXHIBIT 99.1 PRESS RELEASE Exhibit 99.1 MBIA Inc. Reports 5 Percent Decrease in First Half Net Income Per Share ARMONK, N.Y.--(BUSINESS WIRE)--Aug. 3, 2004--MBIA Inc. (NYSE: MBI), the holding company for MBIA Insurance Corporation, reported today that diluted earnings per share decreased 5 percent in the first six months of 2004 to $2.90 from $3.04 in last year's first half. Net income for the first half of 2004 was $424.7 million compared with $441.2 million in the same period last year, a 4 percent decrease. The decrease was a result of small mark-to-market net unrealized gains on MBIA's derivative exposure recorded for the first half of 2004 compared with much larger net unrealized gains for the comparable period of 2003. Excluding the effects of the net unrealized gains, net income for the first six months of 2004 was $423.9 million compared to $374.0 million for the first half of 2003, a 13 percent increase. Second quarter diluted earnings per share decreased 2 percent to $1.48 from $1.51 in last year's second quarter. Net income for the second quarter was $217.1 million compared to $217.9 million in last year's second quarter. Excluding the effects of the mark-to-market net unrealized gains, net income for the second quarter of 2004 was $209.3 million, a 10 percent increase over the second quarter of 2003. Diluted earnings per share information - ---------------------------------------- Three Months Six Months Ended Ended June 30 June 30 ------------------------- 2004 2003 2004 2003 ------------------------- Net income $1.48 $1.51 $2.90 $3.04 Income from discontinued operations 0.02 0.00 0.02 0.01 ------------------------- Net income from continuing operations 1.47 1.50 2.88 3.04 Net realized gains 0.07 0.09 0.26 0.23 Net unrealized gains on derivative instruments and foreign exchange 0.05 0.19 0.01 0.46 ------------------------- Operating income (1) $1.34 $1.21 $2.61 $2.35 (1) Presented on the same basis as analysts' estimates. Operating income per share, which excludes the effects of net realized gains, net unrealized gains on derivative instruments and foreign exchange, and income from discontinued operations, rose 11 percent to $2.61 per share for the first half of 2004 compared with $2.35 per share in the same period last year. Gary C. Dunton, MBIA Chief Executive Officer, said, "MBIA posted strong results for the second quarter of 2004. While our pipeline of new business opportunities remains steady, difficult market conditions will make it unlikely that the company will match last year's record new business production. However, we remain confident that the market will return to a more balanced view of risk and that demand for our product will grow over the long-term as the global capital markets continue to expand." Insurance Operations Adjusted direct premium (ADP), a non-GAAP measure, which includes both upfront premiums written and the present value of estimated installment premiums for new business writings and excludes premiums assumed or ceded, decreased 11 percent to $546.3 million from $612.4 million in the first half of 2003. For the second quarter of 2004, ADP rose to $408.3 million from $368.9 million in the second quarter of last year, an 11 percent increase. Adjusted Direct Premium (dollars in millions) - ---------------------------------------------------------------------- Three Months Six Months Ended Ended June 30 June 30 ---------------------------------------------- 2004 2003 % Change 2004 2003 % Change ---------------------------------------------- Public Finance United States $200.2 $217.2 (8) $255.4 $349.4 (27) Non-United States 102.9 28.8 257 106.6 59.9 78 ---------------------------------------------- Total 303.1 246.0 23 362.0 409.3 (12) Structured Finance United States 38.9 72.6 (46) 98.9 113.1 (13) Non-United States 66.3 50.3 32 85.4 90.0 (5) ---------------------------------------------- Total 105.2 122.9 (14) 184.3 203.1 (9) Total $408.3 $368.9 11 $546.3 $612.4 (11) Public finance ADP declined 12 percent due to lower U.S. production in the first half of 2004 compared with the same period last year, when market issuance reached record levels. Non-U.S. public finance production was strong for the first half of 2004, driven by a large infrastructure transaction in Latin America which closed in the second quarter. Credit quality for public finance remained very high, with 89 percent of insured business written rated Single-A or above in the first half of 2004. Structured finance ADP in the first half of 2004 declined 9 percent, as tight spreads and greater investor demand for uninsured transactions continued to impact this sector. While the company remained very selective in the mortgage and consumer asset-backed markets, the company insured several attractive CDO and future flow transactions in the first half of 2004. In structured finance, 55 percent of insured business written in the first half of 2004 was rated Single-A or higher. Premiums earned in the first half of 2004 rose 18 percent to $408.1 million from $346.9 million in last year's first half due to strong levels of new business written over the last few years as well as refunding activity. Earned premiums from refundings were up 43 percent to $77.9 million in the first half of 2004 driven by the low interest rate environment. Pre-tax net investment income in the first half of 2004, excluding net realized gains, was $236.7 million, an 11 percent increase from $214.1 million in the same period of 2003. In the first six months of 2004, lower yields were offset by an 11 percent increase in invested assets. MBIA's advisory fees in the first six months of 2004 were down 25 percent to $23.1 million from $30.6 million during the same period of 2003, primarily reflecting lower new business production and a mix of business which included fewer large, complex transactions. Insurance expenses, which include the amortization of deferred acquisition costs and operating expenses, were up 10 percent for the first half of 2004 to $88.2 million from $80.4 million in last year's first half. The statutory expense ratio for insurance operations increased to 18.4 percent, compared to 12.8 percent in the first half of 2003, primarily due to lower ceding commission income that resulted from the portfolio reassumptions and cessions in the first quarter. However, the GAAP expense ratio decreased slightly to 21.6 percent in the first half of 2004 as compared to 23.2 percent in last year's first half. MBIA's pre-tax operating income from insurance operations rose 13 percent to $540.1 million in the first half of 2004 from $476.2 million in last year's first half. Risk Management and Loss Reserves The company incurred $39.6 million in loss and loss adjustment expenses in the first half of 2004, a 13 percent increase compared with $35.1 million in last year's first half due to the growth in scheduled earned premium, which is the basis of the company's loss reserving formula. Total case-incurred activity was $45.1 million in the first half of 2004, primarily related to MBIA's guaranteed tax lien portfolios. During the second quarter, the company paid a $46.3 million claim related to its guarantee on the Philadelphia Authority for Industrial Development ("PAID") 6.488% Tax Claim Collateralized Revenue Bonds, Series 1997. As the bonds reached their maturity, MBIA's payment represented the remaining principal balance of the bonds. In June of 1997, $75 million of bonds were issued to provide financing to the City of Philadelphia and the Philadelphia School District and were backed by a pool of delinquent property tax liens that the City of Philadelphia and the Philadelphia School District sold to PAID. The performance of the tax liens was much worse than projected resulting in a shortfall in collections necessary to pay the bonds at maturity. MBIA will continue to pursue collections of the remaining liens. MBIA estimates that approximately $20 million can be realized in net future collections that will be used to reimburse MBIA for the claim it paid, resulting in an incurred loss of $23 million in the second quarter, net of previous reserves and reinsurance. While MBIA had been working closely with the City of Philadelphia and fully expected that such efforts would be successful in avoiding a claim under its policy, negotiations with the city failed to produce a resolution by the maturity date of the bonds. On June 30, 2004, in order to reduce ongoing carrying and other costs, a ten percent clean-up call was exercised for two Capital Asset-related tax lien securitizations. The clean-up calls permitted the issuers of the bonds to buy back any remaining tax liens when the principal amount of the bonds fell below ten percent of the original principal amount. In connection with the clean-up calls, MBIA paid $51.5 million, net of reinsurance, under its policies to the trustee for the Capital Asset Research Funding Series 1997A and Series 1998A tax lien securitizations, which defeased its remaining exposure to these transactions. The issuer will use these funds to repay all principal and interest outstanding on the bonds on the next scheduled payment date, September 15, 2004. MBIA did not book any additional losses in connection with the payments used to exercise the clean-up calls during the second quarter given its pre-existing case reserves and the expected recoveries on the remaining tax liens. Investment Management Services The market value of quarterly average assets under management, excluding those attributable to 1838 Investment Advisors, LLC, was $36.6 billion in the second quarter of 2004, up 16 percent from $31.5 billion in last year's second quarter. In addition, conduit assets totaled $6.1 billion at the end of the quarter. Pre-tax operating income from MBIA's fixed-income investment management businesses increased 24 percent in the first half to $26.9 million from $21.7 million in last year's first half. The increase was driven by strong results in the company's investment agreement business. Corporate The corporate segment includes net investment income, interest expense and corporate expenses. Net corporate segment expenses in the first half increased 13 percent to $40.9 million from $36.3 million in the same period last year. The increase primarily reflects MBIA's minority share of costs incurred by ASIA Ltd. prior to MBIA's acquisition of its portfolio which occurred in the first quarter. Gains and Losses In the first half of 2004, MBIA recorded net realized gains of $59.7 million, compared with net realized gains of $51.0 million in the first half of 2003. The 2004 net realized gains were primarily the result of the sale of a common stock investment the company purchased in 2002. The company recorded pre-tax mark-to-market net unrealized gains of $1.3 million for the first half of 2004 on its derivative exposure, compared with pre-tax mark-to-market net unrealized gains of $103.3 million for the first half of 2003. While there was little movement in credit spreads during the first half of 2004, the tightening of credit spreads in the investment grade bond market in the first half of 2003 resulted in large net unrealized gains, primarily attributable to insured synthetic CDOs. Discontinued Operations MBIA completed the sale of the net assets of 1838 Investment Advisors to the management of 1838 and an investor group led by Orca Bay Partners in the second quarter. The sale resulted in a $3.2 million after-tax gain. The activities of this business prior to its sale have been accounted for as a discontinued operation and its revenues and expenses have been excluded from the results of continuing operations. Discontinued operations resulted in an after-tax loss of $481,000 in the first half of 2004. Book Value and Adjusted Book Value MBIA's book value per share at June 30, 2004 was $43.81, up 1 percent from $43.50 at December 31, 2003. The increase was principally driven by net income from operations offset by a significant decrease in the unrealized appreciation of the company's investment portfolio. Adjusted book value (ABV) per share, a non-GAAP measure, at June 30, 2004 rose 4 percent to $62.35 from $59.84 at December 31, 2003. ABV includes the after-tax effects of deferred premium revenue less prepaid reinsurance premiums and deferred acquisition costs, the present value of installment premiums, unrealized gains or losses on investment contract liabilities and a provision for loss and loss adjustment expenses. Share Repurchase Through August 2, the company has repurchased approximately 2 million shares in 2004 at an average cost of $57.06 per share. These purchases include shares bought under an additional one million share authorization granted by MBIA's board of directors in July after the original 11.3 million share buyback program was completed. Approximately 750,000 shares remain under the current board share repurchase authorization. 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 Nicholas Ferreri, the company's chief financial officer, followed by a question and answer session. The conference call will be web cast live on MBIA's Web site at http://investor.mbia.com (then click "Conference Call"). Those who are unable to participate in the conference call may listen to a replay by dialing 1-800-396-1244 in the United States and 1-402-998-1607 for international calls. A recording will also be available on MBIA's Web site approximately two hours after the end of the conference call. MBIA Inc., through its subsidiaries, is a leading financial guarantor and provider of specialized financial services. MBIA's innovative and cost-effective products and services meet the credit enhancement, financial and investment needs of its public and private sector clients, domestically and internationally. MBIA Inc.'s principal operating subsidiary, MBIA Insurance Corporation, has a financial strength rating of Triple-A from Moody's Investors Service, Standard & Poor's Ratings Services, Fitch Ratings, and Rating and Investment Information, Inc. Please visit MBIA's Web site at http://www.mbia.com. This news release contains forward-looking statements. Important factors such as general market conditions and the competitive environment could cause actual results to differ materially from those projected in these forward-looking statements. The company undertakes no obligation to revise or update any forward-looking statements to reflect changes in events or expectations. Explanation of Non-GAAP Financial Measures The following are explanations of why MBIA believes that the non-GAAP financial measures used in this press release, which serve to supplement GAAP information, are meaningful to investors. Operating Income: The company believes operating income is a useful measurement of performance because it measures income from operations, unaffected by investment portfolio realized gains and losses, gains and losses on derivatives instruments and foreign exchange and non-recurring items. Operating income is also provided to assist research analysts and investors who use this information in their analysis of the company. Adjusted Direct Premiums: The company believes adjusted direct premiums are a meaningful measure of the total value of the insurance business written during a reporting period since they represent the present value of all premiums collected and expected to be collected on policies closed during the period. As such, it gives investors an opportunity to measure the value of new business activities in a given period and compare it to new business activities in other periods. Other measures, such as premiums written and premiums earned, include the value of premiums resulting from business closed in prior periods and do not provide the same information to investors. Adjusted Book Value: The company believes the presentation of adjusted book value, which includes items that are expected to be realized in future periods, provides additional information that gives a comprehensive measure of the value of the company. Since the company expects these items to affect future results and, in general, they do not require any additional future performance obligation on the company's part, ABV provides an indication of the company's value in the absence of any new business activity. ABV is not a substitute for GAAP book value but does provide investors with additional information when viewed in conjunction with GAAP book value. MBIA Inc. and Subsidiaries Consolidated Balance Sheets - ---------------------------------------------------------------------- (dollars in thousands) June 30, December 31, 2004 2003 -------------- ------------ Assets - ------ Investments: Fixed-maturity securities held as available-for-sale at fair value (amortized cost $17,413,789 and $15,628,937) $17,897,914 $16,493,338 Conduit investments held-to-maturity 6,066,779 8,386,280 Investment agreement portfolio pledged as collateral at fair value (amortized cost $608,840 and $581,633) 617,102 596,366 Short-term investments 2,103,850 1,873,477 Other investments 277,701 357,346 -------------- ------------ Total investments 26,963,346 27,706,807 Cash and cash equivalents 274,172 172,129 Accrued investment income 273,642 269,610 Deferred acquisition costs 339,921 319,728 Prepaid reinsurance premiums 552,334 535,728 Reinsurance recoverable on unpaid losses 27,302 61,085 Goodwill 79,406 79,406 Property and equipment (net of accumulated depreciation) 117,669 120,691 Receivable for investments sold 320,473 20,376 Derivative assets 245,683 256,744 Variable interest entity assets 600,422 600,322 Other assets 113,122 125,108 -------------- ------------ Total assets $29,907,492 $30,267,734 ============== ============ Liabilities and Shareholders' Equity - ------------------------------------ Liabilities: Deferred premium revenue $3,151,450 $3,079,851 Loss and loss adjustment expense reserves 511,315 559,510 Investment agreement and medium-term note obligations 10,147,437 8,840,125 Securities sold under agreements to repurchase 527,712 505,883 Conduit debt obligations 5,704,490 7,848,060 Short-term debt 58,745 57,337 Long-term debt 1,018,905 1,021,795 Current income taxes 6,498 14,554 Deferred income taxes, net 424,153 552,740 Deferred fee revenue 20,144 21,543 Payable for investments purchased 647,340 47,059 Derivative liabilities 397,318 437,683 Variable interest entity liabilities 600,422 600,322 Other liabilities 393,195 422,257 -------------- ------------ Total liabilities 23,609,124 24,008,719 Shareholders' Equity: Common stock 155,010 153,551 Additional paid-in capital 1,379,199 1,295,638 Retained earnings 4,948,873 4,593,486 Accumulated other comprehensive income 351,847 632,623 Unearned compensation - restricted stock (41,227) (12,299) Treasury stock (495,334) (403,984) -------------- ------------ Total shareholders' equity 6,298,368 6,259,015 Total liabilities and shareholders' equity $29,907,492 $30,267,734 ============== ============ MBIA Inc. and Subsidiaries Consolidated Statements of Income - ---------------------------------------------------------------------- (dollars in thousands except per share amounts) Three Months Ended June 30 Six Months Ended June 30 --------------------------- ------------------------- 2004 2003 2004 2003 ----------- ------------- ----------- ------------ Insurance operations Revenues: Gross premiums written $ 372,909 $ 327,094 $ 577,602 $ 615,241 Ceded premiums (49,291) (55,571) (84,255) (119,690) ---------- ---------- ---------- --------- Net premiums written 323,618 271,523 493,347 495,551 Scheduled premiums earned 169,991 151,588 330,271 292,241 Refunding premiums earned 38,309 34,083 77,851 54,610 --------- ---------- ---------- --------- Premiums earned 208,300 185,671 408,122 346,851 Net investment income 114,856 107,728 236,697 214,149 Advisory fees 17,190 17,342 23,055 30,644 --------- ---------- ---------- --------- Total insurance revenues 340,346 310,741 667,874 591,644 Expenses: Losses and LAE incurred 20,399 18,192 39,633 35,070 Amortization of deferred acquisition costs 16,493 14,619 32,079 27,401 Operating 28,931 29,318 56,103 52,961 ---------- --------- --------- --------- Total insurance expenses 65,823 62,129 127,815 115,432 Insurance income 274,523 248,612 540,059 476,212 --------- --------- --------- --------- Investment management services Revenues 126,256 91,189 247,716 184,939 Interest expense 92,438 69,361 183,473 139,386 --------- --------- --------- --------- Net revenues 33,818 21,828 64,243 45,553 Expenses 18,757 12,623 37,344 23,809 --------- --------- --------- --------- Investment management services income 15,061 9,205 26,899 21,744 --------- --------- --------- --------- Municipal services Revenues 5,752 7,419 11,711 13,461 Expenses 5,526 7,292 11,380 13,282 --------- --------- --------- --------- Municipal services income 226 127 331 179 --------- --------- --------- --------- Corporate Net investment income 2,457 2,208 4,577 4,581 Interest expense 17,771 16,932 35,545 33,881 Corporate expenses 4,070 3,384 9,960 7,047 --------- --------- --------- --------- Corporate loss (19,384) (18,108) (40,928) (36,347) --------- --------- --------- --------- Gains and losses Net realized gains 15,416 20,822 59,667 50,979 Net gains on derivative instruments and foreign exchange 11,947 43,132 1,284 103,341 --------- --------- --------- --------- Net gains and losses 27,363 63,954 60,951 154,320 --------- --------- --------- --------- Income from continuing operations before income taxes 297,789 303,790 587,312 616,108 Provision for income taxes 83,388 86,654 165,291 175,760 --------- --------- --------- --------- Income from continuing operations 214,401 217,136 422,021 440,348 Income (loss) from discontinued operations, net of tax (510) 718 (481) 832 Gain on sale of discontinued operations, net of tax 3,178 -- 3,178 -- --------- --------- --------- --------- Income from discontinued operations 2,668 718 2,697 832 Net income $ 217,069 $ 217,854 $ 424,718 $ 441,180 ========= ========= ========= ========= Net income per common share: Basic $ 1.51 $ 1.52 $ 2.96 $ 3.07 Diluted $ 1.48 $ 1.51 $ 2.90 $ 3.04 Weighted-average common shares outstanding: Basic 143,454,174 143,132,545 143,530,690 143,584,818 Diluted 146,289,467 144,628,641 146,600,213 144,999,949 MBIA Inc. and Subsidiaries Reconciliation of Adjusted Direct Premiums to Gross Premiums Written - ------------------------------------------------------ (dollars in millions) Three Months Six Months Ended Ended June 30 June 30 -------------------------------- 2004 2003 2004 2003 -------------------------------- Adjusted direct premiums (1) $408.3 $368.9 $546.3 $612.4 Adjusted premiums assumed 0.0 26.4 (2.9) 31.8 -------------------------------- Adjusted gross premiums 408.3 395.3 543.4 644.2 Present value of estimated future installment premiums (2) (206.7) (202.5)(288.9) (300.3) -------------------------------- Gross upfront premiums written 201.6 192.8 254.5 343.9 Gross installment premiums received 171.3 134.3 323.1 271.3 -------------------------------- Gross premiums written $372.9 $327.1 $577.6 $615.2 ================================ (1)A non-GAAP measure. (2)At June 30, 2004 and March 31, 2004 the discount rate was 4.7% and at June 30, 2003 and March 31, 2003 the discount rate was 5.3% and 5.6%, respectively. Components of Net Income per Share (1) - -------------------------------------- Three Months Six Months Ended Ended June 30 June 30 -------------------------------- 2004 2003 2004 2003 -------------------------------- Net income $1.48 $1.51 $2.90 $3.04 Income from discontinued operations 0.02 0.00 0.02 0.01 -------------------------------- Net income from continuing operations 1.47 1.50 2.88 3.04 Net realized gains 0.07 0.09 0.26 0.23 Net gains on derivative instruments and foreign exchange 0.05 0.19 0.01 0.46 -------------------------------- Operating income (2) $1.34 $1.21 $2.61 $2.35 ================================ (1) May not add due to rounding. (2) A non-GAAP measure. MBIA Inc. and Subsidiaries Components of Adjusted Book Value per Share - ------------------------------------------- June 30, 2004 December 31, 2003 ----------------- ----------------- Book value $43.81 $43.50 After-tax value of: Deferred premium revenue 14.25 13.91 Prepaid reinsurance premiums (2.50) (2.42) Deferred acquisition costs (1.54) (1.44) ------ ------ Net deferred premium revenue 10.21 10.05 Present value of installment premiums (1) 9.53 9.27 Unrealized gains (losses) on investment contract liabilities 1.35 (0.49) Loss provision (2) (2.55) (2.49) ----------- ----------- Adjusted book value (3) $62.35 $59.84 =========== =========== (1) At June 30, 2004 and December 31, 2003, the discount rate was 4.7%. (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) June 30, December 31, 2004 2003 ------------ ------------- Capital and surplus $3,822.9 $3,715.0 Contingency reserve 2,422.4 2,368.2 ----------- ----------- Capital base 6,245.3 6,083.2 Unearned premium reserve 3,155.3 3,066.6 Present value of installment premiums (1) 2,108.2 2,052.9 ----------- ----------- Premium resources 5,263.5 5,119.5 Loss and loss adjustment expense reserves 185.4 200.7 Soft capital credit facilities 1,100.0 1,236.0 ----------- ----------- Total claims-paying resources $12,794.2 $12,639.4 =========== =========== Net debt service outstanding $840,277.8 $835,773.8 Capital ratio (2) 135:1 137:1 Claims-paying ratio (3) 77:1 77:1 (1) At June 30, 2004 and December 31, 2003, the discount rate was 4.7%. (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-----