-----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, Ev8S/1wbPAep5LaopbtLu7VrErN6JxShsv85rHXLdONj4HnCblDedaIBvc3WkjQB uXh/7aDhXQ8KBNuV6b0tNA== 0001157523-05-000891.txt : 20050201 0001157523-05-000891.hdr.sgml : 20050201 20050201155813 ACCESSION NUMBER: 0001157523-05-000891 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20050201 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050201 DATE AS OF CHANGE: 20050201 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: 05565865 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 a4812471.txt MBIA INC. 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): February 1, 2005 MBIA INC. (Exact name of registrant as specified in its charter) Connecticut 1-9583 06-1185706 (State or other jurisdiction (Commission File Number) (IRS Employer of incorporation) Identification No.) 113 King Street, Armonk, New York 10504 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 914-273-4545 Not Applicable (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ================================================================================ Item 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION. The following information, including the Exhibit to this Form 8-K, is being furnished pursuant to Item 2.02 - Results of Operations and Financial Condition of Form 8-K. On February 1, 2005, MBIA Inc. issued a press release announcing its results of operations for the year ended December 31, 2004. A copy of the press release is attached as Exhibit 99.1 to this Form 8-K and is incorporated by reference to this Item 2.02 as if fully set forth herein. Item 9.01. FINANCIAL STATEMENTS AND EXHIBITS. 99.1 Press Release issued by MBIA Inc. dated February 1, 2005. This information is not deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934 and is not incorporated by reference into any Securities Act registration statements. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. MBIA INC. By: /s/ Ram D. Wertheim ------------------- Ram D. Wertheim General Counsel Date: February 1, 2005 EXHIBIT INDEX TO CURRENT REPORT ON FORM 8-K Dated February 1, 2005 Exhibit 99.1 Press Release issued by MBIA Inc. dated February 1, 2005. EX-99.1 2 a4812471ex991.txt MBIA INC. EXHIBIT 99.1 Exhibit 99.1 MBIA Inc. Reports 1 Percent Decrease in 2004 Earnings Per Share; Operating Earnings Per Share up 10 Percent in 2004 ARMONK, N.Y.--(BUSINESS WIRE)--Feb. 1, 2005--MBIA Inc. (NYSE: MBI), the holding company for MBIA Insurance Corporation, reported today that 2004 diluted earnings per share declined 1 percent to $5.55 per share compared to $5.61 in 2003. Net income for 2004 was $804.1 million compared to $813.6 million for 2003, a 1 percent decrease. The decrease was the result of small mark-to-market net unrealized gains on MBIA's derivative exposure recorded for 2004, compared with large net unrealized gains for 2003. Excluding the effects of the net unrealized gains, net income for 2004 was $803.1 million, compared with $748.8 million for 2003, a 7 percent increase. Fourth quarter diluted earnings per share increased 9 percent to $1.36 from $1.25 in 2003. Net income for the fourth quarter rose 6 percent to $193.4 million from $182.0 million in last year's fourth quarter. Diluted earnings per share information - -------------------------------------- Three Months Year Ended Ended December 31 December 31 --------------- -------------- 2004 2003 2004 2003 ------ ------- ----- ------- Net income $1.36 $1.25 $5.55 $5.61 Income from discontinued operations 0.00 0.00 0.02 0.01 ------ ------- ----- ------- Net income from continuing operations 1.36 1.25 5.54 5.60 Net realized gains 0.01 0.05 0.28 0.36 Net gains (losses) on derivative instruments and foreign exchange 0.01 (0.02) 0.01 0.45 ------ ------- ----- ------- Operating income $1.34 $1.22 $5.25 $4.79 (1) Presented on the same basis as analysts' estimates Operating income per share, which excludes the effects of net realized gains, net unrealized gains and losses on derivative instruments and foreign exchange, and income from discontinued operations, rose 10 percent to $5.25 per share in 2004 compared to $4.79 per share in 2003. Operating income, excluding refundings, also rose 10 percent to $4.68 per share in 2004 from $4.27 per share in 2003. For the fourth quarter of 2004, operating income increased 10 percent to $1.34 per share from $1.22 per share in the fourth quarter of 2003. Excluding refundings, fourth quarter operating income rose 14 percent to $1.22 per share in 2004 from $1.07 per share in the same period of 2003. Gary Dunton, MBIA Chief Executive Officer, said, "MBIA's financial and operating results for 2004 were solid, despite a very challenging market environment characterized by tight credit spreads and increased levels of competition. New business production in insurance operations, while down from last year's record results, was still among the highest in the company's history. Critical to the long-term success of our franchise, we continued to maintain our strict underwriting standards in this demanding environment." Mr. Dunton added, "While we believe that current market conditions will likely continue this year, we have a solid pipeline across most of our product lines. For 2005, we expect operating earnings per share, excluding refundings, to increase by 10 to 12 percent, but then return to the 12 to 14 percent growth range in 2006-2007. We anticipate that operating ROE will be at the lower end of the 12 to 14 percent range in 2005 due to our strong capital position and the projected decline in refunding volume. Looking forward to 2006 and 2007, we expect that operating ROE will improve and be within the 12 to 14 percent range. We continue to manage MBIA to provide long-term growth in shareholder value, and we remain very optimistic about the prospects for our global franchise." 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, declined 29 percent to $1.15 billion in 2004 from a record $1.62 billion in 2003. The decline is primarily due to tighter credit spreads, particularly in the global structured finance market, increased competition from the uninsured market and other monolines, and uneven new business production in the company's international operations. In the fourth quarter of 2004, ADP was a healthy $383.9 million, although down 13 percent from the fourth quarter of last year. The decrease was the result of the factors cited above. Adjusted Direct Premium (dollars in millions) - ----------------------- Three Months Year Ended Ended December 31 December 31 ------------ ----------- 2004 2003 % Change 2004 2003 % Change -------------------------------------------------- Public Finance United States $106.8 $124.5 (14%) $457.4 $627.0 (27%) Non-United States 119.8 154.4 (22%) 261.6 409.4 (36%) -------------------------------------------------- Total 226.6 278.9 (19%) 719.0 1,036.4 (31%) Structured Finance United States 126.0 91.6 38% 284.5 332.3 (14%) Non-United States 31.3 70.1 (55%) 142.6 252.7 (44%) -------------------------------------------------- Total 157.3 161.7 (3%) 427.1 585.0 (27%) Total $383.9 $440.6 (13%)$1,146.1 $1,621.4 (29%) Global public finance ADP declined 31 percent in 2004 compared with 2003. U.S. public finance production declined 27 percent in 2004, due to lower market issuance, increased competition and lower overall pricing. As fewer large infrastructure transactions came to market this year, non-U.S. production declined 36 percent, despite solid growth in the Latin American and Australian markets. Credit quality for global public finance transactions remained very high, with 87 percent of insured business written rated Single-A or above in 2004. Global structured finance ADP in 2004 declined 27 percent from record production in 2003. This market continues to be adversely impacted by tight spreads and greater investor demand for uninsured transactions. In addition, fewer large European transactions came to market and the volume of CDO issuance was lower due to narrowing credit spreads. Fourth quarter global structured finance ADP was the strongest of the year, as the company closed several major transactions during the quarter. In global structured finance, 64 percent of insured business written in 2004 was rated Single-A or higher. Premiums earned in 2004 rose 11 percent to $813.8 million from $733.0 million in 2003, due to strong levels of new business written over the last few years as well as refunding activity. Earned premiums from refundings were up 10 percent to $138.0 million in 2004, driven by the low interest rate environment. Pre-tax net investment income in 2004, excluding net realized gains, was $474.4 million, an 8 percent increase from $437.7 million in 2003, driven by an 8 percent increase in average invested assets. MBIA's advisory fees in 2004 were down 30 percent to $41.5 million from $59.7 million during 2003, primarily reflecting lower new business production, and a mix of business that included fewer large, complex transactions. Insurance expenses, consisting of the amortization of deferred acquisition costs and operating expenses, were up 8 percent for 2004 to $180.0 million from $166.0 million in 2003. The statutory expense ratio for insurance operations increased to 18.6 percent, compared to 12.8 percent in 2003. The increase in the statutory expense ratio was driven by lower ceding commission income resulting from lower cessions in 2004, as well as the effect of portfolio reassumptions and cessions in the first quarter related to the establishment of Channel Re. However, the GAAP expense ratio decreased slightly to 22.1 percent in 2004, compared to 22.7 percent in 2003. MBIA's pre-tax operating income from insurance operations, which excludes the effects of net realized gains and net unrealized gains and losses on derivative instruments and foreign exchange, rose 8 percent to a record $1.1 billion in 2004 from $991.5 million in 2003, marking the first time in the company's history that insurance operating income exceeded $1 billion. Risk Management and Loss Reserves The company incurred $81.1 million in loss and loss adjustment expenses in 2004, an 11 percent increase compared to $72.9 million in 2003. The growth was driven by an increase in scheduled earned premiums, which is the basis for the company's loss reserve formula. Total case-incurred activity was $125.9 million in 2004, primarily related to losses incurred on MBIA's guaranteed tax lien portfolios in the second quarter and a health care credit in the third quarter. Case-incurred activity totaled $19.9 million in the fourth quarter of 2004. The effects of a strengthening economy have resulted in an overall improvement in the credit quality of the company's insured portfolio. The portion of the insured portfolio rated below investment grade continued to decline during 2004. In the fourth quarter of 2004, MBIA commuted and assumed from AXA RE Finance S.A. (AXA) business that AXA assumed directly and indirectly in connection with the reinsurance agreements under which MBIA was reinsured for losses incurred with respect to the MBIA insured bonds issued by Allegheny Health, Education and Research Foundation (AHERF). As a result, MBIA received related premiums of $39.5 million and the right to receive future installment premiums with a discounted present value of approximately $18.5 million. MBIA's outstanding insured par value increased by $21.3 billion as a result of the transactions. Investment Management Services The market value of quarterly average fixed-income assets under management was $38.3 billion in 2004, up 13 percent from $34.0 billion in 2003. In addition, conduit assets totaled $7.0 billion at the end of the fourth quarter, compared with $8.4 billion at the same period last year. Pre-tax operating income from MBIA's fixed-income investment management businesses, which excludes the effects of net realized gains and net unrealized gains and losses on derivative instruments and foreign exchange, increased a robust 31 percent in 2004 to $61.4 million from $46.8 million in 2003. A record year for this division was driven by strong results in the company's investment agreement business. Corporate Net corporate segment expenses, excluding the effects of net realized gains and losses, increased 13 percent in 2004 to $83.8 million from $74.2 million in the same period last year. The increase is due to higher interest expense resulting from a net increase in long-term debt during the fourth quarter and MBIA's minority share of costs incurred by ASIA Ltd., prior to MBIA's acquisition of its portfolio in the first quarter. MBIA Insurance Corporation paid a special dividend of $375 million plus its regular quarterly dividend of $82.3 million to its holding company, MBIA Inc., in December 2004. The transaction was approved by the New York State Department of Insurance. MBIA Insurance Corporation's capital position, relative to its insured exposure, has improved substantially over the past several years as a result of improved premium rates and a higher quality insured portfolio, exceeding both the capital required by New York State Insurance Law and the rating agencies for its Triple-A ratings. The proceeds may be used over time for share repurchase, strategic initiatives, general liquidity or other corporate purposes. Gains and Losses In 2004, MBIA recorded net realized gains of $62.9 million for all business operations, compared to net realized gains of $80.7 million in 2003. The 2004 net realized gains were primarily the result of the sale of a common stock investment that the company purchased in 2002. The company recorded pre-tax mark-to-market net unrealized gains of $1.6 million for all business operations in 2004 on its derivative exposure, compared to pre-tax mark-to-market net unrealized gains of $99.7 million in 2003. While there was little movement in credit spreads during 2004, the tightening of credit spreads in the investment-grade bond market in 2003 resulted in large net unrealized gains, primarily attributable to insured synthetic CDOs. Book Value and Adjusted Book Value MBIA's book value per share at December 31, 2004 was $47.53, up 9 percent from $43.50 at December 31, 2003. The increase was principally driven by net income from operations offset by a significant increase in treasury stock resulting from share repurchases. Adjusted book value (ABV) per share, a non-GAAP measure, at December 31, 2004 rose 11 percent to $66.36 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 During 2004, the company repurchased approximately 5.8 million shares at an average cost of $56.75 per share. At December 31, 2004, approximately 10.9 million shares remained in the company's share buyback program which was authorized in August 2004. Operating ROE In 2004, MBIA's operating return on equity, a non-GAAP measure, was 13.0 percent compared to 13.1 percent for 2003. Conference Call MBIA will host a conference call for investors today at 11 a.m. EST. The conference call will consist of brief comments by Nicholas Ferreri, MBIA Chief Financial Officer, followed by a question and answer session with Mr. Dunton and Mr. Ferreri. The conference call will be Web cast live on MBIA's Web site at http://investor.mbia.com (then select "Conference Call"). Those who are unable to participate in the conference call may listen to a replay by dialing 1-800-396-1244 in the United States and 1-402-998-1607 for outside the United States. 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 derivative instruments and foreign exchange and non-recurring items. Operating income is also provided to assist research analysts and investors who use this information in their analysis of the company. Operating Return on Equity (ROE): The company believes operating return on equity is a useful measurement of performance because it measures return on equity based upon income from operations, unaffected by investment portfolio realized gains and losses, gains and losses on derivative instruments and foreign exchange and non-recurring items. Operating return on equity is also provided to assist research analysts and investors who use this information in their analysis of the company. Adjusted Direct Premiums: The company believes adjusted direct premiums are a meaningful measure of the total value of the insurance business written during a reporting period since they represent the present value of all premiums collected and expected to be collected on policies closed during the period. As such, it gives investors an opportunity to measure the value of new business activities in a given period and compare it to new business activities in other periods. Other measures, such as premiums written and premiums earned, include the value of premiums resulting from business closed in prior periods and do not provide the same information to investors. Adjusted Book Value: The company believes the presentation of adjusted book value, which includes items that are expected to be realized in future periods, provides additional information that gives a comprehensive measure of the value of the company. Since the company expects these items to affect future results and, in general, they do not require any additional future performance obligation on the company's part, ABV provides an indication of the company's value in the absence of any new business activity. ABV is not a substitute for GAAP book value but does provide investors with additional information when viewed in conjunction with GAAP book value. MBIA INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS --------------------------- (dollars in thousands) December 31, December 31, 2004 2003 -------------------------- Assets - ------ Investments: Fixed-maturity securities held as available-for-sale, at fair value (amortized cost $18,802,894 and $15,628,937) $19,679,905 $16,493,338 Investments held-to-maturity, at amortized cost (fair value $7,535,787 and $8,955,173) 7,540,218 8,890,866 Investment agreement portfolio pledged as collateral, at fair value (amortized cost $713,704 and $581,633) 730,870 596,366 Short-term investments, at amortized cost 2,405,192 1,913,476 Other investments 261,865 357,346 ------------ ------------- Total investments 30,618,050 28,251,392 Cash and cash equivalents 366,236 227,544 Accrued investment income 312,208 269,909 Deferred acquisition costs 360,496 319,728 Prepaid reinsurance premiums 534,364 535,728 Reinsurance recoverable on unpaid losses 33,734 61,085 Goodwill 79,406 79,406 Property and equipment (net of accumulated depreciation) 114,692 120,691 Receivable for investments sold 67,205 20,376 Derivative assets 288,811 256,744 Other assets 136,667 125,131 ------------ ------------- Total assets $32,911,869 $30,267,734 ============ ============= Liabilities and Shareholders' Equity - ------------------------------------ Liabilities: Deferred premium revenue $3,211,181 $3,079,851 Loss and loss adjustment expense reserves 564,964 559,510 Investment agreements 8,678,036 6,956,669 Commercial paper 2,598,655 2,639,878 Medium-term notes 6,943,840 7,091,638 Variable interest entity floating rate notes 600,505 600,299 Securities sold under agreements to repurchase 647,104 505,883 Short-term debt 58,745 57,337 Long-term debt 1,332,540 1,021,795 Current income taxes -- 14,554 Deferred income taxes, net 610,985 552,740 Deferred fee revenue 26,780 21,543 Payable for investments purchased 94,609 47,059 Derivative liabilities 528,562 437,683 Other liabilities 390,620 422,280 ------------ ------------- Total liabilities 26,287,126 24,008,719 Shareholders' Equity: Common stock 155,608 153,551 Additional paid-in capital 1,410,799 1,295,638 Retained earnings 5,260,863 4,593,486 Accumulated other comprehensive income 611,173 632,623 Unearned compensation - restricted stock (34,686) (12,299) Treasury stock (779,014) (403,984) ------------ ------------- Total shareholders' equity 6,624,743 6,259,015 Total liabilities and shareholders' equity $32,911,869 $30,267,734 ============ ============= MBIA INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME --------------------------------- (dollars in thousands except per share amounts) Three Months Ended Year Ended December 31 December 31 -------------------------------------------------- 2004 2003 2004 2003 -------------------------------------------------- Insurance operations Revenues: Gross premiums written $283,704 $307,515 $1,116,915 $1,268,808 Ceded premiums (23,407) (45,951) (159,576) (235,736) ------------------------------------------------ Net premiums written 260,297 261,564 957,339 1,033,072 Scheduled premiums earned 175,613 156,375 675,757 607,400 Refunding premiums earned 28,283 35,413 138,038 125,597 ------------------------------------------------ Premiums earned 203,896 191,788 813,795 732,997 Net investment income 120,355 117,219 474,415 437,696 Advisory fees 12,328 16,803 41,539 59,719 Net realized gains 4,770 3,700 67,582 48,157 Net gains on derivative instruments and foreign exchange 4,180 252 7,389 100,050 ------------------------------------------------ Total insurance revenues 345,529 329,762 1,404,720 1,378,619 Expenses: Losses and LAE incurred 21,074 18,766 81,091 72,888 Amortization of deferred acquisition costs 16,531 15,152 64,290 57,907 Operating 33,157 30,854 115,745 108,130 ------------------------------------------------ Total insurance expenses 70,762 64,772 261,126 238,925 Insurance income 274,767 264,990 1,143,594 1,139,694 ------------------------------------------------ Investment management services Revenues 161,887 120,107 551,926 403,990 Net realized gains (losses) (1,555) 5,232 (4,120) 17,135 Net losses on derivative instruments and foreign exchange (1,669) (4,800) (5,508) (385) ------------------------------------------------ Total investment management services revenues 158,663 120,539 542,298 420,740 Interest expense 123,711 89,250 413,615 302,224 Expenses 19,948 18,571 76,912 55,005 ------------------------------------------------ Total investment management services expenses 143,659 107,821 490,527 357,229 ------------------------------------------------ Investment management services income 15,004 12,718 51,771 63,511 ------------------------------------------------ Municipal services Revenues 7,637 6,681 27,593 26,814 Net realized gains (losses) 9 30 (81) 139 Net losses on derivative instruments and foreign exchange (279) -- (279) -- ------------------------------------------------ Total municipal services revenues 7,367 6,711 27,233 26,953 Expenses 6,636 6,155 25,649 25,857 ------------------------------------------------ Municipal services income 731 556 1,584 1,096 ------------------------------------------------ Corporate Net investment income 1,935 2,240 8,446 9,000 Net realized gains (losses) (281) 2,748 (467) 15,237 Interest expense 21,308 17,504 74,651 68,368 Corporate expenses 3,445 5,533 17,579 14,874 ------------------------------------------------ Corporate loss (23,099) (18,049) (84,251) (59,005) ------------------------------------------------ Income from continuing operations before income taxes 267,403 260,215 1,112,698 1,145,296 Provision for income taxes 73,932 78,365 311,160 333,815 ------------------------------------------------ Income from continuing operations 193,471 181,850 801,538 811,481 Income (loss) from discontinued operations, net of tax (121) 170 (602) 2,104 Gain on sale of discontinued operations, net of tax -- -- 3,178 -- ------------------------------------------------ Income (loss) from discontinued operations (121) 170 2,576 2,104 Net income $193,350 $182,020 $804,114 $813,585 ================================================ Net income per common share: Basic $1.39 $1.27 $5.67 $5.67 Diluted $1.36 $1.25 $5.55 $5.61 Weighted-average common shares outstanding: Basic 139,007,629 143,374,308 141,861,225 143,449,007 Diluted 141,926,243 145,656,977 144,799,513 144,980,396 MBIA INC. AND SUBSIDIARIES Reconciliation of Adjusted Direct Premiums to Gross Premiums Written - -------------------------------------------------------------------- (dollars in millions) Three Months Ended Year Ended December 31 December 31 ------------------- ------------------- 2004 2003 2004 2003 -------- ------- -------- ---------- Adjusted direct premiums(1) $383.9 $440.6 $1,146.1 $1,621.4 Adjusted premiums assumed -- 9.6 (2.9) 41.4 -------- ------- -------- ---------- Adjusted gross premiums 383.9 450.2 1,143.2 1,662.8 Present value of estimated future installment premiums(2) (238.2) (336.9) (632.2) (1,015.0) -------- ------- -------- ---------- Gross upfront premiums written 145.7 113.3 511.0 647.8 Gross installment premiums received 138.0 194.2 605.9 621.0 -------- ------- -------- ---------- Gross premiums written $283.7 $307.5 $1,116.9 $1,268.8 ======== ======= ======== ========== (1) A non-GAAP measure. (2) At December 31, 2004, September 30, 2004, June 30, 2004 and March 31, 2004 the discount rate was 4.8%, 4.6%, 4.7% and 4.7%, respectively, and at December 31, 2003, September 30, 2003, June 30, 2003 and March 31, 2003 the discount rate was 4.7%, 5.1%, 5.3% and 5.6%, respectively. Components of Net Income per Share(1) - -------------------------------------- Three Months Ended Year Ended December December 31 31 ------------------ ---------------- 2004 2003 2004 2003 ------- -------- ------- ------- Net income $1.36 $1.25 $5.55 $5.61 Income from discontinued operations 0.00 0.00 0.02 0.01 ------- -------- ------- ------- Net income from continuing operations 1.36 1.25 5.54 5.60 Net realized gains 0.01 0.05 0.28 0.36 Net gains (losses) on derivative instruments and foreign exchange 0.01 (0.02) 0.01 0.45 ------- -------- ------- ------- Operating income(2) $1.34 $1.22 $5.25 $4.79 ======= ======== ======= ======= (1) May not add due to rounding. (2) A non-GAAP measure. MBIA INC. AND SUBSIDIARIES Components of Adjusted Book Value per Share - ------------------------------------------- December 31, 2004 December 31, 2003 ----------------- ------------------ Book value $47.53 $43.50 After-tax value of: Deferred premium revenue 14.97 13.91 Prepaid reinsurance premiums (2.49) (2.42) Deferred acquisition costs (1.68) (1.44) ------ ------ Net deferred premium revenue 10.80 10.05 Present value of installment premiums(1) 9.83 9.27 Unrealized gains (losses) on investment contract liabilities 0.88 (0.49) Loss provision(2) (2.68) (2.49) ------------- ------------- Adjusted book value(3) $66.36 $59.84 ============= ============= (1) At December 31, 2004 and December 31, 2003, the discount rate was 4.8% and 4.7%, respectively. (2) The loss provision is calculated by applying 12% to the following items on an after-tax basis: a) deferred premium revenue; (b) prepaid reinsurance premiums; and, (c) the present value of installment premiums. (3) A non-GAAP measure. CONSOLIDATED INSURANCE OPERATIONS --------------------------------- Selected Financial Data Computed on a Statutory Basis - ----------------------------------------------------- (dollars in millions) December 31, December 31, 2004 2003 ------------- ------------- Capital and surplus $3,445.2 $3,715.0 Contingency reserve 2,665.6 2,368.2 ------------- ------------- Capital base 6,110.8 6,083.2 Unearned premium reserve 3,268.2 3,066.6 Present value of installment premiums(1) 2,108.3 2,052.9 ------------- ------------- Premium resources 5,376.5 5,119.5 Loss and loss adjustment expense reserves 272.5 200.7 Soft capital credit facilities 1,100.0 1,236.0 ------------- ------------- Total claims-paying resources $12,859.8 $12,639.4 ============= ============= Net debt service outstanding $890,222.1 $835,773.8 Capital ratio(2) 146:1 137:1 Claims-paying ratio(3) 81:1 77:1 (1) At December 31, 2004 and December 31, 2003, the discount rate was 4.8% and 4.7%, 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-----