MBIA reports 3.5 billion loss on derivative write-downs

By Margarita Snegireva. Bond insurer MBIA Inc. announced its second consecutive quarterly net loss of USD 3.5 billion on derivative write-downs.

Photo: MBIA reports 3.5 billion loss on derivative write-downs

The Armonk, N.Y., financial guarantor posted a fourth-quarter net loss of $2.3 billion, or $18.61 a share, compared with year-earlier net income of $181 million, or $1.32 a share.

At the same time, the company said it closed on its $500 million stock sale to private equity investor Warburg Pincus, part of a deal announced earlier this month that will have Warburg invest up to $1 billion in the troubled bond insurer. As part of the deal, two Warburg managing directors took seats on MBIA's board of directors, replacing two current directors.

MBIA, Inc. is a financial services company, a member of the S&P 500 index. It was founded in 1973 and headquartered in Armonk, New York and has over 1200 employees. MBIA is the largest bond insurer.

MBIA is a monoline insurer primarily of municipal bonds and on asset- and mortgage-backed securities, a form of credit enhancement. This underwriting is essential on the issuance of bonds and securities, as insurance to the purchasers in case of default on the debt by the issuer. It also provides a fixed-income asset management service with about seventy billion dollars under management.

MBIA has an AAA rating from Moody's, Standard and Poor's and Fitch Ratings. Fitch placed MBIA on review for possible downgrade but have later affirmed its Triple-A ratings (16 Feb 2008) after MBIA successfully raised US$2 billion in additional Capital to support its obligations, while Moody's have placed it on review for possible downgrade (18 Feb 2008) based on the risk of the market it is in rather than the basis of its financial strength.