NU Online News Service, May 11, 2:49 p.m.EDT

MBIA narrowed its first-quarter net loss by more than $340million as the company saw a steady decline in loss severity in itsstructured-finance obligations.

The Armonk, N.Y.-based bond insurer reports a net lossof $1.14 billion for the 2011 first quarter compared to a $1.5billion net loss for the same period last year.

Total revenues for the quarter amounted to a loss of $1.4billion, compared to a loss of $1.86 billion for the previousyear.

CEO Jay Brown and Chuck Chaplin, president and chief financialofficer, speaking during an analyst's conference call today, saythat the quarter did not produce anything of special note.

"We see declining loss payments and declining volatility in ourRMBS (residential mortgage-backed securities) related exposures,and there is an ever-increasing recognition of the liability ofsponsors who placed ineligible mortgages and securitizations thatwe wrap," says Chaplin.

The company is embroiled in a bitter dispute with a number ofbanks over the placement of mortgages that MBIA contends shouldnever have been insured by the company. The company has sued thebanks for return of payments made under the policies, which couldresult in hundreds of millions of dollars returned to MBIA.

At the same time, the banks are challenging the split of the company into two divisions:National Public Finance Guarantee Corp., responsible for coverageof public finance bonds; and MBIA Insurance Corp., responsible forcovering the structured finance instruments.

The banks argue, under an Article 78 appeal of the New YorkInsurance Department's order, that the split endangers the abilityof MBIA to pay future claims.

Chaplin says that the banks' argument is not valid and that inthe two years that the arrangement has been in effect, the companyhas not failed to pay a claim. He says there is no reason tobelieve that the company should not be able to continue to do so inthe future.