NU Online News Service, Nov. 10, 1:05 p.m. EST

Two major bond insurers hobbled by the financial meltdown in the credit markets report mixed third-quarter results today.

N.Y.-based MBIA reports third quarter net income of $444 million, or $2.26 a share, compared to a net loss of $213 million, or $1.06 a share a year ago. Revenues stood at $1.12 billion compared to the previous year's loss of $191 million.

For the first nine months of the year, the company reports a net loss of $693 million, or $3.50 a share, compared to net loss of $398 million, or $1.96 a share in 2010.

New York-based Ambac records a net loss of $76 million, or 25 cents a share for the third quarter, compared to net income of $76 million or 25 cents a share for the previous year's third quarter. Revenues fell to $26 million in the quarter from $361 million in 2010.

For the first nine months of this year, Ambac's net loss increased to $997 million, or $3.30 a share, from $672 million, or $2.29 a share. Revenues increased from $243 million in 2010 to $377 million this year.

During a conference call with financial analyst, MBIA's Chief Executive Officer Joseph Brown Jr. says that the results show the positive effects of its commutation agreements with insureds over credit default obligations that reduced the company's “volatility” to those financial instruments.

Chuck Chaplin, president and chief financial officer, says the impact of the commutation agreements “is the reason that we feel pretty good about our results in the third quarter.”

He says the number of plaintiffs contesting the company's split into two separate insurance entities through an Article 78 hearing is continuing to drop, leaving only eight left.

The insureds are contesting a decision by New York State Insurance Department that allowed the company to split its portfolio of health municipal bonds into a separate company in 2009, named National Public Finance Guarantee. MBIA kept its book of troubled structured-finance polices.

The plaintiffs argue that the split of the company put their policies at risk because it put the structured finance portion in danger of insolvency.

Brown says that as time passes the company's performance shows their suit has no merit and he continues to predict MBIA will eventually prevail.

On its own fraud suit against a number of banks that had policies covering those structured-finance instruments, Brown says the company believes it will ultimately prevail and collect the “vast majority” of its losses from those institutions.

Regarding the announcement yesterday that Jefferson County in Alabama would file for bankruptcy on about $4 billion of debt, executives say they have about $91 million of exposure that has been reserved for and they expect no surprises.

For its part, Ambac did not hold a conference call. The company, which is in Chapter 11 bankruptcy, says its declines are in part the result of its inability to write new business and runoff.

One bright spot was a 17 percent increase in investment income of $12 million to $82 million.

Special Reports /

MBIA Posts 3Q Profit; Ambac Records Loss

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