MBIA Reports $2.3B Quarterly Loss, Gets $500M Financing

Troubled bond insurer MBIA reported a $2.3 billion fourth-quarter net loss for 2007 a day after saying it closed on its stock deal to raise $500 million--part of a total capital package of $1 billion investment with Warburg Pincus.

Also, the firm's Chairman and Chief Executive Officer Gary C. Dunton said, during an extended conference call, he believes the firm can maintain it's AAA financial strength ratings.

The fourth-quarter results amounted to a loss of $18.61 a share, compared with net income of $1.32 a share, or $181 million, for the same period of 2006.

MBIA for all of 2007 reported a loss of $1.9 billion in contrast to net income of $819 million in 2006. Loss per share stood at $15.22 compared to net earnings per share of $5.99 for 2006.

The quarterly loss was primarily due to a $3.5 billion pretax net loss on security notes related to the subprime mortgage market crisis. The losses were also affected by foreign exchange and ratings downgrades.

The Armonk, N.Y.-based insurer reported gross written premiums of $267.5 million in the fourth quarter of 2007 compared to $275.1 million for the same period last year.

Gross written premium for the year stood at $998.9 million for 2007 compared to $922 million in 2006.

The company said yesterday that it closed on its deal to sell 16.1 million shares of its common stock at a price of $31 a share for an aggregate amount of $500 million.

The sale is part of a previously announced deal for $1 billion Warburg has pledged to invest in the insurer.

In response to the deal, David A. Coulter, a Warburg Pincus managing director who leads the firm's Financial Services investment activities, and Kewsong Lee, a Warburg Pincus managing director and member of the firm's executive management group, were named to MBIA's board of directors.

Richard Walker, who has been a board member since September of 2006 and is the general counsel of Deutsche Bank, resigned from board. He did so to avoid any possible appearance of a potential conflict of interest in light of the ongoing discussions among the New York State Superintendent of Insurance, the banking industry and the monoline financial guarantee insurance industry, MBIA said.

In a statement, Mr. Dunton,, said the company has strengthened its capital position by $1.5 billion, and there is intention to raise additional capital in the coming weeks.

The insurer has been under pressure by ratings agencies to raise capital as it reports write-downs in response to potential losses from the subprime crisis, where the insurer backed some mortgage-backed securities that are now showing significant losses.

Even as MBIA said it believed it could hold onto its ratings Standard & Poor's announced it had placed its ratings on MBIA Insurance Corp., on CreditWatch with negative implications.

S&P said although MBIA has succeeded in accessing $1.5 billion of additional capital, the magnitude of projected losses underscores our view that time is of the essence in the completion of capital-raising efforts.

The firm also put XL Capital Assurance Inc., XL Financial Assurance Ltd., and their related entities on CreditWatch.

This article updated Feb. 1, 8:56 a.m.