NU Online News Service, May 12, 4:00 p.m. EDT
Armonk, N.Y.-based bond insurer MBIA, Inc. reported a $1.5 billion loss for the first quarter of this year driven by a $2.2 billion unrealized loss on insured credit derivatives.
The results reported Monday were in stark contrast to net income of $697 million for the same period last year.
Earnings per share in the quarter stood at negative $7.22 compared to $3.34 per share last year.
During a conference call with analysts, Jay Brown, MBIA's chief executive officer said the company has endured more than its share of risk over the past three years, but the economy is showing some stabilization, which bodes well for the company.
Mr. Brown noted that the company was the victim of the collateralized debt obligations it insured and now it is coming to light that many of those vehicles were designed to fail.
"A significant portion of the major losses that MBIA sustained over the past three years have more to do with collateral that was misrepresented and doomed to fail, rather than the recession," he noted.
He said MBIA is proceeding with legal action against many of the companies that developed these financial deals and a court has approved a major case against Bank of America and the former mortgage originator Country-Wide that is now owned by Bank of America.
He noted there have been numerous stories of misrepresentation of these mortgage origination programs that caused the company heavy losses, and that proceeding successfully with legal claims against the CDO originators is "important to MBIA's long term financial strength and we do expect that we will ultimately prevail."
He noted that from a performance perspective, the company's adjusted book value (ABV) per share was "basically flat," down 34 cents to $36.01 in the quarter compared to last year.
MBIA said ABV is a reflection of the value of the company and does not reflect unrealized gains or losses.
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