NU Online News Service, March 2, 3:19 p.m. EST
Bond insurer MBIA expects to complete separation of its municipal and mortgage insurance companies this year and begin going to trial over its legal wrangling with banks over collateralized debt obligations the company says were ineligible for insurance coverage.
During a conference call with financial analysts today to discuss the company's fourth-quarter and year-end results, Joseph W. Brown Jr., chief executive officer for Armonk, N.Y.-based MBIA, said the company expects to resolve a challenge to its plan to split the company in two this year. It also believes it will go to trial soon over its suit against Bank of America and other banks that MBIA says placed bad mortgages in securitized portfolios the company insured.
The company, which appeared to be on the brink of ruin as losses mounted in the face of the economic meltdown, is recovering, said Mr. Brown.
"The past year has had some ups and some downs. But net, net, I'm comfortable that over the course of 2010 the degree of uncertainty about our future has dissipated on several fronts."
He noted that the exposure faced because of the CDOs MBIA insured has diminished and that there has been a "steady decline in defaults" that caused the company to pay out billions.
The company is working on two fronts to strengthen its business. One is recovery of what it paid out on mortgages that defaulted that the company believes were misrepresented to it.
Mr. Brown said he was "dismayed" that after presenting clear evidence of this to the banks that underwrote the mortgages, they still refused to return the payouts. He said he continues to believe that recovery of these payouts will offset the losses the company suffered.
On the second front, the company's plan to split its mortgage insurance business from municipal bond business remains on track, he said. He was confident that a hearing challenging the split brought by a "small group of policyholders" will be held later this year and resolved in the company's favor.
"I am confident that we remain well positioned and on track to meet the long-term objectives that we established for our company in 2008," Mr. Brown said.
For the fourth quarter of 2010, MBIA reported net income of $451 million, or $2.24 a share, compared to net loss of $240 million, or $1.16 a share, for the prior year. Revenues rose 32 percent, or $211 million, to $864 million.
For the year, net income dropped from $623 million, or $2.99 a share in 2009, to $53 million, or 26 cents a share. Revenues were down from $2.95 billion to $894 million.
The impact on the company's net income was primarily impacted by the recording of investment gains and losses between 2009 and 2010.
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