May 10 (Reuters) – U.S. bond insurer MBIA Inc posted an adjusted loss compared with a year-ago profit, hurt by legal costs, losses on its insured exposures and investment impairments.
For the first quarter, MBIA's adjusted pre-tax loss was $548 million, compared with a profit of $25 million a year ago. The loss also widened from the fourth-quarter.
“Our first quarter 2012 operating results were a disappointment due to the significant actions we took to reduce future volatility in our insured portfolio and lower liquidity risk at the holding company,” Chief Financial Officer Chuck Chaplin said in a statement.
During the quarter, MBIA Insurance Corp commuted $4.3 billion of insured exposure, comprising investment grade corporate collateralized debt obligations and commercial real estate CDOs, to mitigate future losses.
Subsequent to March 31, MBIA Corp agreed to commute $7.2 billion in exposure related to the real estate market, with additional counterparties.
MBIA historically focused on insuring municipal bonds but as the U.S. real-estate market heated up last decade, it sold large numbers of credit default swaps on mortgage-backed securities and other structured finance products.
MBIA's bets on CDS started souring as the financial crisis ramped up, leading the company to split itself into two parts: a municipal guarantee business and a structured finance unit.
Banks sued the company, contending that the split was intended to defraud policyholders by leaving the MBIA Insurance unit undercapitalized and siphoning $5 billion from that unit at their expense.
Net income available to common shareholders was $10 million, or 5 cents a share, compared with a net loss of $1.3 billion, or $6.37 per share, a year ago.
Shares of the company were down 2 percent at $9.65 in after-market trade. They closed at $9.82 on Thursday on the New York Stock Exchange.
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