Saturday, May 8, 2010

MBIA Inc. (NYSE: MBI): Q1 Earnings Preview

MBIA Inc. (NYSE: MBI) is scheduled to release its first-quarter 2010 financial results after the market close on Monday, May 10, 2010. Analysts, on average, expect the company to report a loss of $1.02 a share on revenue of $252.47 million. In the year ago period, the company posted a loss of $1.51 per share on revenue of $371.57 million.

MBIA Inc. provides financial guarantee insurance and credit protection products, as well as investment management services to public finance and structured finance issuers, investors, and capital market participants worldwide. The company operates in two segments, Insurance and Investment Management Services. Despite ongoing litigation, less than stellar ratings and continued losses on structured finance products, MBIA Inc. managed to post positive net income last year.

In the preceding fourth quarter, the Armonk, New York-based company posted net loss of $242.02 million or $1.16 per share, compared with a net loss of $1.2 billion or $5.21 per share in the comparable period a year-ago. Total revenues for the quarter were $652.66 million, compared with $1.58 billion a year-ago.

The management of the company considers nonGAAP ABV (adjusted book value) as the best estimate of the present value of the company's assets and liabilities. It includes about 1.5 billion in expected recoveries under warranties and representations. At the end of 2009, ABV stood at 36.35 per share. Jay Brown, in his letter to shareholders for 2009, was willing to put forward 45 as an intermediate goal.

The value of MBIA's stock is contingent on the company's success in litigation. CEO Jay Brown has articulated a strategy of pursuing legal remedies against every party who wrongfully harmed the interests of MBIA shareholders. In April, the New York State Supreme Court released a decision on the suit bond insurer MBIA (MBI) filed against Merrill Lynch (BAC), alleging fraud in securing CDS protection on 4 CDOs of ABS with a face value of 5.7 billion. Five out of six causes of action were dismissed: one will be permitted to go forward. Dismissed were causes of action for fraud, fraud by comission, negligent misrepresentation, breach of covenant of good faith and fair dealing, and an action to enforce contractual rights.

Shares of MBIA recently got some boost after the Securities and Exchange Commission alleged Goldman Sachs Group fraudulently structured a complex mortgage-related vehicle known as a collateralized debt obligation. The latest development gave hope to the investors that the bond insurers could win lawsuits against Wall Street banks.

In terms of stock performance, MBIA shares have gained nearly 41% over the past year.

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