DOW JONES NEWSWIRES
MBIA Inc. (MBI) swung to a first-quarter profit on $1.64 billion
of derivative gains as the bond insurer also saw sharply higher
earned premiums.
Shares jumped 14% in after-hours trading to $7.95. The stock
through regular trading Monday was up 71% this year.
The industry has been reeling from a foray into insuring
mortgage-backed securities, which plummeted along with the housing
market and increasing defaults and delinquencies on home loans.
Weak consumer sentiment and the contracting U.S. economy have hurt
the companies further.
The nation's largest bond insurer posted a profit of $700.6
million, or $3.34 a share, compared with a year-earlier loss of
$2.41 billion, or $12.92 a share, as that period included $3.54
billion of derivative losses.
Revenue was $1.92 billion on the derivative gains, compared with
negative $2.94 billion a year earlier. Net premiums earned jumped
47% to $228.7 million.
Rival bond insurer Ambac Financial Group Inc. (ABK) on Monday
posted a narrowed first-quarter loss on a gain related to
derivatives and a year-earlier write-down. Chief Executive David
Wallis said the credit environment remains adverse although
"perhaps the rate of degradation is slowing."
MBIA has been sued by several banks over its restructuring plan,
announced in February, under which it will split its business of
guaranteeing U.S. municipal debt into a separate company, isolating
it from the riskier activities related to insuring the complex
securities at the heart of the financial crisis. Several banks that
hold MBIA shares or notes have sued, saying the split amounts to
asset stripping and defrauds investors.
MBIA is also suing Merrill Lynch to cancel about half of its
$5.7 billion of credit-default swap contracts and said it will seek
compensation for payments it made to other counterparties. It said
Merrill had a strategy to offload billions of dollars in
deteriorating U.S. subprime mortgages by packaging them into
collateralized debt obligations or hedging their exposure through
swaps guaranteed by insurers like MBIA.
-By Kerry E. Grace, Dow Jones Newswires; 201-938-5089;
kerry.grace@dowjones.com