##### Table of Contents

 

 

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**
 
**

**Form 10-Q**

 

**
 
**

 

**For the quarter ended September 30, 2009**

**or**

 

**For the transition period from              to            **

**Commission File Number 1-9583**

 

**
 
**

**MBIA INC.**

**(Exact name of registrant as specified in its charter)**

 

**
 
**

 

**Registrant’s telephone number, including area code: (914) 273-4545**

 

**
 
**

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Actof 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No   ̈

Indicateby check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   ̈    No   ̈

Indicateby check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smallerreporting company” in Rule 12b-2 of the Exchange Act. (Check one): 

 

Indicate by check mark whether the Registrant is shell company (as defined in Rule 12b-2 of theAct).    Yes   ̈    No  x

As of October 30, 2009, 207,954,051 shares of Common Stock, par value $1 per share, were outstanding. 

 

 

 

Table of Contents      **PAGE****PART I FINANCIAL INFORMATION**  **Item 1.**  Financial Statements (Unaudited) MBIA Inc. and Subsidiaries    Consolidated Balance Sheets—September 30, 2009 and December 31, 2008  1  Consolidated Statements of Operations—Three and nine months ended September 30, 2009 and 2008  2  Consolidated Statement of Changes in Shareholders’ Equity—Nine months ended September 30, 2009  3  Consolidated Statements of Cash Flows—Nine months ended September 30, 2009 and 2008  4  Notes to Consolidated Financial Statements  5-81**Item 2.**  Management’s Discussion and Analysis of Financial Condition and Results of Operations  82-160**Item 3.**  Quantitative and Qualitative Disclosures About Market Risk  160**Item 4.**  Controls and Procedures  160**PART II OTHER INFORMATION**  **Item 1.**  Legal Proceedings  161-164**Item 1A.**  Risk Factors  165**Item 1B.**  Unresolved Staff Comments  165**Item 2.**  Unregistered Sales of Equity Securities and Use of Proceeds  165**Item 3.**  Defaults Upon Senior Securities  165**Item 4.**  Submission of Matters to a Vote of Security Holders  165**Item 5.**  Other Information  165**Item 6.**  Exhibits  165**SIGNATURES**  
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**MBIA INC. AND SUBSIDIARIES**

**CONSOLIDATED BALANCE SHEETS (Unaudited)**

(In thousands except per share amounts) 

 
   **September 30, 2009**  **December 31, 2008** 
Assets
   
Investments:
   
Fixed-maturity securities held as available-for-sale, at fair value (amortized cost $11,330,409 and $13,245,574) (includes hybridfinancial instruments at fair value $30,710 and $25,498)
    $9,955,464     $11,223,716  
Fixed-maturity securities held as trading, at fair value (amortized cost $115,946)
   123,467    -  
Investments held-to-maturity, at amortized cost (fair value $2,405,860 and $3,109,248)
   2,861,353    3,156,969  
Investments pledged as collateral, at fair value (amortized cost $652,992 and $1,101,929)
   617,249    845,887  
Short-term investments held as available-for-sale, at fair value (amortized cost $2,895,514 and $4,728,090)
   2,895,530    4,693,283  
Short-term investments held-to-maturity, at amortized cost (fair value $605,650 and $485,857)
   1,032,388    498,865  
Other investments (includes investments at fair value $373,097 and $216,805)
   376,150    220,412           
Total investments
   17,861,601    20,639,132  
Cash and cash equivalents
   1,645,453    2,279,783  
Accrued investment income
   111,558    201,688  
Premiums receivable
   2,059,389    7,744  
Deferred acquisition costs
   477,429    560,632  
Prepaid reinsurance premiums
   367,110    216,609  
Insurance loss recoverable
   2,207,625    458,512  
Reinsurance recoverable on paid and unpaid losses
   53,440    173,548  
Goodwill
   76,938    76,938  
Property and equipment, at cost (less accumulated depreciation of $148,453 and $141,295)
   84,349    105,364  
Receivable for investments sold
   203,093    77,464  
Derivative assets
   780,795    911,188  
Current income taxes
   75,035    240,871  
Deferred income taxes, net
   1,309,423    2,374,164  
Other assets
   539,822    706,812           
Total assets
    $27,853,060     $29,030,449           
Liabilities and Equity
   
Liabilities:
   
Unearned premium revenue
    $5,121,978     $3,424,402  
Loss and loss adjustment expense reserves
   1,322,873    1,557,884  
Reinsurance premiums payable
   208,422    8,672  
Investment agreements
   2,881,757    4,666,944  
Medium-term notes (includes financial instruments at fair value $142,017 and $176,261)
   3,932,747    6,339,527  
Variable interest entity notes
   2,668,798    1,791,597  
Securities sold under agreements to repurchase
   501,961    802,938  
Long-term debt
   2,718,076    2,396,059  
Deferred fee revenue
   88,000    44,989  
Payable for investments purchased
   303,949    239  
Derivative liabilities
   4,988,759    6,470,874  
Other liabilities
   362,171    504,306           
Total liabilities
   25,099,491    28,008,431           
Commitments and contingencies (See Note 16)
   
Equity:
   
Preferred stock, par value $1 per share; authorized shares—10,000,000; issued and outstanding—none
   -    -  
Common stock, par value $1 per share; authorized shares—400,000,000; issued shares – 274,837,483 and273,199,801
   274,837    273,200  
Additional paid-in capital
   3,056,500    3,050,506  
Retained earnings
   2,633,690    1,629,187  
Accumulated other comprehensive loss, net of deferred income tax of $500,600 and $946,759
   (1,044,568)   (1,775,954) 
Treasury stock, at cost — 66,892,054 and 65,278,904 shares
   (2,183,668)   (2,182,519)          
Total shareholders’ equity of MBIA Inc.
   2,736,791    994,420  
Preferred stock of subsidiary
   16,778    27,598           
Total equity
   2,753,569    1,022,018           
Total liabilities and equity
    $27,853,060     $29,030,449           
The accompanying notes are an integral part of the consolidated financial statements.

 

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**MBIA INC. AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)**

(In thousands except per share amounts) 

 
   **Three Months Ended****September 30,**  **Nine Months Ended****September 30,**    **2009**  **2008**  **2009**  **2008** 
Revenues:
     
Premiums earned:
     
Scheduled premiums earned
    $144,414     $141,049     $492,515     $434,205  
Refunding premiums earned
   36,834    93,696    95,350    189,248                   
Premiums earned (net of ceded premiums of $21,540, $31,607, $70,159 and $93,840)
   181,248    234,745    587,865    623,453  
Net investment income
   156,775    354,419    524,965    1,286,829  
Fees and reimbursements
   14,291    12,120    55,317    31,968  
Change in fair value of insured derivatives:
     
Realized gains (losses) and other settlements on insured derivatives
   (30,282)   34,263    33,536    102,325  
Unrealized gains (losses) on insured derivatives
   (810,189)   104,818    1,222,761    (147,972)                  
Net change in fair value of insured derivatives
   (840,471)   139,081    1,256,297    (45,647) 
Net gains (losses) on financial instruments at fair value and foreign exchange
   (87,296)   (234,200)   74,462    (70,853) 
Net realized gains (losses)
   (78,121)   (292,241)   (13,710)   (618,932) 
Investment losses related to other-than-temporary impairments:
     
Investment losses related to other-than-temporary impairments
   (199,094)   (134,058)   (786,501)   (793,837) 
Other-than-temporary impairments recognized in accumulated other comprehensive loss
   105,814    -    349,566    -                   
Net investment losses related to other-than-temporary impairments
   (93,280)   (134,058)   (436,935)   (793,837) 
Net gains on extinguishment of debt
   126,696    239,898    253,097    319,115                   
Total revenues
   (620,158)   319,764    2,301,358    732,096  
Expenses:
     
Losses and loss adjustment
   238,760    982,514    203,174    1,292,466  
Amortization of deferred acquisition costs
   19,896    24,618    66,663    63,147  
Operating
   77,113    95,011    249,603    224,790  
Interest
   110,136    264,211    359,889    962,767                   
Total expenses
   445,905    1,366,354    879,329    2,543,170                   
Income (loss) before income taxes
   (1,066,063)   (1,046,590)   1,422,029    (1,811,074) 
Provision (benefit) for income taxes
   (341,530)   (240,111)   547,900    (298,222)                  
Net income (loss)
   (724,533)   (806,479)   874,129    (1,512,852) 
Preferred stock dividends of subsidiary
   3,271    -    10,484    -                   
Net income (loss) available to common shareholders
    $(727,804)    $(806,479)    $863,645     $(1,512,852)                  
Net income (loss) per common share:
     
Basic
    $(3.50)    $(3.42)    $4.15     $(6.87) 
Diluted
    $(3.50)    $(3.42)    $4.15     $(6.87) 
Weighted-average number of common shares outstanding:
     
Basic
   208,219,324    235,706,851    208,278,589    220,137,758  
Diluted
   208,219,324    235,706,851    208,278,589    220,137,758  
The accompanying notes are an integral part of the consolidated financial statements.

 

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**MBIA INC. AND SUBSIDIARIES**

**CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)**

**For the Nine Months Ended September 30, 2009**

(Inthousands except per share amounts) 

 
         **Accumulated**     **Total**      **Common Stock** **Additional**