Bond insurer MBIA Inc. posted a loss for the 2011 fourth quarter, but remains positive on its ability to commute risky insurance contracts and the prospect of forcing buy backs of troubled mortgages.
The Armonk, New York-based company ended up in the middle of the mortgage crisis after insuring mortgage bonds that later showed signs of deteriorating credit quality.
For the fourth quarter, MBIA posted a loss of $626 million, or $3.23 a share, compared to a profit of $451 million, or $2.24 a share, a year earlier.
Fourth-quarter results were hurt by $1.7 billion in pretax “losses on insured credit derivatives resulting primarily from an improved market perception of MBIA Corp.’s credit quality, as realized losses associated with settlement and claim payments on multi-sector CDO and CMBS transactions were largely offset by the reversal of previously booked unrealized losses on these transactions.”
President and Chief Financial Officer Chuck Chaplin said the company commuted or agreed to commute $24 billion in risky liabilities since the third quarter of last year.
Chaplin said court rulings in New York related to the company’s ongoing litigation against the banks over the sale of troubled mortgages that MBIA ended up insuring suggest MBIA will be able to recover on losses tied to some of those insured mortgages.
The company also has settled most of the claims filed by big banks challenging the company’s 2009 restructuring.
“Since the third quarter of 2011, five banks have exited the litigation challenging our transformation, leaving four of the original 18 plaintiffs,” Chaplin said. “We look forward to the resolution of this action in 2012, which will remove a major obstacle to National Public Finance’s re-entry into the municipal bond insurance market.”