SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 1995
OR
( ) TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from __________ to __________
Commission File No. 1-9583 I.R.S. Employer Identification No. 06-1185706
MBIA INC.
A Connecticut Corporation
113 King Street, Armonk, N. Y. 10504
(914) 273-4545
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Sections 13 or 15(d) of the
Securities Exchange Act of 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
----- -----
As of April 28, 1995 there were outstanding 41,690,498 shares of
Common Stock, par value $1 per share, of the registrant.
PAGE 1 OF 15
<PAGE>
INDEX
-----
PAGE
----
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
MBIA Inc. and Subsidiaries
Consolidated Balance Sheets - March 31, 1995
and December 31, 1994 (Audited) 3
Consolidated Statements of Income - Three months
ended March 31, 1995 and 1994 4
Consolidated Statement of Changes in Shareholders'
Equity - Three months ended March 31, 1995 5
Consolidated Statements of Cash Flows
- Three months ended March 31, 1995 and 1994 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8 - 13
PART II OTHER INFORMATION, AS APPLICABLE
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
(2)
<PAGE>
MBIA INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except per share amounts)
March 31, 1995 December 31, 1994
-------------- -----------------
(Unaudited) (Audited)
ASSETS
Investments:
Fixed maturity securities held
as available-for-sale at market
(amortized cost $3,190,072
and $3,123,838) $3,246,516 $3,051,906
Short-term investments, at
amortized cost (which approximates
market value) 147,778 121,384
Other investments 19,083 17,550
---------- ----------
3,413,377 3,190,840
Municipal investment agreement
portfolio, held as available-for-sale
at market (amortized cost
$2,112,313 and $1,738,375) 2,087,924 1,675,935
---------- ----------
TOTAL INVESTMENTS 5,501,301 4,866,775
Cash and cash equivalents 9,706 7,940
Accrued investment income 71,220 68,486
Deferred acquisition costs 134,682 133,048
Prepaid reinsurance premiums 185,734 186,492
Goodwill (less accumulated amortization
of $37,364 and $36,115) 110,503 111,252
Property and equipment, at cost
(less accumulated depreciation of
$14,830 and $13,917) 45,310 45,069
Receivable for investments sold 36,654 945
Other assets 36,593 36,432
---------- ----------
TOTAL ASSETS $6,131,703 $5,456,439
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deferred premium revenue $1,524,712 $1,512,211
Loss and loss adjustment
expense reserves 42,033 40,148
Municipal investment agreements 2,104,144 1,526,133
Long-term debt 298,818 298,790
Short-term debt 23,000 17,000
Current income taxes payable 10,838 ---
Deferred income taxes 139,220 76,843
Payable for investments purchased 44,144 209,966
Other liabilities 72,888 70,632
---------- ----------
TOTAL LIABILITIES 4,259,797 3,751,723
---------- ----------
Shareholders' 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--100,000,000;
issued shares--42,077,387 42,077 42,077
Additional paid-in capital 720,136 719,750
Retained earnings 1,108,947 1,057,092
Cumulative translation adjustment 5,010 503
Unrealized appreciation (depreciation)
of investments, net of deferred
income tax provision (benefit)
of $12,303 and $(46,292) 21,828 (86,560)
Treasury stock, at cost; shares--
430,463 and 461,763 (26,092) (28,146)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 1,871,906 1,704,716
---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $6,131,703 $5,456,439
========== ==========
The accompanying notes are an integral part of the
consolidated financial statements.
(3)
<PAGE>
MBIA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands except per share amounts)
Three months ended
March 31
--------------------------
1995 1994
---------- -----------
Revenues:
Insurance:
Gross premiums written $ 70,834 $ 84,311
Ceded premiums (7,080) (7,798)
---------- ----------
Net premiums written 63,754 76,513
Increase in deferred premium revenue (12,680) (22,061)
---------- ----------
Premiums earned (net of ceded premiums of
$7,839 and $7,254) 51,074 54,452
Net investment income 52,837 46,884
Net realized gains 1,724 6,370
Investment management services:
Income 4,202 2,218
Net realized gains (losses) 33 (617)
Other 910 320
---------- ----------
Total revenues 110,780 109,627
---------- ----------
Expenses:
Insurance:
Losses and loss adjustment 2,033 1,925
Policy acquisition costs, net 5,140 5,959
Operating 9,747 9,342
Investment management services 2,871 2,334
Interest 7,050 6,735
Other 417 423
---------- ----------
Total expenses 27,258 26,718
---------- ----------
Income before income taxes 83,522 82,909
Provision for income taxes 17,516 17,168
---------- ----------
NET INCOME $ 66,006 $ 65,741
========== ==========
NET INCOME PER COMMON SHARE $ 1.57 $ 1.56
========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES AND
COMMON STOCK EQUIVALENTS OUTSTANDING 42,061,641 42,155,023
========== ==========
The accompanying notes are an integral part of the
consolidated financial statements.
(4)
<PAGE>
MBIA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)
For the three months ended March 31, 1995
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Unrealized
Common Stock Additional Cumulative Appreciation Treasury Stock
--------------- Paid-in Retained Translation (Depreciation) --------------
Shares Amount Capital Earnings Adjustment of Investments Shares Amount
------ ------- -------- ---------- ---------- -------------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1995 42,077 $42,077 $719,750 $1,057,092 $ 503 $(86,560) 462 $28,146
Treasury shares acquired --- --- --- --- --- --- (32) (2,054)
Exercise of stock options --- --- 386 (1,241) --- --- --- ---
Net income --- --- --- 66,006 --- --- --- ---
Change in foreign
currency translation --- --- --- --- 4,507 --- --- ---
Change in unrealized
appreciation of
investments net of
change in deferred
income taxes of
$(58,595) --- --- --- --- --- 108,388 --- ---
Dividends per
common share $0.31 --- --- --- (12,910) --- --- --- ---
------ ------- -------- ---------- ------ -------- ----- -------
Balance,
March 31, 1995 42,077 $42,077 $720,136 $1,108,947 $5,010 $ 21,828 430 $26,092
====== ======= ======== ========== ====== ======== ===== =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
(5)
<PAGE>
MBIA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
Three months ended
March 31
--------------------
1995 1994
-------- --------
Cash flows from operating activities:
Net income $ 66,006 $ 65,741
Adjustments to reconcile net income to net cash
provided by operating activities:
(Increase) decrease in accrued investment income (2,734) 1,253
Increase in deferred acquisition costs (1,634) (2,941)
Decrease (increase) in prepaid reinsurance premiums 758 (544)
Increase in deferred premium revenue 11,922 22,665
Increase in loss and loss
adjustment expense reserves 1,885 1,913
Depreciation 907 741
Amortization of goodwill 1,249 1,256
Amortization of bond (discount) premium, net (358) 1
Net realized gains on sale of investments (1,757) (6,370)
Deferred income taxes 3,782 3,020
Other, net 21,935 9,291
-------- --------
Total adjustments to net income 35,955 30,285
-------- --------
Net cash provided by operating activities 101,961 96,026
-------- -------
Cash flows from investing activities:
Purchase of fixed maturity securities, net
of payable for investments purchased (182,603) (342,288)
Sale of fixed maturity securities, net of
receivable for investments sold 92,891 142,388
Redemption of fixed maturity securities, net of
receivable for investments redeemed 16,717 40,091
(Purchase) sale of short-term investments, net (9,908) 1,742
(Purchase) sale of other investments, net (863) 87,956
Purchases for municipal investment agreement
portfolio, net of payable for
investments purchased (864,740) (460,578)
Sales from municipal investment agreement
portfolio, net of receivable for
investments sold 284,957 261,642
Capital expenditures, net of disposals (1,106) (1,008)
-------- --------
Net cash used by investing activities (664,655) (270,055)
-------- --------
Cash flows from financing activities:
Dividends paid (12,901) (10,836)
Purchase of treasury stock --- (8,886)
Proceeds from issuance of municipal
investment agreements 779,995 277,591
Payments for drawdowns of municipal
investment agreements (203,833) (80,546)
Exercise of stock options 1,199 434
-------- --------
Net cash provided by financing activities 564,460 177,757
-------- --------
Net increase in cash and cash equivalents 1,766 3,728
Cash and cash equivalents - beginning of period 7,940 2,492
-------- --------
Cash and cash equivalents - end of period $ 9,706 $ 6,220
======== ========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Income taxes paid $ 146 $ 1,818
Interest paid:
Municipal investment agreements $ 25,010 $ 2,880
Long-term debt 9,188 9,188
Short-term debt 281 ---
The accompanying notes are an integral part of the
consolidated financial statements.
(6)
<PAGE>
MBIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and, accordingly,
do not include all of the information and disclosures required by generally
accepted accounting principles. These statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Form 10-K for the year ended December 31, 1994 for MBIA Inc.
and Subsidiaries (the "Company"). The accompanying unaudited consolidated
financial statements have not been audited by independent accountants in
accordance with generally accepted auditing standards but in the opinion of
management such financial statements include all adjustments, consisting
only of normal recurring adjustments, necessary to summarize fairly the
Company's financial position and results of operations. The results of
operations for the three months ended March 31, 1995 may not be indicative
of the results that may be expected for the year ending December 31, 1995.
The December 31, 1994 condensed balance sheet data was derived from audited
financial statements, but does not include all disclosures required by
generally accepted accounting principles.
2. Dividends Declared
Dividends declared by the Company during the three months ended March 31,
1995 were $12.9 million.
(7)
<PAGE>
MBIA INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
1995 AND 1994 - FIRST QUARTER RESULTS
- -------------------------------------
MBIA Inc.'s (the "Company") 1995 first quarter net income was
$66.0 million compared to $65.7 million in 1994. Earnings per
share grew 1% to $1.57 from $1.56 in the first quarter of 1994.
The Company also measures its performance in terms of core
earnings, which exclude the effects of the relatively less
predictable elements of net premiums earned from refundings and
calls of previously insured issues, realized gains and accounting
changes. Core earnings increased by 13% to $1.43 per share
compared with $1.27 a year ago, reflecting the Company's
continuing ability to produce consistent growth from its
expanding portfolio of insured issues, its investment portfolio
and investment management services.
According to THE BOND BUYER, long-term new issue municipal bond
volume was $28.0 billion of par value in the first quarter of
1995, down from $49.8 billion in the first quarter of 1994 due to
a sharp decline in refunding activity. The insured portion of
the market declined to 30% from 36% in the first quarter of 1994.
The decrease was the result of a larger percentage than usual in
this year's first quarter of new issues that sold without
insurance because of their very high credit quality. In the
first quarter of 1995, the Company's principal operating
subsidiary, MBIA Insurance Corporation (formerly, Municipal Bond
Investors Assurance Corporation) ("MBIA Corp."), continued to
lead the industry in market share, guaranteeing 38% of the
insured long-term new issue municipal bond volume. In addition,
the Company insured a record $2.1 billion (par value) of
structured finance securities, more than double the $927.5
million insured in last year's first quarter.
Influenced by the decline in overall new issue market volume,
but partially offset by increased writings in secondary market,
asset-backed and international activity, gross premiums written
by MBIA Corp. decreased 16% to $70.8 million during the first
quarter, from $84.3 million during the first quarter of 1994.
New issue and secondary market municipal and asset-backed
premiums, the major components of gross premiums written,
decreased 22% to $59.6 million compared with $76.1 million in the
same period last year. Installment premiums received for
policies issued in prior years, including net amounts assumed
related to the installment business of the Association, were $7.9
million and $7.3 million for the first quarters of 1995 and 1994,
respectively. MBIA Assurance S. A., a subsidiary of MBIA Corp.
has shown
(8)
<PAGE>
MBIA INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
substantial growth contributing $3.3 million of gross premium
written in first quarter 1995 compared to $0.7 million in the
first quarter of 1994. Gross premiums written also included
portfolio assumptions of $0.2 million in the first quarter of
1994.
With the decrease in the volume of gross premiums written,
premiums ceded to reinsurers declined 9% to $7.1 million during
the first quarter of 1995 compared to $7.8 million in the same
period last year. Premiums ceded as a percentage of gross
premiums written were relatively constant at 10% and 9% for the
first quarters of 1995 and 1994, respectively.
The Company monitors on a continual basis the creditworthiness
of its reinsurers. The substantial majority (97%) of the
Company's current reinsurance treaty capacity is with reinsurance
companies which are rated AA or better by Standard & Poors or A
or better by A. M. Best & Co., an insurance rating organization.
In the first quarter of 1995, the maximum amount reinsured by any
one reinsurance company as a percent of the Company's gross
premiums written was 4%. As of March 31, 1995, the maximum
amount of debt service outstanding reinsured by any one
reinsurance company as a percent of insured gross debt service
outstanding was also 4%. The Company remains liable for risks
reinsured but believes that the likelihood of not recovering the
reinsured portion of losses from its reinsurers is remote.
Typically, insurance premiums are paid in full at the time the
insurance policy is issued and are earned pro rata over the
period of risk. Premiums are allocated to each bond maturity
based on par amount and are earned on a straight-line basis over
the term of each maturity. Accordingly, the portion of net
premiums earned on each policy in any given year represents a
relatively small percentage of the total net upfront premium
received. The balance represents deferred premium revenue to be
earned in the future over the remaining life of the bond.
Approximately 10% of MBIA's premiums are collected on an
installment basis. Installment premiums are not recorded as a
component of deferred premium revenue until received and
therefore represent an off-balance sheet value which will
contribute to future earned premiums and cash flow. As of
March 31, 1995, MBIA estimates the present value of this future
stream of payments to be $182.5 million. The present value of
installment premiums related to MBIA's asset-backed and UIT
businesses written in the first quarter of 1995 increased 92% to
$13.6 million from $7.1 million in the first quarter of 1994.
(9)
<PAGE>
MBIA INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Premiums earned in the first quarter decreased 6% to $51.1
million from $54.5 million in the first quarter of 1994. The
growth in the deferred premium revenue from the addition of new
business in 1994 was more than offset by the decline in earned
premiums associated with bond refundings and calls during first
quarter 1995, which were significantly lower than in the same
period last year.
When an MBIA-insured bond issue is refunded or retired prior to
the end of the expected period of coverage, the outstanding
liability associated with the refunded or called portion is
extinguished and the remaining deferred premium revenue is earned
immediately, except for any portion which may be applied as a
credit toward the premium charged on the refunding bond issue if
such refunding issue is insured by MBIA Corp. Earned premiums
generated by refunded and called bonds declined to $8.0 million
from $14.5 million in the first quarter of 1994. The amount of
bond refundings and calls is difficult to predict since it is
influenced by a variety of factors such as prevailing interest
rates relative to the coupon rates of the original issue, the
issuer's desire to modify restrictive covenants and changing
requirements under the Internal Revenue Code.
The Company's total investments were $5.5 billion as of March
31, 1995, including $2.1 billion related to the Company's
municipal investment agreement business.
Net investment income (excluding the amount earned on
investment agreement assets which are recorded as a component of
investment management services income) increased 13% to $52.8
million in the first quarter of 1995 compared with $46.9 million
in the corresponding period of 1994. The increase was primarily
the result of the growth of investments from continued positive
operating cash flows. Average investments excluding investment
agreement assets were $3.29 billion in the first quarter of 1995
compared with $3.01 billion for the same period last year. Tax-
exempt investments represented 75% of total investments excluding
investment agreement assets, at both March 31, 1995 and March 31,
1994. Net realized capital gains in the first quarter of 1995
decreased to $1.7 million from $6.4 million in the same period of
1994.
MBIA has undertaken the development of investment management
services which capitalize on its capabilities, reputation and
marketplace relationships. In aggregate for the first quarter
1995, these businesses contributed $4.2 million in revenue, a
substantial increase over first quarter 1994 revenues of $1.6
million.
(10)
<PAGE>
MBIA INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
MBIA Municipal Investors Services Corporation ("MBIA/MISC"), a
subsidiary of the Company, provides cash management services for
local governments, school districts and similar authorities. As
of March 31, 1995 MBIA/MISC had over 1,000 clients and over $1.7
billion of client assets under management. MBIA/MISC is
operating in nine states and plans to continue its expansion into
additional states. MBIA/MISC provides fund administration
services to over 200 clients.
MBIA Investment Management Corp. ("IMC"), another subsidiary of
the Company, provides investment vehicles in the form of
investment agreements guaranteed as to principal and interest,
for states, municipalities and municipal authorities. At March
31, 1995, IMC managed outstanding investment agreements of $2.1
billion compared with $693.6 million at March 31, 1994. The
related assets are high quality securities and are recorded as a
component of the Company's total investments.
Municipal investment agreements are recorded as liabilities at
the time such agreements are executed. The liability for a
municipal investment agreement is carried at the principal value
of the obligation plus accrued interest due. Interest expense on
municipal investment agreements is computed daily based upon the
outstanding liability balance at rates specified in the
agreements. Such expense is deducted from the investment income
arising from the related investment agreement assets, and the net
amount is included in investment management services income.
The provision for losses and loss adjustment expenses for the
first quarter of 1995 was $2.0 million, compared with $1.9
million in 1994, representing additions to the loss reserves
consistent with the Company's reserve methodology. At March 31,
1995, $22.1 million of the $42.0 million loss and loss adjustment
expense reserve was allocated on a case basis, compared with
$22.4 million of the $35.6 million reserve at March 31, 1994.
During the first quarter of 1995 there were no new case reserves
nor any material adjustments to those reserves currently
outstanding.
For the first quarter of 1995, policy acquisition costs net of
deferrals decreased $0.8 million to $5.1 million. Since policy
acquisition costs are deferred and amortized over the period in
which the related premiums are earned, this decrease is primarily
a function of the lower level of premiums earned caused by the
1995 decline in refunding activity. Other insurance operating
expenses remained relatively flat increasing to $9.7 million from
$9.3 million in the first quarter of 1994.
(11)
<PAGE>
MBIA INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Expenses of MBIA's investment management services businesses
increased to $2.9 million from $2.3 million last year due to
increased costs associated with the expansion of these new
businesses. The 1995 increase in expenses was more than offset
by increased investment management services income.
The Company's interest expense was $7.1 million and $6.7
million for the first quarters of 1995 and 1994, respectively.
The increase resulted from utilization of short-term bank
borrowings under existing lines of credit during the first
quarter of 1995 for investment management services' working
capital needs.
In summary, aggregate expenses for the first quarter of 1995
increased by 2% over the first quarter of 1994
The Company's effective tax rates at 20.97% and 20.71% for the
first quarters of 1995 and 1994, respectively, were relatively
constant.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At March 31, 1995, the market value of the Company's consolidated
investment portfolio was $5.50 billion, an increase of 13% from
$4.87 billion at year-end 1994. Of this increase 15% was due to
continued positive operating cash flow from MBIA Corp.'s
insurance premiums and investment income; 59% was from municipal
investment agreement portfolio operations; and the balance, 26%,
was attributable to unrealized gains.
The Company's liquidity is in part dependent upon MBIA Corp.'s
ability to pay dividends to the Company. MBIA Corp.'s net
income, consisting of premium earnings and investment income less
losses and expenses, is a source of continuing additions to
earned surplus and dividend paying capability. Under New York
insurance law, without prior approval of the Superintendent of
the New York State Insurance Department, MBIA Corp. may pay a
dividend only from earned surplus subject to the maintenance of a
minimum capital requirement, and the dividends in any 12-month
period may not exceed the lesser of 10% of its policyholders'
surplus as shown on its last filed statutory-based financial
statements or adjusted net investment income, as defined, for
such 12-month period. MBIA Corp. paid dividends of $22.5 million
in the first quarter of 1995 and at March 31, 1995 had in excess
of $52 million available for payment of further dividends to the
Company without prior approval.
(12)
<PAGE>
MBIA INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
MBIA Corp. has an irrevocable standby line of credit of $600
million with a group of major banks to provide funds for the
payment of claims in the event that severe losses should occur.
The agreement is for a seven-year term expiring on September 30,
2001 but, subject to approval by the banks, the agreement may be
renewed annually to extend the term to seven years beyond the
renewal date. The Company and MBIA Corp. maintain short-term
liquidity facilities totaling $250 million with major banks for
general corporate purposes including immediate liquidity for
payment of claims should they occur. At March 31, 1995, $23
million was outstanding under these facilities to fund investment
management services' working capital requirements.
MBIA Corp. also maintains a high degree of liquidity within its
investment portfolio in the form of readily marketable high
quality fixed income securities and short-term investments. In
management's opinion, the capital resources of MBIA Corp.,
represented by the liquidity of its investment portfolio, its
cash flows from operations and bank lines of credit, are more
than adequate to meet the Company's expected cash requirements.
At March 31, 1995, MBIA Corp. had $22.1 million in case
specific loss reserves. Any related payments are expected to be
funded from operating cash flows.
(13)
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
11. Computation of Earnings Per Share Assuming Full Dilution
27. Financial Data Schedule
99. Additional Exhibits - MBIA Insurance Corporation and
Subsidiaries Consolidated Financial Statements
(14)
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
MBIA INC.
-----------------------------------
Registrant
Date: May 12, 1995 /s/ ARTHUR M. WARREN
---------------------- -----------------------------------
Arthur M. Warren
Senior Vice President,
Chief Financial Officer
Date: May 12, 1995 /s/ JULLIETTE S. TEHRANI
---------------------- -----------------------------------
Julliette S. Tehrani
Senior Vice President,
Director of Finance
(Principal Accounting Officer)
(15)
EXHIBIT 11
MBIA INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE ASSUMING FULL DILUTION
(In thousands except per share amounts)
Three Months Ended
March 31
------------------
1995 1994
-------- -------
Net income $66,006 $65,741
======= =======
Fully diluted shares:
Average number of common shares outstanding 41,629 41,719
Assumed exercise of dilutive stock options 489 436
------- -------
42,118 42,155
======= =======
Earnings per share assuming full dilution $1.57 $1.56
======= =======
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<DEBT-HELD-FOR-SALE> 3,246,516
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 5,501,301
<CASH> 9,706
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 134,682
<TOTAL-ASSETS> 6,131,703
<POLICY-LOSSES> 42,033
<UNEARNED-PREMIUMS> 1,524,712
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 321,818
<COMMON> 42,077
0
0
<OTHER-SE> 1,829,829
<TOTAL-LIABILITY-AND-EQUITY> 6,131,703
51,074
<INVESTMENT-INCOME> 52,837
<INVESTMENT-GAINS> 1,724
<OTHER-INCOME> 5,145
<BENEFITS> 2,033
<UNDERWRITING-AMORTIZATION> 5,140
<UNDERWRITING-OTHER> 9,747
<INCOME-PRETAX> 83,522
<INCOME-TAX> 17,516
<INCOME-CONTINUING> 66,006
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 66,006
<EPS-PRIMARY> 1.57
<EPS-DILUTED> 1.57
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
<PAGE>
MBIA INSURANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1995 AND DECEMBER 31, 1994
AND FOR THE PERIODS ENDED MARCH 31, 1995 AND 1994
PAGE 1 OF 7
<PAGE>
MBIA INSURANCE CORPORATION
AND SUBSIDIARIES
I N D E X
---------
PAGE
Consolidated Balance Sheets - March 31, 1995
and December 31, 1994 (Audited) 3
Consolidated Statements of Income - Three months
ended March 31, 1995 and 1994 4
Consolidated Statement of Changes in Shareholder's
Equity - Three months ended March 31, 1995 5
Consolidated Statements of Cash Flows
- Three months ended March 31, 1995 and 1994 6
Notes to Consolidated Financial Statements 7
-2-
<PAGE>
MBIA INSURANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except per share amounts)
March 31, 1995 December 31, 1994
-------------- ------------------
(Unaudited) (Audited)
ASSETS
Investments:
Fixed maturity securities held as
available-for-sale at market
(amortized cost $3,190,073
and $3,123,838) $3,246,516 $3,051,906
Short-term investments, at
amortized cost (which
approximates market value) 147,778 121,384
Other investments 12,540 11,970
---------- ----------
TOTAL INVESTMENTS 3,406,834 3,185,260
Cash and cash equivalents 1,950 1,332
Accrued investment income 54,387 55,347
Deferred acquisition costs 134,682 133,048
Prepaid reinsurance premiums 185,734 186,492
Goodwill (less accumulated amortization
of $33,669 and $32,437) 109,311 110,543
Property and equipment, at cost (less
accumulated depreciation of
$10,144 and $9,501) 39,877 39,648
Receivable for investments sold 16,653 945
Other assets 48,253 46,552
---------- ----------
TOTAL ASSETS $3,997,681 $3,759,167
========== ==========
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities:
Deferred premium revenue $1,524,712 $1,512,211
Loss and loss adjustment
expense reserves 42,033 40,148
Current income taxes payable 9,338 ---
Deferred income taxes 146,549 97,828
Payable for investments purchased 29,999 6,552
Other liabilities 51,215 46,925
---------- ----------
TOTAL LIABILITIES 1,803,846 1,703,664
---------- ----------
Shareholder's Equity
Common stock, par value $150 per share;
authorized, issued and outstanding
- 100,000 shares 15,000 15,000
Additional paid-in capital 956,394 953,655
Retained earnings 1,182,209 1,134,061
Cumulative translation adjustment 4,842 427
Unrealized appreciation (depreciation)
of investments, net of deferred
income tax provision (benefit)
of $19,605 and $(25,334) 35,390 (47,640)
---------- ----------
TOTAL SHAREHOLDER'S EQUITY 2,193,835 2,055,503
---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDER'S EQUITY $3,997,681 $3,759,167
========== ==========
The accompanying notes are an integral part of the
consolidated financial statements.
- 3 -
<PAGE>
MBIA INSURANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands)
Three Months Ended
March 31
-------------------
1995 1994
-------- --------
Revenues:
Gross premiums written $ 71,112 $ 84,402
Ceded premiums (7,080) (7,798)
-------- --------
Net premiums written 64,032 76,604
Increase in deferred premium revenue (12,680) (22,061)
-------- --------
Premiums earned (net of ceded
premiums of $7,839 and $7,254) 51,352 54,543
Net investment income 53,065 46,529
Net realized gains 1,724 6,370
Other income 908 313
-------- --------
Total revenues 107,049 107,755
-------- --------
Expenses:
Losses and loss adjustment expenses 2,033 1,925
Underwriting and operating expenses 9,752 9,346
Policy acquisition costs, net 5,140 5,959
-------- --------
Total expenses 16,925 17,230
-------- --------
Income before income taxes 90,124 90,525
Provision for income taxes 19,476 19,466
-------- --------
Net income $ 70,648 $ 71,059
======== ========
The accompanying notes are an integral part of the
consolidated financial statements.
-4-
<PAGE>
MBIA INSURANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY (Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 1995
(Dollars in thousands except per share amounts)
Unrealized
Common Stock Additional Cumulative Appreciation
--------------- Paid-in Retained Translation (Depreciation)
Shares Amount Capital Earnings Adjustment of Investments
------- ------- --------- ---------- ----------- --------------
Balance,
January 1,
1995 100,000 $15,000 $953,655 $1,134,061 $ 427 $(47,640)
Net
income --- --- --- 70,648 --- ---
Change
in
foreign
currency
trans-
lation --- --- --- --- 4,415 ---
Change in
unrealized
appreciation
of
investments
net of change
in deferred
income taxes
of
$(44,939) --- --- --- --- --- 83,030
Dividends
declared
(per common
share
$225) --- --- --- (22,500) --- ---
Tax
reduction
related to
tax sharing
agreement
with
MBIA Inc. --- --- 2,739 --- --- ---
------- ------- --------- ---------- ----------- ------------
Balance,
March 31,
1995 100,000 $15,000 $956,394 $1,182,209 $4,842 $ 35,390
======= ======= ========= ========== =========== ============
The accompanying notes are an integral part of the consolidated
financial statements.
-5-
<PAGE>
MBIA INSURANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands)
Three Months Ended
March 31
----------------------
1995 1994
--------- ----------
Cash flows from operating activities:
Net income $ 70,648 $71,059
Adjustments to reconcile net income to net
cash provided by operating activities:
Decrease in accrued investment income 960 2,222
Increase in deferred acquisition costs (1,634) (2,941)
Decrease (increase) in prepaid
reinsurance premiums 758 (544)
Increase in deferred premium revenue 11,922 22,605
Increase in loss and loss adjustment
expense reserves 1,885 1,913
Depreciation 630 343
Amortization of goodwill 1,232 1,241
Amortization of bond (discount) premium, net (358) 4
Net realized gains on sale of investments (1,724) (6,370)
Deferred income taxes 3,782 3,020
Other, net 19,601 21,135
--------- --------
Total adjustments to net income 37,054 42,628
--------- --------
Net cash provided by operating activities 107,702 113,687
--------- --------
Cash flows from investing activities:
Purchase of fixed maturity securities, net
of payable for investments purchased (182,603) (342,288)
Sale of fixed maturity securities, net of
receivable for investments sold 92,890 99,660
Redemption of fixed maturity securities,
net of receivable for investments redeemed 16,717 40,091
(Purchase) sale of short-term investments, net (9,908) 1,742
(Purchase) sale of other investments (863) 87,955
Capital expenditures, net of disposals (817) (27)
--------- --------
Net cash used in investing activities (84,584) (112,867)
--------- --------
Cash flows from financing activities:
Dividends paid (22,500) ---
--------- --------
Net cash used by financing activities (22,500) ---
--------- --------
Net increase in cash and cash equivalents 618 820
Cash and cash equivalents - beginning of period 1,332 747
--------- --------
Cash and cash equivalents - end of period $ 1,950 $ 1,567
--------- --------
Supplemental cash flow disclosures:
Income taxes paid $ 1 $ 1,798
========= ========
The accompanying notes are an integral part of the consolidated
financial statements.
-6-
<PAGE>
MBIA INSURANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
- -------------------------
The accompanying consolidated financial statements are unaudited
and include the accounts of MBIA Insurance Corporation and its
Subsidiaries (the "Company"). The statements do not include all
of the information and disclosures required by generally accepted
accounting principles. These statements should be read in
conjunction with the consolidated financial statements and notes
thereto for the year ended December 31, 1994 for the Company.
The accompanying consolidated financial statements have not been
audited by independent accountants in accordance with generally
accepted auditing standards but in the opinion of management such
financial statements include all adjustments, consisting only of
normal recurring adjustments, necessary to summarize fairly the
Company's financial position and results of operations. The
results of operations for the three months ended March 31, 1995
may not be indicative of the results that may be expected for the
year ending December 31, 1995. The December 31, 1994 condensed
balance sheet data was derived from audited financial statements,
but does not include all disclosures required by generally
accepted accounting principles.
2. DIVIDENDS DECLARED
- ----------------------
Dividends declared by the Company during the three months ended
March 31, 1995 were $22.5 million.
-7-
