SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
Form 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: November 3, 1998
Date of Earliest
Event Reported: November 3, 1998
MBIA Inc.
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(Exact name of registrant as specified in its charter)
Connecticut 1-9583 06-1185706
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(State of (Commission File Number) (IRS Employer
Incorporation) Identification No.)
113 King Street, Armonk, New York 10504
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(Address of principal executive offices) (Zip Code)
(914) 273-4545
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(Registrant's telephone number, including area code)
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ITEMS 1-4. Not applicable.
ITEM 5. OTHER EVENTS
------------
On November 3, 1998, the Company announced its earnings for the third
quarter ended September 30, 1998. The press release making such announcement is
filed herewith as an exhibit.
ITEM 6. Not applicable.
ITEM 7. FINANCIAL STATMENTS AND EXHIBITS
--------------------------------
(c) Exhibits
20.1 MBIA Inc. Press Release dated November 3, 1998.
ITEM 8. Not applicable.
Page 2 of 4
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SIGNATURE
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 hereunto duly authorized.
MBIA Inc.
------------------------------
(Registrant)
Date: November 3, 1998 By /s/ Julliette S. Tehrani
------------------ -------------------------------
Name: Julliette S. Tehrani
Title: Executive Vice President
Chief Financial Officer
Treasurer
Page 3 of 4
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EXHIBIT INDEX
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Exhibit No. Description
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20.1 MBIA Inc. Press Release
dated November 3, 1998
Page 4 of 4
EXHIBIT 20.1
MBIA MBIA INC. NEWS RELEASE
113 King Street
Armonk, NY 10504
914 273 4545
contact: Michael C. Ballinger FOR IMMEDIATE RELEASE
(914) 765-3893 ---------------------
MBIA INC. REPORTS 17 PERCENT INCREASE IN THIRD QUARTER NET INCOME, EXCLUDING
- --------------------------------------------------------------------------------
$16.9 MILLION AFTER-TAX CHARGE FOR MERGER-RELATED EXPENSES
- ----------------------------------------------------------
ARMONK, New York -- November 3, 1998 -- MBIA Inc. (NYSE: MBI), holding company
for MBIA Insurance Corporation, reported today that third quarter net income
increased 17 percent to $125.1 million, excluding a $16.9 million after-tax
charge for merger-related expenses for 1838 Investment Advisors, the remaining
costs of other merger-related activities and reorganization expenses to
streamline operations and reduce future operating costs. Including the charge,
third quarter net income increased 2 percent to $108.2 million from $106.6
million in last year's third quarter.
Diluted earnings per share, excluding the $0.17 per share merger-related charge,
were $1.25, an increase of 17 percent from $1.07. Including the charge, third
quarter diluted earnings per share were $1.08, up 1 percent. Diluted operating
earnings were $1.16 per share, up 13 percent from $1.03 per share.
On July 31, MBIA Inc. announced that it completed the merger of its investment
business with 1838 Investment Advisors, an asset management firm with over $6
billion of assets under management. Accordingly, 1997 and 1998 financial results
have been restated to reflect the merger, which has been accounted for as a
"pooling of interests."
For the first nine months of 1998, net income increased 9 percent to $329.4
million from $303.2 million in the same 1997 period. Diluted earnings per share
grew 6 percent to $3.29 from $3.10. Excluding one-time after-tax charges of
$36.1 million, or $0.36 per share, net income increased 21 percent to $365.5
Page 1 of 10
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MBIA
million and diluted earnings per share rose 18 percent to $3.65. Diluted
operating earnings were $3.42 per share, a 14 percent increase from $3.01.
Third quarter core diluted earnings, which exclude the net income effects of
capital gains, premiums earned from refunded issues and non-recurring items such
as merger-related charges were $1.07 per share, an 11 percent increase over
$0.96 in the same quarter last year. Core diluted earnings for the first nine
months of 1998 rose 13 percent to $3.14 per share from $2.78.
Book value per share as of September 30 grew 16 percent to $38.06 from $32.68 a
year ago. Adjusted book value per share for the same period increased 13 percent
to $52.71 from $46.53. Adjusted book value includes the after-tax effects of
deferred premiums, less deferred acquisition costs, the present value of future
installment premiums, and unrealized gains/losses on investment contract
liabilities.
David H. Elliott, chairman and chief executive officer, said, "We are pleased
with our third quarter performance as the company continues to report strong
financial and operating results. Global turmoil in the credit markets has
resulted in a flight to quality and record demand for our guarantee in the
municipal, structured finance and international markets. We are well positioned
to capitalize on strong growth opportunities in our financial guarantee and
financial services businesses."
Regarding MBIA's exposure to a Philadelphia hospital group which filed for
bankruptcy, MBIA expects that any anticipated losses arising from the Delaware
Valley Obligated Group (DVOG) will be fully covered by reinsurance. As a result,
the company's third quarter earnings have not been affected by the bankruptcy.
INSURANCE OPERATIONS
MBIA insurance operations guaranteed $32.9 billion of par value in the third
quarter, an increase of 23 percent over the $26.8 billion of par insured in the
1997 third quarter. For the first nine months, MBIA insured par value rose 38
percent to $91.1 billion compared with $65.9 billion in the same period last
year.
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MBIA
Total new issue municipal volume in the third quarter was $57.3 billion, a 10
percent increase from $52.4 billion in last year's third quarter. The insured
portion of the new issue market was a record 62 percent. MBIA's share of the
insured new issue market was 40 percent.
For the third quarter, MBIA insured $16.4 billion of par value in the domestic
new issue and secondary municipal markets, a 40 percent increase from $11.8
billion insured in the 1997 third quarter.
For the first nine months of 1998, total new issue municipal volume was $195.4
billion, a 42 percent increase from $137.9 billion in the same 1997 period. The
insured portion of the new issue market in this period was 56 percent. MBIA was
the market share leader in the period with a 37 percent share.
For the first nine months, MBIA insured $45.0 billion of municipal bonds in the
domestic new issue and secondary markets, a 29 percent increase from the $34.8
billion of a year ago.
In the domestic new issue and secondary structured finance markets, which
include mortgage-backed and asset-backed transactions, MBIA insured $13.4
billion of par value in the third quarter, an increase of 13 percent from the
$11.9 billion insured in the same period last year. For the first nine months of
1998, MBIA's structured finance volume rose 39 percent to $34.6 billion compared
with $25.0 billion in the first nine months of 1997.
In addition, MBIA insured $1.5 billion of securities internationally in the
third quarter compared with $2.4 billion in last year's third quarter. For the
first nine months, MBIA's international volume was $8.3 billion compared with
$4.3 billion in the same period last year, an increase of 94 percent.
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MBIA
Gross premiums written for the third quarter were $167.4 million compared with
$146.9 million in the year ago quarter, a 14 percent increase. For the first
nine months, gross premiums written increased 11 percent to $486.7 million from
$439.8 million in the same period in 1997. Gross premiums written consist of
premiums received for business originated in the current period, assumed
premiums for international and other reinsurance transactions, and installment
premiums received for current- and prior-period business.
Adjusted gross premiums, which consist of both upfront premiums written and the
present value of estimated installment premiums for new business writings, were
$203.4 million in the third quarter, a 10 percent increase over $185.5 million
in the same 1997 period. Adjusted gross premiums for the first nine months
increased 15 percent to $587.5 million from $510.8 million last year.
Premiums earned during the third quarter were $105.6 million compared with $87.7
million in the same period in 1997. These amounts include $16.3 million and
$12.5 million, respectively, of premiums earned from refundings. For the first
nine months of 1998, premiums earned were $308.9 million compared with $256.5
million in last year's comparable period, including $48.9 million and $38.3
million, respectively, of premiums earned from refundings. On a per share basis,
the net income effect of refunding activity, including related expense
recognition, was $0.09 for the 1998 third quarter compared with $0.07 in the
1997 third quarter. This impact was $0.28 for the first nine months of 1998
compared with $0.23 in the same period last year.
In the third quarter of 1998, fee revenues recognized rose 6 percent to $4.7
million from $4.4 million. For the first nine months, fee revenues recognized
increased 43 percent to $18.1 million from $12.6 million in last year's
comparable period.
INVESTMENT MANAGEMENT SERVICES
For the third quarter, investment management services revenues, excluding
realized gains and losses, increased 38 percent to $16.0 million from $11.6
million. For the first nine months, revenues from investment management services
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MBIA
were $44.3 million compared with $35.0 million, a 27 percent increase. These
amounts include the results of 1838 Investment Advisors.
The market value of average assets under management for the company's investment
management businesses was $22.1 billion in the third quarter. These amounts
include assets owned by MBIA Inc. and it subsidiaries, MBIA Insurance
Corporation and MBIA Investment Management Corp., as well as assets managed for
pooled public funds and for institutional client portfolios.
CONSOLIDATED FINANCIAL RESULTS
Net investment income, excluding net realized capital gains and amounts earned
from the company's municipal investment agreement business, increased 9 percent
for the third quarter to $84.1 million from $77.0 million in 1997's third
quarter. For the first nine months of 1998, net investment income increased 12
percent to $247.2 million from $221.4 million in the same period in 1997. As of
September 30, MBIA's investment portfolio, including fixed-income securities
related to its municipal investment agreement business, increased 14 percent to
$9.8 billion compared with $8.6 billion a year ago. As of September 30, assets
supporting the investment agreement business grew to $3.6 billion from $3.2
billion a year ago. The average quality of all fixed-income investments
continues to be Double-A.
Third quarter total revenues rose 21 percent to $236.0 million from $195.3
million in the third quarter of 1997. For the first nine months, total revenues
were $685.0 million, up 24 percent from $553.8 million in the first nine months
of 1997. Revenues are the sum of premiums earned, total investment income,
investment management services fees and other revenues.
Total expenses for the third quarter and first nine months were $92.4 million
and $252.3 million, respectively, compared with $58.1 million and $166.0 million
in the same periods last year. The increase in expenses for 1998 is primarily
due to the pre-tax merger-related charges of $26.0 million and $55.5 million
taken in the third quarter and nine month periods.
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MBIA
Computed on a statutory basis as of September 30, MBIA Insurance Corporation's
unearned premium reserve was $2.3 billion, and its capital base (consisting of
capital, surplus and contingency reserve) was $3.6 billion. Aggregate
policyholders' reserves were $5.9 billion compared with $5.2 billion a year ago.
OTHER CORPORATE DEVELOPMENTS
On September 3, MBIA Inc. announced that its joint venture, MBIA-AMBAC
International, intends to form a strategic alliance with two of Japan's largest
non-life insurance companies, Mitsui Marine and Fire Insurance Co. Ltd. and The
Yasuda Fire and Marine Insurance Co. Ltd. The alliance will provide financial
guarantee insurance to Japanese issuer and investor clients. To support this
effort, MBIA-AMBAC announced that it has opened a representative office in
Tokyo.
MBIA Inc., through its subsidiaries, is the world's preeminent financial
guarantor and a leading provider of specialized financial services. MBIA
provides innovative and cost-effective products and services that meet the
credit enhancement, financial and investment needs of its public and private
sector clients, domestically and internationally. MBIA Insurance Corporation has
a claims-paying rating of Triple-A from Moody's Investors Service, Standard &
Poor's Ratings Services, Fitch IBCA, and Japan Rating and Investment
Information, Inc. Please visit MBIA's web site at http://www.mbia.com.
# #
This news release contains forward-looking statements. Important factors such as
general market conditions and the competitive environment could cause actual
results to differ materially from those projected in these forward-looking
statements. The company undertakes no obligation to revise or update any
forward-looking statements to reflect changes in events or expectations or
otherwise.
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MBIA INC. AND SUBSIDIARIES (1)(2)
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------------------------------------------------------------
1998 1997 1998 1997
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<S> <C> <C> <C> <C>
REVENUES
Insurance:
Gross premiums written $167,355 $146,941 $ 486,745 $ 439,791
Ceded premiums (27,498) (23,632) (69,111) (63,066)
--------------- -------------- ---------------- --------------
Net premiums written 139,857 123,309 417,634 376,725
Increase in deferred premium revenue (34,214) (35,622) (108,773) (120,206)
--------------- -------------- ---------------- --------------
Premiums earned 105,643 87,687 308,861 256,519
Net investment income 84,067 77,027 247,195 221,421
Net realized gains 9,089 6,119 22,981 11,776
Advisory fees 4,696 4,411 18,135 12,640
Investment management services:
Income 16,047 11,619 44,332 34,954
Net realized gains 4,787 391 11,879 2,043
Other 11,657 8,063 31,602 14,432
--------------- -------------- ---------------- --------------
Total revenues 235,986 195,317 684,985 553,785
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EXPENSES
Insurance:
Losses and loss adjustment 9,028 6,420 24,613 17,554
Policy acquisition costs, net 6,869 8,377 25,324 26,205
Operating 20,762 19,508 54,223 56,398
Investment management services 8,614 7,234 25,401 21,494
Interest 10,974 10,303 31,959 28,216
Other 36,159 6,281 90,745 16,142
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Total expenses 92,406 58,123 252,265 166,009
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Income before income taxes 143,580 137,194 432,720 387,776
Provision for income taxes 35,337 30,642 103,343 84,575
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NET INCOME $108,243 $ 106,552 $329,377 $303,201
=============== ============== ================ ==============
NET INCOME PER COMMON SHARE:
BASIC $ 1.09 $ 1.09 $ 3.33 $ 3.15
DILUTED $ 1.08 $ 1.07 $ 3.29 $ 3.10
Weighted average number
of common shares outstanding:
Basic 99,098,611 98,008,870 98,882,373 96,398,516
Diluted 100,230,622 99,329,666 100,171,148 97,839,020
</TABLE>
(1) All data retroactively adjusted to reflect the mergers with CapMAC
Holdings, Inc. effective February 17, 1998 and 1838 Investment Advisors
effective July 31, 1998.
(2) Common share data retroactively adjusted to reflect the two-for-one stock
split effective October 1, 1997 and FAS 128.
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MBIA INC. AND SUBSIDIARIES (1)(2)
CONSOLIDATED BALANCE SHEETS
---------------------------
(dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998 DECEMBER 31, 1997 SEPTEMBER 30, 1997
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<S> <C> <C> <C>
ASSETS
Investments:
Fixed-maturity securities held as
available-for-sale at fair value (amortized
cost $5,454,390, $4,936,760 and $4,846,416) $ 5,842,968 $ 5,211,311 $5,063,222
Short-term investments 318,335 303,898 249,875
Other investments 67,468 51,693 52,276
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6,228,771 5,566,902 5,365,373
Municipal investment agreement portfolio held
as available-for-sale at fair value (amortized
cost $3,400,764, $3,241,703 and $3,149,589) 3,572,835 3,341,394 3,213,175
------------- ------------- -------------
Total investments 9,801,606 8,908,296 8,578,548
Cash and cash equivalents 35,330 26,296 16,773
Securities borrowed or purchased
under agreements to resell 561,763 472,963 369,401
Accrued investment income 114,094 121,090 111,752
Deferred acquisition costs 236,768 216,165 210,215
Prepaid reinsurance premiums 295,175 289,508 253,907
Reinsurance recoverable on unpaid losses 170,000 --- ---
Goodwill - net 135,478 121,642 123,600
Property and equipment - net 73,565 66,709 63,520
Receivable for investments sold 23,961 13,435 54,023
Other assets 218,887 148,887 133,932
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Total assets $11,666,627 $10,384,991 $9,915,671
============= ============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deferred premium revenue $ 2,205,690 $ 2,090,460 $1,989,628
Loss and loss adjustment expense reserves (3) 282,044 103,061 88,635
Municipal investment agreements 2,412,500 1,974,165 1,937,162
Municipal repurchase agreements 991,519 1,177,022 1,119,528
Long-term debt 638,967 488,878 488,849
Short-term debt --- 20,000 20,000
Securities loaned or sold
under agreements to repurchase 579,363 606,263 502,301
Deferred income taxes 376,091 298,498 268,574
Deferred fee revenue 45,558 48,126 44,154
Payable for investments purchased 126,514 44,007 70,361
Other liabilities 234,563 172,999 167,519
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Total liabilities 7,892,809 7,023,479 6,696,711
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Shareholders' Equity:
Common stock 99,324 98,754 98,650
Additional paid-in capital 1,159,024 1,133,950 1,133,524
Retained earnings 2,162,768 1,901,608 1,819,006
Accumulated other comprehensive income-net 362,015 236,095 176,080
Unallocated ESOP shares (4,083) (4,083) (4,550)
Unearned compensation - restricted stock (4,595) (4,812) (3,750)
Treasury stock (635) --- ---
------------- ------------- -------------
Total shareholders' equity 3,773,818 3,361,512 3,218,960
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Total liabilities and shareholders' equity $11,666,627 $10,384,991 $9,915,671
============= ============= =============
Book value per share $ 38.06 $ 34.09 $ 32.68
============= ============= =============
(1) All data retroactively adjusted to reflect the mergers with CapMAC
Holdings, Inc. effective February 17, 1998 and 1838 Investment Advisors
effective July 31, 1998.
(2) Common share data retroactively adjusted to reflect the two-for-one stock
split effective October 1, 1997 and FAS 128.
(3) Includes net case reserves $ 198,473 $ 25,215 $ 20,817
</TABLE>
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MBIA INC. AND SUBSIDIARIES (1) (2)
COMPONENTS OF CORE EARNINGS PER SHARE (3)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
---------------------- --------------------
1998 1997 1998 1997
-------- -------- -------- --------
Reported earnings per share $1.08 $1.07 $3.29 $3.10
Realized gains 0.09 0.04 0.23 0.09
One-time merger charge (0.17) --- (0.36) ---
-------- --------- ------ --------
Operating earnings per share (4) 1.16 1.03 3.42 3.01
Earnings from refunded issues 0.09 0.07 0.28 0.23
-------- -------- ------- --------
Core earnings per share(4) $1.07 $0.96 $3.14 $2.78
======== ======== ======= ========
COMPONENTS OF ADJUSTED BOOK VALUE PER SHARE
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
1998 1997 1997
------------ ------------ -------------
Book value $38.06 $34.09 $32.68
After-tax value of:
Net deferred premium revenue,
net of DAC 10.97 10.45 10.07
Present value of future
installment premiums 4.09 3.54 3.52
Unrealized (loss) gain on
investment contract
liabilities (0.41) 0.11 0.26
-------- -------- -----------
Adjusted book value $52.71 $48.19 $46.53
======== ======== ===========
(1) All data retroactively adjusted to reflect the mergers with CapMAC
Holdings, Inc. effective February 17, 1998 and 1838 Investment Advisors
effective July 31, 1998.
(2) Common share data retroactively adjusted to reflect the two-for-one stock
split effective October 1, 1997 and FAS 128.
(3) Based on weighted average diluted common shares.
(4) Amounts may not add due to rounding.
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MBIA INC. AND SUBSIDIARIES
COMBINED INSURANCE OPERATIONS (1)
SELECTED FINANCIAL DATA COMPUTED ON A STATUTORY BASIS:
(dollars in millions)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998 DECEMBER 31, 1997 SEPTEMBER 30, 1997
------------------ ----------------- ------------------
<S> <C> <C> <C>
Capital and surplus $ 2,203.7 $ 1,951.5 $ 1,902.9
Contingency reserve 1,374.7 1,187.9 1,123.8
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Capital base 3,578.4 3,139.4 3,026.7
Unearned premium reserve 2,331.1 2,193.4 2,130.2
Loss and loss adjustment
expense reserves 28.3 15.2 10.7
------------- -------------- --------------
Total policyholders' reserves 5,937.8 5,348.0 5,167.6
Present value of installment
premiums 624.0 536.9 533.8
Standby line of credit/stop loss 900.0 900.0 900.0
------------- -------------- --------------
Total claims-paying resources $ 7,461.8 $ 6,784.9 $ 6,601.4
============= ============== ==============
Net debt service outstanding $597,350.1 $513,735.9 $493,642.5
Capital ratio (2) 167:1 164:1 163:1
Claims-paying ratio (3) 93:1 88:1 87:1
</TABLE>
(1) 1997 represents MBIA Insurance Corporation Consolidated and Capital Markets
Assurance Corporation combined.
(2) Net debt service outstanding divided by capital base.
(3) Net debt service outstanding divided by the sum of capital base, unearned
premium reserve (after tax), loss and loss adjustment expense reserves,
present value of installment premiums (after-tax) and standby line of
credit/stop loss.
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