UNITED STATES
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, 2003
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 ¨
Indicate by check mark whether the Registrant is an accelerated filer (as specified in Rule 12 b-2 of the Act). Yes x No ¨
As of May 1, 2003 there were outstanding 143,868,657 shares of Common Stock, par value $1 per share, of the registrant.
| PAGE | ||||
| PART I |
FINANCIAL INFORMATION |
|||
| Item 1. |
Financial Statements (Unaudited) |
|||
| MBIA Inc. and Subsidiaries |
||||
| Consolidated Balance Sheets—March 31, 2003 and December 31, 2002 |
3 | |||
| Consolidated Statements of Income—Three months ended March 31, 2003 and 2002 |
4 | |||
| Consolidated Statement of Changes in Shareholders’ Equity—Three months ended March 31, 2003 |
5 | |||
| Consolidated Statements of Cash Flows—Three months ended March 31, 2003 and 2002 |
6 | |||
| 7-11 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
12-42 | ||
| Item 3. |
43 | |||
| Item 4. |
43 | |||
| PART II |
OTHER INFORMATION, AS APPLICABLE |
|||
| Item 1. |
43-44 | |||
| Item 6. |
44 | |||
| 45 | ||||
(2)
MBIA INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands except per share amounts)
| March 31, 2003 |
December 31, 2002 |
|||||||
| Assets |
||||||||
| Investments: |
||||||||
| Fixed-maturity securities held as available-for-sale at fair value (amortized cost $7,590,223 and $7,555,978) |
$ |
8,128,081 |
|
$ |
8,093,650 |
| ||
| Short-term investments, at amortized cost (which approximates fair value) |
|
792,148 |
|
|
687,238 |
| ||
| Other investments |
|
198,663 |
|
|
212,673 |
| ||
|
|
9,118,892 |
|
|
8,993,561 |
| |||
| Investment agreement and medium-term note portfolios held as available-for-sale at fair value (amortized cost $6,992,624 and $7,080,870) |
|
7,347,027 |
|
|
7,433,615 |
| ||
| Investment agreement portfolio pledged as collateral at fair value (amortized cost $882,550 and $646,287) |
|
916,327 |
|
|
667,854 |
| ||
| Total investments |
|
17,382,246 |
|
|
17,095,030 |
| ||
| Cash and cash equivalents |
|
288,177 |
|
|
83,218 |
| ||
| Accrued investment income |
|
217,045 |
|
|
215,265 |
| ||
| Deferred acquisition costs |
|
303,801 |
|
|
302,222 |
| ||
| Prepaid reinsurance premiums |
|
530,488 |
|
|
521,641 |
| ||
| Reinsurance recoverable on unpaid losses |
|
44,222 |
|
|
43,828 |
| ||
| Goodwill |
|
90,041 |
|
|
90,041 |
| ||
| Property and equipment, at cost (less accumulated depreciation of $89,727 and $86,135) |
|
126,004 |
|
|
128,441 |
| ||
| Receivable for investments sold |
|
54,017 |
|
|
91,767 |
| ||
| Derivative assets |
|
177,336 |
|
|
191,755 |
| ||
| Other assets |
|
86,623 |
|
|
88,893 |
| ||
| Total assets |
$ |
19,300,000 |
|
$ |
18,852,101 |
| ||
| Liabilities and Shareholders' Equity |
||||||||
| Liabilities: |
||||||||
| Deferred premium revenue |
$ |
2,828,100 |
|
$ |
2,755,046 |
| ||
| Loss and loss adjustment expense reserves |
|
577,294 |
|
|
573,275 |
| ||
| Investment agreement and medium-term note obligations |
|
6,718,370 |
|
|
6,666,595 |
| ||
| Investment repurchase agreement obligations |
|
489,670 |
|
|
563,967 |
| ||
| Securities sold under agreements to repurchase |
|
719,167 |
|
|
539,561 |
| ||
| Long-term debt |
|
1,035,690 |
|
|
1,033,070 |
| ||
| Current income taxes |
|
84,203 |
|
|
17,648 |
| ||
| Deferred income taxes |
|
484,832 |
|
|
471,534 |
| ||
| Deferred fee revenue |
|
23,998 |
|
|
24,838 |
| ||
| Payable for investments purchased |
|
119,526 |
|
|
58,436 |
| ||
| Derivative liabilities |
|
240,764 |
|
|
309,749 |
| ||
| Other liabilities |
|
313,823 |
|
|
345,031 |
| ||
| Total liabilities |
|
13,635,437 |
|
|
13,358,750 |
| ||
| 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—400,000,000; issued shares—152,886,294 and 152,555,034 |
|
152,886 |
|
|
152,555 |
| ||
| Additional paid-in capital |
|
1,256,881 |
|
|
1,239,313 |
| ||
| Retained earnings |
|
4,089,596 |
|
|
3,895,112 |
| ||
| Accumulated other comprehensive income, net of deferred income tax provision of $296,056 and $294,160 |
|
550,668 |
|
|
541,250 |
| ||
| Unallocated ESOP shares |
|
(170 |
) |
|
(653 |
) | ||
| Unearned compensation—restricted stock |
|
(17,416 |
) |
|
(12,646 |
) | ||
| Treasury stock, at cost—9,026,124 and 7,781,213 shares |
|
(367,882 |
) |
|
(321,580 |
) | ||
| Total shareholders' equity |
|
5,664,563 |
|
|
5,493,351 |
| ||
| Total liabilities and shareholders' equity |
$ |
19,300,000 |
|
$ |
18,852,101 |
| ||
The accompanying notes are an integral part of the consolidated financial statements.
(3)
MBIA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands except per share amounts)
| Three months ended March 31 |
||||||||
| 2003 |
2002 |
|||||||
| Insurance |
||||||||
| Revenues: |
||||||||
| Gross premiums written |
$ |
288,147 |
|
$ |
186,772 |
| ||
| Ceded premiums |
|
(64,119 |
) |
|
(52,315 |
) | ||
| Net premiums written |
|
224,028 |
|
|
134,457 |
| ||
| Scheduled premiums earned |
|
140,653 |
|
|
124,486 |
| ||
| Refunding premiums earned |
|
20,527 |
|
|
14,552 |
| ||
| Premiums earned (net of ceded premiums of $56,306 and $44,501) |
|
161,180 |
|
|
139,038 |
| ||
| Net investment income |
|
106,421 |
|
|
106,199 |
| ||
| Advisory fees |
|
13,302 |
|
|
7,089 |
| ||
| Total insurance revenues |
|
280,903 |
|
|
252,326 |
| ||
| Expenses: |
||||||||
| Losses and LAE incurred |
|
16,878 |
|
|
14,938 |
| ||
| Amortization of deferred acquisition costs |
|
12,782 |
|
|
11,123 |
| ||
| Operating |
|
23,643 |
|
|
20,212 |
| ||
| Total insurance expenses |
|
53,303 |
|
|
46,273 |
| ||
| Insurance income |
|
227,600 |
|
|
206,053 |
| ||
| Investment management services |
||||||||
| Revenues |
|
29,240 |
|
|
29,851 |
| ||
| Expenses |
|
15,799 |
|
|
14,978 |
| ||
| Investment management services income |
|
13,441 |
|
|
14,873 |
| ||
| Municipal services |
||||||||
| Revenues |
|
6,042 |
|
|
5,691 |
| ||
| Expenses |
|
5,990 |
|
|
5,604 |
| ||
| Municipal services income |
|
52 |
|
|
87 |
| ||
| Corporate |
||||||||
| Net investment income |
|
2,373 |
|
|
2,217 |
| ||
| Interest expense |
|
16,949 |
|
|
12,834 |
| ||
| Corporate expenses |
|
3,663 |
|
|
4,205 |
| ||
| Corporate loss |
|
(18,239 |
) |
|
(14,822 |
) | ||
| Gains and losses |
||||||||
| Net realized gains (losses) |
|
30,157 |
|
|
(836 |
) | ||
| Change in fair value of derivative instruments | ||||||||