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, 2004
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 April 30, 2004 there were outstanding 144,388,020 shares of Common Stock, par value $1 per share, of the registrant.
| PAGE | ||||
| PART I |
FINANCIAL INFORMATION |
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| Item 1. |
Financial Statements (Unaudited) MBIA Inc. and Subsidiaries |
|||
| Consolidated Balance Sheets – March 31, 2004 and December 31, 2003 |
3 | |||
| Consolidated Statements of Income – Three months ended March 31, 2004 and 2003 |
4 | |||
| Consolidated Statement of Changes in Shareholders’ Equity - Three months ended March 31, 2004 |
5 | |||
| Consolidated Statements of Cash Flows - Three months ended March 31, 2004 and 2003 |
6 | |||
| 7 - 13 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
14 -38 | ||
| Item 3. |
39 | |||
| Item 4. |
39 | |||
| PART II |
OTHER INFORMATION, AS APPLICABLE |
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| Item 1. |
39 | |||
| Item 2. |
Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities |
40 | ||
| Item 6. |
40 | |||
| 41 | ||||
(2)
MBIA INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands except per share amounts)
| March 31, 2004 |
December 31, 2003 |
|||||||
| Assets |
||||||||
| Investments: |
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| Fixed-maturity securities held as available-for-sale at fair value (amortized cost $17,140,295 and $16,526,579) |
$ | 18,182,082 | $ | 17,390,979 | ||||
| Conduit investments held-to-maturity at amortized cost |
7,726,328 | 8,386,280 | ||||||
| Investment agreement portfolio pledged as collateral at fair value (amortized cost $818,939 and $581,633) |
856,368 | 596,366 | ||||||
| Short-term investments at amortized cost (which approximates fair value) |
788,823 | 975,836 | ||||||
| Other investments |
343,881 | 357,346 | ||||||
| Total investments |
27,897,482 | 27,706,807 | ||||||
| Cash and cash equivalents |
265,614 | 172,129 | ||||||
| Accrued investment income |
262,915 | 269,610 | ||||||
| Deferred acquisition costs |
339,931 | 319,728 | ||||||
| Prepaid reinsurance premiums |
523,726 | 535,728 | ||||||
| Reinsurance recoverable on unpaid losses |
42,454 | 61,085 | ||||||
| Goodwill |
79,406 | 79,406 | ||||||
| Property and equipment, at cost (less accumulated depreciation of $98,162 and $94,944) |
119,407 | 120,691 | ||||||
| Receivable for investments sold |
274,447 | 20,376 | ||||||
| Derivative assets |
245,860 | 256,744 | ||||||
| Variable interest entity assets |
600,272 | 600,322 | ||||||
| Other assets |
150,491 | 125,108 | ||||||
| Total assets |
$ | 30,802,005 | $ | 30,267,734 | ||||
| Liabilities and Shareholders’ Equity |
||||||||
| Liabilities: |
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| Deferred premium revenue |
$ | 3,037,756 | $ | 3,079,851 | ||||
| Loss and loss adjustment expense reserves |
616,182 | 559,510 | ||||||
| Investment agreement and medium-term note obligations |
9,081,092 | 8,840,125 | ||||||
| Securities sold under agreements to repurchase |
747,730 | 505,883 | ||||||
| Conduit debt obligations |
7,215,740 | 7,848,060 | ||||||
| Short-term debt |
58,745 | 57,337 | ||||||
| Long-term debt |
1,018,391 | 1,021,795 | ||||||
| Current income taxes |
71,046 | 14,554 | ||||||
| Deferred income taxes, net |
605,367 | 552,740 | ||||||
| Deferred fee revenue |
23,717 | 21,543 | ||||||
| Payable for investments purchased |
284,763 | 47,059 | ||||||
| Derivative liabilities |
523,744 | 437,683 | ||||||
| Variable interest entity liabilities |
600,272 | 600,322 | ||||||
| Other liabilities |
364,026 | 422,257 | ||||||
| Total liabilities |
24,248,571 | 24,008,719 | ||||||
| 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 — 154,630,733 and 153,551,061 |
154,631 | 153,551 | ||||||
| Additional paid-in capital |
1,350,557 | 1,295,638 | ||||||
| Retained earnings |
4,766,412 | 4,593,486 | ||||||
| Accumulated other comprehensive income, net of deferred income tax of $381,305 and $337,175 |
732,070 | 632,623 | ||||||
| Unearned compensation—restricted stock |
(25,875 | ) | (12,299 | ) | ||||
| Treasury stock, at cost — 9,990,003 and 9,675,887 shares |
(424,361 | ) | (403,984 | ) | ||||
| Total shareholders’ equity |
6,553,434 | 6,259,015 | ||||||
| Total liabilities and shareholders’ equity |
$ | 30,802,005 | $ | 30,267,734 | ||||
The accompanying notes are an integral part of the consolidated financial statements.
(3)
MBIA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In thousands except per share amounts)
| Three months ended March 31 |
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| 2004 |
2003 |
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| Insurance |
||||||||
| Revenues: |
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| Gross premiums written |
$ | 204,693 | $ | 288,147 | ||||
| Ceded premiums |
(34,964 | ) | (64,119 | ) | ||||
| Net premiums written |
169,729 | 224,028 | ||||||
| Scheduled premiums earned |
160,280 | 140,653 | ||||||
| Refunding premiums earned |
39,542 | 20,527 | ||||||
| Premiums earned (net of ceded premiums of $46,966 and $56,306) |
199,822 | 161,180 | ||||||
| Net investment income |
121,841 | 106,421 | ||||||
| Advisory fees |
5,865 | 13,302 | ||||||
| Total insurance revenues |
327,528 | 280,903 | ||||||
| Expenses: |
||||||||
| Losses and LAE incurred |
19,234 | 16,878 | ||||||
| Amortization of deferred acquisition costs |
15,586 | 12,782 | ||||||
| Operating |
27,172 | 23,643 | ||||||
| Total insurance expenses |
61,992 | 53,303 | ||||||
| Insurance income |
265,536 | 227,600 | ||||||
| Investment management services |
||||||||
| Revenues |
121,460 | 93,750 | ||||||
| Interest expense |
91,035 | 70,025 | ||||||
| Net revenues |
30,425 | 23,725 | ||||||
| Expenses |
18,587 | 11,186 | ||||||
| Investment management services income |
11,838 | 12,539 | ||||||
| Municipal services |
||||||||
| Revenues |
5,959 | 6,042 | ||||||
| Expenses |
5,854 | 5,990 | ||||||
| Municipal services income |
105 | 52 | ||||||
| Corporate |
||||||||
| Net investment income |
2,120 | 2,373 | ||||||
| Interest expense |
17,774 | 16,949 | ||||||
| Corporate expenses |
5,890 | 3,663 | ||||||
| Corporate loss |
(21,544 | ) | (18,239 | ) | ||||
| Gains and losses |
||||||||
| Net realized gains |
44,251 | 30,157 | ||||||
| Net gains (losses) on derivative instruments and foreign exchange |
(10,663 | ) | 60,209 | |||||
| Net gains and losses |
33,588 | 90,366 | ||||||
| Income from continuing operations before income taxes |
289,523 | 312,318 | ||||||
| Provision for income taxes |
81,903 | 89,106 | ||||||
| Income from continuing operations |
207,620 | 223,212 | ||||||
| Income from discontinued operations, net of tax |
29 | 114 | ||||||
| Net income |
$ | 207,649 | $ | 223,326 | ||||
| Net income per common share: |
||||||||
| Basic |
$ | 1.45 | $ | 1.55 | ||||
| Diluted |
$ | 1.42 | $ | 1.54 | ||||
| Weighted-average common shares outstanding: |
||||||||
| Basic |
143,608,056 | 144,042,116 | ||||||
| Diluted |
146,647,142 | 145,357,445 | ||||||
| Gross revenues from continuing operations |
490,655 | 473,434 | ||||||
| Gross expenses from continuing operations |
201,132 | 161,116 | ||||||
The accompanying notes are an integral part of the consolidated financial statements.
(4)
MBIA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
For the three months ended March 31, 2004
(In thousands except per share amounts)
| Common Stock |
Additional Capital |
Retained Earnings |
Accumulated Income |
Unearned Stock |
Treasury Stock |
Total Equity |
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| Shares |
Amount |
Shares |
Amount |
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| Balance, January 1, 2004 |
153,551 | $ | 153,551 | $ | 1,295,638 | $ | 4,593,486 | $ | 632,623 | $ | (12,299 | ) | (9,676 | ) | $ | (403,984 | ) | $ | 6,259,015 | |||||||||||||
| Comprehensive income: |
||||||||||||||||||||||||||||||||
| Net income |
— | — | — | 207,649 | — | — | — | — | 207,649 | |||||||||||||||||||||||
| Other comprehensive income: |
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| Change in unrealized appreciation of investments net of change in deferred income taxes of $54,267 |
— | — | — | — | 102,822 | — | — | — | 102,822 | |||||||||||||||||||||||
| Change in fair value of derivative instruments net of change in deferred income taxes of $(11,935) |
— | — | — | — | (21,163 | ) | ||||||||||||||||||||||||||