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 June 30, 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 July 23, 2004 there were outstanding 143,249,317 shares of Common Stock, par value $1 per share, of the registrant.
(2)
MBIA INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands except per share amounts)
| June 30, 2004 |
December 31, 2003 |
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| Assets |
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| Investments: |
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| Fixed-maturity securities held as available-for-sale at fair value (amortized cost $17,413,789 and $15,628,937) |
$ | 17,897,914 | $ | 16,493,338 | ||||
| Conduit investments held-to-maturity at amortized cost |
6,066,779 | 8,386,280 | ||||||
| Investment agreement portfolio pledged as collateral at fair value (amortized cost $608,840 and $581,633) |
617,102 | 596,366 | ||||||
| Short-term investments at amortized cost (which approximates fair value) |
2,103,850 | 1,873,477 | ||||||
| Other investments |
277,701 | 357,346 | ||||||
| Total investments |
26,963,346 | 27,706,807 | ||||||
| Cash and cash equivalents |
274,172 | 172,129 | ||||||
| Accrued investment income |
273,642 | 269,610 | ||||||
| Deferred acquisition costs |
339,921 | 319,728 | ||||||
| Prepaid reinsurance premiums |
552,334 | 535,728 | ||||||
| Reinsurance recoverable on unpaid losses |
27,302 | 61,085 | ||||||
| Goodwill |
79,406 | 79,406 | ||||||
| Property and equipment, at cost (less accumulated depreciation of $101,613 and $94,944) |
117,669 | 120,691 | ||||||
| Receivable for investments sold |
320,473 | 20,376 | ||||||
| Derivative assets |
245,683 | 256,744 | ||||||
| Variable interest entity assets |
600,422 | 600,322 | ||||||
| Other assets |
113,122 | 125,108 | ||||||
| Total assets |
$ | 29,907,492 | $ | 30,267,734 | ||||
| Liabilities and Shareholders’ Equity |
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| Liabilities: |
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| Deferred premium revenue |
$ | 3,151,450 | $ | 3,079,851 | ||||
| Loss and loss adjustment expense reserves |
511,315 | 559,510 | ||||||
| Investment agreement and medium-term note obligations |
10,147,437 | 8,840,125 | ||||||
| Securities sold under agreements to repurchase |
527,712 | 505,883 | ||||||
| Conduit debt obligations |
5,704,490 | 7,848,060 | ||||||
| Short-term debt |
58,745 | 57,337 | ||||||
| Long-term debt |
1,018,905 | 1,021,795 | ||||||
| Current income taxes |
6,498 | 14,554 | ||||||
| Deferred income taxes, net |
424,153 | 552,740 | ||||||
| Deferred fee revenue |
20,144 | 21,543 | ||||||
| Payable for investments purchased |
647,340 | 47,059 | ||||||
| Derivative liabilities |
397,318 | 437,683 | ||||||
| Variable interest entity liabilities |
600,422 | 600,322 | ||||||
| Other liabilities |
393,195 | 422,257 | ||||||
| Total liabilities |
23,609,124 | 24,008,719 | ||||||
| Shareholders’ Equity: |
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| 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 — 155,009,789 and 153,551,061 |
155,010 | 153,551 | ||||||
| Additional paid-in capital |
1,379,199 | 1,295,638 | ||||||
| Retained earnings |
4,948,873 | 4,593,486 | ||||||
| Accumulated other comprehensive income, net of deferred income tax of $188,530 and $337,175 |
351,847 | 632,623 | ||||||
| Unearned compensation—restricted stock |
(41,227 | ) | (12,299 | ) | ||||
| Treasury stock, at cost — 11,227,947 and 9,675,887 shares |
(495,334 | ) | (403,984 | ) | ||||
| Total shareholders’ equity |
6,298,368 | 6,259,015 | ||||||
| Total liabilities and shareholders’ equity |
$ | 29,907,492 | $ | 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 June 30 |
Six months ended June 30 |
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| 2004 |
2003 |
2004 |
2003 |
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| Insurance |
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| Revenues: |
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| Gross premiums written |
$ | 372,909 | $ | 327,094 | $ | 577,602 | $ | 615,241 | ||||||||
| Ceded premiums |
(49,291 | ) | (55,571 | ) | (84,255 | ) | (119,690 | ) | ||||||||
| Net premiums written |
323,618 | 271,523 | 493,347 | 495,551 | ||||||||||||
| Scheduled premiums earned |
169,991 | 151,588 | 330,271 | 292,241 | ||||||||||||
| Refunding premiums earned |
38,309 | 34,083 | 77,851 | 54,610 | ||||||||||||
| Premiums earned (net of ceded premiums of $53,483, $62,014, $100,449 and $118,320) |
208,300 | 185,671 | 408,122 | 346,851 | ||||||||||||
| Net investment income |
114,856 | 107,728 | 236,697 | 214,149 | ||||||||||||
| Advisory fees |
17,190 | 17,342 | 23,055 | 30,644 | ||||||||||||
| Total insurance revenues |
340,346 | 310,741 | 667,874 | 591,644 | ||||||||||||
| Expenses: |
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| Losses and LAE incurred |
20,399 | 18,192 | 39,633 | 35,070 | ||||||||||||
| Amortization of deferred acquisition costs |
16,493 | 14,619 | 32,079 | 27,401 | ||||||||||||
| Operating |
28,931 | 29,318 | 56,103 | 52,961 | ||||||||||||
| Total insurance expenses |
65,823 | 62,129 | 127,815 | 115,432 | ||||||||||||
| Insurance income |
274,523 | 248,612 | 540,059 | 476,212 | ||||||||||||
| Investment management services |
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| Revenues |
126,256 | 91,189 | 247,716 | 184,939 | ||||||||||||
| Interest expense |
92,438 | 69,361 | 183,473 | 139,386 | ||||||||||||
| Net revenues |
33,818 | 21,828 | 64,243 | 45,553 | ||||||||||||
| Expenses |
18,757 | 12,623 | 37,344 | 23,809 | ||||||||||||
| Investment management services income |
15,061 | 9,205 | 26,899 | 21,744 | ||||||||||||
| Municipal services |
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| Revenues |
5,752 | 7,419 | 11,711 | 13,461 | ||||||||||||
| Expenses |
5,526 | 7,292 | 11,380 | 13,282 | ||||||||||||
| Municipal services income |
226 | 127 | 331 | 179 | ||||||||||||
| Corporate |
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| Net investment income |
2,457 | 2,208 | 4,577 | 4,581 | ||||||||||||
| Interest expense |
17,771 | 16,932 | 35,545 | 33,881 | ||||||||||||
| Corporate expenses |
4,070 | 3,384 | 9,960 | 7,047 | ||||||||||||
| Corporate loss |
(19,384 | ) | (18,108 | ) | (40,928 | ) | (36,347 | ) | ||||||||
| Gains and losses |
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| Net realized gains |
15,416 | 20,822 | 59,667 | 50,979 | ||||||||||||
| Net gains on derivative instruments and foreign exchange |
11,947 | 43,132 | 1,284 | 103,341 | ||||||||||||
| Net gains and losses |
27,363 | 63,954 | 60,951 | 154,320 | ||||||||||||
| Income from continuing operations before income taxes |
297,789 | 303,790 | 587,312 | 616,108 | ||||||||||||