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, 2005
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 29, 2005 there were outstanding 135,408,786 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, 2005 and December 31, 2004 |
3 | |||
| Consolidated Statements of Income – Three months ended March 31, 2005 and 2004 |
4 | |||
| Consolidated Statement of Changes in Shareholders’ Equity - Three months ended March 31, 2005 |
5 | |||
| Consolidated Statements of Cash Flows - Three months ended March 31, 2005 and 2004 |
6 | |||
| 7 - 14 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
15 - 39 | ||
| Item 3. |
40 | |||
| Item 4. |
40 | |||
| PART II |
OTHER INFORMATION, AS APPLICABLE | |||
| Item 1. |
40 - 41 | |||
| Item 2. |
41 - 42 | |||
| Item 4. |
42 - 44 | |||
| Item 6. |
44 | |||
| 45 | ||||
(2)
CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands except per share amounts)
| March 31, 2005 |
December 31, 2004 |
|||||||
| Assets |
||||||||
| Investments: |
||||||||
| Fixed-maturity securities held as available-for-sale, at fair value (amortized cost $20,476,640 and $18,802,894) |
$ | 21,134,588 | $ | 19,679,905 | ||||
| Investments held-to-maturity, at amortized cost (fair value $7,120,369 and $7,535,787) |
7,140,265 | 7,540,218 | ||||||
| Investment agreement portfolio pledged as collateral, at fair value (amortized cost $744,071 and $713,704) |
768,196 | 730,870 | ||||||
| Short-term investments, at amortized cost (which approximates fair value) |
1,859,417 | 2,405,192 | ||||||
| Other investments |
258,949 | 261,865 | ||||||
| Total investments |
31,161,415 | 30,618,050 | ||||||
| Cash and cash equivalents |
544,484 | 366,236 | ||||||
| Accrued investment income |
336,904 | 312,208 | ||||||
| Deferred acquisition costs |
371,932 | 360,496 | ||||||
| Prepaid reinsurance premiums |
462,390 | 471,375 | ||||||
| Reinsurance recoverable on unpaid losses |
33,202 | 33,734 | ||||||
| Goodwill |
79,406 | 79,406 | ||||||
| Property and equipment, at cost (less accumulated depreciation of $112,416 and $108,848) |
113,124 | 114,692 | ||||||
| Receivable for investments sold |
100,865 | 67,205 | ||||||
| Derivative assets |
270,648 | 288,811 | ||||||
| Other assets |
282,295 | 315,197 | ||||||
| Total assets |
$ | 33,756,665 | $ | 33,027,410 | ||||
| Liabilities and Shareholders’ Equity |
||||||||
| Liabilities: |
||||||||
| Deferred premium revenue |
$ | 3,238,851 | $ | 3,211,181 | ||||
| Loss and loss adjustment expense reserves |
755,563 | 726,617 | ||||||
| Investment agreements |
9,316,470 | 8,678,036 | ||||||
| Commercial paper |
2,302,859 | 2,598,655 | ||||||
| Medium-term notes |
7,414,651 | 6,943,840 | ||||||
| Variable interest entity floating rate notes |
600,670 | 600,505 | ||||||
| Securities sold under agreements to repurchase |
686,131 | 647,104 | ||||||
| Short-term debt |
58,745 | 58,745 | ||||||
| Long-term debt |
1,325,460 | 1,332,540 | ||||||
| Current income taxes |
12,126 | — | ||||||
| Deferred income taxes, net |
573,849 | 610,545 | ||||||
| Deferred fee revenue |
24,355 | 26,780 | ||||||
| Payable for investments purchased |
201,138 | 94,609 | ||||||
| Derivative liabilities |
428,360 | 528,562 | ||||||
| Other liabilities |
381,426 | 390,620 | ||||||
| Total liabilities |
27,320,654 | 26,448,339 | ||||||
| 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 — 156,241,947 and 155,607,737 |
156,242 | 155,608 | ||||||
| Additional paid-in capital |
1,449,944 | 1,410,799 | ||||||
| Retained earnings |
5,377,327 | 5,215,191 | ||||||
| Accumulated other comprehensive income, net of deferred income tax of $268,807 and $317,563 |
500,516 | 611,173 | ||||||
| Unearned compensation — restricted stock |
(56,206 | ) | (34,686 | ) | ||||
| Treasury stock, at cost — 19,829,450 and 16,216,405 shares |
(991,812 | ) | (779,014 | ) | ||||
| Total shareholders’ equity |
6,436,011 | 6,579,071 | ||||||
| Total liabilities and shareholders’ equity |
$ | 33,756,665 | $ | 33,027,410 | ||||
The accompanying notes are an integral part of the consolidated financial statements.
(3)
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In thousands except per share amounts)
| Three months ended March 31 |
||||||||
| 2005 |
2004 |
|||||||
| Restated | ||||||||
| Insurance |
||||||||
| Revenues: |
||||||||
| Gross premiums written |
$ | 282,619 | $ | 204,693 | ||||
| Ceded premiums |
(35,688 | ) | (30,732 | ) | ||||
| Net premiums written |
246,931 | 173,961 | ||||||
| Scheduled premiums earned |
169,873 | 161,994 | ||||||
| Refunding premiums earned |
36,365 | 39,876 | ||||||
| Premiums earned (net of ceded premiums of $45,415 and $44,918) |
206,238 | 201,870 | ||||||
| Net investment income |
119,146 | 121,841 | ||||||
| Advisory fees |
6,425 | 5,865 | ||||||
| Net realized gains |
211 | 46,293 | ||||||
| Net gains (losses) on derivative instruments and foreign exchange |
(6,075 | ) | 1,070 | |||||
| Total insurance revenues |
325,945 | 376,939 | ||||||
| Expenses: |
||||||||
| Losses and loss adjustment |
20,385 | 19,439 | ||||||
| Amortization of deferred acquisition costs |
16,293 | 15,586 | ||||||
| Operating |
29,166 | 27,526 | ||||||
| Total insurance expenses |
65,844 | 62,551 | ||||||
| Insurance income |
260,101 | 314,388 | ||||||
| Investment management services |
||||||||
| Revenues |
186,235 | 121,460 | ||||||
| Net realized gains (losses) |
3,194 | (1,817 | ) | |||||
| Net gains (losses) on derivative instruments and foreign exchange |
11,178 | (11,733 | ) | |||||
| Total investment management services revenues |
200,607 | 107,910 | ||||||
| Interest expense |
149,418 | 91,035 | ||||||
| Expenses |
14,377 | 18,587 | ||||||
| Total investment management services expenses |
163,795 | 109,622 | ||||||
| Investment management services income |
36,812 | (1,712 | ) | |||||
| Municipal services |
||||||||
| Revenues |
5,536 | 5,959 | ||||||
| Net realized losses |
(85 | ) | (5 | ) | ||||
| Net gains on derivative instruments and foreign exchange |
130 | — | ||||||
| Total municipal services revenues |
5,581 | 5,954 | ||||||
| Expenses |
5,405 | 5,854 | ||||||
| Municipal services income |
176 | 100 | ||||||
| Corporate |
||||||||
| Net investment income |
7,927 | 2,120 | ||||||
| Net realized losses |
(1,608 | ) | (220 | ) | ||||
| Interest expense |
22,021 | 17,774 | ||||||
| Corporate expenses |
3,681 | 5,890 | ||||||
| Corporate loss |
(19,383 | ) | (21,764 | ) | ||||
| Income from continuing operations before income taxes |
277,706 | 291,012 | ||||||
| Provision for income taxes |
77,202 | 82,424 | ||||||
| Income from continuing operations |
200,504 | 208,588 | ||||||
| Income from discontinued operations, net of tax |
— | 29 | ||||||
| Net income |
$ | 200,504 | $ | 208,617 | ||||
| Income from continuing operations per common share: |
||||||||
| Basic |
$ | 1.46 | $ | 1.45 | ||||
| Diluted |
$ | 1.43 | $ | 1.42 | ||||
| Net income per common share: |
||||||||
| Basic |
$ | 1.46 | $ | 1.45 | ||||
| Diluted |
$ | 1.43 | $ | 1.42 | ||||
| Weighted-average number of common shares outstanding: |
||||||||
| Basic |
137,258,739 | 143,608,056 | ||||||
| Diluted |
140,442,217 | 146,647,142 | ||||||
| Gross revenues from continuing operations |
538,452 | 492,703 | ||||||
| Gross expenses from continuing operations |
260,746 | 201,691 | ||||||
The accompanying notes are an integral part of the consolidated financial statements.
(4)
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
For the three months ended March 31, 2005
(In thousands except per share amounts)
| Common Stock |
Additional Capital |
Retained Earnings |
Accumulated Other Comprehensive Income |
Unearned Compensation- Restricted Stock |
Treasury Stock |
Total Equity |
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| Shares |
Amount |
Shares |
Amount |
|||||||||||||||||||||||||||||
| Balance, January 1, 2005 |
155,608 | $ | 155,608 | $ | 1,410,799 | $ | 5,215,191 | $ | 611,173 | $ | (34,686 | ) | (16,216 | ) | $ | (779,014 | ) | $ | 6,579,071 | |||||||||||||
| Comprehensive income: |
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