MBIA posts big gain in 2nd-qtr profit on value of holdings backed by insurance unit credit

MBIA posts 2Q profit jump as credit quality dips

ARMONK, N.Y. — Bond insurer MBIA Inc. on Monday posted a surprise profit for its second quarter, mainly due to gains booked on a decline in the perceived strength of the company’s credit.

The company also said it expects to have enough cash to cover its needs through 2015, and shares rose sharply in after-hours trading.

MBIA posted net income available to common shareholders of $1.3 billion, or $6.32 per share, for the three months ended June 30. That compared with net income of $895 million, or $4.30 per share, in the 2009 second quarter.

Analysts polled by Thomson Reuters, on average, had expected a loss of 65 cents per share.

The results included a $1.5 billion unrealized gain on insured credit derivatives. These complex holdings rose in value as the market price of securities based on the credit quality for the company’s MBIA Insurance Corp. unit fell during the quarter.

Premiums earned during the quarter fell 12 percent to $156.3 million, from $177.9 million in the second quarter of last year. Net investment income fell to $107.4 million, from $149.6 million a year ago.

President and Chief Financial Officer Chuck Chaplin said the company saw both paid losses and new delinquencies on insured mortgage-related securities fall during the quarter.

MBIA suffered heavy losses on its coverage of these risky financial instruments as the loans held in those securities defaulted in the last few years. During the quarter, it recorded a $353.7 million increase in losses on mortgage-related securities. The company reduced its exposure to certain types of these securities after the quarter ended, Chaplin said.

In after-hours trading, MBIA shares rose 73 cents, or 7.9 percent, to $9.92. The stock closed the regular session at $9.19, and has traded between $3.19 and $10.92 in the past 52 weeks.