MBIA (US:MBI)2020-11-09 21:52Financial Performance - In Q3 2020, MBIA reported total revenues of $71 million, a decrease of 58.8% from $172 million in Q3 2019[203]. - The company incurred a net loss of $58 million in Q3 2020, compared to a net income of $83 million in Q3 2019, reflecting a significant decline in performance[203]. - Adjusted net income for Q3 2020 was a loss of $18 million, down from an adjusted net income of $115 million in Q3 2019[199]. - The total expenses for Q3 2020 were $129 million, up from $83 million in Q3 2019, indicating increased operational costs[203]. - The company’s diluted net income (loss) per share was $(1.11) in Q3 2020, compared to $1.00 in Q3 2019[203]. - Consolidated total revenues for the three months ended September 30, 2020 decreased due to unfavorable changes in revenues from consolidated variable interest entities (VIEs) and net gains (losses) on financial instruments at fair value and foreign exchange[204]. - Consolidated total expenses for the three months ended September 30, 2020 included net insurance loss and LAE of $48 million, compared to a loss and LAE benefit of $13 million for the same period in 2019[204]. - For the nine months ended September 30, 2020, consolidated total revenues decreased primarily due to unfavorable changes in net gains (losses) on financial instruments at fair value and foreign exchange, and net investment income[205]. - Net insurance loss and LAE for the nine months ended September 30, 2020 was $427 million, significantly higher than $89 million for the same period in 2019[205]. - Adjusted net income (loss) for the three months ended September 30, 2020 was $(18) million, compared to $115 million for the same period in 2019[209]. - Adjusted net income (loss) per diluted common share for the three months ended September 30, 2020 was $(0.34), down from $1.46 in the same period of 2019[209]. Market and Economic Conditions - The COVID-19 pandemic has led to increased stress on municipal budgets, which could adversely affect the performance of MBIA's insured portfolios[193]. - Economic conditions remain challenging, with many states and municipalities experiencing financial distress due to delayed tax collections and increased unemployment[200]. - Federal legislation, including the $2.7 trillion CARES Act, has provided significant aid to public sector issuers, which may help mitigate financial distress in the municipal sector[195]. Risk Management - MBIA has recorded significant loss reserves on its residential mortgage-backed securities (RMBS) and collateralized debt obligations (CDO) exposures due to the pandemic[195]. - The company continues to monitor its liquidity position, with potential impacts from declines in market value or rating eligibility of pledged assets[196]. - The company continues to manage market risk through active portfolio management to minimize exposure to interest rate risk, foreign exchange risk, and credit spread movement[291]. Valuation and Book Value - As of September 30, 2020, the total insured gross par outstanding for National's U.S. public finance insurance portfolio was $43.9 billion[213]. - GAAP book value per share as of September 30, 2020 was $4.25, a decrease from $10.40 as of December 31, 2019[212]. - Management's adjustments to GAAP book value included removing the negative book value of MBIA Corp. of $(30.83) per share[212]. Interest Rate and Credit Spread Sensitivity - As of September 30, 2020, a 300 basis point decrease in interest rates would result in an estimated pre-tax change in fair value of $275 million[292]. - A 200 basis point decrease in interest rates would lead to an estimated pre-tax change in fair value of $153 million[292]. - A 100 basis point increase in interest rates would result in an estimated pre-tax change in fair value of $(53) million[292]. - A 50 basis point decrease in credit spreads would lead to an estimated pre-tax change in fair value of $45 million[293]. - A 200 basis point increase in credit spreads would result in an estimated pre-tax change in fair value of $(160) million[293]. - A 50 basis point increase in credit spreads would lead to an estimated pre-tax change in fair value of $(43) million[293].