MBIA Inc. (MBI) reported last night that its fourth-quarter loss slimmed to $242 million, or $1.16 per share, from its year-ago deficit of $1.16 billion, or $5.21 per share. The bond insurer's quarterly results included an unrealized mark-to-market gain of $427.6 million on insured credit derivatives. Revenue for the period arrived at $742.1 million, partially reversing MBI's negative revenue of $1.57 billion for the fourth quarter of 2008.
Despite the year-over-year improvement, the company's per-share loss was slightly wider than analysts expected. Thomson Reuters reports that Wall Street was looking for a loss of just $1.11 per share for the fourth quarter.
Nevertheless, MBI has elbowed its way to a pre-market gain of more than 2%. Now, the stock will have an opportunity to climb back above tenuous support from its 10-week moving average, which was breached last Friday for the first time since mid-December 2009.
Ahead of last night's earnings report, MBI's March 5 call was the most popular option. This out-of-the-money strike saw 3,730 contracts change hands on Monday, with the majority of these contracts trading at the ask price -- revealing a bias toward buying activity. Open interest at the March 5 call rose overnight by 1,552 contracts, confirming that a fair number of traders added new bullish bets at this strike yesterday.
the "put back" of over a 1.5 billion dollars worth of RMBS tranches to the originators was really exciting. And to think the forensic reviews of this paper has only just begun.
from the release:
"Included in the Company’s $2.0 billion insurance loss recovery estimate are approximately $1.5 billion in expected recoveries recorded in connection with ineligible mortgages in certain insured second-lien residential mortgage loan securitizations that are subject to contractual obligations by the seller/servicers to repurchase or replace the mortgages. The Company’s estimates for expected recoveries related to ineligible mortgages increased from $1.2 billion as of September 30, 2009 and reflect a probability distribution of net cash inflows resulting from the repurchase the of ineligible mortgages by the seller/servicers that takes into account the uncertainty of such expected recoveries. The Company is continuing to review and evaluate additional mortgage loans in its insured RMBS pools and expects that there will be a substantial number of additional mortgages in these or in other transactions that are subject to repurchase or replacement obligations by the seller/servicer"
At the end of the day, it seems we're going to find,a sizable number of RMBS tranches will fall into the "ineligible" category due to underwriting fraud and the like.
2. Why is the market scoffing at MBIA's view ? I am sure part of the problem is the uncertainty of what is likely to be a multi-year litigation, but I suspect there are bigger problems for MBIA which may come out during discovery. It is fairly clear that the market views MBIA's supposed future recoveries as doubtful...
Remember this is a high profile company domiciled in America's financial capital (NY State anyway)...Do you fools really think that the financial professionals are missing something on this "sure-thing" ?