Can MBIA’s $36.35 Adjusted Book Value Entice? (MBI, RDN)

MBIA Inc. (NYSE: MBI) reported some mixed earnings after the close.  The only reason it even really matters is because Radian Group Inc. (NYSE: RDN) has such better earnings than expected last week.  The financial guarantee and credit protection firm was expected to report earnings (or losses) of -$1.11 EPS per Thomson Reuters consensus data versus -$5.30 a year ago.  MBIA Inc. posted a net loss to common shareholders of $242.0 million, or -$1.16 EPS.  What will be interesting to see is if that still-high adjusted book value can come into play or not.

Things looked better on an annual basis where it recorded net income available to common shareholders for the full year of 2009 of $623.2 million, or $2.99 per share, compared with a net loss of $2.7 billion, or $12.11 per share, in 2008.   National’s existing book of business generated scheduled premiums earned of $409.1 million in 2009, a rise of about 50% from 2008 due to a previously reinsurance transaction with FGIC.  Refunded premiums earned totaled $153.6 million in 2009, down about 34% from 2008.

The company noted that its National Public Finance Guarantee Corporation and MBIA Insurance Corporation operating subsidiaries had statutory capital of $2.0 billion and $3.5 billion, respectively.

Cash and short-term investments at National and MBIA Corp. were $233.8 million and $1.1 billion, respectively; Cash and short-term investments at the Corporate segment of the holding company were $332.4 million, while cash and short-term investments in the wind-down Asset Liability Management business came to $1.2 billion.

Here is the one issue that stands out the most… Adjusted Book Value, a non-GAAP measurement, was listed as $36.35 per share at the end of 2009 compared with $40.06 per share at at the end of 2008.  Unfortunately that is not a GAAP figure and book value for companies which lose money is viewed as something far different from other money-making operations.  The U.S. public finance insurance business is conducted in the National subsidiary. National’s contribution to ABV per share was $20.70 as of December 31, 2009 as compared with $18.95 (pro forma) as of December 31, 2008. The contribution to the Company’s book value per share attributable to National was $13.52 as of December 31, 2009 compared with $10.97 as of December 31, 2008 (pro forma).

The company is also getting a tax refund from Uncle Sam.  Under the Business Assistance Act of 2009, the Net Operating Loss carryback provision within the U.S. income tax law MBIA expects to fully recover the available amount of about $500 million in taxes paid.

MBI shares closed down 0.4% at $4.80 today but shares are up 2% at $4.92 in the after-hours session.  The focus for now is on cash, what the company can bring in, and maybe even that high book value.  The focus ahead after tomorrow will be one that is back to scrutinizing its operations and its ability to weather another down cycle.

Jon C. Ogg