MBIA Inc. Reports First Quarter 2013 Financial Results

  MBIA Inc. Reports First Quarter 2013 Financial Results

Highlights

  *MBIA Inc.’s (the Company’s) Adjusted Book Value (ABV), a non-GAAP measure,
    was $30.56 per share at March 31, 2013 compared with $30.68 per share at
    December 31, 2012 and $32.00 per share at March 31, 2012.
  *MBIA Inc.’s adjusted pre-tax loss, a non-GAAP measure, was $20 million for
    the first quarter of 2013 compared with an adjusted pre-tax loss of $548
    million for the first quarter of 2012.
  *MBIA Inc. recorded net income available to common shareholders of $164
    million, or $0.84 per share, for the first quarter of 2013, compared with
    net income of $10 million, or $0.05 per share, for the first quarter of
    2012.
  *On May 2, 2013, MBIA Corp. entered into an agreement (the Settlement
    Agreement) settling the lawsuit filed by MBIA Corp. on January 11, 2013
    against Flagstar Bank and certain affiliated entities (Flagstar)
    concerning certain securitization transactions backed by second-lien
    mortgages which were insured by MBIA Corp. in 2006 and 2007. Under the
    terms of the Settlement Agreement, MBIA Corp. terminated the lawsuit
    against Flagstar and in exchange received $110 million in cash and other
    consideration.
  *On May 6, 2013, MBIA Inc. and Bank of America agreed to the terms of a
    comprehensive settlement agreement, which among other things, resolved
    litigation between MBIA Inc. and certain of its subsidiaries and Bank of
    America and certain of its subsidiaries. As part of the settlement, MBIA
    Insurance Corporation (MBIA Corp.) received a net payment of approximately
    $1.7 billion consisting of approximately $1.6 billion in cash and $136
    million principal amount of MBIA Inc.’s 5.70% Senior Notes due 2034. Bank
    of America and MBIA Inc. have also agreed to the commutation of all of the
    MBIA Corp. policies held by Bank of America, which have a notional insured
    amount of approximately $7.4 billion, and of which $6.1 billion are
    policies insuring credit default swaps held by Bank of America referencing
    commercial real estate exposures. MBIA Corp. will have no further payment
    obligations under the commuted policies.
  *On May 8, 2013, MBIA Corp. entered into a settlement agreement with
    Société Générale under which certain insured exposures were commuted and
    Société Générale agreed to dismiss the pending litigation between the
    parties concerning MBIA’s Transformation. This agreement ends all
    Transformation-related litigation with bank plaintiffs.
  *Most of the proceeds received by MBIA Corp. from the Bank of America and
    Flagstar settlements were used to repay the outstanding balance of the
    secured loan from its affiliate, National Public Finance Guarantee
    Corporation (National). The outstanding balance of the loan was
    approximately $1.7 billion as of April 1, 2013. The loan has been paid in
    full and extinguished.
  *During the first quarter of 2013, MBIA Corp. commuted $2.1 billion of
    gross insured exposure, primarily comprising investment grade corporate
    collateralized debt obligations (CDOs). Subsequent to March 31, 2013, MBIA
    Corp. agreed to commute $7.4 billion of exposure in connection with the
    Bank of America settlement, primarily comprising structured commercial
    mortgage-backed securities (CMBS) pools and $4.2 billion of exposure held
    by Société Générale comprising asset-backed securities (ABS) CDOs,
    structured CMBS pools and commercial real estate (CRE) CDOs. In addition,
    it also agreed to commute $1.8 billion of exposure with other
    counterparties primarily comprising first-lien subprime and alternative-A
    residential mortgage-backed securities (RMBS), asset-backed securities
    (ABS) CDOs, structured CMBS pools and commercial real estate (CRE) CDOs.
    Commutations and agreements to commute insured exposures have totaled
    $83.6 billion since the beginning of the fourth quarter of 2008.

Business Wire

ARMONK, N.Y. -- May 09, 2013

MBIA Inc. (NYSE: MBI) today reported Adjusted Book Value (ABV) per share (a
non-GAAP measure defined in the attached Explanation of Non-GAAP Financial
Measures) of $30.56 per share at March 31, 2013 compared with $30.68 per share
at December 31, 2012. Book Value (BV) per share was $17.04 as of March 31,
2013, compared to $16.22 as of December 31, 2012.

MBIA Inc.’s adjusted pre-tax loss (a non-GAAP measure defined in the attached
Explanation of Non-GAAP Financial Measures) for the first quarter of 2013 was
$20 million compared with an adjusted pre-tax loss of $548 million for the
first quarter of 2012. The lower adjusted pre-tax loss for the three months
ended March 31, 2013 compared to the three months ended March 31, 2012 was
driven primarily by lower net losses on insured exposures, the absence of net
investment losses related to other-than-temporary impairments, gains on sales
of investments and lower operating expenses due to significantly lower legal
and litigation-related costs. ABV and adjusted pre-tax income (loss) provide
investors with additional views of the Company’s operating results that
management finds useful in measuring financial performance. Reconciliations of
ABV to BV calculated in accordance with GAAP and adjusted pre-tax income
(loss) to pre-tax income (loss) calculated in accordance with GAAP are
attached.

Net income available to common shareholders for the first quarter of 2013 was
$164 million, or $0.84 per share, compared with net income of $10 million, or
$0.05 per share, for the first quarter of 2012. In the three months ended
March 31, 2013, the Company recorded a $194 million reduction in losses
incurred compared with $97 million of losses incurred in the three months
ended March 31, 2012. There were no investment losses related to
other-than-temporary impairments in the first quarter of 2013 compared with
$94 million of losses related to other-than-temporary impairments in the first
quarter of 2012 and $106 million of operating expenses in the first quarter of
2013 compared with $158 million of operating expenses in the first quarter of
2012.

These positive drivers of the improvement in net income were partially offset
by $73 million of unrealized losses on insured derivatives in the first
quarter of 2013 compared with $303 million of unrealized gains on insured
derivatives in the first quarter of 2012. The unrealized net loss on insured
credit derivatives in the first quarter of 2013 resulted from a more favorable
market perception of MBIA Corp.’s credit quality, partially offset by the
effects of changes in the weighted average life of the portfolio and favorable
movements in spreads and pricing on collateral within the transactions. The
unrealized net gain on insured credit derivatives in the first quarter of 2012
resulted primarily from a combination of gains associated with commutations of
insured exposures and tighter credit spreads on the underlying collateral,
partially offset by the impact of an improved market perception of MBIA
Corp.'s credit quality. The Company is required to adjust the values of its
derivative liabilities for the market's perception of its non-performance
risk. A decrease in the value of the derivative liabilities attributable to an
increase in non-performance risk is reflected as an unrealized gain while an
increase in the value of the derivative liabilities attributable to a decline
in non-performance risk is reflected as an unrealized loss in the income
statement.

“This quarter’s financial results and subsequent settlements reflect a
continued trend toward risk reduction in our businesses,” said MBIA Inc.
President and Chief Financial Officer Chuck Chaplin.“Our settlements with
Bank of America, Société Générale, Flagstar and a secondary program have
improved the liquidity profile and volatility of economic losses of MBIA Corp.
and substantially reduced the risk of regulatory intervention against it,
while at the same time allowing it to repay its secured loan from
National.Although there are yet volatile structured exposures that we expect
to commute, and litigations with investors and mortgage originators that need
to be settled or adjudicated, the risk profile of the company has been
substantially improved since we last reported.”

Adjusted Book Value and Book Value

The following is a summary of ABV and BV per share data by segment as of March
31, 2013:


                U.S.        Structured
                Public                        Advisory                   Wind-down
                     Finance and                Corporate               Consolidated
                Finance                       Services                   Segment
                            International
3/31/13
ABV per     $ 25.61   $    11.51      $  0.11    $  (3.10)   $  (3.57)   $    30.56
share
3/31/13
BV per      $ 20.97   $    2.81       $  0.11    $  (3.27)   $  (3.58)   $    17.04
share


First Quarter 2013 Segment Results

The following is a summary of pre-tax results by segment for the first quarter
of 2013:


                 U.S.        Structured
$ in             Public                        Advisory                   Wind-down
millions               Finance and                Corporate               Consolidated
                 Finance                       Services                   Segment
                             International
1Q 2013
Pre-tax      $  142    $     136       $   (1)    $   (46)    $  (19)     $     215
Income
(Loss)
1Q 2012
Pre-tax      $  55     $     102       $   (4)    $   (10)    $  (147)    $     21
Income
(Loss)


First Quarter 2013 Adjusted Pre-Tax Income

The following is a summary of adjusted pre-tax income (loss) for the first
quarter of 2013 where such results differ from pre-tax income calculated in
accordance with GAAP:


                                           Structured

$ in millions                          Finance and     Consolidated

                                           International
1Q 2013 Adj. Pre-tax Income (Loss)     $    (97)       $    (20)
1Q 2012 Adj. Pre-tax Income (Loss)     $    (446)      $    (548)


U.S. Public Finance Insurance Results

The Company’s U.S. public finance insurance business is primarily conducted
through its National Public Finance Guarantee Corp. (National) subsidiary.

The U.S. public finance insurance segment recorded $142 million of pre-tax
income in the first quarter of 2013 compared with $55 million of pre-tax
income in the first quarter of 2012.

Total premiums earned in the U.S. public finance insurance segment were $103
million in the first quarter of 2013, down 3 percent from $106 million of
total premiums earned in the first quarter of 2012, reflecting a decrease in
scheduled premiums earned.

Net investment income for the U.S. public finance insurance segment was $49
million in the first quarter of 2013, down 9 percent from $54 million in the
first quarter of 2012 due to both lower average yields and lower invested
assets.

Net gains on financial instruments at fair value and foreign exchange totaled
$32 million in the first quarter of 2013, compared with $10 million in the
first quarter of 2012. The gains in both periods were driven by asset sales
attributable to the ongoing management of the U.S. public finance insurance
segment’s investment portfolios.

The U.S. public finance insurance segment’s loss and loss adjustment expenses
totaled $4 million in the first quarter of 2013 compared with $14 million in
the first quarter of 2012.

Expenses associated with the amortization of deferred acquisition costs
totaled $22 million in the first quarter of 2013, essentially flat with the
first quarter of 2012.

Operating expenses were $18 million in the first quarter of 2013, compared
with $80 million in the first quarter of 2012. Operating expenses in the first
quarter of 2012 were driven by legal and litigation-related costs.

As of March 31, 2013, National’s statutory capital was $3.3 billion and its
claims-paying resources (as described in the attached Explanation of Non-GAAP
Financial Measures) totaled $5.7 billion.

On May 8, 2013, Standard & Poor’s Ratings Services (S&P) raised its financial
strength rating on National to “BBB” from “BB” and its standalone credit
profile to “A” from “BB”. At the same time, S&P placed the rating on
CreditWatch Positive.

Structured Finance and International Insurance Results

The structured finance and international insurance business is primarily
conducted through MBIA Corp. and its subsidiaries.

The structured finance and international insurance segment had an adjusted
pre-tax loss of $97 million for the first quarter of 2013 compared with an
adjusted pre-tax loss of $446 million for the first quarter of 2012. Premiums
earned, net investment income, fees and reimbursements, and premiums and fees
on insured derivatives totaled $95 million in the first quarter of 2013. All
other line items in the aggregate, except losses and credit impairments (a
non-GAAP measure defined in the attached Explanation of Non-GAAP Financial
Measures) and loss-related expenses, had a net $94 million negative impact on
the adjusted pre-tax loss. Losses, credit impairments and loss-related
expenses on insured exposures totaled $98 million in the first quarter of
2013, compared with $402 million in the first quarter of 2012.

The following is a summary of MBIA Corp.’s insured portfolio economic loss (a
non-GAAP measure defined in the attached Explanation of Non-GAAP Financial
Measures) activity in the first quarter:


1Q 2013 Economic Loss

(Benefit) Activity
                  Second-
($ in                         First-Lien     ABS
millions)     Lien                   CDO      CMBS    Other    Total
                              RMBS
                  RMBS
                                                              
Change in
Expected          $ 109       $    (12)      $ (43)     $ 285     $ (10)     $ 329
Payments
                                                                               
Change in
Expected       (255)       (4)      5       (3)    26      (231)
Salvage
Total
Economic
Losses        $ (146)   $    (16)    $ (38)   $ 282   $ 16     $ 98

(Benefit)


In the first quarter, the Company increased its expectations of future
payments on second-lien RMBS exposures by $109 million reflecting increases in
the weightings of certain stress scenarios in the Company’s loss modeling due
to slower than expected declines in early stage delinquencies within these
transactions. Expected salvage increased by $255 million primarily reflecting
additional anticipated recoveries attributable to contractually due interest
on the Company’s put-back claims as well as from incremental contractual
claims related to ineligible mortgage loans improperly included in the insured
securitizations.

First quarter economic losses on first-lien RMBS and multi-sector ABS CDO
exposures were a benefit of $16 million and $38 million, respectively, driven
by reductions in loss reserves.

In the first quarter of 2013, the Company estimated $282 million of
incremental economic losses on certain insured transactions backed by pools of
CMBS. The increase primarily reflects adjustments to commutation price
assumptions and additional deterioration within some insured transactions.

Portions of the $98 million of total economic losses are on policies subject
to insurance accounting while other amounts relate to losses on insured
variable interest entities (VIEs) or insured credit derivatives for which GAAP
specifies different accounting. The following is a summary of first quarter
economic losses based on those categories:


1Q 2013 Economic Losses (Benefit)
$ in millions                                                     
                                                                       
Change in Expected Payments                                            $(1)
Change in Insurance Recoveries                                         (197)
Loss & LAE Expense on Policies Subject to Insurance Accounting         $(198)
                                                                       
Credit Impairments on Insured VIEs                                     $5
                                                                       
Credit Impairments on Insured Credit Derivatives                       $290
LAE on Insured Credit Derivatives                                      1
Credit Impairments and LAE on Insured Credit Derivatives               $291
                                                                       
Total Economic Losses (Benefit)                                        $98


Net payment activity on second-lien RMBS exposures consisted of the following:

$ in millions      Q1 2012   Q2 2012   Q3 2012   Q4 2012   Q1 2013
                                                          
Paid Claims            $  169      $  139      $  107      $   92      $  121
Collections on
Paid Claims
                          (7)         (6)         (6)          (8)        (16)
and Put-back
Recoveries
Paid LAE (net
of                   14       35       29        37      6

collections)
                                                                          
Net Payments       $  176    $  168    $  130    $   121   $  111


Net payments on insured second-lien RMBS exposures totaled $111 million in the
first quarter of 2013 compared with $121 million in the fourth quarter of 2012
and $176 million in the first quarter of 2012.

On May 2, 2013, MBIA Corp. entered into an agreement (the Settlement
Agreement) settling the lawsuit filed by MBIA Corp. on January 11, 2013
against Flagstar concerning certain securitization transactions backed by
second-lien mortgages which were insured by MBIA Corp. in 2006 and 2007. Under
the terms of the Settlement Agreement, MBIA Corp. terminated the lawsuit
against Flagstar and in exchange received $110 million in cash and other
consideration.

On May 6, 2013, MBIA Inc. and Bank of America agreed to the terms of a
comprehensive settlement agreement, which among other things, resolved
litigation between MBIA Inc. and certain of its subsidiaries and Bank of
America and certain of its subsidiaries. As part of the settlement, MBIA Corp.
received a net payment of approximately $1.7 billion consisting of
approximately $1.6 billion in cash and $136 million principal amount of MBIA
Inc.’s 5.70% Senior Notes due 2034. Bank of America and MBIA Inc. have also
agreed to the commutation of all of the MBIA Corp. policies held by Bank of
America, which have a notional insured amount of approximately $7.4 billion,
and of which $6.1 billion are policies insuring credit default swaps held by
Bank of America referencing commercial real estate exposures. MBIA Corp. will
have no further payment obligations under the commuted policies. In addition,
Bank of America’s obligations to repurchase ineligible mortgages in
securitizations insured by MBIA Corp. were extinguished.

Most of the proceeds received from Bank of America were used to repay the
Secured Loan from MBIA Corp.’s affiliate, National, in full.

As a part of the settlement, Bank of America provided a $500 million loan
commitment to MBIA Corp. which can be used for general corporate purposes.
Finally, Bank of America received warrants to purchase approximately 10
million shares of MBIA Inc. for $9.59 per share.

On May 8, 2013, MBIA Corp. entered into a settlement agreement with Société
Générale under which certain insured exposures were commuted and Société
Générale agreed to dismiss the pending litigation between the parties
concerning MBIA’s Transformation.

The commutations completed subsequent to March 31, 2013 will reduce MBIA
Corp.’s statutory case loss reserves by $1.5 billion. In addition, the
settlements of the put-back litigation with Bank of America and Flagstar will
reduce statutory put-back recoverables by $2.9 billion. Because these
transactions were agreed upon in the period subsequent to March 31, 2013, but
before MBIA Corp. published its statutory results, the March 31, 2013 amounts
were adjusted to reflect the agreements. The net effect of the adjustments was
to lower statutory capital by an immaterial amount. The commutation costs and
the put-back receipts were consistent with both the related put-back
recoverables and related case reserves that existed on MBIA Corp.’s balance
sheet as of March 31, 2013.

As of March 31, 2013, MBIA Corp.’s statutory balance sheet reflected $896
million in cash and invested assets. Cash, short-term investments and other
highly liquid investments available to meet liquidity demands, excluding
amounts held by subsidiaries, totaled $258 million. In connection with the
Bank of America settlement, MBIA Corp. has entered into a $500 million
three-year secured revolving credit agreement with Bank of America, which MBIA
Corp. may use for general corporate purposes. Borrowings under the agreement
will be secured by a pledge of the collateral that secured the National loan
to MBIA Corp. and by 65% of MBIA Corp.’s equity interest in its wholly-owned
subsidiary, MBIA UK (Holdings) Limited. The Company believes MBIA Corp.’s
current liquidity position, together with future cash inflows and amounts
available under the Bank of America credit facility, is adequate to make
expected future claim payments.

MBIA Corp. had statutory capital of $1.3 billion and claims-paying resources
totaling $5.3 billion at March 31, 2013.

On May 8, 2013, Standard & Poor's Ratings Services raised its financial
strength rating on MBIA Corp. to 'B' from 'CCC'. The outlook is stable.

Advisory Services

The Company’s Advisory Services business is primarily conducted in its
Cutwater Asset Management subsidiaries. Cutwater recorded a pre-tax loss of $1
million in the first quarter of 2013 compared with a pre-tax loss of $4
million in the first quarter of 2012, as lower fees and reimbursements were
more than offset by reductions in operating expenses.

During the first quarter of 2013, the Company’s Trifinium Advisors (UK)
Limited (Trifinium) subsidiary began managing a financing program that
provides loans to the social housing sector in the United Kingdom. Trifinium
earns fees for management and other services provided to the program.

MBIA Inc. Holding Company

MBIA Inc. contains the Corporate segment and Wind-down Operations. General
corporate activities are conducted through the Corporate segment. The
Company’s corporate operations primarily consist of holding company
activities, including its service company, Optinuity. The Company’s Wind-down
Operations comprise its ALM and Conduit segments, both of which are in
run-off.

The Corporate segment recorded a pre-tax loss of $46 million in the first
quarter of 2013 compared with a pre-tax loss of $10 million in the first
quarter of 2012. The increase in the Corporate segment's pre-tax loss was
driven by significantly higher legal and litigation related expenses partially
offset by higher fees from affiliates and a decrease in interest expense
following the repurchase of a portion of the Company outstanding senior notes.
The fees for affiliate services may vary significantly from period to period.

The Company’s Wind-down Operations recorded a pre-tax loss of $19 million in
the first quarter of 2013 compared with a pre-tax loss of $147 million in the
first quarter of 2012. The pre-tax loss in the first quarter of 2013 was
driven by negative net interest spread in the ALM business, losses related to
fair valuing financial instruments and by a $10 million fee paid to the
Corporate segment partially offset by favorable foreign exchange. The pre-tax
loss in the first quarter of 2012 was driven by a $73 million net loss on
financial instruments at fair value and foreign exchange resulting primarily
from losses on asset sales and by $54 million in net investment losses related
to other-than-temporary impairments to assets identified for sale but not yet
sold. Ongoing negative net interest spread in the ALM business, a portion of
which is included in net gains (losses) on financial instruments at fair value
and foreign exchange, totaled approximately $22 million in the first quarter
of 2013 and $35 million in the first quarter of 2012.

As of March 31, 2013, MBIA Inc. had liquidity of $373 million comprising cash
and liquid assets of $317 million held in the Corporate segment available for
general corporate liquidity purposes, excluding the amounts held in escrow
under its tax sharing agreement, and $56 million not pledged directly as
collateral held in the asset/liability products segment. MBIA Inc. seeks to
maintain sufficient liquidity and capital resources to meet its general
corporate needs as well as the needs of the asset/liability products
operations.

Conference Call

The Company will host a webcast and conference call for investors tomorrow,
Friday, May 10, 2013 at 8:00 AM (EDT) to discuss its first quarter 2013
financial results and other matters relating to the Company. The webcast and
conference call will consist of brief remarks followed by a question and
answer session.

The dial-in number for the call is (877) 694-4769 in the U.S. and (404)
665-9935 from outside the U.S. The conference call code is 57164744. A live
webcast of the conference call will also be accessible on www.mbia.com.

A replay of the call will be available approximately two hours after the
completion of the call on May 10 until 11:59 p.m. on May 24 by dialing (800)
585-8367 in the U.S. or (404) 537-3406 from outside the U.S. The replay call
code is also 57164744. In addition, a recording of the call will be available
on the Company's website approximately two hours after the completion of the
call.

Forward-Looking Statements

The information contained in this press release should be read in conjunction
with our filings made with the Securities and Exchange Commission. This
release includes statements that are not historical or current facts and are
“forward-looking statements” made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. The words “believe,”
“anticipate,” “project,” “plan,” “expect,” “intend,” “will likely result,”
“looking forward” or “will continue,” and similar expressions identify
forward-looking statements. These statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from
historical earnings and those presently anticipated or projected, including,
among other risks and uncertainties, whether the Company will realize, or will
be delayed in realizing, insurance loss recoveries expected in disputes with
sellers/servicers of RMBS transactions at the levels recorded in its financial
statements, the possibility that the Company will experience severe losses or
liquidity needs due to increased deterioration in its insurance portfolios and
in particular, due to the performance of CDOs including multi-sector, CMBS and
CRE CDOs and RMBS, the failure to obtain regulatory approval to implement our
risk reduction and liquidity strategies, the possibility that loss reserve
estimates are not adequate to cover potential claims, the risk that MBIA
Insurance Corporation will be placed in a rehabilitation or liquidation
proceeding by the NYSDFS, the Company’s ability to access capital and the
Company’s exposure to significant fluctuations in liquidity and asset values
within the global credit markets, in particular in the ALM business, the
Company’s ability to fully implement its strategic plan, including its ability
to achieve high stable ratings for National or any other insurance
subsidiaries, and the Company’s ability to commute certain of its insured
exposures, including as a result of limited available liquidity, the Company’s
ability to favorably resolve litigation claims against the Company, and
changes in general economic and competitive conditions. These and other
factors that could affect financial performance or could cause actual results
to differ materially from estimates contained in or underlying the Company’s
forward-looking statements are discussed under the “Risk Factors” section in
MBIA Inc.’s most recent Annual Report on Form 10-K and Quarterly Report on
Form 10-Q, which may be updated or amended in the Company’s subsequent filings
with the Securities and Exchange Commission. The Company cautions readers not
to place undue reliance on any such forward-looking statements, which speak
only to their respective dates. The Company undertakes no obligation to
publicly correct or update any forward-looking statement if it later becomes
aware that such result is not likely to be achieved.

MBIA Inc., headquartered in Armonk, New York is a holding company whose
subsidiaries provide financial guarantee insurance, as well as related
reinsurance, advisory and portfolio services, for the public and structured
finance markets, and asset management advisory services. The Company services
its clients around the globe with offices in New York, Denver, San Francisco,
Paris, London, Madrid and Mexico City. Please visit MBIA's website at
www.mbia.com.

Explanation of Non-GAAP Financial Measures

The following are explanations of why MBIA believes that the non-GAAP
financial measures used in this press release, which serve to supplement GAAP
information, are meaningful to investors.

Adjusted Book Value: Adjusted Book Value (ABV), a non-GAAP measure, is used by
the Company to supplement its analysis of GAAP book value. The Company uses
ABV as a measure of fundamental value and considers the change in ABV an
important measure of periodic financial performance. ABV adjusts GAAP book
value to remove the impact of certain items which the Company believes will
reverse over time, as well as to add in the impact of certain items which the
Company believes will be realized in GAAP book value in future periods. The
Company has limited such adjustments to those items that it deems to be
important to fundamental value and performance and which the likelihood and
amount can be reasonably estimated. ABV assumes no new business activity. The
Company has presented ABV to allow investors and analysts to evaluate the
Company using the same measure that MBIA’s management regularly uses to
measure financial performance. ABV is not a substitute for and should not be
viewed in isolation from GAAP book value.

ABV is calculated on a consolidated basis and a segment basis. ABV by segment
provides information about each segment’s contribution to consolidated ABV and
is calculated using the same formula. ABV per share represents that amount of
ABV allocated to each common share outstanding at the measurement date.

Adjusted Pre-tax Income (Loss): Adjusted pre-tax income (loss), a non-GAAP
measure, is used by the Company to supplement its analysis of GAAP pre-tax
income (loss). The Company uses adjusted pre-tax income (loss) as a measure of
fundamental periodic financial performance. Adjusted pre-tax income (loss)
adjusts GAAP pre-tax income (loss) to remove the effects of consolidating
insured VIEs and gains and losses related to fair valuing insured credit
derivatives, which the Company believes will reverse over time, and adds in
changes in the present value of insurance claims the Company expects to pay on
insured credit derivatives based on its ongoing insurance loss monitoring and
loss adjustment expenses. Adjusted pre-tax income (loss) is not a substitute
for and should not be viewed in isolation from GAAP pre-tax income (loss) and
the Company’s definition of adjusted pre-tax income (loss) may differ from
that used by other companies.

Claims-paying Resources (CPR): CPR is a key measure of the resources available
to National and MBIA Corp. to pay claims under their respective insurance
policies. CPR consists of total financial resources and reserves calculated on
a statutory basis. CPR has been a common measure used by financial guarantee
insurance companies to report and compare resources and continues to be used
by MBIA’s management to evaluate changes in such resources. The Company has
provided CPR to allow investors and analysts to evaluate National and MBIA
Corp. using the same measure that MBIA’s management uses to evaluate their
resources to pay claims under their respective insurance policies. There is no
directly comparable GAAP measure.

Credit Impairments on Insured Derivatives: Credit impairments on insured
derivatives represent actual net payments for the period plus the present
value of the Company’s estimate of expected future net claim payments for such
transactions, using a discount rate required by statutory accounting
principles, plus loss adjustment expenses.  Since the Company’s insured credit
derivatives have similar terms, conditions, risks, and economic profiles to
its financial guarantee insurance policies, the Company evaluates them for
impairment periodically in the same way that it estimates loss and LAE for its
financial guarantee insurance policies. Credit impairments on insured
derivatives are equal to the Company’s statutory losses and loss adjustment
expenses for such contracts.

Credit impairments on insured derivatives may differ from the fair values
recorded in the Company’s financial statements. The Company expects that the
majority of its exposure written in derivative form will not be settled at
fair value. The fair value of an insured derivative contract will be
influenced by a variety of market and transaction-specific factors that may be
unrelated to potential future claim payments. In the absence of credit
impairments or the termination of derivatives at losses, the cumulative
unrealized losses recorded from fair valuing insured derivatives should
reverse before or at the maturity of the contracts. Contracts also may be
settled prior to maturity at amounts that may be more or less than their
recorded fair values. Those settlements can result in realized gains or
losses, and the reversal of unrealized losses. For these reasons, the Company
believes its disclosure of credit impairments on insured derivatives provides
additional meaningful information to investors about potential realized losses
on these contracts.

Economic Losses: Economic losses for a reporting period represent the change
in the discounted values of net payments without regard to the manner in which
they are presented in the Company’s financial statements. Economic losses are
calculated in accordance with GAAP, with the exception of those related to
insured credit derivative impairments. The amounts reported for insured credit
derivative impairments are calculated in accordance with U.S. STAT because
GAAP does not contain a comparable measurement basis for these contracts.
Losses and recoverables on VIEs that are eliminated in consolidation are
included because the consolidation of these VIEs does not impact whether or
not the Company will be required to make payments under insurance contracts.
As a result of the different accounting bases of amounts, the total economic
losses represent a non-GAAP measure.

MBIA INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (unaudited)
(In millions except share and per share amounts)
                                                       
                                            March 31, 2013   December 31, 2012
Assets
Investments:
  Fixed-maturity securities held as
  available-for-sale, at fair value         $   4,215        $    4,485
  (amortized cost $4,101 and $4,347)
  Fixed-maturity securities at fair value       243               244
  Investments pledged as collateral, at
  fair value (amortized cost $374 and           333               443
  $489)
  Short-term investments held as
  available-for-sale, at fair value             866               669
  (amortized cost $859 and $662)
  Other investments (includes investments      22              21       
  at fair value of $13 and $12)
               Total investments                5,679             5,862
                                                                  
Cash and cash equivalents                       862               814
Premiums receivable                             1,161             1,228
Deferred acquisition costs                      290               302
Insurance loss recoverable                      3,877             3,648
Property and equipment, at cost (less
accumulated depreciation of $144 and            68                69
$146)
Deferred income taxes, net                      1,146             1,199
Other assets                                    238               268
Assets of consolidated variable interest
entities:
  Cash                                          72                176
  Investments held-to-maturity, at
  amortized cost (fair value $2,759 and         2,826             2,829
  $2,674)
  Fixed-maturity securities held as
  available-for-sale, at fair value             623               625
  (amortized cost $628 and $637)
  Fixed-maturity securities at fair value       1,753             1,735
  Loans receivable at fair value                1,819             1,881
  Loan repurchase commitments                   1,176             1,086
  Other assets                                 2               2        
               Total assets                 $   21,592      $    21,724   
                                                                  
Liabilities and Equity
Liabilities:
  Unearned premium revenue                  $   2,774        $    2,938
  Loss and loss adjustment expense              785               853
  reserves
  Investment agreements                         915               944
  Medium-term notes (includes financial
  instruments carried at fair value of          1,577             1,598
  $181 and $165)
  Long-term debt                                1,661             1,662
  Derivative liabilities                        3,006             2,934
  Other liabilities                             377               315
  Liabilities of consolidated variable
  interest entities:
      Variable interest entity notes
      (includes financial instruments           7,039             7,124
      carried at fair value of $3,578 and
      $3,659)
      Derivative liabilities                   149             162      
               Total liabilities               18,283          18,530   
                                                                  
                                                                  
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--277,793,696
      and 277,405,039                           278               277
  Additional paid-in capital                    3,107             3,076
  Retained earnings                             2,203             2,039
  Accumulated other comprehensive income        9                 56
  (loss), net of tax of $18 and $21
  Treasury stock, at cost--84,836,010 and      (2,309  )        (2,275   )
  81,733,530 shares
               Total shareholders' equity       3,288             3,173
               of MBIA Inc.
  Preferred stock of subsidiary and            21              21       
  noncontrolling interest
               Total equity                    3,309           3,194    
               Total liabilities and        $   21,592      $    21,724   
               equity

MBIA INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS (unaudited)
(In millions)
                                                                                                                 
                                   Structured
                    U.S.           Finance and
                    Public
                    Finance        International     Advisory
Three Months
Ended March 31,     Insurance      Insurance         Services                     Wind-down
2013
                   (National)    (MBIA Corp.)     (Cutwater)    Corporate    Operations    Subtotal    Eliminations    Consolidated
                                                                                                                               
Revenues:
  Premiums
  earned:
    Scheduled
    premiums      $ 56           $ 36              $ -            $ -           $ -            $ 92         $ (13     )      $ 79
    earned
    Refunding
    premiums       47            -               -            -           -            47         (6      )       41      
    earned
      Total
      premiums      103            36                -              -             -              139          (19     )        120
      earned
  Net investment    49             5                 -              1             7              62           (24     )        38
  income
  Fees and          2              24                11             27            -              64           (58     )        6
  reimbursements
  Change in fair
  value of
  insured
  derivatives:
    Realized
    gains
    (losses) and
    other
      settlements
      on insured    -              12                -              -             -              12           -                12
      derivatives
    Unrealized
    gains
    (losses) on
      insured      -             (73      )       -            -           -            (73   )     -              (73     )
      derivatives
    Net change in
    fair value of
      insured       -              (61      )        -              -             -              (61   )      -                (61     )
      derivatives
  Net gains
  (losses) on
  financial
  instruments
    at fair value
    and foreign     32             22                -              5             3              62           1                63
    exchange
  Net gains
  (losses) on
  extinguishment
    of debt         -              -                 -              -             4              4            -                4
  Revenues of
  consolidated
  VIEs:
    Net
    investment      -              13                -              -             2              15           1                16
    income
    Net gains
    (losses) on
    financial
    instruments
      at fair
      value and    -             31              -            -           -            31         2              33      
      foreign
      exchange
         Total      186            70                11             33            16             316          (97     )        219
         revenues
                                                                                                                               
Expenses:
  Losses and loss   4              (198     )        -              -             -              (194  )      -                (194    )
  adjustment
  Amortization of
  deferred          22             33                -              -             -              55           (39     )        16
  acquisition
  costs
  Operating         18             26                12             67            2              125          (19     )        106
  Interest          -              58                -              12            20             90           (30     )        60
  Expenses of
  consolidated
  VIEs:
    Operating       -              5                 -              -             11             16           (12     )        4
    Interest       -             10              -            -           2            12         -              12      
         Total     44            (66      )       12           79          35           104        (100    )       4       
         expenses
                                                                                                                               
Pre-tax income    $ 142          $ 136            $ (1     )     $ (46   )     $ (19    )     $ 212       $ 3               215
(loss)
                                                                                                                               
  Provision
  (benefit) for                                                                                                               51      
  income taxes
                                                                                                                               
Net income (loss)                                                                                                            $ 164     

MBIA INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS (unaudited)
(In millions)
                                                                                                                            
                                              Structured
                               U.S.           Finance and
                               Public
                               Finance        International     Advisory
Three Months Ended March 31,   Insurance      Insurance         Services                     Wind-down
2012
                              (National)    (MBIA Corp.)     (Cutwater)    Corporate    Operations    Subtotal    Eliminations    Consolidated
                                                                                                                                          
Revenues:
  Premiums earned:
    Scheduled premiums       $ 59           $ 47              $ -            $ -           $ -            $ 106        $ (10     )      $ 96
    earned
    Refunding premiums        47            -               -            -           -            47         (6      )       41      
    earned
      Total premiums earned    106            47                -              -             -              153          (16     )        137
  Net investment income        54             8                 -              1             16             79           (17     )        62
  Fees and reimbursements      1              25                13             23            -              62           (55     )        7
  Change in fair value of
  insured derivatives:
    Realized gains (losses)
    and other
      settlements on insured   -              (4       )        -              -             -              (4    )      -                (4      )
      derivatives
    Unrealized gains
    (losses) on
      insured derivatives     -             303             -            -           -            303        -              303     
    Net change in fair value
    of
      insured derivatives      -              299               -              -             -              299          -                299
  Net gains (losses) on
  financial instruments
    at fair value and          10             18                -              5             (73     )      (40   )      21               (19     )
    foreign exchange
  Investment losses related
  to other-than-
    temporary impairments:
    Investment losses
    related to other-than-
      temporary impairments    -              (2       )        -              -             (51     )      (53   )      -                (53     )
    Other-than-temporary
    impairments
      recognized in
      accumulated
      other comprehensive     -             (38      )       -            -           (3      )     (41   )     -              (41     )
      income (loss)
        Net investment
        losses related to
        other-than-temporary   -              (40      )        -              -             (54     )      (94   )      -                (94     )
        impairments
  Other net realized gains     -              1                 -              -             -              1            -                1
  (losses)
  Revenues of consolidated
  VIEs:
    Net investment income      -              13                -              -             3              16           1                17
    Net gains (losses) on
    financial instruments
      at fair value and       -             (31      )       -            -           -            (31   )     4              (27     )
      foreign exchange
        Total revenues         171            340               13             29            (108    )      445          (62     )        383
                                                                                                                                          
Expenses:
  Losses and loss adjustment   14             83                -              -             -              97           -                97
  Amortization of deferred     22             27                -              -             -              49           (36     )        13
  acquisition costs
  Operating                    80             57                17             25            4              183          (25     )        158
  Interest                     -              53                -              14            31             98           (25     )        73
  Expenses of consolidated
  VIEs:
    Operating                  -              7                 -              -             -              7            (1      )        6
    Interest                  -             11              -            -           4            15         -              15      
        Total expenses        116           238             17           39          39           449        (87     )       362     
                                                                                                                                          
Pre-tax income (loss)        $ 55           $ 102            $ (4     )     $ (10   )     $ (147    )    $ (4    )    $ 25              21
                                                                                                                                          
  Provision (benefit) for                                                                                                                11      
  income taxes
                                                                                                                                          
Net income (loss)                                                                                                                       $ 10      

MBIA INC. AND SUBSIDIARIES
ADJUSTED PRE-TAX INCOME (LOSS) RECONCILIATION^(1)
(In millions)
                                                               
                                                  Three Months Ended March 31,
                                                  2013             2012
Adjusted pre-tax income (loss)                    $   (20    )     $  (548  )
Additions to adjusted pre-tax income (loss):
     Impact of consolidating certain VIEs             18              5
     Mark-to-market gains (losses) on insured         (73    )        303
     credit derivatives
Subtractions from adjusted pre-tax income
(loss):
     Impairments on insured credit derivatives       (290   )       (261  )
Pre-tax income (loss)                             $   215         $  21    
                                                                      
                                                                      
STRUCTURED FINANCE & INTERNATIONAL INSURANCE (MBIA CORP.)
ADJUSTED PRE-TAX INCOME (LOSS) RECONCILIATION^(1)
(In millions)
                                                                      
                                                  Three Months Ended March 31,
                                                  2013             2012
Adjusted pre-tax income (loss)                    $   (97    )     $  (446  )
Additions to adjusted pre-tax income (loss):
     Impact of consolidating certain VIEs             16              (16   )
     Mark-to-market gains (losses) on insured         (73    )        303
     credit derivatives
Subtractions from adjusted pre-tax income
(loss):
     Impairments on insured credit derivatives       (290   )       (261  )
Pre-tax income (loss)                             $   136         $  102   
                                                                      
                                                                      
(1 ) A non-GAAP measure; please see Explanation of Non-GAAP Financial
     Measures.


MBIA INC. AND SUBSIDIARIES

Components of Adjusted Book Value per Share:
                                                           
                                    March 31,     December 31,
                                    2013          2012               Change
Reported Book Value                 $ 17.04       $  16.22           $ 0.82
                                                                     
Adjustments for items
included in book value per
share (after-tax):
Cumulative net loss from
consolidating certain VIEs          0.53          0.59               (0.06   )
^ (1)
Cumulative unrealized loss
on insured credit                   10.09         9.70               0.39
derivatives
Net unrealized (gains)
losses included in other            (0.31   )     (0.47     )        0.16
comprehensive income
Adjustments for items not
included in book value per
share (after-tax):
Net unearned premium                9.07          9.49               (0.42   )
revenue ^ (2)(3)
Cumulative impairments on           (5.86   )     (4.85     )        (1.01   )
insured credit derivatives
Adjusted Book Value ^ (4)           $ 30.56      $  30.68         $ (0.12 )


^(1)  Represents the impact on consolidated total equity of VIEs that are not
       considered a business enterprise of the Company.
       The discount rate on financial guarantee installment premiums was the
^(2)   risk-free rate as defined by the accounting principles for financial
       guarantee insurance contracts and the discount rate on insured
       derivative installment revenue and impairments was 5.0%.
       The amounts consist of installment and upfront financial guarantee
^(3)   premiums, insured derivative revenue and deferred
       commitment/structuring fees, net of deferred acquisition costs.
^(4)   A non-GAAP measure; please see Explanation of Non-GAAP Financial
       Measures.
       

Net Income (Loss) per Common Share:
                                     Three Months Ended
                                              March 31,
                                              2013            2012
                                 Basic        $ 0.84            $ 0.05
                                 Diluted      $ 0.84            $ 0.05
                                                                 
                                                                 
                                                                 
Weighted Average Number of
Common Shares Outstanding:
                                                                 
                                 Basic          194,523,933       193,489,424
                                 Diluted        195,631,960       194,594,974


INSURANCE OPERATIONS
                                                  
Selected Financial Data
Computed on a Statutory Basis
(dollars in millions)
                                                                 
National Public Finance
Guarantee Corporation
                                                                 
                                        March 31, 2013       December 31, 2012
  Policyholders’ surplus                $  2,104             $   1,999
  Contingency reserves                    1,245               1,249     
      Statutory capital                    3,349                 3,248
                                                                 
  Unearned premium reserve                 1,951                 2,041
  Present value of                        213                 217       
  installment premiums ^ (1)
      Premium resources ^ (2)              2,164                 2,258
                                                                 
  Net loss and loss
  adjustment expense reserves              (103     )            (109      )
  ^ (1)
  Salvage reserves                        263                 262       
      Gross loss and loss
      adjustment expense                  160                 153       
      reserves
  Total claims-paying                   $  5,673            $   5,659     
  resources
                                                                 
  Net debt service                      $  496,903           $   519,458
  outstanding
                                                                 
  Capital ratio ^ (3)                      148:1                 160:1
                                                                 
  Claims-paying ratio ^ (4)                101:1                 107:1
                                                                 
MBIA Insurance Corporation
                                        March 31, 2013       December 31, 2012
  Policyholders’ surplus                $  784               $   965
  Contingency reserves                    478                 493       
      Statutory capital                    1,262                 1,458
                                                                 
  Unearned premium reserve                 585                   600
  Present value of                        979                 1,035     
  installment premiums ^ (5)
      Premium resources ^ (2)              1,564                 1,635
                                                                 
  Net loss and loss
  adjustment expense reserves              (2,378   )            (2,448    )
  ^ (5)
  Salvage reserves ^ (6)                  4,893               4,628     
      Gross loss and loss
      adjustment expense                  2,515               2,180     
      reserves
  Total claims-paying                   $  5,341            $   5,273     
  resources
                                                                 
  Net debt service                      $  139,420           $   145,763
  outstanding
                                                                 
  Capital ratio ^ (3)                      110:1                 100:1
                                                                 
  Claims-paying ratio ^ (4)                29:1                  31:1


^(1)  At March 31, 2013 and December 31, 2012 the discount rate was 4.54%.
^(2)   The amounts consist of Financial Guarantee premiums and Insured
       Derivative premiums.
^(3)   Net debt service outstanding divided by statutory capital.
       Net debt service outstanding divided by the sum of statutory capital,
^(4)   unearned premium reserve (after-tax), present value of installment    
       premiums (after-tax), net loss and loss adjustment expense reserves
       and salvage reserves.
^(5)   At March 31, 2013 and December 31, 2012 the discount rate was 5.72%.
^(6)   The amount primarily consists of expected recoveries related to the
       Company’s put-back claims of ineligible mortgage loans.
                                                                             

Contact:

MBIA Inc.
Media:
Kevin Brown +1-914-765-3648
or
MBIA Inc.
Investor Relations:
Greg Diamond +1-914-765-3190
 
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