MBIA Inc. Reports First Quarter 2014 Financial Results

  MBIA Inc. Reports First Quarter 2014 Financial Results

Business Wire

ARMONK, N.Y. -- May 12, 2014

MBIA Inc. (NYSE:MBI) (the Company) today reported an adjusted pre-tax loss (a
non-GAAP measure defined in the attached Explanation of Non-GAAP Financial
Measures) of $99 million for the first quarter of 2014 compared with an
adjusted pre-tax loss of $20 million for the same period of 2013. MBIA Inc.
recorded consolidated net income of $256 million, or $1.32 per diluted share,
for the first quarter of 2014 compared with consolidated net income of $164
million, or $0.84 per diluted share, for the same period of 2013.

Adjusted Book Value (ABV) per share (a non-GAAP measure defined in the
attached Explanation of Non-GAAP Financial Measures) was $26.64 as of March
31, 2014 compared with $27.78 as of December 31, 2013.

“The first quarter represented another milestone on our journey to financial
stability and re-entry into the municipal finance market,” said MBIA Inc.
President and Chief Financial Officer Chuck Chaplin. “In March, National
Public Finance Guarantee Corp. achieved a rating upgrade to ‘AA-’ from
Standard & Poor’s and today added a ‘AA+’ rating from the Kroll Bond Rating
Agency. National is the largest bond insurer exclusively focused on domestic
public finance and the Double-A ratings will enable National to begin insuring
bonds in the municipal market. We are looking forward to writing new business
and adding value for issuers, investors and our shareholders.”

“In MBIA Insurance Corp., the trend toward lower volatility continued in the
quarter, with $6.7 billion of exposures commuted or terminated, bringing the
portfolio down to $70 billion of gross par insured as of March 31, 2014,” Mr.
Chaplin continued. “At the same time, recent trends in overall economic losses
and payments on second-lien RMBS have been favorable.”

The increase in the adjusted pre-tax loss for the three months ended March 31,
2014 compared with the same period of 2013 was driven primarily by losses on
financial instruments at fair value and foreign exchange compared to gains in
2013 and lower net premiums earned, partially offset by decreases in legal and
litigation related operating expenses. ABV per share and adjusted pre-tax
income provide investors with alternative views of the Company’s operating
results that management finds useful in measuring financial performance.
Reconciliations of ABV per share to book value (BV) per share calculated in
accordance with GAAP and adjusted pre-tax income to pre-tax income calculated
in accordance with GAAP are attached.

The increase in reported consolidated net income was primarily due to higher
net gains from a reduction in derivative liabilities as a result of
commutation activity, partially offset by an increase in loss and loss
adjustment expenses. Consolidated total revenues for the three months ended
March 31, 2014 included $469 million of net gains on insured derivatives,
primarily in the Structured Finance and International Insurance segment,
compared with $61 million of net losses for the same period of 2013.
Consolidated total expenses for the three months ended March 31, 2014 included
$50 million of net insurance loss and loss adjustment expenses compared with a
$194 million net benefit to losses incurred for the same period of 2013.

The Company’s net derivative liability (the cumulative negative
mark-to-market) with respect to insured credit default swaps was $309 million
as of March 31, 2014, its lowest level since the second quarter of 2007.

U.S. Public Finance Insurance Results

The Company’s U.S. public finance insurance business is primarily conducted
through its National Public Finance Guarantee Corporation (National)
subsidiary. The U.S. Public Finance Insurance segment recorded $92 million of
pre-tax income in the first quarter of 2014 compared with $142 million of
pre-tax income in the same period of 2013.

Total premiums earned in the U.S. Public Finance Insurance segment were $65
million in the first quarter of 2014, down 37 percent from $103 million of
total premiums earned in the same period of 2013, reflecting a 53 percent
decrease in refunded premiums earned and a 23 percent decline in scheduled
earned premiums. Refunded premiums earned declined due to a lower level of
market refundings in the period. The decline in scheduled earned premiums
resulted from portfolio amortization and high refunding volume over the past
several years. National did not write any new business during the first
quarter of 2014.

Net investment income for the U.S. Public Finance Insurance segment was $33
million in the first quarter of 2014, down 33 percent from $49 million in the
first quarter of 2013 primarily due to higher asset balances invested at lower
average yields following the repayment of the secured loan that National had
extended to MBIA Insurance Corporation (MBIA Corp.).

Net gains on financial instruments at fair value and foreign exchange totaled
$4 million in the first quarter of 2014, compared with $32 million of gains in
the comparable period of 2013. The decline was primarily attributable to lower
gains from asset sales in the first quarter of 2014 compared with the first
quarter of 2013.

The U.S. Public Finance Insurance segment’s loss and loss adjustment expenses
were a benefit of $14 million in the first quarter of 2014 compared with a $4
million expense in the same period of 2013.

Expenses associated with the amortization of deferred acquisition costs
totaled $14 million in the first quarter of 2014, compared with $22 million in
the same period of 2013, reflecting lower premiums earned and the reduction in
the outstanding balance of the Company’s insured public finance portfolio.

Operating expenses were $13 million in the first quarter of 2014, compared
with $18 million in the same period of 2013. The decrease in operating
expenses in the first quarter of 2014 was driven by lower legal expenses
following the settlement of certain litigation challenging the creation of
National.

National had qualified statutory capital of $3.3 billion and claims-paying
resources totaling $5.2 billion as of March 31, 2014.

On March 18, 2014, Standard & Poor’s Ratings Services (S&P) raised its
financial strength rating on National to ‘AA-’ from ‘A’. The outlook on the
company is stable. On May 12, 2014, the Kroll Bond Rating Agency assigned a
AA+, Stable Outlook insurance financial strength rating to National.

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 pre-tax income
on a GAAP basis of $392 million in the first quarter of 2014, compared with
pre-tax income of $136 million in the same period of 2013. Pre-tax income in
the first quarter of 2014 increased compared with the first quarter of 2013
primarily due to an increase in net gains on the fair value of insured
derivatives, partially offset by higher loss and loss adjustment expenses. The
net gains on insured derivatives in the first quarter of 2014 were principally
associated with the reversal of unrealized losses from commutations partially
offset by settlements and claim payments. Financial guarantee losses and loss
adjustment expenses (LAE) totaled $64 million in the first quarter of 2014
compared with a net benefit of $198 million in the same period of 2013 that
resulted from increased expectations of recoveries related to ineligible
mortgage loans in insured second-lien RMBS securitizations.

The Structured Finance and International Insurance segment had an adjusted
pre-tax loss of $110 million for the first quarter of 2014 compared with an
adjusted pre-tax loss of $97 million for the first quarter of 2013.

Insured portfolio economic loss (a non-GAAP measure defined in the attached
Explanation of Non-GAAP Financial Measures) activity totaled $104 million in
the first quarter of 2014, compared with $98 million in the same period of
2013. The following is a summary of economic loss activity in the first
quarter of 2014:

1Q 2014 Economic Loss                                             
(Benefit) Activity
($ in millions)        Second-Lien  First-Lien  ABS   CMBS  Other  Total
                        RMBS          RMBS         CDO
Increase (Decrease)     $16           $26          $18    $18    $6      $84
in Expected Payments
(Increase) Decrease    21           2           (2)   2     (3)    20
in Expected Salvage
Total Economic Losses  $37          $28         $16   $20   $3     $104
(Benefit)

Net loss and LAE payments on insured second-lien RMBS exposures totaled $29
million in the first quarter of 2014 compared with $111 million in the same
period of 2013.

As of March 31, 2014, MBIA Corp.’s statutory balance sheet reflected $480
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 $423 million. The Company believes MBIA
Corp.’s current liquidity position, together with future cash inflows, is
adequate to make expected future claim payments.

MBIA Corp. had qualified statutory capital of $787 million and claims-paying
resources totaling $3.0 billion as of March 31, 2014.

Advisory Services

The Company’s Advisory Services business is primarily conducted in its
Cutwater Asset Management subsidiary. The Advisory Services segment recorded a
pre-tax loss of $7 million in the first quarter of 2014 compared with a
pre-tax loss of $1 million in the same period of 2013. The pre-tax loss in the
first quarter of 2014 was driven primarily by a loss in foreign exchange from
the liquidation of a foreign subsidiary and by lower fees due to declines in
assets under management.

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 shared services company. The Company’s Wind-down
Operations comprise its Asset/Liability Management (ALM) and Conduit segments,
both of which are in run-off.

The Corporate segment recorded a pre-tax loss of $28 million in the first
quarter of 2014 compared with a pre-tax loss of $46 million in the same period
of 2013. The decrease in the Corporate segment's pre-tax loss was primarily
driven by lower operating expenses, partially offset by increased
mark-to-market losses on the value of outstanding warrants issued on MBIA Inc.
common stock and lower fees from affiliates. Operating expenses in the first
quarter of 2013 were negatively impacted by the cost of issuance of common
stock warrants related to the Company’s comprehensive settlement with Bank of
America.

The Company’s Wind-down Operations recorded a pre-tax loss of $47 million in
the first quarter of 2014 compared with a pre-tax loss of $19 million in the
same period of 2013. The larger pre-tax loss in the first quarter of 2014
compared with the same period of 2013 was driven by net losses on financial
instruments at fair value and foreign exchange compared with net gains in the
first quarter of 2013, partially offset by lower operating expenses of
consolidated variable interest entities (VIEs). The net losses on financial
instruments at fair value and foreign exchange resulted from foreign exchange
losses in the first quarter of 2014 compared with gains in the comparable
period of 2013, and losses on interest rate swaps in the ALM asset portfolio
in the first quarter of 2014 compared with gains in the first quarter of 2013.
The lower operating expenses of consolidated VIEs resulted from lower fees
paid to the Corporate segment.

As of March 31, 2014, MBIA Inc. had liquidity of $499 million comprising cash
and liquid assets of $443 million held in the Corporate segment available for
general corporate liquidity purposes and $56 million not pledged directly as
collateral held in the ALM segment. MBIA Inc. seeks to maintain sufficient
liquidity and capital resources to meet its general corporate needs as well as
the needs of the ALM operations. These amounts exclude $353 million held in
escrow under its tax sharing agreement. Releases to MBIA Inc. from the tax
escrow account totaled $173 million during the first quarter of 2014. The
Company’s consolidated net operating loss (NOL) carryforward as of March 31,
2014 was approximately $3.1 billion. The Company expects to fully utilize the
NOL carryforward prior to its expiration.

On March 18, 2014, S&P raised MBIA Inc.’s counterparty credit rating to ‘A-‘
from ‘BBB’. The outlook on the Company is stable.

Conference Call

The Company will host a webcast and conference call for investors tomorrow,
Tuesday, May 13, 2014 at 8:00 AM (EDT) to discuss its first quarter 2014
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 34250434. 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 13 until 11:59 p.m. on May 27 by dialing (800)
585-8367 in the U.S. or (404) 537-3406 from outside the U.S. The replay call
code is also 34250434. 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, the possibility that the Company will
experience increased credit losses or impairments on public finance
obligations we insure issued by state, local and territorial governments and
finance authorities that are experiencing unprecedented fiscal stress, the
possibility that MBIA Corp. will have inadequate liquidity to pay expected
claims as a result of increased losses on certain structured finance
transactions, in particular residential mortgage-backed securities
transactions that include a substantial number of ineligible mortgage loans,
or a delay or failure in collecting expected recoveries, the possibility that
loss reserve estimates are not adequate to cover potential claims, a
disruption in the cash flow from our subsidiaries or an inability to access
capital and our exposure to significant fluctuations in liquidity and asset
values within the global credit markets as a result of collateral posting
requirements, our ability to fully implement our strategic plan, including our
ability to achieve and maintain high stable ratings for National and generate
investor demand for our financial guarantees, deterioration in the economic
environment and financial markets in the United States or abroad, and adverse
developments in European sovereign credit performance, real estate market
performance, credit spreads, interest rates and foreign currency levels, the
effects of governmental regulation, including insurance laws, securities laws,
tax laws, legal precedents and accounting rules; and uncertainties that have
not been identified at this time. 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. Please visit MBIA's
website at www.mbia.com.

Explanation of Non-GAAP Financial Measures

The following are explanations of why the Company 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 unrealized 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, including those related to consolidated
VIEs, 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 loss
adjustment expenses 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, 2014     December 31,
                                                                  2013
Assets
Investments:
  Fixed-maturity securities held as
  available-for-sale, at fair value            $    5,200         $   4,987
  (amortized cost $5,173 and $5,064)
  Investments carried at fair value                 212               204
  Investments pledged as collateral, at
  fair value (amortized cost $329 and               278               424
  $483)
  Short-term investments held as
  available-for-sale, at fair value                 1,319             1,204
  (amortized cost $1,318 and $1,203)
  Other investments (includes investments          16               16
  at fair value of $12 and $11)
              Total investments                     7,025             6,835
                                                                      
Cash and cash equivalents                           679               1,161
Premiums receivable                                 1,009             1,051
Deferred acquisition costs                          250               260
Insurance loss recoverable                          671               694
Assets held for sale                                29                29
Deferred income taxes, net                          917               1,109
Other assets                                        200               222
Assets of consolidated variable interest
entities:
  Cash                                              54                97
  Investments held-to-maturity, at
  amortized cost (fair value $2,695 and             2,793             2,801
  $2,651)
  Investments held as available-for-sale,
  at fair value (amortized cost $35 and             35                136
  $136)
  Fixed-maturity securities at fair value           504               587
  Loans receivable at fair value                    1,557             1,612
  Loan repurchase commitments                      364              359
              Total assets                     $    16,087        $   16,953
                                                                      
Liabilities and Equity
Liabilities:
  Unearned premium revenue                     $    2,337         $   2,441
  Loss and loss adjustment expense                  602               641
  reserves
  Investment agreements                             689               700
  Medium-term notes (includes financial
  instruments carried at fair value of              1,418             1,427
  $215 and $203)
  Long-term debt                                    1,731             1,702
  Derivative liabilities                            381               1,152
  Other liabilities                                 287               294
  Liabilities of consolidated variable
  interest entities:
       Variable interest entity notes
       (includes financial instruments              5,012             5,286
       carried at fair value of $2,194 and
       $2,356)
       Derivative liabilities                      5                11
              Total liabilities                    12,462           13,654
                                                                      
                                                                      
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--281,291,579
       and 277,812,430                              281               278
  Additional paid-in capital                        3,115             3,115
  Retained earnings                                 2,545             2,289
  Accumulated other comprehensive income            (13)              (86)
  (loss), net of tax of $16 and $54
  Treasury stock, at cost--86,086,648 and          (2,324)          (2,318)
  85,562,546 shares
              Total shareholders' equity            3,604             3,278
              of MBIA Inc.
  Preferred stock of subsidiary and                21               21
  noncontrolling interest
              Total equity                         3,625            3,299
              Total liabilities and equity     $    16,087        $   16,953
                                                                      
                                                                      

MBIA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(In millions except share and per share amounts)
                                                        
                                               Three Months Ended March 31,
                                               2014              2013
                                                                   
Revenues:
  Premiums earned:
    Scheduled premiums earned                  $ 69              $ 79
    Refunding premiums earned                   19               41
          Premiums earned (net of ceded          88                120
          premiums of $2 and $2)
  Net investment income                          50                38
  Fees and reimbursements                        4                 6
  Change in fair value of insured
  derivatives:
    Realized gains (losses) and other            (369)             12
    settlements on insured derivatives
    Unrealized gains (losses) on insured        838              (73)
    derivatives
          Net change in fair value of            469               (61)
          insured derivatives
  Net gains (losses) on financial
  instruments at fair value and foreign          (55)              63
  exchange
  Net gains (losses) on extinguishment of        1                 4
  debt
  Other net realized gains (losses)              1                 -
  Revenues of consolidated variable
  interest entities:
    Net investment income                        12                16
    Net gains (losses) on financial
    instruments at fair value and foreign        3                 33
    exchange
    Net gains (losses) on extinguishment        4                -
    of debt
                    Total revenues               577               219
                                                                   
Expenses:
  Losses and loss adjustment                     50                (194)
  Amortization of deferred acquisition           10                16
  costs
  Operating                                      46                106
  Interest                                       54                60
  Expenses of consolidated variable
  interest entities:
    Operating                                    3                 4
    Interest                                    10               12
                    Total expenses              173              4
Income (loss) before income taxes                404               215
Provision (benefit) for income taxes            148              51
Net income (loss)                              $ 256             $ 164
                                                                   
                                                                   
                                                                   
Net income (loss) per common share:
  Basic                                        $ 1.33            $ 0.84
  Diluted                                      $ 1.32            $ 0.84
                                                                   
                                                                   
Weighted average number of common shares
outstanding:
  Basic                                          189,033,982       189,111,170
  Diluted                                        190,263,748       190,219,197
                                                                   
                                                                   

                                                              
MBIA INC. AND SUBSIDIARIES
ADJUSTED PRE-TAX INCOME (LOSS) RECONCILIATION^(1)
(In millions)
                                                                        
                                                  Three Months Ended March 31,
                                                  2014               2013
Adjusted pre-tax income (loss)                    $   (99)           $  (20)
Additions to adjusted pre-tax income (loss):
        Impact of consolidating certain VIEs          19                18
        Mark-to-market gains (losses) on              838               (73)
        insured credit derivatives
Subtractions from adjusted pre-tax income
(loss):
        Impairments on insured credit                354              (290)
        derivatives
Pre-tax income (loss)                             $   404            $  215
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
STRUCTURED FINANCE & INTERNATIONAL INSURANCE (MBIA CORP.)
ADJUSTED PRE-TAX INCOME (LOSS) RECONCILIATION^(1)
(In millions)
                                                                        
                                                  Three Months Ended March 31,
                                                  2014               2013
Adjusted pre-tax income (loss)                    $   (110)          $  (97)
Additions to adjusted pre-tax income (loss):
        Impact of consolidating certain VIEs          18                16
        Mark-to-market gains (losses) on              838               (73)
        insured credit derivatives
Subtractions from adjusted pre-tax income
(loss):
        Impairments on insured credit                354              (290)
        derivatives
Pre-tax income (loss)                             $   392            $  136
                                                                        
                                                                        
(1)     A non-GAAP measure; please see Explanation of Non-GAAP Financial
        Measures.
        
        

MBIA INC. AND SUBSIDIARIES
                                                                                   
Components of
Adjusted Book Value
per Share:
                         As of March 31, 2014
                                                                                               
                                      Structured
                         U.S.         Finance and
                         Public
                         Finance      International   Advisory
                         Insurance    Insurance       Services                 Wind-down
                         (National)   (MBIA Corp.)    (Cutwater)   Corporate   Operations   Consolidated
Reported Book Value      $   20.12    $    4.69       $    0.11    $ (2.97 )   $  (3.49 )   $  18.46
per Share
                                                                                               
       Reverse net
       unrealized
       (gains)
       losses                0.07          (0.05  )        -         0.06         (0.09 )      (0.01  )
       included in
       OCI
       (after-tax)
                                                                                               
       Add net
       unearned
       premium               3.91          3.32            -         -            -            7.23
       revenue
       (after-tax) ^
       (1) (2)
                                                                                               
       Reverse
       cumulative
       net loss from
       consolidating         -             0.32            -         -            -            0.32
       certain VIEs
       (after-tax) ^
       (3)
                                                                                               
       Reverse
       cumulative
       unrealized
       loss on               -             1.02            -         -            -            1.02
       insured
       credit
       derivatives
       (after-tax)
                                                                                               
       Subtract
       cumulative
       impairments
       on insured            -             (0.38  )        -         -            -            (0.38  )
       credit
       derivatives
       (after-tax) ^
       (1)
                                                                                    
Adjusted Book Value      $   24.10    $    8.92      $    0.11    $ (2.91 )   $  (3.58 )   $  26.64  
per Share ^ (4)
                                                                                               
                                                                                               
                                                                                               
                                                                                               
                         As of December 31, 2013
                                                                                               
                                      Structured
                         U.S.         Finance and
                         Public
                         Finance      International   Advisory
                         Insurance    Insurance       Services                 Wind-down
                         (National)   (MBIA Corp.)    (Cutwater)   Corporate   Operations   Consolidated
Reported Book Value      $   19.83    $    3.48       $    0.12    $ (2.89 )   $  (3.49 )   $  17.05
per Share
                                                                                               
       Reverse net
       unrealized
       (gains)
       losses                0.34          (0.06  )        -         0.08         0.01         0.37
       included in
       OCI
       (after-tax)
                                                                                               
       Add net
       unearned
       premium               4.15          3.55            -         -            -            7.70
       revenue
       (after-tax) ^
       (1) (2)
                                                                                               
       Reverse
       cumulative
       net loss from
       consolidating         -             0.38            -         -            -            0.38
       certain VIEs
       (after-tax) ^
       (3)
                                                                                               
       Reverse
       cumulative
       unrealized
       loss on               -             3.87            -         -            -            3.87
       insured
       credit
       derivatives
       (after-tax)
                                                                                               
       Subtract
       cumulative
       impairments
       on insured            -             (1.59  )        -         -            -            (1.59  )
       credit
       derivatives
       (after-tax) ^
       (1)
                                                                                    
Adjusted Book Value      $   24.32    $    9.63      $    0.12    $ (2.81 )   $  (3.48 )   $  27.78  
per Share ^ (4)
                                                                                               
                                                                                               
       The discount rate on financial guarantee installment premiums was the risk-free rate as defined
^(1)   by the accounting principles for financial guarantee insurance contracts and the discount rate on
       insured derivative installment revenue and impairments was 5.0%.
^(2)   The amounts consist of installment and upfront financial guarantee premiums, insured derivative
       revenue and deferred commitment/structuring fees, net of deferred acquisition costs.
^(3)   Represents the impact on consolidated total equity of VIEs that are not considered a business
       enterprise of the Company.
^(4)   A non-GAAP measure; please see Explanation of Non-GAAP Financial Measures.
       
       

INSURANCE OPERATIONS
                                                      
Selected Financial Data
Computed on a Statutory
Basis
(Dollars in millions)
                                                                 
National Public Finance                 
Guarantee Corporation
                                                                 
                                   March 31, 2014            December 31, 2013
  Policyholders’ surplus           $    2,165                $   2,086
  Contingency reserves                 1,168                  1,172     
       Statutory capital                3,333                    3,258
                                                                 
  Unearned premium                      1,613                    1,678
  reserve
  Present value of
  installment premiums ^               223                    226       
  (1)
       Premium resources                1,836                    1,904
       ^ (2)
                                                                 
  Net loss and loss
  adjustment expense                    (101      )              (87       )
  reserves ^ (1)
  Salvage reserves                     167                    177       
       Gross loss and
       loss adjustment                 66                     90        
       expense reserves
  Total claims-paying              $    5,235               $   5,252     
  resources
                                                                 
  Net debt service                 $    420,078              $   435,194
  outstanding
                                                                 
  Capital ratio ^ (3)                   126:1                    134:1
                                                                 
  Claims-paying ratio ^                 91:1                     95:1
  (4)
                                                                 
MBIA Insurance
Corporation ^ (5)
                                   March 31, 2014            December 31, 2013
  Policyholders’ surplus           $    401                  $   403
  Contingency reserves                 386                    422       
       Statutory capital                787                      825
                                                                 
  Unearned premium                      523                      535
  reserve
  Present value of
  installment premiums ^               798                    850       
  (6)
       Premium resources                1,321                    1,385
       ^ (2)
                                                                 
  Net loss and loss
  adjustment expense                    (239      )              103
  reserves ^ (6)
  Salvage reserves                     1,121                  1,148     
       Gross loss and
       loss adjustment                 882                    1,251     
       expense reserves
  Total claims-paying              $    2,990               $   3,461     
  resources
                                                                 
  Net debt service                 $    94,254               $   106,385
  outstanding
                                                                 
  Capital ratio ^ (3)                   120:1                    129:1
                                                                 
  Claims-paying ratio ^                 37:1                     36:1
  (4)
                                                                 
  ^(1) At March 31, 2014 and December 31, 2013 the discount rate was 3.14%.
  ^(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) The table reflects MBIA Insurance Corporation including its subsidiary
       MBIA UK limited.
  ^(6) At March 31, 2014 and December 31, 2013 the discount rate was 5.09%.

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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