MBIA Posts $2.4 Billion Loss, Shocking Those Who Believed Worst Was Over

MBIA posted a loss twice as large as anticipated by analysts, as the company was forced to write-down the value of its credit default swaps by $3.58 billion. The loss was equivalent to $13.03 a share allowing MockTheMarket to honor MBIA with its coveted "We lost more money than our market capitalization in one quarter!" award. Furthermore, it pulled off this amazing feat two quarters in a row and still maintained its AAA rating. CEO Brown was optimistic, claiming "We have ample liquidity, our balance sheet is built to withstand credit stress levels many multiples of what we are experiencing now." What he didn't mention in his reassuring speech was that MBIA's share in the municipal bond insurance business had dwindled to 2.5%. This used to be MBIA's bread and butter before it ventured off into the lucrative business of granting AAA ratings to CDOs whose cash flows it didn't understand. Now the company is stuck with a deteriorating portfolio coupled with insufficient capital. It can't venture into new businesses and has lost most of its municipal insurance business to Berkshire Hathaway, a company with ample capital and a solid reputation. What does the future hold for MBIA? A tremendous amount of risk from its current portfolio and an inability to do future business. Not a combination that would tempt one to buy the stock, even at a hefty discount to its former glory.