MBIA IncorporatedMBI

Morningstar Rating

Stock Research and Analysis

by Jim Ryan

Financial guaranty industry leader MBIA has fallen on hard times. Downgraded by the rating agencies, MBIA's insurance financial strength rating has taken a steep drop from the AAA rating it enjoyed a year and a half ago. Worse yet, claims from mortgage-related Read more

Bulls Say

The longevity of the bonds that MBIA insures endows consistent revenue. If MBIA made no sales during the next decade, revenue would decline only slightly as premiums on existing bonds are earned.

MBIA faces attractive international growth prospects. Foreign markets are 3 times larger than those of the U.S., but financial guaranty insurance penetration is low. This could propel growth for decades.

Government and private bailouts of the mortgage industry will help curtail MBIA's losses. It may even raise the company's insurance financial strength ratings. Read more

Bears Say

MBIA has billions of exposure to "toxic" collateralized debt obligations. A prolonged credit squeeze would permanently tarnish its balance sheet. The company simply does not have enough capital.

MBIA is expanding internationally, but it may not be as adept at evaluating risk overseas as it is in the U.S. Pressure to win foreign sales may compromise underwriting discipline.

The company is vulnerable to competitors underpricing it or accepting riskier terms to steal business, even after MBIA has invested significant effort to underwrite a transaction.

Premiums on MBIA's structured-finance and international deals are paid monthly or quarterly, not in advance, so these transactions generate less float for MBIA to invest while it holds premiums. Read more

Strategy

MBIA's strategy is to preserve capital while also attempting to garner new business through a good bank/bad bank scenario. The firm has separated its operations by splitting the municipal bond business Read more

Management

Former chairman Joseph Brown has returned from retirement to replace ousted CEO Gary Dunton. To entice him back to his former position, the board has granted an initial 1.6 million restricted shares that vest in five years only if the stock trades at Read more

Profile

MBIA provides financial guaranty insurance for municipal bonds and asset-backed securities in the United States and internationally. It offers an unconditional guarantee Read more

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