MBIA Inc. Is Probed For Additional Reinsurer Deal-WSJ|
May 13, 2005
(Updated From April 6)
The Wall Street Journal reported that authorities are investigating whether MBIA Inc. had a secret agreement with another reinsurance company beyond the one that triggered its recently announced earnings restatement. MBIA says it had no such agreement. Investigators are trying to determine if MBIA Inc. secretly promised Channel Re that it would protect the Bermuda reinsurer from any losses as a result of claims it had transferred to the offshore company. If so, MBIA could have used the transaction to burnish its books by making its potential liabilities look smaller, possibly misleading investors. Authorities, including federal prosecutors, had been investigating a transaction with a French reinsurer that MBIA recently said may have included a secret pact. MBIA disclosed that it had received fresh subpoenas from the Securities and Exchange Commission and the New York Attorney General's office about, among other things, its dealings with Channel Re. MBIA helped set up Channel Re in 2004 with a 17.4% ownership stake. The disclosure did not say what the investigators' interest in Channel Re was. In addition to the New York Attorney General's office and the SEC, specialists from the New York State Insurance Department are participating in the reinsurance-sector probes.
MBIA Inc. Document Subpoenas Supplemented
March 30 2005
MBIA Inc. announced that it has received additional requests from the New York Attorney General's Office (NYAG) and the Securities and Exchange Commission (SEC) that supplement the subpoenas it received in late 2004. The requests seek documents relating to the Company's accounting treatment of advisory fees; its methodology for determining loss reserves and case reserves; instances of purchase of credit default protection on itself, and documents relating to Channel Reinsurance Ltd., a reinsurance company of which MBIA is part owner. The requests cover the period January 1, 2000 to the present. MBIA is cooperating fully with the NYAG and the SEC.
MBIA Inc. Receives Additional Document Subpoena Regarding AHERF Reinsurance Agreements
March 9 2005
MBIA Inc. announced that it has received a subpoena from the U.S. Attorney's Office for the Southern District of New York seeking information related to the reinsurance agreements it entered into in connection with the loss it incurred in 1998 on bonds insured by MBIA Insurance Corp. that were issued by Allegheny Health, Education and Research Foundation (AHERF). These matters are under investigation by the Securities and Exchange Commission and the New York State Attorney General's Office, with which the Company has been cooperating. The Company intends also to cooperate fully with the U.S. Attorney's Office.
MBIA Inc. to Restate Financial Statements for 1998 and Subsequent Years
March 8 2005
MBIA Inc. announced that it has decided to restate its financial statements for 1998 and subsequent years. The restatement is being made to correct the accounting treatment for two reinsurance agreements that MBIA entered into in 1998 with Converium Re (previously known as Zurich Reinsurance North America). As a result of this restatement, MBIA's financial results for 1998 will reflect a third quarter incurred loss of $70 million related to $265 million of bonds insured by MBIA that were issued by Allegheny Health, Education and Research Foundation (AHERF). The after-tax loss will be approximately $47 million, resulting in net income for the year of approximately $386 million, or $2.57 per share, down 11% from $433 million or $2.88 per share as originally reported. MBIA estimates that its earnings will be reduced by approximately $6 million (or four cents per share) in 1999, $4 million (or 3 cents per share) in 2000, $3 million (or two cents per share) in 2001 and will have a de minimis effect in 2002. MBIA estimates that its earnings will increase by approximately $2 million (or one cent per share) in 2003 and $4 million (or three cents per share) in 2004. The Company expects to finalize these estimates and file its 2004 audited financial statements in its 10K by the March 16 deadline. The restatement could result in a delay in this filing.