MBIA says insurance company balance sheet strong, asset liability products prepared for volatility

By Jennifer Lanning Drey

Portland, Ore., March 18 - MBIA Inc.'s insurance company balance sheet has not been meaningfully impaired by the $2.5 billion of paid losses the company experienced in 2008, and the balance sheet of its asset liability products business is also in a healthy position, C. Edward Chaplin, chief executive officer of MBIA, said Wednesday.

In the insurance company, claims-paying resources were up slightly at year-end versus the start of 2008, and the investment portfolio also grew during the year, Chaplin reported during a presentation at the JPMorgan 2009 Credit and Equity Conference in New York.

Cash was up to $2 billion at the end of the year versus $300 million at the start due to the company's effort to begin building a cash cushion around mid-year, he said.

In the asset liability products business, MBIA now has adequate cash to cover all remaining putable guaranteed investment contracts.

"I think we're in a very good position now with respect to liquidity requirements with respect to this business. However, I wouldn't suggest that we're totally out of the woods. There are still some risks to this book," Chaplin said.

Specifically, he said there is still potential for eligible collateral posted against guaranteed investment contracts to be downgraded. If that happens, the collateral would have to be replaced with cash.

Additionally, spread widening would reduce the market value of collateral, he said.

As a result of the risks, MBIA plans to carry a substantial cash cushion in the asset liability management business, even in its months of negative cash flow.

"Even in the lowest period, we think that there's an adequate cash cushion to absorb any potential volatility that might arise from these factors," Chaplin said.

MBIA is a holding company based in Armonk, N.Y., whose subsidiaries provide financial guarantee insurance, fixed-income asset management and other specialized financial services.

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