MBI’s Losses Decline On Increased Recoveries; R&W Settlement Reached

Analysts at Deutsche Bank maintain their "hold" rating on MBIA Inc MBI, while reducing their estimates for the company. The target price for MBI is set to $8. According to Deutsche Bank, “Losses from MBIA insurance Corp in 2Q’10 are still large at $274 million (based on losses incurred and credit impairments on derivatives), but it declined from $395 million in 1Q’10 and $801 million in 4Q’09. The 2Q’10 losses were reduced by $173 million reflecting increased estimated recoveries on ineligible mortgages. RMBS and ABS CDO losses seem to be abating, but the company incurred $230 million losses on insured commercial mortgage backed securities in 2Q’10 up from $123 million in 1Q’10. In July 2010, MBIA reached a settlement on representations and warranties, with recoveries exceeding 90% of management’s expectation. The settlement represented a small fraction of management’s $2.1 billion of estimated recoveries.” “To the extent MBIA can successfully resolve the litigation against its municipal bond subsidiary (National) and insure municipal bonds again, there could be meaningful value in the stock. National has double A level of capital, but the company carries a lower rating as the rating agencies are waiting to for the outcome of the litigation. If National can write business again, MBIA could monetize a portion of National and eliminate holding company default risk,” the analysts add. Deutsche Bank has lowered its EPS estimates for 2010 and 2011 from -$2.40 to -$2.70 and from -$1.55 to -$1.60, respectively. More Analyst Ratings here