MBIA slashes dividend by more than half
Bond insurer says move will save the company $80 million annually, warns of bigger-than-expected quarterly loss.
NEW YORK (CNNMoney.com) -- MBIA Inc. slashed its dividend by more than half Wednesday as part of a larger plan by the troubled bond insurer to raise capital and maintain its lofty credit rating.
The Armonk, NY-based company said it would cut its quarterly dividend by 62 percent, lowering it to 13 cents a share from 34 cents a share.
MBIA said the cut would save the company approximately $80 million annually. In conjunction with a $1 billion investment from Warburg Pincus, the company expected the moves to help the company maintain its Triple-A credit rating.
"We are committed to the successful implementation of this comprehensive plan to significantly strengthen our capital position and secure our Triple-A ratings without qualification," MBIA Chairman and CEO Gary Dunton said in a statement.
The company also warned that it expects to post a $737 million loss for the fourth quarter when it reports its results Jan 31. Analysts polled by Thomson Financial were anticipating the company would post a net loss of $182 million.
The company also said federal regulators have probed how thoroughly the insurer disclosed the risks it faced.
In a filing with the Securities and Exchange Commission, MBIA said it furnished the SEC and the New York Insurance Department with information tied to the Warburg Pincus investment, as well as a disclosure to investors dated Dec. 10.
That day, MBIA said it needed to set aside $500 million to $800 million to cover probable losses on insured bonds backed by home equity loans. The company also said it expected $850 million in costs to reflect how insured CDOs had lost market value.
A deputy superintendent for the New York Insurance Department said it wanted to make sure the Warburg Pincus investment was still intact. The department is not investigating MBIA, he said.
A spokesman for the SEC said the agency had no comment.
MBIA (MBI) shares dropped more than 12 percent in mid-day trading Wednesday, falling $1.70 to $12.28.