Bond insurer MBIA posts a profit, shares soar

NEW YORK (Reuters) - MBIA Inc (MBI.N), once the largest U.S. bond insurer, reported Monday it had swung to a first-quarter profit after a huge year-earlier loss, sending its shares 26 percent higher in after-hours trade.

MBIA said its quarterly results were helped by an accounting gain of about $1.6 billion, as the fair value of its obligations declined.

Shares of MBIA, which had closed down 3.5 percent in regular trading Monday at $6.96, rose to $8.80 in extended trading after the company posted its results.

MBIA had quarterly net income of $696.7 million, versus a loss of $2.4 billion in the year-ago period.

On a per share basis, MBIA earned $3.34 in the quarter, compared with a $12.92 per share loss last year.

MBIA and smaller rival Ambac (ABK.N) have struggled since last year, seeing new business dry up as credit ratings were downgraded.

Bond insurers depend on high ratings to win new business, as buyers of the protection can use the insurer's own rating to boost the perceived credit-worthiness of a bond, and thereby lower financing costs.

Ambac and MBIA were downgraded by rating agencies last year after a foray into guaranteeing repackaged debt left each with heavy losses.

MBIA said the accounting gain had been partially offset in the quarter by $693.7 million in pretax loss and loss adjustment expenses on residential mortgage-backed securities.