November 8, 2017 / 5:55 PM / 2 years ago

Bond insurer MBIA stock price rises sharply after third-quarter earnings

NEW YORK (Reuters) - Shares of MBIA Inc. (MBI.N), a bond insurer with exposure to Puerto Rico, rose sharply on Wednesday after it reported third quarter 2017 results that included notice it planned to extend its already sizeable share buyback program.

Earnings, reported late on Tuesday, were negatively impacted as MBIA increased loss reserves on the expectation of greater payouts on bonds issued by Puerto Rico’s cash-strapped government.

But the board of directors on Nov. 3 authorized buybacks for up to $250 million worth of stock, the company said in its earnings statement.

From Aug. 8 to Nov. 3, the company had purchased about 34 million of its shares, it told Reuters.

MBIA’s stock was up 29.1 percent on Wednesday to $8.95.

“Given the chaos in Puerto Rico following Hurricane Maria, it appeared that MBIA as an insurer of a significant amount of Puerto Rico’s debt could be in for a difficult third quarter,” said Mark Palmer, a managing director and financials analyst at BTIG in New York.

“As it stands, a lot of those who took a short position on MBIA may not have realized the amount of financial flexibility that the company had with regard to buying back its own stock.”

Hurricane Maria tore through Puerto Rico in September, severely damaging the U.S. territory’s electricity grid and infrastructure, further limiting the island’s ability to resurrect its teetering economy.

In May, Puerto Rico filed for bankruptcy, with $72 billion of total debt it cannot pay. The Puerto Rico Electric Power Authority filed for a form of bankruptcy in June to shed $9 billion of debt.

MBIA reported a net loss of $267 million for the third quarter of 2017, compared to a net income of $31 million during the same time last year.

“The damage caused to Puerto Rico’s infrastructure by Hurricane Maria will require significant time and effort to repair and remediate, which led us to withdraw two of our adversary complaints and further increase our Puerto Rico loss reserves,” said Bill Fallon, MBIA’s CEO, in the statement.

Shares of other bond insurance firms with exposure to Puerto Rico, Ambac Financial Group Inc. (AMBC.O) and Assured Guaranty Ltd. (AGO.N), also rose on the day. Ambac’s stock is up 1.8 percent and Assured Guaranty shares gained 3.3 percent.

Ambac will report third quarter results on Wednesday following the close.

Reporting by Stephanie Kelly; Editing by Daniel Bases and Rosalba O'Brien

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