Fitch Rates MBIA Inc.'s Swiss Market Offering `AA'.
NEW YORK--(BUSINESS WIRE)--Nov. 13, 2000
Fitch assigns its `AA' rating to MBIA Inc.'s CHF 175 million nine and one-half year Swiss market offering with a coupon of 4.5%. It will be swapped to a fixed-rate U.S. dollar denominated obligation of approximately $100 million and will carry an interest rate of approximately 7.6%. MBIA Insurance Corp. (MBIA), MBIA Inc.'s principal subsidiary, is a monoline financial guarantor. Fitch rates the insurer financial strength of MBIA `AAA'.
MBIA Inc.'s debt rating is based on stable revenue flows and extremely strong coverage levels. MBIA Inc. had a $6.7 billion investment portfolio, $2.4 billion of deferred premium revenue, and $838 million of present value installment premiums at Sept. 30, 2000. These resources produce stable and predictable revenue flows. MBIA Inc.'s net income for the first nine months of 2000 was $392 million. MBIA Inc.'s long-term debt was $589 million and shareholders' equity was $3.9 billion at Sept. 30, 2000. Factoring in additional anticipated issuances results in a pro forma long-term debt-to-capital ratio of 15%-16%. Long- term debt-to-capital ratios of 15%-20% are considered moderate for a financial guarantor.
The New York Insurance Department permits MBIA to upstream dividends to MBIA Inc. up to the lesser of 10% of statutory surplus or 100% of adjusted net investment income for the last 12 months, without prior approval. In MBIA's case, 10% of surplus is the limiting factor. At Sept. 30, 2000, statutory surplus was $2.424 billion, resulting in a $242 million annual dividend limit. Annual interest costs, including the incremental debt, are expected to be approximately $60 million. Therefore, permitted dividends provide 4.02 times (x) interest coverage, exclusive of cash, marketable securities, and lines of credit already available at the holding company level.
Fitch's `AAA' insurer financial strength rating on MBIA reflects the company's experienced management team, zero- expected loss underwriting strategy, superior surveillance, high quality investment portfolio, strong capital adequacy, and diversified book of business. MBIA is the largest guarantor of U.S. municipal bonds, asset- and mortgage- backed securities (ABS/MBS), and international transactions. Holding company subsidiaries provide investment management, guaranteed investment contracts (GICs), and revenue enhancement services to public sector clients. MBIA had insured net par in-force of $405 billion at Sept. 30, 2000, supported by claims-paying resources of $8.9 billion, $4.4 billion of which was qualified statutory capital. At 45.3:1, MBIA's net par outstanding to total claims-paying resources ratio is the lowest (strongest) among the four major 'AAA' rated U.S. financial guarantors.