New York Times Story Is Inaccurate and Misleading

Armonk, NY – A story in the New York Times on June 18, entitled “MBIA Debt is Setting Up a Quandary.” contains inaccuracies and is misleading. Following are the specifics:

#1: The story leads with the speculative question of “whether regulators will let MBIA…renege on a promise to shore up a crucial unit with $900 million in capital.” That phrasing is erroneous, primarily because no such “promise” has ever been made. The $900 million referenced is part of the net proceeds from the Company's $1.1 billion equity offering that closed in February, which was issued as part of MBIA’s overall capital strengthening plan. The prospectus for the offering stated in the Use of Proceeds section: “We estimate that the net proceeds from this offering and the backstop commitment will be approximately $959 million, after deducting estimated expenses relating to this offering and the backstop commitment. The net proceeds of this offering and the backstop commitment shall be used to support our business plan and operations.” No promise was made to put the capital in MBIA Insurance Corporation.

In a January 9 press release, MBIA said “Upon successful completion of its capital management plan, the Company expects to meet or exceed the rating agencies' current capital requirements for MBIA to retain its Triple-A ratings. Based on discussions with the rating agencies and the commentary they have released to the market, the Company believes that the successful implementation of this capital plan will result in a robust capital position that will lead to stable ratings.”

In a press release issued the same day announcing the issuance of a $1 billion surplus notes offering, MBIA said that as part of its plan to raise capital to meet or exceed the rating agencies' Triple-A requirements, its primary insurance operating subsidiary, MBIA Insurance Corporation (the "Insurance Company"), intends to issue $1 billion of surplus notes due 2033.

In a press release issued on January 18, Gary Dunton, former MBIA Chairman and CEO, said, "We have developed and are implementing a comprehensive capital strengthening plan in good faith reliance on Moody's stated requirements. The plan includes the Warburg Pincus commitment for $500 million of new equity and its agreement to backstop a $500 million rights offering, along with the issuance of $1 billion of Surplus Notes on January 16, 2008. We have been proactive in raising a substantial amount of new capital to support our Triple-A ratings. We believe our capital plan meets or exceeds the requirements previously outlined by Moody's and the other two major rating agencies.”

In two press releases issued on February 6 and February 7 related to it’s equity offering the Company stated that it intends to contribute most of the net proceeds of the Insurance Company “to support its business plan”. The Company’s business plan has consistently been to restore its stable Triple-A ratings.

When S&P downgraded MBIA to Double-A and Moody’s placed MBIA’s rating on credit watch and both made it clear that their actions were not a function of capital adequacy, the impetus for MBIA to contribute the proceeds of the common stock offering to support its Triple-A ratings no longer applied. To contribute the capital at this stage would simply not serve the Company stated objective of maintaining its Triple-A. The amount of capital that MBIA raised as part of its capital strengthening plan was based on the amount that the rating agencies indicated the Company would need to maintain its Triple-A ratings plus a cushion. The rating agencies are now indicating that the ratings of the Insurance Company are dependent on other factors besides the amount of capital or claims-paying resources it has.

#2: In the second paragraph the New York Times article asserts, “Most of these [credit default] contracts stipulate that if MBIA…is taken over by state regulators…buyers can demand payment immediately” and references “the threat that similar swaps pose to MBIA." This analysis is misleading. Typically in MBIA’s policies insuring CDS contracts, there are no provisions that allow a counterparty to terminate the insured CDS contract and make a claim under the policy, absent MBIA’s bankruptcy or insolvency or an MBIA payment default on the policy insuring the CDS contract. Each insured CDS contract that the Insurance Company enters into is governed by an International Swaps and Derivatives Association, Inc. (ISDA) Master Agreement and Confirmation. MBIA’s CDS contracts typically conform to the Monoline Supplement Agreement, where a bankruptcy of the credit support provider, including the initiation of a receivership proceeding by the NYSID, would give the counterparty the option to terminate the swap and receive a termination payment; it would not be an automatic termination event. As MBIA’s financial condition and statutory capital are very strong and its claims-paying resources are in excess of $16 billion, even mention of such a bankruptcy or insolvency proceeding is highly theoretical and extremely remote.

#3: The story further speculates that, “Given…[this threat], Mr. Dinallo is unlikely to push for a regulatory takeover.” While it is inappropriate for us to speak on behalf of the NYSID, we believe that our highly creditworthy balance sheet and liquidity, with over $16 billion in claims-paying resources make talk of a regulatory takeover misleading and irrelevant. S&P has downgraded MBIA to Double-A, which puts us in a rating category of significant financial strength. Other financial institutions with this rating include AIG, Met Life and Citicorp. What’s at issue is the rating difference between Triple-A and Double-A credit quality; not the difference between solvency and insolvency. As Superintendent Dinallo has stated repeatedly, solvency is not the issue we are dealing with. The issue is whether the Company deserves the highest credit rating, or some level below that.

#4: The article quotes analyst Joshua Rosner as saying, “It seems to me that if Jay Brown insists on putting the money anywhere other than at the insurance subsidiary or through a new subsidiary directly under it, he is making a very clear statement that he no longer believes in the viability of the Insurance Company to meet its obligations.” Of course, Mr. Rosner has no way of knowing Mr. Brown’s thinking and, indeed, everything Mr. Brown has said publicly runs counter to Rosner’s conjecture. In fact, it is because of the high capital adequacy and liquidity of MBIA Insurance Corporation that we don’t believe there is a need to contribute additional capital. The facts are that Jay Brown has repeatedly said that our policyholders are our first priority, and that we will meet all of our obligations. MBIA has more than $16 billion in claims-paying resources to support policyholders.

In his letter to owners on June 11, Mr. Brown wrote, “This management team and Board have always, and always will, pursue the objective of maximizing shareholder value over the long-term while being able to meet our obligations to policyholders.”

In Jay Brown’s “Principles and Decisions Guiding MBIA’s Transformation February 25”, the first item is: “1. We are committed to protect all of MBIA’s policyholders.”

#5: The article references “rising losses on the $230 billion in mortgage and related securities.” This is incorrect. MBIA has approximately $69 billion in mortgage and residential real estate-related exposure, —as was disclosed in our Operating Supplement for the first quarter of 2008. Furthermore, in MBIA’s first quarter 2008 financial results press release, we stated, “As a result of this review, the Company recognized a total of $1.34 billion of pre-tax impairments and loss reserves on its housing-related insured portfolio in the quarter, bringing the cumulative total of incurred pre-tax credit losses for housing-related exposures to $2.15 billion over the past two quarters. The impairments and loss reserves are expressed on a net present value basis and are expected to be paid out over the next four years for direct and multi-sector CDO squared exposures, and up to 30 to 40 years for the Company's insured multi-sector collateralized debt obligations ("CDOs"). The Company does not anticipate material additional impairment for these exposures in the foreseeable future, unless the U.S. housing and mortgage markets perform materially worse than MBIA is projecting.”

#6: The article reports, “MBIA has written $137 billion in swaps, which are privately traded insurance contracts that let people bet on companies’ financial health.” This is not true for MBIA’s credit default swaps contracts. MBIA does not provide insurance for single-name corporate obligors, rather for structured securitizations.

All these facts stated above have been a part of the public record through various and widely distributed letters and statements from the Company. We have also provided lengthy background to the reporters on this article in recent days. We believe that ignoring key facts – in favor of speculation and error – is simply irresponsible, and we would suggest that readers regard this story as incomplete and unreliable.

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Footnotes for point #1

The prospectus for the offering stated in the Use of Proceeds section: “We estimate that the net proceeds from this offering and the backstop commitment will be approximately $959 million, after deducting estimated expenses relating to this offering and the backstop commitment. The net proceeds of this offering and the backstop commitment shall be used to support our business plan and operations.”

• Our press release of February 7, “MBIA Prices and Increases Its Equity Offering to $1 Billion,” states: “The Company intends to contribute most of the net proceeds of the offering to the surplus of its subsidiary, MBIA Insurance Corporation, to support its business plan.”

• Financial Results release on May 12 states, “After consultation with the New York State Insurance Department, MBIA Inc. has decided to contribute $900 million of the proceeds of the offering to its insurance subsidiaries in the next 10 to 30 days. This contribution is consistent with our previously announced capital strengthening plan and is intended to support MBIA Insurance Corporation's Triple-A ratings and existing and future policyholders. After such contribution, MBIA Inc. will have sufficient cash and short-term assets to cover its projected annual cash needs for more than four years, even without any dividends from MBIA Insurance Corporation.”

• On June 11, MBIA issued the following release, “MBIA Issues Statement on $900 Million Capital Deployment,” and stated, "When we reported our first quarter financial results on May 12, 2008, we said that we would downstream $900 million in proceeds from our recent public equity offering from the holding company to our insurance subsidiaries to support our Triple-A ratings," said C. Edward "Chuck" Chaplin, Chief Financial Officer. "We said then that we would complete the transfer in 30 days or sooner and this deadline is now upon us. However, our landscape has changed.

"Last week, the actions taken and statements made by both Moody's and Standard & Poor's made it clear that, at this point, maintaining Triple-A ratings for MBIA Insurance Corporation would be dependent on other factors besides the amount of capital or claims-paying resources we have," said Mr. Chaplin. "Our capital-raising efforts since the fourth quarter of 2007, which put us at the forefront of the industry, were completed to meet the rating agencies' capital requirements to maintain a Triple-A rating. Our liquidity and ability to pay claims have never been an issue.

"In fact, we have stated from the beginning that we believe MBIA Insurance Corporation has substantially more claims-paying resources and liquidity than it will need to satisfy fully all policyholder obligations on a timely basis," said Mr. Chaplin. "Now that the landscape has changed, we will re-evaluate our business strategies and capital deployment plans, including the deployment of the $900 million proceeds, while balancing our obligations to policyholders with optimizing returns to our shareholders. A high priority is pursuing opportunities to support the bond insurance market as a whole. We are actively pursuing such solutions in conjunction with the New York State Insurance Department and other stakeholders."

Footnote for point #3

On June 11, MBIA issued the following release, “MBIA Issues Statement on $900 Million Capital Deployment,” and stated, "In fact, we have stated from the beginning that we believe MBIA Insurance Corporation has substantially more claims-paying resources and liquidity than it will need to satisfy fully all policyholder obligations on a timely basis," said Mr. Chaplin. "Now that the landscape has changed, we will re-evaluate our business strategies and capital deployment plans, including the deployment of the $900 million proceeds, while balancing our obligations to policyholders with optimizing returns to our shareholders. A high priority is pursuing opportunities to support the bond insurance market as a whole. We are actively pursuing such solutions in conjunction with the New York State Insurance Department and other stakeholders."