MBIA Former Chief Returns as Credit Rating Cut Looms

(Bloomberg) -- MBIA Inc., the world's largest bond insurer, brought back former Chief Executive Officer Joseph Brown to run the company and expedite talks with regulators to help preserve its AAA credit rating.

Gary Dunton, who succeeded Brown as CEO in 2004 and added the title of chairman last year, will leave the company, Armonk, New York-based MBIA said today in a statement.

Brown, 59, will be tasked with forging a plan to restructure and revive MBIA, which has recorded losses of more than $5 billion on subprime-mortgage securities, threatening its credit rating and sending its shares plunging 83 percent in the past year. New York Insurance Superintendent Eric Dinallo said last week bond insurers may need to be split into two businesses to protect more than $1 trillion of insured municipal debt from subprime losses.

``MBIA faces meaningful challenges,'' Brown said in the statement. Brown said he is seeking to ``frame a new model,'' for MBIA.

Brown said he has already discussed MBIA's plans with Dinallo who provided ``helpful guidance.'' Dinallo, who is taking the lead among the nation's insurance regulators, brought in Warren Buffett to start a new insurer and also asked the billionaire investor to value the guarantors' municipal business.

Insurers Splitting

FGIC Corp., the third-largest bond insurer, sought permission to split up last week. Dinallo said MBIA and Ambac Financial Group Inc., the market leaders, may do the same if they can't raise capital.

The companies and Security Capital Assurance Ltd. insure about $580 billion of asset-backed debt, including collateralized debt obligations that package bonds into new securities.

MBIA, New York-based Ambac and FGIC of New York are struggling after more than $8 billion in losses tied to the slumping value of subprime debt.

MBIA rose 53 cents to $12.77 in early New York Stock Exchange trading. Ambac, down 88 percent this year, fell 24 cents to $9.98. FGIC is owned by New York-based leveraged buyout firm Blackstone Group LP and mortgage insurer PMI Group Inc. of Walnut Creek, California.

Under Dunton, 52, MBIA sold about $2.5 billion in the sale of shares and notes in the past three months.

 

Read more at Bloomberg

Medco profit tops estimates

(Reuters) - Medco Health Solutions Inc (MHS.N: Quote, Profile, Research) reported better-than-expected quarterly earnings on Tuesday, helped by sales of generic drugs, and the pharmacy benefit manager boosted its full-year profit forecast, sending its shares higher.

Medco, which derives more than half its profit from home delivery of generic medicines by mail, said its rosier outlook reflected confidence in its fundamentals, new business, and more generics becoming available sooner than anticipated.

Pharmacy benefit managers (PBMs), which administer prescription drug benefits for employers and health plans and operate large mail-order pharmacies, have profited from the availability of low-cost generic versions of popular drugs.

Morgan Stanley analyst David Veal said in a research note, "Another quarter of solid growth, when coupled with higher guidance, affirm our positive view of the PBM industry and should offer relief for the high level of investor nervousness around the quarter."

After a huge gain in 2007, Medco shares were down 3 percent this year through Friday's close, compared with a 13 percent drop for rival Express Scripts Inc (ESRX.O: Quote, Profile, Research). Medco shares rose 4 percent to $51 in pre-market trading on Tuesday.

Fourth-quarter net income fell 9 percent to $207.6 million, or 38 cents per share, from $228.8 million, or 39 cents per share, a year earlier.

The latest results were hurt by higher-than-expected costs tied to new clients and expenses related to two acquisitions. The year-earlier earnings were boosted by the temporary availability of a generic version of a popular blood thinner.

 

Read more at Reuters