MBIA Inc. Reports 10 Percent Increase in First Half Net Income Per Share; Operating Income Per Share up 6 Percent

For the first half of 2006, operating income per share, whichexcludes the effects of net realized gains and net gains and losses onderivative instruments and foreign exchange, increased 6 percent to$2.95 from $2.79 in the first half of 2005. Excluding refundings,first half 2006 operating income per share rose 3 percent to $2.57from $2.49 in the same period of 2005.
Diluted earnings per share information
--------------------------------------
Three Months Six Months
Ended June 30 Ended June 30
------------- -------------
2006 2005 2006 2005
---- ---- ---- ----
Net income $1.62 $ 1.27 $3.08 $ 2.79

Net realized gains 0.08 0.00 0.08 0.01
Net gains (losses) on derivative
instruments and foreign exchange 0.04 (0.11) 0.05 (0.01)
----- ------ ----- ------
Operating income (1) $1.50 $ 1.38 $2.95 $ 2.79

(1) Non-GAAP measure

In the second quarter of 2006, net income per share increased 28percent to $1.62 from $1.27 during the same period of 2005. Net incomefor the second quarter was $221.4 million compared with $173.7 millionin the same period last year, a 27 percent increase. Second quarter2006 per share results were positively impacted by $0.12 per share ofnet gains versus net losses of $0.11 in the same period of 2005.

For the second quarter of 2006, operating income per shareincreased 9 percent to $1.50 from $1.38 in the second quarter of 2005.Excluding refundings, second quarter 2006 operating income per sharerose 4 percent to $1.29 from $1.24 during the same period of 2005.

Gary Dunton, MBIA Chief Executive Officer, said, "Our financialresults for the quarter were acceptable. Business production was inline with our expectations as market conditions remain challenging,primarily due to tight credit spreads and intense competition from theuninsured market, traditional monolines and European banks. We remainfocused on our commitment to create long-term value for ourshareholders, pursuing only those business opportunities that meet ourrigorous underwriting and pricing discipline."

Insurance Operations

Adjusted direct premiums (ADP), a non-GAAP measure, which includesboth upfront premiums written and the present value of estimatedfuture installment premiums for new business writings and excludespremiums assumed or ceded, decreased 38 percent to $399.5 million inthe first half of 2006 from $646.6 million in the first half of 2005.For the second quarter of 2006, ADP declined 14 percent to $283.5million, compared to $329.0 million during the same period of 2005. Inthe second quarter, non-U.S. public finance and U.S. structuredfinance provided favorable comparisons over last year's secondquarter, which were offset by weaker production in the U.S. publicfinance and non-U.S. structured finance business sectors.
Adjusted Direct Premiums
------------------------
(dollars in millions)

Three Months Six Months
Ended June 30 Ended June 30
------------- -------------
2006 2005 % Change 2006 2005 % Change
---- ---- -------- ---- ---- --------
Global Public Finance
United States $ 73.7 $143.8 (49%) $121.7 $285.6 (57%)
Non-United States 102.2 57.6 77% 102.2 65.1 57%
------ --------------- ------ ---------------
Total 175.9 201.4 (13%) 223.9 350.7 (36%)

Global Structured Finance
United States 73.8 33.3 122% 89.6 171.5 (48%)
Non-United States 33.8 94.3 (64%) 86.0 124.4 (31%)
------ --------------- ------ ---------------
Total 107.6 127.6 (16%) 175.6 295.9 (41%)

Total $283.5 $329.0 (14%) $399.5 $646.6 (38%)

MBIA's global public finance ADP decreased 36 percent in the firsthalf of 2006 compared to the first half of 2005. Compared to lastyear's first half, U.S. public finance production was down 57 percent,impacted by a 15 percent decrease in overall market issuance and a 33percent decline in insured volume, as well as a particularlycompetitive market environment. Non-U.S. public finance production,during the first half, increased 57 percent due to two significantinternational transactions that closed in early April. In globalpublic finance, 84 percent of insured business written in the firsthalf of 2006 had underlying ratings of Single-A or higher.

MBIA's global structured finance ADP decreased 41 percent in thefirst half of 2006. U.S. structured finance ADP declined 48 percentcompared to first half production in 2005, however, second quarterproduction more than doubled as a result of increased ADP from CDOs,Operating Assets and Residential Mortgage-Backed sectors. Non-U.S.structured finance production for the first half of 2006 declined 31percent. In global structured finance, 70 percent of insured businesswritten in the first half of 2006 had underlying ratings of Single-Aor higher.

Scheduled earned premiums in the first half of 2006 declined 5percent to $336.8 million from $354.7 million in the first half of2005. The decline was a result of early policy terminations ofstructured finance deals as well as the effect of refunding activityin prior periods, which accelerated the earning of premiums intoearlier periods. Earned premiums from refundings were a robust $85.8million for the first half of 2006, up 23 percent from $69.6 millionin the first half of 2005. While refunding par volume in the U.S.public finance market was down 52 percent for the first half of 2006,MBIA's earned premium from refunded issues was boosted by fiverefunded deals, including two international credits, that accountedfor more than 25 percent of the refunded premiums earned for the firsthalf.

Pre-tax net investment income in the first half of 2006, excludingnet realized gains, was $284.4 million, a 14 percent increase from$249.6 million in the same period of 2005. The increase was primarilydue to the growth in interest income related to consolidated VariableInterest Entities (VIEs) and the growth of invested assets. Whileinvestment income for VIEs continues to be shown in net investmentincome, as of the first quarter of 2006, VIE interest expense has beenreclassified to the interest expense line on the Company's incomestatement for the current and prior periods. Excluding the effects ofVIE interest income, pre-tax net investment income would haveincreased by 8 percent.

MBIA's fees and reimbursements (which had been labeled AdvisoryFees until the first quarter of 2006) were up 15 percent in the firsthalf of 2006 to $12.2 million from $10.6 million during the first halfof 2005.

Total insurance expenses were up 20 percent in the first half of2006 to $178.1 million from $149.0 million in the first half of 2005.The increase resulted from the reclassification of interest expensefor VIEs and the lower deferral rate that the Company adopted duringlast year's third quarter for gross insurance expenses related topolicy acquisition costs. Gross insurance expenses, which are prior toany expense deferrals, were down 3 percent for the first six months ofthis year versus the same period last year.

The Company incurred $40.4 million in loss and loss adjustmentexpenses (LAE) in the first half of 2006, a 5 percent decreasecompared to $42.6 million in last year's first half. Loss and LAE forboth periods is based on the Company's formula of reserving 12 percentof scheduled earned premium. During the first half of 2006, MBIAexperienced an $8.1 million increase to its unallocated loss reservebased on case loss reserve activity, which, combined with theadditional loss and LAE expenses, boosted the Company's unallocatedloss reserve by $47.9 million to $256.5 million at June 30, 2006 from$208.6 million at December 31, 2005.

For the second quarter, there was an $18.7 million increase to theunallocated loss reserves from case loss reserve activity. The largestadjustment was $56.7 million for the Northwest Airlines EETC exposure,for which the Company had established a $76.3 million case lossreserve in the fourth quarter of 2005. The adjustment resultedprimarily from the sale of unsecured claims, which providedunanticipated proceeds, as well as the sale of selected collateral(aircraft) from one of the securitizations and an agreement to sellcollateral from another securitization. There were also a number ofcredits that reduced the unallocated loss reserve during the secondquarter of 2006. The largest adjustment came from a CDO transaction.

During the second quarter, MBIA made a debt service payment of$6.0 million on a policy issued for New Orleans Regional TransitAuthority (RTA), a credit adversely affected by Hurricane Katrina.MBIA expects to be fully reimbursed for the payment and has $24.1million net par outstanding for the RTA. The Company continues toclosely monitor the performance of MBIA-insured credits impacted byHurricane Katrina last year. The Company does not expect to incur anultimate loss, other than immaterial loss adjustment expenses, on itsHurricane Katrina exposure.

Additionally, MBIA has approximately $1.5 billion net paroutstanding for Eurotunnel as of June 30, 2006. Eurotunnel haspetitioned for protection under the Paris commercial court for asafeguard procedure, a new procedure under French law with limitedsimilarities to a U.S. Chapter 11 reorganization. At the July 25hearing, the commercial court decided to delay its decision untilAugust 2. In addition, Eurotunnel has indicated it will continue tomake payments on its debt obligations pending the court decision. Debtrestructuring talks are ongoing and MBIA continues to work with thecreditors committee toward a consensual restructuring plan to beapproved by all Eurotunnel stakeholders. The Company believes that itwill not incur an ultimate loss on its Eurotunnel exposure and therehas been no case loss reserve established for the credit.

MBIA's pre-tax operating income from insurance operations, whichexcludes the effects of net realized gains and net gains and losses onderivative instruments and foreign exchange, increased 1 percent to$541.1 million in the first half of 2006 compared to $535.4 million inthe same period of 2005.

Investment Management Services

The market value of year-to-date average fixed-income assets undermanagement, excluding conduits, was $49.1 billion in the first half of2006, up 15 percent from $42.8 billion in the first half of last year.Pre-tax operating income from MBIA's investment management business,which excludes the effects of net realized gains and net gains andlosses on derivative instruments and foreign exchange, increased 17percent in the first half of 2006 to $49.8 million from $42.7 millionin the first half of 2005 driven by strong demand for the Company'sasset/liability products.

Corporate

The pre-tax operating loss for the corporate segment decreased 6percent for the first half of 2006 to $38.9 million from $41.4 millionin the same period last year. The decrease was primarily due to lowerinterest expense and lower corporate expenses, which were partiallyoffset by reduced net investment income. Part of the decline incorporate expenses reflects a decline in legal and consulting expensesrelated to the regulatory investigations.

Gains and Losses

In the first half of 2006, MBIA recorded net realized gains of$16.8 million for all business operations, compared to net realizedgains of $1.3 million in the first half of 2005. Net realized gainsfor the first half of 2006 included a $13.9 million write-down duringthe first quarter of a receivable balance that the Company obtainedunder salvage and subrogation rights, partly offset by a $10.5 milliongain during the second quarter related to the sale of the Company'scommon stock investment in Ram Re.

The Company recorded pre-tax mark-to-market net gains onderivative instruments and foreign exchange of $9.5 million for allbusiness operations in the first half of 2006, compared to pre-taxmark-to-market net losses of $1.9 million in the first half of 2005.

Book Value and Adjusted Book Value

MBIA's book value per share at the end of the first half of 2006increased $0.31 to $49.48, from December 31, 2005. The increase inbook value per share was driven by an increase in retained earnings,which was partially offset by a reduction in unrealized appreciationof investment securities. Adjusted book value (ABV) per share, anon-GAAP measure, at June 30, 2006 rose 2 percent to $72.32 from$70.62 at December 31, 2005. ABV includes the after-tax effects ofdeferred premium revenue less prepaid reinsurance premiums anddeferred acquisition costs, the present value of installment premiums,the present value of the net spread of asset/liability products and aprovision for loss and loss adjustment expenses.

Conference Call

MBIA will host a conference call for investors today at 11 a.m.EDT. The conference call will consist of brief comments by Mr. C.Edward Chaplin, MBIA Chief Financial Officer, followed by a questionand answer session with Mr. Chaplin. The dial-in number for the callis (877) 694-4769 in the U.S. and (973) 582-2849 from outside the U.S.The conference call code is 7388808. The call will also be broadcastlive on MBIA's Web site at www.mbia.com. Those who are unable toparticipate in the conference call may listen to a replay by dialing(877) 519-4471 in the U.S. and (973) 341-3080 from outside the U.S.The replay code is also 7388808. The replay will be available onMBIA's Web site approximately two hours after the end of theconference call.

MBIA Inc., through its subsidiaries, is a leading financialguarantor and provider of specialized financial services. MBIA'sinnovative and cost-effective products and services meet the creditenhancement, financial and investment needs of its public and privatesector clients, domestically and internationally. MBIA Inc.'sprincipal operating subsidiary, MBIA Insurance Corporation, has afinancial strength rating of Triple-A from Moody's Investors Service,Standard & Poor's Ratings Services, Fitch Ratings, and Rating andInvestment Information, Inc. Please visit MBIA's Web site atwww.mbia.com.

This news release contains forward-looking statements. Importantfactors such as general market conditions and the competitiveenvironment could cause actual results to differ materially from thoseprojected in these forward-looking statements. The Company undertakesno obligation to revise or update any forward-looking statements toreflect changes in events or expectations.

Explanation of Non-GAAP Financial Measures

The following are explanations of why MBIA believes that thenon-GAAP financial measures typically used in the Company's pressreleases, which serve to supplement GAAP information, are meaningfulto investors.

Operating Income (Loss): The Company believes operating income isa useful measurement of performance because it measures income fromoperations, unaffected by investment portfolio realized gains andlosses, gains and losses on derivative instruments and foreignexchange and other non-operating items. Operating income (loss) isalso provided to assist research analysts and investors who use thisinformation in their analysis of the Company.

Adjusted Direct Premiums: The Company believes adjusted directpremiums are a meaningful measure of the total value of the insurancebusiness written during a reporting period since they represent thepresent value of all premiums collected and expected to be collectedon policies closed during the period. As such, it gives investors anopportunity to measure the value of new business activities in a givenperiod and compare it to new business activities in other periods.Other measures, such as premiums written and premiums earned, includethe value of premiums resulting from business closed in prior periodsand do not provide the same information to investors.

Adjusted Book Value (ABV): The Company believes the presentationof adjusted book value, which includes items that are expected to berealized in future periods, provides additional information that givesa comprehensive measure of the value of the Company. Since the Companyexpects these items to affect future results and, in general, they donot require any additional future performance obligation on theCompany's part, ABV provides an indication of the Company's value inthe absence of any new business activity. ABV is not a substitute forGAAP book value but does provide investors with additional informationwhen viewed in conjunction with GAAP book value.
MBIA INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(dollars in thousands)


June 30, December 31,
2006 2005
-------- ------------
Assets
------
Investments:
Fixed-maturity securities held as available-
for-sale, at fair value (amortized cost
$25,510,087 and $23,189,684) $25,440,302 $23,747,204
Investments held-to-maturity, at amortized
cost (fair value $4,553,735 and $5,734,335) 4,588,155 5,765,182
Investment agreement portfolio pledged as
collateral, at fair value (amortized cost
$577,209 and $712,054) 559,450 729,072
Short-term investments, at amortized cost
(which approximates fair value) 2,187,705 1,678,281
Other investments 240,736 234,927
----------- ------------
Total investments 33,016,348 32,154,666

Cash and cash equivalents 221,502 233,046
Accrued investment income 446,821 396,048
Deferred acquisition costs 434,020 427,111
Prepaid reinsurance premiums 385,704 407,614
Reinsurance recoverable on unpaid losses 44,472 58,965
Goodwill 79,406 79,406
Property and equipment (net of accumulated
depreciation) 107,356 109,275
Receivable for investments sold 74,108 74,787
Derivative assets 600,158 326,867
Other assets 221,682 293,609
----------- ------------
Total assets $35,631,577 $34,561,394
=========== ============

Liabilities and Shareholders' Equity
-------------------------------------
Liabilities:
Deferred premium revenue $ 3,123,086 $ 3,185,200
Loss and loss adjustment expense reserves 708,293 721,502
Investment agreements 11,801,633 10,806,277
Commercial paper 753,594 859,997
Medium-term notes 7,806,665 7,542,416
Variable interest entity floating rate notes 1,228,760 1,280,160
Securities sold under agreements to
repurchase 508,154 646,343
Short-term debt 40,898 58,745
Long-term debt 1,219,962 1,210,405
Deferred income taxes, net 379,226 569,536
Deferred fee revenue 17,680 20,379
Payable for investments purchased 372,322 83,369
Derivative liabilities 483,499 384,611
Other liabilities 519,872 600,810
----------- ------------
Total liabilities 28,963,644 27,969,750

Shareholders' Equity:
Common stock 157,539 156,602
Additional paid-in capital 1,467,493 1,435,590
Retained earnings 6,084,005 5,747,171
Accumulated other comprehensive income 120,262 399,381
Treasury stock (1,161,366) (1,147,100)
----------- ------------
Total shareholders' equity 6,667,933 6,591,644

Total liabilities and shareholders' equity $35,631,577 $34,561,394
=========== ============


MBIA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended Six Months Ended
June 30 June 30
----------------------- ----------------------
2006 2005 2006 2005
--------- ---------- ---------- ---------
Insurance operations
Revenues:
Gross premiums
written $251,476 $ 248,965 $ 424,348 $531,584
Ceded premiums (27,166) (31,622) (51,071) (63,748)
--------- ---------- ---------- ---------
Net premiums
written 224,310 217,343 373,277 467,836

Scheduled premiums
earned 169,130 180,902 336,845 354,662
Refunding premiums
earned 47,606 32,483 85,790 69,568
--------- ---------- ---------- ---------
Premiums earned 216,736 213,385 422,635 424,230

Net investment
income 144,390 126,113 284,402 249,563
Fees and
reimbursements 4,019 4,214 12,193 10,639
Net realized gains
(losses) 17,085 996 10,073 1,207
Net gains (losses)
on derivative
instruments and
foreign exchange 1,305 4,002 6,062 (2,070)
--------- ---------- ---------- ---------
Total insurance
revenues 383,535 348,710 735,365 683,569

Expenses:
Losses and loss
adjustment 20,295 21,708 40,421 42,559
Amortization of
deferred acquisition
costs 17,122 16,858 33,388 33,515
Operating 35,889 32,268 72,616 61,434
Interest expense 18,786 6,104 31,704 11,504
--------- ---------- ---------- ---------
Total insurance
expenses 92,092 76,938 178,129 149,012

Insurance income 291,443 271,772 557,236 534,557
--------- ---------- ---------- ---------

Investment management
services
Revenues 294,299 206,543 552,505 392,778
Net realized gains
(losses) (295) (1,478) 5,233 1,716
Net gains (losses) on
derivative instruments
and foreign exchange 6,258 (27,395) 3,308 26
--------- ---------- ---------- ---------
Total investment
management services
revenues 300,262 177,670 561,046 394,520

Interest expense 249,921 167,164 466,668 316,582
Expenses 18,461 19,090 36,051 33,467
--------- ---------- ---------- ---------
Total investment
management services
expenses 268,382 186,254 502,719 350,049
--------- ---------- ---------- ---------
Investment management
services income 31,880 (8,584) 58,327 44,471
--------- ---------- ---------- ---------

Municipal services
Revenues 5,399 5,398 11,010 10,934
Net realized gains
(losses) -- -- -- (85)
Net gains (losses) on
derivative instruments
and foreign exchange 11 6 40 136
--------- ---------- ---------- ---------
Total municipal
services revenues 5,410 5,404 11,050 10,985
Expenses 4,324 5,108 9,449 10,513
--------- ---------- ---------- ---------
Municipal services
income 1,086 296 1,601 472
--------- ---------- ---------- ---------

Corporate
Net investment income 3,508 5,776 7,072 13,703
Net realized gains
(losses) 841 81 1,467 (1,527)
Net gains (losses) on
derivative instruments
and foreign exchange 138 -- 138 --
Interest expense 20,170 22,040 40,301 44,061
Corporate expenses 3,357 7,398 5,659 11,079
--------- ---------- ---------- ---------
Corporate loss (19,040) (23,581) (37,283) (42,964)
--------- ---------- ---------- ---------

Income before income
taxes 305,369 239,903 579,881 536,536

Provision for income
taxes 84,007 66,229 159,525 150,055
--------- ---------- ---------- ---------

Net income $221,362 $ 173,674 $ 420,356 $ 86,481
========= ========== ========== =========

Net income per common
share:
Basic $ 1.67 $ 1.30 $ 3.17 $ 2.85
Diluted $ 1.62 $ 1.27 $ 3.08 $ 2.79

Weighted-average number
of common shares
outstanding:
Basic 132,765,468 133,938,175 132,741,516 135,589,284
Diluted 136,634,382 136,886,153 136,658,183 138,680,637


MBIA INC. AND SUBSIDIARIES

Reconciliation of Adjusted Direct Premiums to Gross Premiums Written
--------------------------------------------------------------------
(dollars in millions)

Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
2006 2005 2006 2005
-------- -------- -------- --------

Adjusted direct premiums (1) $ 283.5 $ 329.0 $ 399.5 $ 646.6

Adjusted premiums assumed 0.0 1.0 0.0 1.0
-------- -------- -------- --------
Adjusted gross premiums 283.5 330.0 399.5 647.6

Present value of estimated future
installment premiums (2) (156.5) (200.8) (224.2) (376.6)
-------- -------- -------- --------
Gross upfront premiums written 127.0 129.2 175.3 271.0

Gross installment premiums
received 124.5 119.8 249.0 260.6
-------- -------- -------- --------
Gross premiums written $ 251.5 $ 249.0 $ 424.3 $ 531.6
======== ======== ======== ========

(1) A non-GAAP measure.

(2) At June 30, 2006 and March 31, 2006 the discount rate was 5.00%
and 5.02%, repsectively, and at June 30, 2005 and March 31, 2005
the discount rate was 4.99% and 4.84%, respectively.

Components of Net Income per Share
-----------------------------------

Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
2006 2005 2006 2005
-------- -------- -------- --------
Net income $ 1.62 $ 1.27 $ 3.08 $ 2.79

Net realized gains 0.08 0.00 0.08 0.01

Net gains (losses) on derivative
instruments and foreign exchange 0.04 (0.11) 0.05 (0.01)
-------- -------- -------- --------

Operating income (1) $ 1.50 $ 1.38 $ 2.95 $ 2.79
======== ======== ======== ========
(1) A non-GAAP measure.


MBIA INC. AND SUBSIDIARIES

Components of Adjusted Book Value per Share
-------------------------------------------

June 30, 2006 December 31, 2005
--------------- -----------------
Book value $ 49.48 $ 49.17
After-tax value of:
Deferred premium revenue 15.07 15.45
Prepaid reinsurance premiums (1.86) (1.98)
Deferred acquisition costs (2.09) (2.07)
------ ------
Net deferred premium revenue 11.12 11.40
Present value of installment
premiums (1) 10.44 10.53
Asset/liability products adjustment 4.12 2.40
Loss provision (2) (2.84) (2.88)
---------- ----------
Adjusted book value (3) $ 72.32 $ 70.62
========== ==========

(1) At June 30, 2006 and December 31, 2005 the discount rate was
5.00%, respectively.

(2) The loss provision is calculated by applying 12% to the following
items on an after-tax basis: (a) deferred premium revenue; (b)
prepaid reinsurance premiums; and, (c) the present value of
installment premiums.

(3) A non-GAAP measure.


CONSOLIDATED INSURANCE OPERATIONS

Selected Financial Data Computed on a Statutory Basis
-----------------------------------------------------
(dollars in millions)
June 30, December 31,
2006 2005
----------- -----------
Capital and surplus $ 4,344.0 $ 3,800.4
Contingency reserve 2,382.1 2,769.0
----------- -----------
Capital base 6,726.1 6,569.4

Unearned premium reserve 3,475.7 3,508.1
Present value of installment premiums (1) 2,163.6 2,171.1
----------- -----------

Premium resources 5,639.3 5,679.2

Loss and loss adjustment expense reserves 270.4 317.8
Soft capital credit facilities 850.0 850.0
----------- -----------
Total claims-paying resources $ 13,485.8 $ 13,416.4
=========== ===========

Net debt service outstanding $895,271.7 $889,018.9

Capital ratio (2) 133:1 135:1

Claims-paying ratio (3) 78:1 78:1

(1) At June 30, 2006 and December 31, 2005 the discount rate was
5.00%, respectively.

(2) Net debt service outstanding divided by the capital base.

(3) Net debt service outstanding divided by the sum of the capital
base, unearned premium reserve (after-tax), present value of
installment premiums (after-tax), loss and loss adjustment expense
reserves and soft capital credit facilities.