UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
| x | Annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934 |
For the fiscal year ended December 31, 2006
Or
| ¨ | Transition report pursuant to Section 15(d) of the Securities Exchange Act of 1934 |
For the Transition Period from to
Commission File No. 1-9583
A. Full title of the plan and the address of the plan, if different from that of the issuer named below:
MBIA Inc.
401(k) Plan
B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:
MBIA Inc.
113 King Street
Armonk, N. Y. 10504
Required Information
The MBIA Inc. 401(k) Plan (the “Plan”) is subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). In lieu of the requirements of items 1-3 of form 11-K, the financial statements of the Plan and the supplemental schedule have been prepared in accordance with the financial reporting requirements of ERISA and are presented herein.
MBIA INC.
401(k) PLAN
FINANCIAL STATEMENTS
Schedules required by the Department of Labor’s Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974 other than those listed
above have been omitted because they are not applicable.
1
Report of Independent Registered Public Accounting Firm
To the Participants and Administrator of
MBIA Inc. 401(k) Plan:
We have audited the accompanying statement of net assets available for benefits of the MBIA Inc. 401(k) Plan (the “Plan”) as of December 31, 2006, and the related statement of changes in net assets available for benefits for the year then ended. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Plan’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the MBIA Inc. 401(k) Plan as of December 31, 2006, and the changes in its net assets available for benefits for the year then ended in conformity with U.S. generally accepted accounting principles.
Our audit was performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of assets (held at end of year) as of December 31, 2006 is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
/s/ Salibello & Broder LLP
New York, NY
June 26, 2007
2
Report of Independent Registered Public Accounting Firm
To the Participants and Administrator of
MBIA Inc. 401(k) Plan:
In our opinion, the accompanying statements of Net Assets Available for Benefits and the related statements of changes in Net Assets Available for Benefits present fairly, in all material respects, the net assets available for benefits of MBIA Inc. 401(k) Plan (the “Plan”) at December 31, 2005, and the changes in net assets available for benefits for the year then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
/s/ PRICEWATERHOUSECOOPERS LLP
New York, NY
June 23, 2006
3
401(k) PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 2006 AND 2005
| December 31, 2006 |
December 31, 2005 | |||||
| Investments, at fair value: (Note 4) |
||||||
| Mutual funds and commingled fund |
$ | 71,194,858 | $ | 64,266,576 | ||
| Common stock |
45,854,607 | 38,642,508 | ||||
| 117,049,465 | 102,909,084 | |||||
| Participant loans |
708,846 | 725,331 | ||||
| Dividend receivable |
194,565 | — | ||||
| Net assets available for benefits |
$ | 117,952,876 | $ | 103,634,415 | ||
The accompanying notes are an integral part of the financial statements.
4
401(k) PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
| For the Years Ended December 31, | ||||||||
| 2006 | 2005 | |||||||
| Additions: |
||||||||
| Additions to net assets attributed to: |
||||||||
| Investment income: |
||||||||
| Net appreciation (depreciation) in fair value of investments (Note 4) |
$ | 9,871,281 | $ | (1,462,764 | ) | |||
| Interest and dividends |
6,496,190 | 3,811,993 | ||||||
| Contributions: |
||||||||
| Employees |
5,228,068 | 5,094,598 | ||||||
| Employer |
2,358,457 | 2,741,871 | ||||||
| Total additions |
23,953,996 | 10,185,698 | ||||||
| Deductions: |
||||||||
| Deductions from net assets attributed to: |
||||||||
| Benefit distributions |
(9,635,535 | ) | (10,634,450 | ) | ||||
| Total deductions |
(9,635,535 | ) | (10,634,450 | ) | ||||
| Net increase (decrease) |
14,318,461 | (448,752 | ) | |||||
| Net assets available for benefits: |
||||||||
| Beginning of year |
103,634,415 | 104,083,167 | ||||||
| End of year |
$ | 117,952,876 | $ | 103,634,415 | ||||
The accompanying notes are an integral part of the financial statements.
5
401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
AS OF AND FOR THE YEARS ENDED
DECEMBER 31, 2006 AND 2005
1. Plan Description
The MBIA Inc. 401(k) Plan (the “Plan”) is a defined contribution plan for employees of MBIA Inc. and Subsidiaries (the “Company”) who are at least 21 years of age. Leased employees, temporary employees and employees classified as interns are not eligible to participate in the Plan. Under a 401(k) deferral feature, eligible participants may defer up to 10% of their total eligible compensation. Matching contributions are made by the Company, in the form of MBIA Inc. common stock, at the rate of 100% of each participant’s contribution up to a maximum of 5% of each participant’s eligible compensation. Effective January 1, 2002, the Plan was amended to allow employees that met certain criteria to diversify the Company matching contribution. Participants may request loans from their accounts in accordance with established guidelines.
The Plan is administered by the Company and the Plan’s assets are managed by Fidelity Management Trust Company (“Fidelity”), the investment advisor, trustee and custodian. The participants of the Plan have the option to direct the investment of their contribution share into one or more of nineteen Fidelity funds, two Baron Asset Management Company, Inc. (“Baron”) funds, one Van Kampen fund, one Morgan Stanley fund, one PIMCO fund and the Employer Stock Fund. The transactions with Fidelity and the Company qualify as exempt party-in-interest transactions.
Vesting in employer contributions begins after two years of service and full vesting is achieved after five years of service. Participants are fully vested in their salary deferred contributions at all times. Upon reaching the normal retirement date, death or becoming disabled, a participant will be entitled to receive benefit payments. Nonvested benefits remaining after termination of employment are forfeited and generally may serve to pay the Plan’s administrative expenses and are otherwise used to reduce future Company contributions. During 2006 and 2005, $386,125 and $102,294, respectively, of forfeitures were used to fund the Company’s matching obligation pursuant to the terms of the Plan. The forfeiture balance as of December 31, 2006 and 2005 was $99 and $133, respectively.
A participant is entitled to the benefit that can be provided by the contributions and income thereon, including net realized and unrealized investment gains and losses, of each participant’s account. Upon retirement, disability, death or termination, a participant or beneficiary can elect to receive either a lump-sum distribution or installment distributions.
A participant may borrow from their account a minimum of $1,000 up to a maximum equal to the lesser of $50,000 reduced by the excess, if any, of the highest outstanding balance of loans from the Plan during the one-year period prior to the date of the loan over the current outstanding balance of loans or 50% of their vested account balance. Loan terms range from 1 to 5 years, or longer for the purchase of a principal residence but not to exceed 10 years. The loans are collateralized by 50% of the vested account balance and bear a reasonable rate of interest as determined by the Plan Administrator based on the interest rates charged for similar types of loans by other lenders.
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MBIA INC.
401(k) PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
AS OF AND FOR THE YEARS ENDED
DECEMBER 31, 2006 AND 2005
The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”). Participants should refer to the Summary Plan Description and Plan Document for specific information regarding Plan provisions.
2. Summary of Significant Accounting Policies
The financial statements have been prepared on the basis of accounting principles generally accepted in the United States of America (“GAAP”). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, changes therein and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Investment securities are exposed to various risks, such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the statement of net assets available for benefits. The Company’s common stock comprises approximately 39% and 37% of the net assets available for benefits at December 31, 2006 and 2005, respectively.
Significant accounting policies are as follows:
Basis of Accounting
The financial statements of the Plan are prepared under the accrual method of accounting.
Investments
The Plan’s shares of mutual funds and commingled fund are valued at the net asset value of shares held by the Plan at year end. The Plan’s common stock is valued at current fair value based on the last reported sales price on the last business day of the year.
Interest income from investments is recorded as earned on an accrual basis. Dividend income is recorded on the ex-dividend date.
The Plan’s net appreciation (depreciation) in the fair value of its investments consists of realized gains and losses and unrealized appreciation and depreciation on investments.
Contributions
Contributions from eligible participants and matching Company contributions are recorded in the month the related payroll deductions are made.
7
MBIA INC.
401(k) PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
AS OF AND FOR THE YEARS ENDED
DECEMBER 31, 2006 AND 2005
Participant Accounts
Each participant has an account which is credited with the Company’s contribution, employee’s contribution, and net results from the investment activities of the participant’s account, reduced for any withdrawal activity.
Participant Loans
Participant loan balances are stated at cost, plus accrued interest, which approximates market value. Loans outstanding are reflected as assets of the Plan. Interest income on the loans is recorded as earned.
Payment of Benefits
Benefits are recorded when paid.
Administrative Expenses
Administrative expenses, which consist primarily of investment management, recordkeeping and auditing fees, are paid directly by the Company rather than out of Plan assets. Employee loan fees are paid out of the participants’ accounts.
3. Plan Termination
The Company has not expressed any intent to discontinue its contributions or terminate the Plan. However, it reserves the right to temporarily suspend contributions to or amend or terminate the Plan. Upon termination of the Plan, the accounts of all participants shall become fully vested, and the net assets of the Plan shall be distributed among the participants and beneficiaries of the Plan in proportion to their respective account balances, subject to the provisions of ERISA.
8
MBIA INC.
401(k) PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
AS OF AND FOR THE YEARS ENDED
DECEMBER 31, 2006 AND 2005
4. Investments
The Plan’s investments at fair value as of December 31, 2006 and 2005 are presented in the following table:
| December 31, 2006 |
December 31, 2005 |
|||||||
| Common Stock: |
||||||||
| MBIA Inc. Stock |
$ | 45,854,607 | * | $ | 38,642,508 | * | ||
| Mutual Funds: |
||||||||
| Fidelity Puritan Fund |
2,281,523 | 2,161,710 | ||||||
| Fidelity Magellan Fund |
3,831,481 | 3,835,776 | ||||||
| Fidelity Growth Company Fund |
6,820,929 | * | 6,162,338 | * | ||||
| Fidelity Growth and Income Portfolio |
12,175,517 | * | 11,435,972 | * | ||||
| Fidelity Intermediate Bond Fund |
2,707,844 | 2,891,320 | ||||||
| Fidelity Value Fund |
4,527,147 | 3,874,522 | ||||||
| Fidelity Overseas Fund |
5,984,796 | * | 4,883,411 | |||||
| Fidelity Blue Chip Growth Fund |
5,298,644 | 4,935,981 | ||||||
| Fidelity Spartan U.S. Equity Index Fund |
7,866,697 | * | 6,858,294 | * | ||||
| Fidelity Low-priced Stock Fund |
1,241,820 | 762,868 | ||||||
| Fidelity Freedom Income Fund |
85,726 | 112,183 | ||||||
| Fidelity Freedom Fund 2010 |
475,443 | 413,563 | ||||||
| Fidelity Freedom Fund 2015 |
144,587 | 118,721 | ||||||
| Fidelity Freedom Fund 2020 |
438,816 | 375,368 | ||||||
| Fidelity Freedom Fund 2025 |
369,567 | 193,940 | ||||||
| Fidelity Freedom Fund 2030 |
316,967 | 161,553 | ||||||
| Fidelity Freedom Fund 2035 |
189,138 | 44,190 | ||||||
| Fidelity Freedom Fund 2040 |
56,652 | 30,508 | ||||||
| Baron Asset Fund |
1,833,275 | 1,242,976 | ||||||
| Baron Growth Fund |
1,925,109 | 1,340,882 | ||||||
| Van Kampen International Growth Fund |
1,829,098 | 1,244,364 | ||||||
| PIMCO High Yield Bond Fund |
525,936 | 380,360 | ||||||
| Morgan Stanley Inst. International Equity Portfolio-Class B |
1,107,690 | 836,843 | ||||||
| Commingled Fund: |
||||||||
| Fidelity Managed Income Fund |
9,160,456 | * | 9,968,933 | * | ||||
| $ | 117,049,465 | $ | 102,909,084 | |||||
| Participant Loans** |
$ | 708,846 | $ | 725,331 | ||||
| * | Each of these investments, at fair value, represents 5% or more of the Plan’s net assets as of the respective year end date. |
| ** | Interest rates range from 6.25% to 11.5%. Maturity dates range from January 12, 2007 to September 12, 2015. |
9
MBIA INC.
401(k) PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
AS OF AND FOR THE YEARS ENDED
DECEMBER 31, 2006 AND 2005
The Plan’s net appreciation (depreciation) in fair value of investments for the years ended December 31, 2006 and 2005, were as follows:
| Years Ended December 31, | |||||||
| 2006 | 2005 | ||||||
| Investments: |
|||||||
| Mutual funds and commingled fund |
$ | 1,672,530 | $ | 1,070,711 | |||
| Common stock |
8,198,751 | (2,533,475 | ) | ||||
| Net appreciation (depreciation) in fair value |
$ | 9,871,281 | $ | (1,462,764 | ) | ||
5. Nonparticipant-directed Investments
Information about the net assets of the Plan and the significant components of the changes in net assets of the Plan relating to the nonparticipant-directed investments is as follows:
| As of December 31, | ||||||
| 2006 | 2005 | |||||
| Net assets: |
||||||
| Common stock |
$ | 45,854,607 | $ | 38,642,508 | ||
| Dividend receivable |
194,565 | — | ||||
| Total |
$ | 46,049,172 | $ | 38,642,508 | ||
| Year Ended December 31, 2006 |
||||
| Change in net assets: |
||||
| Net appreciation |
$ | 8,198,751 | ||
| Interest and dividends |
990,183 | |||
| Contributions |
3,338,008 | |||
| Benefit distributions |
(1,942,527 | ) | ||
| Transfers to participant-directed investments |
(3,177,751 | ) | ||
| Net change in fair value |
$ | 7,406,664 | ||
6. Tax Status
The Internal Revenue Service has advised that the Plan constitutes a qualified plan under Section 401(a) of the Internal Revenue Code and is therefore exempt from federal income taxes under
10
MBIA INC.
401(k) PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
AS OF AND FOR THE YEARS ENDED
DECEMBER 31, 2006 AND 2005
provisions of Section 501(a). The Plan obtained its latest determination letter on April 30, 2003 in which the Internal Revenue Service stated that the Plan, as then designed, was in compliance with the applicable requirements of the Internal Revenue Code. Since the date of the determination letter there have been no Plan amendments and, in the Company’s view, the Plan has continued to maintain its tax exempt status and is in compliance with all applicable requirements of the Internal Revenue Code.
11
401(k) PLAN
SCHEDULE H (FORM 5500) - LINE 4i
SCHEDULE OF ASSETS (HELD AT END OF YEAR)
ID # 13-2689375, PLAN 002
DECEMBER 31, 2006
| (a) |
(b) Identity of Issue, Borrower, Lessor, or Similar Party |
(c) Description of Investments, Including Maturity Date, Rate of Interest, Collateral, Par or Maturity Value |
(d) Cost (1) |
(e) Current Value | ||||||
| Common Stock: | ||||||||||
| * | MBIA Inc. |
Common stock | $ | 37,741,549 | $ | 45,854,607 | ||||
| Mutual Funds: | ||||||||||
| * | Fidelity Puritan Fund |
Mutual fund | 2,281,523 | |||||||
| * | Fidelity Magellan Fund |
Mutual fund | 3,831,481 | |||||||
| * | Fidelity Growth Company Fund |
Mutual fund | 6,820,929 | |||||||
| * | Fidelity Growth and Income Portfolio |
Mutual fund | 12,175,517 | |||||||
| * | Fidelity Intermediate Bond Fund |
Mutual fund | 2,707,844 | |||||||
| * | Fidelity Value Fund |
Mutual fund | 4,527,147 | |||||||
| * | Fidelity Overseas Fund |
Mutual fund | 5,984,796 | |||||||
| * | Fidelity Blue Chip Growth Fund |
Mutual fund | 5,298,644 | |||||||
| * | Fidelity Spartan U.S. Equity Index Fund |
Mutual fund | 7,866,697 | |||||||
| * | Fidelity Low-priced Stock Fund |
Mutual fund | 1,241,820 | |||||||
| * | Fidelity Freedom Income Fund |
Mutual fund | 85,726 | |||||||
| * | Fidelity Freedom Fund 2010 |
Mutual fund | 475,443 | |||||||
| * | Fidelity Freedom Fund 2015 |
Mutual fund | 144,587 | |||||||
| * | Fidelity Freedom Fund 2020 |
Mutual fund | 438,816 | |||||||
| * | Fidelity Freedom Fund 2025 |
Mutual fund | 369,567 | |||||||
| * | Fidelity Freedom Fund 2030 |
Mutual fund | 316,967 | |||||||
| * | Fidelity Freedom Fund 2035 |
Mutual fund | 189,138 | |||||||
| * | Fidelity Freedom Fund 2040 |
Mutual fund | 56,652 | |||||||
| Baron Asset Fund |
Mutual fund | 1,833,275 | ||||||||
| Baron Growth Fund |
Mutual fund | 1,925,109 | ||||||||
| Van Kampen International Growth Fund |
Mutual fund | 1,829,098 | ||||||||
| PIMCO High Yield Bond Fund |
Mutual fund | 525,936 | ||||||||
| Morgan Stanley Inst. International Equity Portfolio – Class B |
Mutual fund | 1,107,690 | ||||||||
| Commingled Fund: | ||||||||||
| * | Fidelity Managed Income Fund |
Commingled fund | 9,160,456 | |||||||
| * | Participant loans |
Interest rates: 6.25% to 11.5%; Maturity dates: January 12, 2007 to September 12, 2015 | 708,846 | |||||||
| Total | $ | 117,758,311 | ||||||||
| (1) |
Cost is not required for participant-directed investments. |
| * | Fidelity Management Trust Company, including associated funds, and the Company are parties-in-interest. |
12
Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.
| MBIA Inc. | ||||
| 401(k) Plan | ||||
| Date: June 26, 2007 |
/s/ C. EDWARD CHAPLIN | |||
| C. Edward Chaplin | ||||
| Vice President | ||||
| Chief Financial Officer | ||||
| Date: June 26, 2007 |
/s/ KEVIN D. SILVA | |||
| Kevin D. Silva | ||||
| Plan Administrator | ||||
| Chief Administrative Officer | ||||
13