SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
| x | ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES |
| EXCHANGE ACT OF 1934 |
| For the fiscal year ended December 31, 2002 or |
| ¨ | TRANSITION REPORTS PURSUANT TO SECTION 13 OR 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
MBIA INC.
401(k) PLAN
FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2002 AND 2001
MBIA INC.
401(k) PLAN
FINANCIAL STATEMENTS
INDEX
| Page | ||
| 2 | ||
| Statements of Net Assets Available for Plan Benefits as of December 31, 2002 and 2001 |
3 | |
| 4 | ||
| 5-9 | ||
| 10 | ||
| 11 | ||
| 12 | ||
Schedules other than those listed above have been omitted since they are either not required or not applicable.
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Report of Independent Accountants
To the Participants and Administrator of
MBIA Inc. 401(k) Plan:
In our opinion, the accompanying statements of net assets available for plan benefits and the related statements of changes in net assets available for plan benefits present fairly, in all material respects, the net assets available for benefits of MBIA Inc. 401(k) Plan (the “Plan”) at December 31, 2002 and December 31, 2001, and the changes in net assets available for benefits for the years 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 audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which 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 audits provide a reasonable basis for the opinion expressed above.
Our audits were conducted 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 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 audits 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/ PRICEWATERHOUSECOOPERS LLP
June 13, 2003
New York, New York
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MBIA INC.
401(k) PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
| December 31, 2002 |
December 31, 2001 | |||||
| Investments, at fair value: (Note 4) |
||||||
| Mutual funds |
$ | 40,864,680 | $ | 46,876,214 | ||
| Common stock |
36,127,395 | 45,681,780 | ||||
| 76,992,075 | 92,557,994 | |||||
| Participant loans |
969,139 | 1,206,893 | ||||
| Net assets available for plan benefits |
$ | 77,961,214 | $ | 93,764,887 | ||
The accompanying notes are an integral part of the financial statements.
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MBIA INC.
401(k) PLAN
STATEMENTS OF CHANGES IN NET ASSETS
AVAILABLE FOR PLAN BENEFITS
| Years ended December 31 |
||||||||
| 2002 |
2001 |
|||||||
| Net depreciation in fair value of investments (Note 4) |
$ | (17,051,923 | ) | $ | (3,194,248 | ) | ||
| Interest and dividends |
1,422,296 | 1,524,606 | ||||||
| Contributions: |
||||||||
| Employees’ salary deferral |
4,344,692 | 3,833,070 | ||||||
| Employer |
2,844,971 | 2,311,288 | ||||||
| Benefit distributions |
(7,363,709 | ) | (5,840,501 | ) | ||||
| Net decrease |
(15,803,673 | ) | (1,365,785 | ) | ||||
| Net assets available for plan benefits, beginning of year |
93,764,887 | 95,130,672 | ||||||
| Net assets available for plan benefits, end of year |
$ | 77,961,214 | $ | 93,764,887 | ||||
The accompanying notes are an integral part of the financial statements.
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MBIA INC.
401(k) PLAN
1. Plan Description
The MBIA Inc. 401(k) Plan (the ”Plan”), formerly known as the MBIA, Inc. Employees Profit Sharing and 401(k) Salary Deferral 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. Effective April 1, 1987, a 401(k) deferral feature was implemented enabling eligible participants to 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 the participant’s contribution up to a maximum of 5% of the participant’s eligible compensation. During 2001, the Plan was amended to no longer require six months of service before being eligible to participate in the Plan. 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. Loan balances outstanding are reflected as assets of the Plan. Interest income on the loans is recorded as earned.
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 ten Fidelity funds, one Baron Asset Management Company, Inc. (“Baron”) fund, one or more of three 1838 Investment Advisors, Inc. (“1838”) funds and the Employer Stock Fund. 1838 is a wholly-owned subsidiary of MBIA Inc. These transactions qualify as 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 may serve to reduce future Company contributions. The forfeiture balance as of December 31, 2002 and 2001, was $284,345 and $159,667, 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.
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MBIA INC.
401(k) PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
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.
In July 1999, as a result of the merger with CapMAC Holdings Inc., the CapMAC Employee Stock Ownership Plan (“ESOP”) was merged with the Plan. In conjunction with the merger of the plans, the unallocated ESOP shares would be used to fund the Company’s match obligations. As of December 31, 2002 and 2001, the unallocated ESOP balance was $653,311 and $1,982,993, respectively.
2. Summary of Significant Accounting Policies
The financial statements have been prepared on the basis of generally accepted accounting principles (“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.
The Plan provides for various investment options in any combination of stocks, bonds, fixed income securities, mutual funds, and other investment securities. 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 Statements of Net Assets Available for Plan Benefits.
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 are valued at the net asset value of shares held by the Plan at year end. The Plan’s common stock is valued at the current fair value based on last reported sales price on the last business day of the year. Participant loans are stated at cost, plus accrued interest.
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MBIA INC.
401(k) PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
Gain or loss on the sale of investments is based on specifically identified cost. Interest income from investments is recorded as earned on the 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 the realized gains or losses and the unrealized appreciation (depreciation) on those investments.
Contributions
Contributions from eligible participants and matching Company contributions are recorded in the month the related payroll deductions are made.
Participant Accounts
Each participant has an account which is credited with the Company’s contribution, employees’ contribution and the net results from the investment activities of the participant’s account.
Payment of Benefits
Benefits are recorded when paid.
Administrative Expenses
Administrative expenses, which consist primarily of investment management, record keeping 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.
4. Investments
The Plan’s investments at fair value as of December 31, 2002 and 2001, were as shown on the following page:
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MBIA INC.
401(k) PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
| December 31, 2002 | |||
| Common Stock: |
|||
| Employer Stock* |
$ | 20,906,161 | |
| ESOP Plan* |
15,221,234 | ||
| Mutual Funds: |
|||
| Fidelity Puritan Fund |
1,082,374 | ||
| Fidelity Magellan Fund |
2,703,317 | ||
| Fidelity Growth Company Fund |
3,438,804 | ||
| Fidelity Growth and Income Portfolio* |
9,666,789 | ||
| Fidelity Intermediate Bond Fund |
2,735,378 | ||
| Fidelity Value Fund |
1,167,547 | ||
| Fidelity Overseas Fund |
2,208,138 | ||
| Fidelity Blue Chip Growth Fund |
3,745,413 | ||
| Fidelity Spartan U.S. Equity Index Fund |
3,571,323 | ||
| Fidelity Managed Income Fund* |
7,169,506 | ||
| Baron Asset Fund |
188,625 | ||
| 1838 International Equity Fund |
1,000,077 | ||
| 1838 Large Cap Equity Fund |
1,811,207 | ||
| 1838 Fixed Income Fund |
376,182 | ||
| $ | 76,992,075 | ||
| Participant Loans |
969,139 | ||
| * | Each of these investments, at fair value, represents 5% or more of the Plan’s net assets at December 31, 2002. |
| December 31, 2001 | |||
| Common Stock: |
|||
| Employer Stock* |
$ | 28,337,478 | |
| ESOP Plan* |
17,344,302 | ||
| Mutual Funds: |
|||
| Fidelity Puritan Fund |
1,079,968 | ||
| Fidelity Magellan Fund |
3,222,978 | ||
| Fidelity Growth Company Fund |
4,533,689 | ||
| Fidelity Growth and Income Portfolio* |
12,128,341 | ||
| Fidelity Intermediate Bond Fund |
2,726,216 | ||
| Fidelity Value Fund |
823,568 | ||
| Fidelity Overseas Fund |
2,547,713 | ||
| Fidelity Blue Chip Growth Fund* |
4,762,742 | ||
| Fidelity Spartan U.S. Equity Index Fund |
4,294,256 | ||
| Fidelity Managed Income Fund* |
6,319,958 | ||
| Baron Asset Fund |
87,279 | ||
| 1838 International Equity Fund |
1,038,540 | ||
| 1838 Large Cap Equity Fund |
2,791,154 | ||
| 1838 Fixed Income Fund |
519,812 | ||
| $ | 92,557,994 | ||
| Participant Loans |
1,206,893 | ||
| * | Each of these investments, at fair value, represents 5% or more of the Plan’s net assets at December 31, 2001. |
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MBIA INC.
401(k) PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
The Plan’s net change in fair value of investments for the year ended December 31, 2002 and 2001, were as follows:
| Years ended December 31, |
||||||||
| 2002 |
2001 |
|||||||
| Investments: |
||||||||
| Mutual funds |
$ | (8,871,462 | ) | $ | (6,868,801 | ) | ||
| Common stock |
(8,180,461 | ) | 3,674,553 | |||||
| Net change in fair value |
$ | (17,051,923 | ) | $ | (3,194,248 | ) | ||
5. 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 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. There have been no Plan amendments since the date of the determination letter.
6. Indemnification
In November 2002, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. (FIN) 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees Including Indirect Guarantees of Indebtedness of Others.” In the normal course of business, the Plan enters into agreements that contain a variety of representations and warranties which provide general indemnifications. The Plan’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Plan that have not yet occurred. However, based on experience, the Plan expects the risk of loss to be remote.
7. Subsequent Event
On April 22, 2003, the MBIA Investment Management Committee approved four new funds to be offered as investment options under the Plan. The new fund choices will be available beginning July 1, 2003 and are as follows: Fidelity Low-Priced Stock Fund, Baron Growth Fund, Morgan Stanley Inst. International Equity Portfolio – Class B, and PIMCO High Yield Bond Fund.
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401(k) PLAN
SUPPLEMENTAL SCHEDULE
SCHEDULE OF ASSETS (HELD AT END OF YEAR) (1)
| Identity of issue |
Description |
Cost (2) |
Current Value | ||||
| MBIA Common Stock* |
Common stock | $ | 36,127,395 | ||||
| Fidelity Puritan Fund* |
Mutual fund | 1,082,374 | |||||
| Fidelity Magellan Fund* |
Mutual fund | 2,703,317 | |||||
| Fidelity Growth Company Fund* |
Mutual fund | 3,438,804 | |||||
| Fidelity Growth and Income Portfolio* |
Mutual fund | 9,666,789 | |||||
| Fidelity Intermediate Bond Fund* |
Mutual fund | 2,735,378 | |||||
| Fidelity Value Fund* |
Mutual fund | 1,167,547 | |||||
| Fidelity Overseas Fund* |
Mutual fund | 2,208,138 | |||||
| Fidelity Blue Chip Growth Fund* |
Mutual fund | 3,745,413 | |||||
| Fidelity Spartan U.S. Equity Index Fund* |
Mutual fund | 3,571,323 | |||||
| Fidelity Managed Income Fund* |
Mutual fund | 7,169,506 | |||||
| Baron Asset Fund* |
Mutual fund | 188,625 | |||||
| 1838 International Equity Fund* |
Mutual fund | 1,000,077 | |||||
| 1838 Large Cap Equity Fund* |
Mutual fund | 1,811,207 | |||||
| 1838 Fixed Income Fund* |
Mutual fund | 376,182 | |||||
| $ | 76,992,075 | ||||||
| Participant loans* |
Interest rates: 6.75% - 11.5%; Maturity dates: 1/11/03 – 2/29/12 |
969,139 | |||||
| Total |
$ | 77,961,214 | |||||
| (1) | This schedule has been certified as complete and accurate by the Plan trustee. |
| (2) | Cost is not required for participant directed investments. |
| * | Fidelity Management Trust Company, 1838 Investment Advisors, Inc., and Baron Asset Management Company, Inc., are parties in interest. |
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Signatures
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 thereunto duly authorized.
| MBIA Inc. 401(k) Plan | ||||
| Date: June 13, 2003 |
/s/ NEIL G. BUDNICK | |||
| Neil G. Budnick | ||||
| Vice President | ||||
| Chief Financial Officer | ||||
| Date: June 13, 2003 |
/s/ KEVIN D. SILVA | |||
| Kevin D. Silva | ||||
| Plan Administrator | ||||
| Chief Administrative Officer |
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Section 906 Certification
Pursuant to 18 United States Code §1350
The undersigned hereby certifies that to his knowledge the Form 11-K of MBIA Inc. (the “Company”) filed with the Securities and Exchange Commission on the date hereof fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Date: June 13, 2003 |
/s/ NEIL G. BUDNICK | |||
| Neil G. Budnick Vice President Chief Financial Officer | ||||
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