MBIA Inc.'s wholly owned MBIA Insurance Corp. unit agreed to settle its lawsuit against Royal Indemnity Co. seeking enforcement of policies issued by Royal Indemnity guaranteeing vocational loans originated by Student Finance Corp., which went bankrupt in 2002.
The Armonk, N.Y., bond issuer said Monday the amount payable by Royal under the settlement will be sufficient to repay the $362 million outstanding under bonds insured by MBIA as well as to reimburse the company for part of the claims it has paid to date under its insurance policies.
As a result of the settlement, MBIA expects to incur about $20 million in losses in the first quarter, representing a reduction to its expected recoveries for claims it has paid to date under its policies. The losses will be covered by the company's unallocated loss reserves.
MBIA sued Royal Indemnity in July 2002. The company insured eight securitizations that were collateralized by the Student Finance vocational student loans guaranteed by Royal.
