MBIA Inc. said Monday that it incurred heavier losses in its insurance business than expected, saddling the bond insurer with a third-quarter loss after two straight quarters of profits.

Higher losses on MBIA's coverage of mortgage-related securities and complex investments known as derivatives overwhelmed investment income and premiums collected on its insurance policies. That led to a loss of $727.8 million, or $3.50 per share, for the period ended Sept. 30.

A year earlier, the company had a wider loss of $806.5 million, or $3.42 per share. The loss per share was narrower in the 2008 third quarter due to more shares outstanding in that period.

Investors sent shares of the Armonk, N.Y., company down 15.6 percent in after-hours trading. Shares fell 74 cents to $4.07 after having risen 45 cents, or 10.3 percent, to close regular trading at $4.80 prior to the release. The stock is down 44 percent since hitting a 52-week high of $8.54 in late September.

"The third quarter's loss is a reminder that the impact of this recession continues to be felt throughout the economy," said President and Chief Financial Officer Chuck Chaplin in a statement.

Like others in its industry, MBIA has been hit hard in the past two years by losses on its coverage of risky financial instruments such as mortgage-backed securities as the loans held in those securities falter. During the third quarter, the company recorded a $238.8 million pretax loss related to its insurance of mortgage-backed securities. MBIA also posted an $810.2 million pretax unrealized loss on its insurance of credit derivatives and a pretax loss of $171.4 million on investments.

Premiums earned during the quarter totaled $181.2 million, down 23 percent from $234.7 million in the third quarter of last year.

Net investment income dropped 56 percent to $156.8 million. Continued...