Welcome to the MBIA Inc. Second Quarter 2025 Financial Results Conference Call. I would now like to turn the call over to Greg Diamond, Managing Director of Investor and Media Relations of MBIA. Please go ahead, sir.

Thank you, Erica. Yes, welcome to MBIA's conference call. After the market closed yesterday, we issued and posted several items on our websites, including our financial results, 10Q, quarterly operating supplement, and statutory financial statements for both MBIA Insurance Corporation and National Public Finance Guarantee Corporation. We also posted updates to the listings of our insurance company's insurance portfolios. Regarding today's call, please note that anything said on the call is qualified by the information provided in the company's 10K, 10Q, and other SEC filings as our company's definitive disclosures are incorporated in those documents. We urge investors to read our 10-K and 10-Qs as they contain our most current disclosures about the company and its financial and operating results. Those documents also contain information that may not be addressed on today's call. Definitions and reconciliations of the non-GAAP terms included in our remarks today are also included in our 10-K and 10-Qs, as well as our financial results report and our quarterly operating supplement. The recorded replay of today's call will become available on the MBIA website approximately two hours after the end of the call. Now here is our safe harbor disclosure statement. Our remarks on today's conference call may contain forward-looking statements. Important factors such as general market conditions and the competitive environment could cause our actual results to differ materially from the projected results referenced in our forward-looking statements. Risk factors are detailed in our 10-K and 10-Qs, which are available on our website at mbia.com. The company cautions not to place undue reliance on any such forward-looking statements. The company also undertakes no obligation to publicly correct or update any forward-looking statement if it later becomes aware that such statement is no longer accurate. For our call today, Bill Fallon and Joe Schackinger will provide introductory comments, and then a question and answer session will follow. Now, here is Bill Fallon.

Thanks, Greg. Good morning, everyone. Thank you for being with us today. Our second quarter 2025 financial results had a lower net loss than the comparable period for 2024. Compared to 2024, our second quarter 2025 financial results benefited from lower losses in LAE and lower investment and BIE losses at MBI Insurance Court. Our priority continues to be resolving National's PREPA exposure, where the timing of that resolution remains uncertain. Currently, the Title III court is addressing the administrative expense claims. Given the uncertainty associated with the possible outcomes for National's PREPA bankruptcy claim, which is in excess of $800 million, we continue to believe that the process to sell the company to maximize shareholder value will likely require substantially reducing the uncertainty regarding PREPA. Regarding the balance of the nationals insured portfolio, those credits have continued to perform generally consistent with our expectations. The gross par amount outstanding for nationals insured portfolio has declined by approximately $1.1 billion from year-end 2024. to about $24 billion at June 30th, 2025. National's leverage ratio of gross part of statutory capital was 26 to one at the end of the second quarter. As of June 30th, 2025, National had total claims paying resources of $1.5 billion in statutory capital and surplus in excess of $900 million. Now, Joe will provide additional comments about our financial results.

Thank you, Bill, and good morning, all. I will begin with a review of our second quarter 2025 GAAP and non-GAAP results, and then provide an overview of our statutory results. The company reported a consolidated gap net loss of $56 million, or a negative $1.12 per share, for the second quarter of 2025, compared with a consolidated gap net loss of $254 million, or a negative $5.34 per share, for the second quarter of 2024. The lower gap net loss this quarter was mostly driven by lower losses in LAE at National, primarily on its PREPA exposure. National's loss in LAE for the second quarter of 2025 was $6 million, compared with $141 million for the second quarter of 2024. The larger losses in LAE for the second quarter of 2024 related to Nationals' exit from the then-proposed PREPA Plan of Adjustment, prompting us to revise our loss scenarios to reflect a range of negotiated and litigated outcomes. Also contributing to lower gap net losses this quarter, but to a lesser extent, were lower net losses on financial instruments relating to the revaluation of MBIA Insurance Corp's equity interest in a Zohar-related portfolio company received in connection with claims paid on the Zohar CDOs, and lower losses at MBIA Insurance Corp related to Insured Variable Interest Entities, or VIEs. Higher VIE losses in the second quarter of 2024 primarily related to the deconsolidation of a VIE as part of our strategy to de-risk MBIA Insurance Corp's insured portfolio with no comparable activity in the second quarter of 2025. The company's adjusted net loss, a non-GAAP measure, was $8 million or a negative $0.17 per share for the second quarter of 2025, compared with an adjusted net loss of $138 million or a negative $2.90 per share for the second quarter of 2024. The favorable change was primarily due to the lower losses in LAE at National. MBIA Inc.'s book value per share decreased $2.15 to a negative $43.14 per share as of June 30, 2025 from a negative $40.99 per share as of December 31, 2024. This decrease was primarily due to our $118 million consolidated net loss for the first six months of 2025, partially offset by a decrease in unrealized losses on investments recorded in accumulated other comprehensive income. Included in MBIA Inc.'s book value as of June 30, 2025, is MBIA Insurance Corp.'s negative book value of $51.49 per share, share, which decreased from a negative $49.48 per share as of December 31, 2024. I will now spend a few minutes on our corporate segment balance sheet. The corporate segment, which primarily comprises the activities of the holding company, MBIA, Inc., had total assets of approximately $677 million as of June 30, 2025. Within this total are the following material assets. Unencumbered cash and liquid assets held by MBIA Inc. totaled $355 million, which was down from $380 million as of December 31st, 2024, primarily due to interest payments on the corporate segment's debt. In addition to the unencumbered cash and liquid assets, the corporate segment's assets included approximately $214 million of assets at market value pledged to guaranteed investment agreement contract holders, which fully collateralized those contracts. Now, I'll turn to the insurance company's statutory results. National reported statutory net income of $6 million for the second quarter of 2025, compared with the statutory net loss of $131 million for the second quarter of 2024. The positive variance primarily reflects lower losses in LAE related to National's PREPA exposure. National statutory capital as of June 30, 2025, was $914 million, up $2 million compared with December 31st, 2024. The increase in statutory capital was driven by year-to-date net income of $11 million, which was mostly offset by an increase in unrealized losses on investments. Claims paying resources were $1.5 billion and continue to be consistent with December 31st, 2024. Now I'll turn to MBIA Insurance Corp. MBIA Insurance Corp reported statutory net income of $4 million for the second quarter of 2025, compared with a statutory net loss of $35 million for the second quarter of 2024. The favorable variance was primarily due to lower losses in LAE. A small losses in LAE benefit in the current quarter was primarily driven by favorable adjustments to recoveries of paid claims associated with the Zohar CDOs, while $34 million of losses in LAE in the second quarter of 2024 was primarily driven by unfavorable adjustments to our Zohar-related recoveries. As of June 30, 2025, the statutory capital of NBIA Insurance Corp. was $92 million, which was $4 million higher than year-end 2024. Claims paying resources totaled $346 million at June 30, 2025, compared with $356 million at December 31, 2024. MBIA Insurance Corp's insured gross par outstanding was $2.2 billion as of June 30, 2025, down from $2.3 billion at year-end 2024. And now, we will turn the call over to the operator to begin the question and answer session.

Thank you. If you have a question at this time, please press star 1 on your telephone keypad. If you wish to remove yourself from the queue, press star 2. We ask that when posing your question, you please pick up your handset to allow optimal sound quality. We'll take our first question from Tommy Joint with KBW. Please go ahead.

Hey, good morning, guys. Thanks for taking our questions. The first one I see in the 10Q, a disclosure about national transferring certain prep of bankruptcy claims to a custodian. So a few questions around that. You know, first, can we interpret this action as a signal that you guys are marketing, selling those claims to potential buyers? And secondly, is there a, you know, potential liquid buyer pool for those claims? And then secondly, it looks like you only transferred certain claims of the PREP aside. I guess what made you decide between which ones to transfer and which ones not to transfer?

Yeah, Tommy, what took place is $374 million of claims were transferred to custodian. And in return, they transfer to us what are referred to as custodial receipts. We feel very good about the litigation with regard to PREPA. As you know, it's been ongoing and is the focus and a priority for us. What happens as we have different bonds where we pay the full debt service, those then become claims versus unpaid bonds. So it's not a question that we pick and choose, right? Those have been completely paid off bonds. And essentially by doing this, they are more marketable in that they become effectively securities versus, you know, claims. So that's what you saw reported. That's in our 10Q. With regard to how many buyers there are for this. We believe there are some, as you know, in the past, we sold actually about a third of our PREPA claims going back a few years ago. So there are other interested parties. Whether or not we sell them remains to be seen. But we thought that by doing this, it does make them more marketable. There are certain investment funds that are more likely to be able to hold them because they are now securities. They have their own QCIP number and things like that.

Okay, got it. Thanks for clarifying that. And then secondly, looking to some of the recent headlines, the Oversight Board in Puerto Rico saw five of its seven members get terminated by the president. As we think about just like logistically you know how this impacts the uh the restructuring and the negotiations between bondholders and the oversight board and other stakeholders um how do you guys view that that headline um is it a positive it doesn't delay the process just what are your viewpoints around that there are lots of questions that all the interested parties have given the news that you just referenced, that is the dismissal of five of the board members.

Hard to tell exactly what happens. I think in the coming days, we'll know a whole lot more, starting with how long does it take to replace those board members? Who are the new board members? What approach do they take? Given the challenges that we've had with PREPA and the desire, we believe, of all the creditors to reach a consensual deal, we would hope that this will turn out to be a positive. Again, And until those questions that I just mentioned are answered and the approach that the newly reconstituted board takes, it would really be just speculation on our part in terms of what happens. But as you know, when you go back through the history of PROMESA, which is now, we're nine years into it, there were four large credits that we had that were put into Title III. Three of those have been resolved in a consensual way. It looked as though there was low probability right now that we would reach a consensual deal in the near term. But perhaps this news will lead to an increased probability for a settlement, even along a faster timeline. But we just don't know at this point.

Okay, got it. And then this last one, looking also at the disclosures in the queue, there's a note that the Oversight Board informed the court that it was intending to modify National's settlement in the forthcoming amended plan. Could you give me some background and some details on what that's referring to?

Tommy, which disclosure are you referring to?

In the queue, the business developments around PREPA, it reads that following the appeal decision, the oversight board informed the court, national and other parties that intended to modify national settlement in a forthcoming amended plan.

Yeah, I think you're referring to the one that's in the current queue, but it's dated. It took place a while back. So I don't think there's any new information that we're sharing on that one. And that's with regard to the agreement that we had, which they wanted to modify, which has then resulted in us. We think they breached the agreement. The agreement effectively became terminated.

Thank you. And we'll go next to the line of Carlos Fardo, private investor. Please go ahead.

Oh, hi. This is Carlos calling from London. Thank you very much again for your time back in February. And thank you also for the move to sell the claims or to pass the claims to the custodian. I think that I agree that it increases the marketability. So, I mean, thank you for that. I think it is in line with what I suggested in February, and I really appreciate the move. In terms of the repurchase capacity, we still have 71 million repurchase capacity. And my suggestion, and this is only a suggestion, is that if the share prices would at any point, hopefully not, fall again to lower levels to the ones that we have now, that you would consider, and I say only consider using this repurchase capacity. At the moment, we could repurchase approximately 20% of the shares outstanding. If we were back to lower levels, you know, please just consider the possibility of using it. I know that's a substantial answer.

Yeah, no, thank you. We agree with you. We look at potential repurchases of stock constantly, and you are correct. We have authorization remaining, and it is something that we are always looking at and trading that off with liquidity issues at the holding company and capacity at National to repurchase based on statutory requirements. So we agree with you. It's something that we will continue to look at.

Perfect. Thank you very much. If at any point I feel that we have reached hopefully not a level that is lower enough to justify the repurchase, I will of course drop you a line but at the moment I don't think that it is necessary but just the idea of the repurchases being a possibility helps us as shareholders a lot then the next question would be on the cooperation agreement with Azure and Golden Tree is it still the case that it will expire in December at the end of the year but that Golden Tree and Azure guarantee can extend it until the end of March Yes.

I'm sorry. Go ahead. Joe's going to take it. Carlos, I'm sorry. Could you repeat the question? Yes.

The cooperation agreement with the ad hoc group with the Azure Guarantee and Golden At the moment, our agreement will expire at the end of the year, but the Golden Tree and Azure can't extend it until the end of March. Is that still the case? Is my understanding correct?

Yes. With regards to the agreement, Carlos, yeah, we look at that, the group looks at that, given the news that the previous caller asked about with the reconstitution of the board, we will be gathering new information, we hope, very shortly. We hope that leads to, you know, real discussions and potentially a deal. But we'll continue to review that situation and how it relates to the co-op agreement. But we feel that the co-op agreement has been beneficial up until this point. But we'll continue to look at it.

Perfect. My suggestion, and again, it is only a suggestion, is that you don't extend the co-op until we have the November call. So that would be, and again, you know, it's just a suggestion, a polite suggestion. So just, you know, because you guys are in charge. But that would be my suggestion.

Okay, thank you.

Thank you. And then the final question is regarding the prep exposure. At the moment, the outstanding exposure would be the total exposure as per the results would be $657 million. But I assume that we have made a significant payment back on the 1st of July. Is it possible to give an updated figure?

Yeah, Carlos, we do report that in our operating supplement. As of June 30th, the outstanding par was $504 million. And we didn't make a $91 million and $97 million payment on July 1st. Okay, perfect.

That's fantastic. So that's all. And thank you very much again for the move with the custodian. Really appreciate it.

Thank you.

Thank you.

Thank you. And we'll go next to the line of John Staley with Staley Capital Advisor. Please go ahead.

Yes, sir. Bill, when the Trump administration removed five of the seven members of the Oversight Committee, I think, of course, I think they're all political appointees, but did it include the chairman?

Yes, the current chair of the Oversight Board was Arthur Gonzalez. He was one of the five people who was dismissed by the president.

And he has, am I correct, that he has historically, is he the professor that has been, shall I say, challenging to deal with, with his leadership?

No, no, you're referring to David Skeel. He stepped down a while back. Arthur Gonzalez is a retired bankruptcy judge.

Oh, okay. So who were the two that were left and why were they left?

John, there were no reasons given for that. We just know that the five were dismissed. The two who are left are Andrew Biggs and John Nixon.

And do you find that a positive or a negative, that there's two that stayed?

Listen, it's hard for us to assess. We don't deal with sort of each of the seven board members. We deal typically through their advisors. There's some contact occasionally with board members, but as you can imagine, given all the parties involved, that most of this is done through lawyers, et cetera, and advisors. So hard to know at the individual board member level exactly how they view different aspects of the restructuring.

But in order to get this restructuring completed, I gather that while they remove five of the seven, the oversight board's authority remains in place so that they'll have to put on an additional five or four or three, whatever the bylaws require, for this oversight board to continue to function and continue to exercise its so-called oversight power to approve any deal that's done. That's correct. The board's still there.

You're correct, John. There are certain things that can continue, but there would be certain things, for example, actually approving and confirming a plan. The board, we need to have a quorum. Two people does not, or two directors does not constitute a quorum. Under PROMESA, they need to have four. They need a certain number of positive votes. So they will need to add board members, which our understanding is that that is the intention, just a question of when that happens and who the people are. Okay. All right.

And are there any valuation guidelines on, for instance, when you transferred to fully paid bonds? Has there been any transactions in those bonds that suggest what market levels are out there?

It's not a very deep or liquid market. There are some trades that have been done. Again, it's very small, so nothing along the lines of the size that we transferred into the custodian, because I mentioned that's $374 million. The small trades that have been done have been done at about $0.55 on the dollar. for the uninsured. Yes, those are for uninsured bonds, as Greg reminds me of. But that's roughly, but again, those are small transactions. Okay. All right.

Thank you very much.

Thank you. As a reminder, if you'd like to ask a question, it is the star and one on your touchtone telephone. And we'll take our next question from Patrick Stadelhofer with Conn brothers, please go ahead.

Good morning. Now that you've turned your claims into easy-to-sell securities, would monetizing half your exposure, like you did four or five years ago, move along a sale process by lowering that uncertainty you talk about and kind of narrow that bid-ask spread, or would it at least help with a special dividend in the alternative?

It clearly will reduce the uncertainty with regard to PREPA, which, as you know, is one of the things that we've cited need to happen for us to pursue a sale of the company. So, you know, if we were to sell $374 million of our total exposure, which is a little bit in excess of $800 million, that clearly would be a big step in that direction. With regard to the second, a little bit premature to start speculating what happens with regard to special dividends just given the remaining Puerto Rico exposure. But again, all those things are possibilities and the probability goes up as we take those types of actions that you're suggesting.

Just a question is, why did you take the step to transfer to the custodian now as opposed to some of these other tranches that already matured a few years ago? So just, I guess, a question around the timing. Thank you.

Yeah, I think nothing special about the timing. We've been looking at this. It takes a while to put the program in place. We thought we'd gotten to a quantum of bond claims where it was meaningful, and that by increasing the marketability of those, it might help facilitate sales if we found attractive prices to transact at. But as we've said, we've also sold them without putting them into a custodian and creating custodial receipts where we have sold claims.

But again, we thought it was a good thing to do. nothing in particular about this time there was no specific catalyst uh to doing it right now great thank you thank you and we'll take our next question from paul saunders with hutch capital morning bill thanks for taking my question sure morning um on those on the um the transferred claims that we're talking about to the custodian you mentioned 374 million um Is that all of the claims? Or my understanding was you had about $300 million previously, and now you just paid $92 million. So, you know, rough numbers, $390,000, $400,000. Did you leave any behind? And if so, was there a reason for that?

No, we didn't leave any behind. As I mentioned, you can't transfer until you've paid off the full bond, right? So when you go back, we talk about our prep exposure, but it's made up of lots of different bonds that we insured. So even though you saw $91 million getting paid, it's possible that none of those were the last payment on a particular bond. So it's just a question of when you've made the last net service payment and the bonds completely paid off that we can then transfer it and create a new CUSIP for it.

Perfect.

That makes perfect sense.

And then last one, this is also pretty tiny, but it did look like Nationals salvage went down a little bit, lost reserves went up, you know, slightly. I'm assuming that's changing the recovery assumptions on PREPA, and if so, I mean, I guess is that right? And if so, was there a reason that you thought sort of PREP recoveries might be a little bit lower than as of last quarter?

Yeah, so the change you're seeing is a result of modifications to assumptions within our PREPA scenarios. Each quarter, we look at those assumptions and we may make modifications. This quarter, we did make a small modification, which generated a small loss, which you're seeing reflected in the results.

Obviously, it sounds like you don't really want to provide any more color in that. Was there something that happened that made you change that? And I kind of while we're on that, is that something like where, you know, the market obviously views the board decision by Trump as positive. You know, is that something you'd factor into your recovery assumptions that, you know, now maybe market prices of prep of claims are moving higher or something? Would you factor that into the recovery assumptions for the quarterly balance sheet?

Yeah. So, Paul, with regard to sort of your earlier comment, in terms of the current reserve that was reflected in the second quarter results, just following up on Joe's comments, it really had to do more with timing as opposed to the dollar or percentage recovery. And as you know, right, as we follow the litigation, the process, every quarter we look at it and we try to estimate how much longer it's going to take. And no one has a precise answer. But I think the decline in salvage that you saw had to do with it taking longer than perhaps we expected three months earlier. Nothing more than that. There was no new information with regard to what the Oversight Board was going to offer, what the bondholders might accept, where there might be an agreement reached. With regard to your follow-up question regarding the events this week and what will be a newly constituted board in the near future, we will take that into account when we do reserves for third quarter based on what we learned. So when the board is in place, the board and its advisors have a new approach with regard to, you know, perhaps increasing the likelihood that a consensual deal is reached versus litigating this and, you know, people put forth estimates how long it could take to litigate.

So in that sense, absolutely, it will get factored in to the reserves if we think that has changed any assumptions in the scenarios that we use. that's great um and sorry one more for me bill just while i have you um because you're you're being so open with us on these and it's very helpful for me but um the the articles on that the board news are you know as i said very positive there's a view that trump is is bond holder friendly could you being a little closer to the situation than me do you agree with that and you know do you have any sort of context or have you heard him discuss puerto rico specifically or anything like that in terms of how his views might be different than the current oversight board or or have you sort of heard any expectations on on i guess trump's view of how he would would resolve the difference between the island and the oversight board and the bondholders?

So with regard to the last part of your question, none of us here have heard anything from the president with regard to Puerto Rico, whether it be any public statements, which we're unaware of any or anything that we've heard through advisors or any of his cabinet or anything like that. With regard to sort of the early part of the question and what does this mean and how we'll be approached, and the news seems to have been a positive, as you mentioned, we obviously see all the same things. Given that we've been at this for quite a long time, it would be great if, in fact, sort of the market reaction is correct, and this moves along faster than perhaps people anticipated even, you know, a week ago. Whether it's going to be more friendly to bondholders, all those things, hopefully we'll learn more in the very near future. So, you know, we like to be optimistic. But again, what we know in terms of facts are that five board members have been dismissed. And that's all we know at this point.

Sounds good. Thank you, Bill. Thank you.

At this time, I am showing no further questions, so I'd like to turn the floor back over to Greg. Diamond, please go ahead.

Thank you, Erica. And thanks to those listening to our call today. Please contact us directly if you have additional questions. We also recommend that you visit our website at MBIA.com for additional information on our company. Thank you for your interest in MBIA. Good day and goodbye.

We'd like to thank everybody for your participation. Please feel free to disconnect your line at any time.