Conference Transcript - MBI 2026-02-27

Operator

Welcome to the MBIA, Inc. Fourth Quarter and Full Year 2025 Financial Results Conference Call. I would now like to turn the call over to Greg Diamond, Managing Director of Investor and Media Relations at MBIA. Sir, please go ahead.

Greg Diamond, Head of Investor Relations

Thank you, Chelsea, and welcome to our conference call for the full year 2025 MBIA Financial Results. After the market closed yesterday, we issued and posted several items on our websites, including our financial results, 10K, 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 by the company's 10K and other SEC filings as our company's definitive disclosures are incorporated in those documents. We urge investors to read our 10K as it contains our most current disclosures about the company and its financial and operating results. The 10K also contains information that may not be addressed on today's call. The definitions and reconciliations of the non-GAAP terms included in our remarks today are also included in our 10K as well as our financial results report and our quarterly operating supplement. The recorded replay of today's call will become available approximately two hours after the end of the call. Now for 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, which is 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 Sackinger will provide introductory comments and then a question and answer session will follow. Now here is Bill Fallon. Thanks, Greg. Good morning,

Bill Fallon, CEO

everyone. Thank you for being with us today. We had lower net losses for our full year 2025 financial results versus full year 2024 and comparable net losses for the fourth quarters of 2025 and 2024. Comparing the two years results, National recorded a benefit from losses and loss adjustment expense in 2025 versus incurred losses in 2024. For both years, National's losses in LAE resulted primarily from changes to loss estimates for its PREPA-related exposure. The 2025 benefit largely resulted from the sale of a custodial receipt associated with National's PREPA bankruptcy claims at prices better than National's loss estimates, as well as favorably revised estimate for losses on National's remaining $425 million of PREPA gross par outstanding. Our priority continues to be resolving National's PREPA exposure. In that regard, there has not been much substantive progress since our last conference call in November. Until the legal issues related to the members of the Financial Oversight and Management Board are resolved, it is unlikely that substantive progress will be made. Regarding the balance of 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 $23 billion from year-end 2024 to about $22 billion at the end of 2025. National's leverage ratio of gross part of statutory capital was 24 to 1 at the end of 2025, down from 28 to 1 at year-end 2024. As of December 31, 2025, National had total claims-paying resources of $1.4 billion and statutory capital surplus in excess of $900 million. Now Joe will provide additional comments about our financial results.

Joe Schachinger, CFO

Thank you, Bill, and good morning, all. I will begin with a review of our fourth quarter and full year 2025 gap and non-gap results and then provide an overview of our statutory results. The company reported a consolidated gap net loss of $51 million or a negative $1.01 per share for the fourth quarter of 2025, compared with a consolidated gap net loss of also $51 million or a negative $1.07 per share for the fourth quarter of 2024. When comparing the fourth quarters of 2025 and 2024, there are a few offsetting items. Lower revenues in our corporate segment, which were primarily due to a decrease in foreign exchange gains, were offset by lower interest expense on MBIA Insurance Corps' floating rate surplus notes and lower operating expenses related to Consolidated Variable Interest Entities, or VIEs, at NBIA Insurance Corps. The company's adjusted net loss, a non-GAAP measure, was $12 million, or a negative 24 cents per share, for the fourth quarter of 2025, compared with an adjusted net loss of $22 million, or a negative 48 cents per share, for the fourth quarter of 2024. The favorable change was primarily due to lower losses in LAE at National, largely related to its PREPA exposure. For a full year 2025, the company reported a consolidated gap net loss of $177 million, or a negative $3.58 per share, compared with a consolidated net loss of $447 million. or a negative $9.43 per share for the full year 2024. The lower consolidated gap net loss for full year 2025 was driven by lower expenses and to a lesser extent higher revenues compared with

Bill Fallon, CEO

full year 2024. Our lower expenses were primarily driven by a loss in LAE benefit on our PREPA

Joe Schachinger, CFO

exposure in 2025 compared with an expense in 2024. The benefit in 2025 primarily resulted from our sale of PREPA bankruptcy claims at an amount that exceeded national's loss recovery estimates and the impacts of adjustments to our PREPA loss scenarios. Contributing to our higher revenues were lower losses related to VIEs at NBIA Insurance Corp. In 2024, VIE losses resulted from the repurchase of VIE debt and the deconsolidation of a VIE with no comparable activity in 2025. In addition, we recorded lower fair value losses in 2025 on assets acquired in connection with recoveries of paid claims related to the Zohar CDOs offset by higher foreign exchange losses as a result of the dollar weakening and lower net investment income. The company's adjusted net income was $23 million, or 46 cents per share, for full year 2025 compared with an adjusted net loss of $184 million or a negative $3.90 per share for full year 2024. The favorable change was primarily due to the loss in LAE benefit at National in 2025 related to its PREPA exposure. MBIA Inc.'s book value per share decreased $3.28 cents to a negative $44.27 per share as of December 31st, 2025. This decrease was primarily due to our consolidated net loss for full year 2025. In addition, included in NBIA Inc.'s book Corp's book value. 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 $653 million as of December 31, 2025. five. Within this total are the following material assets. Unencumbered cash and liquid assets held by MBIA Inc. totaled $357 million, compared with $380 million as of December 31st, 2024. The decrease was largely due to the repayment of MBIA Inc. 7% debt that matured in December of 2025 and the payment of operating expenses, partially offset by a dividend received from National. In December of 2025, National declared and paid an as-of-right dividend of $63 million to MBIA Inc. In addition to these unencumbered cash and liquid assets, the corporate segment's assets included approximately $183 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 $5 million for the fourth quarter of 2025, compared with a statutory net loss of $10 million for the fourth quarter of 2024. The favorable variance was driven by lower loss in LAE in the fourth quarter of 2025 related to National's PREPA exposure. For full year 2025, National reported statutory net income of $88 million compared with a statutory net loss of 133 million dollars for full year 2024. The favorable change was primarily due to a loss in LAE benefit of 35 million dollars in 2025 compared with an expense of 196 million dollars in 2024. The loss in LAE activity in both years were mostly related to national's PREPA exposure. National statutory capital as of December 31st, 2025 was $937 million, which was up $25 million compared with December 31st, 2024. The increase was largely due to national statutory net income for full year 2025, partially offset by the $63 million as of right dividend paid to MBIA, Inc. As of year-end 2025, claims paying resources were $1.4 billion. Now I'll turn to MBIA Insurance Corp. MBIA Insurance Corp. reported a statutory net loss of $7 million for the fourth quarter of 2025 compared with statutory net income of $4 million for the fourth quarter of 2024. The net loss for the fourth quarter of 2025 was driven by losses reclassified from surplus related to the dissolution of MBIA Insurance Corp's Mexican subsidiary and higher losses in LAE compared with the fourth quarter of 2024. In last year's fourth quarter, losses in LAE related to RMBS exposure were mostly offset by a benefit related to recovery estimates on the Zohar CDOs. For full year 2025, MBIA Insurance Corp. reported a statutory net loss of $26 million compared with a statutory net loss of $64 million for full year 2024. The lower net loss in 2025 was primarily driven by lower losses in LAE, largely related to estimating recoveries of paid claims associated with the Zohar CDOs. As of December 31st, 2025, the statutory capital of MBIA Insurance Corp. was $79 million, dollars, down from $88 million at year-end 2024 due to its net loss for full year 2025, partially offset by an increase in the value of investments recorded directly to surplus. As of year-end 2025, claims-paying resources totaled $317 million. MBIA Insurance Corps' Group's insured gross par outstanding was approximately $2 billion as of December 31st, 2025, down about 13% from year-end 2024. The decrease in gross par outstanding was primarily driven by regular amortization of the insured portfolio. And now we will turn the call over to the operator to begin the question and answer session.

Operator

thank you if you have a question at this time please press star one on your telephone keypad if you wish to remove yourself from the queue press star two we ask that when posing your question you please pick up your handset to allow optimal sound quality and we'll take our first question from Tommy McJoyne with KBW. Please go ahead. Hey, good morning. The fourth quarter

Tommy McJoynt, Analyst — KBW

often presents a time or an opportunity for a special dividend, and that's based off of the special dividend that we saw out of National in the fourth quarter of 2023. This most recent fourth quarter, did you guys explore the potential for a special dividend? Are you having conversations with your regulators about potentially distributing some of the excess capital beyond just the as a right dividend?

Bill Fallon, CEO

Yeah, Tommy, with regard to special dividends, first of all, there's nothing in particular about the fourth quarter. National, just given its history, has only actually requested and had one special dividend, which happened to be in the fourth quarter of 2023, a couple of years ago. So it's something that we are looking at all the time, as you know and can appreciate as the portfolio runs off, and in particular as our prep exposure comes down, which it did substantially in the second half of last year, the likelihood and the amount of a potential speculative goes up. So it's something that we're looking at all the time. There's no information we have at this point. The information that we would provide is that we have received approval for a special dividend and have distributed it to the holding company. But it's something that, again, we're looking at all the time. And I think since the last special dividend, circumstances have improved in terms of the likelihood of a special dividend.

Tommy McJoynt, Analyst — KBW

Thanks for that. And the other important story that people are focused on just around the strategic process, potentially including a sale of the company, what's the latest updates there in that process as you explore that opportunity? And I've asked this before, and I'll ask it again. Do you think in a scenario where there is a sale, does the company just sell national and then take the proceeds and sort of wind down the rest of the operation? Or would the strategic action be to sell the entire holding company and its subsidiaries included?

Bill Fallon, CEO

As you know, and just as a reminder to other people, we did look at selling the company a few years ago. So based on the feedback during that process, we concluded it would be beneficial for our shareholders for us to go get a special dividend and then distribute money to the shareholders and also to hopefully further resolve or make progress with regard to the PREPA restructuring. We obviously were successful with the dividend. Prepa, we reduced our exposure. I can't say that there's been much real progress in terms of resolving Prepa. We are optimistic that something will surely develop this year. With regard to whether to sell the entire company or whether we would sell just national and then, to your point, deal with all the other pieces, whatever is best for the shareholders is what we will do. So, in a sense, all options are on the table. A sale of the company, in a sense, is the cleanest way to do it. But again, if there is more value for shareholders by doing it by its components, then that's what we'll do.

Operator

Thank you. Thank you. Our next question will come from John Staley with Staley Capital Advisors. Please go ahead.

John Staley, Analyst — Staley Capital Advisers

Thank you. Bill, I have a couple of quick questions. First of all, with regard to PREPA and the bonds that you sold, is there a bid out there to sell the rest of your exposure? And if so, how would it compare to the price you got the last time?

Bill Fallon, CEO

Yeah, with regard to the PrEP exposure that we sold last year, John, those were fully paid QCIPs. We are now in a situation where we really don't have much left. In fact, we've got a maturity coming up later this year. Oh, so you're still paying. Okay. So we have the $425 million of exposure. That's not something that can be sold via the custodial receipt that we did last year. So the answer is we wouldn't do a sale like that.

John Staley, Analyst — Staley Capital Advisers

Okay, I understand that. Secondly, with some of the political trends that are happening, particularly New York, California, all the nonsense up in Minnesota, are you getting any pressure from your auditors of higher valuation reserves related to non-Puerto Rican credits?

Bill Fallon, CEO

The short answer is no, as you can appreciate. We look at everything in the portfolio constantly. We're quite comfortable with the way everything is proceeding at this point. And there's been nothing that's been identified. I understand what you're talking about, but nothing identified with regard to specific credits that would cause us to take additional reserves because of those activities that you referred to.

John Staley, Analyst — Staley Capital Advisers

And with regard to NBIA insurance, where its statutory capital is dwarfed by its guarantees that are still out there, whatever it was, $2 billion or something like that, what has to happen for you to wrap that up? So it's no longer a part of, you have Puerto Rico, you have that subsidiary in which there's no liability back, MBIA Inc. But why don't you just get rid of it, rapid liquidated or whatever you have to do, or is it regulators won't let you do that?

Bill Fallon, CEO

There's some of both of those things. So the runoff has occurred sort of as we expected, to your point, there's $2 billion left. There is one major restructuring in there, which is referred to as Zohar, which was a deal that we had wrapped. That's one that's going to take a little bit of time. And once that's resolved, then to your point, there's not much left with regard to the remaining runoff of that company. And so there may be ways after that to accelerate the runoff of MBI Insurance Corp.

John Staley, Analyst — Staley Capital Advisers

So you're still managing a recovery process related to collateral with Zohar?

Bill Fallon, CEO

That's correct.

John Staley, Analyst — Staley Capital Advisers

Oh, I got it. Okay. And I know that Judge Swain, as I understand it, is pushing for the private parties to resolve things. I mean, I thought Trump may have done something with the Republican governor there. But what the hell is keeping this thing from being wrapped up? but Puerto Rico is still being denied access to the municipal market, and electricity is still going off. It just seems so crazy, and they're sitting there with all that money down there. I don't understand what's stopping it. Is it just politics?

Bill Fallon, CEO

Well, I think in the near term, as I referred to in my comments, you've got the situation with the Oversight Board, which is the one negotiating the prep or restructuring on behalf of the Commonwealth. There are four board members, as you know. There was the administration action last year to remove six of the board members. Three took it to court and were reinstated. Either the four existing board members need to, in a sense, take the initiative and start negotiating again with the bondholders, or when the administration names people to those open three spots, perhaps then that will be the catalyst to restarting negotiations. So that's really, I think, what the creditors are waiting for. And as soon as that happens, I think then you'll see some real progress.

John Staley, Analyst — Staley Capital Advisers

Okay. Is there political pressure that you're aware of to get those six seats filled? Is there somebody who's an advocate for that in Congress?

Bill Fallon, CEO

Well, there's two parts to it. With regard to the three that challenged their termination in court, there are lawsuits going on to remove those three still. And so I think the administration is taking the position that they should be removed. And therefore, those three spots perhaps are a little uncertain for a period of time. With regard to the other three spots, I don't have an answer for you as to when the administration will fill those. Again, we would hope it would be sooner rather than later.

John Staley, Analyst — Staley Capital Advisers

Okay. All right. So, and the issue gets down, again, to presidential authority.

Bill Fallon, CEO

The president needs to approve all appointments to the board.

John Staley, Analyst — Staley Capital Advisers

yeah but he also could fire them and so somehow or other some guys figure out that they still should be on the board it's amazing to me it must be driving you nuts

Bill Fallon, CEO

we understand your frustration trust me okay thank you bill very much thank you thank you

Operator

So, as a reminder, that is star one to ask a question. And our next question will come from Patrick Saddlehofer with Kahn. Please go ahead.

Patrick Saddlehofer, Analyst — Kahn

Patrick Saddlehofer, Good morning.

Bill Fallon, CEO

Patrick Saddlehofer, Good morning.

Patrick Saddlehofer, Analyst — Kahn

Just a question on the extraordinary dividend, because it's been seven months since the custodial receipts were sold and kind of de-risked the whole proper exposure, which I'm just curious what is the gating item to actually trying to get one, given that you've said, you know, the circumstances have improved and all of it, and you're looking at it, but what is it going to take you from looking at it to acting on it, especially with other progress, somewhat stalled

Bill Fallon, CEO

in PREPA? Thank you. Yeah, as I mentioned, with regards to special dividend, it's something we're looking at all the time. We don't get into, you know, where we are in the process, whether we start a process, feedback from the regulator. Our view is those are discussions between us and our regulator. We talk to our regulator about lots of issues on a regular basis. When we have approval for a special dividend and when it's been distributed, as I mentioned earlier, we'll announce that that has taken place. But again, I think the things to look at are the runoff in the portfolio and in particular the reduction in the PREPA exposure. And again, for those people who are familiar, it is a process you go through with the regulator, which does take some time.

Operator

All right. Well, Patrick, your line is still open. I'll be off. No. Thank you. Okay. Thank you. And at this time, I am showing no further questions. So I'd like to turn the floor back over to Greg Diamond for any additional or closing remarks.

Greg Diamond, Head of Investor Relations

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

Operator

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.