MBIA Third Quarter 2025 Earnings Call - Significant Progress and Reduced Uncertainty in Puerto Rico Exposure Drive Improved Loss Metrics

Erica, Conference Call Operator: Welcome to the MBIA third 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 at MBIA. Please go ahead, sir.

Greg Diamond, Managing Director of Investor and Media Relations, MBIA: Thank you, Erica. Welcome to MBIA’s conference call for our Third Quarter 2025 Financial Results. After the market closed yesterday, we issued and posted several items on our website, including our financial results, 10-Q, quarterly operating supplement, and statutory financial statements for both MBIA Insurance Corp and National Public Finance Guarantee Corporation. We also posted updates to the listings of our insurance companies’ insurance portfolios. Regarding today’s call, please note that anything said on the call is qualified by the information provided in the company’s 10-K, 10-Q, 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.

The 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 Schachinger will provide introductory comments, and then a question-and-answer session will follow. Now, here is Bill Fallon.

Bill Fallon, Executive, MBIA: Thanks, Greg. Good morning, everyone. Thank you for being with us today. Our third quarter 2025 financial results had a lower net loss than the comparable period for 2024. Compared to 2024, our third quarter 2025 financial results benefited from lower losses and LAE associated with National’s PREPA exposure, which benefited from the sale of $374 million of National’s PREPA-related bankruptcy claims and higher estimated recoveries on National’s remaining PREPA exposure. National’s PREPA exposure now amounts to $425 million of gross PAR outstanding. Our priority continues to be resolving National’s PREPA exposure, where the path and timing of that resolution remains largely uncertain. The administrative expense claims litigation, which was temporarily stayed following the dismissal of certain Puerto Rico Financial Oversight and Management Board members, has been restarted.

Since last quarter’s conference call, PREPA’s bondholders representing about 30% of the PREPA bonds outstanding have joined forces with the cooperative group of bondholders in opposition to PREPA’s proposed confirmation plan. The combined group now represents approximately 90% of PREPA’s bondholders that oppose the confirmation plan. Regarding the balance of National’s insured portfolio, those credits have continued to perform generally consistent with our expectations. The gross PAR amount outstanding for National’s insured portfolio has declined by approximately $2.1 billion from year-end 2024 to about $23.2 billion as of September 30, 2025. National’s leverage ratio of gross PAR to statutory capital was 23 to 1 at the end of the third quarter. As of September 30, 2025, National had total claims-paying resources of $1.5 billion and statutory capital in surplus of almost $1 billion. Now, Joe will provide additional comments about our financial results.

Joe Schachinger, Financial Executive, MBIA: Thank you, Bill, and good morning, all. I will begin with a review of our third quarter 2025 GAAP and non-GAAP results and then provide an overview of our statutory results. The company reported a consolidated GAAP net loss of $8 million, or a negative $0.17 per share for the third quarter of 2025, compared with a consolidated GAAP net loss of $56 million, or a negative $1.18 per share for the third quarter of 2024. The lower GAAP net loss this quarter was mostly driven by lower losses in LAE at National, primarily on its PREPA exposure. National’s losses in LAE for the third quarter of 2025 was a net benefit of $54 million, compared with a loss of $2 million for the third quarter of 2024.

The net benefit in this year’s third quarter was primarily driven by revising our range of outcomes and the timing of an ultimate resolution in our PREPA loss reserving, giving consideration to the factors Bill previously mentioned. Again, those being the dismissal of certain members of the FOMB. The increase in representation of bondholders within the cooperative group, and the sale of a portion of our PREPA bankruptcy claims at prices higher than our prior quarter’s recorded salvage. Partially offsetting Nationals’ losses and LAE benefit in the current quarter were investment losses related to revaluing MBIA Insurance Corp’s ownership interest in a Zohar-related company. The company’s adjusted net income, a non-GAAP measure, was $51 million, or $1.03 per share for the third quarter of 2025, compared with an adjusted net loss of $174,000 or essentially $0 per share for the third quarter of 2024.

The favorable change was primarily due to the losses in LAE benefit at National this quarter. MBIA’s consolidated book value per share as of September 30, 2025, was a negative $43.17, due to MBIA Insurance Corp’s negative book value per share of $52.64. 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, and our services company, MBIA Services Corp, had total assets of approximately $650 million as of September 30, 2025. Within this total are the following material assets. Unencumbered cash and liquid assets held by MBIA totaled $354 million, which was down from $380 million as of December 31, 2024, primarily due to the payment of principal and interest on the corporate segment’s debt.

In addition to the unencumbered cash and liquid assets, the corporate segment’s assets included approximately $180 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 $73 million for the third quarter of 2025, compared with statutory net income of $19 million for the third quarter of 2024. The positive variance was driven by National’s statutory losses in LAE benefit of $56 million for the third quarter of 2025, resulting from the adjustments to its PREPA loss reserves, compared to losses in LAE of $2 million for the third quarter of 2024. National’s statutory capital as of September 30, 2025, was $994 million, up $82 million compared with December 31, 2024. The increase in statutory capital was driven by National’s year-to-date net income.

Claims-paying resources were $1.5 billion. They continue to be consistent with December 31, 2024. Now, I’ll turn to MBIA Insurance Corp. MBIA Insurance Corp reported a statutory net loss of $25 million for the third quarter of 2025, compared with statutory net income of $2 million for the third quarter of 2024. The unfavorable variance was primarily due to statutory losses in LAE of $25 million for the third quarter of 2025, compared with a losses in LAE benefit of $2 million for the third quarter of 2024. The losses in LAE in the current quarter were primarily driven by adjustments to reflect lower expected recoveries of paid claims associated with the Zohar CDOs. As of September 30, 2025, the statutory capital of MBIA Insurance Corp was $79 million, which was $9 million below year-end 2024 as a result of its year-to-date net loss.

Net of an increase in its admitted assets. Claims-paying resources totaled $326 million at September 30, 2025, compared with $356 million at December 31, 2024. MBIA Insurance Corp’s insured gross PAR outstanding was $2.1 billion as of September 30, 2025, down from $2.3 billion at year-end 2024. We will now turn the call over to the operator to begin the question-and-answer session.

Erica, Conference Call 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. We’ll take our first question from Carlos Pardo, a private investor. Please go ahead. Your line is open.

Carlos Pardo, Private Investor: Oh, hi. This is Carlos calling from London. I mean, first of all, I mean, thank you very much again for your strategy with the custodial receipts. It was brilliant. And also, thank you for the very reasonable approach that you have taken on Puerto Rico over the years. My first question is on the cooperation agreement. After the BlackRock group joined, my understanding from the agreement is that now not a single party can block any deal. So basically, when I look at the definition of requisite bondholders, my understanding from this clause is that no single party, including Assured Guaranty or any other party, can block the deal. Is my understanding correct? Because the definition includes that even if a party would hold more than 25% of the bonds, it would be reduced for the purposes of this calculation to 24%?

Bill Fallon, Executive, MBIA: Carlo, that’s correct. The requisite bondholders totals 77.5%. And as you noted correctly, there is a limit on the percentage that can be voted. That is correct, that no one bondholder would be able to.

Carlos Pardo, Private Investor: That’s fantastic. I think that this is great news, and I think that it changes the dynamics of the cooperation agreement. Also, I assume that with the new board, once the old board finally goes, I think that with the new board elected by the new administration, I think that there are very good prospects of regional agreements. I think that with these changes to the cooperation agreement with the wider group, I assume that I am absolutely in favor of us being there. I hope that you guys can negotiate as good as you always do.

Bill Fallon, Executive, MBIA: Thank you.

Carlos Pardo, Private Investor: Yeah. On the buybacks, I see that the buyback capacity is still there with $71 million. If, as we discussed in the previous call, if it is ever necessary, I assume that you guys are ready to deploy it, although at the moment, I do not think that it is needed. I also noticed that the PREPA payments that are due after the huge payment that we made in July, it is $57 million next year, $20 million in 2027, and $20 million in 2028, which is absolutely manageable. I assume that the buyback capacity is there if needed.

Bill Fallon, Executive, MBIA: It’s correct. We have buyback capacity if we choose to use it.

Carlos Pardo, Private Investor: Fantastic. Yeah, I mean, thank you, guys. I mean, well done. All the best with the negotiations. Hopefully, we can reach a good agreement that is good for us as creditors and also for Puerto Rico and for the people there. Thank you very much.

Bill Fallon, Executive, MBIA: Thank you.

Carlos Pardo, Private Investor: Thank you.

Erica, Conference Call Operator: Thank you. We’ll go next to Patrick Stettelhofer with Kahn Brothers. Please go ahead.

Patrick Stettelhofer, Analyst, Kahn Brothers: Hi. Good morning.

Bill Fallon, Executive, MBIA: Good morning, Patrick.

Patrick Stettelhofer, Analyst, Kahn Brothers: First of all, yeah, great job on selling the custodial receipts. This week on the PREPA docket, it looks like all of the buyers from your previous sale in 2021 and 2022, so GoldenTree, Taconic, Whitebox, made the exact same transfer to Argent, also for custodial receipts, and it looks very coordinated. Do you know why all of Nationals or all of previously Nationals’ available claims are being sold or prepared to be sold in such a coordinated fashion? And what kind of a claims buyer needs a CUSIP rather than buying it directly from a firm like yours?

Bill Fallon, Executive, MBIA: We are aware of what they’ve done with the custodial receipts. Similar to us. We do not know their motivation, so you have to approach them.

Patrick Stettelhofer, Analyst, Kahn Brothers: Got it. In 2022, obviously, you’d hired Barclays for the strategic review, and you tried to sell the company. What are the gating items to doing it again now that you’ve resolved a very large part of your PREPA exposure? You talk about reducing uncertainty and all of that. If you did it again, would you feel like you disclosed it again like back in 2022, or could it have been going on in the background this time around?

Bill Fallon, Executive, MBIA: As you mentioned, about three years ago, we announced that we had engaged Barclays to initiate that sale process. We learned things during that process that led us to conclude that it was not the best time for our shareholders. As you then know, two years ago, we had a special dividend approved from National up to the holding company and then a dividend out to the common shareholders. I think one of the conclusions we had was getting money from National up to the holding company was probably better done before we would sell the company. In a similar way, as you mentioned, the uncertainty around Puerto Rico. We have now substantially reduced that Puerto Rico. Our PREPA exposure is roughly a third of what it was when PREPA went into Title III.

We believe, as you indicated, that reducing that uncertainty allows us to get closer to a sale of the company. We would announce if we start a process. To your point, you do not need and we do not need to have a formal process to talk to potential buyers about selling the company. As you know, companies do that all the time. With the reduced uncertainty, I think people thought the termination of several of the board members was going to lead to a new board being constituted quite quickly. As you know, that has ended in litigation, which has delayed it a little bit. I think as there is even further clarity around where PREPA is going, the potential buyers for National will be more inclined to have meaningful conversations. We may at some point decide to start a formal process.

Patrick Stettelhofer, Analyst, Kahn Brothers: That’s great. On that topic of the dividends, for the first time in years, there were some interesting language changes in the 10-Q around special dividends versus annual dividends. Clearly, it’s front of mind. How do you weigh kind of such a special dividend versus a sale and delivering value to shareholders?

Bill Fallon, Executive, MBIA: Two parts to that. When we think about dividends, there is the dividend from National up to the holding company. As you know, we have an as-of-right dividend every year. We did get that special dividend, which has to be approved by the Department of Financial Services in New York. We obviously received feedback when we went through that process two years ago. I think we have a sense of when it would be appropriate as the book runs off and there is further progress on Puerto Rico. When would be the ideal time to go for a special dividend? Again, there is a lot that goes in that calculation. It is not set in stone, and we have to see how PREPA in particular evolves. Then there is the dividend from the holding company out to shareholders, which you are referring to as well. We take into account for that.

All the factors that you would expect. There are the debt service requirements at the holding company. There is what we think is an appropriate amount of liquidity, which I think has already been discussed this morning. We feel right now that we have the necessary liquidity to meet all the debt service obligations at the holding company. There are, as I mentioned, as-of-right dividends. Taking all those factors into account, if there was enough cash at the holding company to meet all those obligations, and we thought there was enough cushion beyond that, we would consider another dividend to the shareholders.

Patrick Stettelhofer, Analyst, Kahn Brothers: Wonderful. Thank you. Always great to see adjusted book value going up in the quarter. Congrats. Thank you.

Bill Fallon, Executive, MBIA: Thank you.

Erica, Conference Call Operator: Thank you. As a reminder, if you would like to ask a question, it is the star and one on your touchstone telephone. We’ll take our next question from John Staley with Staley Capital Advisors. Please go ahead.

John Staley, Investor, Staley Capital Advisors: Thank you. Bill, in the transaction where you sold the bonds, two questions. Is there any contingency to that sale, or is it simply an outright sale, buyer beware? Can you elaborate a little bit more on the identity of the entity that bought the bond?

Bill Fallon, Executive, MBIA: Yeah. John, with regard to the first, there are no contingencies whatsoever. So we have sold $374 million of our bankruptcy claims. To your point, whatever now happens with the restructuring and the recovery, that’s now on the books of the buyers. With regard to the buyers, it wasn’t one buyer. There are multiple buyers involved in that.

John Staley, Investor, Staley Capital Advisors: Oh, okay. Do you think that you potentially added another litigant against a settlement? If you and the other bondholders come up with a number that is unfavorable to what this group of buyers think it’s worth, do you see another potential delay where they sue over everything, or are they not allowed to sue?

Bill Fallon, Executive, MBIA: We don’t think that is likely. Many of those buyers, to the best of our knowledge, actually already own PREPA bonds.

John Staley, Investor, Staley Capital Advisors: They already own them.

Bill Fallon, Executive, MBIA: They were increasing their position.

John Staley, Investor, Staley Capital Advisors: They’re part of the settlement group. They would be approving.

Bill Fallon, Executive, MBIA: Correct.

John Staley, Investor, Staley Capital Advisors: Okay. All right. The oversight board only has one member on it. Do you anticipate that remaining that way?

Bill Fallon, Executive, MBIA: The update on that is that there was a temporary stay in the court in Puerto Rico. Three of those members that were dismissed filed a suit that they were wrongfully terminated. The temporary restraining order essentially says they were never terminated. Right now, John, there are four members on the board. There is this lawsuit still proceeding in Puerto Rico. They’ve not yet set a schedule as to when the actual merits of the case will be heard. Depending on that outcome, either they are reinstated, which looks as though that’s the way the judge in Puerto Rico is going. That could be appealed by the administration, or the administration potentially could then take further steps to terminate those board members. Right now, there are four board members. In some cases, you need more than four.

Board members, excuse me, to approve certain items. For example, our understanding is to approve a confirmation plan in the bankruptcy court, the board would need at least five members. They are clearly shorthanded right now.

John Staley, Investor, Staley Capital Advisors: That sounds to me. That seems to simplify, but that sounds like a roadblock. That seems like one more thing that could delay things.

Bill Fallon, Executive, MBIA: There is clearly a near-term delay as these three were thought to be terminated board members pursue their case in court.

John Staley, Investor, Staley Capital Advisors: Okay. One final question. I appreciate this time. The MBIA that has the limited capacity versus their outstanding obligations, which are unrelated in terms of eventual liability to the holding company, what’s keeping you from just declaring whatever it is, some level of bankruptcy, and just getting rid of that? You are even cleaner to a potential buyer? That you guys have solved that issue and not sold an entity to a potential buyer who has to accept the fact that there is no liability between the holding company and National and MBIA. Why do you not just get rid of that?

Bill Fallon, Executive, MBIA: It is possible that we could sell it. On an insurance basis or a statutory basis, MBIA Insurance Corp is not bankrupt, right? It has substantial surplus. As we’ve stated before, there is not necessarily economic value to the MBIA shareholder. Whatever value there is would accrue to what we call the surplus note holders. We have consistent conversations, regular conversations with the Department of Financial Services. The real issue there, I think what you’re talking about, if for some reason MBIA Insurance Corp could not pay a claim under a policy, then the department might step in. On an insurance company, the equivalent of bankruptcy would be some form of receivership. It is not bankrupt. It has substantial surplus at this point and meets the regulatory threshold.

John Staley, Investor, Staley Capital Advisors: You do not see that continuing the way it is as a barrier to somebody coming in and buying MBIA?

Bill Fallon, Executive, MBIA: It’s possible someone might raise some questions, but we don’t think it is a barrier to selling MBIA sometime in the future.

John Staley, Investor, Staley Capital Advisors: Thank you, Bill, very much, as always.

Bill Fallon, Executive, MBIA: You’re welcome. Thank you.

Erica, Conference Call Operator: At this time, I am showing no further questions. I’d like to turn the floor back over to Mr. Greg Diamond.

Greg Diamond, Managing Director of Investor and Media Relations, MBIA: Thank you, Erica. Thank you to those of you listening to the 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 on our company. Thank you for your interest in MBIA. Good day and goodbye.

Erica, Conference Call Operator: We’d like to thank everybody for their participation on today’s conference. Please feel free to disconnect your line at any time.