MBIA Inc. 2026 Q2 Earnings Call

Yes, welcome to MBIA's conference call for our latest 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 Corporation and National Public Finance Guarantee Corporation. We also posted updates to the listings of our insurance company's insured 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-Qs, 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's Bill Fallon. Thanks, Greg.

Good morning, everyone. Thank you for being with us today. Our second quarter and year-to-date financial results for 2026 provided favorable comparisons to the same periods for the prior year. Our priority continues to be resolving National's PREPA exposure. National's outstanding PREPA exposure reduced by $35 million to $390 million of gross par value due to the insurance policy claims paid by National on PREPA bonds that matured on July 1st, 2026. There was also some progress on several of the litigations related to PREPA.

The director of the White House Personnel Office, which appealed the injunctive relief that was awarded to three of the oversight board members that were fired by President Trump, has asked the First Circuit Court of Appeals to remand that case back to the trial court in light of the U.S. Supreme Court's rulings issued in late June regarding the Slaughter and Cook cases. In the case about the PREPA bondholders' counterclaim for the calculation of net revenues, Judge Swayne lifted the self-imposed litigation stay, and that case is currently in discovery. The administrative claim appeal to the First Circuit, that case is now fully briefed and scheduled for all arguments in Boston on September 15th. Separately, the oversight board nearly doubled their settlement offer to PREPA bondholders from $1.6 billion to approximately $3 billion.

Bondholders representing about 90% of bondholder claims soundly dismissed the offer as unacceptable and inadequate. 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 $1.5 billion from year-end 2025 to about $20.8 billion at June 30th, 2026. National's leverage ratio gross par to statutory capital was 21:1 at the end of the quarter, down from 24:1 at year-end 2025. As of June 30th, 2026, National had total claims-paying resources of $1.4 billion and statutory capital and surplus of about $970 million. Joe will provide additional comments about our financial results.

Thank you, Bill. Good morning, everyone. I will begin with a review of our second quarter 2026 GAAP and non-GAAP results, followed by an overview of our holding company liquidity and our statutory results. The company reported a consolidated GAAP net loss of $46 million, or a negative $0.91 per share, for the second quarter of 2026, compared with a consolidated GAAP net loss of $56 million, or a negative $1.12 per share, for the second quarter of 2025.

The lower GAAP net loss this quarter was primarily driven by two items First, we recorded a reversal of legal expenses within a consolidated variable interest entity, or VIE, related to our Zohar CDO recoveries at MBIA Insurance Corp.

Second, our results benefited from foreign exchange gains in the second quarter of 2026, compared with foreign exchange losses in the same period of 2025. These foreign exchange impacts were associated with the revaluation of euro-denominated medium-term note liabilities in our corporate segment and resulted from changes in foreign exchange rates. The company's adjusted net loss, which is a non-GAAP measure, was $7 million, or a negative $0.14 per share, for the second quarter of 2026, compared with an adjusted net loss of $8 million, or a negative $0.17 per share, for the second quarter of 2025.

The modest improvement in our adjusted net loss this quarter was primarily driven by slightly lower loss and loss adjustment expenses, or LAE, at National related to its PREPA exposure. MBIA Inc.'s book value per share as of June 30th, 2026, was negative $45.58 per share, reflecting a decrease of $1.31 per share from year-end 2025. This decrease was primarily due to our consolidated net loss of $86 million for the first six months of 2026. Included in MBIA Inc.'s book value per share as of June 30th, 2026, is a negative $54.26 per share of MBIA Insurance Corp.'s book value. I will now spend a few minutes on our corporate segment balance sheet. The corporate segment, which primarily includes the activities of the holding company, MBIA Inc., had total assets of approximately $635 million as of June 30th, 2026. Within this total are the following material assets.

Unencumbered cash and liquid assets held by MBIA Inc. totaled $337 million, compared with $357 million as of December 31st, 2025. The decrease from year-end 2025 was primarily due to ongoing debt service payments and operating expenses net of investment income. We continue to manage holding company liquidity carefully with a primary focus on meeting our outstanding obligations and preserving financial flexibility. In addition to the 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. These assets fully collateralized the principal amounts of those contracts. The segment's assets also included $66 million of assets at MBIA Services, our management services company, to support its operating obligations. I'll now turn to the insurance company's statutory results.

National reported statutory net income of $10 million for the second quarter of 2026, compared with statutory net income of $6 million for the second quarter of 2025. The favorable variance was primarily driven by higher earned premiums, which resulted from refundings of insured credits and lower loss in LAE and operating expenses in the current quarter. National statutory capital as of June 30th, 2026, was $968 million, up $31 million compared with December 31st, 2025. The increase was mostly due to National's statutory net income for the first six months of 2026, as well as unrealized gains in its investment portfolio. As of June 30th, 2026, National's claims-paying resources were $1.4 billion, consistent with year-end 2025. Now I'll turn to MBIA Insurance Corp. MBIA Insurance Corp. reported statutory net income of $27 million for the second quarter of 2026, compared with statutory net income of $4 million for the second quarter of 2025.

The favorable variance was primarily driven by a significantly larger loss in LAE benefit in the current quarter compared with the second quarter of 2025. The loss in LAE benefit this quarter was driven by our ongoing reassessment of recoveries of paid claims and other amounts owed to MBIA Insurance Corp. related to the Zohar CDOs. As of June 30th, 2026, the statutory capital of MBIA Insurance Corp. was $106 million, reflecting an increase of $27 million from year-end 2025.