MBIA (MBI) Q4 2025 Earnings Call Transcript

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DATE

Feb. 27, 2026, 8 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — William Charles Fallon
• Chief Financial Officer — Joseph Ralph Schachinger
• Director of Investor Relations — Gregory R. Diamond

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TAKEAWAYS

• Consolidated GAAP net loss -- $51 million, or negative $1.01 per share, for the full year 2025.
• Change in full-year GAAP net loss -- $177 million, or negative $3.58 per share, compared with $447 million, or negative $9.43 per share, in the previous year.
• Adjusted net income (non-GAAP) -- $23 million, or $0.46 per share, for the full year, an improvement from an adjusted net loss of $184 million, or negative $3.90 per share, in the prior year.
• Book value per share -- Decreased by $3.28 to negative $44.27 per share as of year-end, primarily due to consolidated net loss.
• National's gross par outstanding -- Decreased by approximately $3 billion to $22 billion, with a leverage ratio reduction from 28-to-1 to 24-to-1.
• National's statutory capital -- $937 million at year-end, up $25 million from the previous year, with claims-paying resources of $1.4 billion.
• National's statutory net income -- $88 million full-year, compared with a statutory net loss of $133 million the prior year, driven by a $35 million loss and LAE benefit related to PREPA claims.
• Dividend activity -- National declared and paid a $63 million as-of-right dividend to MBIA(NYSE:MBI) in December.
• MBIA Insurance Corporation’s statutory net loss -- $26 million for the full year, improved from a $64 million statutory net loss the year before.
• MBIA Insurance Corporation statutory capital -- $79 million at year-end, down from $88 million, with claims-paying resources of $317 million.
• MBIA Insurance Corporation gross par outstanding -- $2 billion at year-end, reflecting a 13% decline, mainly due to regular amortization.
• Corporate segment liquid assets -- Unencumbered cash and liquid assets totaled $357 million, compared to $380 million a year earlier, due primarily to debt repayment and operating expenses, offset by the National dividend.
• National’s PREPA exposure -- Remaining exposure totals $425 million of gross par; benefit from 2025 driven by claims sale above loss estimates and revised loss scenarios.
• Strategic process update -- Management confirmed "all options are on the table," including a potential company sale or sale of National, stating "whatever is best for the shareholders is what we will do."
• Special dividend potential -- Management reiterated ongoing review, noting the likelihood and the amount of a potential special dividend goes up as PREPA exposure reduces and portfolio runs off.

SUMMARY

Management highlighted that limited progress has been made regarding PREPA restructuring, with resolution still contingent on resolving legal issues related to Financial Oversight and Management Board appointments. The insured portfolio outside of PREPA continues to perform generally in line with company expectations. In response to a question, management clarified that ongoing recovery processes for Zohar CDOs remain a gating item for further runoff of MBIA Insurance Corporation. The CEO also addressed concerns about reserve pressure from non–Puerto Rican credits, stating nothing has been identified with regard to specific credits that would cause us to take additional reserves. In the Q&A, management provided context that finalizing insurance subsidiary runoff is tied to resolving the remaining large Zohar restructuring.

• CEO Fallon noted the process for obtaining special dividend approval with regulators is ongoing and "does take some time," with the company committed to providing updates once approval and distribution occur.
• Management described the absence of material progress since the prior call in November regarding PREPA claim resolution, noting that resolution is unlikely until new board appointments are finalized.
• The CEO elaborated that potential strategic actions might include selling National or the entire holding company, emphasizing evaluation of whatever is best for the shareholders. In a sense, all options are on the table. To sell the company is the cleanest way to do it. But, again, if there is more value for shareholders by doing it via its components, then that is what we will do.

INDUSTRY GLOSSARY

• PREPA: Puerto Rico Electric Power Authority — a major municipal credit undergoing restructuring, to which MBIA(NYSE:MBI) is exposed via insured bonds.
• Zohar CDOs: A specific set of collateralized debt obligations which MBIA(NYSE:MBI) insured and for which recoveries continue to impact statutory results.
• LAE: Loss Adjustment Expense; the costs associated with investigating and settling insurance claims.
• Gross par outstanding: The principal amount of insured debt that has not yet matured or been paid off.
• Variable Interest Entities (VIEs): Entities in which MBIA(NYSE:MBI) has a controlling financial interest, affecting consolidated results.

Full Conference Call Transcript

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-Ks 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, William Charles Fallon and Joseph Ralph Schachinger will provide introductory comments, and then a question and answer session will follow. I will now turn the call over to William Charles Fallon.

William Charles Fallon: Thanks, Greg. Good morning, 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 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 and 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 a 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 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 $3 billion from year-end 2024 to about $22 billion at the end of 2025. National’s leverage ratio of gross par to statutory capital was 24-to-1 at the end of 2025, down from 28-to-1 at year-end 2024. As of 12/31/2025, National had total claims-paying resources of $1.4 billion and statutory capital and surplus in excess of $900 million. I will now turn the call over to Joseph Ralph Schachinger for additional comments about our financial results.

Joseph Ralph Schachinger: Thank you, Bill, and good morning all. I will begin with a review of our fourth quarter and full year 2025 GAAP and non-GAAP results and then provide an overview of our statutory results. The company reported a consolidated GAAP net loss of $51 million, or a negative $1.01 per share, for 2025 compared with a consolidated GAAP net loss of also $51 million, or a negative $1.07 per share, for 2024. When comparing 2025 and 2024, there were 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 Corporation’s floating rate surplus notes and lower operating expenses related to consolidated variable interest entities, or VIEs, at MBIA Insurance Corporation. The company’s adjusted net loss, a non-GAAP measure, was $12 million, or a negative $0.24 per share, for 2025 compared with an adjusted net loss of $22 million, or a negative $0.48 per share, for 2024. The favorable change was primarily due to lower losses and LAE at National, largely related to its PREPA exposure.

For full year 2025, the company reported a consolidated GAAP 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 full year 2024. The lower consolidated GAAP net loss for full year 2025 was driven by lower expenses and, to a lesser extent, higher revenues compared with full year 2024. Our lower expenses were primarily driven by a loss and LAE benefit on our PREPA 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 estimate and the impacts of adjustments to our PREPA loss scenarios. Contributing to our higher revenues were lower losses related to VIEs at MBIA Insurance Corporation. 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 $0.46 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 and LAE benefit at National in 2025 related to its PREPA exposure. MBIA Inc.’s book value per share decreased $3.28 to a negative $44.27 per share as of 12/31/2025. This decrease was primarily due to our consolidated net loss for full year 2025. In addition, included in MBIA Inc.’s book value as of 12/31/2025 is a negative $53.35 per share of MBIA Insurance Corporation’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 12/31/2025. 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 12/31/2024. The decrease was largely due to the repayment of MBIA Inc. 7% debt that matured in December 2025 and the payment of operating expenses, partially offset by a dividend received from National. In December 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 will turn to the insurance companies’ statutory results. National reported statutory net income of $5 million for 2025 compared with a statutory net loss of $10 million for 2024. The favorable variance was driven by lower loss and LAE in 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 for full year 2024.

The favorable change was primarily due to a loss and LAE benefit of $35 million in 2025 compared with an expense of $196 million in 2024. The loss and LAE activity in both years were mostly related to National’s PREPA exposure. National statutory capital as of 12/31/2025 was $937 million, which was up $25 million compared with 12/31/2024. The increase was largely due to National’s 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 will turn to MBIA Insurance Corporation.

MBIA Insurance Corporation reported a statutory net loss of $7 million for 2025 compared with statutory net income of $4 million for 2024. The net loss for 2025 was driven by losses reclassified from surplus related to the dissolution of MBIA Insurance Corporation’s Mexican subsidiary and higher losses and LAE compared with 2024. In last year’s fourth quarter, losses and 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 Corporation 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 and LAE, largely related to estimating recoveries of paid claims associated with the Zohar CDOs. As of 12/31/2025, the statutory capital of MBIA Insurance Corporation was $79 million, 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 Corporation insured gross par outstanding was approximately $2 billion as of 12/31/2025, down about 13% from year-end 2024. The decrease in gross par outstanding was primarily driven by regular amortization of the insured portfolio.

We will now open for questions.

Operator: If you have a question at this time, please press 1 on your telephone keypad. If you wish to remove yourself from the queue, press 2. We ask that when posing your question, you please pick up your handset to allow optimal sound quality. We will take our first question from Thomas Patrick McJoynt-Griffith with KBW. Please go ahead.

Thomas Patrick McJoynt-Griffith: Good morning. The fourth quarter often presents a time or an opportunity for a special dividend, and that is based off of the special dividend that we saw out of National in 2023. This most recent fourth quarter, did you explore the potential for a special dividend? Are you having conversations with your regulators about potentially distributing some of the capital beyond just the as-of-right dividend?

William Charles Fallon: Tommy, with regard to a special dividend, first of all, there is 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 2023. It is 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 PREPA exposure comes down, which it did substantially in the second half of last year, the likelihood and the amount of a potential special dividend goes up. So it is something that we are looking at all the time. There is 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 to the holding company. But it is something that, again, we are 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.

Thomas Patrick McJoynt-Griffith: Thanks for that. The other important story that people are focused on surrounds the strategic process potentially including a sale of the company. What are the latest updates there in that process as you explore that opportunity? And I have asked this before, and I will 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? Thanks.

William Charles Fallon: As you know, and as a reminder to other people, we did look at selling the company a few years ago. 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 were successful with the dividend, properly reduced our exposure. I cannot say that there has been much real progress in terms of resolving PREPA, but we are optimistic that something will 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. To sell the company, in a sense, is the cleanest way to do it. But, again, if there is more value for shareholders by doing it via its components, then that is what we will do. Thanks.

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

John Adolphus Staley: 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?

William Charles Fallon: With regard to the PREPA exposure that we sold last year, John, those were fully paid CUSIPs. We are now in a situation where we really do not have much left. In fact, we have a maturity coming up later this year. We have the $425 million of exposure. That is not something that can be sold via the custodial receipt that we did last year in the near term.

John Adolphus Staley: Secondly, with some of the political trends that are happening—New York, California, all the nonsense up in Minnesota—are you getting any pressure from your auditors of a higher valuation of reserves related to non–Puerto Rican credits?

William Charles Fallon: The short answer is no. As you can appreciate, we look at everything in the portfolio constantly. We are quite comfortable with the way everything is proceeding at this point, and there has been nothing that has been identified. I understand what you are talking about, but nothing has been identified with regard to specific credits that would cause us to take additional reserves because of those activities that you referred to.

John Adolphus Staley: And with regard to MBIA Insurance Corporation, it is dwarfed, where its statutory capital is, 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 that it is no longer a part of—You have Puerto Rico, you have that subsidiary in which there is no liability back to MBIA Inc. But why do you not just get rid of it? Wrap it, liquidate it, or whatever you have to do, or is it that regulators will not let you do that?

William Charles Fallon: There is some of both of those things. The runoff has occurred sort of as we expected. To your point, there is $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 one is going to take a little bit of time. Once that is resolved, then, to your point, there is 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 MBIA Insurance Corporation.

John Adolphus Staley: So you are still managing a recovery process related to collateral with Zohar?

William Charles Fallon: That is correct.

John Adolphus Staley: I know that Judge Swain, as I understand it, is pushing for the private parties to resolve things. What is keeping this thing from being wrapped up? Puerto Rico is still being denied access to the municipal market, and electricity is still going off. It just seems so crazy. They are sitting there with all that money down there. I do not understand what is stopping it. Is it just politics?

William Charles Fallon: I think in the near term, as I referred to in my comments, you have the situation with the Oversight Board, which is the one negotiating the PREPA 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 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. That is really what the creditors are waiting for.

As soon as that happens, I think you will see some real progress.

John Adolphus Staley: Is there political pressure that you are aware of to get those six seats filled? Is there somebody who is an advocate for that in Congress?

William Charles Fallon: There are two parts to it. With regard to the three that challenged their termination in court, there are lawsuits ongoing to remove those three still. 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 do not 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 Adolphus Staley: So the issue gets down again to presidential authority.

William Charles Fallon: The President needs to approve all appointments to the board.

John Adolphus Staley: Yes. But he also required them and said somehow some guys figure out that they still should be on the board. It is amazing to me. It must be driving you nuts.

William Charles Fallon: We understand your frustration. Trust me.

John Adolphus Staley: Thank you, Bill, very much. Thank you.

Operator: Thank you. As a reminder, that is star one to ask a question. Our next question will come from Patrick Stadelhofer with Kahn. Please go ahead.

Patrick Stadelhofer: Good morning. Good morning. Just a question on this extraordinary dividend. It has been seven months since the custodial receipts were sold and kind of de-risked the whole PREPA exposure. I am just curious, what is the gating item to actually trying to get one, given that you have said the circumstances have improved and you are looking at it? What is it going to take you from looking at it to acting on it, especially with other progress somewhat stalled in PREPA? Thank you.

William Charles Fallon: As I mentioned, with regard to the special dividend, it is something we are looking at all the time. We do not get into where we are in the process, whether we started a process, or 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 has been distributed, as I mentioned earlier, we will announce that has taken place. Again, the things to look at are the runoff in the portfolio and, in particular, the reduction in the PREPA exposure.

For those people who are familiar, it is a process you go through with the regulator, which does take some time.

Operator: Alright. Patrick, your line is still open. Did you—

Patrick Stadelhofer: No. Thank you.

Operator: Thank you. At this time, I am showing no further questions. I would like to turn the floor back over to Gregory R. Diamond for any additional or closing remarks.

Gregory R. Diamond: 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 Inc. 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.

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