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MBIA Inc. (NYSE:MBI) Q1 2024 Earnings Call Transcript

MBIA Inc. (NYSE:MBI) Q1 2024 Earnings Call Transcript May 10, 2024

MBIA Inc. isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Welcome to the MBIA Inc. First Quarter 2024 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: Thank you, Ashley. Welcome to MBIA's conference call for our first quarter 2024 financial results. After the market closed yesterday, we issued and posted several items on our website, including our financial results, our 10-Q, quarterly operating supplement and statutory financial statements for both MBIA Insurance Corporation and the 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-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 disclosure about the company and its financial and operating results.

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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. 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: Thanks, Greg. Good morning, everyone. Thanks for being with us today. Last month, we said goodbye to Anthony McKiernan, our CFO, who helped us navigate through some very difficult times and was instrumental on many projects that have been critical to MBIA. Anthony will be missed, and we wish him the very best in his future endeavors. Our first quarter 2024 results were relatively straightforward and relatively unchanged versus a year ago. Our new CFO, Joe Schachinger, will have more to say about these results shortly. In the meantime, our primary objectives continue to be focused on the resolution of our remaining Puerto Rico exposure and then restarting the process to sell the company. Regarding PREPA, National's remaining exposure to PREPA was $610 million of gross par insured at the end of the first quarter.

The Title III Court held the confirmation hearing for PREPA's plan of adjustment in March of this year and we await a ruling on that hearing as well as rulings to be issued by the First Circuit Court regarding appeals being sought by bondholders opposing the current PREPA restructuring 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 $600 million from the year-end 2023 to $27.8 billion at the end of the first quarter of this year. National's leverage ratio of gross par to statutory capital remained unchanged from year-end 2023 at 25 to 1. At the end of the first quarter, National had total claims paying resources of $1.7 billion and statutory capital surplus of $1.1 billion.

Now, Joe will provide additional comments about our financial results.

An aerial view of a bustling financial market, highlighting the complexity of the public finance sector.
An aerial view of a bustling financial market, highlighting the complexity of the public finance sector.

Joe Schachinger: Thank you, Bill, and good morning all. I will begin with a review of our first quarter 2024 GAAP and non-GAAP results and then provide an overview of our statutory results. The company reported a consolidated GAAP net loss of $86 million or a negative $1.84 per share for the first quarter of 2024 compared to a consolidated GAAP net loss of $93 million or a negative $1.86 per share for the first quarter of 2023. The lower GAAP net loss this quarter was largely driven by lower losses from our discontinued operations. Our net loss from continuing operations of $87 million was slightly higher in the first quarter of 2024 compared with a net loss of $83 million in the same period in 2023, primarily as a result of higher loss and LAE at National, which largely related to pushing out the timing of the effective date of the PREPA plan to restructure its debt and higher losses on variable interest entities at MBIA Insurance Corp., most of which were reclassified from other comprehensive income and therefore, neutral to total equity.

These losses largely relate to purchases of VIE debt executed as part of a planned termination of MBIA Insurance Corp.'s last material insured ABS CDO transaction. These unfavorable variances were partly offset by foreign exchange gains on our euro medium-term note liabilities in our corporate segment this quarter compared to mark-to-market losses on interest rate swaps and foreign exchange losses on euro medium-term notes in our corporate segment in the first quarter of last year. As a reminder, in the fourth quarter of 2023 and the first quarter of 2024, we terminated all of the swaps that were part of our holding company ALM business. The company's adjusted net loss, a non-GAAP measure, was $24 million or a negative $0.52 per share for the first quarter of 2024 compared with an adjusted net loss of $1 million or negative $0.03 per share for the first quarter of 2023.

The unfavorable change was primarily due to higher loss and LAE at National in the current quarter. MBIA Inc.'s book value per share decreased $1.24 to a negative $33.80 per share as of March 31, 2024 versus a negative $32.56 per share as of December 31, 2023, primarily due to the net loss for the quarter. Included in MBIA Inc.'s book value as of March 31, 2024 is a negative $45.44 per share of MBIA Insurance Corp.'s book value versus a negative $44.91 per share as of December 31, 2023. 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 $710 million as of March 31, 2024. Within this total are the following material assets: Unencumbered cash and liquid assets held by MBIA Inc.

totaled $376 million compared with $411 million as of December 31, 2023. The decrease was largely due to spending approximately $36 million on retiring GFL euro-denominated medium-term note liabilities before their maturities. These purchases were executed at prices accretive to equity and will reduce euro exchange rate volatility within our results going forward. I'll also note that subsequent to March 31, we spent an additional $26 million to retire GFL's remaining near-term euro-denominated medium-term note liabilities at a price accretive to equity. In addition to the unencumbered cash and liquid assets I mentioned, the corporate segment's assets included approximately $230 million of assets at market value pledged to guaranteed investment contract holders.

Turning to the insurance company's statutory results. National reported a statutory net loss of $11 million for the first quarter of 2024 compared to statutory net income of $11 million for the first quarter of 2023. The unfavorable variance was primarily driven by higher loss and LAE, largely related to the estimated extension of the PREPA debt restructuring and, to a lesser extent, lower net investment income. Net investment income in 2024 reflects lower invested assets due to the as of right and special dividends paid by National to MBIA Inc. in the fourth quarter of 2023, which totaled almost $650 million. National statutory capital decreased by $18 million largely due to its net loss for the quarter and, consistent with year-end 2023, was approximately $1.1 billion as of March 31, 2024.

Claims-paying resources were $1.7 billion, also consistent with year-end 2023. As of March 31, 2024, National had gross par outstanding of $27.8 billion, which is down about $600 million from year-end 2023. Now, we'll turn to MBIA Insurance Corp. MBIA Insurance Corp. reported a statutory net loss of $35 million for the first quarter of 2024 compared to a statutory net loss of $20 million for the first quarter of 2023. Net losses in both periods were driven by loss and LAE on primarily Zohar-related salvage. As of March 31, 2024, the statutory capital of MBIA Insurance Corp. was $119 million, down from $152 million at year-end 2023, primarily due to the net loss for the current quarter. Claims-paying resources totaled $468 million at March 31, 2024, compared to $504 million at year-end 2023.

MBIA Insurance Corp.'s insured gross par outstanding was $2.7 billion as of March 31, 2024, down about 5% from year-end 2023. And now, we will turn the call over to the operator to begin the question-and-answer session.

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To continue reading the Q&A session, please click here.