Title

Presentation

MBIA Inc. beats earnings expectations. Reported EPS is $-0.03, expectations were $-0.42.

Operator: Welcome to the MBIA Inc. First Quarter 2023 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, Chelsea, and yes, welcome everybody. After the market closed yesterday, we issued and posted several items on our websites, 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 the 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 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. 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 approximately two hours after the end of the call and the information for accessing it is included in last week’s press announcement and in the financial results report posted yesterday on the MBIA website. Now, for our safe harbor disclosure. 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 Anthony McKiernan 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. Thank you for being with us today. As noted in yesterday’s financial results report, given prevailing volatile market conditions and feedback that we received during the pursuit of our strategic alternatives, we have decided to suspend that process. We will continue with our mission to deliver shareholder value by continuing to finalize our PREPA remediation, seeking additional cost reductions, monitoring the runoff of our insurance portfolios and pursuing regulatory approval of special dividends from National. We also disclosed yesterday the MBIA Inc. — excuse me, that the MBIA Inc. Board of Directors has approved a new $100 million share repurchase authorization that can be used by MBIA Inc.

and/or National. Regarding our first quarter financial results, I’d like to point out that National had positive net income for both GAAP and statutory presentations, which reflects the substantial reduction of uncertainty regarding its remaining Puerto Rico exposure. It also demonstrates the stability of National’s financial results absent significant adjustments to its loss and loss adjustment expenses. During the first quarter National also sold its Puerto Rico-related investment holdings. Regarding National’s last material Puerto Rico exposure PREPA, while bondholder challenges remain to the plan of adjustment incorporating National’s planned support agreement with the Oversight Board, the Title III Court has not modified the timing for the confirmation hearings for the plan, which are scheduled for July.

As of March 31, National’s remaining exposure to PREPA is $710 million of gross par insured. The remainder of the insured credits in National’s portfolio have continued to perform consistent with our expectations. National’s insured portfolio has continued to run off at its outstanding — excuse me — as its outstanding gross par declined by $600 million from year-end 2022 to $31 billion at March 31, 2023. National’s leverage ratio gross par to statutory capital at the end of the quarter remains unchanged from year-end 2022 at 16:1. As of March 31, 2023 National had total claims paying resources of $2.4 billion, and statutory capital and surplus of $1.9 billion. I also want to note that, Charlie Rinehart our Board Chairman resigned this week after 15 years of service.

I greatly appreciate Charlie’s contributions and leadership to MBIA and counsel to me. Now, Anthony will provide additional comments about our financial results.

Anthony McKiernan: Thanks, Bill, and good morning. I will begin with a review of our first quarter 2023 GAAP and non-GAAP results. The company reported a consolidated GAAP net loss of $93 million or a negative $1.86 per share for the first quarter of 2023 compared to a consolidated GAAP net loss of $73 million, or negative $1.48 per share for the first quarter ended March 31, 2022. The higher GAAP net loss this quarter was largely driven by losses on financial instruments at fair value and foreign exchange in the holding company’s legacy ALM business due to lower interest rates and a weaker dollar versus gains due to higher rates and a stronger dollar for the prior comparable quarter and losses on VIEs at MBIA Corp. due to the termination and deconsolidation of a legacy ABS CDO where losses were reclassified from other comprehensive income and therefore had no effect on total equity.

Offsetting these negative variances were lower loss in LAE at National and higher investment income. The company’s adjusted net loss a non-GAAP measure was $1 million or negative $0.03 per diluted share for the first quarter of 2023, compared with an adjusted net loss of $96 million or a negative $1.94 per diluted share for the first quarter of 2022. The favorable change was due primarily to the lower loss in LAE at National. MBIA Inc.’s book value per share decreased to a negative $16.57 per share as of March 31, 2023, versus a negative $16.07 per share as of December 31, 2022, primarily due to the net loss for the year partially offset by decreased unrealized losses on investments recorded to other comprehensive income driven by lower interest rates.

Included in book value as of March 31, 2023, is a negative $38.82 per share book value of MBIA Corp. I will now spend a few minutes on the corporate segment balance sheet and our insurance company’s statutory results. The corporate segment which primarily includes the activity of the holding company MBIA Inc. had total assets of approximately $638 million as of March 31, 2023. Within this total are the following material items, unencumbered cash and liquid assets held by MBIA Inc. totaled approximately $214 million as of March 31, 2023 compared with $230 million as of December 31, 2022 due to debt service and operating expenses. The corporate segment’s assets also included approximately $313 million of assets at market value pledged to the GICs and the interest rate swaps supporting the legacy GIC operation.

Turning to the insurance company’s statutory results. National reported statutory net income of $11 million for the quarter ended March 31, 2023 versus statutory net income of $104 million for the quarter ended March 31, 2022. The unfavorable comparison was primarily due to the large loss in LAE benefit across its Puerto Rico exposures in Q1 2022 versus modest loss in LAE expense in Q1, 2023 related to PREPA and lower premium income, somewhat offset by higher investment income. Statutory capital increased by $22 million from year-end 2022 and was $1.9 billion as of 3/31, 2023 due to the quarterly net profit and unrealized gains in the investment portfolio. Claims paying resources were $2.4 billion. From inception through 3/31, 2023, gross claims paid on insured Puerto Rico exposure totaled approximately $2.9 billion including $18 million of claims paid in Q1, 2023 related to PREPA.

Turning to MBIA Insurance Corp. Its statutory net loss was $20 million for the first quarter of 2023 compared to a statutory net loss of $14 million in the first quarter of 2022. The unfavorable compassion was primarily due to increased loss in LAE expense in Q1 2023 driven by lower salvage value on the former Zohar-related collateral. As of March 31, 2023, the statutory capital of MBIA Insurance Corp. was $147 million, down from $169 million at year-end 2022 due to the quarterly net loss. Claims-paying resources totaled $608 million. MBIA Corp.’s insured growth par outstanding reduced by approximately $47 million during the quarter and was $3.3 billion as of March 31, 2023. And now, we will turn the call over to the operator to begin the question-and-answer session.

Operator: Thank you sir. [Operator Instructions] And we’ll take our first question from Tommy McJoynt with KBW. Your line is open.

Operator: Thank you. Our next question will come from Paul Saunders with Hutch Capital. Your line is open.

Operator: Thank you. Our next question will come from Geoffrey Dunn with Dowling & Partners. Your line is open.

Operator: Thank you. [Operator Instructions] And our next question will come from Carl Schecter with Staunton Capital. Your line is open.

Operator: Thank you. [Operator Instructions] And at this time, I am showing no further questions. I’d like to turn the floor back over to management for any additional or closing remarks.

Greg Diamond : Thank you again, Chelsea, and thanks to 0those of you listening to our call today. Please contact me 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 ladies and gentlemen. This does conclude today’s MBIA first quarter 2023 financial results conference call. You may now disconnect.