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MBIA Inc. (NYSE:MBI) Q4 2023 Earnings Call Transcript

MBIA Inc. (NYSE:MBI) Q4 2023 Earnings Call Transcript February 29, 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. Fourth Quarter and Full Year 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, Brittany. Welcome to MBIA's conference call for our full year and fourth quarter 2023 financial results. After the market closed yesterday, we issued and posted several items on our websites, including our financial results, 10-K, quarterly operating supplement and statutory financial statements for both MBIA Insurance Corporation and National Public Finance Guarantee Corporation. Regarding today's call, please note that anything said on the call is qualified by the information provided in the company's 10-K and other SEC filings as our company's definitive disclosures are incorporated in those docs. We urge investors to read our 10-K as it contains our most current disclosures about the company and its financial and operating results.

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The 10-K also contains 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 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 I'll read 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, which is 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.

William Fallon: Thanks, Greg. Good morning, everyone. Thank you for being with us today. In December, we obtained the approval from the New York Department of Financial Services for National to pay an extraordinary dividend of $550 million from its excess capital that enables MBIA Inc. to pay an extraordinary dividend of $8 per share to our shareholders that qualified as a return of capital. We also retained about $235 million of National's dividends at the holding company to enhance MBIA Inc.'s liquidity and financial flexibility. At this time, our primary objectives are to resolve our remaining Puerto Rico exposure and then restart the process to sell the company. Regarding PREPA, National's remaining exposure to PREPA was $610 million of gross par insured at year-end 2023.

Title III court begins the confirmation hearing for PREPA's plan of adjustment on Monday, March 4. Regarding the balance of National's insured portfolio, those credits have continued to perform generally consistent with our expectations. The gross par amount outstanding Financials' insured portfolio has declined by approximately $3.3 billion from year-end 2022 to $28.4 billion at the end of 2023. National's leverage ratio of gross par to statutory capital at the end of the year was 25:1. At the end of the fourth quarter, National had total claims paying resources of $1.7 billion and statutory capital and surplus of $1.1 billion. Now Anthony 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.

Anthony McKiernan: Thanks, Bill, and good morning. I will begin with a review of our fourth quarter and year-end 2023 GAAP and non-GAAP results. The company reported a consolidated GAAP net loss of $138 million or a negative $2.94 per share for the fourth quarter of 2023 compared to a consolidated GAAP net loss of $52 million or negative $1.05 per share for the fourth quarter ended December 31, 2022. The higher GAAP net loss this quarter was largely driven by loss in LAE expense at MBIA Corp. on its first lien RMBS insured credits related primarily to lower risk-free rates, and lower revenues driven by realized losses from sales of investments associated with funding dividends at National and the termination of swaps in the legacy ALM business at the holding company.

The company's adjusted net loss, a non-GAAP measure was $8 million or a negative $0.16 per diluted share for the fourth quarter of 2023 compared with adjusted net income of $15 million or $0.30 per diluted share for the fourth quarter of 2022. The unfavorable change was due primarily to lower premium revenues and nominal loss in LAE expense at National versus a benefit in the prior comparable quarter. For the 12 months ended December 31, 2023, the company reported a consolidated GAAP net loss of $491 million or a negative $10.18 per share compared to a consolidated GAAP net loss of $195 million or negative $3.92 per share for the 12 months ended December 31, 2022. The higher GAAP net loss in 2023 was largely driven by an increase in loss in LAE expense at MBIA Corp.

compared to loss in LAE benefits in the prior year, driven by an increase in risk-free rates during 2022 and at National related to Puerto Rico credits. Lower revenues driven by VIE activity at MBIA Corp., which was partially equity neutral, net losses on investments and higher interest expense related to MBIA Corp. surplus notes. The company's non-GAAP adjusted net loss was $169 million or negative $3.49 per diluted share for the fiscal year 2023 compared with an adjusted net loss of $145 million or a negative $2.90 per diluted share for fiscal year 2022. The unfavorable change was due primarily to higher loss in LAE expense at National. MBIA Inc.'s book value per share decreased to a negative $32.56 per share as of December 31, 2023, versus a negative $16.07 per share as of December 31, 2022, primarily due to the net loss for the year and the $8 per share shareholder distribution in the fourth quarter of 2023.

Included in book value as of December 31, 2023, is a negative $44.91 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 $755 million as of December 31, 2023. Within this total are the following material items, unencumbered cash and liquid assets held by MBIA Inc. totaled approximately $411 million compared with $230 million as of December 31, 2022. The increase was due primarily to approximately $235 million of retained net cash inflows related to the as-of-right and special dividend proceeds from National in Q4 2023.

The corporate segment's assets also included approximately $241 million of assets at market value pledged to the GICs. All swaps supporting the legacy GIC operation were terminated in Q4 2023 and Q1 2024. Turning to the insurance company's statutory results. National reported a statutory net loss of $9 million for the quarter ended December 31, 2023, versus statutory net income of $40 million for the quarter ended December 31, 2022. The unfavorable comparison was primarily due to higher net realized investment losses, higher loss in LAE and lower premiums. National reported statutory net loss of $142 million for the year ended December 31, 2023, versus statutory net income of $75 million for the year ended December 31, 2022. The unfavorable comparison was primarily due to higher loss in LAE, net realized investment losses and lower premiums.

Statutory capital decreased by $807 million from year-end 2022 and was $1.1 billion as of 12/31/2023, primarily due to the dividend payments in the fourth quarter and the full year net loss. Claims paying resources were $1.7 billion versus $2.4 billion at 12/31/2022. Turning to MBIA Insurance Corp. Its statutory net income was $6 million for the fourth quarter of 2023 compared to statutory net income of $16 million for the fourth quarter of 2022. The unfavorable comparison was primarily due to a lower loss in LAE benefit in Q4 2023 and lower premium earnings. For the year ended 12/31/2023, Corp. statutory net loss was $28 million compared to statutory net income of $46 million for the year ended 12/31/2022. The unfavorable comparison was primarily due to loss in LAE expense in 2023 on first lien RMBS and salvage write-downs.

As of December 31, 2023, the statutory capital of MBIA Insurance Corp. was $152 million, down from $169 million at year-end 2022, primarily due to its year-to-date net loss. Claims paying resources totaled $504 million versus $669 million at year-end 2022. The decrease was due in part to a reduction in gross loss reserves associated with several deal liquidations and the year-to-date net loss. MBIA Corp.'s insured gross par outstanding was $2.9 billion as of December 31, 2023. And now we will turn the call over to the operator to begin the question-and-answer session.

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