MBIA Inc. Aktie

Welcome to the MBIA Inc. First Quarter 2026 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.

Thank you, Nikki. 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 the statutory statements for both MBIA Insurance Corporation and National Public Finance Guarantee Corporation. We also posted 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 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-Q 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 those non-GAAP terms included in our remarks today are also included in our 10-K and 10-Q as well as our financial results report and our quarterly operating supplement. The recorded replay of today's call will become available approximately 2 hours after the end of the call.

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-K and 10-Q, 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 is Bill Fallon.

Thanks, Greg. Good morning, everyone. Thank you for being with us today. We had lower net losses for our first quarter 2026 financial results versus our first quarter 2025 results. National's losses and loss adjustment expense were essentially unchanged year-over-year. National's outstanding PREPA exposure remains unchanged from year-end 2025 at $425 million of gross par value. 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 February. 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 $900 million from year-end 2025 to about $21.5 billion at March 31, 2026. National's leverage ratio of gross par to statutory capital was 23:1 at the end of the quarter, down from 24:1 at year-end 2025. As of March 31, 2026, National had total claims paying resources of $1.4 billion and statutory capital and surplus of $950 million.

Now Joe will provide additional comments about our financial results.

Thank you, Bill, and good morning, all. I will begin with a review of our first quarter 2026 GAAP and non-GAAP results and then provide an overview of our statutory results. The company reported a consolidated GAAP net loss of $40 million or a negative $0.80 per share for the first quarter of 2026 compared with a consolidated GAAP net loss of $62 million or a negative $1.28 per share for the first quarter of 2025. The lower GAAP net loss this quarter was primarily driven by several items. We reported favorable variances in foreign exchange gains and losses at MBIA Insurance Corp. and within the Corporate segment. The variance at MBIA Insurance Corp. reflects losses recorded in 2025 related to the liquidation of its Mexican subsidiary with no comparable losses in 2026.

The favorable variance in the Corporate segment related to Global Funding's euro-denominated medium-term notes and was driven by the U.S. dollar strengthening against the euro in the first quarter of 2026 compared to a weakening of the dollar against the euro in the first quarter of 2025. In addition, we reported a favorable variance in losses in LAE at MBIA Insurance Corp., primarily due to the impact of changes in the risk-free rates used to discount its loss reserves. In the first quarter of 2026, these rates increased, thereby reducing the present value of reserves compared with a decrease in rates in the first quarter of 2025, which increased the present value of reserves. And we reported a favorable variance in net realized investment gains and losses at National.

In the first quarter of 2025, National recorded investment losses from sales of securities with no comparable activity in the first quarter of 2026. Partially offsetting these favorable variances was an unfavorable variance at MBIA Insurance Corp. related to gains on the extinguishment of variable interest entity debt recorded in the first quarter of 2025 with no comparable activity in the first quarter of 2026. The company's adjusted net loss, a non-GAAP measure, was $8 million or a negative $0.16 per share for the first quarter of 2026 compared with an adjusted net loss of also $8 million or a negative $0.16 per share for the first quarter of 2025.

Slightly lower revenues in the first quarter of 2026 were offset by slightly lower expenses. During the quarter, MBIA Inc.'s book value per share decreased $0.55 to a negative $44.82 per share as of March 31, 2026. This decrease was primarily due to our consolidated net loss for the first quarter of 2026. In addition, included in MBIA Inc.'s book value as of March 31, 2026, is a negative $53.59 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 comprises the activities of the holding company, MBIA Inc., had total assets of approximately $639 million as of March 31, 2026. Within this total are the following material assets. Unencumbered cash and liquid assets held by MBIA Inc. totaled $353 million, reflecting a small decrease compared with $357 million as of December 31, 2025. In addition to these unencumbered cash and liquid assets, -- the corporate segment's assets included approximately $181 million of assets at market value pledged to guaranteed investment agreement contract holders, which fully collateralized those contracts.

Now I'll turn to the insurance company's statutory results. National reported statutory net income of $11 million for the first quarter of 2026 compared with statutory net income of $4 million for the first quarter of 2025. The favorable variance was primarily driven by net realized losses on the sale of investments in the first quarter of 2025 with no comparable losses in the current quarter. National statutory capital as of March 31, 2026, was $950 million, which was up $13 million compared with December 31, 2025. The increase was mostly due to National statutory net income for the current quarter. As of March 31, 2026, 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 $1 million for the first quarter of 2026 compared with statutory net income of $2 million for the first quarter of 2025. The unfavorable variance was primarily driven by a smaller loss in LAE benefit in the current quarter compared with the first quarter of 2025. As of March 31, 2026, the statutory capital of MBIA Insurance Corp. was $79 million, unchanged from year-end 2025. As of March 31, 2026, claims paying resources totaled $316 million, down just $1 million from year-end 2025. MBIA Insurance Corp.'s insured gross par outstanding was just under $2 billion as of March 31, 2026, which is down about 7% from year-end 2025.

And now we will turn the call over to the operator to begin the question-and-answer session.

[Operator Instructions] We'll take our first question from Tommy McJoynt with KBW.

A question on the corporate segment balance sheet, looking at the liability side there. Occasionally, you've been able to redeem some of those liabilities at a discount early. It didn't look like there were any actions taken in the quarter. So can you just go through the opportunity there going forward to satisfy some of those obligations early and potentially accretively just as a use of capital that could be good for shareholders?

Sure, Tommy. It's Joe. So we're consistently looking for opportunities in which we can buy back the holding company debt at discounts. We haven't seen a whole lot of that recently. We are focused on repaying the debt coming up in '27 and '28 -- the debt beyond that, once we get into the 2030s is not yet in our liquidity window, but we expect that to be within the next couple of years. So we'll have more opportunities there. And that's where we'll see more of the benefit to our capital in trying to get those back at discounts.

Okay. And then since we last spoke around fourth quarter earnings a few months ago, have there been any updates on the strategic process to the extent of hiring advisers or bankers to explore options? Any updates over the past couple of months?

There's nothing that we've chosen to communicate to anybody at this point in time, Tommy.

We will move next with John Staley with Staley Capital Advisors.

I have 2 questions. One, what is the projected cash requirement to meet the guarantees on the outstanding Puerto Rico PREPA debt in 2026? And secondly, this lawsuit the oversight Board being a non-lawyer strike me as being awfully frivolous. I mean it's an appointed position. The entities that appointed said, well, you're not here anymore. I'm trying to understand the basis of the litigation in which they are suing to be restored? Is there a payment that they get and they're suing because they felt they should be entitled to be paid? Or what's the basis that they're suing? I had lost.

I thought it was -- I don't know if there was a voluntary position, but it wasn't anything you paying for, you were appointed. And it seemed to me that a lawyer, the President through C has the right to do whatever Hey wants in terms of who sits on that Board. So those are my 2 questions.

Thanks, John. With regard to your first question, the PREPA payments, the debt service that we have is approximately $35 million for the rest of the year. So with regard to your second question, the Oversight Board litigation in those positions, you're correct. Those positions are not compensated. So there is no remuneration to any of the Oversight Board members. The lawsuit, as you mentioned, is somewhat complicated. Most of the argument, we believe, comes down to whether the process was appropriate in terminating what now are the 3 Oversight Board members who have sued to retain their positions.

As you know, one judge has already put them back on saying that the -- until the whole case is heard that they should be on the Board. That case is essentially on hold until a different case, which is the Federal Reserve, which is the Lisa Cook case is decided, at which point then the Puerto Rico court will resume this case. So it may take a little time for this to get resolved. It is not about compensation, and it really is, we think, primarily around the process that was either followed or not follow. There is, I suppose, a longshot argument whether or not the administration that is the President has the right to terminate them. But we think most likely, the answer to that is yes that he does as long as it's for cause and that there is a procedure that's followed.

Do you have any time line on it? Isn't the Cook case expected to be handed down by the Supreme Court very shortly?

Yes. And so as soon as that decision is rendered, then we believe that the case can resume in Puerto Rico, and hopefully, that will move quickly. I should mention there are 3 open positions that the administration with obviously the President's approval could fill those spots after, again, the recommendations are made to the President. We think that would actually help move the process along in terms of potentially negotiating a settlement between the bondholders and the Oversight Board. But again, no words specifically on when those 3 positions might be filled.

[Operator Instructions]We will move next with Paul Saunders with Hutch Capital.

All right. Great. So I've got just a quick question on selling the company, like we've talked about our strategic actions. And this is a hypothetical, so you might not be able to answer it, but I'm going to ask it anyway just to get your thoughts. And the idea behind this is just that considering the amount that you've reduced the PREPA exposure a couple of quarters ago and the fact that you were able to sell that amount at your current mark now. And so there's a pretty established value for the recovery there and that balance is pretty small. It seems like that band has gotten pretty small in terms of uncertainty. So I wanted to ask you just in a hypothetical, let's imagine PREPA doesn't exist anymore.

You've satisfied all those claims. You've paid the salvage at your mark. So the adjusted book value remains the same in the kind of low 13s per share. And now you're in a position where you feel like you can sell the company. Can you kind of describe -- I would imagine at that point, there's bids that come in and it's some sort of discount to the book value and the discussion is really over what the size of that discount should be. So I was curious if you could kind of describe on both sides of a buyer, what's their argument for asking for what you think is an unreasonable discount to book value? Like why would they be asking for that? And then on the other side of that, what's kind of the selling point to the buyer of why it should be closer to the book value per share or something like that? Just to give us some context of like how people are thinking about this between the buyer and the seller.

Yes. In some ways, Paul, what you're describing, and again, thank you for your question, is a typical process that a company would go through when it decides to sell the company, and we went through a process along those lines at this point about 3 years ago. There are all different ways. And so a lot of the potential parties involved don't even use adjusted book value. So in some ways, it's hard to answer it with the construct that you put forth. They all put forth a proposed acquisition amount. We have an analysis or we do an analysis in your hypothetical situation with what our alternatives are that is pursuing any of those, if they're just a straight sale of the entire company, that's pretty straightforward.

If it was something other than that, for example, people have suggested selling just National. People have suggested mergers. People have suggested reinsurance. People have suggested we continue or compare that to continuing to run the company off a loan. So it's hard to answer in terms of the discounts to adjusted book value, it gets more -- I think your question gets at the right issue, which is what are all the different ways and what would be the bids for the company and what are the choices that we have for the company going forward. So in some ways, I think it's a pretty typical sale process.

And at this time, I am showing no further questions. I would like to turn the floor back over to management for closing remarks.

Thanks again, Nikki, and thanks to those of you listening to our call. 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.

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

Welcome to the MBIA Inc. Fourth Quarter and Full Year 2025 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. Sir, please go ahead.

Thank you, Chelsea, and welcome to our conference call for the full year 2025 MBIA 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. We also posted 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 and other SEC filings as our company's definitive disclosures are incorporated in those documents. We urge investors to read our 10-K as it contains our most current disclosures about the company and its financial and operating results.

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 2 hours after the end of the call. 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-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 Joe Schachinger will provide introductory comments and then a question-and-answer session will follow. Now here is Bill 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 fourth quarters of 2025 and 2024. Comparing the 2 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 in LAE resulted primarily from changes to loss estimates for its PREPA-related exposure. The 2025 benefit largely resulted from the sale of a custodial receipts associated with National's PREPA bankruptcy claims at prices better than National's loss estimates as well as 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 24:1 at the end of 2025, down from 28:1 at year-end 2024. As of December 31, 2025, National had total claims paying resources of $1.4 billion and statutory capital surplus in excess of $900 million. Now Joe will provide additional comments about our financial results.

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 the fourth quarter of 2025 compared with a consolidated GAAP net loss of also $51 million or a negative $1.07 per share for the fourth quarter of 2024. When comparing the fourth quarters of 2025 and 2024, there are 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 Corp.'s floating rate surplus notes and lower operating expenses related to consolidated variable interest entities, or VIEs, at MBIA Insurance Corp.

The company's adjusted net loss, a non-GAAP measure, was $12 million or a negative $0.24 per share for the fourth quarter of 2025 compared with an adjusted net loss of $22 million or a negative $0.48 per share for the fourth quarter of 2024. The favorable change was primarily due to lower losses in 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 the 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 in 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 Corp. 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 in 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 December 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 December 31, 2025, is a negative $53.35 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 comprises the activities of the holding company, MBIA Inc., had total assets of approximately $653 million as of December 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 December 31, 2024. The decrease was largely due to the repayment of MBIA Inc.'s 7% debt that matured in December of 2025 and the payment of operating expenses, partially offset by a dividend received from National. In December of 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'll turn to the insurance company statutory results. National reported statutory net income of $5 million for the fourth quarter of 2025 compared with a statutory net loss of $10 million for the fourth quarter of 2024. The favorable variance was driven by lower loss in LAE in the fourth quarter of 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 in LAE benefit of $35 million in 2025 compared with an expense of $196 million in 2024. The loss in LAE activity in both years were mostly related to National's PREPA exposure. National statutory capital as of December 31, 2025, was $937 million, which was up $25 million compared with December 31, 2024.

The increase was largely due to National 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'll turn to MBIA Insurance Corp. MBIA Insurance Corp. reported a statutory net loss of $7 million for the fourth quarter of 2025 compared with statutory net income of $4 million for the fourth quarter of 2024. The net loss for the fourth quarter of 2025 was driven by losses reclassified from surplus related to the dissolution of MBIA Insurance Corp.'s Mexican subsidiary and higher losses in LAE compared with the fourth quarter of 2024.

In last year's fourth quarter, losses in 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 Corp. 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 in LAE largely related to estimating recoveries of paid claims associated with the Zohar CDOs. As of December 31, 2025, the statutory capital of MBIA Insurance Corp. 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 Corp.'s insured gross par outstanding was approximately $2 billion as of December 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. And now we will turn the call over to the operator to begin the question-and-answer session.

And we'll take our first question from Tommy McJoynt with KBW.

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

Yes, Tommy, with regard to special dividend, first of all, there's 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 the fourth quarter of 2023, a couple of years ago. It's 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's something that we're looking at all the time. There's 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's something that, again, we're 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.

And the other important story that people are focused on just around the strategic process, potentially including a sale of the company. What's the latest update there in that process as you explore that opportunity? And I've asked this before, and I'll 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?

As you know, and just 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 obviously were successful with the dividend. PREPA, we reduced our exposure. I can't say that there's been much real progress in terms of resolving PREPA.

We are optimistic that something will should 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. The sale of 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's what we'll do.

Our next question will come from John Staley with Staley Capital Advisors.

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, would it -- how would it compare to the price you got the last time?

Yes. 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 don't have much left. In fact, we've got a maturity coming up later this year, so we have the $425 million of exposure, that's not something that can be sold via the custodial receipts that we did last year. So the answer is we wouldn't do a sale like that.

Okay. I understand. Secondly, with some of the political trends that are happening, particularly New York, California, all the nonsense up in Minnesota, are you getting any pressure from your auditors about higher valuation reserves to -- related to non-Puerto Rican credits?

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

And with regard to MBIA Insurance, where its statutory capital is dwarfed 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's no longer a part of -- you have Puerto Rico, you have that subsidiary in which there's no liability back to MBIA Inc. But why don't you just get rid of it, wrap -- liquidate it or whatever you have to do? Or is it regulators won't let you do that?

There's some of both of those things. So the runoff has occurred sort of as we expected. To your point, there's $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's one that's going to take a little bit of time. And once that's resolved, then to your point, there's 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 Corp.

So you're still managing a recovery process related to collateral with Zohar?

That's correct.

I got it. Okay. And I know that the Judge Swain, as I understand it, is pushing for the private parties to resolve things. I mean, I thought Trump may have done something with the Republican governor there. But what the hell is keeping this thing from being wrapped up? Puerto Rico is still being denied access to municipal market and electricity is still going off. It just seems so crazy, and you're sitting there with all that money down there. I don't understand what's stopping it. Is it just politics?

Well, I think in the near term, as I referred to in my comments, you've got the situation with the Oversight Board, which is the one negotiating the PREPA restructuring on behalf of the Commonwealth. There are 4 Board members. As you know, there was the administration action last year to remove 6 of the Board members, 3 took up the court and were reinstated. Either the 4 existing Board members need to, in a sense, take the initiative and start negotiating again with the bondholders or when the administration names people to those open 3 spots, perhaps then that will be the catalyst to restarting negotiations. So that's really, I think, what the creditors are waiting for. And as soon as that happens, I think then you'll see some real progress.

Okay. Is there political pressure that you're aware of to get those 6 seats filled? Is there somebody who's an advocate for that in Congress?

Well, there's 2 parts to it. With regard to the 3 that challenged their termination in court, there are lawsuits going on to remove those 3 still. And so I think the administration is taking the position that they should be removed. And therefore, those 3 spots perhaps are a little uncertain for a period of time. With regard to the other 3 spots, I don't have an answer for you as to when the administration will fill those. Again, we would hope it would be sooner rather than later.

Okay. So -- and the issue gets down again the Presidential authority.

President needs to approve all appointments to the Board.

Yes. But he also to fired them. And so somehow or other -- some guys figure out that they still should be on the Board. It's amazing to me. It must be driving you nuts.

We understand your frustration, trust me.

[Operator Instructions] And our next question will come from Patrick Stadelhofer with Kahn.

Just a question on the extraordinary dividend because it's been 7 months since the custodial receipts were sold and kind of derisked the whole PREPA exposure. So I'm just curious what is the gating item to actually trying to get one given that you've said the circumstances have improved and all of it and you're looking at it, but what is it going to take you from looking at it to acting on it, especially with other progress somewhat stalled in PREPA?

Yes. As I mentioned, with regard to the special dividend, it's something we're looking at all the time. We don't get into where we are in the process, whether we start a process, 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's been distributed, as I mentioned earlier, we'll announce that, that has taken place. But again, I think the things to look at are the runoff in the portfolio and in particular, the reduction in the PREPA exposure. And again, for those people who are familiar, it is a process you go through with the regulator, which does take some time.

And at this time, I am showing no further questions. So I'd like to turn the floor back over to Greg Diamond for any additional or closing remarks.

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. Good day, and goodbye.

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

Welcome to the MBIA Inc. Third Quarter 2025 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.

Thank you, Erica. Welcome to MBIA's conference call for our third quarter 2025 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 Corp., and National Public Finance Guarantee Corporation. We also posted 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 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 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 2 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 third quarter 2025 financial results had a lower net loss than the comparable period for 2024. Compared to 2024, our third quarter 2025 financial results benefited from lower losses and LAE associated with National's PREPA exposure, which benefited from the sale of $374 million of National's PREPA-related bankruptcy claims and higher estimated recoveries on National's remaining PREPA exposure.

National's PREPA exposure now amounts to $425 million of gross par outstanding. Our priority continues to be resolving National's PREPA exposure, where the path and timing of that resolution remains largely uncertain. The administrative expense claims litigation, which was temporarily stayed following the dismissal of certain Puerto Rico Financial Oversight and Management Board members has been restarted.

Since last quarter's conference call, PREPA's bondholders representing about 30% of the PREPA bonds outstanding have joined forces with the cooperative group of bondholders in opposition to PREPA's proposed confirmation plan. The combined group now represents approximately 90% of PREPA's bondholders that oppose the confirmation 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 $2.1 billion from year-end 2024 to about $23.2 billion at September 30, 2025. National's leverage ratio of gross par to statutory capital was 23:1 at the end of the third quarter. As of September 30, 2025, National had total claims paying resources of $1.5 billion and statutory capital and surplus of almost $1 billion.

Now Joe will provide additional comments about our financial results.

Thank you, Bill, and good morning, all. I will begin with a review of our third quarter 2025 GAAP and non-GAAP results and then provide an overview of our statutory results. The company recorded a consolidated GAAP net loss of $8 million or a negative $0.17 per share for the third quarter of 2025 compared with a consolidated GAAP net loss of $56 million or a negative $1.18 per share for the third quarter of 2024.

The lower GAAP net loss this quarter was mostly driven by lower losses in LAE at National, primarily on its PREPA exposure. National's losses in LAE for the third quarter of 2025 was a net benefit of $54 million compared with a loss of $2 million for the third quarter of 2024. The net benefit in this year's third quarter was primarily driven by revising our range of outcomes and the timing of an ultimate resolution in our PREPA loss reserving, giving consideration to the factors Bill previously mentioned.

Again, those being the dismissal of certain members of the FOMB, the increase in representation of bondholders within the cooperative group and the sale of a portion of our PREPA bankruptcy claims at prices higher than our prior quarter's recorded salvage. Partially offsetting National's losses and LAE benefit in the current quarter were investment losses related to revaluing MBIA Insurance Corp.'s ownership interest in a Zohar-related company.

The company's adjusted net income, a non-GAAP measure, was $51 million or $1.03 per share for the third quarter of 2025 compared with an adjusted net loss of $174,000 or essentially $0.00 per share for the third quarter of 2024. The favorable change was primarily due to the losses in LAE benefit at National this quarter. MBIA Inc.'s consolidated book value per share as of September 30, 2025, was a negative $43.17 due to MBIA Insurance Corp.'s negative book value per share of $52.64.

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., and our services company, MBIA Services Corp., had total assets of approximately $650 million as of September 30, 2025. Within this total are the following material assets.

Unencumbered cash and liquid assets held by MBIA Inc. totaled $354 million, which was down from $380 million as of December 31, 2024, primarily due to the payment of principal and interest on the corporate segment's debt. In addition to the unencumbered cash and liquid assets, the corporate segment's assets included approximately $180 million of assets at market value pledged to guaranteed investment agreement contract holders, which fully collateralized those contracts.

Now I'll turn to the insurance company's statutory results. National reported statutory net income of $73 million for the third quarter of 2025 compared with statutory net income of $19 million for the third quarter of 2024. The positive variance was driven by National's statutory losses and LAE benefit of $56 million for the third quarter of 2025, resulting from the adjustments to its PREPA loss reserves, compared to losses in LAE of $2 million for the third quarter of 2024.

National statutory capital as of September 30, 2025, was $994 million, up $82 million compared with December 31, 2024. The increase in statutory capital was driven by National's year-to-date net income. Claims paying resources were $1.5 billion and continue to be consistent with December 31, 2024.

Now I'll turn to MBIA Insurance Corp. MBIA Insurance Corp. reported a statutory net loss of $25 million for the third quarter of 2025 compared with statutory net income of $2 million for the third quarter of 2024. The unfavorable variance was primarily due to statutory losses in LAE of $25 million for the third quarter of 2025 compared with a losses in LAE benefit of $2 million for the third quarter of 2024. The losses in LAE in the current quarter were primarily driven by adjustments to reflect lower expected recoveries of paid claims associated with the Zohar CDOs.

As of September 30, 2025, the statutory capital of MBIA Insurance Corp. was $79 million, which was $9 million below year-end 2024 as a result of its year-to-date net loss, net of an increase in its admitted assets. Claims paying resources totaled $326 million at September 30, 2025, compared with $356 million at December 31, 2024. MBIA Insurance Corp.'s insured gross par outstanding was $2.1 billion as of September 30, 2025, down from $2.3 billion at year-end 2024.

Now we will turn the call over to the operator to begin the question-and-answer session.

[Operator Instructions] We'll take our first question from Carlos [Pardo], a private investor.

This is Carlos calling from London. I mean, first of all, I mean, thank you very much again for your -- for the strategy with the Custodial Receipts. It was brilliant. Also thank you for the very reasonable approach that you have taken on Puerto Rico over the years.

My first question is on the cooperation agreement. After the BlackRock Group joined, my understanding from the agreement is that now not a single party cannot block any deal. Basically, when I look at the definition of requisite bondholders, my understanding from this close is that no single party, including Assured Guaranty or any other party can block the deal. Is my understanding correct? So that because the definition includes that even if a party would hold more than 25% of the bonds, it would be reduced for the purposes of this calculation to 24%?

Carl, that's correct. The requisite bondholders total 77.5%. As you noted correctly, there is a limit on the percentage that can be voted. That is correct that no one bondholder would be able to.

That's fantastic. I think that this is great news, and I think that it changes the dynamics of the cooperation agreement. Also, I assume that with the new Board, once the old Board finally goes, I think that with the new Board elected by the new administration, I think that there are very good prospects of reaching an agreement. I think that with these changes to the cooperation agreement with the wider group, I assume that I am absolutely in favor of us being there. I hope that you guys can negotiate as good as you always do.

Thank you.

Then on the buybacks, I see that the buyback capacity is still there with $71 million. As we discussed in the previous call, if it is ever necessary, I assume that you guys are ready to deploy it, although at the moment, I don't think that it is needed. I also noticed that the PREPA payments that are due after the huge payment that we made on July, then it is $57 million next year, $20 million in '27 and $20 million in '28, which is absolutely manageable. I assume that the buyback capacity is there if needed.

It's correct. We have buyback capacity if we choose to use it.

Fantastic. Well done and all the best with the negotiations, and hopefully, we can reach a good agreement that is good for us as creditors and also for Puerto Rico and for the people there.

We'll go next to Patrick Stadelhofer with Kahn Brothers.

First of all, yes, great job on selling the custodial receipts. This week on the PREPA docket, it looks like all of the buyers from your previous sale in '21 and '22, so GoldenTree, Tonic, Whitebox, they did the exact same transfer to Argent, all the for custodial receipts and that looks very coordinated. Do you know why all of nationals or all of previously national available claims are being sold or prepared to be sold in such a coordinated fashion? What kind of claims buyer needs like a CUSIP rather than buying it directly from a firm like yours?

We are aware of what they've done with the custodial receipts similar to us. We do not know their motivation, so you have to approach them.

Then in 2022, obviously, you hired Barclays for a strategic review and you tried to sell the company. What are the gating items to doing it again now that you've resolved a very large part of your proper exposure and you talk about producing uncertainty and all of that. If you did it again, would you feel like you disclosed it again like back in 2022? Or could this be going on in the background this time around?

As you mentioned, about 3 years ago, we announced that we had engaged Barclays to initiate that sale process. We learned things during that process that led us to conclude that it was not the best time for our shareholders. As you then know, 2 years ago, we had a special dividend approved from National up to the holding company and then a dividend out to the common shareholders. I think one of the conclusions we had was getting money from National and off the holding company was probably better done before we sell -- before we would sell the company.

In a similar way, as you mentioned, the uncertainty around Puerto Rico. We've now substantially reduced that Puerto Rico. Our PREPA exposure is roughly 1/3 of what it was when PREPA went into Title III. We believe, as you indicated, that reducing that uncertainty allows us to get closer to a sale of the company. We would announce if we start a process. To your point, you don't need and we don't need to have a formal process to talk to potential buyers about selling the company. As you know, companies do that all the time. With the reduced uncertainty, I think people thought the termination of several of the Board members was going to lead to a new Board being constituted quite quickly. As you know, that's ended in litigation, which has delayed it a little bit. I think as there's even further clarity around where PREPA is going, the potential buyers for National will be more inclined to have meaningful conversations. We may, at some point, decide to start a formal process.

That's great. On that topic of the dividends, for the first time in years, there were some interesting language changes in the 10-Q around special dividends versus annual dividends. Clearly, it's front of mind. How do you weigh kind of such a special dividend versus a sale and delivering value to shareholders?

2 parts to that. When we think about dividends, there is the dividend from National up to the holding company. As you know, we have an as-of-right dividend every year. We did get that special dividend, which has to be approved by the Department of Financial Services in New York. We obviously received feedback when going through that process 2 years ago. I think we have a sense of when it would be appropriate as the book runs off and there's further progress on Puerto Rico, one would be the ideal time to go for a special dividend.

Again, there's a lot that goes in that calculation, and it's not a set in stone, and we have to see how PREPA in particular, evolves. Then there's the dividend from the holding company out to shareholders, which you're referring to as well. That takes -- we take into account for that all the factors that you would expect. There are the debt service requirements at the holding company. There's what we think is an appropriate amount of liquidity, which I think has already been discussed this morning. We feel right now that we have the necessary liquidity to meet all the debt service obligations at the holding company. There are, as I mentioned, as the right dividends.

Taking all those factors into account, if there was enough cash at the holding company to meet all those obligations and we thought there was enough cushion beyond that, we would consider another dividend to the shareholders.

Always great to see adjusted book value going up in the quarter, so congrats.

[Operator Instructions] We'll take our next question from John Staley with Staley Capital Advisors.

Bill, in the transaction where you sold the bonds, 2 questions. Are there any contingency to that sale? Or is it simply an outright sale, buyer be aware? Can you elaborate a little bit more on the identity of the entity that bought it bought the bond?

Yes. John, with regard to the first, there are no contingencies whatsoever. We have sold $374 million of our bankruptcy claims. To your point, whatever now happens with the restructuring and the recovery, that's now on the books of the buyers. With regard to the buyers, it wasn't one buyer. There are multiple buyers involved in that.

Do you think that you potentially added another litigant against a settlement if you and the other bondholders come up with a number that is unfavorable to what this group of buyers think it's worth. Do you see another potential delay where they suit over everything? Or are they not allowed to suit?

We don't think that is likely. Many of those buyers to the best of our knowledge, actually already own PREPA bonds. They were increasing -- they increased their position.

They're part of the settlement group. They would be approving...

Correct.

The Oversight Board only has one member on it. Do you anticipate that remaining that way?

The update on that is that there was a temporary stay in the court in Puerto Rico. 3 of those members that were dismissed filed a suit that they were wrongfully terminated. The temporary straining order essentially says, they were never terminated. Right now, John, there are 4 members on the Board. There is this lawsuit still proceeding in Puerto Rico. They've not yet set a schedule as to when the actual merits of the case will be heard.

Then depending on that outcome, either they are reinstated, which looks as though the way -- that's the way the judge in Puerto Rico is going. Then that could be appealed by the administration or the administration potentially could then take further steps to terminate those Board members. Right now, there are 4 Board members, but in some cases, you need more than 4 Board members to approve certain items. For example, our understanding is to approve a confirmation plan in the bankruptcy court, the Board would need at least 5 members, so they are clearly shorthanded right now.

That sounds to me that things got simplified, but that sounds like a roadblock. That seems like one more thing that could delay things.

There is clearly a near-term delay as these 3 what were thought to be terminated Board members pursue their case in court.

Then one final question. I appreciate this time. The MBIA Inc. that has the limited capacity versus their outstanding obligations, which are unrelated in terms of eventual liability to the holding company. What's keeping you from just declaring whatever it is some level of bankruptcy and just getting rid of that so you're even cleaner to a potential buyer. You guys have solved that issue and not sold an entity to a potential buyer who has to accept the fact that there's no liability between the holding company and National and MBIA Inc. Why don't you just get rid of that?

It is possible that we could sell it. On an insurance basis or a statutory basis, MBIA Insurance Corp. is not bankrupt, right? It has substantial surplus. As we've stated before, there is not necessarily economic value to the MBIA Inc. shareholder. Whatever value there is would accrue to what we call the surplus noteholders, we have consistent conversations or regular conversations with the Department of Financial Services. The real issue there, I think what you're talking about, if for some reason, MBIA Insurance Corp. couldn't pay a claim under a policy, then the department might step in.

On an insurance company, the equivalent bankruptcy would be some form of receivership, but it's not bankrupt. It has substantial surplus at this point and meets the regulatory threshold.

You don't see that continuing the way it is as a barrier to somebody coming in and buying MBIA Inc.?

It's possible someone might raise some questions, but we don't think it is a barrier to selling MBIA Inc. sometime in the future.

At this time, I am showing no further questions. I'd like to turn the floor back over to Mr. Greg Diamond.

Thank you, Erica, and thanks to those of you listening to the 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 on our company. Thank you for your interest in MBIA. Good day, and goodbye.

We'd like to thank everybody for their participation on today's conference. Please feel free to disconnect your line at any time.

Welcome to the MBIA Inc. Second Quarter 2025 Financial Results Conference Call. I would now like to turn the call over to Greg Diamond, Managing Director of Investor and Media Relations of MBIA. Please go ahead, sir.

Thank you, Erica. Yes, welcome to MBIA's conference call. 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 insurance 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 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. A recorded replay of today's call will become available on the MBIA website approximately 2 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 is Bill Fallon.

Thanks, Greg. Good morning, everyone. Thanks for being with us today. Our second quarter 2025 financial results had a lower net loss than the comparable period for 2024. Compared to 2024, our second quarter 2025 financial results benefited from lower losses in LAE and lower investment in VIE losses at MBIA Insurance Corp.

Our priority continues to be resolving National's PREPA exposure, where the timing of that resolution remains uncertain. Currently, the Title III Court is addressing the administrative expense claims. Given the uncertainty associated with the possible outcomes for National's PREPA bankruptcy claim, which is in excess of $800 million, we continue to believe that the process to sell the company to maximize shareholder value will likely require substantially reducing the uncertainty regarding PREPA.

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 $1.1 billion from year-end 2024 to about $24 billion at June 30, 2025.

National's leverage ratio of gross par to statutory capital was 26:1 at the end of the second quarter. As of June 30, 2025, National had total claims paying resources of $1.5 billion and statutory capital and surplus in excess of $900 million. Now Joe will provide additional comments about our financial results.

Thank you, Bill, and good morning, all. I will begin with a review of our second quarter 2025 GAAP and non-GAAP results and then provide an overview of our statutory results. The company reported a consolidated GAAP net loss of $56 million or a negative $1.12 per share for the second quarter of 2025 compared with a consolidated GAAP net loss of $254 million or a negative $5.34 per share for the second quarter of 2024.

The lower GAAP net loss this quarter was mostly driven by lower losses in LAE at National, primarily on its PREPA exposure. National's loss in LAE for the second quarter of 2025 was $6 million compared with $141 million for the second quarter of 2024. The larger losses in LAE for the second quarter of 2024, related to National's exit from the then proposed PREPA plan of adjustment, prompting us to revise our loss scenarios to reflect a range of negotiated and litigated outcomes.

Also contributing to lower GAAP net losses this quarter, but to a lesser extent, were lower net losses on financial instruments relating to the revaluation of MBIA Insurance Corp.'s equity interest in a Zohar-related portfolio company received in connection with claims paid on the Zohar CDOs and lower losses at MBIA Insurance Corp. related to insured variable interest entities or VIEs.

Higher VIE losses in the second quarter of 2024 primarily related to the deconsolidation of a VIE as part of our strategy to derisk MBIA Insurance Corp.'s insured portfolio with no comparable activity in the second quarter of 2025. The company's adjusted net loss, a non-GAAP measure, was $8 million or a negative $0.17 per share for the second quarter of 2025 compared with an adjusted net loss of $138 million or a negative $2.90 per share for the second quarter of 2024.

The favorable change was primarily due to the lower losses in LAE at National. MBIA Inc.'s book value per share decreased $2.15 to a negative $43.14 per share as of June 30, 2025, from a negative $40.99 per share as of December 31, 2024. This decrease was primarily due to our $118 million consolidated net loss for the first 6 months of 2025, partially offset by a decrease in unrealized losses on investments recorded in accumulated other comprehensive income.

Included in MBIA Inc.'s book value as of June 30, 2025, is MBIA Insurance Corp.'s negative book value of $51.49 per share, which decreased from a negative $49.48 per share as of December 31, 2024. 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 $677 million as of June 30, 2025. Within this total are the following material assets. Unencumbered cash and liquid assets held by MBIA Inc. totaled $355 million, which was down from $380 million as of December 31, 2024, primarily due to interest payments on the corporate segment's debt.

In addition to the unencumbered cash and liquid assets, the corporate segment's assets included approximately $214 million of assets at market value pledged to guaranteed investment agreement contract holders, which fully collateralized those contracts.

Now I'll turn to the insurance company statutory results. National reported statutory net income of $6 million for the second quarter of 2025 compared with a statutory net loss of $131 million for the second quarter of 2024. The positive variance primarily reflects lower losses in LAE related to National's PREPA exposure.

National statutory capital as of June 30, 2025, was $914 million, up $2 million compared with December 31, 2024. The increase in statutory capital was driven by year-to-date net income of $11 million, which was mostly offset by an increase in unrealized losses on investments. Claims paying resources were $1.5 billion and continue to be consistent with December 31, 2024.

Now I'll turn to MBIA Insurance Corp. MBIA Insurance Corp. reported statutory net income of $4 million for the second quarter of 2025 compared with a statutory net loss of $35 million for the second quarter of 2024. The favorable variance was primarily due to lower losses in LAE.

A small losses in LAE benefit in the current quarter was primarily driven by favorable adjustments to recoveries of paid claims associated with the Zohar CDOs, while $34 million of losses in LAE in the second quarter of 2024 was primarily driven by unfavorable adjustments to our Zohar-related recoveries.

As of June 30, 2025, the statutory capital of MBIA Insurance Corp. was $92 million, which was $4 million higher than year-end 2024. Claims paying resources totaled $346 million at June 30, 2025, compared with $356 million at December 31, 2024. MBIA Insurance Corp.'s insured gross par outstanding was $2.2 billion as of June 30, 2025, down from $2.3 billion at year-end 2024.

And now we will turn the call over to the operator to begin the question-and-answer session.

[Operator Instructions] We'll take our first question from Tommy Joynt with KBW.

The first one, I see in the 10-Q, a disclosure about National transferring certain PREPA bankruptcy claims to a custodian. So a few questions around that. First, can we interpret this action as a signal that you guys are marketing, selling those claims to potential buyers? And secondly, is there a potential liquid buyer pool for those claims? And then secondly, it looks like you only transferred certain claims of the PREPA side. I guess what made you decide between which ones to transfer and which ones not to transfer?

Yes. Tommy, what took place is $374 million of claims were transferred to custodian in return, they transferred to us, what I referred to as custodial receipts. We are -- we feel very good about the litigation with regard to PREPA. As you know, it's been ongoing and is the focus and a priority for us. What happens as we have different bonds where we pay the full debt service, those then become claims versus unpaid bonds.

So it's not a question that we pick and choose, right? Those have been completely paid off bonds. And essentially, by doing this, they are more marketable and that they become effectively securities versus claims. So that's what you saw reported. That's in our 10-Q. With regard to how many buyers there are for this, we believe there are some. As you know, in the past, we sold actually about 1/3 of our PREPA claims going back a few years ago.

So there are other interested parties. Whether or not we sell them remains to be seen. But we thought that by doing this, it does make them more marketable. There are certain investment funds that are more likely to be able to hold them because they are now securities, they have their own CUSIP number and things like that.

Okay. Got it. Thanks for clarifying that. And then secondly, looking to some of the recent headlines, the Oversight Board in Puerto Rico saw 5 of its 7 members get terminated by the President. As we think about just like logistically, how this impacts the restructuring and the negotiations between bondholders and the Oversight Board and other stakeholders. How do you guys view that headline? Is it a positive? Does it delay the process? Just what are your viewpoints around that?

There are lots of questions that all the interested parties have given the news that you just referenced that is the dismissal of 5 of the Board members. Hard to tell exactly what happens. I think in the coming days, we'll know a whole lot more, starting with how long does it take to replace those Board members, who are the new Board members, what approach do they take.

Given the challenges that we've had with PREPA and the desire, we believe, of all the creditors to reach a consensual deal, we would hope that this will turn out to be a positive. Again, until those questions that I just mentioned are answered and the approach that the newly reconstituted Board takes, it would really be just speculation on our part in terms of what happens. But as you know, when you go back through the history of PROMESA, which is now -- we're 9 years into it.

There were 4 large credits that we had that were put into Title III. Three of those have been resolved in a consensual way. It looked as though there was low probability right now that we would reach a consensual deal in the near term. But perhaps this news will lead to an increased probability for a settlement even along a faster time line, but we just don't know at this point.

Okay. Got it. And then just last one, looking also at the disclosures in the Q, there's a note that the Oversight Board informed the court that it was intending to modify National's settlement in the forthcoming amended plan. Could you give me some background or some details on what that's referring to?

Tommy, which disclosure are you referring to?

In the Q, the business developments around PREPA, it reads following the appeal decision, the Oversight Board informed the court, national and other parties that intended to modify national settlement in a forthcoming amended plan.

Yes. I think you're referring to the one that's -- it's in the current Q, but it's dated -- it took place a while back. So I don't think there's any new information that we're sharing on that one. That's with regard to the agreement that we had, which they wanted to modify, which has then resulted in us -- we think they've breached the agreement. We -- right, the agreement effectively came terminated.

And we'll go next to the line of Carlos [indiscernible], Private Investor.

This is Carlos calling from London. Thank you very much again for your time, back in February. And thank you also for the move to sell the claims or to pass the claims to the custodian. I think that I agree that it is -- it increases the marketability. So I mean thank you for that. I think it is in line with what I suggested in February, and I really appreciate the move.

In terms of the repurchase capacity, we still have the $71 million repurchase capacity and my suggestion, and this is only a suggestion is that if the share price would at any point, hopefully not fall again to lower levels to the ones that we have now that you would consider, and I say only consider using this repurchase capacity as this -- at the moment, we could buy -- we could repurchase approximately 20% of the shares outstanding. If we were back to lower levels, please just consider the possibility of using it.

Yes. No, thank you. We agree with you. We look at potential repurchases of stock constantly. And you are correct, we have authorization remaining and it is something that we are always looking at and trading that off with liquidity issues at the holding company and capacity at National to repurchase based on statutory requirements. So we agree with you. It's something that we will continue to look at.

Perfect. If at any point, I feel that we have reached hopefully not a level that is lower enough to justify the repurchase, I will, of course, drop you a line. But at the moment, I don't think that it is necessary, but just the idea of the repurchases being a possibility helps us shareholders a lot. Then the next question would be on the on the cooperation agreement with Assured and Golden Tree, is it still the case that it will expire in December at the end of the year, but that Golden Tree and Assured Guaranty can extend it until the end of March?

Yes. Go ahead. Joe is going to take.

Carlos, I'm sorry, could you repeat the question?

Yes. The cooperation agreement with -- or the ad hoc group with Assured Guaranty and Golden Tree. At the moment, our agreement will expire at the end of the year, but the Golden Tree and Assure can extend it until the end of March. Is that still the case? Is my understanding correct?

Yes. Agreement, Carlos...

Yes, we look at that -- the group looks at that -- given the news that the previous caller asked about with the reconstitution of the Board, we will be gathering new information, we hope, very shortly. We hope that leads to real discussions and potentially a deal. But we'll continue to review that situation and how it relates to the co-op agreement. But we feel that the co-op agreement has been beneficial up until this point, but we'll continue to look at it.

Perfect. My suggestion, and again, it is only a suggestion is that you don't extend the co-op until we have the November call. So that would be -- and again, it's a suggestion, a polite suggestion. So just because you guys are in charge, but that would be my suggestion.

Okay. Thank you.

And then the final question is regarding the PREPA exposure. At the moment, the outstanding exposure would be -- the total exposure would be in the -- as per the results will be $657 million. But I assume that we have made a significant payment back in -- on the 1st of July. Is it possible to give an updated figure?

Yes. Carlos, we do report that in our operating supplement. As of June 30, the outstanding part was $504 million. And we didn't make a $91 million and $97 million payment on July 1.

And we'll go next to the line of John Staley with Staley Capital Advisers.

Bill, when the Trump administration removed 5 of the 7 members of the Oversight Committee, I think -- of course, I think they're all political appointees. But did it include the Chairman?

Yes. The current Chair of the Oversight Board was Arthur Gonzalez. He was one of the 5 people who was dismissed by the President.

And he has -- am I correct that he has historically -- as he is a professor that has been, shall I say, challenging to deal with, with his leadership.

No, that you're referring to David Skeel. He stepped down a while back. Arthur Gonzalez is a retired bankruptcy judge.

Okay. All right. So who were the 2 that were left and why were they left?

John, there were no reasons given for that. We just know that the 5 were dismissed. The 2 who are left are Andrew Biggs and John Nixon.

And do you find that a positive or a negative that those 2 that stayed?

Listen, it's hard for us to assess. We don't deal with sort of each of the 7 Board members. We deal typically through their advisers. There's some contact occasionally with Board members. But as you can imagine, given all the parties involved that most of this is done through lawyers, et cetera, and advisers. So hard to know at the individual Board member level exactly how they view different aspects of the restructuring.

But in order to get this restructuring completed, I gather that while they removed 5 of the 7, the Oversight Board's authority remains in place so that they'll have to put on an additional 5 or 4 or whatever the bylaws require for this oversight Board to continue to function and continue to exercise its so-called oversight power to approve any deal that's done.

You're correct, John. There are certain things that can continue, but there will be certain things, for example, actually approving and confirming a plan, the Board would need to have a quorum. 2 people does not -- or 2 directors does not constitute a quorum under PROMESA. They need to have 4. They need a certain number of positive votes. So they will need to add Board members, which our understanding is that, that is the intention, just a question of when that happens and who the people are.

Okay. All right. And are there any valuation guidelines on -- for instance, when you transfer the fully paid bonds, has there been any transactions in those bonds that suggest what market levels are out there?

It's not a very deep or liquid market. There are some trades that have been done. Again, it's very small. So nothing along the size -- along the lines of the size that we transferred into the custodian because I mentioned that $374 million. The small trades that have been done have been done at about $0.55 on the dollar.

For the uninsured?

Yes, those are for uninsured bonds, as Greg reminds me. But that's roughly -- but again, those are small transactions.

[Operator Instructions] And we'll take our next question from Patrick Stadelhofer with Kahn Brothers.

Now that you've turned your claims into easy-to-sell securities, would monetizing half your exposure like you did 4 or 5 years ago, move along a sale process by lowering that uncertainty you talked about and kind of narrow that bid-ask spread? Or would at least help with a special dividend in the alternative?

It clearly will reduce the uncertainty with regard to PREPA, which, as you know, is one of the things that we've cited needs to happen for us to pursue a sale of the company. So if we were to sell $374 million of our total exposure, which is a little bit in excess of $800 million, that clearly would be a big step in that direction.

With regard to the second, a little bit premature to start speculating what happens with regard to special dividends, just given the remaining Puerto Rico exposure. But again, all those things are possibilities and the probability goes up as we take those types of actions that you're suggesting.

And just the question is why did you take a step to transfer to the custodian now as opposed to some of these other tranches that already matured a few years ago? So just, I guess, a question around the timing.

Yes. I think nothing special about the timing. We've been looking at this. It takes a while to put the program in place. We thought we've gotten to a quantum of bond claims where it was meaningful and that by increasing the marketability of those, it might help facilitate sales if we found attractive prices to transact at.

But as we've said, we've also sold them without putting them into a custodian and creating custodial receipts where we have sold claims. But again, we thought it was a good thing to do. Nothing in particular about this time. There was no specific catalyst to doing it right now.

And we'll take our next question from Paul Saunders with Hutch Capital.

On the transferred claims that we're talking about to the custodian, you mentioned $374 million. Is that all of the claims? Or my understanding was you had about $300 million previously, and now you just paid $92 million. So rough numbers, $390 million, $400 million. Did you leave any behind? And if so, was there a reason for that?

No, we didn't leave any behind. As I mentioned, you can't transfer until you've paid off the full bond, right? So when you go back, we talk about our PREPA exposure, but it's made up of lots of different bonds that we insured. So even though you saw $91 million getting paid, it's possible that none of those were the last payment on a particular bond. So it's just a question of when you've made the last debt service payment and the bonds completely paid off that we can then transfer it and create a new CUSIP for it.

Perfect. That makes perfect sense. And then last one, this is also pretty tiny, but it did look like National's salvage went down a little bit, loss reserves went up slightly. I'm assuming that's changing the recovery assumptions on PREPA. And if so, I mean, I guess, is that right? And if so, is there a reason that you thought sort of PREPA recoveries might be a little bit lower than as of last quarter?

Yes. So the change you're seeing is a result of modifications to assumptions within our PREPA scenarios. Each quarter, we look at those assumptions and we may make modifications. This quarter, we did make a small modification and which generated a small loss, which you're seeing reflected in the results.

Okay. Can you -- obviously, it sounds like you don't really want to provide any more color on that. Was there something that happened that made you change that? And kind of while we're on that, is that something like where the market obviously views the Board decision by Trump as positive. Is that something you factor into your recovery assumptions that now maybe market prices of PREPA claims are moving higher or something? Would you factor that into the recovery assumptions for the quarterly balance sheet?

Yes. So Paul, with regard to sort of your earlier comment, in terms of the current reserve that was reflected in the second quarter results, just following up on Joe's comments, it really had to do more with timing as opposed to the dollar or percentage recovery. And as you know, right, as we follow the litigation, the process -- every quarter, we look at it and we try to estimate how much longer it's going to take. And no one has a precise answer.

But I think the decline in salvage that you saw had to do with it taking longer than perhaps we expected 3 months earlier, nothing more than that. There was no new information with regard to what the Oversight Board was going to offer, what the bondholders might accept, where there might be an agreement reached.

With regard to your follow-up question regarding the events this week and what will be a newly constituted Board in the near future, we will take that into account when we do reserves for third quarter based on what we learned. So when the Board is in place, the Board and its advisers have a new approach with regard to perhaps increasing the likelihood that a consensual deal is reached versus litigating this and people put forth estimates how long it could take to litigate.

So in that sense, absolutely, it will get factored into the reserves if we think that has changed any assumptions in the scenarios that we used.

That's great. And sorry, one more for me, Bill, just while I have you, because you're being so open with us on these, and it's very helpful for me. But the articles on that -- the Board news are, as I said, very positive. There's a view that Trump is bondholder-friendly. Can you -- being a little closer to the situation than me, do you agree with that? And do you have any sort of context or have you heard him discuss Puerto Rico specifically or anything like that in terms of how his views might be different than the current Oversight Board? Or have you sort of heard any expectations on, I guess, Trump's view of how he would resolve the difference between the island and the Oversight Board and the bondholders?

So with regard to the last part of your question, none of us here have heard anything from the President with regard to Puerto Rico, right, whether it be any public statements, which we're unaware of any or anything that we've heard through advisers or any of his cabinet or anything like that.

With regard to sort of the early part of the question and what does this mean and how we'll be approached and the news seems to have been a positive, as you mentioned, we obviously see all the same things. Given that we've been at this for quite a long time, it would be great if, in fact, sort of the market reaction is correct and this moves along faster than perhaps people anticipated even a week ago. Whether it's going to be more friendly to bondholders, all those things, hopefully, we'll learn more in the very near future. So we like to be optimistic. But again, what we know in terms of facts are that 5 Board members have been dismissed, and that's all we know at this point.

At this time, I am showing no further questions. So I'd like to turn the floor back over to Greg Diamond. Please go ahead.

Thank you, Erica, and thanks to those listening to our call today. Please contact us directly if you have additional questions. We also recommend that you visit our website at mbia.com for additional information on our company. Thank you for your interest in MBIA. Good day, and goodbye.

We'd like to thank everybody for your participation. Please feel free to disconnect your line at any time.