MBIA Inc. Aktie

Hello, and welcome, everyone, to the MBIA Inc. Third 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. Please go ahead, sir.

Thank you, Leslie. Welcome to MBIA's financial results 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 the National Public Finance Guarantee Corporation. We also posted updates to the listings of our insurance company's insured portfolios. Regarding today's call, please note that anything said on the call is qualified by the information provided in the company's 10-K, 10-Qs 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 definition 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 the 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.

And now here's 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. Thank you for being with us today. While our third quarter 2026 net loss was greater than last year's third quarter loss, our year-to-date results compare favorably to last year. Joe will provide more details on this quarter's results shortly.

Regarding our operations, our priority continues to be resolving National's PREPA exposure, which remains at $390 million of gross par outstanding as of September 30, 2026, and $35 million of saleable PREPA bankruptcy claims consisting of custodial receipts and uninsured bonds.

Since our last conference call, the U.S. District Court for Puerto Rico granted permanent injunctive relief to 3 of the Oversight Board members that President Trump attempted to fire. The Title III court scheduled oral argument for November 18, 2026, on summary judgment for the accounting counterclaim regarding the calculation of net revenue. The PREPA bondholders petition the First Circuit Court of Appeals for an appeal on the Title III Court stay of the bondholders filing to lift the automatic stay and appoint a receiver for PREPA, and oral arguments were heard on the administrative claim appeal to the First Circuit and a ruling is pending.

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 $2.6 billion from year-end 2025 to about $19.7 billion at September 30, 2026. National's leverage ratio of gross par to statutory capital was 20:1 at the end of the quarter, down from 24:1 at year-end 2025. As of September 30, 2026 national had total claims paying resources of $1.4 billion and statutory capital and surplus of $974 million.

Now Joe will provide additional comments about our financial results.

Thank you, Bill, and good morning, everyone. I will begin with a review of our third quarter 2026 GAAP and non-GAAP results, followed by an overview of our holding company liquidity and our statutory results. The company reported a consolidated GAAP net loss of $24 million or a negative $0.49 per share for the third quarter of 2026 compared with a consolidated GAAP net loss of $8 million or a negative $0.17 per share for the third quarter of 2025. The larger GAAP net loss in the current quarter was primarily attributable to a smaller loss and LAE benefit. In the third quarter of 2026, we recorded a loss and LAE benefit of $12 million.

This benefit was largely driven by the impact of an increase in the interest rates used to discount our loss reserves, which lowered the present value of those reserves, principally with respect to MBIA Insurance Corp.'s first lien RMBS exposures.

By comparison, in the third quarter of 2025, we recorded a loss and LAE benefit of $50 million. That benefit was primarily driven by revising our PREPA loss scenarios to reflect developments at that time, including National's sale of PREPA bankruptcy claims at prices above our previous estimates. The company's adjusted net loss, which is a non-GAAP measure, was $3 million or a negative $0.06 per share for the third quarter of 2026 compared with adjusted net income of $51 million or $1.03 per share for the third quarter of 2025.

The unfavorable variance was primarily driven by $3 million of losses and LAE at National in the current quarter, reflecting the accrual of LAE and the accretion of loss reserves compared with a $54 million loss and LAE benefit in the third quarter of 2025, primarily from the favorable developments associated with National's PREPA reserves and recoveries. As of September 30, 2026, MBIA Inc.'s book value per share was negative $46.87 per share, reflecting a decrease of $2.60 per share from year-end 2025. This decrease was primarily due to our consolidated GAAP net loss of $110 million for the first 9 months of 2026 and an increase in unrealized losses on our investment portfolios recorded in other comprehensive income.

The increase in unrealized investment losses largely resulted from higher interest rates, which reduced the fair value of our fixed income investments. Included in MBIA Inc.'s book value per share as of September 30, 2026, is a negative $54.87 per share of MBIA Insurance Corp.'s book value.

I will now turn to the corporate segment balance sheet. The Corporate segment, which primarily comprises the activities of the holding company, MBIA Inc., had total assets of approximately $577 million as of September 30, 2026. Within this total are the following material assets: Unencumbered cash and liquid assets held by MBIA Inc. totaled $335 million compared with $357 million at December 31, 2025.

The decrease since year-end 2025 primarily reflects ongoing debt service payments and operating expenses, partially offset by investment income. We continue to manage holding company liquidity carefully with a primary focus on meeting our outstanding obligations and preserving our financial flexibility.

In addition to the unencumbered cash and liquid assets, the corporate segment's assets included approximately $124 million of assets at market value pledged to guaranteed investment agreement contract holders. These assets fully collateralized the principal amounts of those contracts. The segment's assets also included $70 million of assets at MBIA Services Corp., our management services company, to support its operating obligations.

I'll now turn to the statutory results of our insurance companies, beginning with National. National reported statutory net income of $18 million for the third quarter of 2026 compared with statutory net income of $73 million for the third quarter of 2025. The unfavorable variance was primarily attributable to loss and LAE activity. National recorded $4 million of statutory loss and LAE this quarter compared with a $56 million loss and LAE benefit in the third quarter of 2025. As noted earlier, the expense in the current quarter reflects the accrual of LAE and accretion of reserves while the benefit in the third quarter of 2025 was primarily driven by adjustments to our PREPA loss scenarios and assumptions and the sale of PREPA bankruptcy claims at prices above our previous estimates.

As of September 30, 2026, National statutory capital was $974 million, up $37 million compared with December 31, 2025. The increase was primarily driven by National's statutory net income of $39 million for the first 9 months of 2026. As of September 30, 2026, National's claims paying resources were $1.4 billion, unchanged from year-end 2025. Now I'll turn to MBIA Insurance Corp. MBIA Insurance Corp. reported a statutory net loss of $3 million for the third quarter of 2026 compared with a statutory net loss of $25 million for the third quarter of 2025. The favorable variance was primarily attributable to lower loss and LAE.

MBIA Insurance Corp. reported loss and LAE of $4 million in the current quarter compared with $25 million in the third quarter of 2025. The larger loss and LAE in the third quarter of 2025 primarily reflected reserve adjustments associated with lower expected recoveries of paid claims relating to the Zohar CDOs. As of September 30, 2026, MBIA Insurance Corp.'s statutory capital was $102 million, reflecting an increase of $23 million from year-end 2025. The increase was principally driven by MBIA Insurance Corp.'s statutory net income of $25 million for the first 9 months of 2026. Claims paying resources totaled $335 million as of September 30, 2026, increasing $18 million from year-end 2025. MBIA Insurance Corp.'s insured gross par outstanding was just under $1.8 billion as of September 30, 2026, declining approximately 13% from year-end 2025, reflecting the scheduled amortization of the insured portfolio. And now we will turn the call over to the operator to begin the question-and-answer session.

[Operator Instructions] We will now take our first question from Tommy McJoynt with KBW.

First question, what was the amount of the as-of-right dividend that National paid to MBIA Inc. in the fourth quarter, I think that's usually in October, versus the $63 million as-of-right dividend last year?

This is Joe. We have not yet paid the as-of-right dividend. We typically pay it in December, Tommy, not October. So we do expect to pay that dividend this coming December, and we expect it to be in a similar amount as the last 2 years, perhaps slightly higher.

Okay. Got it. And then from your vantage point, does the Democratic sweep in the midterms change the outlook for how you expect the Oversight Board to get constructed in terms of nominations from the different House and Senate leaders? And do you have a viewpoint on how that could ultimately impact how creditor-friendly and maybe resolution focused that Oversight Board will be?

Yes. With regard to the results of the elections and the implications that you're talking about, we do think it's possible that puts more focus on the 3 vacant positions. And the current administration has the ability going through the process outlined in PROMESA to fill those 3 vacancies in a sense they could do it today. I don't know where the different parties stand in terms of providing list to the President. But we do think there's an increased possibility that those 3 positions could be filled in the sense before the end of the year, which we think would help move things along. So that's probably the biggest highlight coming out of that.

Okay. Got it. And then just on the litigation side, I understand there's a few hearings coming up here later in the month. In terms of the case sort of looking at the net revenue debate in terms of how that gets calculated, could you just kind of summarize what you're seeing there in terms of those -- that case development in terms of if you feel like the sides are getting closer together, further apart, there's a lot of stuff to track there. So I just wanted to understand your sort of take on that case specifically.

Yes. Tommy, without going into a lot of details and obviously, people have read all the court filings, there clearly is a difference of opinion with regard to what the Board thinks and what the bondholders think. Again, collectively, as one of the bondholders, we feel we have a very strong case on that one. I don't know that there's really any movement in terms of sides getting closer together as you asked that part of the question. But again, I think we feel pretty good. Hard to know with litigation what the final outcome will be, but hopefully, we will know soon.

We will take our next question from Patrick Stadelhofer with Kahn Brothers.

First question is just why have you not yet sold the custodial receipts you created in July? Last year, that was presold pretty fast. And it looks like prices have held up. So I'm just curious why you're holding on to these receipts longer than last year's batch.

Yes. Patrick, we continue to look at the market and look at opportunities. As I think you're aware, it's not a really deep and liquid market. We're, I think, pretty aware of what the possibilities are, and we want to make sure that it's beneficial to shareholders. So we'll continue to look at that. As you know, some of these court decisions could impact the price up or down. There could be other events, but we're looking at that all the time.

Okay. And then a few years ago, you publicly announced and ran the sale process. And since then, you've mostly or substantially resolved a lot of the gating issues it seemed that prevented the sale then. So the question is, are you running a sale process now? And if not, why aren't you given the kind of rapid burn of shareholder value from kind of ongoing operational costs?

Yes. I think you summarized it correctly. We believe that a transaction would be beneficial to shareholders. We set out to do that several years ago, everything that you just described. As I've mentioned in previous calls, I think the feedback from that process was really twofold. One was reduce your PREPA exposure or eliminate it. Two was to get dividends from National up to the holding company. We clearly did the second one and provided the actual shareholder dividend 3 years ago. We reduced our PREPA exposure significantly. From the time we started, this is down by 2/3. As you referenced, all the custodial receipts the deal with another $35 million. While we've not started a formal process, I think people know that we are in runoff. And based on the sale process from a few years ago, we would obviously look to sell the company, sell National, do whatever it is that's beneficial to shareholders as soon as possible.

Our next question comes from [ Carlos Sparto ] private investor.

My first question is the usual question, but this time was a twist, the $71 million buyback authorization that you have in the books, is it correct that you can use it as we discussed before, that you can use it if you would like to and that there are no legal or regulatory constraints in order to use it? And could it be used for dividends?

So with regard to the $71 million authorization, and I will apologize, Carlos, you broke up there for a little bit. The $71 million authorization is valid. We have the ability to use that. That applies both to the holding company and to National. There are no regulatory constraints on that. It's not the same as dividends. Dividends are something that the company looks at on a regular basis, and the Board can approve at any point in time. There's not an authorization ahead of time. And so therefore, the $71 million does not apply to that.

Okay. But MBIA Inc., the holding company could pay a dividend in theory without having to go to the regulator.

That's correct.

If you decide to pay back [indiscernible]

No, no, go ahead.

No, no, you can go ahead please.

Yes. No, there is no regulatory oversight in terms of DFS with regard to the holding company. So the holding company has the ability to declare and pay dividends.

Exactly. So it would be just a liquidity constraint rather than a regulatory constraint. Perfect. That's very helpful. The other question that I have is that I sent you a letter with my understanding and the rationale for using the buyback capacity of $71 million, and that's basically was a proposal that was also supported by other shareholders. Could you please explain why this has not been done? And what is the rationale for not using this capacity at this stage?

With regard to dividends, I think as most people know, if you go back to about the time PREPA entered Title III, which is a little over 9 years ago, we repurchased over 80 million shares during that period at an average price of $7.74. That's not necessarily equivalent to today's share price because in addition to those share repurchases, we had the special dividend 3 years ago, which was $8 a share, which is a little bit over $400 million in total. So during the time that PREPA has been in Title III, we've returned over $1 billion to shareholders through share buybacks and through dividends. We think given that we're in runoff, it's very important to distribute money to the shareholders via both of those approaches.

We continue to look at those. And with regard to the current situation and your question about repurchases of shares, as I think most of the people know, most of those share repurchases have been done through National. There has not been any capacity at National for the last couple of years. That could change based on the stock price at any given time in our financial results.

So therefore, over the last couple of years, the dividends would have to come from the holding company. And there, again, as we've articulated in the past, we look at several things in terms of the use of the liquidity of the holding company that could be shareholder dividends. It could be debt repurchases. We obviously have obligations, primarily the Inc. debt and the MTNs to the holding company, not only in the next couple of years, meaning '27 and '28, but we also have maturities beyond that. So we take all those things into account and make decisions that we think are best for the company.

What is the specific reason not to use -- I understand that National is constrained, but the holding company is not constrained and you could use the $71 million buyback authorization. What is the exact reason why you are not doing that?

Yes. The $71 million is not a specific amount of money. It's just an authorization. So the money would come from the holding company and the liquidity. And as I just mentioned, we look at several things in terms of utilizing that liquidity. We obviously have all the obligations I mentioned, but we look at debt and stock repurchases at any point in time. And if we think it makes sense, then we'll do it.

Okay. Perfect. We have a meeting later this month, so we can discuss further there. The other question that I have is that the sales process, I know that it is not necessarily active at the moment, but that you would listen to offers as you just discussed with representative of Kahn Brothers. If someone -- what is the starting price for this selling project? I mean if someone would come or I would come tomorrow and I would offer you $300 million, knowing that the market cap at the moment is $225 million, would you accept it? Or is it something that you consider? I mean what is the starting price for the selling process?

Yes. I don't think it's appropriate for us to discuss price of particular transactions on this call. If for some reason, you are interested in making a bid for the company, you should contact us after the call. I also want to clarify, you have a call with Greg Diamond, the Head of our Investor and Media Relations next week, not with anybody else at the company.

Yes. So I will be discussing this issue. Then another question that I have is that my understanding, now we go to the Co-op. In the Co-op, MBIA Inc. is not bound by the terms of the Co-op. So it is only National. I did review the Co-op and MBIA Inc. would be free to act without being constrained by the terms of the Co-op. Is that correct?

I think it depends on what type of actions you're talking about.

MBIA Inc. is not a party to the Co-op, and there is no definition of affiliate. So the Co-op is only binding on National.

Carlos, you have a specific question?

Basically, MBIA Inc -- could you please confirm that MBIA Inc is not a party to the Co-op.

Okay. So let's hypothetically say I agree that it's not. What's the follow-up question?

Yes. No, basically, MBIA Inc. would be free to contact the Oversight Board with a proposal and then we'll say directly if you want it.

I'm sorry, I didn't understand that.

Yes. MBIA Inc. would be able to contact the Oversight Board, for example, and make a proposal if MBIA Inc. want it? That's basically my question.

The PREPA claims are held at National. So any proposal would come from National, making a distinction in this case between National and Inc. is irrelevant in our view.

I respectfully disagree. And coming also to the offer that the Oversight Board made of approximately 40%, you mentioned last time, 30% to 40%. Has any counter offer been made by the Co-op?

We can't talk about the confidential negotiations that may or may not be going on between the creditors and the Oversight Board.

Yes. In my opinion, and this is only my opinion, I think that making a counter offer of 60% would be beneficial for MBIA shareholders. So that's something that I will be discussing during our meetings later this month. Then also one question that I have about the Co-op is that unfortunately, our lawyers are going to be dissolved, Weil, Gotshal. So my question, I mean, what is the process now that our lawyers are going to be dissolved? And are we going to be trying to find lawyers that are a little bit more effective because the strategy didn't work over the last few years. So what is the process to replace them?

Yes. Given the announcement and the process going on at Weil, Gotshal, we are currently represented and have adequate or appropriate representation. We're very comfortable with the representation and advice that Weil has provided. We're in conversations with the lawyers there in terms of next steps, and we are comfortable that we will have legal representation without any disruption during this process.

Perfect. Would you consider a different law firm if we suggest a different law firm that has a different strategy? Is this something that you are willing to listen to?

Well, at this point, almost by definition, we're going to end up with a different law firm at some point, given that Weil is winding down. So stay tuned, and we'll let you know how that plays out.

Perfect. I will be proactive, and I will be suggesting something also during our conversation this week. And then also another question I have is what are the costs of being a member of the Co-op annually? Do you have any idea of how much is the cost in terms of like legal costs? Also I can imagine that there are some common costs with the other members of the Co-op. What is the cost of having the Co-op running?

In our view, there is no incremental cost to being a member of the Co-op.

I mean you are paying fees. So there should be some kind of figure. I mean, of course, you will have to compare it to the cost of running it alone, but what is the cost of being a member of the Co-op?

There are no fees to be a member of the Co-op.

Well, you have to pay lawyers and the lawyers have to participate in the Co-op. So I guess that you have some understanding of what is it costing to be in the Co-op.

Why don't you follow up with Greg on that because maybe we're not understanding. But in our view, actually, it probably reduces expenses given that some of the things are shared by different parties. But there is no incremental cost in our view.

Okay. And finally, the Co-op is now scheduled to end at the end of August 2027. What is the plan in terms of extending it?

It's early at this point. So there's no sort of plan at this point in terms of what might happen come August.

Yes. And would you consider extending it only if any of the members of the Co-op would decide to buy our claims?

I think those are 2 separate things. We can sell our claims if we get an attractive offer. But again, in terms of extending it, we think there's great benefit to the Co-op at this point. And again, August in some way is a ways off. So we have plenty of time to make decisions there, but we think there's a great benefit to the Co-op.

Have we approached any of the members of the Co-op in order to make any offer or to see whether they're interested in buying our claims?

Yes. Again, that's not something that we would discuss. Those would be confidential discussions back and forth. So not anything I can comment on at this time.

Let's continue discussing later in the month first with Greg, and probably with them in a different way.

We will now take our next question from John Staley with Staley Advisors.

Bill, I have a couple of questions. I'm not current on it, but at one time, I was aware there was an incentive plan in place that paid bonuses, so to speak, upon exit to yourself and a couple of other executives. Is that plan still in place?

There is a plan that takes effect on a change of control, so sale of the company. At this point, I am the only one left who is covered by that. There were many other executives at one point who have all left the firm.

Okay. And as they've left the firm, the incentive payment to you is still in place. I mean, as I recall, it was reasonably substantial.

It's all -- yes, it's all in the proxy. And that's why I know you have no information yet.

Yes. But it's still in place?

Yes it is.

Do you have any direct or indirect exposure to this commuter railroad in Florida, this Brightline?

I can happily say no. We have no exposure whatsoever.

All right. That leads me to a question. Affiliated Guaranty is deeply involved in that. And as I understand it from a very, very high level, they did a bankruptcy reconstruction in which they excluded the municipal part, but I think there had to be additional investments made. but it's certainly an impaired credit or at least one that has potential problems for Affiliated, which suggests that for them to keep their rating, there's indications they may be looking to increase their capital. And I remember some time ago when I had a discussion with you about assured Guaranty acquiring MBIA, I said, well, maybe because all the positions merge and they're already insuring most everything and they get a big benefit. You said, no, the real benefit is the capital. So it seems to me that if Assured Guaranty is looking to enhance its capital whether it's because of Brightline or some other credit issues, they would be more incented than normal to try to get something done with you guys. And I wondered if you had any reaction to that thought.

Well, I think you summarized the situation that Assured faces with regard to Brightline, which as you mentioned, is the railroad down in Florida. Again, they would be the experts on that particular situation. We are aware of it. In terms of whether that makes a combination between MBIA and Assured more or less likely, similar other things, I can't really comment on that at this point in time.

Okay. The other thing that has happened is that the -- I think it was on the call earlier that the Kahn Brothers have come back into ownership and between Kahn Brothers and I think it's Levin, who's a private investor, they combined have over 15% ownership. I wonder if you're getting any suggestions from them as shareholders to try to accelerate this wrap-up, even though I recognize from the earlier comments, there seem to be a number of very significant legal decisions and court decisions that are going to be occurring over the near term. But are you getting any encouragement from your larger shareholders to get this thing wrapped up?

I won't comment on any discussions we have with specific shareholders. But as you know, we speak to shareholders on a regular basis. Greg, in particular, speaks to many of them, but I've had conversations with many of our investors as well. And I think the group that is most focused on wrapping this up, as you suggest, is actually the company or management. So again, as was referenced on one of the earlier -- by one of the earlier callers, we started a process at this point almost 4 years ago, I guess it was. And everything we've been doing is trying to accelerate and come up with some transaction that would benefit shareholders. So we think we're making progress towards that. We'd all like it to be as fast as possible. I think the litigation has sort of delayed the time line from what we originally set out, but we're doing everything we can to make that happen.

[Operator Instructions] We will take our next question from Paul Saunders with Hutch Capital.

I've got just a couple of sort of housekeeping questions, I guess. First one is the investment agreement principal balance was down pretty substantially, about $57 million. I know that there were maturities there. It sort of lines up with what the maturities were, but I just kind of wanted to ask, were those like voluntary prepayments? Or were those just scheduled maturity payments?

Those were scheduled maturity payments.

Great. My other one is on LCOR Alexandria. The gross par insured is dropping like on a consistent basis each quarter, like $11 million or $12 million. Is that National making claims payments on those? Or is the issuer paying like amortization payments, which is reducing your exposure?

National is making claim payments, regular claim payments on LCOR.

And obviously, that's because LCOR is not making those. I mean my reading of that one is that, that credit seems to be in pretty good shape, especially with some like meaningful positive things happening this year with leasing of one of those buildings. Can you provide any sort of color, I guess, on that credit? And why National is making those and not the issuer itself?

Yes. On that, Paul, just to be clear, LCOR is making partial payments. So they are paying some of the debt service. They're just not paying 100% of it. So National then pays the difference. And everything you described is correct. There is what we think is positive activity with regard to that credit. You mentioned the additional building being leased. So we do think despite what happened over the last couple of years, it is moving in a very positive direction.

And yes, I don't want to really belabor that one because I don't worry about it too much. But do you know -- or can you, I guess, give us your opinion, do you think they'll sell those buildings? Or how do you think that will get settled there?

I think at this point, it's hard and it would just be speculation. But again, I think because of the sort of underlying economic conditions right now with regard to that building, we're pretty optimistic about it.

Yes, agreed. Last question for me really is I saw some headlines on the U.S. Virgin Islands issuing new gross receipts tax debt, and it said they were going to issue $500 million and the use of proceeds would be for repaying other gross receipts debt and other general corporate purposes. Can you tell us are the proceeds of that new issuance, is that happening? And is that to repay our national wrap debt? Or is it just kind of coming in pari passu with us?

It's pretty much the latter. So it will not be repaying our debt to the best of our knowledge.

Got it. Okay. And yes, one more comment for me while I have you, I would sort of respectfully disagree a little bit with Carl before on the share repurchases. Just I agree with you really in that. I actually think it would be better for shareholders to focus on the debt, particularly the ones that you can buy at a large discount. So I think you can kind of create similar book value expansion with some of those medium-term notes, but also, obviously, which I know you're focused on probably reducing the negative carry associated with the cash and your Inc. debt as well. So that's not a question, just a comment that I wanted to add. So thanks for your time.

We will take our next question from Neil Byers, private investor.

A couple of facts I just wanted to confirm before my first question, just to clarify. So the first being, MBIA Inc.'s reported operating expenses are running roughly $65-plus million a year going on 3 straight years, like $69 million in '24, $68 million in '25 and through last night's reporting about $48 million through the first 3 quarters of '26. That would be one thing I just want to confirm. And then second, the Co-op's term has now been extended 5 times since National joined. Now with the next extension running through August 31 and a possible extension after that through November '27. So it doesn't look like there's really any kind of committed end date there. So is that a fair wrap-up of those facts there?

The operating expenses are as reported. And as we've stated, I think, already in the discussion today, the agreement goes through August. And to your point, it's been extended in the past. I can't comment whether or not it will be at that point among all the bondholders, but it's always a possibility.

Great. Okay. Yes. So with the $65 million plus or minus in expenses being reported and outcome pending on the Co-op side, I'd just like to know, does the Board have an internal threshold, some type of dollar amount or date beyond which it would pivot from the Co-op to look at other options of private transfer sale or settlement? And if there isn't one, if there isn't some type of threshold there, how does the Board distinguish between the patience and your desire to see this out versus funding the sunk cost of continuing. And I understand, too, that it's National and it's just PREPA related. But how do you distinguish between that patience and just running the cost out?

Yes. With regard to the Co-op or the PREPA situation, first of all, there's nothing in the Co-op agreement that prevents us from selling our claims. So we've sold many in the past, as I mentioned earlier on the call, we had $1.2 billion of exposure when PREPA filed Title III back in 2017. We reduced that by approximately 2/3. As you know, we sold custodial receipts last year. We do have other custodial receipts right now, which if we had what we thought was an appropriate price, we could sell those. Remaining $390 million, which is insured par is a little bit more difficult to get rid of. But there was an attractive price at which to do it. We could do that irrespective of the Co-op agreement.

So again, that's not preventing us from winding down our PREPA exposure. Regard to the operating expenses, the only thing I would say is, I think for shareholders, the way I think most of the shareholders look at it is some of those expenses are associated with MBIA Inc. The ones that really affect the shareholders are the operating expenses at the holding company and at National.

Right. Okay. So really, there is not a threshold that's being looked at.

When you say threshold, we're trying to reduce our exposure as quickly as we can, again, but it's got to be at attractive prices. So I'm not sure when you say threshold, what you're looking for?

Yes. Just wondering if overall, if it ends up being 4 years, so if there's an extension in August and an extension in November, that potential for remaining in the Co-op then could look out for a total of 4 years that National is in that, and it's National not necessarily being the party that's unilaterally controlling everything there, it's largely the bondholders. Yes, just wondering if -- I guess, following up on that then, if there is looking down the road with the expenses and the run -- the company being in the runoff, just trying to figure out if there's any kind of deadline or a point in time where the Board or management has said we're ready to pivot if we get to X, Y or Z?

Yes. Again, the Co-op agreements are irrelevant, I think, for what you're talking about. The question is, can we reduce our PREPA exposure at attractive prices? Or does the PREPA exposure somehow prevent an attractive sale or transaction related to the company. Again, I think the time line is driven more by the litigation schedule. I take your point that perhaps implicitly the bondholders could impact the litigation schedule. But for the most part, that's driven by the judges and the court. So again, we continue to look for ways to reduce our exposure. And we've never felt that the Co-op agreement constrains us. We've been frustrated by the pace of litigation through the court system.

Right. Okay. And one other question, if you don't mind. So on the second quarter call, I believe you characterized the Oversight Board's proposal of roughly $0.30 to $0.40 on the dollar against PREPA bonds trading around maybe $0.75. And looking at National's own disclosed loss LAE reserves against $508 million of insured debt service that implies an expected recovery somewhere in the mid-50s, that's implied, which would be well above the rejected offer in that $0.30 to $0.40 range. I'm just curious if the Co-op -- did the Co-op counter an offer anywhere near that reserve high level? Or did the Co-op counter at all?

Again, I can't comment on the negotiations. Those are all confidential in terms of any offers or counter offers unless or until they're made public.

Okay. So that's okay, that cannot be disclosed. I think final question, if you don't mind, I guess. So in August 2025, National sold $374 million of the custodial receipts. That was the price you described as higher than your prior estimate, but that was not disclosed. What did National realize as a percentage of face? And is that something you can disclose?

I ask the question again, Neil. I didn't catch the last one. Percentage of what?

Percentage of the face value.

Yes. We didn't and don't disclose that.

At this time, I'm showing no further questions in the queue. I'd like to turn the floor back over to Greg Diamond for closing remarks.

Thank you, Leslie, 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 on 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. Second 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. Please go ahead, sir.

Thank you, Angela. 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 websites, including our financial results, 10-Q, early 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 companies' insured portfolios.

Regarding today's call, please note that anything said on the call is qualified by the information provided in the company's 10-K, 10-Qs, 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, 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 Sackinger 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 second quarter and year-to-date financial results for 2026 provided favorable comparisons to the same periods for the prior year. Our priority continues to be resolving National's PREPA exposure. National's outstanding PREPA exposure reduced by $35 million to $390 million of gross par value, due to the insurance policy claims paid by National PREPA bonds that matured on July 1, 2026.

There was also some progress on several of the litigations related to PREPA. The director of the White House Personnel Office, which appealed the injunctive relief that was awarded to three of the oversight board members that were fired by President Trump, has asked the First Circuit Court of Appeals to remand that case back to the trial court in light of the U.S. Supreme Court's rulings issued in late June regarding the [ slaughter and cook ] cases.

In the case about the PREPA bondholders' counterclaim for the calculation of net revenues, Judge Swain lifted the self-imposed litigation stay and that case is currently in discovery. Administrative claim appeal to the First Circuit. That case is now fully briefed and scheduled for oral arguments in Boston on September 15. Separately, the Oversight Board nearly doubled their settlement offer to PREPA bondholders from $1.6 billion to approximately $3 billion. However, bondholders representing about 90% of the bondholder claims soundly dismissed the offer as unacceptable and inadequate.

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 $1.5 billion from year-end 2025 to about $20.8 billion at June 30, 2026. National's leverage ratio, gross par to statutory capital, is 21 to 1 at the end of the quarter, down from 24 to 1 at year-end 2025. As of June 30, 2026, National had total claims-paying resources of $1.4 billion and statutory capital and surplus of about $970 million. Now Joe will provide additional comments about our financial results.

Thank you, Bill, and good morning, everyone. I will begin with a review of our second quarter 2026 GAAP and non-GAAP results, followed by an overview of our holding company liquidity and our statutory results. The company reported a consolidated GAAP net loss of $46 million, or a negative $0.91 per share, for the second quarter of 2026, compared with a consolidated GAAP net loss of $56 million, or a negative $1.12 per share, for the second quarter of 2025.

The lower GAAP net loss this quarter was primarily driven by two items. First, we recorded a reversal of legal expenses within a consolidated variable interest entity, or VIE, related to our Zohar CDO recoveries at MBIA Insurance Corp. And second, our results benefited from foreign exchange gains in the second quarter of 2026, compared with foreign exchange losses in the same period of 2025. These foreign exchange impacts were associated with the revaluation of Euro-denominated medium-term note liabilities in our corporate segment, and resulted from changes in foreign exchange rates.

The company's adjusted net loss, which is a non-GAAP measure, was $7 million, or a negative $0.14 per share, for the second quarter of 2026, compared with an adjusted net loss of $8 million, or a negative $0.17 per share, for the second quarter of 2025. The modest improvement in our adjusted net loss this quarter was primarily driven by slightly lower loss and loss adjustment expenses, or LAE, at National related to its exposure. MBIA Inc.'s book value per share as of June 30, 2026, was negative $45.58 per share, reflecting a decrease of $1.31 per share from year-end 2025. This decrease was primarily due to our consolidated net loss of $86 million for the first 6 months of 2026. Included in MBIA Inc.'s book value per share as of June 30, 2026, is a negative $54.26 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 includes the activities of the holding company, MBIA, Inc., had total assets of approximately $635 million as of June 30, 2026. Within this total are the following material assets. Unencumbered cash and liquid assets held by MBIA Inc. totaled $337 million, compared with $357 million as of December 31, 2025. The decrease from year-end 2025 was primarily due to ongoing debt service payments and operating expenses net of investment income. We continue to manage holding company liquidity carefully with a primary focus on meeting our outstanding obligations and preserving financial flexibility.

In addition to the 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. These assets fully collateralized the principal amounts of those contracts. The segment's assets also included $66 million of assets at MBIA Services, our management services company, to support its operating obligations.

I'll now turn to the insurance company statutory results. National reported statutory net income of $10 million for the second quarter of 2026, compared with statutory net income of $6 million for the second quarter of 2025. The favorable variance was primarily driven by higher earned premiums, which resulted from refundings of insured credits, and lower loss and LAE and operating expenses in the current quarter. National's statutory capital as of June 30, 2026, was $968 million, up $31 million compared with December 31, 2025. The increase was mostly due to National's statutory net income for the first 6 months of 2026, as well as unrealized gains in its investment portfolio.

As of June 30, 2026, National's 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 $27 million for the second quarter of 2026, compared with statutory net income of $4 million for the second quarter of 2025. The favorable variance was primarily driven by a significantly larger loss and LAE benefit in the current quarter compared with the second quarter of 2025. The loss and LAE benefit this quarter was driven by our ongoing reassessment of recoveries of paid claims and other amounts owed to MBIA Insurance Corp. related to the Zohar CDOs.

As of June 30, 2026, the statutory capital of MBIA Insurance Corp. was $106 million, reflecting an increase of $27 million from year-end 2025. This increase was primarily a result of net income of $28 million for the first 6 months of 2026. Claims-paying resources totaled $342 million as of June 30, 2026, up $25 million from year-end 2025. MBIA Insurance Corp.'s insured gross par outstanding was just under $1.8 billion as of June 30, 2026, down approximately 12% from year-end 2025 due to regular amortization of the insured portfolio. And now we will turn the call over to the operator to begin the question-and-answer session.

[Operator Instructions] And we'll take our first question from Tommy McJoynt with KBW. Your line is now open.

Good morning, this is Molly on for Tommy. Thank you for taking our questions. First, can you talk about the latest settlement proposal from the Oversight Board from your perspective? Was there anything incrementally positive about the offering terms relative to prior proposals? Or, you know, in your view, are we no closer to a potential resolution previously?

Yes, thank you, Molly. With regard to the PREPA proposal that came across, the positive was that it was, from their perspective, a substantial increase. Other than that, there's not a whole lot to talk about. As I said in my comments, the bondholders dismissed it as clearly inadequate. So hard to say where we go from here in terms of how much time. As I mentioned, the litigations are moving forward and, as you know, there is some uncertainty with regard to the composition of the Oversight Board currently. Currently only four members, three of whom are fighting the dismissal by the Trump administration. So hard to tell with regard to timing and, you know, exactly how this will play out, but those are our thoughts with regard to that proposal.

Thank you. And I guess, secondly, you paid the special dividend out of National a couple years ago that caused National's capital ratio to dip from just over 3% to about 2%. Should we think of any portion of the capital ratio above that roughly 2% figure as potentially being available to distribute up to the holdco as the insured portfolio continues to run down?

Yes, so with regard to National and any distributions from National to the holding company, you're correct. It was at the end of 2023 that we had a special distribution from National to the holding company. While everyone looks at different metrics and does their own financial analysis as the book gets smaller, it becomes a very tailored analysis with regard to what's in the National portfolio. So I understand how everyone looks at metrics and that's in a sense fine. But it probably has to be even a more detailed analysis to determine exactly what the potential dividend or distribution could be.

And our next question will come from investor Carlos Pardo. Your line is now open.

Hi, this is Carlos Pardo from London. Good afternoon. Just a few questions. I mean, on the buybacks, I saw that the capacity is still $71 million, and I just wanted to make sure that you confirmed that it is available and it still could be deployed.

That is correct. There is $71 million available.

So basically there is no other constraint, not just the legal constraint, but also it's basically up to you to decide when you think that this is in the interest of the shareholders. My impression is that since the share price has dropped as you said, as you have seen over the last year, maybe now it is the time to consider whether deploying these buybacks. And of course, I mean, I will be sending you my idea of basically the levels and the volumes as to how this could be done.

But basically, at the moment with yesterday's price, you could retire approximately 14 million shares. Since I expect that the Oversight Board will have some good news in terms of the composition of the Oversight Board soon, I think that probably this drop to around $5 is a good opportunity. So just to let you know that I will be sending you a proposal. It's always up to you to decide whether to implement it. Okay.

Then on the custodial receipts, I saw that you have done another transaction for $30 million. I assume that this $30 million corresponds to the payments that we made under PREPA on the 1st of July, and I think that there was another one on the 1st of January?

So with regard to the custodial receipts and the debt service payment that we made on July 1st, so we paid $35 million on July 1st. $5 million was a secondary policy. So $30 million now have been transferred into a custody account. We have the custodial receipts as we did last year. Those could be sold.

Fantastic. Okay, that. And then the $5 million that were secondary, those can be sold as well?

So we have $35 million that could be sold. If we think there was an appropriate price or offer that we received, then we would sell up to $35 million.

That's fantastic. And then on PREPA payments, the only payments that we will have to make over the next 2 years is $20 million in '27 and $20 million in '28. So it is relatively benign, the payment schedule.

That's correct. The debt service payments on PREPA have declined significantly over the period you just mentioned. Yes.

That's fantastic. That's good news. And also, you know, related to the potential use of the buybacks, I think that, you know, that could theoretically make sense. But of course, I mean, it's always up to you guys that you have the bigger, the full picture.

Then on the Co-op, you know, basically, you know, the Co-op has been extended until, I think that is August 2027, which I think that it makes sense in terms of the recent decisions and the potential for new members of the Oversight Board. But I just wanted to know, the terms of the Co-op has not changed. So basically, only 1 party to the Co-op is opposing an agreement that has been reached by all the other parties to the Co-op. This party, let's say for example, Assured Guaranty, could not block this agreement. Is that correct? Are those terms still valid?

Essentially, yes. Yes. So basically, they could not block.

I mean, let's say, for example, Assured Guaranty does not agree with an agreement that has been reached by the rest of the Co-op members, they cannot block it. My question there is, since the resolution of PREPA is so important for MBIA, and we put any further move on sale or similar on hold until this is resolved. How does the conversations within the Co-op look like? Are we actively seeking to propose potential solutions to the other members of the Co-op or are we more on a passive mode?

I can't get into the details in terms of the views of all the different members at the bondholders. I can assure you we're not passive, but we obviously have a very vested interest in the outcome. And we're looking to work to 90% of the bondholders are in the Co-op agreement. And I think the biggest issue really has been the Oversight Board. That is the uncertainty with regard to the composition of the Board and also the litigation related to it. We think that could be a real catalyst. That is either the appointment of the three vacant positions or the resolution of the litigation. Hopefully that will be again a catalyst to move this forward.

Well, when do you expect, I mean, of course, we are dealing with the Puerto Rico bankruptcy, so predicting is impossible. But when do you think that, in your opinion, after the recent decision, I think it was last week, when do you think that there will be some kind of green light for new members? What is your expectation of the Board?

It's very hard to predict. It really depends on how the administration wants to move forward. Again, we hope it's as soon as possible, but it's just very hard to predict.

Is the Co-op contacting also the administration in terms of trying to get them to accelerate this situation or?

Again, I can't speak to the specific actions that the Co-op Board is taking, but I think it's reasonable to assume that not only are we, but all bondholders doing everything they can to move forward, move this to a resolution.

Fantastic. I will be also sending you some direct, kind of proposal as to what I would do in terms of trying to get the Co-op to move. Of course, knowing that the key catalyst, as you said, is the appointment of the new members of the Board, but I will be sending it to you for your consideration. Okay. Perfect. Thank you for your time.

Thank you.

[Operator Instructions] We'll move next to John Staley with Staley Capital Advisors. Your line is now open.

And as the offer from the Oversight Board doubled roughly, how, what's your estimate how much of a spread there is between their offer and what the bondholders would consider to be reasonable? Do they have to double again or triple again? I don't know the magnitude of it.

Yes, John, again, it's difficult to answer because I think every bondholder probably has a different number in mind. But roughly speaking, the offer that came across was somewhere probably in between $0.30 and $0.40, depending how you value everything. That's $0.30 to $0.40 on a dollar of par. And just as a benchmark, the bonds right now in the marketplace, while it's not a really deep or liquid market, but the last indications, were trading at about $0.75. So that at least gives you some reference point between what the offer was and what the so-called marketplace is saying.

Yes. And if you review your current insured portfolio, do you factor in the political trends of the protected liberal side of the parties in the so-called blue states and this democratic socialist group who have no respect for existing contracts? Has that factored into you with any potential thoughts that you might have some impairment because of political trends not supporting honoring existing contracts and permits?

So when we look at the portfolio, we look at obviously many factors. What you just described is one, it's not a new factor. We have looked at the way different administrations have handled, whether it be state or local, obligations for a long time. Clearly, you're looking at some of the trends and situations that are developing across the country right now. We look at all of those things.

So without getting into what probably could be a weeks-long discussion on the topic that you're highlighting, it is something that we factor into our analysis. There are no impairments that we have taken in this quarter specifically related to those type of administrations for some reason, choosing not to meet a contractual obligation. We hope all administrations will continue to fulfill their obligations and we'll just continue to monitor the situation.

Thank you, and I interpret the various updates you had on PREPA as being quite as positive as it could be. I don't know how the Supreme Court ruling could have been any more positive other than if they talked, you know, they literally said that you could fire, they basically implied they have the right to fire anybody. I suspect this is finally moving to a more, hopefully, clear resolution.

We would love for things to move quickly just to do what.

And we'll go next to Patrick Stadelhofer with Kahn.

Hi, good morning. I just wanted to ask about a kind of thoughts around the potential sale process, given that all the gating items from last time you're making progress on. And obviously there's ongoing cash burn in the business. Just wanted to think how kind of what steps are remaining for you to do so. And would you again, do it as a public process the way you did 3 or 4 years ago or would you do it to come around?

Thank you. Yes, Patrick, thank you. With regard to a sale process and again, you're referring to, I guess it was 4 years ago, we announced we had hired Barclays to help us with a sale process. We then decided to stop that process and pursued the distribution from National and shareholder dividend. With regard to how we would do this moving forward, the answer is it depends.

I think the probability of a transaction goes up every time we reduce our exposure to PREPA. Obviously different potential acquirers will view the PREPA situation differently. There are some who probably look at a resolution similar to what we might think of in terms of value or potential value. So again, at this point, we don't have any specific decision.

If we decided that we were going to run a process similar to what we did, you know, 4 years ago, my guess is we would announce that. Also the possibility that individuals contact us at any point in time or given that we probably can identify potential acquirers we could reach out to them at any point in time if we thought it was advantageous for shareholders. So again, nothing specific on that at this point in time but something that we look at constantly.

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

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

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. 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.