MBIA Inc. Stock

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.