MBIA Inc. (NYSE:MBI) has reported a consolidated GAAP net loss of $86 million for the first quarter of 2024, an improvement from the $93 million loss in the same period last year. The company emphasized its focus on resolving its exposure in Puerto Rico, particularly with PREPA, and its plans to sell the company. The insured portfolio decreased to $27.8 billion, and the leverage ratio stood firm at 25 to 1. MBIA also highlighted its liquidity profile and the ability to repurchase liabilities, including medium-term notes and unsecured debt, while investment agreements must wait until maturity.
Key Takeaways
- MBIA reported a consolidated GAAP net loss of $86 million for Q1 2024, improving from a $93 million loss in Q1 2023.
- The company's insured portfolio decreased by approximately $600 million to $27.8 billion.
- MBIA's primary focus is on resolving its exposure in Puerto Rico and selling the company.
- The leverage ratio remained unchanged at 25 to 1.
- MBIA has the liquidity to repurchase certain liabilities, including medium-term notes and unsecured debt.
- Legal proceedings are ongoing, and the timing for a resolution is uncertain.
Company Outlook
- MBIA is intent on resolving remaining exposure in Puerto Rico.
- The sale of the company is a primary objective.
- Awaiting rulings for PREPA's plan of adjustment confirmed in March 2024.
Bearish Highlights
- The insured portfolio saw a reduction of approximately $600 million.
- The company is facing ongoing legal proceedings with uncertain outcomes.
- Statutory net losses were reported for both National and MBIA Insurance Corp.
Bullish Highlights
- The company has improved its net loss position year-over-year.
- MBIA maintains a strong liquidity profile, enabling liability repurchases.
- There is authorization and liquidity to buy back stock at the holding company level.
Misses
- Despite improvements, the company still reported a significant net loss.
- The decline in the insured portfolio could indicate challenges in business growth.
Q&A Highlights
- Joe Schachinger and Bill Fallon clarified the company's ability to repurchase medium-term notes and unsecured debt.
- Bill Fallon noted the company is waiting for the First Circuit's opinion before Judge Swain issues confirmation.
- Management encouraged direct contact for further inquiries and reminded listeners to visit the company's website for additional information.
MBIA Inc. remains focused on its strategic objectives amidst a challenging financial environment. The company's proactive measures to manage its liabilities and maintain liquidity are noteworthy, even as it navigates through ongoing legal complexities. As MBIA continues to work towards a resolution in Puerto Rico and the potential sale of the company, investors and stakeholders are advised to stay informed through the company's communications channels.
InvestingPro Insights
InvestingPro Tips for MBIA Inc. (MBI) highlight some critical aspects of the company's financial health and market performance. Notably, management's aggressive share buyback strategy may reflect confidence in the company's future, as share buybacks can potentially increase earnings per share and return value to shareholders. Additionally, while analysts expect sales growth in the current year, they are not optimistic about the company's profitability for the same period.
InvestingPro Data metrics provide a quantitative perspective on MBIA's financial status:
- The Market Cap (Adjusted) stands at 335.86M USD, offering a sense of the company's size in the market.
- A negative P/E Ratio (Adjusted) of -0.69 for the last twelve months as of Q4 2023 indicates that the company is not currently profitable.
- The 1 Year Price Total Return of 97.5% is a testament to the significant share price appreciation over the past year, which may be of interest to potential investors.
These insights, coupled with the company's current strategic objectives and financial maneuvers, can help investors better understand MBIA Inc.'s position in the market. For a more comprehensive analysis and additional InvestingPro Tips, visit https://www.investing.com/pro/MBI and consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are 9 additional InvestingPro Tips available for MBIA Inc. that could further inform investment decisions.
Full transcript - Mbia Inc (MBI) Q1 2024:
Operator: Welcome to the MBIA Inc. First Quarter 2024 Financial Results Conference Call. I would now like to turn the call over to Greg Diamond, Managing Director of Investor and Media Relations at MBIA. Please go ahead, sir.
Greg Diamond: Thank you, Ashley. Welcome to MBIA's conference call for our first quarter 2024 financial results. After the market closed yesterday, we issued and posted several items on our website, including our financial results, our 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-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 disclosure 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 two 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. 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.
Bill Fallon: Thanks, Greg. Good morning, everyone. Thanks for being with us today. Last month, we said goodbye to Anthony McKiernan, our CFO, who helped us navigate through some very difficult times and was instrumental on many projects that have been critical to MBIA. Anthony will be missed, and we wish him the very best in his future endeavors. Our first quarter 2024 results were relatively straightforward and relatively unchanged versus a year ago. Our new CFO, Joe Schachinger, will have more to say about these results shortly. In the meantime, our primary objectives continue to be focused on the resolution of our remaining Puerto Rico exposure and then restarting the process to sell the company. Regarding PREPA, National's remaining exposure to PREPA was $610 million of gross par insured at the end of the first quarter. The Title III Court held the confirmation hearing for PREPA's plan of adjustment in March of this year and we await a ruling on that hearing as well as rulings to be issued by the First Circuit Court regarding appeals being sought by bondholders opposing the current PREPA restructuring 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 $600 million from the year-end 2023 to $27.8 billion at the end of the first quarter of this year. National's leverage ratio of gross par to statutory capital remained unchanged from year-end 2023 at 25 to 1. At the end of the first quarter, National had total claims paying resources of $1.7 billion and statutory capital surplus of $1.1 billion. Now, Joe will provide additional comments about our financial results.
Joe Schachinger: Thank you, Bill, and good morning all. I will begin with a review of our first quarter 2024 GAAP and non-GAAP results and then provide an overview of our statutory results. The company reported a consolidated GAAP net loss of $86 million or a negative $1.84 per share for the first quarter of 2024 compared to a consolidated GAAP net loss of $93 million or a negative $1.86 per share for the first quarter of 2023. The lower GAAP net loss this quarter was largely driven by lower losses from our discontinued operations. Our net loss from continuing operations of $87 million was slightly higher in the first quarter of 2024 compared with a net loss of $83 million in the same period in 2023, primarily as a result of higher loss and LAE at National, which largely related to pushing out the timing of the effective date of the PREPA plan to restructure its debt and higher losses on variable interest entities at MBIA Insurance Corp., most of which were reclassified from other comprehensive income and therefore, neutral to total equity. These losses largely relate to purchases of VIE debt executed as part of a planned termination of MBIA Insurance Corp.'s last material insured ABS CDO transaction. These unfavorable variances were partly offset by foreign exchange gains on our euro medium-term note liabilities in our corporate segment this quarter compared to mark-to-market losses on interest rate swaps and foreign exchange losses on euro medium-term notes in our corporate segment in the first quarter of last year. As a reminder, in the fourth quarter of 2023 and the first quarter of 2024, we terminated all of the swaps that were part of our holding company ALM business. The company's adjusted net loss, a non-GAAP measure, was $24 million or a negative $0.52 per share for the first quarter of 2024 compared with an adjusted net loss of $1 million or negative $0.03 per share for the first quarter of 2023. The unfavorable change was primarily due to higher loss and LAE at National in the current quarter. MBIA Inc.'s book value per share decreased $1.24 to a negative $33.80 per share as of March 31, 2024 versus a negative $32.56 per share as of December 31, 2023, primarily due to the net loss for the quarter. Included in MBIA Inc.'s book value as of March 31, 2024 is a negative $45.44 per share of MBIA Insurance Corp.'s book value versus a negative $44.91 per share as of December 31, 2023. 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 $710 million as of March 31, 2024. Within this total are the following material assets: Unencumbered cash and liquid assets held by MBIA Inc. totaled $376 million compared with $411 million as of December 31, 2023. The decrease was largely due to spending approximately $36 million on retiring GFL euro-denominated medium-term note liabilities before their maturities. These purchases were executed at prices accretive to equity and will reduce euro exchange rate volatility within our results going forward. I'll also note that subsequent to March 31, we spent an additional $26 million to retire GFL's remaining near-term euro-denominated medium-term note liabilities at a price accretive to equity. In addition to the unencumbered cash and liquid assets I mentioned, the corporate segment's assets included approximately $230 million of assets at market value pledged to guaranteed investment contract holders. Turning to the insurance company's statutory results. National reported a statutory net loss of $11 million for the first quarter of 2024 compared to statutory net income of $11 million for the first quarter of 2023. The unfavorable variance was primarily driven by higher loss and LAE, largely related to the estimated extension of the PREPA debt restructuring and, to a lesser extent, lower net investment income. Net investment income in 2024 reflects lower invested assets due to the as of right and special dividends paid by National to MBIA Inc. in the fourth quarter of 2023, which totaled almost $650 million. National statutory capital decreased by $18 million largely due to its net loss for the quarter and, consistent with year-end 2023, was approximately $1.1 billion as of March 31, 2024. Claims-paying resources were $1.7 billion, also consistent with year-end 2023. As of March 31, 2024, National had gross par outstanding of $27.8 billion, which is down about $600 million from year-end 2023. Now, we'll turn to MBIA Insurance Corp. MBIA Insurance Corp. reported a statutory net loss of $35 million for the first quarter of 2024 compared to a statutory net loss of $20 million for the first quarter of 2023. Net losses in both periods were driven by loss and LAE on primarily Zohar-related salvage. As of March 31, 2024, the statutory capital of MBIA Insurance Corp. was $119 million, down from $152 million at year-end 2023, primarily due to the net loss for the current quarter. Claims-paying resources totaled $468 million at March 31, 2024, compared to $504 million at year-end 2023. MBIA Insurance Corp.'s insured gross par outstanding was $2.7 billion as of March 31, 2024, down about 5% from year-end 2023. And now, we will turn the call over to the operator to begin the question-and-answer session.
Operator: Certainly. [Operator Instructions] We'll take our first question from Tommy McJoynt with KBW. Please go ahead.
Tommy McJoynt: Hey, good morning, guys. Thanks for taking my questions. You've repurchased some medium-term notes during the quarter and post quarter-end. Can you talk about your current liquidity profile at the holding company and your appetite and ability to continue repurchasing some of those liabilities? And should all of those transactions be accretive?
Bill Fallon: Yeah. Tommy, I think you know after we did the dividend at the end of last year, the amount that went up to the holding company, depending on how you look at it, the dividend was $550 million. We sent about $400 million out to the actual shareholders. So, our liquidity to holding company is stronger than it's been in quite a while. And so, as we've indicated on the last call, we continue to look for opportunities whether it be buying debt, buying stock in terms of how to use that liquidity. So, we do have opportunities to do that. It really is a matter of balancing all those trade-offs and looking for good opportunities, whether they'd be near-term debt, some of the longer maturities and it really just has to do with what the prices and therefore what the interest rates are at any point in time. So, we'll continue to look at that. And we do believe that they are value adding to our shareholders when we do them.
Tommy McJoynt: Thanks. Actually, just one follow-up here. Between the investment agreements, the medium-term notes and the unsecured notes on the holding company balance sheet, are all of those able to be repurchased or redeemed in the open market, or do some of those have to wait till maturity?
Joe Schachinger: Yeah. This is Joe Schachinger. Good morning. The investment agreements do have to wait for maturity. There are really no provisions to call those earlier. However, as we've done in the past, we are able to purchase the medium-term notes and the ink unsecured debt. And as Bill explained, we'll look to be opportunistic about getting those back at prices accretive to equity.
Operator: [Operator Instructions] We'll take our next question from John Staley with Staley Capital Advisers. Please go ahead.
John Staley: Thank you. Bill, I'm curious, what do you think is contributing to the lack of an issuance over an opinion, particularly from Judge Swain? It just seems really puzzling to me that this thing has been around for so long. Can't imagine what the hell's new. What are your comments on when this thing finally gets resolved?
Bill Fallon: Yeah. Good morning, John. As you know, I guess there's two things that we focused on or we are focusing on. One was the hearing at the First Circuit. That took place January 29th, I believe, is when the hearing took place. So, we're now more than three months past that. There is a view that, Judge Swain is waiting for the First Circuit to issue their opinion before she issues the confirmation. And, unfortunately, we have some experience over the years, it's just very difficult to predict when these opinions will be issued. So just like you, we're very focused on it. It could come any day, but I suppose we've been saying that now for over three months. So, I can't tell you when it's going to happen, but you're focused on the right thing, which I think is the First Circuit and then Judge Swain.
John Staley: Okay. And at what level do you become more active in buying stock back?
Bill Fallon: As you know, we've done a lot of it out of National. Right now, National [does] (ph) have capacity, but as I just mentioned in response to the earlier caller, we continue to look at it at the holding company. And we'll continue to look at where the stock is trading, what the best use of that cash is and what's best for our shareholders.
John Staley: So, that -- any buying would be done at the holding company level and you have capacity to do that?
Bill Fallon: We do. We have authorization, and we have liquidity to do that.
John Staley: Okay. All right. Thank you.
Operator: [Operator Instructions] And there appears to be no further questions at this time. I'll turn the call back over to the management for closing remarks.
Greg Diamond: Thank you, Ashley, and thanks to those of you 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 the company. Thank you for your interest in MBIA. Good day and goodbye.
Operator: Thank you, ladies and gentlemen. This does conclude today's MBIA first quarter 2024 financial results conference call. You may now disconnect your line, and have a wonderful day.
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