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DATE

Friday, Aug. 7, 2026 at 8:30 a.m. ET

CALL PARTICIPANTS

  • Managing Director of Investor and Media Relations - Greg Diamond
  • Chief Executive Officer - William Fallon
  • Chief Financial Officer - Joseph Schachinger

TAKEAWAYS

  • Consolidated GAAP Net Loss -- $46 million, or $0.91 per share, for MBIA Inc. (MBI +3.21%) compared with $56 million, or $1.12 per share, in the second quarter of 2025.
  • Adjusted Net Loss -- $7 million, or $0.14 per share, in the second quarter of 2026 compared with $8 million, or $0.17 per share, in the prior year period.
  • National PREPA Exposure -- $390 million in gross par value, reflecting a reduction of $35 million due to insurance policy claims paid on bonds that matured on July 1, 2026.
  • National Insured Portfolio -- $20.8 billion in gross par outstanding as of June 30, 2026, representing a decline of approximately $1.5 billion since the end of 2025.
  • National Leverage Ratio -- 21:1 gross par to statutory capital at the end of the quarter, down from 24:1 at year-end 2025.
  • National Statutory Net Income -- $10 million in the second quarter of 2026 compared with $6 million in the second quarter of 2025, driven by higher earned premiums from refundings.
  • National Claims Paying Resources -- $1.4 billion as of June 30, 2026, which remained consistent with the level reported at year-end 2025.
  • National Statutory Capital and Surplus -- $970 million, up $31 million from year-end 2025 due to statutory net income and unrealized gains in the investment portfolio.
  • MBIA Insurance Corp Statutory Net Income -- $27 million in the second quarter of 2026 compared with $4 million in the second quarter of 2025, primarily due to recoveries related to Zohar CDOs.
  • MBIA Insurance Corp Claims Paying Resources -- $342 million as of June 30, 2026, an increase of $25 million from year-end 2025.
  • MBIA Insurance Corp Insured Gross Par -- $1.8 billion, representing a 12% decline from year-end 2025 due to regular portfolio amortization.
  • MBIA Insurance Corp Statutory Capital -- $106 million as of June 30, 2026, reflecting an increase of $27 million since the end of 2025.
  • Corporate Segment Assets -- $635 million as of June 30, 2026, including $337 million in unencumbered cash and liquid assets at the holding company.
  • Holding Company Liquidity -- $337 million in liquid assets, down from $357 million at year-end 2025 due to debt service payments and operating expenses.
  • Book Value Per Share -- negative $45.58 as of June 30, 2026, which includes a negative $54.26 per share contribution from MBIA Insurance Corp.
  • PREPA Settlement Offer -- $3 billion, a near doubling of the previous $1.6 billion offer by the Oversight Board, though rejected by bondholders representing 90% of claims.
  • PREPA Payment Schedule -- $20 million in 2027 and $20 million in 2028, showing a significant decrease in scheduled debt service obligations.
  • Share Buyback Capacity -- $71 million remains available under the current authorization for potential deployment.
  • Pledged Assets -- $183 million at market value pledged to guaranteed investment agreement contract holders, fully collateralizing the principal amounts.

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RISKS

  • Fallon stated, "bondholders representing about 90% of the bondholder claims soundly dismissed the offer as unacceptable and inadequate," regarding the $3 billion settlement proposal from the Oversight Board.

SUMMARY

Management reported that financial results for the second quarter were driven by the continued reduction of insured portfolio exposure and progress in litigation related to the Puerto Rico Electric Power Authority (PREPA). The company stated that National Public Finance Guarantee Corporation's portfolio decreased through regular amortization and refundings, while MBIA Insurance Corp. benefited from significant loss recoveries associated with Zohar CDOs. Holding company liquidity remained focused on meeting debt service obligations, with unencumbered cash levels slightly lower due to ongoing expenses. Management noted that while the Oversight Board increased its settlement offer for PREPA, a substantial majority of bondholders rejected the terms as insufficient, leading to continued legal discovery and appellate proceedings.

  • CFO Schachinger noted that statutory net income at MBIA Insurance Corp. was "primarily driven by a significantly larger loss in LAE benefit" in the current quarter compared with the prior year.
  • CEO Fallon stated that the "probability of a transaction goes up every time we reduce our exposure to PREPA," in response to questions about a potential sale of the company.
  • Management reported that litigation regarding PREPA net revenue calculations has entered the discovery phase after Judge Swain lifted a litigation stay.
  • The company is scheduled for oral arguments in Boston on Sept. 15, 2026, regarding an administrative claim appeal to the First Circuit Court of Appeals.
  • CEO Fallon noted that PREPA bonds have recently traded in the marketplace at approximately $0.75, while the Oversight Board's settlement offer was valued between $0.30 to $0.40.
  • National transferred $30 million to a custody account following the July 1, 2026, debt service payment, resulting in $35 million in custodial receipts currently available for potential sale.
  • Management attributed the decrease in book value per share to a consolidated net loss of $86 million recorded during the first six months of 2026.

INDUSTRY GLOSSARY

  • PREPA: Puerto Rico Electric Power Authority, the primary entity involved in ongoing debt restructuring and litigation within MBIA's insured portfolio.
  • Zohar CDOs: Collateralized Debt Obligations associated with long-term litigation and recovery efforts by MBIA Insurance Corp.
  • Statutory Capital: The capital and surplus of an insurance company as determined by statutory accounting principles rather than GAAP.
  • Claims Paying Resources: The total financial assets available to an insurance company to meet its potential insurance claim obligations.
  • Gross Par: The total face value of the bonds or financial obligations insured by the company.
  • LAE: Loss and Loss Adjustment Expenses, representing the costs associated with investigating and settling insurance claims.
  • VIE: Variable Interest Entity, a legal structure used for Zohar CDO recoveries and consolidated in the company's financial statements.
  • GIA: Guaranteed Investment Agreement, a contract that provides a guaranteed rate of return for a specified period, often used in municipal finance.

Full Conference Call Transcript

Operator: 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.

Greg Diamond: 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 website, including our financial results, 10-Q, quarterly operating supplement and statutory financial statements for both MBIA Insurance Corporation and National Public Finance Guarantee Corporation. We also posted updates to the listings of our insurance company's 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, 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.

William 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 on 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 3 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. With the 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 21:1 at the end of the quarter, down from 24:1 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.

Joseph Schachinger: 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 2 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 PREPA 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 in 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 in LAE benefit in the current quarter compared with the second quarter of 2025. The loss in 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: [Operator Instructions] And we'll take our first question from Tommy McJoynt with KBW.

Unknown Analyst: This is [ Molly Knoll ] on for Tommy McJoynt. First, can you talk about the latest PREPA settlement proposal from the Oversight Board? From your perspective, was there anything incrementally positive about the offering terms relative to prior proposals? Or in your view, are we no closer to a potential resolution than previously?

William Fallon: 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, several of the litigations are moving forward. And as you know, there is some uncertainty with regard to the composition of the Oversight Board. Currently, only 4 members, 3 of whom are fighting the dismissal by the Trump administration.

So hard to tell with regard to timing and exactly how this will play out, but those are our thoughts with regard to that proposal.

Unknown Analyst: And I guess, secondly, after you paid the special dividend out of National a couple of 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?

William Fallon: 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.

Operator: And our next question will come from investor, [ Carlos Pardo ].

Unknown Attendee: This is [ Carlos Pardo ] from London. So 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 confirm that it is available and it still could be deployed.

William Fallon: That is correct. There is $71 million available.

Unknown Attendee: 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 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, I mean, you could retire approximately 14 million shares.

And 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. Of course, it's always up to you to decide whether to implement it.

William Fallon: Okay.

Unknown Attendee: Then on the custodial receipts, I saw that you have done another transaction for $30 million. I assume that this $30 million correspond 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?

William Fallon: So with regard to the custodial receipts and the debt service payment that we made on July 1. So we paid $35 million on July 1. $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. 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 is an appropriate price or offer that we received, then we would sell up to $35 million.

Unknown Attendee: 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 I mean it is relatively benign, the payment schedule.

William Fallon: That's correct. The debt service payments on PREPA declined significantly over the period you just mentioned.

Unknown Attendee: That's fantastic. That's good news. And also related to the potential use of the buybacks, I think that could theoretically make sense. But of course, I mean, it's always up to you guys that you have the full picture. Then on the co-op, basically, 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, if only one 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?

William Fallon: Essentially, yes.

Unknown Attendee: 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 this resolution of PREPA is so important for MBIA and we have basically 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?

William Fallon: I can't get into the details in terms of the views of all the different members that is 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 -- up 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 objection of the 3 vacant positions or the resolution of the litigation. Hopefully, that would be, again, a catalyst to move this forward.

Unknown Attendee: When do you expect -- I mean, of course, I mean we are dealing with the Puerto Rico bankruptcy, so predicting is impossible. But when do you think that -- in your opinion that this -- 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?

William Fallon: 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.

Unknown Attendee: Yes. And is the co-op contacting also the administration in terms of trying to get them to accelerate this situation or...

William Fallon: 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 this to a resolution.

Unknown Attendee: Fantastic. I will be also sending you some 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 you for -- send it to you for your consideration.

William Fallon: Okay.

Operator: [Operator Instructions] We'll move next to John Staley with Staley Capital Advisers.

John Staley: Bill, a quick question. As the offer from the Oversight Board doubled roughly. How -- what's your estimate of how much of a spread there is between your 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.

William Fallon: 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 on how you value everything. That's going to be $0.40 on $1 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, those 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.

John Staley: Yes. Terrific. And as you review your current insured portfolio, do you factor in the political trends of the protected or 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?

William Fallon: 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 week's 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.

John Staley: 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 talk, they literally said that you could fire. They basically implied they have the right to fire anybody. So I suspect this is finally moving to a more hopefully clear resolution.

William Fallon: We would love for things to move quickly, just as you would.

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

Patrick Stadelhofer: I just wanted to ask about a kind of thoughts around the potential sale process given 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 behind the scenes this time around?

William Fallon: Yes. Patrick, thank you. With regard to the 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 pursue the distribution from National and shareholder dividend. But 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 4 years ago, my guess is we would announce that. There's also the possibility that individuals contact us at any point in time or given that we probably can identify potential acquirers, we can 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.

Operator: 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.

Greg Diamond: 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.

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