MBIA Inc.

developments regarding PREPA since our conference call last quarter, the path and timing for resolving PREPA's outstanding debt remains largely uncertain. While there have been rulings and decisions to support a more favorable outcome for PREPA bondholders, the bondholders and the oversight board appear far apart. Given the uncertainty associated with the possible outcomes for National's PREPA bankruptcy claim, which is in excess of $800 million, We continue to believe that the process to sell the company to maximize shareholder value will likely require substantially reducing the uncertainty regarding PREPA. Regarding the balance of Nationals Insured Portfolio, those credits have continued to perform generally consistent with our expectations. The gross par amount outstanding for Nationals Insured Portfolio has declined by approximately $3.1 billion from year end 2023 to about $25 billion at the end of 2024. National's leverage ratio of gross part of statutory capital was 28 to 1 at the end of 2024. As of December 31, 2024, National had total claims-paying resources of $1.5 billion and statutory capital in 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 the review of our fourth quarter and full year 2024 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 $1.07 per share, for the fourth quarter of 2024 compared to a consolidated gap net loss of $138 million or a negative $2.94 per share for the fourth quarter of 2023. The lower gap net loss this quarter was driven by several items. First was a favorable change in net realized investment losses. Significantly higher realized investment losses in the fourth quarter of 2023 resulted from sales of securities to fund nationals as of right and special dividends to NBIA Inc. and in our corporate segment to fund the termination of interest rate swaps. We also realized mark to market losses on those interest rate swaps in 2023 with no comparable losses in 2024. In addition, in the fourth quarter of 2024, we reported foreign exchange gains on Euro denominated debt within our corporate segment compared to foreign exchange losses on that debt in the fourth quarter of 2023. The gains and losses were driven by movements in the US dollar Euro exchange rate in each period. And finally, consolidated operating expenses are lower in the fourth quarter of 2024 compared to the fourth quarter of 2023, primarily due to lower compensation costs. The company's adjusted net loss, a non-GAAP measure, was $22 million, or a negative 48 cents per share, for the fourth quarter of 2024 compared to an adjusted net loss of $8 million, or a negative 16 cents per share, for the fourth quarter of 2023. The unfavorable change was primarily due to higher loss in LAE and lower net investment income at national, partially offset by lower operating expenses. For full year 2024, the company reported a consolidated gap net loss of $447 million, or a negative $9.43 per share, compared to a consolidated net loss of $491 million or a negative $10.18 per share for full year 2023. The lower consolidated gap net loss for full year 2024 was driven by lower net realized investment losses at national and in our corporate segment, lower losses related to determination and deconsolidation of variable interest entities at MBI Insurance Core, and lower operating expenses. These favorable variances were somewhat offset by fair value losses on assets acquired in connection with recoveries of paid claims related to the ZOHAR CDOs, lower net investment income primarily due to a reduction in invested assets from dividends paid in 2023, and higher loss in LAE at national. The company's adjusted net loss was $184 million or a negative $3.90 per share for full year 2024 compared to an adjusted net loss of $169 million or a negative $3.49 per share for full year 2023. The unfavorable change was primarily due to the higher loss in LAE and lower net investment income at national, partially offset by lower operating expenses. NBIA Inc.' 's book value per share decreased $8.43 to a negative $40.99 per share as of December 31st, 2024 from a negative $32.56 per share as of December 31st, 2023. This decrease was primarily due to our consolidated net loss for full year 2024. Included in MBIA, Inc.' 's book value as of December 31st, 2024 is a negative $49.48 per share of NBIA 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, NBIA Inc., had total assets of approximately $707 million as of December 31st, 2024. Within this total are the following material assets. Unencumbered cash and liquid assets held by MBIA Inc. totaled $380 million compared with $411 million as of December 31st, 2023. The decrease was largely due to spending approximately $78 million in the first and second quarters of 2024 on purchasing GFL Euro-denominated medium-term note liabilities and MBA Inc. senior notes before their maturities. As noted in prior quarters, both the medium-term notes and senior notes were purchased at prices accretive to equity. In the fourth quarter of 2024, National declared and paid an as-of-right dividend of $69 million to MBIA Inc., which partially offset MBIA Inc.' 's decrease in cash and liquid assets during 2024. In addition to the unencumbered cash and liquid assets, the corporate segment's assets included approximately $213 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 a statutory net loss of $10 million for the fourth quarter of 2024 compared to a statutory net loss of $9 million for the fourth quarter of 2023. In the fourth quarter of 2024, higher loss in LAE related to National's PREPA exposure and lower net investment income were largely offset by lower net realized investment losses compared to the fourth quarter of 2023. For full year 2024, National reported a statutory net loss of $133 million compared to a statutory net loss of $142 million for full year 2023. The favorable change was primarily due to lower net realized investment losses partially offset by lower net investment income and lower loss in LAE mostly related to National's PREPA exposure. National statutory capital as of December 31st, 2024 was $912 million. down $205 million compared to December 31st, 2023, largely due to its statutory net loss for full year 2024 and the $69 million as of right dividend paid to NBIA Inc. in December of 2024. Claims paying resources were $1.5 billion down $174 million from December 31st, 2023. Now I'll turn to MBI Insurance Corp. MBI Insurance Corp reported statutory net income of $4 million for the fourth quarter of 2024, compared to statutory net income of $6 million for the fourth quarter of 2023. Higher net income in last year's fourth quarter was primarily due to a small loss in LAE benefit. For full year 2024, NBIA Insurance Corp reported a statutory net loss of $64 million compared to a statutory net loss of $28 million for full year 2023. The higher net loss in 2024 was primarily driven by higher loss in LAE mostly related to adjustments to estimates of recoveries of paid claims associated with the Zohar CDOs. As of December 31, 2024, the statutory capital of MBI Insurance Corp. was $88 million, down from $152 million at year-end 2023, primarily due to its net loss for full year 2024. Claims paying resources totaled $356 million at December 31st, 2024, compared to $504 million at year-end 2023. MBI Insurance Corp's insured gross par outstanding was $2.3 billion as of December 31st, 2024, down about 18% from year-end 2023. The decrease in gross par outstanding was driven by regular amortization of the insured portfolio, as well as our proactive de-risking of exposures for which we held reserves and were paying claims. And now, we will turn the call over to the operator to begin the question and answer session.

If you have a question at this time, please press star 1 on your telephone keypad If you wish to remove yourself from the queue, press star two. We ask that when posing your question, you please pick up your handset to allow optimal sound quality. And we'll take our first question from Tommy McJoint with KBW. Please go ahead.

Hey, good morning. So you pay the regular way dividend in the fourth quarter every year, and that's a way to trickle out excess capital out of national. But as the rest of the portfolio continues to run off and you naturally de-lever, are there ways to think about your strategy to release incrementally beyond that regular dividend? You obviously paid the very large special at the end of 2023, but I guess I'm referring to, is it possible to work with your regulator to allow more frequent, albeit smaller and more measured, special capital releases out of national rather than only pursuing a large lump sum special?

Tommy, the answer is yes, we can do that. And to your point, you just need the regulator to approve it. We obviously have ongoing conversations with our regulator. Given what was going on with Puerto Rico when you go back several years and we had approximately $4 billion of exposure, we didn't think it was prudent they engage in those conversations. As you just mentioned, we then had a large dividend of $550 million, which was a special dividend in addition to the annual asset right dividend that you referenced. So we continue to look at that. I think right now, given the size of the portfolio, the way the portfolio is amortizing, and again, with the exception really of PREPA, which is the one thing we focus on quite heavily, we probably would want more certainty around PREPA before we went for a special dividend. from the regulator, but it all depends on all the factors you mentioned. If the portfolio continues to come down, we'll continue to look at it. But I think right now, given the size of PREPA with the $800 million claim that we have, the regulator would wanna see some movement towards resolution of that.

Okay, got it. And then switching over with regards to the PREPA litigation, If you just talk about your position within the creditor group and perhaps as your objectives relate to the rest of the members of that group. And I'm kind of thinking, are there points where maybe MBI has the incentive to focus on, you know, expediting the potential resolution rather than maximizing recoveries? Can you talk about your objectives relative to the other members there?

Sure. When we think about what would be best for our shareholders, there's the two points that you just alluded to. One is the dollar recovery or the percentage recovery, however you want to think about it. But the second is timing. Obviously, all things equal, having this resolved sooner rather than later would be beneficial to our shareholders. So we look at both of those things. I think all of the bondholders also look at both of those components of this. And while I'm sure everyone has a differing view as to exactly what they're looking for, right now I think there's very strong alignment, and we'll continue to work through this. Again, the biggest challenge right now seems to be the Oversight Board and their position, but hopefully we'll see some movement in the near future with regard perhaps to litigation. As people know, we filed. That is, all the bondholders had a filing this week. to try to move the litigation forward because, to your point, timing is important. The sooner we can get this resolved, the better.

Makes sense. Thank you.

Thank you. And as a reminder, if you would like to ask a question today, please press the star and 1 on your telephone keypad now. And we'll pause for just a moment to allow any additional questions to queue. And we will take our next question from Paul Saunders with Hutch Capital. Please go ahead. Please go ahead, Paul Saunders. Your line is open.

Hi. Sorry about that. I was on mute. Can you guys hear me?

Yes.

Morning. Hey, Bill. Thanks for taking my question. Morning, Paul. You guys have been asked this somewhat over the last few quarters, but in terms of just sort of the uncertainty around PREPA and that being what's holding up sort of the bid-ask, I guess, on a sale process for MVIA, can you explain sort of why kind of carving that out of a purchase price and sort of some sort of contingent type instrument to where if you know if if recovery is less than the buyer expects and you know they pay less to shareholders type of thing um is there any sort of possibility to strike a deal for mdia excluding the prep obligation uh it's possible and we've had those conversations everything that has been suggested or offered uh has been in our view uh

very inadequate as far as our shareholders would be concerned.

But why is that? Like, I guess my thought is just, you know, if they have some view on what ultimate recovery is and they're worried about it and you think it's going to be higher than that, I don't really understand why you couldn't solve exactly for that. Or is it something like unrelated to PREPA that you're saying is is unsatisfactory to the shareholders?

I suppose I don't know exactly what is in the mind of the people who are expressing some interest, but I think when you deal with the size of the PREPA claim and the complexity around it, the prospective buyers aren't willing to offer, again, what would be acceptable, and therefore it is better to play out the PREPA situation.

Yep. Got it. Okay. Thank you.

Thank you.

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

Thanks again, Madison. 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 mbae.com for additional information about the company. Thank you for your interest in MBIA. Good day and goodbye.

Thank you. This does conclude today's presentation. Thank you for your participation. You may disconnect at any time.