MBI

MBIA Inc. 10-Q Summary: Period Ended June 30, 2026

Business Context and Reporting Period

This is a Quarterly Report (Form 10-Q) for MBIA Inc. for the period ended June 30, 2026. MBIA operates in the financial guarantee insurance industry with three segments: U.S. Public Finance Insurance (managed by National Public Finance Guarantee Corporation), Corporate, and International and Structured Finance Insurance (managed by MBIA Insurance Corporation). The Company is classified as a non-accelerated filer and a smaller reporting company.

Key Financial Metrics

Material Changes vs. Prior Period

• Improved Net Loss: The net loss attributable to MBIA Inc. narrowed to $(86) million for the six months ended June 30, 2026, compared to $(118) million in the prior year period. This improvement was driven by lower loss and loss adjustment expense (LAE) and favorable foreign currency impacts.
• Revenue Growth: Total revenues increased to $51 million from $37 million year-over-year, primarily due to foreign currency gains on euro-denominated liabilities and the absence of net realized investment losses seen in the prior year.
• Expense Reduction: Total expenses decreased to $135 million from $155 million. LAE expenses dropped significantly to $6 million from $16 million, largely due to higher risk-free rates reducing the present value of loss reserves on RMBS transactions.
• Discontinued Operations: The Company disposed of remaining net assets held for sale related to Zohar CDOs during the period, resulting in a minor loss of $(1) million from discontinued operations.

Guidance, Outlook, and Risks

• PREPA Litigation: The Puerto Rico Electric Power Authority (PREPA) defaulted on debt service in January and July 2026. National paid gross claims of $11 million and $46 million, respectively. Litigation regarding the restructuring plan and administrative expense claims is ongoing. A proposed settlement offering ~35% recovery to bondholders was rejected by the Coop Group of Bondholders. There is significant uncertainty regarding the final recovery value.
• MBIA Corp. Liquidity: MBIA Insurance Corporation (MBIA Corp.) maintains statutory capital but has a significant deficit in earned surplus. The New York State Department of Financial Services (NYSDFS) has not approved interest payments on Surplus Notes since 2013. As of July 15, 2026, $1.8 billion of interest remains unpaid.
• Non-GAAP Measures: Management reports Adjusted Net Loss of $(15) million for the six months ended June 30, 2026, excluding the results of MBIA Corp. and mark-to-market volatility.
• Investment Portfolio: Gross unrealized losses on Available-for-Sale (AFS) investments increased to $133 million due to higher interest rates. The Company does not intend to sell these securities before recovery of cost basis.

Investor Verification Checklist

• PREPA Recovery Assumptions: Verify the probability-weighted scenarios used to estimate recoveries on the $554 million of outstanding insured debt service related to PREPA, given the ongoing litigation and rejected settlement proposals.
• MBIA Corp. Solvency: Confirm the status of NYSDFS approvals regarding Surplus Note interest payments and the sufficiency of "free and divisible surplus" ($83 million as of June 30, 2026) to meet obligations.
• Loss Reserve Adequacy: Review the impact of rising risk-free rates on the discounting of loss reserves, which currently provides a benefit but may reverse if rates decline.
• Valuation Allowance: Note the full valuation allowance of $1.4 billion against net deferred tax assets, resulting in a 0% effective tax rate on losses.
• Collateral Requirements: Assess the liquidity impact of collateral posting requirements for investment agreements, which currently limit the use of $183 million in pledged securities.