MBI

MBIA Inc. 10-Q Summary: Quarter Ended September 30, 2025

Business Context and Reporting Period

This is the Quarterly Report on Form 10-Q for MBIA Inc. (MBIA) for the period ended September 30, 2025. MBIA operates in the financial guarantee insurance industry through 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 an accelerated filer with 50,493,626 shares of common stock outstanding as of October 31, 2025.

Key Financial Metrics

Note: The company reported a full valuation allowance against its net deferred tax asset, resulting in a 0.0% effective tax rate.

Material Changes vs. Prior Period

• Losses and Loss Adjustment Expenses (LAE): The company recorded a significant benefit of $50 million in LAE for the three months ended September 30, 2025, compared to an expense of $11 million in the same period of 2024. For the nine months, the benefit was $34 million versus an expense of $171 million in 2024. This improvement is primarily driven by the sale of PREPA Custodial Receipts at a price higher than previous estimates and updated loss reserve scenarios for the Puerto Rico Electric Power Authority (PREPA).
• Revenues: Consolidated revenues decreased in the quarter ($15M vs $29M) due to unfavorable fair value changes on investments, partially offset by foreign currency revaluations. For the nine months, revenues increased ($52M vs $5M) driven by gains from consolidated Variable Interest Entities (VIEs) and fair value adjustments.
• PREPA Developments: PREPA defaulted on debt service in January ($13M claims) and July ($92M claims) 2025. In August 2025, MBIA sold Custodial Receipts representing approximately 47% of its PREPA bond claims, reducing volatility and risk.
• MBIA Mexico: The company completed the liquidation of its Mexican subsidiary, returning approximately $12 million of capital to MBIA Corp.

Guidance, Outlook, and Risks

• PREPA Litigation: Significant uncertainty remains regarding the PREPA Title III bankruptcy proceedings. The Oversight Board intends to modify the settlement plan, which MBIA has contested. A substantially different confirmed plan could materially adversely affect loss reserves and recoveries.
• MBIA Corp. Liquidity: MBIA Insurance Corporation (MBIA Corp.) continues to face liquidity constraints. The New York State Department of Financial Services (NYSDFS) has not approved interest payments on Surplus Notes since 2013. As of September 30, 2025, there was $1.7 billion of unpaid interest on $953 million of par outstanding. MBIA Corp. had "free and divisible surplus" of $56 million.
• Non-GAAP Measures: Management reports Adjusted Net Income of $51 million for the quarter and $35 million for the nine months, excluding the results of MBIA Corp. and mark-to-market fluctuations.
• Capital Resources: National Public Finance Guarantee Corporation reported statutory capital of $994 million and policyholders' surplus of $708 million. MBIA Corp. reported statutory capital of $79 million but a negative unassigned surplus of $2.0 billion.

Key Facts for Investor Verification

• PREPA Exposure: Verify the status of the PREPA Title III litigation and the potential impact of the Oversight Board's proposed plan amendments on MBIA's loss reserves and recoveries.
• Surplus Notes: Confirm the likelihood of NYSDFS approval for interest payments on MBIA Corp.'s Surplus Notes, given the $1.7 billion in arrears.
• Loss Reserve Adequacy: Assess the sufficiency of loss reserves for the remaining PREPA exposure ($565 million insured debt service outstanding) and RMBS portfolios given the volatility in risk-free rates.
• Equity Position: Note the negative shareholders' equity of $(2,180) million and the full valuation allowance on deferred tax assets ($1.4 billion).
• Regulatory Compliance: Monitor compliance with New York Insurance Law single risk limits for both National and MBIA Corp., as non-compliance could restrict new business.