MBIA Inc. Q1 2023 Earnings Call
Okay.
Welcome to the N V I, a inc. First quarter 2023 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.
Thank you Chelsea and yes welcome everybody.
After the market closed yesterday, we issued and posted several items on our websites, including our financial results 10-Q quarterly operating supplements and statutory financial statements for both MBIA Insurance Corporation and National Public Finance guarantee Corporation.
We also posted the updates to the listings of our insurance companies insurance portfolios.
Regarding today's call. Please note that anything said on the call is qualified by the information provided by the company's 10-K 10-Q, and other SEC filings as our company's definitive disclosures are incorporated in those documents.
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.
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 approximately two hours. After you ended the call and the information for accessing it is included in last week's press announcement and in the financial results report posted yesterday on the N V I a website.
Now for our Safe Harbor disclosure.
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 dotcom.
Company cautions not to place undue reliance on any such forward looking statements.
He 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 Anthony Mckiernan will.
Well provide introductory comments and then a question and answer session will follow now here is bill Fallon. Thanks, Greg.
Morning, everyone. Thank you for being with us today.
As noted in Yesterdays financial results report.
Even prevailing volatile market condition and feedback that we received during the pursuit of our strategic alternatives, we have decided to suspend that process.
We will continue with our mission to deliver shareholder value by continuing to finalize our prep that remediation.
Seeking additional cost reductions monitoring to run off all of our insurance portfolios and pursuing regulatory approval of special dividends from national.
We also disclosed yesterday in the MBIA, Inc.
It would be Betsy MBIA, Inc. Board of directors has approved a new $100 million share repurchase authorization that can be used by MBIA, Inc, and or national.
Regarding our first quarter financial results I'd like to point out that national had positive net income for both GAAP and statutory presentations, which reflects the substantial reduction of uncertainty regarding its remaining Puerto Rico exposure.
It also demonstrates the stability of National's financial results absent significant adjustments to its loss and loss adjustment expenses.
During the first quarter National also sold its Puerto Rico related investment holdings.
Regarding national's last material, Puerto Rico exposure crop up.
While bondholder challenges remain to the plan of adjustment incorporating National's planned support agreement with the oversight board. The title III Court has not modified the timing for the confirmation hearings for the plan, which are scheduled for July .
As of March 31st National's remaining exposure to PREPA $710 million of gross par insured.
The remainder of the insured credits in National's portfolio have continued to perform consistent with our expectations.
National's insured portfolio has continued to run off and that's outstanding.
Excuse me to write off it's just outstanding gross par declined by $600 million from year end 2000, $22 billion to $31 billion at March 31 2023.
That shows leverage ratio of gross par to statutory capital at the end of the quarter remained unchanged from year end 2020 to 60 to one.
As of March 31, 2023 National had total claims paying resources of $2 $4 billion in statutory capital and surplus of $1.9 billion.
Yeah.
I also want to note that Charlie Reinhart, Our board Chairman resign this week after 15 years of service.
We appreciate Charlie's contributions and leadership leadership to MBIA and counsel to me.
Now Anthony will provide additional comments about our financial results.
Thanks, Bill and good morning.
I will begin with a review of our first quarter 2023, GAAP and non-GAAP results.
The company reported a consolidated GAAP net loss of $93 million or a negative $1.86 per share for the first quarter of 2023 compared to a consolidated GAAP net loss of $73 million or a negative $1.48 per share for the first quarter ended March 31 2022.
The higher GAAP net loss this quarter was largely driven by losses on financial instruments at fair value and foreign exchange and the holding company's legacy a L. M business due to lower interest rates and a weaker dollar versus gains due to higher rates and a stronger dollar for the prior comparable quarter.
And losses on V. I E at MBIA Corp, due to the termination and deconsolidation of our legacy a b S. C. D O where losses were reclassified from other comprehensive income and therefore had no effect on total equity.
Offsetting these negative variances were lower loss and LAE at national and higher investment income.
The company's adjusted net loss, a non-GAAP measure was $1 million or negative three cents per diluted share for the first quarter of 2023, compared with an adjusted net loss of $96 million or a negative $1.94 per diluted share for the first quarter of 2022.
The favorable change was due primarily to the lower loss and LAE at National.
MBIA, Inc. 's book value per share decreased to a negative $16.57 per share as of March 31, 2023 versus a negative $16 seven per share as of December 31, 2022, primarily due to the net loss for the year, partially offset by decreased unrealized losses on.
<unk> recorded to other comprehensive income driven by lower interest rates.
Included in book value as of March 31, 2023 is a negative $38.82 per share book value of MBIA Corp.
I will now spend a few minutes on the corporate segment balance sheet and our insurance company's statutory results. The corporate segment, which primarily includes the activity of the holding company MBIA, Inc. Had total assets of approximately $638 million as of March 31 2023.
Within this total are the following material items on.
Unencumbered cash and liquid assets held by MBIA, Inc. Totaled approximately $214 million as of March 31, 2023, compared with $230 million as of December 31, 2022, due to debt service and operating expenses.
Our corporate segment's assets also included approximately $313 million of assets at market value pledged to the guests on the interest rate swaps supporting the legacy <unk> operation.
Turning to the insurance company's statutory results National reported statutory net income of $11 million for the quarter ended March 31, 2023 versus statutory net income of $104 million for the quarter ended March 31st 2022.
The unfavorable comparison was primarily due to the large loss in L. A E benefit across its Puerto Rico exposures in Q1 2022 versus a modest loss in LAE expense in Q1, 2023 related to PREPA and lower premium income somewhat offset by higher investment income.
Statutory capital increased by $22 million from year end 2022, and was $1 $9 billion as of 331 2023 due to the quarterly net profit and unrealized gains in the investment portfolio.
Claims paying resources were $2 $4 billion.
From inception through 331, 2023 gross claims paid uninsured, Puerto Rico exposure totaled approximately $2 $9 billion, including $18 million of claims paid in Q1 2023 related to PREPA.
Turning to MBIA insurance Corp had statutory net loss was $20 million for the first quarter of 2023 compared to a statutory net loss of $14 million in the first quarter of 2022.
The unfavorable comparison was primarily due to increased loss and LAE expense in Q1, 2023, driven by lower salvage value.
Former Zohar related collateral.
As of March 31, 2023, the statutory capital of MBIA Insurance Corp was $147 million down from $169 million at year end 2022, due to the quarterly net loss.
Claims paying resources totaled $608 million.
MBIA Corp's insured gross par outstanding reduced by approximately $47 million during the quarter and was $3 $3 billion as of March 31 2023.
And now we will turn the call over to the operator to begin the question and answer session.
Thank you Sir.
If you have a question at this time, please press star one on your telephone keypad.
If you wish to remove yourself from the queue Press star two.
Ask that one person to your question you. Please pick up your handset to allow optimal sound quality.
And we'll take our first question is from Thomas joined with <unk>. Your line is open.
Yes.
Hey, good morning, guys. Thanks for taking my question.
You've called out a couple of reasons for the suspension of exploring strategic alternatives just to clarify it was the main reason attributed to the macro economic backdrop of tighter credit or was it more so interest effectively just going sale. Some of some of the potential theaters that you guys had in six months.
Tommy I don't know if theres, a main or primary reason, but it's more the former that you mentioned is the overall conditions.
In the marketplaces.
Sort of progressed through the process.
Okay got it thanks.
And it's been a few years since national has had capacity to buy back stock.
The parent company MBIA, Inc. Can you give us a refresher on the mechanics of the statutory capacity rules for national to purchase its parent company shares.
And then relative to those limits, where do you stand today.
Good morning, Tammi its Anthony.
The measurement for national to buy shares is based on a calculation related to its surplus so it's essentially.
50% of National's surplus minus its common and preferred which there's very little at nationals, So give or take it's around 50% of surpluses the capacity.
And you measure that against the prevailing share price.
So obviously capacity fluctuates.
But given where the share price has been.
And again, it's our authorization.
Authorization for National and for and we do have capacity to purchase shares.
At National at this point.
Yes.
Got it thanks, and any way you could quantify how much that capacity is that national and then also you did mention the authorization also applies to the parent company to buy its own shares.
Just remind us is there any flexibility out there currently or the funding at the holding company really just dependent on future capital releases from National.
So on your first question if you measured it at the end of the first quarter as of 331 national had about $50 million of capacity at that point, but that amount has increased as the share price has gone down.
Along with the market over the last month or two so the capacity is higher at this point as far as it goes we just have to make a decision as we go along if we want to use Inc.
Really focused on keeping the liquidity at Inc. At a point, where we can look into the future several years and now we're looking to the 2028 timeframe as far as being able to cover its debt and expenses just through as of right dividends from national So we'd have to be.
Thoughtful about using ink, but we've been using national primarily as you know the last few years that we were buying shares back.
Okay. Thank you I appreciate the color.
Yep.
Thank you.
Our next question will come from Paul Saunders with Hutch capital. Your line is open.
Good morning, Thanks for taking my call guys.
The previous caller answer I mean asked a lot of the questions that I had so I'll be quick on this one but just.
Just to stick on the strategic.
Plan and in the sale process and just.
You know can you provide any color just on the future like or are we thinking this is a pricing exercise when you talk about macro is it do you think the macro environment.
Package or the pricing or.
I'm, just sort of trying to get inside.
You guys have had in terms of.
Do you really work.
Run this all four.
10, 15 years or what is kind of the game plan. If if a sale is not that game plan.
Yep.
It's obviously difficult to predict it's not 10 or 15 years of running off the company. So I think the feedback and our conclusion from the process as well as looking at the macro environment is that what we have been doing is absolutely. The right thing. So we're going to continue to finalize Puerto Rico and all the other things.
We mentioned.
But we could be back sort of restarting the process very soon I.
I think there's some things we'd like to do to eliminate uncertainty for example, getting PREPA finalized would be a good thing.
Et cetera, and it could be by the fourth quarter of this year first quarter next year that we've restarted the process.
Great. That's helpful. And then just actually a follow up on that.
He is PREPA and actually the finalizing of that do you think that was all.
I know you said previously you did not think it would be an impediment, but with the process concluded.
Do you think that that was kind of a gating factor for certain interested parties.
Yeah.
As you just referenced we believe the fact that we've probably restructured 80% of our.
Large, Puerto Rico credits positioned us well to sell the company the situation with PREPA did come up with.
You know one or more prospective buyers.
So it's hard to tell I think different people looking at differently and as we said, we'll continue to monitor the PREPA situation clearly.
Analyzing it will help.
But again, it's just one one factor that was mentioned by some.
Great. Thanks for taking my questions.
Yeah.
Thank you.
Our next question will come from Geoffrey Dunn with Dowling <unk> partners. Your line is open.
Thank you and good morning, just a few questions to clarify some things.
With respect to your comment about the market conditions.
That more of a risk aversion.
Type of market sentiment issue or is it more of our rates are up spreads are wider creating a P. GAAP challenge on an evaluation for any prospective buyer, particularly in the industry.
Jeff It's probably some of both it's hard to.
Attribute how much the first and how much is the second or is it more you know the second or the first.
We sort of concluded both in the process.
But we'll continue to look at the situation.
Okay and as you consider your next strategic moves.
I guess two questions number one do you think there is a role for select strategic reinsurance deals to help with the run off effectively of national.
And second.
Do you believe there is a framework in place with your state regulator with national for special dividends or is that something that needs to be developed between you and New York.
Yeah with regards to the first we will continue to look for things that would enhance shareholder value. We've looked at reinsurance in the past. The fact that we haven't done it.
Suggest that we haven't concluded that theres been a situation that would benefit shareholders, but if that were to change we obviously pursue it.
With regard to dividends.
National hasn't actually gone for dividend since it's been in existence, but New York is very experienced with regard to insurance companies and assessing.
Special dividends up to the holding company.
So do you believe that could be a fairly quick process. It seems like the regulators kind of gotten a little.
Outdated with assessing how much capital is needed, especially for runoff situations.
Yeah, I'm not quite sure.
Hum.
What you're what experiences you're referring to but we think there's.
There's a process with the department and you know what.
Pursue that as a normal course of our activities.
Okay. Thank you.
Alright, thank you.
As a reminder, that is star one to enter the question queue.
Our next question will come from Karl Ccs with Johnson capital. Your line is open.
Yes, hi, it's Carl sector.
I wanted to better understand.
Whether national in fact has capacity to do a buyback that was under the impression or miss impression maybe.
Some concentration limits that might.
Clued that and.
The second part of the question would be.
Geared towards a true economic book value was buybacks would only make sense. If it's at a meaningful discount. So can you address that as well. Thank you.
Sure Karl in your first point.
The capacity for National is dynamic.
So depending on where the share price trades and your national owns.
A substantial amount of MBIA, Inc shares youre calculating the share price against the.
The formula that I talked about before which is basically the 50% of the surplus minus common and preferred so depending on where the shares trade theres either capacity or theres, not where the shares have been trading.
Last couple of months that capacity has opened up.
And has done so to a point, where we could buy.
Meaningful shares if we decided to do that.
And on the second point related to repurchases I think we've been extremely extremely diligent.
Purchasing shares at what we feel are.
Very solid disc.
Discounted prices to enhance shareholder value and our philosophy is the same as it's been.
Can you can you quantify that a little bit more as to what you view the sort of economic book value is that you are buying at a discount to at this moment.
I really I'm not I really can't give specific numbers on it at this point, but to the degree you again, we feel that it's prudent to do so.
Yeah, we'll make those purchases, but I'm not going to give specific amounts on that.
Understood. Thank you.
Thank you.
Once again that is star one to ask a question.
Yeah.
And at this time I am showing no further questions I'd like to turn the floor back over to management for any additional or closing remarks.
Thank you again, Chelsea and thanks to those of you listening to our call today.
Please contact me directly if you have any additional questions.
We also recommend that you visit our website at MBIA com for additional information about our company.
Thank you for your interest in MBIA.
Good day and Goodbye.
Thank you ladies and gentlemen, this does conclude today's MBIA, Inc. First quarter 2023 financial results Conference call you may now disconnect.
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