MBIA Inc. (NYSE:MBI) is a leading financial guarantee insurance company that has been navigating a challenging market environment in recent years. The company's financial results for the fiscal year 2023 and the latest quarter ended March 31, 2024, provide valuable insights into its performance and future prospects.

Financials

For the fiscal year 2023, MBIA Inc. reported an annual net loss of $491 million, with annual revenue of $6 million. The company's annual operating cash flow was negative $195 million, and its annual free cash flow was negative $193 million. These financial results reflect the ongoing challenges faced by the company in its core business segments.

In the first quarter of 2024, MBIA Inc. reported a consolidated GAAP net loss of $86 million, or a negative $1.84 per share, compared to a consolidated GAAP net loss of $93 million, or a negative $1.86 per share, in the same period of 2023. The lower GAAP net loss in the current quarter was largely driven by lower losses from the company's discontinued operations.

MBIA's net loss from continuing operations of $87 million in the first quarter of 2024 was slightly higher than the net loss of $83 million in the same period of 2023. This was primarily due to higher loss and loss adjustment expenses (LAE) at National Public Finance Guarantee Corporation (National), the company's U.S. public finance insurance segment, which largely related to the extension of the effective date of the Puerto Rico Electric Power Authority (PREPA) debt restructuring plan. Additionally, MBIA Insurance Corporation, the company's international and structured finance insurance segment, experienced higher losses on variable interest entities, most of which were reclassified from other comprehensive income and therefore, neutral to total equity.

These unfavorable variances were partially offset by foreign exchange gains on MBIA Inc.'s euro-denominated medium-term note liabilities in the corporate segment, compared to mark-to-market losses on interest rate swaps and foreign exchange losses on euro-denominated notes in the same period of the prior year.

Business Overview

MBIA Inc. operates within the financial guarantee insurance industry, managing its business across three operating segments: 1) U.S. public finance insurance, 2) corporate, and 3) international and structured finance insurance.

U.S. Public Finance Insurance Segment

MBIA's U.S. public finance insurance portfolio is managed through National. The financial guarantees issued by National provide unconditional and irrevocable guarantees of the payment of principal and interest on insured obligations when due, or in the event National has the right to accelerate the payment upon default or otherwise.

As of March 31, 2024, National had total insured gross par outstanding of $27.8 billion, down from $28.4 billion at the end of 2023. The company's leverage ratio of gross par to statutory capital remained unchanged at 25:1. National had total claims-paying resources of $1.7 billion and statutory capital and surplus of $1.1 billion as of the end of the first quarter of 2024.

Corporate Segment

MBIA Inc.'s corporate segment consists of general corporate activities, including providing support services to the company's subsidiaries and asset and capital management. As of March 31, 2024, the corporate segment had total assets of approximately $710 million, including $376 million in unencumbered cash and liquid assets held by MBIA Inc.

International and Structured Finance Insurance Segment

MBIA's international and structured finance insurance portfolio is managed through MBIA Insurance Corporation (MBIA Corp.). The financial guarantees issued by MBIA Corp. generally provide unconditional and irrevocable guarantees of the payment of principal and interest on non-U.S. public finance and global structured finance insured obligations when due, or in the event MBIA Corp. has the right to accelerate the payment upon default or otherwise.

As of March 31, 2024, MBIA Corp.'s total insured gross par outstanding was $2.7 billion, down from $2.8 billion at the end of 2023. MBIA Corp. reported a statutory net loss of $35 million for the first quarter of 2024, compared to a statutory net loss of $20 million in the same period of 2023. The higher net loss was primarily driven by loss and LAE on primarily Zohar-related salvage.

Puerto Rico Exposures

MBIA's largest remaining exposure to Puerto Rico is to PREPA. On January 1, 2024, PREPA defaulted on scheduled debt service for certain National insured bonds, and National paid gross claims in the aggregate of $16 million. As of March 31, 2024, National had $792 million of insured debt service outstanding related to PREPA.

On August 25, 2023, National and the Financial Oversight and Management Board for Puerto Rico (the Oversight Board) entered into a First Amendment to the Plan Support Agreement (the "Amended PSA"), resolving National's claims in the PREPA Title III case. The Amended PSA remains subject to a number of conditions, including the Title III Court's confirmation and effectiveness of the Amended Plan, as it may be further amended with the Court's approval. The confirmation hearing commenced on March 4, 2024 and concluded on March 18, 2024, but the Court has not yet ruled on the confirmation of the Amended Plan. There is no assurance that the Amended Plan or a plan that is substantially similar in the treatment of National's claims and rights will ultimately be confirmed and become effective.

Liquidity

As of March 31, 2024, MBIA Inc.'s corporate segment had $376 million in unencumbered cash and liquid assets, down from $411 million at the end of 2023. The decrease was largely due to the company's repurchase of $36 million in GFL euro-denominated medium-term note liabilities before their maturities. These purchases were executed at prices accretive to equity and will reduce euro exchange rate volatility within MBIA's results going forward. Subsequent to March 31, 2024, the company spent an additional $26 million to retire GFL's remaining near-term euro-denominated medium-term note liabilities at a price accretive to equity.

National reported statutory capital of $1.1 billion as of March 31, 2024, consistent with the end of 2023. The company's claims-paying resources were also unchanged at $1.7 billion. MBIA Insurance Corporation's statutory capital decreased to $119 million as of March 31, 2024, from $152 million at the end of 2023, primarily due to the net loss for the current quarter. MBIA Insurance Corporation's claims-paying resources totaled $468 million at the end of the first quarter of 2024, down from $504 million at the end of 2023.

Risks and Challenges

MBIA continues to face significant risks related to its insured portfolio, particularly its exposure to PREPA. The company's ability to successfully navigate the PREPA restructuring process and minimize losses on its other insured obligations will be crucial to its future performance. Additionally, the company's liquidity and capital resources, while currently adequate, could be strained if it experiences further losses or is unable to generate sufficient cash flow from its operations.

Outlook

Despite these challenges, MBIA's management remains focused on resolving its remaining Puerto Rico exposure and exploring opportunities to sell the company. The company's ability to execute on these strategic initiatives will be closely watched by investors and analysts in the coming quarters.

Conclusion

MBIA Inc. is navigating a complex and challenging environment as it continues to manage its insured portfolio and explore strategic options for the company. While the company's financial results for the fiscal year 2023 and the first quarter of 2024 reflect the ongoing pressures facing the business, MBIA's management remains committed to addressing the company's key risks and positioning it for future success. Investors and analysts will closely monitor MBIA's progress in resolving its Puerto Rico exposure and any potential strategic transactions that may arise in the coming months.