MBIA Inc. (MBI) is a financial services company that has navigated a challenging industry landscape for decades. With a rich history spanning over four decades, the company has evolved to become a leading player in the financial guarantee insurance market, providing essential services to municipalities, corporations, and other entities around the world.

Company Overview

Founded in 1973 and headquartered in Purchase, New York, MBIA manages its business within three operating segments: United States public finance insurance, corporate, and international and structured finance insurance. The company's U.S. public finance insurance portfolio is managed through its subsidiary National Public Finance Guarantee Corporation, which provides unconditional and irrevocable guarantees of the payment of principal and interest on insured municipal bonds and other public finance obligations. National has insured a wide range of municipal bonds, including tax-exempt and taxable indebtedness of U.S. political subdivisions, as well as utilities, airports, healthcare institutions, and other public purpose projects.

MBIA's corporate segment consists of general corporate activities, including providing support services to its subsidiaries and asset and capital management. This segment has historically issued debt, such as medium-term notes and investment agreements, to finance the operations of the MBIA group. The international and structured finance insurance segment is principally conducted through its subsidiary MBIA Insurance Corporation. MBIA Corp. has insured non-U.S. public finance and global structured finance obligations over the years, including sovereign-related and sub-sovereign bonds, utilities, and asset-backed securities. MBIA Corp. has also insured investment contracts written by the parent company, as well as debt obligations of a subsidiary.

Historical Challenges

Throughout its history, MBIA has faced various challenges, including the financial crisis of 2008-2009, which significantly impacted its insured portfolio, as well as litigation and restructuring efforts related to its Puerto Rico exposures in more recent years. MBIA has worked to manage its legacy exposures and maximize recoveries for stakeholders as it has navigated these challenges.

Key Strengths

One of MBIA's key strengths has been its ability to manage risk effectively. The company's disciplined approach to underwriting and portfolio management has enabled it to navigate turbulent market conditions, such as the 2008 financial crisis, which had a significant impact on the broader financial guarantee industry. MBIA's focus on maintaining a strong capital position and prudent risk management practices has been instrumental in its ability to weather these storms.

Despite the challenges faced by the industry, MBIA has continued to demonstrate its value proposition to clients. The company's expertise in structuring and insuring complex financial transactions has made it a trusted partner for municipalities, corporations, and other entities seeking to access the capital markets. MBIA's commitment to providing innovative solutions and exceptional service has contributed to its enduring reputation in the industry.

Financial Performance

MBIA's financial performance in recent years has been marked by both successes and challenges. As of September 30, 2024, the company reported a consolidated GAAP net loss of $56 million, or $1.18 per share, for the third quarter of 2024. This compares to a consolidated GAAP net loss of $185 million, or $3.94 per share, for the same period in the previous year. The improvement in the company's financial results was primarily driven by lower loss and loss adjustment expenses related to its PREPA exposure, as well as lower losses associated with consolidated variable interest entities.

On a non-GAAP basis, MBIA reported an adjusted net loss of $174,000, or essentially $0.00 per share, for the third quarter of 2024, compared to an adjusted net loss of $138 million, or $2.92 per share, for the same period in 2023. The favorable change in the company's adjusted net loss was primarily due to the lower loss and loss adjustment expenses at its National subsidiary related to PREPA.

Book Value and Financial Position

MBIA's book value per share decreased from negative $32.56 as of December 31, 2023, to negative $39.19 as of September 30, 2024, primarily due to the company's $396 million consolidated net loss for the 2024 year-to-date period. The negative book value per share reflects the ongoing challenges faced by MBIA's MBIA Insurance Corporation subsidiary, which had a negative book value of $48.80 per share as of September 30, 2024, compared to negative $44.91 per share as of December 31, 2023.

Financials

Despite these financial challenges, MBIA remains focused on maximizing the performance of its existing insured portfolio and effectively managing its investment portfolio. The company's U.S. public finance insurance segment, operated through its National subsidiary, reported a statutory net income of $19 million for the third quarter of 2024, compared to a statutory net loss of $133 million for the same period in 2023. This improvement was primarily driven by lower loss and loss adjustment expenses related to PREPA.

MBIA's international and structured finance insurance segment, managed through its MBIA Insurance Corporation subsidiary, reported a statutory net income of $2 million for the third quarter of 2024, compared to a statutory net loss of $14 million for the same period in 2023. The improvement in MBIA Insurance Corporation's financial performance was primarily due to a small loss and loss adjustment expense benefit in the current quarter, compared to an increase in loss reserves on RMBS and ABS CDO exposures in the prior-year period.

For the most recent quarter (Q3 2024), MBIA reported revenue of $29 million, a net loss of $56 million, operating cash flow of $33 million, and free cash flow of $33 million. The company's cash position stood at $72 million as of September 30, 2024.

In the U.S. Public Finance Insurance segment, net premiums earned were $8 million and $24 million for the three and nine months ended September 30, 2024, respectively. Net investment income was $16 million and $51 million for the same periods. Losses and loss adjustment expenses were $2 million and $165 million for the three and nine months ended September 30, 2024, respectively.

The Corporate segment reported net investment income of $7 million and $23 million for the three and nine months ended September 30, 2024, respectively. Net gains on financial instruments at fair value and foreign exchange were $7 million and $5 million for the same periods. Operating expenses were $13 million and $48 million, while interest expense was $19 million and $55 million for the three and nine months ended September 30, 2024, respectively.

In the International and Structured Finance Insurance segment, net premiums earned were $2 million and $7 million for the three and nine months ended September 30, 2024, respectively. Net investment income was $3 million and $8 million for the same periods. Losses and loss adjustment expenses were $9 million and $6 million, operating expenses were $4 million and $17 million, and interest expense was $40 million and $120 million for the three and nine months ended September 30, 2024, respectively.

Liquidity

MBIA's liquidity position remains a key focus for management. As of September 30, 2024, National Public Finance Guarantee Corporation had $1 billion in statutory capital and $1.6 billion in total claims paying resources. National's gross par outstanding declined by approximately $2.5 billion from year-end 2023 to around $26 billion at the end of Q3 2024.

MBIA Insurance Corporation's statutory capital stood at $87 million as of September 30, 2024, down from $152 million at year-end 2023. Its claims paying resources totaled $358 million at September 30, 2024, compared to $504 million at year-end 2023.

Looking ahead, MBIA's management team remains focused on navigating the company's ongoing challenges and positioning the organization for long-term success. The company's ability to adapt to industry changes, manage risk effectively, and provide innovative solutions to its clients will be key drivers of its future performance.

Conclusion

Despite the headwinds facing the financial guarantee insurance industry, MBIA has demonstrated its resilience and commitment to serving its customers. By leveraging its deep industry expertise, disciplined risk management practices, and a steadfast focus on delivering value, the company is well-positioned to weather the current storm and emerge even stronger in the years to come. The company's improved financial results in the third quarter of 2024, compared to the same period in 2023, demonstrate progress in managing its legacy exposures and optimizing its operations. However, challenges remain, as evidenced by the negative book value per share and the ongoing complexities in the financial guarantee insurance market. MBIA's continued focus on maximizing the value of its existing portfolio and maintaining strong liquidity will be crucial as it navigates the evolving landscape of the financial services industry.