MBIA (MBI) - 2025 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1. Financial Statements This section presents MBIA Inc.'s unaudited consolidated financial statements, including balance sheets, statements of operations, comprehensive income, changes in equity, and cash flows, along with detailed explanatory notes Consolidated Balance Sheets Consolidated Balance Sheets (in millions) | | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Total investments | $1,547 | $1,655 | | Cash and cash equivalents | 165 | 84 | | Premiums receivable | 129 | 133 | | Deferred acquisition costs | 25 | 27 | | Insurance loss recoverable | 185 | 185 | | Assets held for sale | 11 | 11 | | Other assets | 37 | 42 | | Assets of consolidated variable interest entities: | | | | Cash | 2 | 3 | | Loans receivable at fair value | 33 | 28 | | Total assets | $2,134 | $2,168 | | Liabilities and Equity | | | | Liabilities: | | | | Unearned premium revenue | $186 | $199 | | Loss and loss adjustment expense reserves | 526 | 526 | | Long-term debt | 2,814 | 2,741 | | Medium-term notes | 454 | 440 | | Investment agreements | 203 | 204 | | Liabilities held for sale | 7 | 7 | | Other liabilities | 67 | 78 | | Liabilities of consolidated variable interest entities: | | | | Variable interest entity debt | 32 | 43 | | Derivative liabilities | 10 | 6 | | Total liabilities | $4,299 | $4,244 | | Equity: | | | | Common stock | 283 | 283 | | Additional paid-in capital | 2,453 | 2,492 | | Retained earnings (deficit) | (1,709) | (1,591) | | Accumulated other comprehensive income (loss) | (96) | (128) | | Treasury stock, at cost | (3,109) | (3,145) | | Total shareholders' equity of MBIA Inc. | (2,178) | (2,089) | | Preferred stock of subsidiary | 13 | 13 | | Total equity | (2,165) | (2,076) | | Total liabilities and equity | $2,134 | $2,168 | Consolidated Statements of Operations Consolidated Statements of Operations (in millions, except share and per share amounts) | | Three Months Ended June 30, | | Six Months Ended June 30, | | :--- | :--- | :--- | :--- | :--- | | | 2025 | 2024 | 2025 | 2024 | | Revenues | | | | | | Premiums earned | $7 | $8 | $15 | $17 | | Net investment income | 19 | 22 | 37 | 45 | | Net realized investment gains (losses) | (1) | (2) | (6) | (3) | | Net gains (losses) on financial instruments at fair value and foreign exchange | (2) | (55) | (17) | (51) | | Fees and reimbursements | - | 1 | 1 | 1 | | Other net realized gains (losses) | - | 2 | - | 5 | | Revenues of consolidated variable interest entities: | | | | | | Net gains (losses) on financial instruments at fair value and foreign exchange | - | 1 | - | (24) | | Other net realized gains (losses) | - | (14) | 7 | (14) | | Total revenues | 23 | (37) | 37 | (24) | | Expenses | | | | | | Losses and loss adjustment | 8 | 142 | 16 | 160 | | Amortization of deferred acquisition costs | 1 | 1 | 2 | 2 | | Operating | 18 | 15 | 34 | 40 | | Interest | 48 | 53 | 98 | 105 | | Expenses of consolidated variable interest entities: | | | | | | Operating | 3 | 5 | 4 | 9 | | Interest | 1 | - | 1 | - | | Total expenses | 79 | 216 | 155 | 316 | | Income (loss) from continuing operations before income taxes | (56) | (253) | (118) | (340) | | Provision (benefit) for income taxes | - | - | - | - | | Income (loss) from continuing operations | (56) | (253) | (118) | (340) | | Income (loss) from discontinued operations, net of income taxes | - | (2) | - | (1) | | Net income (loss) | (56) | (255) | (118) | (341) | | Less: Net income from discontinued operations attributable to noncontrolling interest | - | (1) | - | (1) | | Net income (loss) attributable to MBIA Inc. | $(56) | $(254) | $(118) | $(340) | | Net income (loss) per common share attributable to MBIA Inc. - basic and diluted | | | | | | Continuing operations | $(1.12) | $(5.30) | $(2.40) | $(7.20) | | Discontinued operations | - | (0.04) | - | (0.01) | | Net income (loss) per common share attributable to MBIA Inc. - basic and diluted | $(1.12) | $(5.34) | $(2.40) | $(7.21) | | Weighted average number of common shares outstanding | | | | | | Basic | 49,543,258 | 47,501,248 | 48,952,068 | 47,161,085 | | Diluted | 49,543,258 | 47,501,248 | 48,952,068 | 47,161,085 | Consolidated Statements of Comprehensive Income (Loss) Consolidated Statements of Comprehensive Income (Loss) (in millions) | | Three Months Ended June 30, | | Six Months Ended June 30, | | :--- | :--- | :--- | :--- | :--- | | | 2025 | 2024 | 2025 | 2024 | | Net income (loss) attributable to MBIA Inc. | $(56) | $(254) | $(118) | $(340) | | Other comprehensive income (loss): | | | | | | Available-for-sale securities with no credit losses: | | | | | | Unrealized gains (losses) arising during the period | 1 | (11) | 18 | (26) | | Reclassification adjustments for (gains) losses included in net income (loss) | - | 2 | 7 | 2 | | Foreign currency translation: | | | | | | Reclassification adjustments for (gains) losses included in net income (loss) | - | - | 5 | - | | Instrument-specific credit risk of liabilities measured at fair value: | | | | | | Unrealized gains (losses) arising during the period | 2 | (6) | 2 | (2) | | Reclassification adjustments for (gains) losses included in net income (loss) | - | 9 | - | 28 | | Total other comprehensive income (loss) | 3 | (6) | 32 | 2 | | Comprehensive income (loss) | $(53) | $(260) | $(86) | $(338) | Consolidated Statements of Changes in Shareholders' Equity Consolidated Statements of Changes in Shareholders' Equity (in millions except share amounts) | | Three Months Ended June 30, | | Six Months Ended June 30, | | :--- | :--- | :--- | :--- | :--- | | | 2025 | 2024 | 2025 | 2024 | | Common shares | | | | | | Balance at beginning and end of period | 283,186,115 | 283,186,115 | 283,186,115 | 283,186,115 | | Common stock amount | | | | | | Balance at beginning and end of period | $283 | $283 | $283 | $283 | | Additional paid-in capital | | | | | | Balance at beginning of period | $2,460 | $2,486 | $2,492 | $2,515 | | Share-based compensation | (7) | (3) | (39) | (32) | | Balance at end of period | $2,453 | $2,483 | $2,453 | $2,483 | | Retained earnings (deficit) | | | | | | Balance at beginning of period | $(1,653) | $(1,230) | $(1,591) | $(1,144) | | Net income (loss) attributable to MBIA Inc. | (56) | (254) | (118) | (340) | | Balance at end of period | $(1,709) | $(1,484) | $(1,709) | $(1,484) | | Accumulated other comprehensive income (loss) | | | | | | Balance at beginning of period | $(99) | $(131) | $(128) | $(139) | | Other comprehensive income (loss) | 3 | (6) | 32 | 2 | | Balance at end of period | $(96) | $(137) | $(96) | $(137) | | Treasury shares | | | | | | Balance at beginning of period | (232,815,490) | (231,910,363) | (232,215,934) | (232,323,184) | | Other | 117,432 | (248,052) | (482,124) | 164,769 | | Balance at end of period | (232,698,058) | (232,158,415) | (232,698,058) | (232,158,415) | | Treasury stock amount | | | | | | Balance at beginning of period | $(3,117) | $(3,141) | $(3,145) | $(3,172) | | Other | 8 | 2 | 36 | 33 | | Balance at end of period | $(3,109) | $(3,139) | $(3,109) | $(3,139) | | Total shareholders' equity of MBIA Inc. | | | | | | Balance at beginning of period | $(2,126) | $(1,733) | $(2,089) | $(1,657) | | Period change | (52) | (261) | (89) | (337) | | Balance at end of period | $(2,178) | $(1,994) | $(2,178) | $(1,994) | | Preferred stock of subsidiary shares | | | | | | Balance at beginning and end of period | 1,315 | 1,315 | 1,315 | 1,315 | | Preferred stock of subsidiary and noncontrolling interest held for sale | | | | | | Balance at beginning of period | $13 | $10 | $13 | $10 | | Period change | - | (1) | - | (1) | | Balance at end of period | $13 | $9 | $13 | $9 | | Total equity | $(2,165) | $(1,985) | $(2,165) | $(1,985) | Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows (in millions) | | Six Months Ended June 30, | | :--- | :--- | :--- | | | 2025 | 2024 | | Cash flows from operating activities: | | | | Premiums, fees and reimbursements received | $8 | $7 | | Investment income received | 25 | 31 | | Financial guarantee losses and loss adjustment expenses paid | (29) | (25) | | Proceeds from recoveries and reinsurance, net of salvage paid to reinsurers | 15 | 4 | | Operating expenses paid and other operating | (42) | (35) | | Other proceeds from consolidated variable interest entities | - | 2 | | Interest paid, net of interest converted to principal | (19) | (24) | | Net cash provided (used) by operating activities | (42) | (40) | | Cash flows from investing activities: | | | | Purchases of available-for-sale investments | (173) | (108) | | Sales of available-for-sale investments | 123 | 55 | | Paydowns, maturities and other proceeds of available-for-sale investments | 103 | 117 | | Purchases of investments at fair value | (22) | (68) | | Sales, paydowns, maturities and other proceeds of investments at fair value | 32 | 154 | | Sales, paydowns and maturities (purchases) of short-term investments, net | 74 | 100 | | Other investing | 1 | 3 | | Net cash provided (used) by investing activities | 138 | 253 | | Cash flows from financing activities: | | | | Principal paydowns of investment agreements | (1) | (1) | | Principal paydowns of medium-term notes | - | (62) | | Proceeds from variable interest entity debt | - | 2 | | Principal paydowns/redemptions of variable interest entity debt | (8) | (57) | | Principal paydowns of long-term debt | - | (1) | | Purchases of treasury stock | (7) | (4) | | Net cash provided (used) by financing activities | (16) | (123) | | Net increase (decrease) in cash and cash equivalents | 80 | 90 | | Cash and cash equivalents - beginning of period | 87 | 108 | | Cash and cash equivalents - end of period | $167 | $198 | | Reconciliation of net income (loss) to net cash provided (used) by operating activities: | | | | Net income (loss) | $(118) | $(341) | | Income (loss) from discontinued operations, net of income taxes | - | (1) | | Income (loss) from continuing operations | (118) | (340) | | Adjustments to reconcile net income (loss) from continuing operations to net cash provided (used) by operating activities: | | | | Change in: | | | | Unearned premium revenue | (13) | (16) | | Loss and loss adjustment expense reserves | - | 104 | | Insurance loss recoverable | - | 41 | | Accrued interest payable | 80 | 86 | | Other assets and liabilities | (12) | (6) | | Net realized investment gains (losses) | 6 | 3 | | Net (gains) losses on financial instruments at fair value and foreign exchange | 17 | 75 | | Other net realized (gains) losses | (7) | 9 | | Other operating | 5 | 4 | | Total adjustments to income (loss) from continuing operations | 76 | 300 | | Net cash provided (used) by operating activities | $(42) | $(40) | | Supplementary Disclosure of Consolidated Cash Flow Information: | | | | Non-cash financing activities: | | | | Variable interest entity debt extinguishment | $7 | $- | Notes to Consolidated Financial Statements Note 1: Business Developments and Risks and Uncertainties - National paid gross claims of $13 million on January 1, 2025, and $92 million on July 1, 2025, due to PREPA debt service defaults. As of June 30, 2025, National had $657 million of insured debt service outstanding related to PREPA[26][180][299] - National terminated the PREPA RSA due to the Oversight Board's intent to modify National's settlement in an amended Plan, raising uncertainty about a substantially similar confirmed plan[27][184][300] - MBIA Corp. is dissolving its wholly-owned subsidiary, MBIA Mexico, which returned approximately $12 million of capital to MBIA Corp. during the six months ended June 30, 2025[30][183] - Significant uncertainty remains regarding the realizable value of remaining loans and equity interests in portfolio companies and the litigation trust from Zohar CDOs[32] - Assets and liabilities of certain Zohar entities are classified as 'held for sale' and their results as 'discontinued operations'[33] - MBIA Corp.'s ability to meet obligations is limited by liquidity, and failure to collect expected recoveries could lead to rehabilitation or liquidation proceedings by the NYSDFS[38][40] Note 2: Significant Accounting Policies - Unaudited consolidated financial statements are prepared per Form 10-Q and Article 10 of Regulation S-X, not including all GAAP disclosures for annual periods[44] - Financial statements rely on management's estimates and assumptions, which may differ from actual results[45] Note 3: Recent Accounting Pronouncements - No new accounting pronouncements adopted had a material impact on consolidated financial statements[47] - The company is evaluating the potential impact of ASU 2023-09 (Improvements to Income Tax Disclosures), effective for annual periods after December 15, 2024[48] - The company is evaluating the potential impact of ASU 2024-03 (Disaggregation of Income Statement Expenses), effective for annual periods after December 15, 2026[49] Note 4: Variable Interest Entities - MBIA consolidates VIEs where it has both the power to direct activities that significantly impact economic performance and the obligation to absorb losses or right to receive benefits[52] - No additional consolidations or deconsolidations occurred in Q1/Q2 2025. In Q2 2024, one VIE was deconsolidated due to prepayment, resulting in $14 million losses ($9 million from AOCI)[53] Maximum Exposure to Loss for Nonconsolidated VIEs (in millions) | In millions | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Total insurance in force | $1,255 | $1,425 | | Total investments | $29 | $26 | | Total premiums receivable | $9 | $10 | | Total insurance loss recoverable | $21 | $21 | | Total unearned premium revenue | $7 | $8 | | Total loss and LAE reserves | $231 | $227 | Note 5: Loss and Loss Adjustment Expense Reserves - U.S. public finance loss reserves are estimated using probability-weighted cash flow scenarios, considering debt service and recoveries[58] - RMBS case basis reserves are calculated using the Roll Rate Methodology, involving loan-level data, internal cash flow models, and commercially available models[61] Summary of Loss and LAE Reserves and Recoveries (in millions) | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------------ | :------------ | :---------------- | | Total Insurance loss recoverable | $185 | $185 | | Total Loss and LAE reserves | $526 | $526 | | U.S. Public Finance Insurance loss recoverable | $164 | $165 | | U.S. Public Finance Loss and LAE reserves | $295 | $299 | | International and Structured Finance Insurance loss recoverable | $21 | $20 | | International and Structured Finance Loss and LAE reserves | $231 | $227 | - Loss and LAE reserves remained flat at $526 million for the six months ended June 30, 2025, with claim payments on PREPA and a U.S. public finance leased-backed transaction partially offset by accretion and lower risk-free rates[68][69] - Insurance loss recoverable remained flat at $185 million for the six months ended June 30, 2025, as collections from unwrapped PREPA bonds were offset by reclassification of expected recoveries on a lease-backed transaction, accretion, and a decline in risk-free rates[71][72] Surveillance Categories (June 30, 2025, in millions) | Metric | Total | | :------------------------------------------ | :---- | | Number of policies | 115 | | Number of issues | 84 | | Remaining weighted average contract period (in years) | 5.4 | | Gross insured contractual payments outstanding: Principal | $2,029 | | Gross insured contractual payments outstanding: Interest | $1,694 | | Total Gross insured contractual payments outstanding | $3,723 | | Gross Claim Liability | $872 | | Gross Potential Recoveries | $441 | | Discount, net | $99 | | Net claim liability (recoverable) | $332 | | Unearned premium revenue | $11 | | Reinsurance recoverable on paid and unpaid losses | $16 | Note 6: Fair Value of Financial Instruments - Investments are classified into Level 1 (quoted active markets), Level 2 (observable inputs), and Level 3 (significant unobservable inputs) of the fair value hierarchy[86] - As of June 30, 2025, Level 3 assets represented approximately 6% of total assets measured at fair value, while Level 3 liabilities represented approximately 99% of total liabilities measured at fair value[103] Fair Value Measurements at Reporting Date (in millions) | Category | June 30, 2025 | December 31, 2024 | | :------------------------------------------ | :------------ | :---------------- | | Total assets measured at fair value | $1,746 | $1,769 | | Level 1 Assets | $781 | $797 | | Level 2 Assets | $854 | $866 | | Level 3 Assets | $101 | $96 | | Total liabilities measured at fair value | $75 | $73 | | Level 1 Liabilities | $0 | $0 | | Level 2 Liabilities | $1 | $1 | | Level 3 Liabilities | $74 | $72 | - The company elected to record certain financial instruments at fair value, including certain equity investments and financial instruments consolidated in connection with VIEs[118] - Cumulative changes in instrument-specific credit risk of liabilities elected under the fair value option were gains of $29 million (June 30, 2025) and $27 million (December 31, 2024), reported in AOCI[121] Note 7: Investments AFS Investments (in millions) | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------------ | :------------ | :---------------- | | Total AFS investments (Fair Value) | $1,268 | $1,236 | | Total AFS investments (Amortized Cost) | $1,400 | $1,391 | | Gross Unrealized Gains | $6 | $5 | | Gross Unrealized Losses | $(138) | $(160) | AFS Fixed-Maturity Securities by Contractual Maturity (June 30, 2025, in millions) | Maturity | Net Amortized Cost | Fair Value | | :------------------------------------------ | :----------------- | :--------- | | Due in one year or less | $433 | $432 | | Due after one year through five years | $91 | $91 | | Due after five years through ten years | $182 | $162 | | Due after ten years | $379 | $281 | | Mortgage-backed and asset-backed | $315 | $302 | | Total fixed-maturity investments | $1,400 | $1,268 | - Fair value of securities pledged as collateral for investment agreements was $214 million at June 30, 2025[127] - Gross unrealized losses on AFS investments decreased from $160 million (Dec 31, 2024) to $138 million (June 30, 2025), primarily due to lower interest rates and tighter credit spreads[129] - The company did not purchase any credit-deteriorated assets or establish an allowance for credit losses for AFS securities for the three and six months ended June 30, 2025 and 2024[133] Sales of Available-for-Sale Investments (in millions) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Proceeds from sales | $61 | $27 | $123 | $55 | | Gross realized gains | $0 | $1 | $1 | $1 | | Gross realized losses | $(1) | $(2) | $(7) | $(3) | Note 8: Income Taxes - The effective tax rate was 0.0% for both three and six months ended June 30, 2025 and 2024, due to a full valuation allowance on the net deferred tax asset[139] - A full valuation allowance of $1.4 billion was recorded against the net deferred tax asset as of June 30, 2025, and December 31, 2024, due to a three-year cumulative loss[140] - The company has approximately $4.4 billion in Net Operating Losses (NOLs) as of June 30, 2025, expiring between 2026 and 2044, and a $55 million foreign tax credit carryforward expiring between 2025 and 2033[143] - The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, is not expected to have a material impact on the company's financial results[145] Note 9: Business Segments - MBIA manages three operating segments: U.S. public finance insurance (National), corporate, and international and structured finance insurance (MBIA Corp.)[146] - The U.S. public finance insurance segment (National) provides unconditional guarantees for U.S. municipal bonds and public purpose projects, with $24.2 billion gross insured par outstanding as of June 30, 2025[147][201] - The international and structured finance insurance segment (MBIA Corp.) guarantees non-U.S. public finance and global structured finance obligations, with $2.2 billion gross insured par outstanding as of June 30, 2025. It has not written meaningful new business since 2008[149][228] Segment Results: Income (loss) from continuing operations before income taxes (in millions) | Segment | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | U.S. Public Finance Insurance | $7 | $(130) | $7 | $(139) | | Corporate | $(20) | $(4) | $(35) | $(13) | | International and Structured Finance Insurance | $(42) | $(119) | $(89) | $(188) | | Eliminations | $(1) | $0 | $(1) | $0 | | Consolidated | $(56) | $(253) | $(118) | $(340) | Note 10: Earnings Per Share - Earnings per share (EPS) is calculated using the two-class method, allocating earnings to common stock and participating securities (unvested restricted stock)[165] - Unvested restricted stock is excluded from diluted EPS calculation during net loss periods as it would be antidilutive[166] Net Income (Loss) Per Common Share - Basic and Diluted (in millions except per share amounts) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Continuing operations | $(1.12) | $(5.30) | $(2.40) | $(7.20) | | Discontinued operations | $0.00 | $(0.04) | $0.00 | $(0.01) | | Net income (loss) per share - basic and diluted | $(1.12) | $(5.34) | $(2.40) | $(7.21) | Note 11: Accumulated Other Comprehensive Income Accumulated Other Comprehensive Income (AOCI) Balance (in millions) | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------------ | :------------ | :---------------- | | Balance | $(96) | $(128) | Changes in AOCI (6 months ended June 30, 2025, in millions) | Component | Balance, Dec 31, 2024 | Other comprehensive income (loss) before reclassifications | Amounts reclassified from AOCI | Net period other comprehensive income (loss) | Balance, June 30, 2025 | | :------------------------------------------ | :-------------------- | :--------------------------------------------------------- | :----------------------------- | :------------------------------------------ | :--------------------- | | Unrealized Gains (Losses) on AFS Securities, Net | $(150) | $18 | $7 | $25 | $(125) | | Foreign Currency Translation, Net | $(5) | $0 | $5 | $5 | $0 | | Instrument-Specific Credit Risk of Liabilities Measured at Fair Value, Net | $27 | $2 | $0 | $2 | $29 | | Total | $(128) | $20 | $12 | $32 | $(96) | - Total reclassifications from AOCI for the six months ended June 30, 2025, were $(12) million, including $(7) million from realized gains/losses on AFS securities and $(5) million from foreign currency translation due to MBIA Mexico liquidation[169] Note 12: Commitments and Contingencies - Ongoing PREPA Title III proceedings are the primary material legal matter. No other material legal proceedings are pending or threatened[171] - The company exercised its right to terminate its Purchase, New York headquarters lease in August 2025 but executed a partial reinstatement for a portion of the space with an initial term expiring in 2029[173] Lease Information (June 30, 2025, in millions) | Metric | Amount | | :------------------------------------------ | :----- | | ROU asset | $2 | | Lease liability | $7 | | Weighted average remaining lease term (years) | 3.8 | | Discount rate used for operating leases | 9.5% | | Total future minimum lease payments | $8 | - MBIA Corp. has a fully drawn $15 million delayed draw term loan commitment to an entity it holds as an equity investment[175] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes the company's financial condition and results, highlighting improved net loss driven by favorable investment fair value changes and reduced loss adjustment expenses - MBIA operates in financial guarantee insurance across U.S. public finance (National), corporate, and international/structured finance (MBIA Corp.) segments. Neither National nor MBIA Corp. is expected to write new financial guarantee policies outside of remediation[177][178] - U.S. economic activity moderated in H1 2025, with low unemployment and elevated inflation. FOMC maintained federal funds rate at 4.25%-4.50%. Economic trends could impact investment portfolio values and yields, and loss reserves[179] OVERVIEW - National paid $13 million in claims on Jan 1, 2025, and $92 million on July 1, 2025, due to PREPA defaults. $657 million of insured debt service outstanding as of June 30, 2025[180] - National terminated the PREPA RSA due to the Oversight Board's intent to modify the settlement, creating uncertainty for future plan confirmation[184] - MBIA Mexico returned $12 million capital to MBIA Corp. during H1 2025 as part of its dissolution process[183] RESULTS OF OPERATIONS Consolidated Financial Results (in millions, except EPS) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total revenues | $23 | $(37) | $37 | $(24) | | Total expenses | $79 | $216 | $155 | $316 | | Net income (loss) attributable to MBIA Inc. | $(56) | $(254) | $(118) | $(340) | | Net income (loss) per basic and diluted common share | $(1.12) | $(5.34) | $(2.40) | $(7.21) | | Adjusted net income (loss) | $(8) | $(138) | $(16) | $(162) | - Consolidated total revenues increased for the three months ended June 30, 2025, primarily due to favorable changes from fair valuing investments ($5 million gains vs. $59 million losses in 2024) and consolidated VIE revenues, partially offset by foreign currency losses ($9 million vs. $1 million gains in 2024) and lower net investment income[186] - Consolidated total revenues increased for the six months ended June 30, 2025, primarily due to favorable changes from fair valuing investments ($1 million gains vs. $59 million losses in 2024) and consolidated VIE revenues ($7 million gain vs. $38 million loss in 2024), partially offset by foreign currency losses ($13 million vs. $4 million gains in 2024) and lower net investment income[188] - Consolidated losses and LAE significantly decreased to $8 million (3 months) and $16 million (6 months) in 2025 from $142 million and $160 million in 2024, primarily due to favorable changes in PREPA net reserves[187][189] - The effective tax rate remained 0.0% for both periods due to a full valuation allowance on the net deferred tax asset[190] Non-GAAP Adjusted Net Income (Loss) - Adjusted net income (loss) is a non-GAAP measure used by management to assess performance and make business decisions, considered a fundamental measure of periodic financial performance[192] - Adjustments include removing after-tax results of the international and structured finance insurance segment, and adjusting for mark-to-market gains/losses on financial instruments, foreign exchange gains/losses, net realized investment gains/losses, and extinguishment of debt[193][198] Adjusted Net Income (Loss) (in millions) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Adjusted net income (loss) | $(8) | $(138) | $(16) | $(162) | | Adjusted net income (loss) per diluted common share | $(0.17) | $(2.90) | $(0.33) | $(3.44) | Book Value Adjustments Per Share - Management analyzes adjusted book value (ABV) per share by removing the negative book value of MBIA Corp., net unrealized gains/losses on AFS securities, and including net unearned premium revenue in excess of expected losses of National[197][202] GAAP Book Value Per Share (in millions except share and per share amounts) | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------------ | :------------ | :---------------- | | Total shareholders' equity of MBIA Inc. | $(2,178) | $(2,089) | | Common shares outstanding | 50,488,057 | 50,970,181 | | GAAP book value per share | $(43.14) | $(40.99) | U.S. Public Finance Insurance Segment - National's gross insured par outstanding was $24.2 billion as of June 30, 2025[201] U.S. Public Finance Insurance Segment Results: Income (loss) from continuing operations before income taxes (in millions) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total revenues | $23 | $23 | $40 | $49 | | Total expenses | $16 | $153 | $33 | $188 | | Income (loss) from continuing operations before income taxes | $7 | $(130) | $7 | $(139) | - For the three and six months ended June 30, 2025, losses and LAE incurred were primarily due to extending the timing of a settlement on the PREPA exposure. In 2024, they were mainly due to changes in PREPA reserves[207] - National paid $3.2 billion in gross claims related to Puerto Rico bonds through June 30, 2025[217] PREPA Scheduled Gross Debt Service (June 30, 2025, in millions) | Year | Amount | | :------------------------------------------ | :----- | | 2025 (remaining 6 months) | $92 | | 2026 | $57 | | 2027 | $20 | | 2028 | $20 | | 2029 | $89 | | Thereafter | $379 | | Total | $657 | Credit Quality Distribution of National's U.S. Public Finance Outstanding Gross Par Insured (June 30, 2025, in millions) | Rating | Amount | % | | :------------------------------------------ | :----- | :---- | | AAA | $960 | 4.0% | | AA | $10,831 | 44.7% | | A | $8,878 | 36.6% | | BBB | $1,788 | 7.4% | | Below investment grade | $1,757 | 7.3% | | Total | $24,214 | 100.0% | Corporate Segment Corporate Segment Results: Income (loss) from continuing operations before income taxes (in millions) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total revenues | $14 | $27 | $30 | $58 | | Total expenses | $34 | $31 | $65 | $71 | | Income (loss) from continuing operations before income taxes | $(20) | $(4) | $(35) | $(13) | - Net gains (losses) on financial instruments at fair value and foreign exchange included foreign currency losses of $9 million (3 months) and $13 million (6 months) in 2025 due to the U.S. dollar weakening against the euro[226] International and Structured Finance Insurance Segment - MBIA Corp.'s total insured gross par outstanding was $2.2 billion as of June 30, 2025[228] International and Structured Finance Insurance Segment Results: Income (loss) from continuing operations before income taxes (in millions) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total revenues | $6 | $(63) | $10 | $(85) | | Total expenses | $48 | $56 | $99 | $103 | | Income (loss) from continuing operations before income taxes | $(42) | $(119) | $(89) | $(188) | - The net loss for the six months ended June 30, 2025, from financial instruments at fair value and foreign exchange was primarily due to the reclassification of foreign currency translation losses from AOCI due to the liquidation of a foreign subsidiary[232] - Consolidated VIE revenue for the six months ended June 30, 2025, was a gain of $7 million from a litigation trust, compared to losses in 2024 primarily from reclassification of credit risk losses due to early redemptions and deconsolidation[233] - For the three and six months ended June 30, 2025, losses and LAE incurred primarily related to a decrease in risk-free rates used to discount loss reserves and accretion of loss reserves on insured RMBS transactions[234] Insurance Loss Recoverable and Loss and LAE Reserves (in millions) | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------------ | :------------ | :---------------- | | Insurance loss recoverable | $21 | $20 | | Loss and LAE reserves | $231 | $227 | - As of June 30, 2025, 25% of the international and structured finance insured portfolio was rated below investment grade, primarily first-lien RMBS exposures[240] - MBIA Corp. had $532 million of first-lien RMBS gross par outstanding as of June 30, 2025[242] LIQUIDITY AND CAPITAL RESOURCES - The company uses a liquidity risk management framework, including cash forecasting and stress-scenario testing, managed on a legal-entity basis[247] Consolidated Cash Flows (6 months ended June 30, in millions) | Metric | 2025 | 2024 | Percent Change | | :------------------------------------------ | :----- | :----- | :------------- | | Net cash provided (used) by operating activities | $(42) | $(40) | 5% | | Net cash provided (used) by investing activities | $138 | $253 | -45% | | Net cash provided (used) by financing activities | $(16) | $(123) | -87% | | Cash and cash equivalents - end of period | $167 | $198 | -16% | - Net cash used by operating activities increased due to payments for non-qualified deferred compensation and less investment income, partially offset by lower net losses/LAE and interest expense paid[249] - Net cash provided by investing activities decreased due to higher net proceeds from investment sales in 2024 to fund debt payments[250] - Net cash used by financing activities decreased due to repurchase of GFL MTNs and early redemption of VIE debt in 2024[251] - The company's AFS fixed-maturity investment portfolio had a weighted average credit quality rating of A, with 95% investment grade as of June 30, 2025[253] - National held $1.2 billion in cash and investments as of June 30, 2025, and had statutory capital of $914 million. It was not in compliance with certain single risk limits, which could prevent new business[258][274][275] National Claims-Paying Resources (CPR) (in millions) | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------------ | :------------ | :---------------- | | Policyholders' surplus | $616 | $602 | | Contingency reserves | $298 | $310 | | Statutory capital | $914 | $912 | | Unearned premiums | $196 | $208 | | Present value of installment premiums | $94 | $95 | | Premium resources | $290 | $303 | | Net loss and LAE reserves | $127 | $130 | | Salvage reserves on paid claims | $159 | $162 | | Gross loss and LAE reserves | $286 | $292 | | Total claims-paying resources | $1,490 | $1,507 | - MBIA Corp. held $230 million in cash and investments as of June 30, 2025, and had statutory capital of $92 million. It had a negative unassigned surplus of $1.9 billion and was not in compliance with certain single risk limits. NYSDFS has not approved interest payments on its Surplus Notes since January 2013[267][280][281][283] MBIA Insurance Corporation Claims-Paying Resources (CPR) (in millions) | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------------ | :------------ | :---------------- | | Policyholders' surplus | $87 | $83 | | Contingency reserves | $5 | $5 | | Statutory capital | $92 | $88 | | Unearned premiums | $18 | $21 | | Present value of installment premiums | $17 | $20 | | Premium resources | $35 | $41 | | Net loss and LAE reserves | $43 | $57 | | Salvage reserves on paid claims | $176 | $170 | | Gross loss and LAE reserves | $219 | $227 | | Total claims-paying resources | $346 | $356 | CRITICAL ACCOUNTING ESTIMATES - The company's most critical accounting estimates, requiring significant judgment, include loss and LAE reserves and the valuation of financial instruments[287] RECENT ACCOUNTING PRONOUNCEMENTS - This section refers to Note 3 for a discussion of new accounting pronouncements and their potential impact on the consolidated financial statements[289] Item 3. Quantitative and Qualitative Disclosures About Market Risk Market risk exposures from interest rates, foreign exchange, and credit spreads are actively managed, with no material changes observed since December 31, 2024 - Market risk exposures include changes in interest rates, foreign exchange rates, and credit spreads affecting investment securities, MTNs, and investment agreement liabilities[290] - The company minimizes exposure through active portfolio management, ensuring a proper mix of securities and staggering maturities[290] - No material changes in market risk related to interest rates, foreign exchange rates, and credit spreads were observed since December 31, 2024[290] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting - Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[291] - No material changes in the company's internal control over financial reporting occurred during the fiscal quarter[291] PART II – OTHER INFORMATION Item 1. Legal Proceedings This section refers to Note 12 for a discussion of the company's litigation, primarily the ongoing PREPA Title III proceedings, with no other material legal matters pending - The company's litigation and related matters are discussed in Note 12, primarily focusing on PREPA's Title III proceedings[294] - There are no other material legal proceedings pending or, to the knowledge of the Company, threatened[294] Item 1A. Risk Factors This section supplements risk factors, highlighting potential increased credit losses on public finance obligations due to fiscal stress, particularly concerning PREPA's bankruptcy-like proceedings - Fiscal stress in state, local, and territorial governments could lead to increased credit losses or impairments on public finance obligations[296][297] - PREPA remains in a bankruptcy-like proceeding under PROMESA. National had $657 million of insured debt service outstanding related to PREPA as of June 30, 2025, and paid $13 million and $92 million in gross claims on January 1 and July 1, 2025, respectively[298][299] - There is no assurance that a plan substantially similar to National's settlement for PREPA will ultimately be confirmed, which could materially adversely affect National's PREPA loss reserves and recoveries[300] Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities The company made no equity security repurchases in Q2 2025, under a $100 million share repurchase program approved on May 3, 2023 - The company did not purchase any shares in April, May, or June 2025[302] - A share repurchase program authorizing up to $100 million in share repurchases was approved on May 3, 2023[302] Item 6. Exhibits This section lists exhibits filed with the 10-Q report, including CEO and CFO certifications and XBRL documents - Exhibits include CEO and CFO certifications pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002[306] - XBRL documents, including the instance document, taxonomy extension schema, and cover page interactive data file, are filed[306] SIGNATURES - The report was signed by Joseph R. Schachinger, Chief Financial Officer, on August 6, 2025[308]