MBIA Q3 2026 Earnings Call Transcript

MBIA (NYSE:MBI) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.

This transcript is brought to you by Benzinga APIs. For real-time access to our entire catalog, please visit https://www.benzinga.com/apis/ for a consultation.

Access the full call at https://events.q4inc.com/attendee/588608000

Summary

MBIA Inc. reported a consolidated GAAP net loss of $24 million for Q3 2026, an increase from an $8 million loss in Q3 2025, primarily due to a smaller loss and LAE benefit.

The company’s adjusted net loss was $3 million, down from an adjusted net income of $51 million in the same quarter last year, largely influenced by loss and LAE at National.

National’s PREPA exposure remains a priority, with $390 million of gross par outstanding, and efforts continue to resolve related issues.

National’s leverage ratio improved to 20 to 1, down from 24 to 1 at year-end 2025, with statutory capital at $974 million.

Future strategic focus includes potential sales of custodial receipts and ongoing litigation concerning PREPA, with positive developments anticipated in the legal environment.

Management reiterated its commitment to returning value to shareholders through potential dividends and share repurchases, while carefully managing liquidity.

Full Transcript

OPERATOR

Hello and welcome everyone to the MBIA Inc. Third Quarter 2026 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.

Greg Diamond (Managing Director of Investor and Media Relations)

Thank you. Ladies, welcome to MBIA’s financial results conference call. After the market closed yesterday, we issued and posted several items on our website including our financial results, 10Q, quarterly operating supplement, and statutory financial statements for both MBIA Insurance Corporation and National Public Finance Guarantee Corporation. We also posted updates to the listings of our insurance companies’ insured portfolios. Regarding today’s call, please note that anything said on the call is qualified by the information provided in the company’s 10K, 10Qs, and other SEC filings, as our company’s definitive disclosures are incorporated in those documents. We urge investors to read our 10K and 10Qs 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.

The definitions and reconciliations of the non-GAAP terms included in our remarks today are also included in our 10K and 10Qs, as well as our financial results report and the quarterly operating supplement. The recorded replay of today’s call will become available on the MBIA website approximately two hours after the end of the call. And now here is our Safe Harbor Disclosure Statement. 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 10K and 10Qs, which are available on our website at mbia.com. The company cautions not to place undue reliance on any such forward-looking statements. The company 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 Joe Schachinger will provide introductory comments and then a question and answer session will follow. Now here is Bill Fallon.

William Fallon (President and CEO)

Thanks, Greg. Good morning, everyone. Thank you for being with us today. While our third quarter 2026 net loss was greater than last year’s third quarter loss, our year-to-date results compare favorably to last year. Joe will provide more details on this quarter’s results shortly. Regarding our operations, our priority continues to be resolving National’s PREPA exposure, which remains at $390 million of gross par outstanding as of September 30, 2026, and $35 million of saleable PREPA bankruptcy claims consisting of custodial receipts and uninsured bonds. Since our last conference call, the U.S. District Court for Puerto Rico granted permanent injunctive relief to three of the Oversight Board members that President Trump attempted to fire.

The Title III court scheduled oral argument for November 18, 2026, on summary judgment for the accounting counterclaim regarding the calculation of net revenue. The PREPA bondholders petitioned the First Circuit Court of Appeals for an appeal on the Title III court stay of the bondholders’ filing to lift the automatic stay and appoint a receiver for PREPA, and oral arguments were heard on the administrative claim appeal to the First Circuit, and a ruling is pending.

Regarding the balance of National’s insured portfolio, those credits have continued to perform generally consistent with our expectations. The gross par amount outstanding for National’s insured portfolio has declined by approximately $2.6 billion from year-end 2025 to about $19.7 billion at September 30, 2026. National’s leverage ratio of gross par to statutory capital was 20 to 1 at the end of the quarter, down from 24 to 1 at year-end 2025. As of September 30, 2026, National had total claims-paying resources of $1.4 billion and statutory capital and surplus of $974 million.

Now Joe will provide additional comments about our financial results.

Joseph Schachinger (Chief Financial Officer)

Thank you, Bill, and good morning, everyone. I will begin with a review of our third quarter 2026 GAAP and non-GAAP results, followed by an overview of our holding company liquidity and our statutory results. The company reported a consolidated GAAP net loss of $24 million, or negative $0.49 per share, for the third quarter of 2026 compared with a consolidated GAAP net loss of $8 million, or negative $0.17 per share, for the third quarter of 2025.

The larger GAAP net loss in the current quarter was primarily attributable to a smaller loss and LAE benefit. In the third quarter of 2026, we recorded a loss and LAE benefit of $12 million. This benefit was largely driven by the impact of an increase in the interest rates used to discount our loss reserves, which lowered the present value of those reserves, principally with respect to MBIA Insurance Corp.’s first-lien RMBS exposures. By comparison, in the third quarter of 2025 we recorded a loss and LAE benefit of $50 million. That benefit was primarily driven by revising our PREPA loss scenarios to reflect developments at that time, including National’s sale of PREPA bankruptcy claims at prices above our previous estimates.

The company’s adjusted net loss, which is a non-GAAP measure, was $3 million, or negative $0.06 per share, for the third quarter of 2026 compared with adjusted net income of $51 million, or $1.03 per share, for the third quarter of 2025. The unfavorable variance was primarily driven by $3 million of losses and LAE at National in the current quarter, reflecting the accrual of LAE and the accretion of loss reserves, compared with a $54 million loss and LAE benefit in the third quarter of 2025, primarily from the favorable developments associated with National’s PREPA reserves and recoveries.

As of September 30, 2026, MBIA Inc.’s book value per share was negative $46.87 per share, reflecting a decrease of $2.60 per share from year-end 2025. This decrease was primarily due to our consolidated GAAP net loss of $110 million for the first nine months of 2026 and an increase in unrealized losses on our investment portfolios recorded in other comprehensive income. The increase in unrealized investment losses largely resulted from higher interest rates, which reduced the fair value of our fixed-income investments included in MBIA Inc.’s book value per share as of September 30, 2026.

A negative $54.87 per share of MBIA Insurance Corp. book value. I will now turn to the corporate segment balance sheet. The corporate segment, which primarily comprises the activities of the holding company MBIA Inc., had total assets of approximately $577 million as of September 30, 2026. Within this total are the following material assets. Unencumbered cash and liquid assets held by MBIA Inc. totaled $335 million compared with $357 million at December 31, 2025. The decrease since year-end 2025 primarily reflects ongoing debt service payments and operating expenses, partially offset by investment income.

We continue to manage holding company liquidity carefully, with a primary focus on meeting our outstanding obligations and preserving our financial flexibility. In addition to the unencumbered cash and liquid assets, the corporate segment’s assets included approximately $124 million of assets at market value pledged to guaranteed investment agreement contract holders. These assets fund, fully collateralized, the principal amounts of those contracts. The segment’s assets also included $70 million of assets at MBIA Services Corp., our management services company, to support its operating obligations.

I’ll now turn to the statutory results of our insurance companies, beginning with National. National reported statutory net income of $18 million for the third quarter of 2026 compared with statutory net income of $73 million for the third quarter of 2025. The unfavorable variance was primarily attributable to loss and LAE activity. National recorded $4 million of statutory loss and LAE this quarter compared with a $56 million loss and LAE benefit in the third quarter of 2025.

As noted earlier, the expense in the current quarter reflects the accrual of LAE and accretion of reserves, while the benefit in the third quarter of 2025 was primarily driven by adjustments to our PREPA loss scenarios and assumptions and the sale of PREPA bankruptcy claims at prices above our previous estimates. As of September 30, 2026, National’s statutory capital was $974 million, up $37 million compared with December 31, 2025. The increase was primarily driven by National’s statutory net income of $39 million for the first nine months of 2026.

As of September 30, 2026, National’s claims-paying resources were $1.4 billion, unchanged from year-end 2025. Now I’ll turn to MBIA Insurance Corp. MBIA Insurance Corp. reported a statutory net loss of $3 million for the third quarter of 2026 compared with a statutory net loss of $25 million for the third quarter of 2025. The favorable variance was primarily attributable to lower loss and LAE. MBIA Insurance Corp. reported loss and LAE of $4 million in the current quarter compared with $25 million in the third quarter of 2025. The larger loss and LAE in the third quarter of 2025 primarily reflected reserve adjustments associated with lower expected recoveries of paid claims relating to the Zohar CDOs.

As of September 30, 2026, MBIA Insurance Corp.’s statutory capital was $102 million, reflecting an increase of $23 million from year-end 2025. The increase was principally driven by MBIA Insurance Corp.’s statutory net income of $25 million for the first nine months of 2026. Claims-paying resources totaled $335 million as of September 30, 2026, increasing $18 million from year-end 2025. MBIA Insurance Corp.’s insured gross par outstanding was just under $1.8 billion as of September 30, 2026, declining approximately 13% from year-end 2025, reflecting the scheduled amortization of the insured portfolio.

And now we will turn the call over to the operator to begin the question and answer session.

OPERATOR

Thank you. If you would like to ask a question at this time, please press star 1 on your telephone keypad. If you wish to remove yourself from the queue, please press star 2. We ask that when posing your question, you please pick up your handset to allow optimal sound quality. We will now take our first question from Tommy McJoin with KBW. Please go ahead.

Tommy McJoin (Analyst)

Hey, good morning, guys. First question. What was the amount of the as-of-right dividend that National paid to MBIA Inc. in the fourth quarter? I think that’s usually in October versus the $63 million as-of-right dividend last year.

Joseph Schachinger (Chief Financial Officer)

Hi, this is Joe. We have not yet paid the as-of-right dividend. We typically pay it in December, Tommy, not October. So we do expect to pay that dividend this coming December and we expect it to be in a similar amount as the last two years, perhaps slightly higher.

Tommy McJoin (Analyst)

Okay, got it. And then, you know, from your vantage point, does the Democratic sweep in the midterms change the outlook for how you expect the Oversight Board to get constructed in terms of nominations from the different, you know, House and Senate leaders? And do you have a viewpoint on how that could ultimately impact how creditor-friendly and maybe resolution-focused that Oversight Board will be?

William Fallon (President and CEO)

Yeah. With regard to the results, the elections and the implications that you’re talking about, we do think it’s possible that puts more focus on the three vacant positions. And the current administration has the ability, going through the process outlined in PROMESA, to fill those three vacancies. In a sense they could do it today. I don’t know where the different parties stand in terms of providing lists to the President, but we do think there’s an increased possibility that those three positions could be filled, in a sense, before the end of the year, which we think would help move things along.

So that’s probably the biggest highlight coming out of that.

Tommy McJoin (Analyst)

Okay, got it. And then just on the litigation side, understand there’s a few, you know, hearings coming up here later in the month in terms of the case, sort of looking at the net revenue debate in terms of how that gets calculated. Could you just kind of summarize, you know, what you’re seeing there in terms of that case’s developments, in terms of if you feel like the sides are getting closer together, further apart? There’s a lot of stuff to track there.

So we just want to understand your sort of take on that case specifically. Thanks.

William Fallon (President and CEO)

Yeah. Tommy, without going into a lot of details, and obviously people have read all the court filings, there clearly is a difference of opinion with regard to what the Board thinks and what the bondholders think. Again, collectively, as one of the bondholders, we feel we have a very strong case on that one. I don’t know that there’s really any movement in terms of the sides getting closer together, as you asked that part of the question. But again, I think we feel pretty good.

Hard to know with litigation what the final outcome will be, but hopefully we will know soon.

OPERATOR

Thank you for your question. We will take our next question from Patrick Sottlehofer with Kahn Brothers.

Patrick Sottlehofer (Analyst)

Good morning, guys.

William Fallon (President and CEO)

Good morning.

Patrick Sottlehofer (Analyst)

First question is just why have you not yet sold the custodial receipts you created in July last year? That was sold pretty fast and it looked like prices have held up. So I’m just curious why you’re holding onto these receipts longer than last year’s batch.

William Fallon (President and CEO)

Yeah. Patrick, we continue to look at the market and look at opportunities. As I think you’re aware, it’s not a really deep and liquid market. We’re, I think, pretty aware of what the possibilities are, and we want to make sure that it’s beneficial to shareholders. So we’ll continue to look at that. As you know, some of these court decisions could impact the price up or down. There could be other events, but we’re looking at that all the time.

Patrick Sottlehofer (Analyst)

Sounds good. And then a few years ago, you publicly announced and ran the sale process. Since then, you’ve mostly or substantially resolved a lot of the gating issues that seemed to prevent the sale then. So the question is, are you running a sale process now? And if not, why aren’t you given the kind of rapid burn of shareholder value from kind of ongoing operational costs?

William Fallon (President and CEO)

Yeah, I think you summarized it correctly. We believe that a transaction would be beneficial to shareholders. We set out to do that several years ago. Everything that you just described, as I’ve mentioned in previous calls, I think the feedback from that process was really twofold. One was reduce your PREPA exposure or eliminate it. Two was to get dividends from National Public Finance Guarantee Corporation Holding Company. We clearly did the second one and provided the actual shareholder dividend.

Three years ago, we reduced our PREPA exposure significantly from the time we started. This is down by two-thirds. As you referenced, the custodial receipts deal with another 35 million. While we’ve not started a formal process, I think people know that we are in runoff. And based on the sale process from a few years ago, we would obviously look to sell the company, sell National, do whatever it is that’s beneficial to shareholders as soon as possible.

Patrick Sottlehofer (Analyst)

Good. Thank you.

William Fallon (President and CEO)

Thank you.

OPERATOR

Thank you. Our next question comes from Carlos Pardo, private investor.

Carlos Pardo (Private investor)

Oh, hi. Good afternoon from London. Hope all well. My first question is the usual question, but this time with a twist. The 71 million buyback authorization that you have in the books, is it correct that you can still use it, as we discussed before, that you can use it if you would like to, and that there are no legal or regulatory constraints in order to use it? And could it be used for dividends?

William Fallon (President and CEO)

So, with regard to the $71 million authorization, and I will apologize, Carlos, you broke up there for a little bit. The 71 million authorization is valid. We have the ability to use that. That applies to both the holding company and to National. There are no regulatory constraints on that. It’s not the same as dividends. Dividends are something that the company looks at on a regular basis, and the Board can approve at any point in time. There’s not an authorization ahead of time, and so therefore, the 71 million does not apply to that.

Carlos Pardo (Private investor)

Okay, but MBIA Inc., the holding company, could pay a dividend, in theory, without having to go to the regulator.

William Fallon (President and CEO)

That’s correct.

Carlos Pardo (Private investor)

Perfect. Thank you. The other question.

William Fallon (President and CEO)

Yeah, please, go ahead.

Carlos Pardo (Private investor)

No, no, go ahead. Yeah, no, no, you can go ahead, please.

William Fallon (President and CEO)

Yeah, no, there is no regulatory oversight in terms of DFS with regard to the holding company. So the holding company has the ability to declare and pay dividends.

Carlos Pardo (Private investor)

Exactly. So it would be just a liquidity constraint rather than a regulatory constraint. Perfect. Thank you. That’s very helpful. The other question that I have is that I sent you a letter with my understanding and the rationale for using the buyback capacity of 71 million. And that’s basically a proposal that was also supported by other shareholders. Could you please explain why this has not been done? And what is the rationale for not using this capacity at this stage with regard to dividends?

William Fallon (President and CEO)

I think, as most people know, if you go back to about the time PREPA entered Title III, which is a little over nine years ago, we repurchased over 80 million shares during that period at an average price of $7.74. That’s not necessarily equivalent to today’s share price, because in addition to those share repurchases, we had the special dividend three years ago, which was $8 a share, which is a little bit over $400 million in total. So during the time that PREPA has been in Title III, we’ve returned over a billion dollars to shareholders through share buybacks and through dividends.

We think given that we’re in runoff, it’s very important to distribute money to the shareholders via both of those approaches. We continue to look at those. And with regard to the current situation, in your question about repurchases of shares, as I think most of the people know, most of those share repurchases have been done through National. There has not been any capacity at National for the last couple of years. That could change based on the stock price at any given time and our financial results. So therefore, over the last couple of years, the dividends would have to come from the holding company.

And there again, as we’ve articulated in the past, we look at several things in terms of the use of the liquidity of the holding company. That could be shareholder dividends, it could be debt repurchases. We obviously have obligations, primarily the Inc. debt and the MTNs of the holding company, not only in the next couple of years, meaning ’27 and ’28, but we also have maturities beyond that. So we take all those things into account and make decisions that we think are best for the company.

Carlos Pardo (Private investor)

Yes, but what is the specific reason not to use— I understand that National is constrained, but the holding company is not constrained. And you could use the 71 million. What is the exact reason why you are not doing that?

William Fallon (President and CEO)

Yeah, the 71 million is not a specific amount of money. It’s just an authorization. So the money would come from the holding company and the liquidity. And as I just mentioned, we look at several things in terms of utilizing that liquidity. We obviously have all the obligations I mentioned, but we look at debt and stock repurchases at any point in time. And if we think it makes sense, then we’ll do it.

Carlos Pardo (Private investor)

Okay, perfect. We have a meeting later this month so we can discuss further there. The other question that I have is that the same process, I know that it is not necessarily active at the moment, but that you would listen to offers, as we just discussed with a representative of Kahn Brothers. If someone—what is the starting price for this bidding process? I mean, if someone would come, or I would come tomorrow, and I would offer you $300 million, knowing that the market cap at the moment is 225 million, would you accept it, or is it something that you would consider?

I mean, what is your starting price for the process?

William Fallon (President and CEO)

Yeah, I don’t think it’s appropriate for us to discuss price of particular transactions on this call. If for some reason you are interested in making a bid for the company, you should contact us after the call. I also want to clarify. You have a call with Greg Diamond, the head of our investor and media relations, next week, not with anybody else at the company.

Carlos Pardo (Private investor)

Yes. So I will be discussing this issue then. Another question that I have is that—now we go to the COP. In the COP, MBIA Inc. is not bound by the terms of the COP. So it is only National. I’ve been reviewing the COP and MBIA Inc. would be free to act without being constrained by the terms of the COP, is that correct?

William Fallon (President and CEO)

I think it depends on what type of actions you’re talking about.

Carlos Pardo (Private investor)

But MBIA Inc. is not a party to the COP and there is no definition of affiliate. So the COP is only binding on National.

William Fallon (President and CEO)

Carlos, do you have a specific question?

Carlos Pardo (Private investor)

Yeah. Basically MBIA Inc. is not a party to the COP.

William Fallon (President and CEO)

Okay. So let’s hypothetically say I agree that it’s not. What’s the follow-up question?

Carlos Pardo (Private investor)

Yeah, no, well, basically MBIA Inc. would be free to contact the Oversight Board with a proposal and negotiate directly if you wanted.

William Fallon (President and CEO)

I’m sorry, I didn’t understand that.

Carlos Pardo (Private investor)

Yeah, MBIA Inc. would be able to contact the Oversight Board, for example, and make a proposal if MBIA Inc. wants. That’s basically my question.

William Fallon (President and CEO)

The PREPA claims are held at National. So any proposal would come from National. Making a distinction in this case between National and Inc. is irrelevant in our view.

Carlos Pardo (Private investor)

Yeah, well, I respectfully disagree. And coming also to the offer that the Oversight Board made of approximately 40%—you mentioned last time, 30 to 40%—has any counteroffer been made by the COP?

William Fallon (President and CEO)

We can’t talk about the confidential negotiations that may or may not be going on between the creditors and the Oversight Board.

Carlos Pardo (Private investor)

Yeah, well, in my opinion, and this is only my opinion, I think that making a counteroffer of 60% would be beneficial for MBIA shareholders. So that’s something that I will be discussing during our meetings later this month. Then also, one question that I have about the COP is that unfortunately our lawyers are going to be dissolved. So my question is what is the process now that our lawyers are going to be dissolved, and are we going to be trying to find lawyers that are a little bit more effective because the strategy didn’t work over the last few years?

So what is the process to replace them?

William Fallon (President and CEO)

Yeah, given the announcement and the process going on at Weil Gotshal, we are currently represented and have adequate or appropriate representation. We’re very comfortable with the representation and advice that Weil has provided. We’re in conversations with the lawyers there in terms of next steps, and we are comfortable that we will have legal representation without any disruption during this process.

Carlos Pardo (Private investor)

Perfect. Would you consider different law firms? If we suggest a different law firm that has a different strategy, is this something that you are willing to listen to?

William Fallon (President and CEO)

Well, at this point, almost by definition, we’re going to end up with a different law firm at some point, given that file is winding down. So stay tuned and we’ll let you know how that plays out.

Carlos Pardo (Private investor)

Perfect. I will be proactive and I will be suggesting something also during our conversation this week. And then also another question that I have is what are the costs of being a member of the co-op? Do you have any idea of how much this is costing in terms of your legal cost? Also, I can imagine that there are some common costs with the other members of the co-op. What is the cost of having the co-op running?

William Fallon (President and CEO)

In our view, there is no incremental cost to being a member of the co-op group.

Carlos Pardo (Private investor)

But you are paying fees, so there should be some kind of figures. I mean, of course you will have to compare to the cost of running it alone. But what is the cost of being a member of the co-op?

William Fallon (President and CEO)

There are no fees to be a member of the co-op group.

Carlos Pardo (Private investor)

Well, you have to pay lawyers and the lawyers have to participate in the co-op. So I think that you have some understanding of what is it costing to be in the co-op.

William Fallon (President and CEO)

Why don’t you follow up with Greg on that? Because maybe we’re not understanding, but in our view, actually it probably reduces expenses given that some of the things are shared by different parties. But there is no incremental cost in our view.

Carlos Pardo (Private investor)

Okay. And finally, the co-op is now scheduled to end at the end of August 2027. What is the plan in terms of extending it?

William Fallon (President and CEO)

It’s early at this point. So there’s no sort of plan at this point in terms of what might happen come August?

Carlos Pardo (Private investor)

Yes. And would you consider extending it? Only if any of the members of the co-op would decide to buy our claims.

William Fallon (President and CEO)

I think those are two separate things. We can sell our claims if we get an attractive offer. But again, in terms of extending it, we think there’s great benefit to the co-op group at this point. And again, August in some ways is a ways off. So we have plenty of time to make decisions there. But we think there’s a great benefit to the co-op.

Carlos Pardo (Private investor)

Have we approached any of the members of the co-op in order to ask, in order to make any offer or to see whether they’re interested in buying our claims?

William Fallon (President and CEO)

Yeah. Again, that’s not something that we would discuss. Those would be confidential discussions and back and forth. So not anything I can comment on at this time.

Carlos Pardo (Private investor)

Okay, perfect. So thank you. Thank you for your time. And let’s continue discussing later in the month, first with Greg and probably with them in a different way, but. Perfect. Thank you so much. Thank you for your time.

William Fallon (President and CEO)

Thank you.

OPERATOR

Thank you. We will now take our next question from John Staley with Staley Advisors. Please go ahead.

John Staley (Analyst)

Thank you. Bill, I have a couple of questions. I’m not current on it, but at one time I was aware there was an incentive plan in place that paid bonuses, so to speak, upon exit to yourself and a couple of other executives. Is that plan still in place?

William Fallon (President and CEO)

There is a plan that takes effect on a change of control. So sale of a company. At this point, I am the only one left who is covered by that. There were many other executives at one point who have all left the firm.

John Staley (Analyst)

Okay. And as they’ve left the firm, the. The incentive payment to you is still in place and as I recall, was reasonably substantial.

William Fallon (President and CEO)

It’s all. Yes, it’s all in the proxy. And that’s why I know you have information, yes,

John Staley (Analyst)

but it’s still in place. Okay.

William Fallon (President and CEO)

Yes, it is.

John Staley (Analyst)

Do you have any direction or indirect exposure to this commuter railroad in Florida, this Brightline?

William Fallon (President and CEO)

I can happily say no. We have no exposure whatsoever.

John Staley (Analyst)

All right. Well, that leads me to a question. Assured Guaranty is deeply involved in that. And as I understand it from a very, very high level, they did a bankruptcy reconstruction in which they excluded the municipal part. But I think there had to be additional investments made. But it’s certainly an impaired credit or at least one that has potential problems. Were Affiliated, which suggests that for them to keep their rating, there’s indications they may be looking to increase their capital.

And I remember some time ago when I had a discussion with you about Assured Guaranty acquiring MBIA. I said, well, maybe because all the physicians merge and they’re already insuring most everything and they get a big benefit. You said, no, the real benefits, the capital. So it seems to me that if Assured Guaranty is looking to enhance its capital, whether it’s because of Brightline or some other credit issues, they would be more incentive than normal to try to get something done with you guys and I wondered if you had any reaction to that thought.

William Fallon (President and CEO)

Well, I think you summarized the situation that Assured faces with regard to Brightline, which as you mentioned is the railroad down in Florida. Again, they would be the experts on that particular situation. We are aware of it. In terms of whether that makes a combination between MBIA and Assured more or less likely similar things, I can’t really comment on that at this point in time.

John Staley (Analyst)

The other thing that has happened is that the—he was on the call earlier—that the Kahn Brothers have come back into ownership, and between the Kahn Brothers and I think it’s Levin, who’s a private investor, combined have over 15% ownership. I wonder if you’re getting any suggestions from them as shareholders to try to accelerate this wrap up, even though I recognize from the earlier comments there seem to be a number of very significant legal decisions and court decisions that are going to be occurring over the near term.

But are you getting any encouragement from your larger shareholders to get this thing wrapped up?

William Fallon (President and CEO)

Yeah, I won’t comment on any discussions we have with specific shareholders, but as you know, we speak to shareholders on a regular basis. Greg in particular speaks to many of them, but I’ve had conversations with many of our investors as well. And I think the group that is most focused on wrapping this up, as you suggest, is actually the company or management. So again, as was referenced by one of the earlier callers, we started a process at this point almost four years ago, I guess it was. And you know, everything we’ve been doing is trying to accelerate and come up with some transaction that would benefit shareholders. So we think we’re making progress towards that. We’d all like it to be as fast as possible. I think the litigation has sort of delayed the timeline from what we originally set out, but we’re doing everything we can to make that happen.

John Staley (Analyst)

Thank you very much, Bill.

William Fallon (President and CEO)

Thanks, John.

OPERATOR

Thank you for your question. As a reminder, if you would like to ask a question, please press Star one on your telephone keypad. Now we will take our next question from Paul Sanders with Hutch Capital. Please go ahead.

Paul Sanders (Analyst)

Morning, guys. Thanks for taking my call.

William Fallon (President and CEO)

Good morning.

Paul Sanders (Analyst)

I’ve got just a couple sort of housekeeping questions, I guess. First one is the investment agreement principal balance was down pretty substantially, about 57 million. I know that there were maturities there. It sort of lines up with what the maturities were. But I just kind of wanted to ask, were those like voluntary prepayments or were those just scheduled maturity payments?

Joseph Schachinger (Chief Financial Officer)

Those were scheduled maturity payments

Paul Sanders (Analyst)

Great. My other one is on ELCOR Alexandria. The gross par insured is dropping like on a consistent basis each quarter, like 11 or 12 million. Is that National making claims payments on those or is the issuer paying like amortization payments, which is reducing your exposure?

William Fallon (President and CEO)

National is making claim payments, regular claim payments on ELCOR,

Paul Sanders (Analyst)

and obviously that’s because ELCOR is not making those. I mean my reading of that one is that that credit seems to be in pretty good shape, especially with some like, meaningful, positive things happening this year with leasing of one of those buildings. Can you provide any sort of color, I guess, on that credit and why National’s making those and not the issuer itself?

William Fallon (President and CEO)

Yeah, on that, Paul, just to be clear, ELCOR is making partial payments. So they are paying some of the debt service. They’re just not paying 100% of it. So National then pays the difference. And everything you described is correct. There is what we think is positive activity with regard to that credit. You mentioned the additional building being leased. So we do think, despite what happened over the last couple years, it is moving in a very positive direction.

Paul Sanders (Analyst)

And yeah, I don’t want to really belabor that one because I don’t worry about it too much. But do you know or do you. Can you like, I guess give us your opinion or do you think they’ll sell those buildings or how do you think that will get settled there?

William Fallon (President and CEO)

I think at this point it’s hard and it would just be speculation. But again, I think because of the sort of underlying economic conditions right now with regard to that building, we’re pretty optimistic about it.

Paul Sanders (Analyst)

Yep. Agreed. Last question for me really is I saw some headlines on the US Virgin Islands issuing new gross tax receipts debt, and it said they were going to issue 500 million and the use of proceeds would be for repaying other gross receipts debt and other general purposes. Do you, can you tell us are the proceeds of that new issuance, is that happening and is that to repay our National-wrapped debt or is it just kind of coming in pari passu with us?

William Fallon (President and CEO)

It’s pretty much the latter. So it will not be repaying our debt to the best of our knowledge.

Paul Sanders (Analyst)

Got it. Okay. And yeah, one more comment for me while I have you is I would sort of respectfully disagree a little bit with Carlos before on the share repurchases. Just I agree with you really in that I actually think it would be better for shareholders to focus on the debt, particularly the ones that you can buy at a large discount. So I think you can kind of create similar book value expansion with some of those medium term notes. But also obviously, which I know you’re focused on probably reducing the negative carry associated with the cash and your Inc debt as well.

So that’s not a question, just a comment that I wanted to add. So thanks for your time.

William Fallon (President and CEO)

Nope, thank you.

OPERATOR

Thank you. We will take our next question from Neil Byers, Private investor.

Neil Byers (Private investor)

Hi, good morning. Thank you for taking my call. A couple of facts I just wanted to confirm before my first question, just to clarify. So the first thing, MBIA Inc.’s reported operating expenses are running roughly 65 plus million a year. Went on three straight years like 69 and 24, 68, 25 and through last night’s reporting about 48 million through the first three quarters of 26. That would be one thing I just want to confirm. And then second, the co-op’s term has now been extended five times since National joined, now with the next extension running through August 31st and a possible extension after that through November 27th. So it doesn’t look like there’s really any kind of committed end date there. So is that a fair wrap up of those, those facts there.

William Fallon (President and CEO)

The operating expenses are as reported and as we’ve stated, I think already in the discussion today, the agreement goes through August and at your point it’s been extended in the past. You know, I can’t comment whether or not it will be at that point among all the bondholders, but it’s always a possibility.

Neil Byers (Private investor)

Great. Okay. Yeah, thanks. So with those 65 million plus or minus in expenses being reported and the outcome pending on the co-op side, I’d just like to note, does the board have an internal threshold, some type of dollar amount or date beyond which it would pivot from the co-op to look at other options of private transfer, sale or settlement? And if there isn’t one, if there isn’t some type of threshold there, how does the board distinguish between, you know, this patience and you know, your desire to see this out versus funding the sunk cost on continuing.

And I understand too that it’s National and it’s, that’s just PREPA related. But how does, how do you distinguish between that patience and just running the cost out?

William Fallon (President and CEO)

Yeah. With regard to the co-op or the PREPA situation, first of all, there’s nothing in the co-op agreement that prevents us from selling our claims. So we’ve sold many in the past. As I mentioned earlier on the call, we had 1.2 billion of exposure when PREPA filed Title III back in 2017. We’ve reduced that by approximately two-thirds. As you know, we sold custodial receipts last year. We do have other custodial receipts right now which, if we had what we thought was an appropriate price, we could sell those.

The remaining 390 million, which is insured par, is a little bit more difficult to get rid of. But if there was an attractive price at which to do it, we could do that irrespective of the co-op agreement. So again, that’s not preventing us from winding down our PREPA exposure. Regarding the operating expenses, the only thing I would say is, I think for shareholders, the way I think most of the shareholders look at it is some of those expenses are associated with MBIA Inc. Ones that really affect the shareholders are the operating expenses at the holding company and at National.

Neil Byers (Private investor)

Right. Okay. So really there is not a threshold that’s being looked at? Yes.

William Fallon (President and CEO)

When you say threshold, we’re trying to reduce our exposure as quickly as we can. Again, but it’s got to be attractive prices. So. I’m not sure when you say threshold, what you’re looking for.

Neil Byers (Private investor)

Yeah. Just wondering if, you know, overall, if it ends up being four years, so, you know, if there’s an extension in August and an extension in November, that potential for remaining in the co-op then could look out for a total of four years that National’s in that, and it’s National not necessarily being the party that’s unilaterally controlling everything there, you know, largely the bondholders. Yeah. Just wondering if, I guess, following up on that, then just looking down the road with the expenses and the runoff, the company being in the runoff, you know, just trying to figure out if there’s any kind of deadline or a point in time where the board or management has said, we’re ready to pivot if we get to X, Y, or Z.

William Fallon (President and CEO)

Yeah. Again, the co-op agreements are relevant, I think, for what you’re talking about. The question is, can we reduce our PREPA exposure at attractive prices, or does the PREPA exposure somehow prevent an attractive sale or transaction related to the company? Again, I think the timeline is driven more by the litigation schedule. I take your point that perhaps implicitly the bondholders could impact the litigation schedule, but for the most part, that’s driven by the judges and the courts.

So again, we continue to look for ways to reduce our exposure, and we’ve never felt that the co-op agreement constrains us. We’ve been frustrated by the pace of litigation through the court system.

Neil Byers (Private investor)

Right, sure. Okay. And one other question, if you don’t mind. So on the second quarter call, I believe you characterized the Oversight Board’s proposal as roughly 30 to 40 cents on the dollar against PREPA bonds trading around maybe 75 cents. And looking at National’s own disclosed loss reserves against 508 million of insured debt service, you know, that implies an expected recovery somewhere in the mid-50s. That’s implied. Which, you know, would be well above the rejected offer in that 30 to 40 cents range.

I’m just curious if the co-op—did the co-op counter an offer anywhere near that reserve level, or did the co-op counter at all?

William Fallon (President and CEO)

Again, I can’t comment on the negotiations. Those are all confidential in terms of any offers or counteroffers unless or until they’re made public.

Neil Byers (Private investor)

Okay, so that’s just—okay. That cannot be disclosed. Okay. I think, final question, if you don’t mind. I guess, National—so August 25, National sold 374 million of the custodial receipts. The price you described as higher than your prior estimate, but that was not disclosed. What did National realize as a percentage of face, and is that something you can disclose?

William Fallon (President and CEO)

Ask the question again, Neil. I didn’t catch the last one. As a percentage of what?

Neil Byers (Private investor)

Percentage of the face value.

William Fallon (President and CEO)

Yeah, we didn’t—and don’t—disclose that. It won’t be disclosed.

Neil Byers (Private investor)

Okay, thanks. Okay, thank you. That was it for me. Thank you. Thank you.

OPERATOR

Thank you. At this time, I’m showing no further questions in the queue. I’d like to turn the floor back over to Greg Diamond for closing remarks.

Greg Diamond (Managing Director of Investor and Media Relations)

Thank you, Leslie. And thanks to those of you listening to our call. Please contact me directly if you have any additional questions. We also recommend that you visit our website at mbia.com for additional information on our company. Thank you for your interest in MBIA. Good day and goodbye.

OPERATOR

Thank you. This brings us to the end of today’s meeting. We appreciate your time and participation. You may now disconnect.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.