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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Welcome to the MBIA Inc. Fourth Quarter and Full Year 2023 Financial Results Conference Call. I would now like to turn the call over to Greg Diamond, Managing Director of Investor and Media Relations at MBIA. Please go ahead, sir.
Thank you, Brittany. Welcome to MBIA's conference call for our full year and fourth quarter 2023 financial results. After the market closed yesterday, we issued and posted several items on our websites, including our financial results, 10-K, quarterly operating supplement and statutory financial statements for both MBIA Insurance Corporation and National Public Finance Guarantee Corporation.
Regarding today's call, please note that anything said on the call is qualified by the information provided in the company's 10-K and other SEC filings as our company's definitive disclosures are incorporated in those docs. We urge investors to read our 10-K as it contains our most current disclosures about the company and its financial and operating results. The 10-K also contains 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 10-K as well as our financial results report and our quarterly operating supplement.
The recorded replay of today's call will become available approximately 2 hours after the end of the call, and the information for accessing it is included in last week's press announcement and in the financial results report posted yesterday on the MBIA website.
Now I'll read our safer 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 10-K, which is 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 Anthony McKiernan will provide introductory comments and then a question-and-answer session will follow. Now here is Bill Fallon.
Thanks, Greg. Good morning, everyone. Thank you for being with us today. In December, we obtained the approval from the New York Department of Financial Services for National to pay an extraordinary dividend of $550 million from its excess capital that enables MBIA Inc. to pay an extraordinary dividend of $8 per share to our shareholders that qualified as a return of capital. We also retained about $235 million of National's dividends at the holding company to enhance MBIA Inc.'s liquidity and financial flexibility.
At this time, our primary objectives are to resolve our remaining Puerto Rico exposure and then restart the process to sell the company. Regarding PREPA, National's remaining exposure to PREPA was $610 million of gross par insured at year-end 2023. Title III court begins the confirmation hearing for PREPA's plan of adjustment on Monday, March 4. Regarding the balance of National's insured portfolio, those credits have continued to perform generally consistent with our expectations. The gross par amount outstanding Financials' insured portfolio has declined by approximately $3.3 billion from year-end 2022 to $28.4 billion at the end of 2023. National's leverage ratio of gross par to statutory capital at the end of the year was 25:1. At the end of the fourth quarter, National had total claims paying resources of $1.7 billion and statutory capital and surplus of $1.1 billion.
Now Anthony will provide additional comments about our financial results.
Thanks, Bill, and good morning. I will begin with a review of our fourth quarter and year-end 2023 GAAP and non-GAAP results. The company reported a consolidated GAAP net loss of $138 million or a negative $2.94 per share for the fourth quarter of 2023 compared to a consolidated GAAP net loss of $52 million or negative $1.05 per share for the fourth quarter ended December 31, 2022. The higher GAAP net loss this quarter was largely driven by loss in LAE expense at MBIA Corp. on its first lien RMBS insured credits related primarily to lower risk-free rates, and lower revenues driven by realized losses from sales of investments associated with funding dividends at National and the termination of swaps in the legacy ALM business at the holding company.
The company's adjusted net loss, a non-GAAP measure was $8 million or a negative $0.16 per diluted share for the fourth quarter of 2023 compared with adjusted net income of $15 million or $0.30 per diluted share for the fourth quarter of 2022. The unfavorable change was due primarily to lower premium revenues and nominal loss in LAE expense at National versus a benefit in the prior comparable quarter.
For the 12 months ended December 31, 2023, the company reported a consolidated GAAP net loss of $491 million or a negative $10.18 per share compared to a consolidated GAAP net loss of $195 million or negative $3.92 per share for the 12 months ended December 31, 2022. The higher GAAP net loss in 2023 was largely driven by an increase in loss in LAE expense at MBIA Corp. compared to loss in LAE benefits in the prior year, driven by an increase in risk-free rates during 2022 and at National related to Puerto Rico credits. Lower revenues driven by VIE activity at MBIA Corp., which was partially equity neutral, net losses on investments and higher interest expense related to MBIA Corp. surplus notes. The company's non-GAAP adjusted net loss was $169 million or negative $3.49 per diluted share for the fiscal year 2023 compared with an adjusted net loss of $145 million or a negative $2.90 per diluted share for fiscal year 2022. The unfavorable change was due primarily to higher loss in LAE expense at National.
MBIA Inc.'s book value per share decreased to a negative $32.56 per share as of December 31, 2023, versus a negative $16.07 per share as of December 31, 2022, primarily due to the net loss for the year and the $8 per share shareholder distribution in the fourth quarter of 2023. Included in book value as of December 31, 2023, is a negative $44.91 per share book value of MBIA Corp.
I will now spend a few minutes on the corporate segment balance sheet and our insurance company's statutory results. The corporate segment, which primarily includes the activity of the holding company, MBIA Inc., had total assets of approximately $755 million as of December 31, 2023. Within this total are the following material items: unencumbered cash and liquid assets held by MBIA Inc. totaled approximately $411 million compared with $230 million as of December 31, 2022. The increase was due primarily to approximately $235 million of retained net cash inflows related to the as-of-right and special dividend proceeds from National in Q4 2023. The corporate segment's assets also included approximately $241 million of assets at market value pledged to the GICs. All swaps supporting the legacy GIC operation were terminated in Q4 2023 and Q1 2024.
Turning to the insurance company's statutory results. National reported a statutory net loss of $9 million for the quarter ended December 31, 2023, versus statutory net income of $40 million for the quarter ended December 31, 2022. The unfavorable comparison was primarily due to higher net realized investment losses, higher loss in LAE and lower premiums. National reported statutory net loss of $142 million for the year ended December 31, 2023, versus statutory net income of $75 million for the year ended December 31, 2022. The unfavorable comparison was primarily due to higher loss in LAE, net realized investment losses and lower premiums. Statutory capital decreased by $807 million from year-end 2022 and was $1.1 billion as of 12/31/2023, primarily due to the dividend payments in the fourth quarter and the full year net loss. Claims paying resources were $1.7 billion versus $2.4 billion at 12/31/2022.
Turning to MBIA Insurance Corp. Its statutory net income was $6 million for the fourth quarter of 2023 compared to statutory net income of $16 million for the fourth quarter of 2022. The unfavorable comparison was primarily due to a lower loss in LAE benefit in Q4 2023 and lower premium earnings. For the year ended 12/31/2023, Corp. statutory net loss was $28 million compared to statutory net income of $46 million for the year ended 12/31/2022. The unfavorable comparison was primarily due to loss in LAE expense in 2023 on first lien RMBS and salvage write-downs. As of December 31, 2023, the statutory capital of MBIA Insurance Corp. was $152 million, down from $169 million at year-end 2022, primarily due to its year-to-date net loss. Claims paying resources totaled $504 million versus $669 million at year-end 2022. The decrease was due in part to a reduction in gross loss reserves associated with several deal liquidations and the year-to-date net loss. MBIA Corp.'s insured gross par outstanding was $2.9 billion as of December 31, 2023.
And now we will turn the call over to the operator to begin the question-and-answer session.
[Operator Instructions] And we will take our first question from Tommy McJoynt with KBW.
I wanted to ask about capital at National. Obviously, well done on getting the approval for the large special dividend out of National. When you think about the amount of capital that's still at National relative to its exposure, how much excess capital do you think is still in that entity? And really just asking, just as we think of a scenario where in case a sale of the company scenario doesn't come to fruition soon, over time, the plan, I assume, would be to continue releasing capital from National. So it'd be helpful to think about how much excess is still there after the December maneuver. Is there a way to like quantify the capital ratio such as surplus to par exposure that you could point to? Or will we just have to wait for the exposure to continue to run off before more excess is freed up? Again, just any help with quantifying this topic would be helpful.
Yes, Tommy, I think you've hit on probably the 2 primary things. I think given the size of the portfolio and the runoff and other than the PREPA exposure, what we think of as a very clean portfolio. The 2 things to look for going forward is the continued runoff of the portfolio, which obviously we report every quarter and then the resolution of PREPA. And I think as you see those 2 things continue to happen going forward, you can then start to make some determination with regard to how much capital could come out. Obviously, at the end of the day, New York State Department of Financial Services is the final arbiter of how much capital comes out of our company.
Okay. Got it. And with the liquidity that you now have at the holding company level, this naturally does give you some options for the first time, which is certainly a good thing. Looking at the right side of the holding company balance sheet, can you remind us which of those liabilities are available to repurchase in the open market? Which ones are redeemable right now? And just what is your overall urgency to pay down some of those liabilities at the holding company?
Tommy, it's Anthony. I think to your point, we are in a good position where we've got additional flexibility because of the inflows from the dividend. So when we look at the kind of liquidity window that I talk about, we're now looking with the cash on hand, and assuming as-of-right dividends and normal income over the next few years, we're looking at kind of the 2030 time frame at this point as far as looking out with the current ability of the holding company. We'll look at opportunities to repurchase debt. Specifically, there's no callable debt left at this point. But opportunistically, we look at our MTNs and holding company debentures. During the first quarter, we actually did repurchase our 2024 MTNs at a discount. So we'll continue to look for opportunities that make sense to us economically. But when -- as far as ability to repurchase the Inc. debentures and the MTNs we can repurchase. The GICs, there's not as much flexibility there for us to actually enforce any kind of terminations on those exposures. So we're really focused on the MTNs and the holding company debt.
Okay. Did do a number of the MTNs trade at a discount? Like is there any ability to kind of accelerate some of those repurchases? You mentioned the first quarter 1 at a discount. I guess what would prevent you from getting more aggressive with repurchasing a number of MTNs if they're available at discounts, not sure if they are.
Well, again, the prices have fluctuated especially since the dividend and the view of the holding company. So we'll continue to look for -- when we look at the investment profile of Inc. versus repurchasing the debt, we'll look at what's a better yielding transaction. And we'll certainly be open to executing on that basis. We're still looking more in the 2028 and in time frame. We'd have to look, let's say, the 2030 and beyond time frame a little bit more carefully, but there's definitely some opportunities.
We will take our next question from [ Ethan Meister ], who is a private investor.
I just wanted to run through the kind of the current state of play of PREPA as we head into the confirmation hearing. So against the $610 million of par exposure, under the current agreement and assuming it's not changed at the confirmation, you'll get about $599 million in cash plus the $20 million expense fee plus $237 million in notional CDIs. Is that right?
Yes, that sounds right.
Okay. And then -- so I was just kind of surprised that it didn't look like the loss adjustment expenses kind of reflected. It seems like there were some pretty positive developments in Q4. Are you just kind of waiting for confirmation and potential appeal?
Yes. I think at this point Ethan, you in a sense, just answered the question. There are a lot of things happening. There's the appeal which you referenced, which happened about a month ago, as we said, confirmation starts next week. That's about a 2- to 2.5-week process we believe. There some people have indicated, depending on how Judge [ Wayne ] rules, the confirmation could then be appealed. So I think we'll have a whole lot more information over the next couple of months with regard to PREPA, the timing and the resolution of it.
Okay. And I think is it fair to say that there's some upside if the plan goes ahead as projected now?
Yes. So as you know, the way we do this, there are different scenarios that we have to go through for the reserving process. Obviously, one would be what the agreement says. Then there are other ones that you have to put forth as well. And I think if everything plays out the way you're suggesting, I think there is the potential for some upside.
Okay. And then my second question is just on the NOLs. So there's $1.2 billion of NOLs that are fully reserved, right?
There's $1.2 billion DTA that's been -- it's not on the balance sheet at this point, but that's correct. It's $1.2 billion DTA.
Okay. And $474 million of that is at the -- is it National, right? That's their stand-alone NOL?
National has a $474 million stand-alone NOL.
Okay. And is there any opportunity to kind of realize any of that value as you're going through the transaction review process?
The answer is yes, it is something that is looked at. Each prospective buyer will come to their own determination as to how much of that they think they could use going forward.
[Operator Instructions] We'll take our next question from John Stanley (sic) [ Staley ] with Stanley (sic) [ Staley ] Capital Advisors.
Staley did not become Stanley. Bill, it's obvious that the market doesn't fully appreciate all the complexities within MBIA. I must confess it's the first time I've ever had a company valued at 7.25 or 7.5 wherever it was trading, and it pays an $8 a return of capital dividend. Now it's trading at less than cash per share of about -- it's a pretty crude calculation, you've got $8 a share of cash the stock is trading. I don't know where it will be after all these announcements. It was around $7. I'd rather certainly going to have trouble buying stock because of all of the tremendous dynamics of the information flow, and you guys are not only on the court, but the other aspects of this. But where is the company in terms of its ability to continue to buy -- I mean, you haven't bought any since. I think it was a third quarter of '23. Can you be in the market at all? And my other question is, is not the fair assumption that this residual MBIA entity should be worth more than cash per share?
John, this is Anthony. On your first question as far as share repurchases, we've done a lot of share repurchases over the last few years out of National. At this point, National has no capacity to buy back shares given the amount of shares that it owns and where the shares are trading today versus its surplus and requirements, calculations under New York insurance law. So any share repurchases at this point would be out of the holding company. And we just -- just as the earlier questionnaire brought up, we need to look at that in the context of what's really the best uses of the holding company liquidity to maximize the value of the company for a strategic alternative. So at any given time, we're looking at, does it make sense to buy back debt? Are we looking at share repurchases, where would we buy? So we'll continue to look at that. We do have a share repurchase authorization that remains outstanding. But again, we've got to balance that against the other opportunities that we're having as we continue to simplify the company and position it for a strategic alternative.
And John, it's Bill. Let me just add to that, which gets really, I guess, to the second part of your question. As we think about this going forward, I think what we've focused on over the last year or so as we set out to sell the company and then pause that process is there were a couple of things that really were the focus of prospective buyers and things that we have focused on as well. One was getting money out of National. The second was resolving our Puerto Rico credits. And at this point, that's just PREPA.
I think with regard to the special dividend that came from National at the end of last year and then the distribution of the shareholders. If you remember, that's the first time since the creation of National approximately 15 years ago that we've had any special dividends come out of National. So there was a question whether or not you could get money out? The answer obviously is yes, and it's one of the other callers asked earlier. We think the company is well positioned going forward as we resolve PREPA and the portfolio runs off to get additional money out of National, which I think is only beneficial for our shareholders. The second is the Puerto Rico situation, which again, over the next couple of months, as I indicated, I think we're going to learn a lot more about where that's going and the timing related to PREPA. So both those things, we think, are real positive as you think about the value of the company going forward.
Thanks again for the distribution. You made a lot of long-term shareholders. Pleased to see their basis in many cases, certainly, in my case too, way beyond their basis return.
Thank you for your support.
We'll take our next question from Paul Saunders with Hutch Capital.
My first question is pretty similar to the first caller. I would start by saying congrats on getting the special dividend out of National. That's impressive and great news. And so similar to the first questionnaire just operating under the assumption that there is no sale and you look at your MTN and holdco liabilities, do you expect with kind of the lower investment base and as-of-right dividends from National, but the cash flow can cover the debt as it comes due? Or would part of the assumption be to repaying that debt, would a special dividend be needed at some point in the future to make those payments?
So this is Anthony. As I said earlier, where we are now accounting for potentially lower absolute as-of-right dividends just because of the lower investment base. Obviously, part of this depends on what yield possibilities are. We think we're looking at 2030 under the current operating metrics, which, again, is just as-of-right dividends, cash on hand of the company and normal income at the holding company. So it's always been contemplated that there would be potentially additional special dividends going up to the holding company at some point. But obviously, when you look at National's profile and the time lead we now have, there's an ample amount of time assuming there was no sale of the company to fund future debt requirements.
In addition, there are other things we do. There are refinancings that we would potentially achieve, and National does hold a very large portion of the 2034 Inc. debt. So that gives us possibilities as far as restructuring and things of that nature if we wanted to do that. So we have several arrows in the quiver there. But again, as far as additional distributions, based on kind of a steady-state assumption, we've got ample time for additional distributions, and we're looking more towards 2030 at this point.
And then just on that, you certainly with the $400 million of liquidity unencumbered at the holdco, it looks like you're more than covered on debt all the way through the 2028. So when you answered the question before when someone asked about repurchasing liabilities, you said that's really what you're focused on as opposed to beyond 2030. My question is just considering you have -- you don't have enough liquidity to satisfy all of your debt, but you have more than enough. Can you give me a little more color on -- I mean, obviously, just saying that somewhat changes the prices that people are willing to sell their debt, but there's a pretty steep yield curve maybe because you guys have made those comments. So I guess I'm just wondering like if you're buying shorter-term debt at 7% versus the debt's that longer term, let's say 12%, how big of a yield differential do you need to where you would actually purchase the longer-term debt instead of the shorter-term debt?
Yes. Paul, it's Bill speaking. You focused on the right thing. We look at all the possibilities, and we don't put out information with regard to what the differential would need to be. To your point, there are certain things you just don't provide to the public. But we do look at all the maturities. We make decisions with regard to what the differential is. We look -- make decisions with regard to liquidity at the holding company that Anthony mentioned. So we're constantly looking at all those possibilities.
We do have a follow-up from [ Ethan Meister ], who is a private investor.
By 2030, the portfolio at National will significantly run down, right? So you wouldn't even anticipate the capital required there. I mean, it looks like it will be somewhere in the low-teens billions by the end of 2030, right?
I think that's correct, yes.
Okay. And I just wanted to check on the share repurchase. Is that -- the $71 million remaining, is that all contemplated then to be the Inc., and didn't because I think it previously said it was between National and Inc., and now you said there's no capacity at National, right?
You're correct. It can be used by either entity. Right now, as Anthony described, under the department regulations, we have more capacity at National. So right now, it would only be the Inc. If for some reason, the situation at National were to change in the future, the $71 million would still apply there as well.
Okay. And is that something that you are considering to restart the repurchase after you get through the quiet period here?
Again, we always look at what the opportunities are with our capital, whether it be debt, shares or anything else we might need it for.
At this time, I am showing no further questions. I'd like to turn the floor back over to management for any additional or closing remarks.
Thank you, Brittany, and thanks to all of you for listening to the call today. Please contact us directly if you have any additional questions. We also recommend that you visit our website at mbia.com for additional information about the company. Thank you for your interest in MBIA. Good day, and goodbye.
Thank you, ladies and gentlemen. This does conclude today's MBIA Fourth Quarter and Full Year 2023 Financial Results Conference Call. You may now disconnect your lines, and have a wonderful day.