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Sep 30, 2021
MBIA Q3 2021 Earnings Report
Reported a consolidated GAAP net loss due to greater loss and loss adjustment expenses (LAE) at National and at MBIA Insurance Corporation and an unfavorable comparison of other net realized gains and losses on consolidated VIEs.
Key Takeaways
MBIA Inc. reported a consolidated GAAP net loss of $123 million, or $(2.49) per share, for the third quarter of 2021. The adverse result versus last year’s third quarter was primarily due to greater loss and loss adjustment expenses (LAE) at National and at MBIA Insurance Corporation and an unfavorable comparison of other net realized gains and losses on consolidated VIEs.
National sold approximately $199 million, or about 16%, of the principal amount of its Puerto Rico Electric Power Authority (“PREPA”) related bankruptcy claims.
Loss reserve assumptions were modified to reflect market insight gained from the referenced PREPA bankruptcy claims sale and additional potential sales of similar PREPA bankruptcy claims.
National’s insured Puerto Rico Commonwealth GO (“GO”) scenario assumptions were modified to incorporate the final terms of the Plan of Adjustment for distributions to bondholders, which includes a commutation of 27% of National’s outstanding insured bonds and an acceleration of 73% of National’s outstanding insured bonds.
Book value per share was negative $3.12 as of September 30, 2021 compared with a positive $2.55 as of December 31, 2020.
Forward Guidance
MBIA anticipates that National will have no remaining insured General Obligation (GO) bond exposure upon the Plan of Adjustment’s effective date and expects the restructuring of the HTA and PREPA debt to follow next year.
Positive Outlook
- Continue to make progress on our goal to reduce uncertainty related to our Puerto Rico exposure.
- National will have no remaining insured General Obligation (GO) bond exposure upon the Plan of Adjustment’s effective date.
- Reducing our PREPA exposure and monetizing salvage into investible assets.
- The confirmation hearing related to the restructuring of Puerto Rico’s GO bonds commences next week and we expect the plan will be confirmed.
- The restructuring of the HTA and PREPA debt is expected to follow next year.
Challenges Ahead
- Possibility of increased credit losses or impairments on public finance obligations issued by state, local and territorial governments and finance authorities that are experiencing unprecedented fiscal stress
- Possibility that loss reserve estimates are not adequate to cover potential claims
Historical Earnings Impact
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Avg. Return Before/After Earnings
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