MBIA Inc. (MBI) on Q1 2021 Results - Earnings Call Transcript
Operator: Welcome to the MBIA Inc. First Quarter 2021 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: Thank you, Maria. Welcome to MBIA's conference call for our first quarter 2021 financial results. After the market closed yesterday, we issued and posted several items on our website, including our financial results, 10-Q, 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 portfolios.
Bill Fallon: Thanks Greg. Good morning everyone. Thank you for being with us today. We are pleased to have recently reached an agreement with the Oversight Board to resolve our Puerto Rico Highways and Transportation Authority exposure. This agreement means we will continue to support the Commonwealth's general obligation and Public Buildings Authority Plan Support Agreement. Following these agreements, restructuring frameworks are now in place to address practically all of our Puerto Rico exposure. The proposed timelines for confirmation of the plans incorporating these agreements suggest that each of these debt obligations could be resolved by early to late 2022. However, there can be no assurance that confirmation in those time frames will actually occur.
Anthony McKiernan: Thanks, Bill, and good morning. I will begin with a review of our first quarter 2021 GAAP and non-GAAP results. The company reported a consolidated GAAP net loss of $106 million or a negative $2.16 per share for the first quarter of 2021, compared to a consolidated GAAP net loss of $333 million or a negative $4.62 per share for the quarter ended March 31 2020. The lower net loss this quarter was driven by several factors: lower loss and loss adjustment expense at MBIA Corp.; net gains on financial instruments related to our interest rate swaps associated with the GIC business due to higher interest rates; and lower overall interest expense due to debt repurchases and paydowns over the last year. These items were somewhat offset by higher loss in LAE at National, lower net investment income due to lower invested assets at National and lower VIE income. Loss in LAE incurred at National this quarter was due primarily to assumption changes in our credit loss scenarios related to the recent agreement on the Puerto Rico Highways & Transportation Authority, HTA and the increase in risk-free rates used to discount certain of our Puerto Rico assumed losses and recoveries. More than half of the loss incurred this quarter is due to the increase in GAAP discount rate with the remainder being credit-driven by HTA. Loss and loss adjustment expense this quarter at MBIA Corp. was lower than last year's first quarter primarily due to the increase in the risk-free rates used to discount claim payments on its first-lien RMBS exposure, which offset a reduction in estimated recoveries on claims paid on the Zohar CLOs.
Operator: Thank you. The floor is now open for questions. Our first question comes from the line of Tommy McJoynt of KBW.
Tommy McJoynt: Hi. Good morning guys. Thanks for taking my question. So you mentioned being hopeful that, the PREPA negotiation should regain some momentum soon. Is there any specific data or events kind of we should be thinking about along that timeline to look for next?
Bill Fallon: There is no specific date, set at this time, Tommy. But, we do think now everyone's attention will turn towards PREPA given that, HTA and the GO deals have been agreed to. But again, no specific date.
Tommy McJoynt: Okay. Thanks. And then, can you discuss kind of the Board's thinking on, potentially authorizing additional buybacks at National?
Bill Fallon: Sure. Anthony, do you want to talk about some of the details with regard to buybacks?
Anthony McKiernan: Sure. So at this point, as you know Tommy, we're repurchasing or purchasing MBIA Inc. shares through National. National has capacity constraints that are limited by calculations for New York insurance law, that essentially require it that it can purchase no more shares than 50% of the surplus, of National.
Tommy McJoynt: Okay. That's helpful to put some numbers around that. Thanks. And then, just lastly, thinking about kind of over the next, I guess a year or two, you mentioned, there being plans in place potentially to get resolution on all of the Puerto Rico credits by early to late 2022. What kind of actions, are you kind of thinking about to create kind of value for shareholders kind of over that interim time period?
Bill Fallon: Well, as we've mentioned in the past, Puerto Rico, we think, is the highest priority. So getting those deals actually executed is the top priority, as well as PREPA as we've already talked about. During that time, we expect the portfolio to continue to decline, which we think is helpful. And as we've talked about, the key things for us are getting money from National up to the holding company and then, also, looking at strategic alternatives, which we've been very clear about. We think there's further consolidation in the industry and that we're likely to be a seller at some point in the future. So those are the things that we will continue to focus on.
Tommy McJoynt: That’s helpful. Thanks for the comment.
Operator: Our next question comes from the line of John Staley of Staley Capital Advisers.
John Staley: Hi. I'm just curious, the settlement agreements that you're working with the Oversight committee, are they completely consistent with Assured Guaranty, who announced several times during the quarter about their progress? And you guys didn't announce anything. Are you guys all on the same page?
Bill Fallon: Yes. So the agreements on HTA, which is the most recent one, which then has the link back to the GO deal, John, we and Assured are both in those deals.
John Staley: Okay. Thank you. So I'm assuming that you and your management team are holding to your -- holding your stock and I haven't noticed any selling or buying into insiders.
Bill Fallon: Look, I can't speak for everybody, but other than for, what we call tax settlement, I've never sold a share of stock. I've been purchasing, as you know.
John Staley: Yes. You and I are on the same page. Okay. Thank you.
Bill Fallon: Yes.
Operator: And at this time, I'm showing no further questions. I'd like to turn the floor back over to Greg Diamond for any additional or closing remarks.
Greg Diamond: Thank you, Maria, and thanks to those of you listening to our 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 our company. Thank you for your interest in MBIA. Good day and goodbye.
Operator: Thank you, ladies and gentlemen. This does conclude today's first quarter 2021 financial results conference call. You may now disconnect.
