MBIA Narrows Q3 Loss to $8M Amid PREPA Defaults, Expense Cuts

TL;DR

**MBIA's shrinking losses are a mirage; PREPA's $565M outstanding debt is a ticking time bomb for shareholders.**

AI Summary

MBIA Inc. reported a net loss attributable to MBIA Inc. of $8 million for the three months ended September 30, 2025, a significant improvement from the $56 million net loss in the same period of 2024. For the nine months ended September 30, 2025, the net loss was $126 million, compared to a $396 million net loss in the prior year period. Total revenues for the three months ended September 30, 2025, were $15 million, down from $29 million in 2024, primarily due to a $12 million net loss on financial instruments at fair value and foreign exchange. However, total expenses decreased substantially to $22 million from $80 million, driven by a positive $50 million adjustment in losses and loss adjustment expenses, compared to an $11 million expense in 2024. The company's total assets decreased to $2,060 million as of September 30, 2025, from $2,168 million at December 31, 2024, while total liabilities slightly decreased to $4,227 million from $4,244 million. A key business development involved the Puerto Rico Electric Power Authority (PREPA) defaulting on National insured bonds, leading to National paying gross claims of $13 million on January 1, 2025, and $92 million on July 1, 2025, with $565 million of insured debt service outstanding related to PREPA as of September 30, 2025.

Why It Matters

MBIA's continued net losses, despite significant improvement, highlight the ongoing challenges in its financial guarantee business, particularly with large exposures like PREPA. For investors, the $565 million in outstanding insured debt service related to PREPA represents a substantial contingent liability that could impact future profitability and liquidity. The competitive landscape for financial guarantors remains tough, and MBIA's ability to manage these legacy exposures and generate consistent revenue is crucial. Employees and customers are directly affected by the company's financial stability and its capacity to honor claims, which is currently supported by a reduction in loss and loss adjustment expenses. The broader market watches these filings for signs of systemic risk, especially concerning municipal debt, where MBIA's guarantees play a role.

Risk Assessment

Risk Level: high — The risk level is high due to the significant exposure to the Puerto Rico Electric Power Authority (PREPA), with $565 million of insured debt service outstanding as of September 30, 2025. National paid gross claims of $13 million on January 1, 2025, and $92 million on July 1, 2025, indicating ongoing defaults. This substantial, unresolved liability, coupled with a net loss of $126 million for the nine months ended September 30, 2025, presents a material risk to MBIA's financial health.

Analyst Insight

Investors should exercise extreme caution and consider reducing exposure to MBI given the substantial and ongoing PREPA liabilities. Monitor closely for updates on the PREPA restructuring support agreement and any further claim payments, as these will directly impact MBIA's financial performance and liquidity.

Financial Highlights

debt To Equity

N/A

revenue

$15M

operating Margin

N/A

total Assets

$2,060M

total Debt

N/A

net Income

-$8M

eps

N/A

gross Margin

N/A

cash Position

N/A

revenue Growth

-48.3%

Revenue Breakdown

Key Numbers

• $8M — Net Loss Attributable to MBIA Inc. (Q3 2025) (Improved from $56M net loss in Q3 2024)
• $126M — Net Loss Attributable to MBIA Inc. (YTD Q3 2025) (Improved from $396M net loss in YTD Q3 2024)
• $565M — PREPA Insured Debt Service Outstanding (Significant contingent liability for National as of September 30, 2025)
• $105M — Total PREPA Gross Claims Paid by National (YTD 2025) (Comprises $13M on Jan 1, 2025, and $92M on July 1, 2025)
• $2,060M — Total Assets (Decreased from $2,168M at December 31, 2024)
• $4,227M — Total Liabilities (Slightly decreased from $4,244M at December 31, 2024)
• $50M — Losses and Loss Adjustment (Q3 2025) (Positive adjustment, significantly reducing expenses compared to $11M expense in Q3 2024)
• $15M — Total Revenues (Q3 2025) (Decreased from $29M in Q3 2024)

Key Players & Entities

• MBIA Inc. (company) — registrant and parent company
• National Public Finance Guarantee Corporation (company) — MBIA's U.S. public finance insurance business segment
• Puerto Rico Electric Power Authority (company) — entity with defaulted bonds insured by National
• $8 million (dollar_amount) — net loss attributable to MBIA Inc. for Q3 2025
• $56 million (dollar_amount) — net loss attributable to MBIA Inc. for Q3 2024
• $126 million (dollar_amount) — net loss attributable to MBIA Inc. for the nine months ended September 30, 2025
• $396 million (dollar_amount) — net loss attributable to MBIA Inc. for the nine months ended September 30, 2024
• $565 million (dollar_amount) — insured debt service outstanding related to PREPA as of September 30, 2025
• $13 million (dollar_amount) — gross claims paid by National for PREPA on January 1, 2025
• $92 million (dollar_amount) — gross claims paid by National for PREPA on July 1, 2025

FAQ

Risk Factors

• Puerto Rico Oversight Board Litigation [medium — legal]: Three former Oversight Board members filed a lawsuit seeking reinstatement and a preliminary injunction. The court granted the injunction, allowing them to remain on the board until a final hearing on termination notice adequacy and executive authority. A hearing schedule is not yet set.
• PREPA Default and Claims [high — financial]: The Puerto Rico Electric Power Authority (PREPA) defaulted on National insured bonds. National paid gross claims of $13 million on January 1, 2025, and $92 million on July 1, 2025. As of September 30, 2025, $565 million of insured debt service related to PREPA remains outstanding.
• MBIA Mexico Dissolution [low — operational]: MBIA Corp. is in the process of dissolving its Mexican subsidiary, MBIA Mexico. Approximately $12 million of capital was returned to MBIA Corp. during the nine months ended September 30, 2025, indicating a substantially complete liquidation.
• Zohar CDOs Reimbursement and Recovery [medium — financial]: MBIA Corp. is entitled to reimbursement and recovery for claims paid on Zohar CDOs. Remaining assets were distributed or recorded as investments, with potential for further recovery actions.
• Fair Value of Financial Instruments [medium — market]: The company reported a $12 million net loss on financial instruments at fair value for the three months ended September 30, 2025, contributing to the overall revenue decrease.

Industry Context

The financial guarantee insurance sector, particularly for municipal bonds, faces significant headwinds due to defaults and economic instability in certain regions. MBIA operates in a market where credit quality of issuers and the regulatory environment are paramount. Competitors may also be impacted by similar large-scale defaults, leading to increased scrutiny and potential consolidation.

Regulatory Implications

MBIA is subject to insurance regulations in various jurisdictions. The ongoing litigation regarding the Puerto Rico Oversight Board and the significant exposure to PREPA could attract further regulatory attention and potential investigations into risk management practices.

What Investors Should Do

1. Monitor PREPA claims and recovery efforts
2. Analyze the impact of fair value adjustments
3. Evaluate the resolution of the Puerto Rico Oversight Board litigation
4. Assess the adequacy of loss reserves

Key Dates

• 2025-01-01: PREPA paid gross claims — Indicates a default event and the commencement of significant claim payments by National.
• 2025-07-01: PREPA paid gross claims — Further claim payments related to the PREPA default, highlighting ongoing financial exposure.
• 2025-09-30: End of Q3 2025 — Reporting period for the 10-Q, showing a reduced net loss and decreased revenues compared to the prior year.
• 2025-10-03: Court granted preliminary injunction for PREPA Oversight Board members — Temporarily prevents replacement of terminated Oversight Board members, creating uncertainty around Puerto Rico's governance.
• 2025-12-31: End of Fiscal Year 2024 — Reference point for asset and liability comparison, showing a decrease in total assets and a slight decrease in total liabilities.

Glossary

Loss and Loss Adjustment Expense Reserves

Funds set aside by an insurance company to cover claims that have been incurred but not yet paid, including the costs associated with investigating and settling those claims. (Crucial for assessing MBIA's ability to meet its future obligations, especially given the PREPA default.)

Financial Instruments at Fair Value

Assets or liabilities whose value is determined by current market prices, subject to fluctuations based on market conditions. (The $12 million loss in this category directly impacted MBIA's quarterly revenue.)

Collateralized Debt Obligation (CDO)

A type of structured asset-backed security that pools together various debt obligations and sells claims on the cash flows from this pool to investors. (MBIA has exposure to Zohar CDOs, with ongoing processes for claim payments and asset recovery.)

Variable Interest Entities (VIEs)

Entities in which equity investors have no voting rights or are not the primary beneficiaries, but the reporting entity has a significant interest and control. (MBIA consolidates VIEs, impacting its balance sheet and financial reporting.)

Gross Claims Paid

The total amount of money paid out by an insurer to cover losses before any deductions for salvage or subrogation. (The $13 million and $92 million paid for PREPA defaults are significant cash outflows.)

Year-Over-Year Comparison

MBIA Inc. reported a significantly reduced net loss of $8 million for Q3 2025, a substantial improvement from the $56 million loss in Q3 2024. Total revenues declined to $15 million from $29 million, primarily due to losses on financial instruments and foreign exchange. However, total expenses saw a dramatic decrease to $22 million from $80 million, largely driven by a positive $50 million adjustment in losses and loss adjustment expenses, compared to an $11 million expense in the prior year period. Total assets decreased to $2,060 million from $2,168 million at year-end 2024, while liabilities remained relatively stable.

Key Financial Figures

• $1 — ,626 sha res of Common Stock, par value $1 per share, were outstanding. Table of

Filing Documents

• mbi-20250930.htm (10-Q) — 9118KB
• mbi-ex31_1.htm (EX-31.1) — 16KB
• mbi-ex31_2.htm (EX-31.2) — 16KB
• mbi-ex32_1.htm (EX-32.1) — 11KB
• mbi-ex32_2.htm (EX-32.2) — 10KB
• 0001193125-25-264782.txt ( ) — 38219KB
• mbi-20250930.xsd (EX-101.SCH) — 1951KB
• mbi-20250930_htm.xml (XML) — 12438KB

FINANCIAL INFORMATION

PART I FINANCIAL INFORMATION Item 1.

Financial Statements MBIA Inc. and Subsidiaries (Unaudited)

Financial Statements MBIA Inc. and Subsidiaries (Unaudited) 1 Consolidated Balance Sheets as of September 30, 2025 and December 31, 2024 (Unaudited) 1 Consolidated Statements of Operations for the three and nine months ended September 30, 2025 and 2024 (Unaudited) 2 Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2025 and 2024 (Unaudited) 3 Consolidated Statements of Changes in Shareholders' Equity for the three and nine months ended September 30, 2025 and 2024 (Unaudited) 4 Consolidated Statements of Cash Flows for the nine months ended September 30, 2025 and 2024 (Unaudited) 5

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) 6 Note 1: Business Developments and Risks and Uncertainties 6 Note 2: Significant Accounting Policies 9 Note 3: Recent Accounting Pronouncements 9 Note 4: Variable Interest Entities 10 Note 5: Loss and Loss Adjustment Expense Reserves 12 Note 6: Fair Value of Financial Instruments 16 Note 7: Investments 28 Note 8: Income Taxes 32 Note 9: Business Segments 33 Note 10: Earnings Per Share 38 Note 11: Accumulated Other Comprehensive Income 39 Note 12: Commitments and Contingencies 40 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 41 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 62 Item 4.

Controls and Procedures

Controls and Procedures 62

OTHER INFORMATION

PART II OTHER INFORMATION Item 1.

Legal Proceedings

Legal Proceedings 63 Item 1A.

Risk Factors

Risk Factors 63 Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities 64 Item 6. Exhibits 65

SIGNATURES

SIGNATURES 66 Table of Contents FORWARD-LOOKING AND CAUTIONARY STATEMENTS This quarterly report of MBIA Inc., together with its consolidated subsidiaries, (collectively, "MBIA", the "Company", "we", "us" or "our") includes statements that are not historical or current facts and are "forward-looking statements" made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words "believe", "anticipate", "project", "plan", "expect", "estimate", "intend", "will likely result", "looking forward", or "will continue" and similar expressions identify forward-looking statements. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. MBIA cautions readers not to place undue reliance on any such forward-looking statements, which speak only to their respective dates. We undertake no obligation to publicly correct or update any forward-looking statement if the Company later becomes aware that such result is not likely to be achieved. The following are some of the general factors that could affect financial performance or could cause actual results to differ materially from estimates contained in or underlying the Company's forward-looking statements: increased credit losses or impairments on public finance obligations that National Public Finance Guarantee Corporation ("National") insures issued by state, local and territorial governments and finance authorities and other providers of public services, located in the U.S. or abroad, that are experiencing fiscal stress; the possibility that loss reserve estimates are not adequate to cover potential claims; a disruption in the cash flow from National or an inability to access the capital markets and our exposure to significant fluctuations in liquidity and asset values in the global credit markets as a result of collateral posting requirements

FI NANCIAL INFORMATION

PART I FI NANCIAL INFORMATION

F inancial Statements

Item 1. F inancial Statements MBIA INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) (In millions except share and per share amounts) September 30, 2025 December 31, 2024 Assets Investments: Fixed-maturity securities held as available-for-sale, at fair value (amortized cost $ 1,130 and $ 1,080 ) $ 1,008 $ 925 Investments carried at fair value 221 237 Short-term investments, at fair value (amortized cost $ 497 and $ 492 ) 497 492 Other investments at amortized cost 1 1 Total investments 1,727 1,655 Cash and cash equivalents 64 84 Premiums receivable (net of allowance for credit losses of $ - and $ - ) 125 133 Deferred acquisition costs 24 27 Insurance loss recoverable 39 185 Assets held for sale 10 11 Other assets 33 42 Assets of consolidated variable interest entities: Cash 5 3 Loans receivable at fair value 33 28 Total assets $ 2,060 $ 2,168 Liabilities and Equity Liabilities: Unearned premium revenue $ 178 $ 199 Loss and loss adjustment expense reserves 443 526 Long-term debt 2,853 2,741 Medium-term notes (includes financial instruments carried at fair value of $ 42 and $ 35 ) 463 440 Investment agreements 173 204 Liabilities held for sale 7 7 Other liabilities 67 78 Liabilities of consolidated variable interest entities: Variable interest entity debt (includes financial instruments carried at fair value of $ 26 and $ 31 ) 32 43 Derivative liabilities 11 6 Total liabilities 4,227 4,244 Commitments and contingencies (Refer to Note 12: Commitments and Contingencies) Equity: Preferred stock, par value $ 1 per share; authorized shares-- 10,000,000 ; issued and outstanding-- none - - Common stock, par value $ 1 per share; authorized shares-- 400,000,000 ; issued shares-- 283,186,115 283 283 Additional paid-in capital 2,453 2,492 Retained earnings (deficit)

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) Note 1: Business Developments and Risks and Uncertainties (continued) Between August 1 and August 8, 2025, President Trump notified six Oversight Board members that their membership on the Oversight Board was terminated effective immediately. On September 18, 2025, three of the terminated Oversight Board members, Arthur Gonzalez, Andrew Biggs and Betty Rosa (the "Plaintiffs") sought reinstatement on the Oversight Board by filing injunctive, declaratory and legal relief. On September 22, 2025, Plaintiffs also filed a Motion for Preliminary Injunction seeking restrictions on replacing them on the Oversight Board until the Court hears the underlying merits of their claims. On October 3, 2025, the District Court for the District of Puerto Rico granted Plaintiffs' Motion for Preliminary Injunction permitting the Plaintiffs to remain on the Oversight Board until a final hearing on the adequacy of the termination notice as well as the scope of executive authority. A hearing schedule has not been set at this time. Refer to "Note 5: Loss and Loss Adjustment Expense Reserves" for additional information of the Company's PREPA reserves and recoveries. MBIA Mexico MBIA Corp. has issued financial guarantee insurance in Mexico, through its wholly-owned subsidiary, MBIA Mxico, S.A. de C.V. ("MBIA Mexico"). The Company has commenced the process of dissolving MBIA Mexico. During the nine months ended September 30, 2025, MBIA Mexico returned approximately $ 12 million of capital to MBIA Corp., representing a substantially complete liquidation. Zohar CDOs Payment of claims on MBIA Corp.'s policies insuring the Class A-1 and A-2 notes issued by Zohar collateralized debt obligation ("CDO") 2003-1, Limited ("Zohar I") and Zohar II 2005-1, Limited ("Zohar II") (collectively, the "Zohar CDOs"), entitled MBIA Corp. to reimbursement of such amounts plus interest and expenses and/or to exercise certain rights and remedies to

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