Welcome to the MBIA Inc. First Quarter 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, Chelsea. Yes, welcome everybody. After the market closed yesterday, we issued and posted several items on our websites, 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 the updates to the listings of our insurance company's insurance portfolios. Regarding today's call, please note that anything said on the call is qualified by the information provided by the company's 10-K, 10-Q and other SEC filings as our company's definitive disclosures are incorporated in those documents. We urge investors to read our 10-K and 10-Qs 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.
Definitions and reconciliations of the Non-GAAP terms included in our remarks today are also included in our 10-K and 10-Qs, as well as our financial results report and our Quarterly Operating Supplement. The recorded replay of today's call will become available approximately two 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 for our Safe Harbor Disclosure. 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 and 10-Qs, 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, Will Fallon and Anthony McKiernan will provide introductory comments, and then a Question and Answer session will follow. Now here is W ill Fallon.
Thanks, Greg. Good morning, everyone. Thank you for being with us today. As noted in yesterday's financial results report, given prevailing volatile market conditions and feedback that we received during the pursuit of our strategic alternatives, we have decided to suspend that process. We will continue with our mission to deliver shareholder value by continuing to finalize our PREPA remediation, seeking additional cost reductions, monitoring the runoff of our insurance portfolios, and pursuing regulatory approval of special dividends from National. We also disclosed yesterday that MBIA Inc. Excuse me. The MBIA Inc. Board of Directors has approved a new $100 million share repurchase authorization that can be used by MBIA Inc. and/or National.
Regarding our first quarter financial results, I'd like to point out that National had positive net income for both GAAP and statutory presentations, which reflects the substantial reduction of uncertainty regarding its remaining Puerto Rico exposure. It also demonstrates the stability of National's financial results, absent significant adjustments to its loss and loss adjustment expenses. During the first quarter, National also sold its Puerto Rico-related investment holdings. Regarding National's last material Puerto Rico exposure, PREPA, while bondholder challenges remain to the plan of adjustment incorporating National's Plan Support Agreement with the Oversight Board, the Title III Court has not modified the timing for the confirmation hearings for the plan, which are scheduled for July. As of March 31st, National's remaining exposure to PREPA is $710 million of gross par insured.
The remainder of the insured credits in National's portfolio have continued to perform consistent with our expectations. National's insured portfolio has continued to run off as its outstanding gross par declined by $600 million from year-end 2022 to $31 billion at March 31st, 2023. National's leverage ratio of gross par to statutory capital at the end of the quarter remains unchanged from year-end 2022 at 16 to one. As of March 31st, 2023, National had total claims-paying resources of $2.4 billion and statutory capital and surplus of $1.9 billion. I also want to note that Charlie Rinehart, our Board Chairman, resigned this week after 15 years of service. I greatly appreciate Charlie's contributions and leadership to MBIA and counsel to me.
Now Anthony will provide additional comments about our financial results.
Thanks, Will, and good morning. I will begin with a review of our first quarter 2023 GAAP and non-GAAP results. The company reported a consolidated GAAP net loss of $93 million or a - $1.86 per share for the first quarter of 2023, compared to a consolidated GAAP net loss of $73 million or - $1.48 per share for the first quarter ended March 31st, 2022. The higher GAAP net loss this quarter was largely driven by losses on financial instruments at fair value and foreign exchange in the holding company's legacy ALM business.
Due to lower interest rates and a weaker dollar versus gains due to higher rates and a stronger dollar for the prior comparable quarter. Losses on VIEs at MBIA Corp. due to the termination and deconsolidation of a legacy ABS CDO, where losses were reclassified from other comprehensive income and therefore had no effect on total equity. Offsetting these negative variances were lower loss and LAE at National and higher investment income. The company's adjusted net loss, a non-GAAP measure, was $1 million or -$0.03 per diluted share for the first quarter of 2023, compared with an adjusted net loss of $96 million or -$1.94 per diluted share for the first quarter of 2022. The favorable change was due primarily to the lower loss in LAE at National.
MBIA Inc's book value per share decreased to -$16.57 per share as of March 31st, 2023 versus -$16.07 per share as of December 31st, 2022, primarily due to the net loss for the year, partially offset by decreased unrealized losses on investments recorded to other comprehensive income driven by lower interest rates. Included in book value as of March 31st, 2023 is a -$38.82 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 $638 million as of March 31st, 2023.
Within this total are the following material items. Unencumbered cash and liquid assets held by MBIA Inc. totaled approximately $214 million as of March 31st, 2023, compared with $230 million as of December 31st, 2022, due to debt service and operating expenses. The corporate segment's assets also included approximately $313 million of assets at market value pledged to the GICs on the interest rate swaps supporting the legacy GIC operation. Turning to the insurance company's statutory results, National reported statutory net income of $11 million for the quarter ended March 31st, 2023 versus statutory net income of $104 million for the quarter ended March 31st, 2022.
The unfavorable comparison was primarily due to the large loss in LAE benefit across its Puerto Rico exposures in Q1 2022 versus modest loss in LAE expense in Q1 2023 related to PREPA and lower premium income, somewhat offset by higher investment income. Statutory capital increased by $22 million from year-end 2022 and was $1.9 billion as of 3/31/2023 due to the quarterly net profit and unrealized gains in the investment portfolio. Claims-paying resources were $2.4 billion. From inception through 3/31/2023, gross claims paid on insured Puerto Rico exposure totaled approximately $2.9 billion, including $18 million of claims paid in Q1 2023 related to PREPA.
Turning to MBIA Insurance Corp., its statutory net loss was $20 million for the first quarter of 2023 compared to a statutory net loss of $14 million in the first quarter of 2022. The unfavorable comparison was primarily due to increased loss in LAE expense in Q1 2023, driven by lower salvage value on former Zohar-related collateral. As of March 31st, 2023, the statutory capital of MBIA Insurance Corp was $147 million, down from $169 million at year-end 2022 due to the quarterly net loss. Claims-paying resources totaled $608 million. MBIA Corp's insured gross par outstanding reduced by approximately $47 million during the quarter and was $3.3 billion as of March 31st, 2023.
Now, we will turn the call over to the Operator to begin the question- and- answer session.
Thank you, sir. If you have a question at this time, please press star one on your telephone keypad. If you wish to remove yourself from the queue, press star two. We ask that when posing your question, you please pick up your handset to allow optimal sound quality. We'll take our first question from Tommy McJoynt with KBW. Your line is open.
Hey, good morning, guys. Thanks for taking my question. You called out a couple reasons for the suspension of exploring those strategic alternatives. Just to clarify, was the main reason attributed to the macroeconomic backdrop of tighter credit, or was it more so interest effectively just going stale from some of the potential suitors that you guys had been speaking with?
Tommy, I don't know if there's a main or primary reason, but it's more the former that you mentioned as to overall conditions, in the marketplace as we, sort of progress through the process.
Okay. Got it. Thanks. And it's been a few years since National has had capacity to buy back stock of the parent company, MBIA Inc. Could you give us a refresher on the mechanics of the statutory capacity rules for National to purchase its parent company shares? Relative to those limits, where do you stand today?
Good morning, Tommy McJoynt. It's Anthony McKiernan. The measurement for National to buy shares is based on a calculation related to its surplus. It's essentially 50% of National's surplus minus its common and preferred, which there's very little at National. Give or take, it's around 50% of surplus is the capacity, and you measure that against the prevailing share price. Obviously, capacity fluctuates. Given where the share price has been, and again, it's a, you know, authorization for National and MBIA Inc., you know, we do have capacity to purchase shares at National at this point.
Got it. Thanks. Any way you could quantify how much that capacity is at National? Also you did mention, the authorization also applies to the parent company to buy its own shares. Just remind us, is there any flexibility up there currently, or is the funding at the holding company really just dependent on future capital releases out from National?
On your first question, if you measured it at the end of the first quarter, as of 3/31, National had about $50 million of capacity at that point. That amount has increased, as the share price has gone down, you know, along with the market over the last month or two. You know, the capacity is higher at this point. As far as MBIA Inc. goes, we just have to make a decision as we go along if we wanna use MBIA Inc. You know, we've really focused on keeping the liquidity at MBIA Inc. at a point where we can look into the future several years, and now we're looking to the 2028 timeframe as far as being able to cover its debt and expenses just through as of right dividends from National.
We'd have to be, you know, thoughtful about using MBIA Inc. We've been using National primarily, as you know, the last few years that we were buying shares back.
Okay. Thank you. Appreciate the color.
Yep.
Thank you. Our next question will come from Paul Saunders with Hutch Capital. Your line is open.
Good morning. Thanks for taking my call, guys. The previous caller I mean, asked a lot of the questions that I had, so I'll be quick on this one. Just wanted to stick on the strategic plan and the sale process and just, you know, can you provide any color just on the future? Like, are we thinking this is a pricing exercise when you talk about macro? Do you think the macro environment impacted the pricing? I guess I'm just sort of trying to get inside your guys' heads in terms of do you really run this off for 10- 15 years, or what is kind of the game plan if a sale is not that game plan?
Yep. Paul, it's obviously difficult to predict. It's not 10 or 15 years of running off the company. I think the feedback and our conclusion from the process, as well as looking at the macro environment, is that what we have been doing is absolutely the right thing. We're gonna continue to finalize Puerto Rico and all the other things that we mentioned. But we could be back sort of restarting the process very soon. I think there's some things we'd like to do to eliminate uncertainty. For example, getting PREPA finalized would be a good thing, et cetera. You know, it could be by the fourth quarter of this year, first quarter of next year that we've restarted the process.
Great. That's helpful. Just actually a follow-up on that. Is PREPA and actually the finalizing of that, do you think that was, I know you said previously you did not think it would be an impediment, but with the process concluded, do you think that was kind of a gating factor for certain interested parties?
As you just referenced, we believe the fact that we've probably restructured 80% of our large Puerto Rico credits positioned us well to sell the company. The situation with PREPA did come up with, you know, one or more prospective buyers. It's hard to tell. I think different people look at it differently. As we said, we'll continue to monitor the PREPA situation and clearly, finalizing it will help. Again, it's just one factor that was mentioned by some.
Great. Thanks for taking my questions.
Thank you. Our next question will come from Geoffrey Dunn with Dowling & Partners. Your line is open.
Thank you. Good morning. Just a few questions to clarify some things. With respect to your comment about the market conditions, is that more of a risk aversion type of market sentiment issue, or is it more of a rates are up, spreads are wider, creating a P gap challenge on a valuation for any prospective buyer, particularly in the industry?
Jeffrey, it's probably some of both. It's hard to, you know, attribute how much is the first and how much is the second, or is it more, you know, the second or the first. We sort of concluded both in the process. We'll continue to look at the situation.
Okay. As you consider your next strategic moves, I guess two questions. Number one, do you think there is a role for, you know, select strategic reinsurance deals to help with the runoff effectively of National?
Second, do you believe there is a framework in place with your state regulator with National for special dividends, or is that something that needs to be developed between, and you and New York?
Yeah. With regard to the first, we will continue to look for things that would enhance shareholder value. We've looked at reinsurance in the past. The fact that we haven't done it suggests that we haven't concluded that there's been a situation that would benefit shareholders. If that were to change, we'd obviously pursue it. With regard to dividends, National hasn't actually gone for a dividend since it's been in existence. New York is very experienced with regard to insurance companies and assessing special dividends up to the holding company.
Do you believe that could be a fairly quick process? It seems like the regulator's kind of gotten a little outdated with assessing how much capital is needed, especially for runoff situations.
Yeah. I'm not quite sure what experiences you're referring to. You know, we think, you know, there's a process with the department and, you know, we'll pursue that as a normal course of our activities.
Okay. Thank you.
All right. Thank you. As a reminder, that is star one to enter the questioning queue. Our next question will come from Carl Schecter with Staunton Capital. Your line is open.
Yes. Hi, it's Carl Schecter at Staunton. I wanted to better understand whether National in fact has capacity to do a buyback. I was under the impression or misimpression maybe that there's some concentration limits that might preclude that. The second part of the question would be geared towards the true economic book value, because buybacks would only make sense if it's at a meaningful discount. Can you address that as well? Thank you.
Sure, Carl. On your first point, the capacity for National is dynamic, so depending on where the share price trades, and, you know, National owns, you know, a substantial amount of MBIA Inc. shares. You're calculating the share price against the formula that I talked about before, which is basically the 50% of the surplus minus common and preferred. Depending on where the shares trade, there's either capacity or there's not. Where the shares have been trading the last couple of months, that capacity's opened up, and has done so to a point where we could buy some meaningful shares if we decided to do that.
On the second point related to repurchases, I think we've been extremely diligent about purchasing shares that we feel are very solid discounted prices to enhance shareholder value, and our philosophy is the same as it's been.
Can you quantify that a little bit more as to what you view the true economic book value is that you're buying at a discount to at this moment?
I really can't give specific numbers on it, at this point. You know, to the degree, again, we feel that it's prudent to do so, you know, we'll make those purchases, but I'm not gonna give specific amounts on that.
Understood. Thank you.
Thank you. Once again, that is star one to ask a question. 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 again, Chelsea. Thanks to those of you listening to our call today. Please contact me 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.
Thank you, ladies and gentlemen. This does conclude today's MBIA first Quarter 2023 Financial Results Conference Call. You may now disconnect.