MBIA Inc. has released its financial outcomes for the second quarter of 2026, showcasing ongoing progress in reducing its exposure to the Puerto Rico Electric Power Authority (PREPA) and significant recoveries from Zohar Collateralized Debt Obligations (CDOs). The company recorded a consolidated GAAP net loss of $46 million, or $0.91 per share, which marks an improvement from the $56 million net loss, or $1.12 per share, reported in the same period last year. This better performance is largely due to the reversal of legal expenses within a consolidated variable interest entity related to Zohar CDO recoveries and favorable foreign exchange gains on euro-denominated medium-term note liabilities. Additionally, the adjusted net loss, a non-GAAP metric, also saw a slight improvement to $7 million, or $0.14 per share, compared to $8 million, or $0.17 per share, in the previous year, driven by lower loss and loss adjustment expenses at National related to its PREPA holdings.
A primary focus remains the resolution of National's PREPA exposure, which decreased by $35 million to $390 million in gross par value following insurance policy claims paid on maturing PREPA bonds. The company's insured portfolio has also seen a reduction, with National's outstanding gross par amount declining by approximately $1.5 billion since the end of 2025, now standing at $20.8 billion. This reduction has contributed to a lower leverage ratio of 21:1, down from 24:1 at year-end 2025. National's claims-paying resources remained stable at $1.4 billion, while statutory capital and surplus increased to $970 million due to net income and unrealized gains in the investment portfolio. Meanwhile, MBIA Insurance Corp. reported statutory net income of $27 million, significantly higher than the $4 million in Q2 2025, primarily due to substantial loss and loss adjustment expense benefits from reassessments of Zohar CDO recoveries.
Ongoing litigation surrounding PREPA continues to be a critical factor, with bondholders rejecting a $3 billion settlement offer from the Oversight Board as inadequate. This rejection, representing about 90% of bondholder claims, underscores the persistent disputes over valuation, especially given that PREPA bonds are trading at a higher market value compared to the settlement offer. The legal process, including discovery phases and upcoming oral arguments, is expected to shape future outcomes. Despite a decrease in book value per share to negative $45.58, influenced by the consolidated net loss, MBIA retains $71 million in share buyback capacity. The company also confirmed its commitment to managing holding company liquidity to meet debt obligations and maintain financial flexibility, with future strategic decisions, including potential sales, being heavily reliant on the successful resolution of the PREPA situation.
Amidst challenging financial landscapes and complex legal battles, MBIA's steadfast efforts to streamline operations, reduce legacy exposures, and maintain robust financial health demonstrate a commitment to long-term stability and shareholder value. The progress made in resolving outstanding claims and managing liquidity highlights the company's resilience and its strategic vision to adapt and thrive, even in the face of significant headwinds. This proactive approach not only fortifies its position but also lays the groundwork for future growth and sustainable success in the evolving financial markets.
