On Monday, Keefe, Bruyette & Woods adjusted their financial outlook on MBIA Inc. (NYSE:MBI), reducing the stock price target to $7.50 from the previous $9.00, while keeping a Market Perform rating on the stock. The revision follows MBIA's special dividend payment in the fourth quarter of 2023, which suggested a lower residual value and decreased earnings from the investment portfolio.
The firm's analyst provided insight into the rationale behind the new valuation, outlining two potential scenarios for MBIA. The first involves the monetization of the company's National division, selling it at 75% of its book value to address the holding company's net liabilities.
The second scenario is a runoff approach, where capital would be gradually released from National, with the proceeds used to satisfy the holding company's financial obligations over a period exceeding ten years.
The analyst noted that MBIA now has less trapped capital in its National division, making it a more attractive acquisition target, and increased liquidity at the holding company level, which could be used for accretive buybacks or to redeem debt at a discount.
These factors prevented a more significant reduction in the stock target price, despite the special dividend of $8 per share paid in the last quarter of 2023.
Still, the firm maintains its Market Perform rating due to uncertainties regarding the timing and catalysts for MBIA's strategic moves. The analyst's comments reflect a cautious but acknowledging stance on the company's improved positioning, while also recognizing the unpredictable nature of MBIA's future financial developments.
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