☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Connecticut | 06-1185706 | |||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||
1 Manhattanville Road, Suite 301, Purchase, New York | 10577 | |||
(Address of principal executive offices) | (Zip Code) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock | MBI | New York Stock Exchange |
Large accelerated filer | ☐ | Accelerated filer | ☒ | |||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||
Emerging growth company | ☐ |
Item 1. | ||||||||
1 | ||||||||
2 | ||||||||
3 | ||||||||
4 | ||||||||
5 | ||||||||
6 | ||||||||
6 | ||||||||
9 | ||||||||
9 | ||||||||
10 | ||||||||
11 | ||||||||
16 | ||||||||
33 | ||||||||
35 | ||||||||
36 | ||||||||
36 | ||||||||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | |||||||
Item 3. | ||||||||
Item 4. | ||||||||
Item 1. | ||||||||
Item 1A. | ||||||||
Item 2. | ||||||||
Item | ||||||||
Item 6. | 60 | |||||||
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;
our ability to fully implement our strategic plan;
the possibility that MBIA Insurance Corporation will have inadequate liquidity or resources to timely pay claims as a result of higher than expected losses on certain insured transactions or as a result of a delay or failure in collecting expected recoveries, which could lead the New York State Department of Financial Services (“NYSDFS”) to put MBIA Insurance Corporation into a rehabilitation or liquidation proceeding under Article 74 of the New York Insurance Law and/or take such other actions as the NYSDFS may deem necessary to protect the interests of MBIA Insurance Corporation’s policyholders;
deterioration in the economic environment and financial markets in the United States or abroad, real estate market performance, credit spreads, interest rates and foreign currency levels; and
the effects of changes to governmental regulation, including insurance laws, securities laws, tax laws, legal precedents and accounting rules.
The above factors provide a summary of and are qualified in their entirety by the risk factors discussed under “Risk Factors” in Part II, Other Information, Item 1A included in this Quarterly Report on Form
This quarterly report of MBIA Inc. also includes statements of the opinion and belief of MBIA management which may be forward-looking statements subject to the preceding cautionary disclosure. Unless otherwise indicated herein, the basis for each statement of opinion or belief of MBIA management in this report is the relevant industry or subject matter experience and views of certain members of MBIA’s management. Accordingly, MBIA cautions readers not to place undue reliance on any such statements, because like all statements of opinion or belief they are not statements of fact and may prove to be incorrect. We undertake no obligation to publicly correct or update any statement of opinion or belief if the Company later becomes aware that such statement of opinion or belief was not or is not then accurate. In addition, readers are cautioned that each statement of opinion or belief may be further qualified by disclosures set forth elsewhere in this report or in other disclosures by MBIA.
March 31, 2022 | December 31, 2021 | |||||||
Assets | ||||||||
Investments: | ||||||||
Fixed-maturity securities held as available-for-sale, | $ | 2,677 | $ | 2,157 | ||||
Investments carried at fair value | 356 | 258 | ||||||
Investments pledged as collateral, at fair value (amortized cost $0 and $4) | 0 | 4 | ||||||
Short-term investments, at fair value (amortized cost $441 and $374) | 441 | 374 | ||||||
Total investments | 3,474 | 2,793 | ||||||
Cash and cash equivalents | 147 | 151 | ||||||
Premiums receivable (net of allowance for credit losses $5 and $5) | 177 | 178 | ||||||
Deferred acquisition costs | 41 | 42 | ||||||
Insurance loss recoverable | 366 | 1,296 | ||||||
Other assets | 81 | 67 | ||||||
Assets of consolidated variable interest entities: | ||||||||
Cash | 4 | 9 | ||||||
Investments carried at fair value | 53 | 60 | ||||||
Loans receivable at fair value | 76 | 77 | ||||||
Other assets | 24 | 23 | ||||||
Total assets | $ | 4,443 | $ | 4,696 | ||||
Liabilities and Equity | ||||||||
Liabilities: | ||||||||
Unearned premium revenue | $ | 308 | $ | 322 | ||||
Loss and loss adjustment expense reserves | 886 | 894 | ||||||
Long-term debt | 2,344 | 2,331 | ||||||
Medium-term notes (includes financial instruments carried at fair value of $99 and $98) | 589 | 590 | ||||||
Investment agreements | 274 | 274 | ||||||
Derivative liabilities | 99 | 131 | ||||||
Other liabilities | 210 | 163 | ||||||
Liabilities of consolidated variable interest entities: | ||||||||
Variable interest entity notes carried at fair value | 285 | 291 | ||||||
Total liabilities | 4,995 | 4,996 | ||||||
Commitments and contingencies (Refer to Note 13: Commitments and Contingencies) | 0 | 0 | ||||||
Equity: | ||||||||
Preferred stock, par value $1 per share; authorized shares - 10,000,000; issued and outstanding - 0ne | 0 | 0 | ||||||
Common stock, par value $1 per share; authorized shares - 400,000,000; issued shares - 283,186,115 and 283,186,115 | 283 | 283 | ||||||
Additional paid-in capital | 2,919 | 2,931 | ||||||
Retained earnings (deficit) | (531 | ) | (458 | ) | ||||
Accumulated other comprehensive income (loss), net of tax of $8 and $8 | (82 | ) | 100 | |||||
Treasury stock, at cost - 228,329,115 and 228,630,003 shares | (3,154 | ) | (3,169 | ) | ||||
Total shareholders’ equity of MBIA Inc. | (565 | ) | (313 | ) | ||||
Preferred stock of subsidiary | 13 | 13 | ||||||
Total equity | (552 | ) | (300 | ) | ||||
Total liabilities and equity | $ | 4,443 | $ | 4,696 | ||||
March 31, 2023 | December 31, 2022 | |||||||
Assets | ||||||||
Investments: | ||||||||
Fixed-maturity securities held as available-for-sale, | $ | 1,957 | $ | 1,812 | ||||
Investments carried at fair value | 355 | 511 | ||||||
Short-term investments, at fair value (amortized cost $367 and $353) | 368 | 353 | ||||||
Total investments | 2,680 | 2,676 | ||||||
Cash and cash equivalents | 67 | 50 | ||||||
Premiums receivable (net of allowance for credit losses $0 and $0) | 160 | 160 | ||||||
Deferred acquisition costs | 35 | 35 | ||||||
Insurance loss recoverable | 95 | 137 | ||||||
Assets held for sale | 83 | 80 | ||||||
Other assets | 67 | 73 | ||||||
Assets of consolidated variable interest entities: | ||||||||
Cash | 16 | 16 | ||||||
Investments carried at fair value | 22 | 47 | ||||||
Loans receivable at fair value | 83 | 78 | ||||||
Other assets | 9 | 23 | ||||||
Total assets | $ | 3,317 | $ | 3,375 | ||||
Liabilities and Equity | ||||||||
Liabilities: | ||||||||
Unearned premium revenue | $ | 257 | $ | 266 | ||||
Loss and loss adjustment expense reserves | 379 | 439 | ||||||
Long-term debt | 2,467 | 2,428 | ||||||
Medium-term notes (includes financial instruments carried at fair value of $42 and $41) | 507 | 501 | ||||||
Investment agreements | 233 | 233 | ||||||
Derivative liabilities | 57 | 49 | ||||||
Liabilities held for sale | 68 | 61 | ||||||
Other liabilities | 81 | 94 | ||||||
Liabilities of consolidated variable interest entities: | ||||||||
Variable interest entity debt (includes financial instruments carried at fair value of $154 and $172) | 156 | 174 | ||||||
Derivative liabilities | 11 | 6 | ||||||
Total liabilities | 4,216 | 4,251 | ||||||
Commitments and contingencies (Refer to Note 13: Commitments and Contingencies) | ||||||||
Equity: | ||||||||
Preferred stock, par value $1 per share; authorized shares issued and outstanding—none— 10,000,000; | - | - | ||||||
Common stock, par value $1 per share; authorized shares issued— 400,000,000;shares and 283,186,115— 283,186,115 | 283 | 283 | ||||||
Additional paid-in capital | 2,915 | 2,925 | ||||||
Retained earnings (deficit) | (746 | ) | (653 | ) | ||||
Accumulated other comprehensive income (loss), net of tax of $7 and $8 | (221 | ) | (283 | ) | ||||
Treasury stock, at cost and 228,333,444— 228,221,641 | (3,143 | ) | (3,154 | ) | ||||
Total shareholders’ equity of MBIA Inc. | (912 | ) | (882 | ) | ||||
Preferred stock of subsidiary and noncontrolling interest held for sale | 13 | 6 | ||||||
Total equity | (899 | ) | (876 | ) | ||||
Total liabilities and equity | $ | 3,317 | $ | 3,375 | ||||
Three Months Ended March 31, | ||||||||
2022 | 2021 | |||||||
Revenues: | ||||||||
Premiums earned: | ||||||||
Scheduled premiums earned | $ | 11 | $ | 15 | ||||
Refunding premiums earned | 4 | 5 | ||||||
Premiums earned (net of ceded premiums of $0 and $1) | 15 | 20 | ||||||
Net investment income | 18 | 15 | ||||||
Net realized investment gains (losses) | (3 | ) | (1 | ) | ||||
Net gains (losses) on financial instruments at fair value and foreign exchange | 17 | 52 | ||||||
Other net realized gains (losses) | (3 | ) | 0 | |||||
Revenues of consolidated variable interest entities: | ||||||||
Net gains (losses) on financial instruments at fair value and foreign exchange | (4 | ) | (14 | ) | ||||
Total revenues | 40 | 72 | ||||||
Expenses: | ||||||||
Losses and loss adjustment | 49 | 98 | ||||||
Amortization of deferred acquisition costs | 2 | 2 | ||||||
Operating | 19 | 26 | ||||||
Interest | 41 | 41 | ||||||
Expenses of consolidated variable interest entities: | ||||||||
Operating | 2 | 2 | ||||||
Interest | 0 | 9 | ||||||
Total expenses | 113 | 178 | ||||||
Income (loss) before income taxes | (73 | ) | (106 | ) | ||||
Provision (benefit) for income taxes | 0 | 0 | ||||||
Net income (loss) | $ | (73 | ) | $ | (106 | ) | ||
Net income (loss) per common share: | ||||||||
Basic | $ | (1.48 | ) | $ | (2.16 | ) | ||
Diluted | $ | (1.48 | ) | $ | (2.16 | ) | ||
Weighted average number of common shares outstanding: | ||||||||
Basic | 49,631,448 | 49,258,110 | ||||||
Diluted | 49,631,448 | 49,258,110 |
Three Months Ended March 31, | ||||||||
2023 | 2022 | |||||||
Revenues: | ||||||||
Premiums earned: | ||||||||
Scheduled premiums earned | $ | 10 | $ | 11 | ||||
Refunding premiums earned | - | 4 | ||||||
Premiums earned (net of ceded premiums of $- and $-) | 10 | 15 | ||||||
Net investment income | 26 | 18 | ||||||
Net realized investment gains (losses) | (3 | ) | (3 | ) | ||||
Net gains (losses) on financial instruments at fair value and foreign exchange | (13 | ) | 17 | |||||
Other net realized gains (losses) | - | (3 | ) | |||||
Revenues of consolidated variable interest entities: | ||||||||
Net gains (losses) on financial instruments at fair value and foreign exchange | (3 | ) | (4 | ) | ||||
Other net realized gains (losses) | (15 | ) | - | |||||
Total revenues | 2 | 40 | ||||||
Expenses: | ||||||||
Losses and loss adjustment | 6 | 49 | ||||||
Amortization of deferred acquisition costs | 2 | 2 | ||||||
Operating | 22 | 19 | ||||||
Interest | 51 | 41 | ||||||
Expenses of consolidated variable interest entities: | ||||||||
Operating | 4 | 2 | ||||||
Total expenses | 85 | 113 | ||||||
Income (loss) from continuing operations before income taxes | (83 | ) | (73 | ) | ||||
Provision (benefit) for income taxes | - | - | ||||||
Income (loss) from continuing operations | (83 | ) | (73 | ) | ||||
Income (loss) from discontinued operations, net of income taxes | (3 | ) | - | |||||
Net income (loss) | (86 | ) | (73 | ) | ||||
Less: Net income (loss) from discontinued operations attributable to noncontrolling interests | 7 | - | ||||||
Net income (loss) attributable to MBIA Inc. | $ | (93 | ) | $ | (73 | ) | ||
Net income (loss) per common share attributable to MBIA Inc. - basic and diluted | ||||||||
Continuing operations | $ | (1.67 | ) | $ | (1.48 | ) | ||
Discontinued operations | (0.19 | ) | - | |||||
Net income (loss) per common share attributable to MBIA Inc. - basic and diluted | $ | (1.86 | ) | $ | (1.48 | ) | ||
Weighted average number of common shares outstanding: | ||||||||
Basic | 49,945,917 | 49,631,448 | ||||||
Diluted | 49,945,917 | 49,631,448 |
Three Months Ended March 31, | ||||||||
2022 | 2021 | |||||||
Net income (loss) | $ | (73 | ) | $ | (106 | ) | ||
Other comprehensive income (loss): | ||||||||
Available-for-sale | ||||||||
Unrealized gains (losses) arising during the period | (171 | ) | (87 | ) | ||||
Reclassification adjustments for (gains) losses included in net income (loss) | 0 | (5 | ) | |||||
Foreign currency translation gains (losses) | 0 | 1 | ||||||
Instrument-specific credit risk of liabilities measured at fair value: | ||||||||
Unrealized gains (losses) arising during the period | (14 | ) | (5 | ) | ||||
Reclassification adjustments for (gains) losses included in net income (loss) | 3 | 20 | ||||||
Total other comprehensive income (loss) | (182 | ) | (76 | ) | ||||
Comprehensive income (loss) | $ | (255 | ) | $ | (182 | ) | ||
Three Months Ended March 31, | ||||||||
2023 | 2022 | |||||||
Net income (loss) attributable to MBIA Inc. | $ | (93 | ) | $ | (73 | ) | ||
Other comprehensive income (loss): | ||||||||
Available-for-sale | ||||||||
Unrealized gains (losses) arising during the period | 43 | (171 | ) | |||||
Reclassification adjustments for (gains) losses included in net income (loss) | 5 | - | ||||||
Foreign currency translation gains (losses) | (1 | ) | - | |||||
Instrument-specific credit risk of liabilities measured at fair value: | ||||||||
Unrealized gains (losses) arising during the period | 1 | (14 | ) | |||||
Reclassification adjustments for (gains) losses included in net income (loss) | 14 | 3 | ||||||
Total other comprehensive income (loss) | 62 | (182 | ) | |||||
Comprehensive income (loss) attributable to MBIA Inc. | $ | (31 | ) | $ | (255 | ) | ||
Three Months Ended March 31, | ||||||||
2022 | 2021 | |||||||
Common shares | ||||||||
Balance at beginning and end of period | 283,186,115 | 283,186,115 | ||||||
Common stock amount | ||||||||
Balance at beginning and end of period | $ | 283 | $ | 283 | ||||
Additional paid-in capital | ||||||||
Balance at beginning of period | $ | 2,931 | $ | 2,962 | ||||
Period change | (12 | ) | (28 | ) | ||||
Balance at end of period | $ | 2,919 | $ | 2,934 | ||||
Retained earnings | ||||||||
Balance at beginning of period | $ | (458 | ) | $ | (13 | ) | ||
Net income (loss) | (73 | ) | (106 | ) | ||||
Balance at end of period | $ | (531 | ) | $ | (119 | ) | ||
Accumulated other comprehensive income (loss) | ||||||||
Balance at beginning of period | $ | 100 | $ | 115 | ||||
Other comprehensive income (loss) | (182 | ) | (76 | ) | ||||
Balance at end of period | $ | (82 | ) | $ | 39 | |||
Treasury shares | ||||||||
Balance at beginning of period | (228,630,003 | ) | (229,508,967 | ) | ||||
Other | 300,888 | 671,502 | ||||||
Balance at end of period | (228,329,115 | ) | (228,837,465 | ) | ||||
Treasury stock amount | ||||||||
Balance at beginning of period | $ | (3,169 | ) | $ | (3,211 | ) | ||
Other | 15 | 33 | ||||||
Balance at end of period | $ | (3,154 | ) | $ | (3,178 | ) | ||
Total shareholders’ equity of MBIA Inc. | ||||||||
Balance at beginning of period | $ | (313 | ) | $ | 136 | |||
Period change | (252 | ) | (177 | ) | ||||
Balance at end of period | $ | (565 | ) | $ | (41 | ) | ||
Preferred stock of subsidiary shares | ||||||||
Balance at beginning and end of period | 1,315 | 1,315 | ||||||
Preferred stock of subsidiary amount | ||||||||
Balance at beginning and end of period | $ | 13 | $ | 13 | ||||
Total equity | $ | (552 | ) | $ | (28 | ) | ||
Three Months Ended March 31, | ||||||||
2023 | 2022 | |||||||
Common shares | ||||||||
Balance at beginning and end of period | 283,186,115 | 283,186,115 | ||||||
Common stock amount | ||||||||
Balance at beginning and end of period | $ | 283 | $ | 283 | ||||
Additional paid-in capital | ||||||||
Balance at beginning of period | $ | 2,925 | $ | 2,931 | ||||
Period change | (10 | ) | (12 | ) | ||||
Balance at end of period | $ | 2,915 | $ | 2,919 | ||||
Retained earnings (deficit) | ||||||||
Balance at beginning of period | $ | (653 | ) | $ | (458 | ) | ||
Net income (loss) attributable to MBIA Inc. | (93 | ) | (73 | ) | ||||
Balance at end of period | $ | (746 | ) | $ | (531 | ) | ||
Accumulated other comprehensive income (loss) | ||||||||
Balance at beginning of period | $ | (283 | ) | $ | 100 | |||
Other comprehensive income (loss) | 62 | (182 | ) | |||||
Balance at end of period | $ | (221 | ) | $ | (82 | ) | ||
Treasury shares | ||||||||
Balance at beginning of period | (228,333,444 | ) | (228,630,003 | ) | ||||
Share-based compensation | 111,803 | 300,888 | ||||||
Balance at end of period | (228,221,641 | ) | (228,329,115 | ) | ||||
Treasury stock amount | ||||||||
Balance at beginning of period | $ | (3,154 | ) | $ | (3,169 | ) | ||
Share-based compensation | 11 | 15 | ||||||
Balance at end of period | $ | (3,143 | ) | $ | (3,154 | ) | ||
Total shareholders’ equity of MBIA Inc. | ||||||||
Balance at beginning of period | $ | (882 | ) | $ | (313 | ) | ||
Period change | (30 | ) | (252 | ) | ||||
Balance at end of period | $ | (912 | ) | $ | (565 | ) | ||
Preferred stock of subsidiary shares | ||||||||
Balance at beginning and end of period | 1,315 | 1,315 | ||||||
Preferred stock of subsidiary and noncontrolling interest held for sale | ||||||||
Balance at beginning and end of period | $ | 6 | $ | 13 | ||||
Period change | 7 | - | ||||||
Balance at end of period | $ | 13 | $ | 13 | ||||
Total equity | $ | (899 | ) | $ | (552 | ) | ||
Three Months Ended March 31, | ||||||||
2022 | 2021 | |||||||
Cash flows from operating activities: | ||||||||
Premiums, fees and reimbursements received | $ | 2 | $ | 3 | ||||
Investment income received | 19 | 21 | ||||||
Financial guarantee losses and loss adjustment expenses paid | (336 | ) | (58 | ) | ||||
Proceeds from recoveries and reinsurance | 622 | 17 | ||||||
Proceeds from loan repurchase commitments | 0 | 600 | ||||||
Operating expenses paid and other operating | (22 | ) | (32 | ) | ||||
Interest paid, net of interest converted to principal | (12 | ) | (22 | ) | ||||
Net cash provided (used) by operating activities | 273 | 529 | ||||||
Cash flows from investing activities: | ||||||||
Purchases of available-for-sale | (352 | ) | (299 | ) | ||||
Sales of available-for-sale | 106 | 178 | ||||||
Paydowns and maturities of available-for-sale | 65 | 96 | ||||||
Purchases of investments at fair value | (47 | ) | (62 | ) | ||||
Sales, paydowns, maturities and other proceeds of investments at fair value | 44 | 59 | ||||||
Sales, paydowns and maturities (purchases) of short-term investments, net | (68 | ) | (342 | ) | ||||
Paydowns and maturities of loans receivable | 2 | 5 | ||||||
(Payments) proceeds for derivative settlements | (4 | ) | (53 | ) | ||||
Net cash provided (used) by investing activities | (254 | ) | (418 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from investment agreements | 2 | 0 | ||||||
Principal paydowns of investment agreements | (1 | ) | 0 | |||||
Principal paydowns of variable interest entity notes | (11 | ) | (156 | ) | ||||
Principal paydowns of long-term debt | (17 | ) | 0 | |||||
Purchases of treasury stock | (2 | ) | (1 | ) | ||||
Net cash provided (used) by financing activities | (29 | ) | (157 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | 1 | 0 | ||||||
Net increase (decrease) in cash and cash equivalents | (9 | ) | (46 | ) | ||||
Cash and cash equivalents - beginning of period | 160 | 167 | ||||||
Cash and cash equivalents - end of period | $ | 151 | $ | 121 | ||||
Reconciliation of net income (loss) to net cash provided (used) by operating activities: | ||||||||
Net income (loss) | $ | (73 | ) | $ | (106 | ) | ||
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities: | ||||||||
Change in: | ||||||||
Accrued investment income | (5 | ) | 23 | |||||
Unearned premium revenue | (15 | ) | (19 | ) | ||||
Loss and loss adjustment expense reserves | (13 | ) | 1 | |||||
Insurance loss recoverable | 392 | 55 | ||||||
Loan repurchase commitments | 0 | 604 | ||||||
Accrued interest payable | 24 | 25 | ||||||
Accrued expenses | (36 | ) | (33 | ) | ||||
Net realized investment gains (losses) | 3 | 1 | ||||||
Net (gains) losses on financial instruments at fair value and foreign exchange | (13 | ) | (42 | ) | ||||
Other net realized (gains) losses | 3 | 0 | ||||||
Other operating | 6 | 20 | ||||||
Total adjustments to net income (loss) | 346 | 635 | ||||||
Net cash provided (used) by operating activities | $ | 273 | $ | 529 | ||||
Three Months Ended March 31, | ||||||||
2023 | 2022 | |||||||
Cash flows from operating activities: | ||||||||
Premiums, fees and reimbursements received | $ | 2 | $ | 2 | ||||
Investment income received | 26 | 19 | ||||||
Financial guarantee losses and loss adjustment expenses paid | (28 | ) | (336 | ) | ||||
Proceeds from recoveries and reinsurance, net of salvage paid to reinsurers | 3 | 622 | ||||||
Operating expenses paid and other operating | (34 | ) | (22 | ) | ||||
Other proceeds from consolidated variable interest entities | 15 | - | ||||||
Interest paid, net of interest converted to principal | (14 | ) | (12 | ) | ||||
Cash (used) provided by discontinued operations | (6 | ) | - | |||||
Net cash provided (used) by operating activities | (36 | ) | 273 | |||||
Cash flows from investing activities: | ||||||||
Purchases of available-for-sale | (247 | ) | (352 | ) | ||||
Sales of available-for-sale | 98 | 106 | ||||||
Paydowns and maturities of available-for-sale | 49 | 65 | ||||||
Purchases of investments at fair value | (24 | ) | (47 | ) | ||||
Sales, paydowns, maturities and other proceeds of investments at fair value | 206 | 44 | ||||||
Sales, paydowns and maturities (purchases) of short-term investments, net | (13 | ) | (68 | ) | ||||
Paydowns and maturities of loans receivable | 3 | 2 | ||||||
(Payments) proceeds for derivative settlements | (1 | ) | (4 | ) | ||||
Net cash provided (used) by investing activities | 71 | (254 | ) | |||||
Cash flows from financing activities: | ||||||||
Proceeds from investment agreements | 2 | 2 | ||||||
Principal paydowns of investment agreements | (1 | ) | (1 | ) | ||||
Principal paydowns of variable interest entity debt | (21 | ) | (11 | ) | ||||
Principal paydowns of long-term debt | - | (17 | ) | |||||
Purchases of treasury stock | (4 | ) | (2 | ) | ||||
Cash provided (used) by discontinued operations | 4 | - | ||||||
Net cash provided (used) by financing activities | (20 | ) | (29 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | - | 1 | ||||||
Net increase (decrease) in cash and cash equivalents | 15 | (9 | ) | |||||
Cash and cash equivalents—beginning of period | 78 | 160 | ||||||
Cash and cash equivalents—end of period | $ | 93 | $ | 151 | ||||
Reconciliation of net income (loss) to net cash provided (used) by operating activities: | ||||||||
Net income (loss) | $ | (86 | ) | $ | (73 | ) | ||
Income (loss) from discontinued operations, net of income taxes | (3 | ) | - | |||||
Income (loss) from continuing operations | (83 | ) | (73 | ) | ||||
Adjustments to reconcile net income (loss) from continuing operations to net cash provided (used) by operating activities: | ||||||||
Change in: | ||||||||
Accrued investment income | - | (5 | ) | |||||
Unearned premium revenue | (9 | ) | (15 | ) | ||||
Loss and loss adjustment expense reserves | (66 | ) | (13 | ) | ||||
Insurance loss recoverable | 42 | 392 | ||||||
Accrued interest payable | 34 | 24 | ||||||
Other assets and liabilities | 7 | (36 | ) | |||||
Net realized investment gains (losses) | 3 | 3 | ||||||
Net (gains) losses on financial instruments at fair value and foreign exchange | 16 | (13 | ) | |||||
Other net realized (gains) losses | 15 | 3 | ||||||
Other operating | 5 | 6 | ||||||
Total adjustments to income (loss) from continuing operations | 47 | 346 | ||||||
Net cash provided (used) by operating activities | $ | (36 | ) | $ | 273 | |||
As of | ||||||||
In millions | March 31, 2023 | December 31, 2022 | ||||||
Assets held for sale | ||||||||
Cash | $ | 10 | $ | 12 | ||||
Accounts receivable | 21 | 24 | ||||||
Goodwill | 90 | 90 | ||||||
Other assets | 13 | 8 | ||||||
Loss on disposal group | (51) | (54) | ||||||
Total assets held for sale | $ | 83 | $ | 80 | ||||
Liabilities held for sale | ||||||||
Accounts payable | $ | 11 | $ | 12 | ||||
Debt | 34 | 30 | ||||||
Accrued expenses and other | 23 | 19 | ||||||
Total liabilities held for sale | $ | 68 | $ | 61 | ||||
In millions | ||||
Revenues | ||||
Revenues | $ | 32 | ||
Cost of sales | 17 | |||
Total revenues from discontinued operations | 15 | |||
Expenses | ||||
Operating | 20 | |||
Interest | 1 | |||
Increase (decrease) on loss on disposal group | (3) | |||
Total expenses from discontinued operations | 18 | |||
Income (loss) before income taxes from discontinued operations | (3 | ) | ||
Provision (benefit) for income taxes from discontinued operations | - | |||
Income (loss) from discontinued operations, net of income taxes | $ | (3 | ) | |
March 31, 2022 | ||||||||||||||||||||||||
Carrying Value of Assets | Carrying Value of Liabilities | |||||||||||||||||||||||
In millions | Maximum Exposure to Loss | Investments | Premiums Receivable | Insurance Loss Recoverable | Unearned Premium Revenue | Loss and Loss Adjustment Expense Reserves | ||||||||||||||||||
Insurance: | ||||||||||||||||||||||||
Global structured finance: | ||||||||||||||||||||||||
Mortgage-backed residential | $ | 1,228 | $ | 119 | $ | 13 | $ | 34 | $ | 11 | $ | 395 | ||||||||||||
Consumer asset-backed | 210 | 0 | 1 | 3 | 0 | 6 | ||||||||||||||||||
Corporate asset-backed | 490 | 0 | 3 | 201 | 4 | 4 | ||||||||||||||||||
Total global structured finance | 1,928 | 119 | 17 | 238 | 15 | 405 | ||||||||||||||||||
Global public finance | 848 | 0 | 6 | 0 | 5 | 0 | ||||||||||||||||||
Total insurance | $ | 2,776 | $ | 119 | $ | 23 | $ | 238 | $ | 20 | $ | 405 | ||||||||||||
March 31, 2023 | ||||||||||||||||||||||||
Carrying Value of Assets | Carrying Value of Liabilities | |||||||||||||||||||||||
In millions | Maximum Exposure to Loss | Investments | Premiums Receivable | Insurance Loss Recoverable | Unearned Premium Revenue | Loss and Loss Adjustment Expense Reserves | ||||||||||||||||||
Insurance: | ||||||||||||||||||||||||
Global structured finance: | ||||||||||||||||||||||||
Mortgage-backed residential | $ | 977 | $ | 75 | $ | 6 | $ | 22 | $ | 4 | $ | 289 | ||||||||||||
Consumer asset-backed | 152 | - | - | 1 | 1 | 4 | ||||||||||||||||||
Corporate asset-backed | 437 | - | 3 | 7 | 3 | - | ||||||||||||||||||
Total global structured finance | 1,566 | 75 | 9 | 30 | 8 | 293 | ||||||||||||||||||
Global public finance | 226 | - | 4 | - | 4 | - | ||||||||||||||||||
Total insurance | $ | 1,792 | $ | 75 | $ | 13 | $ | 30 | $ | 12 | $ | 293 | ||||||||||||
December 31, 2021 | ||||||||||||||||||||||||
Carrying Value of Assets | Carrying Value of Liabilities | |||||||||||||||||||||||
In millions | Maximum Exposure to Loss | Investments | Premiums Receivable | Insurance Loss Recoverable | Unearned Premium Revenue | Loss and Loss Adjustment Expense Reserves | ||||||||||||||||||
Insurance: | ||||||||||||||||||||||||
Global structured finance: | ||||||||||||||||||||||||
Mortgage-backed residential | $ | 1,261 | $ | 87 | $ | 14 | $ | 40 | $ | 11 | $ | 430 | ||||||||||||
Consumer asset-backed | 226 | 0 | 1 | 1 | 1 | 6 | ||||||||||||||||||
Corporate asset-backed | 503 | 0 | 3 | 200 | 4 | 11 | ||||||||||||||||||
Total global structured finance | 1,990 | 87 | 18 | 241 | 16 | 447 | ||||||||||||||||||
Global public finance | 834 | 0 | 6 | 0 | 5 | 0 | ||||||||||||||||||
Total insurance | $ | 2,824 | $ | 87 | $ | 24 | $ | 241 | $ | 21 | $ | 447 | ||||||||||||
December 31, 2022 | ||||||||||||||||||||||||
Carrying Value of Assets | Carrying Value of Liabilities | |||||||||||||||||||||||
In millions | Maximum Exposure to Loss | Investments | Premiums Receivable | Insurance Loss Recoverable | Unearned Premium Revenue | Loss and Loss Adjustment Expense Reserves | ||||||||||||||||||
Insurance: | ||||||||||||||||||||||||
Global structured finance: | ||||||||||||||||||||||||
Mortgage-backed residential | $ | 996 | $ | 75 | $ | 6 | $ | 21 | $ | 4 | $ | 277 | ||||||||||||
Consumer asset-backed | 164 | - | - | - | 1 | 5 | ||||||||||||||||||
Corporate asset-backed | 450 | - | 3 | 7 | 3 | - | ||||||||||||||||||
Total global structured finance | 1,610 | 75 | 9 | 28 | 8 | 282 | ||||||||||||||||||
Global public finance | 230 | - | 5 | - | 4 | - | ||||||||||||||||||
Total insurance | $ | 1,840 | $ | 75 | $ | 14 | $ | 28 | $ | 12 | $ | 282 | ||||||||||||
As of March 31, 2023 | As of December 31, 2022 | |||||||||||||||
In millions - | Balance Sheet Line Item | Balance Sheet Line Item | ||||||||||||||
Insurance loss recoverable | Loss and LAE reserves (1) | Insurance loss recoverable | Loss and LAE reserves (1) | |||||||||||||
U.S. Public Finance Insurance | $ | 63 | $ | 85 | $ | 107 | $ | 154 | ||||||||
International and Structured Finance Insurance: | ||||||||||||||||
Before VIE eliminations | 34 | 458 | 32 | 488 | ||||||||||||
VIE eliminations | (2 | ) | (164 | ) | (2 | ) | (203 | ) | ||||||||
Total international and structured finance insurance | 32 | 294 | 30 | 285 | ||||||||||||
Total | $ | 95 | $ | 379 | $ | 137 | $ | 439 | ||||||||
As of March 31, 2022 | As of December 31, 2021 | |||||||||||||||
In millions | Balance Sheet Line Item | Balance Sheet Line Item | ||||||||||||||
Insurance loss recoverable | Loss and LAE reserves (1) | Insurance loss recoverable | Loss and LAE reserves (1) | |||||||||||||
U.S. Public Finance Insurance | $ | 128 | $ | 460 | $ | 1,054 | $ | 425 | ||||||||
International and Structured Finance Insurance: | ||||||||||||||||
Before VIE eliminations | 240 | 635 | 244 | 687 | ||||||||||||
VIE eliminations | (2 | ) | (209 | ) | (2 | ) | (218 | ) | ||||||||
Total international and structured finance insurance | 238 | 426 | 242 | 469 | ||||||||||||
Total | $ | 366 | $ | 886 | $ | 1,296 | $ | 894 | ||||||||
In millions | Changes in Loss and LAE Reserves for the Three Months Ended March 31, 2022 | |||||||||||
Gross Loss and LAE Reserves as of December 31, 2021 (1) | Loss Payments | Accretion of Claim Liability Discount | Changes in Discount Rates | Changes in Assumptions | Changes in Unearned Premium Revenue | Gross Loss and LAE Reserves as of March 31, 2022 (1) | ||||||
$894 | $(326) | $3 | $(22) | $336 | $1 | $886 | ||||||
In millions | Changes in Loss and LAE Reserves for the Three Months Ended March 31, 2023 | |||||||||||||||||||||||||
Gross Loss and LAE Reserves as of December 31, 2022 | Loss and LAE Payments | Accretion of Claim Liability Discount | Changes in Discount Rates | Changes in Assumptions (1) | Changes in Unearned Premium Revenue | Gross Loss and LAE Reserves as of March 31, 2023 | ||||||||||||||||||||
$439 | $(28) | $4 | $11 | $(47) | $- | $379 | ||||||||||||||||||||
Changes in Insurance Loss Recoverable | Changes in Insurance Loss Recoverable | |||||||||||||||||||||||||||||||||||||||||||||||
for the Three Months Ended March 31, 2022 | for the Three Months Ended March 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||
In millions | Gross Recoverable as of December 31, 2021 | Collections for Cases | Accretion of Recoveries | Changes in Discount Rates | Changes in Assumptions | Gross Recoverable as of March 31, 2022 | Gross Recoverable as of December 31, 2022 | Collections for Cases | Accretion of Recoveries | Changes in Discount Rates | Changes in Assumptions | Gross Recoverable as of March 31, 2023 | ||||||||||||||||||||||||||||||||||||
Insurance loss recoverable | $ | 1,296 | $ | (1,197 | ) | $ | 1 | $ | (18 | ) | $ | 284 | $ | 366 | $ | 137 | $ | (2 | ) | $ | 1 | $ | 1 | $ | (42 | ) | $ | 95 | ||||||||||||||||||||
Surveillance Categories | ||||||||||||||||||||
$ in millions | Caution List Low | Caution List Medium | Caution List High | Classified List | Total | |||||||||||||||
Number of policies | 41 | 1 | - | 100 | 142 | |||||||||||||||
Number of issues (1) | 15 | 1 | - | 79 | 95 | |||||||||||||||
Remaining weighted average contract period (in years) | 5.8 | 0.8 | - | 7.0 | 6.4 | |||||||||||||||
Gross insured contractual payments outstanding: (2) | ||||||||||||||||||||
Principal | $ | 1,496 | $ | 2 | $ | - | $ | 1,441 | $ | 2,939 | ||||||||||
Interest | 1,751 | - | - | 572 | 2,323 | |||||||||||||||
Total | $ | 3,247 | $ | 2 | $ | - | $ | 2,013 | $ | 5,262 | ||||||||||
Gross Claim Liability (3) | $ | - | $ | - | $ | - | $ | 591 | $ | 591 | ||||||||||
Less: | ||||||||||||||||||||
Gross Potential Recoveries (4) | - | - | - | 152 | 152 | |||||||||||||||
Discount, net (5) | - | - | - | 156 | 156 | |||||||||||||||
Net claim liability (recoverable) | $ | - | $ | - | $ | - | $ | 283 | $ | 283 | ||||||||||
Unearned premium revenue | $ | 10 | $ | - | $ | - | $ | 9 | $ | 19 | ||||||||||
Reinsurance recoverable on paid and unpaid losses (6) | $ | 3 |
Surveillance Categories | ||||||||||||||||||||
$ in millions | Caution List Low | Caution List Medium | Caution List High | Classified List | Total | |||||||||||||||
Number of policies | 55 | 3 | 0 | 174 | 232 | |||||||||||||||
Number of issues (1) | 16 | 2 | 0 | 87 | 105 | |||||||||||||||
Remaining weighted average contract period (in years) | 6.0 | 2.3 | - | 8.5 | 7.6 | |||||||||||||||
Gross insured contractual payments outstanding: (2) | ||||||||||||||||||||
Principal | $ | 1,325 | $ | 6 | $ | 0 | $ | 2,321 | $ | 3,652 | ||||||||||
Interest | 1,825 | 1 | 0 | 1,053 | 2,879 | |||||||||||||||
Total | $ | 3,150 | $ | 7 | $ | 0 | $ | 3,374 | $ | 6,531 | ||||||||||
Gross Claim Liability (3) | $ | 0 | $ | 0 | $ | 0 | $ | 1,118 | $ | 1,118 | ||||||||||
Less: | ||||||||||||||||||||
Gross Potential Recoveries (4) | 0 | 0 | 0 | 421 | 421 | |||||||||||||||
Discount, net (5) | 0 | 0 | 0 | 187 | 187 | |||||||||||||||
Net claim liability (recoverable) | $ | 0 | $ | 0 | $ | 0 | $ | 510 | $ | 510 | ||||||||||
Unearned premium revenue | $ | 8 | $ | 0 | $ | 0 | $ | 25 | $ | 33 | ||||||||||
Reinsurance recoverable on paid and unpaid losses (6) | $ | 14 |
(1) - | An “issue” represents the aggregate of financial guarantee policies that share the same revenue source for purposes of making debt service payments on the insured debt. |
(2) - | Represents contractual principal and interest payments due by the issuer of the obligations insured by MBIA. |
(3) - | The gross claim liability with respect to Puerto Rico exposures are net of expected recoveries for policies in a net payable position. |
(4) - | Gross potential recoveries with respect to certain Puerto Rico exposures are net of the claim liability for policies in a net recoverable position. |
(5) - | Represents discount related to Gross Claim Liability and Gross Potential Recoveries. |
(6) - | Included in “Other assets” on the Company’s consolidated balance sheets. |
Surveillance Categories | ||||||||||||||||||||
$ in millions | Caution List Low | Caution List Medium | Caution List High | Classified List | Total | |||||||||||||||
Number of policies | 55 | 3 | 0 | 202 | 260 | |||||||||||||||
Number of issues (1) | 16 | 2 | 0 | 88 | 106 | |||||||||||||||
Remaining weighted average contract period (in years) | 6.1 | 2.6 | - | 8.1 | 7.4 | |||||||||||||||
Gross insured contractual payments outstanding: (2) | ||||||||||||||||||||
Principal | $ | 1,366 | $ | 6 | $ | 0 | $ | 2,719 | $ | 4,091 | ||||||||||
Interest | 1,867 | 1 | 0 | 1,214 | 3,082 | |||||||||||||||
Total | $ | 3,233 | $ | 7 | $ | 0 | $ | 3,933 | $ | 7,173 | ||||||||||
Gross Claim Liability (3) | $ | 0 | $ | 0 | $ | 0 | $ | 1,051 | $ | 1,051 | ||||||||||
Less: | ||||||||||||||||||||
Gross Potential Recoveries (4) | 0 | 0 | 0 | 1,498 | 1,498 | |||||||||||||||
Discount, net (5) | 0 | 0 | 0 | (32 | ) | (32 | ) | |||||||||||||
Net claim liability (recoverable) | $ | 0 | $ | 0 | $ | 0 | $ | (415 | ) | $ | (415 | ) | ||||||||
Unearned premium revenue | $ | 8 | $ | 0 | $ | 0 | $ | 29 | $ | 37 | ||||||||||
Reinsurance recoverable on paid and unpaid losses (6) | $ | 7 |
Surveillance Categories | ||||||||||||||||||||
$ in millions | Caution List Low | Caution List Medium | Caution List High | Classified List | Total | |||||||||||||||
Number of policies | 57 | 3 | - | 101 | 161 | |||||||||||||||
Number of issues (1) | 17 | 2 | - | 80 | 99 | |||||||||||||||
Remaining weighted average contract period (in years) | 5.7 | 2.4 | - | 7.2 | 6.4 | |||||||||||||||
Gross insured contractual payments outstanding: (2) | ||||||||||||||||||||
Principal | $ | 1,723 | $ | 4 | $ | - | $ | 1,458 | $ | 3,185 | ||||||||||
Interest | 1,905 | 1 | - | 602 | 2,508 | |||||||||||||||
Total | $ | 3,628 | $ | 5 | $ | - | $ | 2,060 | $ | 5,693 | ||||||||||
Gross Claim Liability (3) | $ | - | $ | - | $ | - | $ | 677 | $ | 677 | ||||||||||
Less: | ||||||||||||||||||||
Gross Potential Recoveries (4) | - | - | - | 198 | 198 | |||||||||||||||
Discount, net (5) | - | - | - | 179 | 179 | |||||||||||||||
Net claim liability (recoverable) | $ | - | $ | - | $ | - | $ | 300 | $ | 300 | ||||||||||
Unearned premium revenue | $ | 11 | $ | - | $ | - | $ | 9 | $ | 20 | ||||||||||
Reinsurance recoverable on paid and unpaid losses (6) | $ | 10 |
(1) - | An “issue” represents the aggregate of financial guarantee policies that share the same revenue source for purposes of making debt service payments on the insured debt. |
(2) - | Represents contractual principal and interest payments due by the issuer of the obligations insured by MBIA. |
(3) - | The gross claim liability with respect to Puerto Rico exposures are net of expected recoveries for policies in a net payable position. |
(4) - | Gross potential recoveries with respect to certain Puerto Rico exposures are net of the claim liability for policies in a net recoverable position. |
(5) - | Represents discount related to Gross Claim Liability and Gross Potential Recoveries. |
(6) - | Included in “Other assets” on the Company’s consolidated balance sheets. |
In millions | Fair Value as of March 31, 2022 | Valuation Techniques | Unobservable Input | Range (Weighted Average) | ||||||||
Assets of consolidated VIEs: | ||||||||||||
Loans receivable at fair value | $ | 76 | Market prices of similar liabilities adjusted for financial | Impact of financial guarantee | 18% - 76 % ( 55%) (1) | |||||||
Liabilities of consolidated VIEs: | ||||||||||||
Variable interest entity notes | 285 | Market assets adjusted for financial guarantees provided or market prices of similar liabilities | Impact of financial guarantee | 36% - 76% (65 %) (1) |
In millions | Fair Value as of March 31, 2023 | Valuation Techniques | Unobservable Input | Range (Weighted Average) | ||||||||
Assets: | ||||||||||||
Equity Investments | $ | 115 | Discounted cash flow | EBITDA multiples (1) | ||||||||
Discount rate (1) | ||||||||||||
Sum of the parts | Hard asset values (1) | |||||||||||
Type certificate values (1) | ||||||||||||
Assets of consolidated VIEs: | ||||||||||||
Loans receivable at fair value | 83 | Market prices of similar liabilities or internal cash flow models adjusted for financial guarantees provided to VIE obligations | Impact of financial guarantee | 13% - 98% | (58%) (2) | |||||||
Liabilities of consolidated VIEs: | ||||||||||||
Variable interest entity notes | 154 | Market prices of VIE assets adjusted for financial guarantees provided or market prices of similar liabilities | Impact of financial guarantee | 44% - 72% | (68%) (2) |
(1) - | Range for EBITDA multiples, discount rate, hard asset values and type certificate values reflects their potential variability. |
(2) - | Weighted average represents the total MBIA guarantees as a percentage of total instrument fair value. |
In millions | Fair Value as of December 31, 2022 | Valuation Techniques | Unobservable Input | Range (Weighted Average) | ||||||||
Assets: | ||||||||||||
Equity Investments | $ | 115 | Discounted cash flow | EBITDA multiples (1) | ||||||||
Discount rate (1) | ||||||||||||
Sum of the parts | Hard asset values (1) | |||||||||||
Type certificate values (1) | ||||||||||||
Assets of consolidated VIEs: | ||||||||||||
Loans receivable at fair value | 78 | Market prices of similar liabilities or internal cash flow models adjusted for financial guarantees provided to VIE obligations | Impact of financial guarantee | 12% - 88% | (52%) (2) | |||||||
Liabilities of consolidated VIEs: | ||||||||||||
Variable interest entity notes | 172 | Market prices of VIE assets adjusted for financial guarantees provided or market prices of similar liabilities | Impact of financial guarantee | 34% - 82% | (68%) (2) |
(1) - | Range for EBITDA multiples, discount rate, hard asset values and type certificate values reflects their potential variability. |
In millions | Fair Value as of December 31, 2021 | Valuation Techniques | Unobservable Input | Range (Weighted Average) | ||||||||
Assets of consolidated VIEs: | ||||||||||||
Loans receivable at fair value | $ | 77 | Market prices of similar liabilities adjusted for financial | Impact of financial guarantee | 23% - 72 % ( 55%) (1) | |||||||
Liabilities of consolidated VIEs: | ||||||||||||
Variable interest entity notes | 291 | Market assets adjusted for financial guarantees provided or market prices of similar liabilities | Impact of financial guarantee | 33% - 73 % (59%) (1) |
Fair Value Measurements at Reporting Date Using | ||||||||||||||||
In millions | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Balance as of March 31, 2023 | ||||||||||||
Assets: | ||||||||||||||||
Fixed-maturity investments: | ||||||||||||||||
U.S. Treasury and government agency | $ | 494 | $ | 56 | $ | - | $ | 550 | ||||||||
State and municipal bonds | - | 131 | - | 131 | ||||||||||||
Foreign governments | - | 24 | - | 24 | ||||||||||||
Corporate obligations | - | 967 | 1 | 968 | ||||||||||||
Mortgage-backed securities: | ||||||||||||||||
Residential mortgage-backed agency | - | 231 | - | 231 | ||||||||||||
Residential mortgage-backed non-agency | - | 104 | - | 104 | ||||||||||||
Commercial mortgage-backed | - | 27 | - | 27 | ||||||||||||
Asset-backed securities: | ||||||||||||||||
Collateralized debt obligations | - | 160 | - | 160 | ||||||||||||
Other asset-backed | - | 106 | - | 106 | ||||||||||||
Total fixed-maturity investments | 494 | 1,806 | 1 | 2,301 | ||||||||||||
Money market securities | 208 | - | - | 208 | ||||||||||||
Equity investments | 37 | 19 | 115 | 171 | ||||||||||||
Cash and cash equivalents | 67 | - | - | 67 | ||||||||||||
Assets of consolidated VIEs: | ||||||||||||||||
Mortgage-backed securities: | ||||||||||||||||
Residential mortgage-backed non-agency | - | 11 | - | 11 | ||||||||||||
Commercial mortgage-backed | - | 9 | - | 9 | ||||||||||||
Asset-backed securities: | ||||||||||||||||
Collateralized debt obligations | - | 1 | - | 1 | ||||||||||||
Other asset-backed | - | 1 | - | 1 | ||||||||||||
Cash | 16 | - | - | 16 | ||||||||||||
Loans receivable at fair value: | ||||||||||||||||
Residential loans receivable | - | - | 83 | 83 | ||||||||||||
Other assets: | ||||||||||||||||
Other | - | - | 9 | 9 | ||||||||||||
Total assets | $ | 822 | $ | 1,847 | $ | 208 | $ | 2,877 | ||||||||
Liabilities: | ||||||||||||||||
Medium-term notes | $ | - | $ | - | $ | 42 | $ | 42 | ||||||||
Derivative liabilities: | ||||||||||||||||
Non-insured interest rate derivatives | - | 57 | - | 57 | ||||||||||||
Liabilities of consolidated VIEs: | ||||||||||||||||
Variable interest entity notes | - | - | 154 | 154 | ||||||||||||
Currency derivatives | - | - | 11 | 11 | ||||||||||||
Total liabilities | $ | - | $ | 57 | $ | 207 | $ | 264 | ||||||||
Fair Value Measurements at Reporting Date Using | ||||||||||||||||
In millions | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Balance as of March 31, 2022 | ||||||||||||
Assets: | ||||||||||||||||
Fixed-maturity investments: | ||||||||||||||||
U.S. Treasury and government agency | $ | 801 | $ | 86 | $ | 0 | $ | 887 | ||||||||
State and municipal bonds | 0 | 705 | 0 | 705 | ||||||||||||
Foreign governments | 0 | 23 | 0 | 23 | ||||||||||||
Corporate obligations | 0 | 1,070 | 0 | 1,070 | ||||||||||||
Mortgage-backed securities: | ||||||||||||||||
Residential mortgage-backed agency | 0 | 183 | 0 | 183 | ||||||||||||
Residential mortgage-backed non-agency | 0 | 99 | 38 | 137 | ||||||||||||
Commercial mortgage-backed | 0 | 12 | 0 | 12 | ||||||||||||
Asset-backed securities: | ||||||||||||||||
Collateralized debt obligations | 0 | 176 | 0 | 176 | ||||||||||||
Other asset-backed | 0 | 189 | 0 | 189 | ||||||||||||
Total fixed-maturity investments | 801 | 2,543 | 38 | 3,382 | ||||||||||||
Money market securities | 24 | 0 | 0 | 24 | ||||||||||||
Perpetual debt and equity securities | 46 | 22 | 0 | 68 | ||||||||||||
Cash and cash equivalents | 147 | 0 | 0 | 147 | ||||||||||||
Assets of consolidated VIEs: | ||||||||||||||||
Corporate obligations | 0 | 4 | 0 | 4 | ||||||||||||
Mortgage-backed securities: | ||||||||||||||||
Residential mortgage-backed non-agency | 0 | 25 | 0 | 25 | ||||||||||||
Commercial mortgage-backed | 0 | 10 | 0 | 10 | ||||||||||||
Asset-backed securities: | ||||||||||||||||
Collateralized debt obligations | 0 | 6 | 0 | 6 | ||||||||||||
Other asset-backed | 0 | 8 | 0 | 8 | ||||||||||||
Cash | 4 | 0 | 0 | 4 | ||||||||||||
Loans receivable at fair value: | ||||||||||||||||
Residential loans receivable | 0 | 0 | 76 | 76 | ||||||||||||
Other assets: | ||||||||||||||||
Currency derivatives | 0 | 0 | 9 | 9 | ||||||||||||
Other | 0 | 0 | 15 | 15 | ||||||||||||
Total assets | $ | 1,022 | $ | 2,618 | $ | 138 | $ | 3,778 | ||||||||
Liabilities: | ||||||||||||||||
Medium-term notes | $ | 0 | $ | 0 | $ | 99 | $ | 99 | ||||||||
Derivative liabilities: | ||||||||||||||||
Insured credit derivatives | 0 | 1 | 0 | 1 | ||||||||||||
Non-insured interest rate derivatives | 0 | 98 | 0 | 98 | ||||||||||||
Liabilities of consolidated VIEs: | ||||||||||||||||
Variable interest entity notes | 0 | 0 | 285 | 285 | ||||||||||||
Total liabilities | $ | 0 | $ | 99 | $ | 384 | $ | 483 | ||||||||
Fair Value Measurements at Reporting Date Using | ||||||||||||||||
In millions | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Balance as of December 31, 2022 | ||||||||||||
Assets: | ||||||||||||||||
Fixed-maturity investments: | ||||||||||||||||
U.S. Treasury and government agency | $ | 463 | $ | 54 | $ | - | $ | 517 | ||||||||
State and municipal bonds | - | 323 | - | 323 | ||||||||||||
Foreign governments | - | 21 | - | 21 | ||||||||||||
Corporate obligations | - | 797 | - | 797 | ||||||||||||
Mortgage-backed securities: | ||||||||||||||||
Residential mortgage-backed agency | - | 207 | - | 207 | ||||||||||||
Residential mortgage-backed non-agency | - | 95 | - | 95 | ||||||||||||
Commercial mortgage-backed | - | 24 | - | 24 | ||||||||||||
Asset-backed securities: | ||||||||||||||||
Collateralized debt obligations | - | 159 | - | 159 | ||||||||||||
Other asset-backed | - | 127 | - | 127 | ||||||||||||
Total fixed-maturity investments | 463 | 1,807 | - | 2,270 | ||||||||||||
Money market securities | 234 | - | - | 234 | ||||||||||||
Equity investments | 38 | 19 | 115 | 172 | ||||||||||||
Cash and cash equivalents | 50 | - | - | 50 | ||||||||||||
Assets of consolidated VIEs: | ||||||||||||||||
Corporate obligations | - | 4 | - | 4 | ||||||||||||
Mortgage-backed securities: | ||||||||||||||||
Residential mortgage-backed non-agency | - | 22 | - | 22 | ||||||||||||
Commercial mortgage-backed | - | 9 | - | 9 | ||||||||||||
Asset-backed securities: | ||||||||||||||||
Collateralized debt obligations | - | 5 | - | 5 | ||||||||||||
Other asset-backed | - | 7 | - | 7 | ||||||||||||
Cash | 16 | - | - | 16 | ||||||||||||
Loans receivable at fair value: | ||||||||||||||||
Residential loans receivable | - | - | 78 | 78 | ||||||||||||
Other assets: | ||||||||||||||||
Other | - | - | 23 | 23 | ||||||||||||
Total assets | $ | 801 | $ | 1,873 | $ | 216 | $ | 2,890 | ||||||||
Liabilities: | ||||||||||||||||
Medium-term notes | $ | - | $ | - | $ | 41 | $ | 41 | ||||||||
Derivative liabilities: | ||||||||||||||||
Non-insured interest rate derivatives | - | 49 | - | 49 | ||||||||||||
Liabilities of consolidated VIEs: | ||||||||||||||||
Variable interest entity notes | - | - | 172 | 172 | ||||||||||||
Currency derivatives | - | - | 6 | 6 | ||||||||||||
Total liabilities | $ | - | $ | 49 | $ | 219 | $ | 268 | ||||||||
Fair Value Measurements at Reporting Date Using | ||||||||||||||||
In millions | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Balance as of December 31, 2021 | ||||||||||||
Assets: | ||||||||||||||||
Fixed-maturity investments: | ||||||||||||||||
U.S. Treasury and government agency | $ | 750 | $ | 95 | $ | 0 | $ | 845 | ||||||||
State and municipal bonds | 0 | 168 | 0 | 168 | ||||||||||||
Foreign governments | 0 | 17 | 0 | 17 | ||||||||||||
Corporate obligations | 0 | 1,050 | 0 | 1,050 | ||||||||||||
Mortgage-backed securities: | ||||||||||||||||
Residential mortgage-backed agency | 0 | 198 | 0 | 198 | ||||||||||||
Residential mortgage-backed non-agency | 0 | 98 | 0 | 98 | ||||||||||||
Commercial mortgage-backed | 0 | 13 | 0 | 13 | ||||||||||||
Asset-backed securities: | ||||||||||||||||
Collateralized debt obligations | 0 | 150 | 0 | 150 | ||||||||||||
Other asset-backed | 0 | 106 | 0 | 106 | ||||||||||||
Total fixed-maturity investments | 750 | 1,895 | 0 | 2,645 | ||||||||||||
Money market securities | 78 | 0 | 0 | 78 | ||||||||||||
Perpetual debt and equity securities | �� | 47 | 23 | 0 | 70 | |||||||||||
Cash and cash equivalents | 151 | 0 | 0 | 151 | ||||||||||||
Derivative assets: | ||||||||||||||||
Non-insured interest rate derivatives | 0 | 1 | 0 | 1 | ||||||||||||
Assets of consolidated VIEs: | ||||||||||||||||
Corporate obligations | 0 | 5 | 0 | 5 | ||||||||||||
Mortgage-backed securities: | ||||||||||||||||
Residential mortgage-backed non-agency | 0 | 27 | 0 | 27 | ||||||||||||
Commercial mortgage-backed | 0 | 10 | 0 | 10 | ||||||||||||
Asset-backed securities: | ||||||||||||||||
Collateralized debt obligations | 0 | 6 | 4 | 10 | ||||||||||||
Other asset-backed | 0 | 8 | 0 | 8 | ||||||||||||
Cash | 9 | 0 | 0 | 9 | ||||||||||||
Loans receivable at fair value: | ||||||||||||||||
Residential loans receivable | 0 | 0 | 77 | 77 | ||||||||||||
Other assets: | ||||||||||||||||
Currency derivatives | 0 | 0 | 9 | 9 | ||||||||||||
Other | 0 | 0 | 14 | 14 | ||||||||||||
Total assets | $ | 1,035 | $ | 1,975 | $ | 104 | $ | 3,114 | ||||||||
Liabilities: | ||||||||||||||||
Medium-term notes | $ | 0 | $ | 0 | $ | 98 | $ | 98 | ||||||||
Derivative liabilities: | ||||||||||||||||
Insured credit derivatives | 0 | 1 | 0 | 1 | ||||||||||||
Non-insured interest rate derivatives | 0 | 130 | 0 | 130 | ||||||||||||
Liabilities of consolidated VIEs: | ||||||||||||||||
Variable interest entity notes | 0 | 0 | 291 | 291 | ||||||||||||
Total liabilities | $ | 0 | $ | 131 | $ | 389 | $ | 520 | ||||||||
Fair Value Measurements at Reporting Date Using | Fair Value Measurements at Reporting Date Using | |||||||||||||||||||||||||||||||||||||||
In millions | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Fair Value Balance as of March 31, 2022 | Carry Value Balance as of March 31, 2022 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Fair Value Balance as of March 31, 2023 | Carry Value Balance as of March 31, 2023 | ||||||||||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||||||||||
Long-term debt | $ | 0 | $ | 413 | $ | 0 | $ | 413 | $ | 2,344 | $ | - | $ | 296 | $ | - | $ | 296 | $ | 2,467 | ||||||||||||||||||||
Medium-term notes | 0 | 0 | 329 | 329 | 487 | - | - | 309 | 309 | 462 | ||||||||||||||||||||||||||||||
Investment agreements | 0 | 0 | 331 | 331 | 274 | - | - | 259 | 259 | 233 | ||||||||||||||||||||||||||||||
Liabilities of consolidated VIEs: | ||||||||||||||||||||||||||||||||||||||||
Variable interest entity loans payable | - | - | 2 | 2 | 2 | |||||||||||||||||||||||||||||||||||
Total liabilities | $ | 0 | $ | 413 | $ | 660 | $ | 1,073 | $ | 3,105 | $ | - | $ | 296 | $ | 570 | $ | 866 | $ | 3,164 | ||||||||||||||||||||
Financial Guarantees: | ||||||||||||||||||||||||||||||||||||||||
Gross liability (recoverable) | $ | 0 | $ | 0 | $ | 1,214 | $ | 1,214 | $ | 828 | $ | - | $ | - | $ | 876 | $ | 876 | $ | 541 | ||||||||||||||||||||
Ceded recoverable (liability) | 0 | 0 | 33 | 33 | 17 | - | - | 22 | 22 | 8 | ||||||||||||||||||||||||||||||
Fair Value Measurements at Reporting Date Using | ||||||||||||||||||||||||||||||||||||||||
In millions | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Fair Value Balance as of December 31, 2021 | Carry Value Balance as of December 31, 2021 | |||||||||||||||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||||||||||
Long-term debt | $ | 0 | $ | 433 | $ | 0 | $ | 433 | $ | 2,331 | ||||||||||||||||||||||||||||||
Medium-term notes | 0 | 0 | 322 | 322 | 490 | |||||||||||||||||||||||||||||||||||
Investment agreements | 0 | 0 | 355 | 355 | 274 | |||||||||||||||||||||||||||||||||||
Total liabilities | $ | 0 | $ | 433 | $ | 677 | $ | 1,110 | $ | 3,095 | ||||||||||||||||||||||||||||||
Financial Guarantees: | ||||||||||||||||||||||||||||||||||||||||
Gross liability (recoverable) | $ | 0 | $ | 0 | $ | 848 | $ | 848 | $ | (80 | ) | |||||||||||||||||||||||||||||
Ceded recoverable (liability) | 0 | 0 | 30 | 30 | (42 | ) |
Fair Value Measurements at Reporting Date Using | ||||||||||||||||||||
In millions | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Fair Value Balance as of December 31, 2022 | Carry Value Balance as of December 31, 2022 | |||||||||||||||
Liabilities: | ||||||||||||||||||||
Long-term debt | $ | - | $ | 330 | $ | - | $ | 330 | $ | 2,428 | ||||||||||
Medium-term notes | - | - | 310 | 310 | 458 | |||||||||||||||
Investment agreements | - | - | 257 | 257 | 233 | |||||||||||||||
Liabilities of consolidated VIEs: | ||||||||||||||||||||
Variable interest entity loans payable | - | - | 2 | 2 | 2 | |||||||||||||||
Total liabilities | $ | - | $ | 330 | $ | 569 | $ | 899 | $ | 3,121 | ||||||||||
Financial Guarantees: | ||||||||||||||||||||
Gross liability (recoverable) | $ | - | $ | - | $ | 864 | $ | 864 | $ | 568 | ||||||||||
Ceded recoverable (liability) | - | - | 21 | 21 | 15 |
In millions | Balance, Beginning of Period | Total Gains / (Losses) Included in Earnings | Unrealized Gains / (Losses) Included in OCI (1) | Purchases | Issuances | Settlements | Sales | Transfers into Level 3 | Transfers out of Level 3 | Ending Balance | Change in Unrealized Gains (Losses) for the Period Included in Earnings for Assets still held as of March 31, 2022 | Change in Unrealized Gains (Losses) for the Period Included in OCI for Assets still held as of March 31, 2022 (1) | ||||||||||||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||||||||||||||||||
Residential mortgage- backed non-agency | $ | 0 | $ | 0 | $ | 0 | $ | 38 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 38 | $ | 0 | $ | 0 | ||||||||||||||||||||||||
Assets of consolidated VIEs: | ||||||||||||||||||||||||||||||||||||||||||||||||
Collateralized debt obligations | 4 | 0 | 0 | 0 | 0 | (4 | ) | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||
Loans receivable - residential | 77 | 1 | 0 | 0 | 0 | (2 | ) | 0 | 0 | 0 | 76 | (1 | ) | 0 | ||||||||||||||||||||||||||||||||||
Currency derivatives | 9 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 9 | 0 | 0 | ||||||||||||||||||||||||||||||||||||
Other | 14 | 1 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 15 | 1 | 0 | ||||||||||||||||||||||||||||||||||||
Total assets | $ | 104 | $ | 2 | $ | 0 | $ | 38 | $ | 0 | $ | (6 | ) | $ | 0 | $ | 0 | $ | 0 | $ | 138 | $ | 0 | $ | 0 | |||||||||||||||||||||||
In millions | Balance, Beginning of Period | Total (Gains) / Losses Included in Earnings | Unrealized (Gains) / Losses Included in OCI (2) | Purchases | Issuances | Settlements | Sales | Transfers into Level 3 | Transfers out of Level 3 | Ending Balance | Change in Unrealized (Gains) Losses for the Period Included in Earnings for Liabilities still held as of March 31, 2022 | Change in Unrealized (Gains) Losses for the Period Included in OCI for Liabilities still held as of March 31, 2022 (2) | ||||||||||||||||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||||||||||||||||||
Medium-term notes | $ | 98 | $ | (8 | ) | $ | 9 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 99 | $ | (8 | ) | $ | 9 | ||||||||||||||||||||||
Liabilities of consolidated VIEs: | ||||||||||||||||||||||||||||||||||||||||||||||||
VIE notes | 291 | 4 | 1 | 0 | 0 | (11 | ) | 0 | 0 | 0 | 285 | (3 | ) | 4 | ||||||||||||||||||||||||||||||||||
Total liabilities | $ | 389 | $ | (4 | ) | $ | 10 | $ | 0 | $ | 0 | $ | (11 | ) | $ | 0 | $ | 0 | $ | 0 | $ | 384 | $ | (11 | ) | $ | 13 | |||||||||||||||||||||
In millions | Balance, Beginning of Period | Total Gains / (Losses) Included in Earnings | Unrealized Gains / (Losses) Included in OCI (1) | Purchases | Issuances | Settlements | Sales | Transfers into Level 3 | Transfers out of Level 3 | Ending Balance | Change in Unrealized Gains (Losses) for the Period Included in Earnings for Assets still held as of March 31, 2021 | Change in Unrealized Gains (Losses) for the Period Included in OCI for Assets still held as of March 31, 2021 (1) | ||||||||||||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||||||||||||||||||
Assets of consolidated VIEs: | ||||||||||||||||||||||||||||||||||||||||||||||||
Loans receivable-residential | $ | 120 | $ | 9 | $ | 0 | $ | 0 | $ | 0 | $ | (5 | ) | $ | 0 | $ | 0 | $ | 0 | $ | 124 | $ | 8 | $ | 0 | |||||||||||||||||||||||
Loan repurchase | 604 | (4 | ) | 0 | 0 | 0 | (600 | ) | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||
Currency derivatives | 6 | 3 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 9 | 3 | 0 | ||||||||||||||||||||||||||||||||||||
Other | 14 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 14 | 0 | 0 | ||||||||||||||||||||||||||||||||||||
Total assets | $ | 744 | $ | 8 | $ | 0 | $ | 0 | $ | 0 | $ | (605 | ) | $ | 0 | $ | 0 | $ | 0 | $ | 147 | $ | 11 | $ | 0 | |||||||||||||||||||||||
In millions | Balance, Beginning of Period | Total (Gains) / Losses Included in Earnings | Unrealized (Gains) / Losses Included in OCI (2) | Purchases | Issuances | Settlements | Sales | Transfers into Level 3 | Transfers out of Level 3 | Ending Balance | Change in Unrealized (Gains) Losses for the Period Included in Earnings for Liabilities still held as of March 31, 2021 | Change in Unrealized (Gains) Losses for the Period Included in OCI for Liabilities still held as of March 31, 2021 (2) | ||||||||||||||||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||||||||||||||||||
Medium-term notes | $ | 110 | $ | (7 | ) | $ | 2 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 105 | $ | (7 | ) | $ | 2 | ||||||||||||||||||||||
Other derivatives | 49 | 0 | 0 | 0 | 0 | (49 | ) | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||
Liabilities of consolidated VIEs: | ||||||||||||||||||||||||||||||||||||||||||||||||
VIE notes | 303 | 22 | (16 | ) | 0 | 0 | (29 | ) | 0 | 0 | 0 | 280 | 4 | 3 | ||||||||||||||||||||||||||||||||||
Total liabilities | $ | 462 | $ | 15 | $ | (14 | ) | $ | 0 | $ | 0 | $ | (78 | ) | $ | 0 | $ | 0 | $ | 0 | $ | 385 | $ | (3 | ) | $ | 5 | |||||||||||||||||||||
Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | |||||||||||||||
In millions | Total Gains (Losses) Included in Earnings | Change in Unrealized Gains (Losses) for the Period Included in Earnings for Assets and Liabilities still held as of March 31, 2022 | Total Gains (Losses) Included in Earnings | Change in Unrealized Gains (Losses) for the Period Included in Earnings for Assets and Liabilities still held as of March 31, 2021 | ||||||||||||
Revenues: | ||||||||||||||||
Net gains (losses) on financial instruments at fair value and foreign exchange | $ | 8 | $ | 8 | $ | 7 | $ | 7 | ||||||||
Revenues of consolidated VIEs: | ||||||||||||||||
Net gains (losses) on financial instruments at fair value and foreign exchange | (2 | ) | 3 | (14 | ) | 7 | ||||||||||
Total | $ | 6 | $ | 11 | $ | (7 | ) | $ | 14 | |||||||
In millions | Balance, Beginning of Period | Total Gains / (Losses) Included in Earnings | Unrealized Gains / (Losses) Included in OCI (1) | Purchases | Issuances | Settlements | Sales | Transfers into Level 3 | Transfers out of Level 3 | Ending Balance | Change in Unrealized Gains (Losses) for the Period Included in Earnings for Assets still held as of March 31, 2023 | Change in Unrealized Gains (Losses) for the Period Included in OCI for Assets still held as of March 31, 2023 (1) | ||||||||||||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||||||||||||||||||
Corporate obligations | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 1 | $ | - | $ | 1 | $ | - | $ | - | ||||||||||||||||||||||||
Equity investments | 115 | - | - | - | - | - | - | - | - | 115 | - | - | ||||||||||||||||||||||||||||||||||||
Assets of consolidated VIEs: | ||||||||||||||||||||||||||||||||||||||||||||||||
Loans receivable - residential | 78 | 7 | - | - | - | (2 | ) | - | - | - | 83 | 5 | - | |||||||||||||||||||||||||||||||||||
Other | 23 | 2 | - | - | - | - | (16 | ) | - | - | 9 | 1 | - | |||||||||||||||||||||||||||||||||||
Total assets | $ | 216 | $ | 9 | $ | - | $ | - | $ | - | $ | (2 | ) | $ | (16 | ) | $ | 1 | $ | - | $ | 208 | $ | 6 | $ | - | ||||||||||||||||||||||
In millions | Balance, Beginning of Period | Total (Gains) / Losses Included in Earnings | Unrealized (Gains) / Losses Included in in OCI (2) | Purchases | Issuances | Settlements | Sales | Transfers into Level 3 | Transfers out of Level 3 | Ending Balance | Change in Unrealized (Gains) Losses for the Period Included in Earnings for Liabilities still held as of March 31, 2023 | Change in Unrealized (Gains) Losses for the Period Included in OCI for Liabilities still held as of March 31, 2023 (2) | ||||||||||||||||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||||||||||||||||||
Medium-term notes | $ | 41 | $ | 3 | $ | (2 | ) | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 42 | $ | 3 | $ | (2 | ) | ||||||||||||||||||||||
Liabilities of consolidated VIEs: | ||||||||||||||||||||||||||||||||||||||||||||||||
VIE notes | 172 | 15 | (14 | ) | - | - | (1 | ) | (18 | ) | - | - | 154 | 1 | - | |||||||||||||||||||||||||||||||||
Currency | 6 | 5 | - | - | - | - | - | - | - | 11 | 5 | - | ||||||||||||||||||||||||||||||||||||
Total liabilities | $ | 219 | $ | 23 | $ | (16 | ) | $ | - | $ | - | $ | (1 | ) | $ | (18 | ) | $ | - | $ | - | $ | 207 | $ | 9 | $ | (2 | ) | ||||||||||||||||||||
(1) - | Reported within the “Unrealized gains (losses) on available-for-sale securities” on MBIA’s Consolidated Statement of Comprehensive Income/Loss. |
(2) - | Reported within the “Instrument-specific credit risk of liabilities measured at fair value” on MBIA’s Consolidated Statement of Comprehensive Income/Loss. |
In millions | Balance, Beginning of Period | Total Gains / (Losses) Included in Earnings | Unrealized Gains / (Losses) Included in OCI (1) | Purchases | Issuances | Settlements | Sales | Transfers into Level 3 | Transfers out of Level 3 | Ending Balance | Change in Unrealized Gains (Losses) for the Period Included in Earnings for Assets still held as of March 31, 2022 | Change in Unrealized Gains (Losses) for the Period Included in OCI for Assets still held as of March 31, 2022 (1) | ||||||||||||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||||||||||||||||||
Residential mortgage- backed non-agency | $ | - | $ | - | $ | - | $ | 38 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 38 | $ | - | $ | - | ||||||||||||||||||||||||
Assets of consolidated VIEs: | ||||||||||||||||||||||||||||||||||||||||||||||||
Collateralized debt obligations | 4 | - | - | - | - | (4 | ) | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||
Loans receivable- residential | 77 | 1 | - | - | - | (2 | ) | - | - | - | 76 | (1 | ) | - | ||||||||||||||||||||||||||||||||||
Currency derivatives | 9 | - | - | - | - | - | - | - | - | 9 | - | - | ||||||||||||||||||||||||||||||||||||
Other | 14 | 1 | - | - | - | - | - | - | - | 15 | 1 | - | ||||||||||||||||||||||||||||||||||||
Total assets | $ | 104 | $ | 2 | $ | - | $ | 38 | $ | - | $ | (6 | ) | $ | - | $ | - | $ | - | $ | 138 | $ | - | $ | - | |||||||||||||||||||||||
In millions | Balance, Beginning of Period | Total (Gains) / Losses Included in Earnings | Unrealized (Gains) / Losses Included in OCI (2) | Purchases | Issuances | Settlements | Sales | Transfers into Level 3 | Transfers out of Level 3 | Ending Balance | Change in Unrealized (Gains) Losses for the Period Included in Earnings for Liabilities still held as of March 31, 2022 | Change in Unrealized (Gains) Losses for the Period Included in OCI for Liabilities still held as of March 31, 2022 (2) | ||||||||||||||||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||||||||||||||||||
Medium-term notes | $ | 98 | $ | (8 | ) | $ | 9 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 99 | $ | (8 | ) | $ | 9 | ||||||||||||||||||||||
Liabilities of consolidated VIEs: | ||||||||||||||||||||||||||||||||||||||||||||||||
VIE notes | 291 | 4 | 1 | - | - | (11 | ) | - | - | - | 285 | (3 | ) | 4 | ||||||||||||||||||||||||||||||||||
Total liabilities | $ | 389 | $ | (4 | ) | $ | 10 | $ | - | $ | - | $ | (11 | ) | $ | - | $ | - | $ | - | $ | 384 | $ | (11 | ) | $ | 13 | |||||||||||||||||||||
(1) - | Reported within the “Unrealized gains (losses) on available-for-sale securities” on MBIA’s Consolidated Statement of Comprehensive Income/Loss. |
(2) - | Reported within the “Instrument-specific credit risk of liabilities measured at fair value” on MBIA’s Consolidated Statement of Comprehensive Income/Loss. |
Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | |||||||||||||||
In millions | Total Gains (Losses) Included in Earnings | Change in Unrealized Gains (Losses) for the Period Included in Earnings for Assets and Liabilities still held as of March 31, 2023 | Total Gains (Losses) Included in Earnings | Change in Unrealized Gains (Losses) for the Period Included in Earnings for Assets and Liabilities still held as of March 31, 2022 | ||||||||||||
Revenues: | ||||||||||||||||
Net gains (losses) on financial instruments at fair value and foreign exchange | $ | (3 | ) | $ | (3 | ) | $ | 8 | $ | 8 | ||||||
Revenues of consolidated VIEs: | ||||||||||||||||
Net gains (losses) on financial instruments at fair value and foreign exchange | 3 | - | (2 | ) | 3 | |||||||||||
Other net realized gains (losses) | (14 | ) | - | - | - | |||||||||||
Total | $ | (14 | ) | $ | (3 | ) | $ | 6 | $ | 11 | ||||||
Three Months Ended March 31, | ||||||||
In millions | 2023 | 2022 | ||||||
Investments carried at fair value (1) | $ | 3 | $ | (8 | ) | |||
Fixed-maturity securities held at fair value-VIE (3) | (4 | ) | (1 | ) | ||||
Loans receivable at fair value: | ||||||||
Residential mortgage loans (2) | 7 | 1 | ||||||
Other assets-VIE (3) | 2 | 1 | ||||||
Medium-term notes (1) | (3 | ) | 8 | |||||
Variable interest entity notes (3) | (15 | ) | (5 | ) |
Three Months Ended March 31, | ||||||||
In millions | 2022 | 2021 | ||||||
Investments carried at fair value (1) | $ | (8 | ) | $ | 3 | |||
Fixed-maturity securities held at fair value-VIE (2) | (1 | ) | 1 | |||||
Loans receivable at fair value: | ||||||||
Residential mortgage loans (2) | 1 | 9 | ||||||
Loan repurchase commitments (2) | 0 | (4 | ) | |||||
Other assets-VIE (2) | 1 | 0 | ||||||
Medium-term notes (1) | 8 | 7 | ||||||
Variable interest entity notes (2) | (5 | ) | (23 | ) |
As of March 31, 2022 | As of December 31, 2021 | |||||||||||||||||||||||
Contractual Outstanding | Fair | Contractual Outstanding | Fair | |||||||||||||||||||||
In millions | Principal | Value | Difference | Principal | Value | Difference | ||||||||||||||||||
Loans receivable at fair value: | ||||||||||||||||||||||||
Residential mortgage loans - current | $ | 40 | $ | 40 | $ | 0 | $ | 40 | $ | 40 | $ | 0 | ||||||||||||
Residential mortgage loans (90 days or more past due) | 146 | 36 | 110 | 141 | 37 | 104 | ||||||||||||||||||
Total loans receivable and other instruments at fair value | $ | 186 | $ | 76 | $ | 110 | $ | 181 | $ | 77 | $ | 104 | ||||||||||||
Variable interest entity notes | $ | 925 | $ | 285 | $ | 640 | $ | 922 | $ | 291 | $ | 631 | ||||||||||||
Medium-term notes | $ | 106 | $ | 99 | $ | 7 | $ | 108 | $ | 98 | $ | 10 |
As of March 31, 2023 | As of December 31, 2022 | |||||||||||||||||||||||
In millions | Contractual Outstanding Principal | Fair Value | Difference | Contractual Outstanding Principal | Fair Value | Difference | ||||||||||||||||||
Loans receivable at fair value: | ||||||||||||||||||||||||
Residential mortgage loans - current | $ | 42 | $ | 42 | $ | - | $ | 39 | $ | 39 | $ | - | ||||||||||||
Residential mortgage loans (90 days or more past due) | 161 | 41 | 120 | 149 | 39 | 110 | ||||||||||||||||||
Total loans receivable and other instruments at fair value | $ | 203 | $ | 83 | $ | 120 | $ | 188 | $ | 78 | $ | 110 | ||||||||||||
Variable interest entity notes | $ | 610 | $ | 154 | $ | 456 | $ | 780 | $ | 172 | $ | 608 | ||||||||||||
Medium-term notes | $ | 54 | $ | 42 | $ | 12 | $ | 53 | $ | 41 | $ | 12 |
March 31, 2023 | ||||||||||||||||||||
In millions | Amortized Cost | Allowance for Credit Losses | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||||
AFS Investments | ||||||||||||||||||||
Fixed-maturity investments: | ||||||||||||||||||||
U.S. Treasury and government agency | $ | 562 | $ | - | $ | 8 | $ | (27 | ) | $ | 543 | |||||||||
State and municipal bonds | 136 | - | 3 | (8 | ) | 131 | ||||||||||||||
Foreign governments | 25 | - | 1 | (2 | ) | 24 | ||||||||||||||
Corporate obligations | 1,007 | - | 3 | (129 | ) | 881 | ||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||
Residential mortgage-backed agency | 237 | - | 1 | (20 | ) | 218 | ||||||||||||||
Residential mortgage-backed non-agency | 104 | - | 2 | (10 | ) | 96 | ||||||||||||||
Commercial mortgage-backed | 27 | - | - | (1 | ) | 26 | ||||||||||||||
Asset-backed securities: | ||||||||||||||||||||
Collateralized debt obligations | 114 | - | 1 | (4 | ) | 111 | ||||||||||||||
Other asset-backed | 88 | - | 1 | (3 | ) | 86 | ||||||||||||||
Total AFS investments | $ | 2,300 | $ | - | $ | 20 | $ | (204 | ) | $ | 2,116 | |||||||||
March 31, 2022 | ||||||||||||||||||||
In millions | Amortized Cost | Allowance for Credit Losses | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||||
AFS Investments | ||||||||||||||||||||
Fixed-maturity investments: | ||||||||||||||||||||
U.S. Treasury and government agency | $ | 862 | $ | 0 | $ | 28 | $ | (15 | ) | $ | 875 | |||||||||
State and municipal bonds | 606 | 0 | 13 | (20 | ) | 599 | ||||||||||||||
Foreign governments | 23 | 0 | 0 | (1 | ) | 22 | ||||||||||||||
Corporate obligations | 1,013 | (3 | ) | 13 | (44 | ) | 979 | |||||||||||||
Mortgage-backed securities: | �� | |||||||||||||||||||
Residential mortgage-backed agency | 186 | 0 | 0 | (8 | ) | 178 | ||||||||||||||
Residential mortgage-backed non-agency | 124 | 0 | 8 | (1 | ) | 131 | ||||||||||||||
Commercial mortgage-backed | 10 | 0 | 0 | (1 | ) | 9 | ||||||||||||||
Asset-backed securities: | ||||||||||||||||||||
Collateralized debt obligations | 125 | 0 | 0 | (1 | ) | 124 | ||||||||||||||
Other asset-backed | 179 | 0 | 0 | (2 | ) | 177 | ||||||||||||||
Total AFS investments | $ | 3,128 | $ | (3 | ) | $ | 62 | $ | (93 | ) | $ | 3,094 | ||||||||
December 31, 2022 | ||||||||||||||||||||
In millions | Amortized Cost | Allowance for Credit Losses | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||||
AFS Investments | ||||||||||||||||||||
Fixed-maturity investments: | ||||||||||||||||||||
U.S. Treasury and government agency | $ | 541 | $ | - | $ | 5 | $ | (38 | ) | $ | 508 | |||||||||
State and municipal bonds | 173 | - | 2 | (11 | ) | 164 | ||||||||||||||
Foreign governments | 23 | - | - | (3 | ) | 20 | ||||||||||||||
Corporate obligations | 862 | - | 1 | (148 | ) | 715 | ||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||
Residential mortgage-backed agency | 217 | - | - | (22 | ) | 195 | ||||||||||||||
Residential mortgage-backed non-agency | 96 | - | 3 | (11 | ) | 88 | ||||||||||||||
Commercial mortgage-backed | 24 | - | - | (1 | ) | 23 | ||||||||||||||
Asset-backed securities: | ||||||||||||||||||||
Collateralized debt obligations | 117 | - | - | (5 | ) | 112 | ||||||||||||||
Other asset-backed | 110 | - | - | (4 | ) | 106 | ||||||||||||||
Total AFS investments | $ | 2,163 | $ | - | $ | 11 | $ | (243 | ) | $ | 1,931 | |||||||||
December 31, 2021 | ||||||||||||||||||||
In millions | Amortized Cost | Allowance for Credit Losses | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||||
AFS Investments | ||||||||||||||||||||
Fixed-maturity investments: | ||||||||||||||||||||
U.S. Treasury and government agency | $ | 782 | $ | 0 | $ | 54 | $ | (2 | ) | $ | 834 | |||||||||
State and municipal bonds | 140 | 0 | 27 | 0 | 167 | |||||||||||||||
Foreign governments | 13 | 0 | 1 | 0 | 14 | |||||||||||||||
Corporate obligations | 905 | 0 | 53 | (5 | ) | 953 | ||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||
Residential mortgage-backed agency | 190 | 0 | 3 | (1 | ) | 192 | ||||||||||||||
Residential mortgage-backed non-agency | 80 | 0 | 12 | 0 | 92 | |||||||||||||||
Commercial mortgage-backed | 10 | 0 | 0 | 0 | 10 | |||||||||||||||
Asset-backed securities: | ||||||||||||||||||||
Collateralized debt obligations | 101 | 0 | 0 | 0 | 101 | |||||||||||||||
Other asset-backed | 95 | 0 | 0 | (1 | ) | 94 | ||||||||||||||
Total AFS investments | $ | 2,316 | $ | 0 | $ | 150 | $ | (9 | ) | $ | 2,457 | |||||||||
AFS Securities | ||||||||
In millions | Net Amortized Cost | Fair Value | ||||||
Due in one year or less | $ | 519 | $ | 520 | ||||
Due after one year through five years | 470 | 466 | ||||||
Due after five years through ten years | 512 | 495 | ||||||
Due after ten years | 1,000 | 994 | ||||||
Mortgage-backed and asset-backed | 624 | 619 | ||||||
Total fixed-maturity investments | $ | 3,125 | $ | 3,094 | ||||
AFS Securities | ||||||||
In millions | Net Amortized Cost | Fair Value | ||||||
Due in one year or less | $ | 218 | $ | 218 | ||||
Due after one year through five years | 419 | 411 | ||||||
Due after five years through ten years | 341 | 302 | ||||||
Due after ten years | 752 | 648 | ||||||
Mortgage-backed and asset-backed | 570 | 537 | ||||||
Total fixed-maturity investments | $ | 2,300 | $ | 2,116 | ||||
March 31, 2022 | ||||||||||||||||||||||||
Less than 12 Months | 12 Months or Longer | Total | ||||||||||||||||||||||
In millions | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | ||||||||||||||||||
AFS Investments | ||||||||||||||||||||||||
Fixed-maturity investments: | ||||||||||||||||||||||||
U.S. Treasury and government agency | $ | 239 | $ | (13 | ) | $ | 20 | $ | (2 | ) | $ | 259 | $ | (15 | ) | |||||||||
State and municipal bonds | 486 | (20 | ) | 0 | 0 | 486 | (20 | ) | ||||||||||||||||
Foreign governments | 14 | (1 | ) | 0 | 0 | 14 | (1 | ) | ||||||||||||||||
Corporate obligations | 576 | (40 | ) | 32 | (4 | ) | 608 | (44 | ) | |||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||||||
Residential mortgage-backed agency | 113 | (4 | ) | 37 | (4 | ) | 150 | (8 | ) | |||||||||||||||
Residential mortgage-backed non-agency | 28 | (1 | ) | 1 | 0 | 29 | (1 | ) | ||||||||||||||||
Commercial mortgage-backed | 9 | (1 | ) | 0 | 0 | 9 | (1 | ) | ||||||||||||||||
Asset-backed securities: | ||||||||||||||||||||||||
Collateralized debt obligations | 86 | 0 | 33 | (1 | ) | 119 | (1 | ) | ||||||||||||||||
Other asset-backed | 175 | (2 | ) | 1 | 0 | 176 | (2 | ) | ||||||||||||||||
Total AFS investments | $ | 1,726 | $ | (82 | ) | $ | 124 | $ | (11 | ) | $ | 1,850 | $ | (93 | ) | |||||||||
March 31, 2023 | ||||||||||||||||||||||||
Less than 12 | 12 Months or Longer | Total | ||||||||||||||||||||||
In millions | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | ||||||||||||||||||
AFS Investments | ||||||||||||||||||||||||
Fixed-maturity investments: | ||||||||||||||||||||||||
U.S. Treasury and government agency | $ | 131 | $ | (9 | ) | $ | 152 | $ | (18 | ) | $ | 283 | $ | (27 | ) | |||||||||
State and municipal bonds | 47 | (1 | ) | 28 | (7 | ) | 75 | (8 | ) | |||||||||||||||
Foreign governments | 1 | - | 9 | (2 | ) | 10 | (2 | ) | ||||||||||||||||
Corporate obligations | 301 | (40 | ) | 390 | (89 | ) | 691 | (129 | ) | |||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||||||
Residential mortgage-backed agency | 60 | (3 | ) | 114 | (17 | ) | 174 | (20 | ) | |||||||||||||||
Residential mortgage-backed non-agency | 51 | (5 | ) | 23 | (5 | ) | 74 | (10 | ) | |||||||||||||||
Commercial mortgage-backed | 19 | - | 7 | (1 | ) | 26 | (1 | ) | ||||||||||||||||
Asset-backed securities: | ||||||||||||||||||||||||
Collateralized debt obligations | 25 | (1 | ) | 85 | (3 | ) | 110 | (4 | ) | |||||||||||||||
Other asset-backed | 9 | - | 37 | (3 | ) | 46 | (3 | ) | ||||||||||||||||
Total AFS investments | $ | 644 | $ | (59 | ) | $ | 845 | $ | (145 | ) | $ | 1,489 | $ | (204 | ) | |||||||||
December 31, 2022 | ||||||||||||||||||||||||
Less than 12 Months | 12 Months or Longer | Total | ||||||||||||||||||||||
In millions | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | ||||||||||||||||||
AFS Investments | ||||||||||||||||||||||||
Fixed-maturity investments: | ||||||||||||||||||||||||
U.S. Treasury and government agency | $ | 266 | $ | (34 | ) | $ | 29 | $ | (4 | ) | $ | 295 | $ | (38 | ) | |||||||||
State and municipal bonds | 92 | (10 | ) | 1 | (1 | ) | 93 | (11 | ) | |||||||||||||||
Foreign governments | 9 | (3 | ) | - | - | 9 | (3 | ) | ||||||||||||||||
Corporate obligations | 508 | (106 | ) | 141 | (42 | ) | 649 | (148 | ) | |||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||||||
Residential mortgage-backed agency | 112 | (9 | ) | 65 | (13 | ) | 177 | (22 | ) | |||||||||||||||
Residential mortgage-backed non-agency | 65 | (10 | ) | 2 | (1 | ) | 67 | (11 | ) | |||||||||||||||
Commercial mortgage-backed | 18 | (1 | ) | 1 | - | 19 | (1 | ) | ||||||||||||||||
Asset-backed securities: | ||||||||||||||||||||||||
Collateralized debt obligations | 51 | (1 | ) | 60 | (4 | ) | 111 | (5 | ) | |||||||||||||||
Other asset-backed | 44 | (3 | ) | 24 | (1 | ) | 68 | (4 | ) | |||||||||||||||
Total AFS investments | $ | 1,165 | $ | (177 | ) | $ | 323 | $ | (66 | ) | $ | 1,488 | $ | (243 | ) | |||||||||
December 31, 2021 | ||||||||||||||||||||||||
Less than 12 Months | 12 Months or Longer | Total | ||||||||||||||||||||||
In millions | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | ||||||||||||||||||
AFS Investments | ||||||||||||||||||||||||
Fixed-maturity investments: | ||||||||||||||||||||||||
U.S. Treasury and government agency | $ | 161 | $ | (1 | ) | $ | 16 | $ | (1 | ) | $ | 177 | $ | (2 | ) | |||||||||
State and municipal bonds | 11 | 0 | 0 | 0 | 11 | 0 | ||||||||||||||||||
Foreign governments | 3 | 0 | 0 | 0 | 3 | 0 | ||||||||||||||||||
Corporate obligations | 270 | (5 | ) | 8 | 0 | 278 | (5 | ) | ||||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||||||
Residential mortgage-backed agency | 94 | (1 | ) | 1 | 0 | 95 | (1 | ) | ||||||||||||||||
Residential mortgage-backed non-agency | 3 | 0 | 1 | 0 | 4 | 0 | ||||||||||||||||||
Commercial mortgage-backed | 2 | 0 | 0 | 0 | 2 | 0 | ||||||||||||||||||
Asset-backed securities: | ||||||||||||||||||||||||
Collateralized debt obligations | 60 | 0 | 29 | 0 | 89 | 0 | ||||||||||||||||||
Other asset-backed | 72 | (1 | ) | 0 | 0 | 72 | (1 | ) | ||||||||||||||||
Total AFS investments | $ | 676 | $ | (8 | ) | $ | 55 | $ | (1 | ) | $ | 731 | $ | (9 | ) | |||||||||
AFS Securities | AFS Securities | |||||||||||||||||||||||
Percentage of Fair Value Below Book Value | Number of Securities | Book Value (in millions) | Fair Value (in millions) | Number of Securities | Book Value (in millions) | Fair Value (in millions) | ||||||||||||||||||
> 5% to 15% | 50 | $ | 84 | $ | 75 | 213 | $ | 427 | $ | 384 | ||||||||||||||
> 15% to 25% | 21 | 11 | 9 | 145 | 297 | 241 | ||||||||||||||||||
> 25% to 50% | 2 | 2 | 2 | 84 | 132 | 91 | ||||||||||||||||||
> 50% | 2 | 0 | 0 | 2 | - | - | ||||||||||||||||||
Total | 75 | $ | 97 | $ | 86 | 444 | $ | 856 | $ | 716 | ||||||||||||||
Three Months Ended March 31, 2022 | ||||||||||||||||||||||||||||||||||||
In millions | Balance as of December 31, 2021 | Additions not previously recorded | Additions arising from PCD Assets | Reductions from Securities Sold | Reductions- Intent to sell or MLTN | Change in Allowance Previously Recorded | Write Offs | Recoveries | Balance as of March 31, 2022 | |||||||||||||||||||||||||||
AFS Investments | ||||||||||||||||||||||||||||||||||||
Fixed-maturity investments: | ||||||||||||||||||||||||||||||||||||
Corporate obligations | $ | 0 | $ | 3 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 3 | ||||||||||||||||||
Total Allowance on AFS investments | $ | 0 | $ | 3 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 3 | ||||||||||||||||||
Three Months Ended March 31, 2022 | ||||||||||||||||||||||||||||||||||||
In millions | Balance as of December 31, 2021 | Additions not previously recorded | Additions arising from PCD Assets | Reductions from Securities Sold | Reductions- Intent to sell or MLTN | Change in Allowance Previously Recorded | Write Offs | Recoveries | Balance as of March 31, 2022 | |||||||||||||||||||||||||||
AFS Investments | ||||||||||||||||||||||||||||||||||||
Fixed-maturity investments: | ||||||||||||||||||||||||||||||||||||
Corporate obligations | $ | - | $ | 3 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 3 | ||||||||||||||||||
Total Allowance on AFS investments | $ | - | $ | 3 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 3 | ||||||||||||||||||
In millions | Fair Value | Unrealized Loss | Insurance Loss Reserve (1) | Fair Value | Unrealized Loss | Insurance Loss Reserve (1) | ||||||||||||||||||
Mortgage-backed | $ | 18 | $ | 0 | $ | 18 | $ | 58 | $ | (8) | $ | 74 | ||||||||||||
Corporate obligations | 11 | 0 | 0 | 77 | (31) | - | ||||||||||||||||||
Total | $ | 29 | $ | 0 | $ | 18 | $ | 135 | $ | (39) | $ | 74 | ||||||||||||
(1) - | Insurance loss reserve estimates are based on the proportion of par value owned to the total amount of par value insured and are discounted using a discount rate equal to the risk-free rate applicable to the currency and weighted average remaining life of the insurance contract and may differ from the fair value. |
Three Months Ended March 31, | ||||||||
In millions | 2022 | 2021 | ||||||
Proceeds from sales | $ | 106 | $ | 178 | ||||
Gross realized gains | $ | 0 | $ | 4 | ||||
Gross realized losses | $ | (3 | ) | $ | (5 | ) |
Three Months Ended March 31, | ||||||||
In millions | 2023 | 2022 | ||||||
Proceeds from sales | $ | 98 | $ | 106 | ||||
Gross realized gains | $ | 1 | $ | - | ||||
Gross realized losses | $ | (4 | ) | $ | (3 | ) |
In millions | Three Months Ended March 31, | |||||||
2022 | 2021 | |||||||
Net gains and (losses) recognized during the period on equity and trading securities | $ | (10 | ) | $ | 2 | |||
Less: | ||||||||
Net gains and (losses) recognized during the period on equity and trading securities sold during the period | 1 | 0 | ||||||
Unrealized gains and (losses) recognized during the period on equity and trading securities still held at the reporting date | $ | (11 | ) | $ | 2 | |||
Three Months Ended March 31, | ||||||||
In millions | 2023 | 2022 | ||||||
Net gains and (losses) recognized during the period on equity and trading securities | $ | 1 | $ | (10 | ) | |||
Less: | ||||||||
Net gains and (losses) recognized during the period on equity and trading securities sold during the period | - | 1 | ||||||
Unrealized gains and (losses) recognized during the period on equity and trading securities still held at the reporting date | $ | 1 | $ | (11 | ) | |||
$ in millions | As of March 31, 2022 | As of March 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Credit Derivatives Sold | Weighted Average Remaining Expected Maturity | AAA | AA | A | BBB | Below Investment Grade | Total Notional | Fair Value Asset (Liability) | Weighted Average Remaining Expected Maturity | AAA | AA | A | BBB | Below Investment Grade | Total Notional | Fair Value Asset (Liability) | ||||||||||||||||||||||||||||||||||||||||||||||||
Insured swaps | 14.0 Years | $ | 0 | $ | 59 | $ | 1,122 | $ | 292 | $ | 0 | $ | 1,473 | $ | (1 | ) | 13.7 Years | $ | - | $ | 48 | $ | 1,010 | $ | 210 | $ | 60 | $ | 1,328 | $ | - | |||||||||||||||||||||||||||||||||
Total fair value | $ | 0 | $ | 0 | $ | (1 | ) | $ | 0 | $ | - | $ | (1 | ) | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||||||||||||||||||||||
$ in millions | As of December 31, 2022 | |||||||||||||||||||||||||||||||
Credit Derivatives Sold | Weighted Average Remaining Expected Maturity | AAA | AA | A | BBB | Below Investment Grade | Total Notional | Fair Value Asset (Liability) | ||||||||||||||||||||||||
Insured swaps | 13.7 Years | $ | - | $ | 50 | $ | 1,013 | $ | 227 | $ | 60 | $ | 1,350 | $ | - | |||||||||||||||||
Total fair value | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||||
$ in millions | As of December 31, 2021 | |||||||||||||||||||||||||||||||
Credit Derivatives Sold | Weighted Average Remaining Expected Maturity | AAA | AA | A | BBB | Below Investment Grade | Total Notional | Fair Value Asset (Liability) | ||||||||||||||||||||||||
Insured swaps | 14.1 Years | $ | 0 | $ | 61 | $ | 1,136 | $ | 292 | $ | 0 | $ | 1,489 | $ | (1 | ) | ||||||||||||||||
Total fair value | $ | 0 | $ | 0 | $ | (1 | ) | $ | 0 | $ | 0 | $ | (1 | ) | ||||||||||||||||||
March 31, 2023 | ||||||||||||||||||||||||||||||||||||||||
In millions | Derivative Assets (1) | Derivative Liabilities (1) | Derivative Assets (1) | Derivative Liabilities (1) | ||||||||||||||||||||||||||||||||||||
Derivative Instruments | Notional Amount Outstanding | Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | Notional Amount Outstanding | Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | ||||||||||||||||||||||||||||||
Not designated as hedging instruments: | ||||||||||||||||||||||||||||||||||||||||
Insured swaps | $ | 1,473 | Other assets | $ | 0 | Derivative liabilities | $ | (1 | ) | $ | 1,328 | Other assets | $ | - | Derivative liabilities | $ | - | |||||||||||||||||||||||
Interest rate swaps | 384 | Other assets | 0 | Derivative liabilities | (98 | ) | 380 | Other assets | - | Derivative liabilities | (57 | ) | ||||||||||||||||||||||||||||
Interest rate swaps-embedded | 203 | Medium-term notes | 0 | Medium-term notes | (6 | ) | 198 | Medium-term notes | 1 | Medium-term notes | (1 | ) | ||||||||||||||||||||||||||||
Currency swaps-VIE | 49 | Other assets-VIE | 9 | Derivative liabilities-VIE | 0 | 14 | Other assets-VIE | - | Derivative liabilities-VIE | (11 | ) | |||||||||||||||||||||||||||||
Total non-designated derivatives | $ | 2,109 | $ | 9 | $ | (105 | ) | $ | 1,920 | $ | 1 | $ | (69 | ) | ||||||||||||||||||||||||||
(1) - | In accordance with the accounting guidance for derivative instruments and hedging activities, the balance sheet location of the Company’s embedded derivative instruments is determined by the location of the related host contract. |
December 31, 2022 | ||||||||||||||||||||
In millions | Derivative Assets (1) | Derivative Liabilities (1) | ||||||||||||||||||
Derivative Instruments | Notional Amount Outstanding | Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | |||||||||||||||
Not designated as hedging instruments: | ||||||||||||||||||||
Insured swaps | $ | 1,350 | Other assets | $ | - | Derivative liabilities | $ | - | ||||||||||||
Interest rate swaps | 380 | Other assets | - | Derivative liabilities | (49 | ) | ||||||||||||||
Interest rate swaps-embedded | 194 | Medium-term notes | 1 | Medium-term notes | (2 | ) | ||||||||||||||
Currency swaps-VIE | 36 | Other assets-VIE | - | Derivative liabilities-VIE | (6 | ) | ||||||||||||||
Total non-designated derivatives | $ | 1,960 | $ | 1 | $ | (57 | ) | |||||||||||||
In millions | Derivative Assets (1) | Derivative Liabilities (1) | ||||||||||||||||||
Derivative Instruments | Notional Amount Outstanding | Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | |||||||||||||||
Not designated as hedging instruments: | ||||||||||||||||||||
Insured swaps | $ | 1,489 | Other assets | $ | 0 | Derivative liabilities | $ | (1 | ) | |||||||||||
Interest rate swaps | 399 | Other assets | 1 | Derivative liabilities | (130 | ) | ||||||||||||||
Interest rate swaps-embedded | 206 | Medium-term notes | 0 | Medium-term notes | (9 | ) | ||||||||||||||
Currency swaps-VIE | 50 | Other assets-VIE | 9 | Derivative liabilities-VIE | 0 | |||||||||||||||
Total non-designated derivatives | $ | 2,144 | $ | 10 | $ | (140 | ) | |||||||||||||
(1) - | In accordance with the accounting guidance for derivative instruments and hedging activities, the balance sheet location of the Company’s embedded derivative instruments is determined by the location of the related host contract. |
In millions | ||||||||||||||||||||
Derivatives Not Designated as | Three Months Ended March 31, | Three Months Ended March 31, | ||||||||||||||||||
Hedging Instruments | Location of Gain (Loss) Recognized in Income on Derivative | 2022 | 2021 | Location of Gain (Loss) Recognized in Income on Derivative | 2023 | 2022 | ||||||||||||||
Interest rate swaps | Net gains (losses) on financial instruments at fair value and foreign exchange | $ | 30 | $ | 35 | Net gains (losses) on financial instruments at fair value and foreign exchange | $ | (9 | ) | $ | 30 | |||||||||
Currency swaps-VIE | Net gains (losses) on financial instruments at fair value and foreign exchange-VIE | 0 | 2 | Net gains (losses) on financial instruments at fair value and foreign exchange-VIE | (4 | ) | - | |||||||||||||
Total | $ | 30 | $ | 37 | $ | (13 | ) | $ | 30 | |||||||||||
Three Months Ended March 31, | ||||||||
In millions | 2022 | 2021 | ||||||
Income (loss) before income taxes | $ | (73 | ) | $ | (106 | ) | ||
Provision (benefit) for income taxes | $ | 0 | $ | 0 | ||||
Effective tax rate | 0.0% | 0.0% |
Three Months Ended March 31, | ||||||||
In millions | 2023 | 2022 | ||||||
Income (loss) from continuing operations before income taxes | $ | (83 | ) | $ | (73 | ) | ||
Provision (benefit) for income taxes | $ | - | $ | - | ||||
Effective tax rate | 0.0 | % | 0.0 | % |
Three Months Ended March 31, 2023 | ||||||||||||||||||||
U.S. Public | International | |||||||||||||||||||
and Structured | ||||||||||||||||||||
Finance | Finance | |||||||||||||||||||
In millions | Insurance | Corporate | Insurance | Eliminations | Consolidated | |||||||||||||||
Revenues (1) | $ | 22 | $ | 5 | $ | 6 | $ | - | $ | 33 | ||||||||||
Net gains (losses) on financial instruments at fair value and foreign exchange | 2 | (12 | ) | (3 | ) | - | (13 | ) | ||||||||||||
Revenues of consolidated VIEs | - | - | (18 | ) | - | (18 | ) | |||||||||||||
Inter-segment revenues (2) | 7 | 14 | 2 | (23 | ) | - | ||||||||||||||
Total revenues | 31 | 7 | (13 | ) | (23 | ) | 2 | |||||||||||||
Losses and loss adjustment | - | - | 6 | - | 6 | |||||||||||||||
Amortization of deferred acquisition costs and operating | 2 | 18 | 3 | 1 | 24 | |||||||||||||||
Interest | - | 14 | 37 | - | 51 | |||||||||||||||
Expenses of consolidated VIEs | - | - | 4 | - | 4 | |||||||||||||||
Inter-segment expenses (2) | 12 | 6 | 6 | (24 | ) | - | ||||||||||||||
Total expenses | 14 | 38 | 56 | (23 | ) | 85 | ||||||||||||||
Income (loss) from continuing operations before income taxes | $ | 17 | $ | (31 | ) | $ | (69 | ) | $ | - | $ | (83 | ) | |||||||
Identifiable assets per segment | $ | 2,472 | $ | 638 | $ | 1,055 | $ | (931 | ) | $ | 3,234 | |||||||||
Assets held for sale | - | - | - | - | 83 | |||||||||||||||
Total identifiable assets | $ | 2,472 | $ | 638 | $ | 1,055 | $ | (931 | ) (3) | $ | 3,317 | |||||||||
Three Months Ended March 31, 2022 | ||||||||||||||||||||
In millions | U.S. Public Finance Insurance | Corporate | International and Structured Finance Insurance | Eliminations | Consolidated | |||||||||||||||
Revenues (1) | $ | 20 | $ | 2 | $ | 5 | $ | 0 | $ | 27 | ||||||||||
Net gains (losses) on financial instruments at fair value and foreign exchange | (16 | ) | 39 | (6 | ) | 0 | 17 | |||||||||||||
Revenues of consolidated VIEs | 0 | 0 | (4 | ) | 0 | (4 | ) | |||||||||||||
Inter-segment revenues (2) | 8 | 17 | 3 | (28 | ) | 0 | ||||||||||||||
Total revenues | 12 | 58 | (2 | ) | (28 | ) | 40 | |||||||||||||
Losses and loss adjustment | 87 | 0 | (38 | ) | 0 | 49 | ||||||||||||||
Amortization of deferred acquisition costs and operating | 3 | 15 | 3 | 0 | 21 | |||||||||||||||
Interest | 0 | 14 | 27 | 0 | 41 | |||||||||||||||
Expenses of consolidated VIEs | 0 | 0 | 2 | 0 | 2 | |||||||||||||||
Inter-segment expenses (2) | 13 | 6 | 9 | (28 | ) | 0 | ||||||||||||||
Total expenses | 103 | 35 | 3 | (28 | ) | 113 | ||||||||||||||
Income (loss) before income taxes | $ | (91 | ) | $ | 23 | $ | (5 | ) | $ | 0 | $ | (73 | ) | |||||||
Identifiable assets | $ | 3,196 | $ | 798 | $ | 1,877 | $ | (1,428 | ) (3) | $ | 4,443 | |||||||||
(1) - | Consists of net premiums earned, net investment income and net realized investment gains (losses). |
(2) - | Primarily represents intercompany service charges and intercompany net investment income and expenses. |
(3) - | Consists principally of intercompany reinsurance balances. |
Three Months Ended March 31, 2022 | ||||||||||||||||||||
U.S. Public | International | |||||||||||||||||||
and Structured | ||||||||||||||||||||
Finance | Finance | |||||||||||||||||||
In millions | Insurance | Corporate | Insurance | Eliminations | Consolidated | |||||||||||||||
Revenues (1) | $ | 20 | $ | 2 | $ | 5 | $ | - | $ | 27 | ||||||||||
Net gains (losses) on financial instruments at fair value and foreign exchange | (16 | ) | 39 | (6 | ) | - | 17 | |||||||||||||
Revenues of consolidated VIEs | - | - | (4 | ) | - | (4 | ) | |||||||||||||
Inter-segment revenues (2) | 8 | 17 | 3 | (28 | ) | - | ||||||||||||||
Total revenues | 12 | 58 | (2 | ) | (28 | ) | 40 | |||||||||||||
Losses and loss adjustment | 87 | - | (38 | ) | - | 49 | ||||||||||||||
Amortization of deferred acquisition costs and operating | 3 | 15 | 3 | - | 21 | |||||||||||||||
Interest | - | 14 | 27 | - | 41 | |||||||||||||||
Expenses of consolidated VIEs | - | - | 2 | - | 2 | |||||||||||||||
Inter-segment expenses (2) | 13 | 6 | 9 | (28 | ) | - | ||||||||||||||
Total expenses | 103 | 35 | 3 | (28 | ) | 113 | ||||||||||||||
Income (loss) from continuing operations before income taxes | $ | (91 | ) | $ | 23 | $ | (5 | ) | $ | - | $ | (73 | ) | |||||||
(1) - | Consists of net premiums earned, net investment income, net realized investment gains (losses), fees and reimbursements and other net realized gains (losses). |
(2) - | Primarily represents intercompany service charges and intercompany net investment income and expenses. |
(3) - | Consists principally of intercompany reinsurance balances. |
Three Months Ended March 31, 2021 | ||||||||||||||||||||
In millions | U.S. Public Finance Insurance | Corporate | International and Structured Finance Insurance | Eliminations | Consolidated | |||||||||||||||
Revenues (1) | $ | 22 | $ | 5 | $ | 7 | $ | 0 | $ | 34 | ||||||||||
Net gains (losses) on financial instruments at fair value and foreign exchange | (2 | ) | 55 | (1 | ) | 0 | 52 | |||||||||||||
Revenues of consolidated VIEs | 0 | 0 | (14 | ) | 0 | (14 | ) | |||||||||||||
Inter-segment revenues (2) | 8 | 18 | 4 | (30 | ) | 0 | ||||||||||||||
Total revenues | 28 | 78 | (4 | ) | (30 | ) | 72 | |||||||||||||
Losses and loss adjustment | 109 | 0 | (11 | ) | 0 | 98 | ||||||||||||||
Amortization | 4 | 21 | 3 | 0 | 28 | |||||||||||||||
Interest | 0 | 14 | 27 | 0 | 41 | |||||||||||||||
Expenses of consolidated VIEs | 0 | 0 | 11 | 0 | 11 | |||||||||||||||
Inter-segment expenses (2) | 14 | 6 | 10 | (30 | ) | 0 | ||||||||||||||
Total expenses | 127 | 41 | 40 | (30 | ) | 178 | ||||||||||||||
Income (loss) before income taxes | $ | (99 | ) | $ | 37 | $ | (44 | ) | $ | 0 | $ | (106 | ) | |||||||
Three Months Ended March 31, | ||||||||
In millions except per share amounts | 2022 | 2021 | ||||||
Basic earnings per share: | ||||||||
Net income (loss) available to common shareholders | $ | (73 | ) | $ | (106 | ) | ||
Basic weighted average shares (1) | 49.6 | 49.3 | ||||||
Net income (loss) per basic common share | $ | (1.48 | ) | $ | (2.16 | ) | ||
Diluted earnings per share: | ||||||||
Net income (loss) available to common shareholders | $ | (73 | ) | $ | (106 | ) | ||
Diluted weighted average shares (1) | 49.6 | 49.3 | ||||||
Net income (loss) per diluted common share | $ | (1.48 | ) | $ | (2.16 | ) | ||
Potentially | 5.1 | 5.0 |
Three Months Ended March 31, | ||||||||
In millions except per share amounts | 2023 | 2022 | ||||||
Basic and diluted earnings per share: | ||||||||
Net income (loss) from continuing operations available to common shareholders | $ | (83 | ) | $ | (73 | ) | ||
Income (loss) from discontinued operations, net of income taxes | (3 | ) | - | |||||
Less: Net income (loss) from discontinued operations attributable to noncontrolling interests | 7 | - | ||||||
Net income (loss) from discontinued operations attributable to MBIA Inc. | (10 | ) | - | |||||
Net income (loss) attributable to MBIA Inc. | $ | (93 | ) | $ | (73 | ) | ||
Basic and diluted weighted average shares (1) | 49.9 | 49.6 | ||||||
Net income (loss) per common share attributable to MBIA Inc. - basic and diluted | ||||||||
Continuing operations | $ | (1.67 | ) | $ | (1.48 | ) | ||
Discontinued operations | (0.19 | ) | - | |||||
Net income (loss) per share attributable to MBIA Inc. - basic and diluted | $ | (1.86 | ) | $ | (1.48 | ) | ||
Potentially dilutive securities excluded from the calculation of diluted EPS because of antidilutive affect | 4.9 | 5.1 |
(1) - | Includes 0.7 million and 0.9 million of participating securities that met the service condition and were eligible to receive nonforfeitable dividends or dividend equivalents for |
Unrealized | Instrument-Specific | |||||||||||||||
Gains (Losses) | Credit Risk of | |||||||||||||||
on AFS | Foreign Currency | Liabilities Measured | ||||||||||||||
In millions | Securities, Net | Translation, Net | at Fair Value, Net | Total | ||||||||||||
Balance, December 31, 2021 | $ | 138 | $ | (6 | ) | $ | (32 | ) | $ | 100 | ||||||
Other comprehensive income (loss) before reclassifications | (171 | ) | 0 | (14 | ) | (185 | ) | |||||||||
Amounts reclassified from AOCI | 0 | 0 | 3 | 3 | ||||||||||||
Net period other comprehensive income (loss) | (171 | ) | 0 | (11 | ) | (182 | ) | |||||||||
Balance, March 31, 2022 | $ | (33 | ) | $ | (6 | ) | $ | (43 | ) | $ | (82 | ) | ||||
In millions | Unrealized Gains (Losses) on AFS Securities, Net | Foreign Currency Translation, Net | Instrument- Specific Credit Risk of Liabilities Measured at Fair Value, Net | Total | ||||||||||||
Balance, December 31, 2022 | $ | (234 | ) | $ | (4 | ) | $ | (45 | ) | $ | (283 | ) | ||||
Other comprehensive income (loss) before reclassifications | 43 | (1 | ) | 1 | 43 | |||||||||||
Amounts reclassified from AOCI | 5 | - | 14 | 19 | ||||||||||||
Net period other comprehensive income (loss) | 48 | (1 | ) | 15 | 62 | |||||||||||
Balance, March 31, 2023 | $ | (186 | ) | $ | (5 | ) | $ | (30 | ) | $ | (221 | ) | ||||
In millions | Amounts Reclassified from AOCI | |||||||||
Three Months Ended March 31, | ||||||||||
Details about AOCI Components | 2022 | 2021 | Affected Line Item on the Consolidated Statements of Operations | |||||||
Unrealized gains (losses) on AFS securities: | ||||||||||
Realized | $ | 0 | $ | 5 | Net realized investment gains (losses) | |||||
Total unrealized gains (losses) on AFS securities | ||||||||||
Instrument-specific credit risk of liabilities: | 0 | 5 | ||||||||
Settlement of liabilities | (3 | ) | (20 | ) | Net gains (losses) on financial instruments at fair value and foreign exchange | |||||
Total reclassifications for the period | $ | (3 | ) | $ | (15 | ) | Net income (loss) | |||
In millions | Amounts Reclassified from AOCI | |||||||||
Three Months Ended March 31, | ||||||||||
Details about AOCI Components | 2023 | 2022 | Affected Line Item on the Consolidated Statements of Operations | |||||||
Unrealized gains (losses) on AFS securities: | ||||||||||
Realized gains (losses) on sale of securities | $ | (5 | ) | $ | - | Net realized investment gains (losses) | ||||
Instrument-specific credit risk of liabilities: | ||||||||||
Deconsolidation of VIE | (14 | ) | - | Other net realized gains (losses) - VIE | ||||||
Settlement of liabilities | - | (3 | ) | Net gains (losses) on financial instruments at fair value and foreign exchange - VIE | ||||||
Total reclassifications for the period | $ | (19 | ) | $ | (3 | ) | Net income (loss) | |||
$ in millions | As of March 31, 2022 | Balance Sheet Location | ||||||
Right-of-use | $ | 18 | Other assets | |||||
Lease liability | $ | 18 | Other liabilities | |||||
Weighted average remaining lease term (years) | 7.4 | |||||||
Discount rate used for operating leases | 7.5% | |||||||
Total future minimum lease payments | $ | 25 |
$ in millions | As of March 31, 2023 | Balance Sheet Location | ||||||
Right-of-use | $ | 16 | Other assets | |||||
Lease liability | $ | 16 | Other liabilities | |||||
Weighted average remaining lease term (years) | 7.0 | |||||||
Discount rate used for operating leases | 7.5% | |||||||
Total future minimum lease payments | $ | 22 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of financial condition and results of operations of MBIA Inc. should be read in conjunction with the other sections of our Annual Report on Form20212022 and the consolidated financial statements and notes thereto included in this Form20212022 for a further discussion of risks and uncertainties.
OVERVIEW
MBIA Inc., together with its consolidated subsidiaries, (collectively, “MBIA”, the “Company”, “we”, “us”, or “our”) operates within the financial guarantee insurance industry. MBIA manages its business within three operating segments: 1) United States (“U.S.”) public finance insurance; 2) corporate; and 3) international and structured finance insurance. Our U.S. public finance insurance portfolio is managed through National Public Finance Guarantee Corporation (“National”), our corporate segment is managed through MBIA Inc. and several of its subsidiaries, including our service company, MBIA Services Corporation (“MBIA Services”), and our international and structured finance insurance business is primarily managed through MBIA Insurance Corporation and its subsidiarysubsidiaries (“MBIA Corp.”).
National’s primary objectives are to maximize the performance of its existing insured portfolio through effective surveillance and remediation activity and effectively manage its investment portfolio. Our corporate segment consists of general corporate activities, including providing support services to MBIA’s operating subsidiaries and asset and capital management. MBIA Corp.’s primary objectives are to satisfy all claims by its policyholders and to maximize future recoveries, if any, for its senior lending and surplus note holders, and then its preferred stock holders. MBIA Corp. is executing this strategy by, among other things, taking steps to maximize the collection of recoveries and reducing and mitigating potential losses on its insurance exposures. We do not expect National or MBIA Corp. to write significant new business.
Economic Environment
U.S. economic activity indicators point to modest growth in spending and employment have continued to strengthenproduction, with strongrobust job gains and a declininglow unemployment rate. Inflation remains elevated with supply and demand issues related to
2023 Business Developments
The following is a summary of 20222023 business developments:
On February 22, 2021, National agreed to join a plan support agreement, dated as of February 22, 2021 (the “GO PSA”), among the Financial Oversight and Management Board for Puerto Rico (the “Oversight Board”), certain holders of Puerto Rico Commonwealth GO (“GO”) Bonds and Puerto Rico Public Buildings Authority (“PBA”) bonds, Assured Guaranty Corp. and Assured Guaranty Municipal Corp, and Syncora Guarantee Inc. in connection withJanuary 1, 2023, the Puerto Rico Commonwealth GOElectric Power Authority (“GO”) and PBA Title III cases. The GO PSA was effective and implemented on March 15, 2022 and among other things, National received cash, including certain fees, newly issued General Obligation bonds (“GO Bonds”) and a contingent value instrument (“CVI”) totaling approximately $1.0 billion. Subsequent to the GO PSA implementation, National made $277 million of acceleration and commutation payments pursuant to the GO PSA. Accordingly, National’s GO and PBA gross par outstanding and debt service outstanding have been reduced to zero from approximately $380 million and $495 million, respectively.
On March 8, 2022, the Puerto Rico Fiscal Agency and Financial Advisory Authority (“AAFAF”) and PREPA terminated the RSA under a provision permitting termination if an order approving the RSA had not been entered by September 30, 2019.pending restructuring support agreement. On April 8, 2022, the Court appointed a new panel of judges to commence mediation among the Financial Oversight and Management Board for Puerto Rico (the “Oversight Board”), the Ad Hoc creditor group asof holders of PREPA Senior Bonds, Assured, National and Syncora (the “April 8 Order”).Syncora. The April 8 Order provides that mediation will terminateinitially terminated on June 1,September 16, 2022; however on September 29, 2022 unless the Court entered an order restarting mediation team extends the time tothrough January 31, 2023. Mediation has since been further continued until July 1, 2022. The April 8 Order further provides that nothing therein acts as a stay of any pending adversary proceedings or contested matters in28, 2023. On January 31, 2023, National entered into the PREPA case, subject to the Court’s pending request toPlan Support Agreement (“PREPA PSA”) with the Oversight Board, on behalf of itself and as the sole Title III representative of PREPA. An amended reorganization plan for a status report by June 1, 2022.
Refer to the following “U.S. Public Finance Insurance Puerto Rico Exposures” section for additional information on our Puerto Rico exposures.
On May 5, 2021,3, 2023, the Company’s Board of Directors approved a share repurchase program authorizing the Company and/or National Assured Guaranty Corp., Assured Guaranty Municipal Corp. and the Oversight Board entered into the HTA PSA. On May 2, 2022, the Oversight Board filed the Title III Plan of Adjustment for the Puerto Rico Highways and Transportation Authority (the “HTA Plan”), together with the Disclosure Statement and supporting documents. National expects to receive during the second quarter of 2022 its allocable portion of cash and CVI relatingpurchase up to HTA, which aggregate amounts to be distributed to bondholders totals approximately $264$100 million and $2.2 billion, respectively. In addition, National shall receive its allocable portion of approximately $1.2 billion of newly issued HTA bonds (or cash equivalent) following the effective date of the HTA Plan.Company’s shares in open market transactions, in privately negotiated transactions or by any other legal means. See “Unregistered Sales of Equity Securities and Use of Proceeds” in Part II, Item 2.
38
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
RESULTS OF OPERATIONS
Summary of Consolidated Results
The following table presents a summary of our consolidated financial results for the three months ended March 31, 20222023 and 2021:
Three Months Ended March 31, | ||||||||
In millions except for per share, percentage and share amounts | 2022 | 2021 | ||||||
Total revenues | $ | 40 | $ | 72 | ||||
Total expenses | 113 | 178 | ||||||
Income (loss) before income taxes | (73) | (106) | ||||||
Provision (benefit) for income taxes | - | - | ||||||
Net income (loss) | $ | (73) | $ | (106) | ||||
Net income (loss) per basic and diluted common share | $ | (1.48) | $ | (2.16) | ||||
Effective tax rate | 0.0% | 0.0% | ||||||
Adjusted net income (loss) (1) | $ | (96) | $ | (116) | ||||
Adjusted net income (loss) per diluted share (1) | $ | (1.94) | $ | (2.36) | ||||
Weighted average basic and diluted common shares outstanding | 49,631,448 | 49,258,110 |
Three Months Ended March 31, | ||||||||||
In millions except for per share, percentage and share amounts | 2023 | 2022 | ||||||||
Total revenues | $ | 2 | $ | 40 | ||||||
Total expenses | 85 | 113 | ||||||||
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Income (loss) from continuing operations before income taxes | (83 | ) | (73 | ) | ||||||
Provision (benefit) for income taxes | - | - | ||||||||
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Net income (loss) from continuing operations | (83 | ) | (73 | ) | ||||||
Income (loss) from discontinued operations, net of income taxes | (3 | ) | - | |||||||
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Net income (loss) | (86 | ) | (73 | ) | ||||||
Less: Net income (loss) from discontinued operations attributable to noncontrolling interests | 7 | - | ||||||||
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Net income (loss) attributable to MBIA Inc. | $ | (93 | ) | $ | (73 | ) | ||||
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Net income (loss) per basic and diluted common share attributable to MBIA Inc. | $ | (1.86 | ) | $ | (1.48 | ) | ||||
Adjusted net income (loss)(1) | $ | (1 | ) | $ | (96 | ) | ||||
Adjusted net income (loss) per diluted share(1) | $ | (0.03 | ) | $ | (1.94 | ) | ||||
Weighted average basic and diluted common shares outstanding | 49,945,917 | 49,631,448 |
(1) - | Adjusted net income (loss) and adjusted net income (loss) per diluted share are non-GAAP measures. Refer to the followingNon-GAAP Adjusted Net Income (Loss) section for a discussion of adjusted net income (loss) and adjusted net income (loss) per diluted share and a reconciliation of GAAP net income (loss) to adjusted net income (loss) and GAAP net income (loss) per diluted share to adjusted net income (loss) per diluted share. |
Income (loss) from Continuing Operations Before Income Taxes
Consolidated total revenues decreased for the three months ended March 31, 20222023 compared with the same period of 2021 principally2022 primarily due to unfavorable changes on interest rate swaps and foreign exchange rates. In addition, the three months ended March 31, 2023 includes $15 million of losses from the deconsolidation of a consolidated variable interest entity (“VIE”) with no comparable loss in the same period of 2022. These unfavorable changes in revenues were partially offset by $4 million of fair value changesgains on investments smallerfor the three months ended March 31, 2023 compared with fair value losses of $20 million with the same period of 2022. For the three months ended March 31, 2023, fair value losses on interest rate swaps were $8 million compared with fair value gains on interest rate swaps and smaller gains from changes in foreign exchange rates. Forof $34 million for the three months ended March 31, 2022, fair value losses on investments was $20 million and fair value gains on interest rate swaps was $34 million. For the three months ended March 31, 2021, fair value gains or losses on investments was not material and fair value gains on interest rate swaps was $39 million.same period of 2022. The fair value losses on investments were principally due to increased interest rates and wider credit spreads. The lower fair value gainsunfavorable change on our interest rate swaps were largely driven by a smaller increasedecrease in interest rates on the long-term yield curve in 2023 compared to an increase in interest rates for the three months ended March 31, 2021.same period of 2022. Foreign exchange gainslosses for the three months ended March 31, 20222023 on Euro-denominated liabilities were $5$3 million compared with gains of $17$5 million for the same period of 2021.2022. For the three months ended March 31, 2023 and 2022, these losses and 2021, these gains were driven by the weakening and strengthening, respectively, of the U.S. dollar against the euro.
Consolidated total expenses for the three months ended March 31, 20222023 included $49$6 million of losses and loss adjustment expense (“LAE”) compared with $98$49 million for the same period of 2021.2022. This decrease in losses and LAE was primarily due to decreases in losses incurred on collateralized debt obligations (“CDOs”) and a net decrease in losses onfavorable changes from certain Puerto Rico credits. This decrease was partially offset by unfavorable changes in losses and LAE from insured first-lien residential mortgage-backed securities (“RMBS”) in 2023 when compared with 2022. Refer to the following “Loss and Loss Adjustment Expenses” sections of the U.S. Public Finance Insurance and International and Structured Finance Insurance segments for additional information on our losses and LAE. In addition, interest expense
39
Item 2. Management’s Discussion and Analysis of consolidated variable interest entities (“VIEs”) decreased for the three months ended March 31, 2022 compared with the same periodFinancial Condition and Results of 2021 due to the repayment of the outstanding insured senior notes of MBIA Corp.’s financing facility between MZ Funding LLC (“MZ Funding”) and certain purchasers (“Refinanced Facility”) during 2021.
RESULTS OF OPERATIONS (continued)
Provision for Income Taxes
For the three months ended March 31, 20222023 and 2021,2022, our effective tax rate applied to our loss before income taxes was 0% compared withbelow the U.S. statutory tax rate of 21% due to the full valuation allowance on the changes in our net deferred tax asset, which includes our net operating loss (“NOL”).
As of March 31, 20222023 and December 31, 2021,2022, the Company’s valuation allowance against its net deferred tax asset was $1.1$1.2 billion. Notwithstanding the full valuation allowance on its net deferred tax asset, the Company believes that it may be able to use some of its net deferred tax asset before the expirations associated with that asset based upon expected earnings at National. Accordingly, the Company will continue to
Income (loss) from discontinued operations, net of income taxes
The Company classifies certain portfolio companies that the Company acquired from the Zohar CDOs bankruptcy distribution as discontinued operations. Included in this amount are the results of operations for the three months ended March 31, 2023. Refer to “Note 1: Business Developments and Risks and Uncertainties” in the Notes to Consolidated Financial Statements for a further discussion of our discontinued operations.
40
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
RESULTS OF OPERATIONS (continued)
Non-GAAP
In addition to our results prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP)GAAP”), we also analyze the operating performance of the Company using adjusted net income (loss) and adjusted net income (loss) per diluted common share, both
Adjusted net income (loss) and adjusted net income (loss) per diluted common share include the
• | Mark-to-market gains (losses) on financial instruments – We remove the impact of mark-to-market gains (losses) on financial instruments such as interest rate swaps, investment securities and hybrid financial instruments. These amounts fluctuate based on market interest rates, credit spreads and other market factors. |
• | Foreign exchange gains (losses) – We remove foreign exchange gains (losses) on the remeasurement of certain assets and liabilities and transactions in non-functional currencies. Given the possibility of volatility in foreign exchange markets, we exclude the impact of foreign exchange gains (losses) to provide a measurement of comparability of adjusted net income (loss). |
• | Net realized investment gains (losses), impaired securities and extinguishment of debt – We remove realized gains (losses) on the sale of investments, net investment losses related to impairment of securities and net gains (losses) on extinguishment of debt since the timing of these transactions are subject to management’s assessment of market opportunities and conditions and capital liquidity positions. |
• | Income taxes –We apply a zero effective tax rate for federal income tax purposes to our pre-tax adjustments, if applicable, consistent with our consolidated effective tax rate. |
The following table presents our adjusted net income (loss) and adjusted net income (loss) per diluted common share and provides a reconciliation of GAAP net income (loss) to adjusted net income (loss) for the three months ended March 31, 20222023 and 2021:
Three Months Ended March 31, | ||||||||
In millions except share and per share amounts | 2022 | 2021 | ||||||
Net income (loss) | $ | (73 | ) | $ | (106 | ) | ||
Less: adjusted net income (loss) adjustments: | ||||||||
Income (loss) before income taxes of our international and structured finance insurance segment and eliminations | (5 | ) | (44 | ) | ||||
Adjustments to income before income taxes of our U.S. public finance insurance and corporate segments: | ||||||||
Mark-to-market (1) | 24 | 38 | ||||||
Foreign exchange gains (losses) (1) | 6 | 17 | ||||||
Net realized investment gains (losses) | (2 | ) | (1 | ) | ||||
Adjusted net income adjustment to the (provision) benefit for income tax | - | - | ||||||
Adjusted net income (loss) | $ | (96 | ) | $ | (116 | ) | ||
Adjusted net income (loss) per diluted common share (2) | (1.94 | ) | (2.36 | ) |
Three Months Ended March 31, | ||||||||
In millions except share and per share amounts | 2023 | 2022 | ||||||
Net income (loss) attributable to MBIA Inc. | $ | (93 | ) | $ | (73 | ) | ||
Less: adjusted net income (loss) adjustments: | ||||||||
Net income (loss) from discontinued operations, net of noncontrolling interest | (10 | ) | - | |||||
Income (loss) before income taxes of our international and structured finance insurance segment and eliminations | (69 | ) | (5 | ) | ||||
Adjustments to income before income taxes of our U.S. public finance insurance and corporate segments: | ||||||||
Mark-to-market gains (losses) on financial instruments(1) | (7 | ) | 24 | |||||
Foreign exchange gains (losses)(1) | (3 | ) | 6 | |||||
Net realized investment gains (losses) | (3 | ) | (2 | ) | ||||
Adjusted net income adjustment to the (provision) benefit for income tax | - | - | ||||||
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Adjusted net income (loss) | $ | (1 | ) | $ | (96 | ) | ||
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Adjusted net income (loss) per diluted common share(2) | (0.03 | ) | (1.94 | ) |
(1) - | Reported within “Net gains (losses) on financial instruments at fair value and foreign exchange” on the Company’s consolidated statements of operations. |
(2) - | Adjusted net income (loss) per diluted common share is calculated by taking adjusted net income (loss) divided by the GAAP weighted average number of diluted common shares outstanding. |
41
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
RESULTS OF OPERATIONS (continued)
Book Value Adjustments Per Share
In addition to GAAP book value per share, for internal purposes management also analyzes adjusted book value (“ABV”) per share, changes to which we view as an important indicator of financial performance. ABV is also used by management in certain components of management’s compensation. Since many of the Company’s investors and analysts continue to use ABV to evaluate MBIA’s share price and as the basis for their investment decisions, we present GAAP book value per share as well as the individual adjustments used by management to calculate its internal ABV metric.
Management adjusts GAAP book value to remove the book value of MBIA Corp., its discontinued operations, and for certain items which the Company believes will reverse from GAAP book value through GAAP earnings and comprehensive income, as well as add in the impact of certain items which the Company believes will be realized in GAAP book value in future periods. The Company has limited such adjustments to those items that it deems to be important to fundamental value and performance and for which the likelihood and amount can be reasonably estimated. The following provides a description of management’s adjustments to GAAP book value:
• | Negative Book value of MBIA Corp. – We remove the negative book value of MBIA Corp., including its discontinued operations based on our view that given MBIA Corp.’s current financial condition, the regulatory regime in which it operates, the priority given to its policyholders, surplus note holders and preferred stock holders with respect to the distribution of assets, and its legal structure, it is not and will not likely be in a position to upstream any economic benefit to MBIA Inc. Further, MBIA Inc. does not face any material financial liability arising from MBIA Corp. |
• | Net unrealized (gains) losses on available-for-sale (“AFS”) securities excluding MBIA Corp. – We remove net unrealized gains and losses on AFS securities recorded in accumulated other comprehensive income since they will reverse from GAAP book value when such securities mature. Gains and losses from sales and impairments of AFS securities are recorded in book value through earnings. |
• | Net unearned premium revenue in excess of expected losses of National - We include net unearned premium revenue in excess of expected losses. Net unearned premium revenue in excess of expected losses consists of the financial guarantee unearned premium revenue of National in excess of expected insurance losses, net of reinsurance and deferred acquisition costs. In accordance with GAAP, a loss reserve on a financial guarantee policy is only recorded when expected losses exceed the amount of unearned premium revenue recorded for that policy. As a result, we only add to GAAP book value the amount of unearned premium revenue in excess of expected losses for each policy in order to reflect the full amount of our expected losses. The Company’s net unearned premium revenue will be recognized in GAAP book value in future periods, however, actual amounts could differ from estimated amounts due to such factors as credit defaults and policy terminations, among others. |
Since the Company has a full valuation allowance against its net deferred tax asset and a zero consolidated effective tax rate, the book value per share adjustments reflect a zero effective tax rate.
The following table provides the Company’s GAAP book value per share and management’s adjustments to book value per share used in our internal analysis:
As of March 31, | As of December 31, | |||||||||||
In millions except share and per share amounts | 2023 | 2022 | ||||||||||
Total shareholders’ equity of MBIA Inc. |
| $ | (912 | ) | $ | (882 | ) | |||||
Common shares outstanding |
| 54,964,474 | 54,852,671 | |||||||||
GAAP book value per share |
| $ | (16.57 | ) | $ | (16.07 | ) | |||||
Management’s adjustments described above: | ||||||||||||
Remove negative book value per share of MBIA Corp. |
| (38.82 | ) | (37.76 | ) | |||||||
Remove net unrealized gains (losses) on available-for-sale securities included in other comprehensive income (loss) |
| (3.14 | ) | (3.96 | ) | |||||||
Include net unearned premium revenue in excess of expected losses |
| 2.99 | 3.08 |
42
As of March 31, | As of December 31, | |||||||
In millions except share and per share amounts | 2022 | 2021 | ||||||
Total shareholders’ equity of MBIA Inc. | $ | (565 | ) | $ | (313 | ) | ||
Common shares outstanding | 54,857,000 | 54,556,112 | ||||||
GAAP book value per share | $ | (10.29 | ) | $ | (5.73 | ) | ||
Management’s adjustments described above: | ||||||||
Remove negative book value per share of MBIA Corp. | (36.16 | ) | (35.94 | ) | ||||
Remove net unrealized gains (losses) on available-for-sale | (0.80 | ) | 2.02 | |||||
Include net unearned premium revenue in excess of expected losses | 3.39 | 3.58 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
RESULTS OF OPERATIONS (continued)
U.S. Public Finance Insurance Segment
Our U.S. public finance insurance portfolio is managed through National. The financial guarantees issued by National provide unconditional and irrevocable guarantees of the payment of the principal of, and interest or other amounts owing on, insured obligations when due or, in the event National has exercised, at its discretion, the right to accelerate the payment under its policies upon the acceleration of the underlying insured obligations due to default or otherwise. National’s guarantees insure municipal bonds, including
National continues to monitor and remediate its existing insured portfolio and may also pursue strategic alternatives that could enhance shareholder value. Some state and local governments and territory obligors that National insures are experiencing financial and budgetary stress which could lead to an increase in defaults by such entities on the payment of their obligations and, while such has not yet occurred materially, losses or impairments on a greater number of the Company’s insured transactions. In particular, Puerto Rico had been experiencing significant fiscal stress and constrained liquidity, and in response, Congress passed PROMESA, which established the Oversight Board vested with the sole power to certify fiscal plans for Puerto Rico.liquidity. Refer to the “U.S. Public Finance Insurance Puerto Rico Exposures” section for additional information on our Puerto Rico exposures. We continue to monitor and analyze these situations and other stressed credits closely, and the overall extent and duration of stress affecting our insured credits remains uncertain.
The following table presents our U.S. public finance insurance segment results for the three months ended March 31, 20222023 and 2021:
Three Months Ended March 31, | Percent | |||||||||||
In millions | 2022 | 2021 | Change | |||||||||
Net premiums earned | $ | 13 | $ | 17 | -24% | |||||||
Net investment income | 17 | 14 | 21% | |||||||||
Net realized investment gains (losses) | (1 | ) | (1 | ) | -% | |||||||
Net gains (losses) on financial instruments at fair value and foreign exchange | (16 | ) | (2 | ) | n/m | |||||||
Fees and reimbursements | 2 | - | n/m | |||||||||
Other net realized gains (losses) | (3 | ) | - | n/m | ||||||||
Total revenues | 12 | 28 | -57% | |||||||||
Losses and loss adjustment | 87 | 109 | -20% | |||||||||
Amortization of deferred acquisition costs | 3 | 4 | -25% | |||||||||
Operating | 13 | 14 | -7% | |||||||||
Total expenses | 103 | 127 | -19% | |||||||||
Income (loss) before income taxes | $ | (91 | ) | $ | (99 | ) | -8% | |||||
Three Months Ended March 31, | Percent | |||||||||||||
In millions | 2023 | 2022 | Change | |||||||||||
Net premiums earned | $ | 7 | $ | 13 | -46% | |||||||||
Net investment income | 23 | 17 | 35% | |||||||||||
Net realized investment gains (losses) | (2 | ) | (1 | ) | 100% | |||||||||
Net gains (losses) on financial instruments at fair value and foreign exchange | 2 | (16 | ) | -113% | ||||||||||
Fees and reimbursements | 1 | 2 | -50% | |||||||||||
Other net realized gains (losses) | - | (3 | ) | -100% | ||||||||||
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Total revenues | 31 | 12 | n/m | |||||||||||
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Losses and loss adjustment | - | 87 | -100% | |||||||||||
Amortization of deferred acquisition costs | 2 | 3 | -33% | |||||||||||
Operating | 12 | 13 | -8% | |||||||||||
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Total expenses | 14 | 103 | -86% | |||||||||||
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Income (loss) from continuing operations before income taxes | $ | 17 | $ | (91 | ) | -119% | ||||||||
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n/m - Percent change not meaningful.
NET PREMIUMS EARNED Net premiums earned on financial guarantees represent gross premiums earned net of premiums ceded to reinsurers, and include scheduled premium earnings and premium earnings from refunded issues. Refunding activity over the past several years has accelerated premium earnings in prior years and reduced the amount of scheduled premiums that would have been earned in the current year. Refunding activity can vary significantly from period to period based on issuer refinancing behavior. For the three months ended March 31, 20222023 and 2021,2022, scheduled premiums earned were $8$7 million and $10$8 million, respectively, and refunded premiums earned were immaterial and $5 million, and $7 million, respectively.
NET INVESTMENT INCOME The increase in net investment income for the three months ended March 31, 20222023 compared with the same period of 20212022 was primarily due to higher yields on investments as a higher average invested asset base resulting from salesresult of the PREPA bankruptcy claims and receipt of the cash and bonds from the GO PSA.
NET GAINS (LOSSES) ON FINANCIAL INSTRUMENTS AT FAIR VALUE AND FOREIGN EXCHANGE For the three months ended March 31, 2022, net losses on financial instruments at fair value and foreign exchange were driven by fair value losses on investments for which the fair value option was elected and investments designated as trading. The losses on the fair value option investments were driven by increases in interest rates and widening of credit spreads during the first quarter ofthree months ended March 31, 2022. The losses on the trading investments were driven by
OTHER NET REALIZED GAINS (LOSSES) For the three months ended March 31, 2022, other net realized losses was primarily related to credit losses on investments as a result of the Ukraine and Russia conflict.
43
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
RESULTS OF OPERATIONS (continued)
LOSSES AND LOSS ADJUSTMENT EXPENSES Our U.S. public finance insured portfolio management group is responsible for monitoring our U.S. public finance segment’s insured obligations. The level and frequency of monitoring of any insured obligation depends on the type, size, rating and our assessed performance of the insured issue. Refer to “Note 5: Loss and Loss Adjustment Expense Reserves” in the Notes to Consolidated Financial Statements for additional information related to the Company’s loss reserves.
For the three months ended March 31, 2023, losses and LAE incurred activity is immaterial.
For the three months ended March 31, 2022, loss and LAE incurred primarily related to changes in our estimate of expected recoveries on National’s PREPA exposure. PREPA loss reserves and recoveries include certain assumptions about the timing and amount of claims payments and recoveries, including assumptions about the values of recoveries on the date we expect to receive reimbursement under an implemented RSA. During the first quarter of 2022, we updated assumptions used to estimate the value of recoveries, the timing and amount of claim payments, as well as the timing of an implemented plan. These assumption changes resulted in a decrease in our estimated present value of PREPA recoveries. Loss and LAE incurred during the quarter related to PREPA was partially offset by benefits related to Puerto Rico HTA and GO recoveries. During the first quarter of 2022, we increased the estimated values of recoveries expected to be received as part of the HTA restructuring to reflect updated information about potential values when received, including considering the current fair values of similar recently issued GO securities. In addition, we recorded a benefit on our GO recoveries to reflect the fair values of the consideration received as of the acquisition date, which was higher than our previous estimate.
The following table presents information about our U.S. public finance insurance loss recoverable asset and loss and LAE reserves liabilities as of March 31, 20222023 and December 31, 2021:
In millions | March 31, 2022 | December 31, 2021 | Percent Change | |||||||||
Assets: | ||||||||||||
Insurance loss recoverable | $ | 128 | $ | 1,054 | -88 | % | ||||||
Reinsurance recoverable on paid and unpaid losses (1) | 10 | 3 | n/ | m | ||||||||
Liabilities: | ||||||||||||
Loss and LAE reserves | 460 | 425 | 8 | % | ||||||||
Insurance loss recoverable - ceded (2) | 3 | 55 | -95 | % | ||||||||
Net reserve (salvage) | $ | 325 | $ | (577 | ) | n/ | m | |||||
In millions | March 31, 2023 | December 31, 2022 | Percent Change | |||||||||
Assets: | ||||||||||||
Insurance loss recoverable | $ | 63 | $ | 107 | -41% | |||||||
Reinsurance recoverable on paid and unpaid losses (1) | 1 | 6 | -83% | |||||||||
Liabilities: | ||||||||||||
Loss and LAE reserves | 85 | 154 | -45% | |||||||||
Insurance loss recoverable - ceded (2) | — | 1 | -100% | |||||||||
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Net reserve (salvage) | $ | 21 | $ | 42 | -50% | |||||||
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(1) - Reported within “Other assets” on our consolidated balance sheets.
(2) - Reported within “Other liabilities” on our consolidated balance sheets.
The insurance loss recoverable as of March 31, 20222023 decreased compared with December 31, 20212022, primarily due to the receiptexpectation in certain circumstances and scenarios, that National will utilize a portion of recoveries pursuantnew collateral received from PREPA to the implemented GO PSA wherebypay current National received cash, GO Bonds, and a CVI.policyholders. In addition, the insurance loss recoverable declineddecrease was due to the sale of PREPA bankruptcy claims and due to changes in assumptions related to the valuean updated analysis of the remainingexpected market value, on the date of receipt, of certain bonds expected to be received under the PREPA recoveries on paid claims. LossPlan of Adjustment. The loss and LAE reservesreserve as of March 31, 2022 increased2023 decreased compared with December 31, 20212022, primarily dueas a result of re-categorization of certain PREPA salvage as an offset to a decrease in PREPA recoveries on claims not yet paid, which are netted in loss and LAE, reserves. The increase in PREPA net loss reserves was partially offset by an increase in the estimated value of recoveries related to the HTA restructuring, which is also netted in loss and LAE reserves, claims payments related to the acceleration and commutation of GO exposure, and scheduledas discussed above, as well as claim payments on Puerto Rico exposures during the three months ended March 31, 2022.
POLICY ACQUISITION COSTS AND OPERATING EXPENSES U.S. public finance insurance segment expenses for the three months ended March 31, 20222023 and 20212022 are presented in the following table:
Three Months Ended March 31, | Percent | |||||||||||
In millions | 2022 | 2021 | Change | |||||||||
Gross expenses | $ | 13 | $ | 15 | -13% | |||||||
Amortization of deferred acquisition costs | $ | 3 | $ | 4 | -25% | |||||||
Operating | 13 | 14 | -7% | |||||||||
Total insurance operating expenses | $ | 16 | $ | 18 | -11% | |||||||
Three Months Ended March 31, | Percent | |||||||||||
In millions | 2023 | 2022 | Change | |||||||||
Gross expenses | $ | 12 | $ | 13 | -8% | |||||||
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Amortization of deferred acquisition costs | $ | 2 | $ | 3 | -33% | |||||||
Operating | 12 | 13 | -8% | |||||||||
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Total insurance operating expenses | $ | 14 | $ | 16 | -13% | |||||||
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Gross expenses represent total insurance expenses before the deferral of any policy acquisition costs. Operating expenses decreased for the three months ended March 31, 2022 compared with the same period of 2021 primarily due to a decrease in legal costs.
When an insured obligation refunds, we accelerate to expense any remaining deferred acquisition costs associated with the policy covering the refunded insured obligation. We did not defer a material amount of policy acquisition costs during 20222023 or 20212022 as we did not write any new insurance business in those years.
44
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
RESULTS OF OPERATIONS (continued)
INSURED PORTFOLIO EXPOSURE Financial guarantee insurance companies use a variety of approaches to assess the underlying credit risk profile of their insured portfolios. National uses both an internally developed credit rating system as well as third-party rating sources in the analysis of credit quality measures of its insured portfolio. In evaluating credit risk, we obtain, when available, the underlying rating(s) of the insured obligation before the benefit of National’s insurance policy from nationally recognized rating agencies, Moody’s Investor Services (“Moody’s”) and Standard & Poor’s Financial Services LLC (“S&P”). Other companies within the financial guarantee industry may report credit quality information based upon internal ratings that would not be comparable to our presentation. We maintain internal ratings on our entire portfolio, and our ratings may be higher or lower than the underlying ratings assigned by Moody’s or S&P.
The following table presents the credit quality distribution of National’s U.S. public finance outstanding gross par insured as of March 31, 20222023 and December 31, 2021.2022. Capital appreciation bonds (“CABs”) are reported at the par amount at the time of issuance of the insurance policy. All ratings are as of the period presented and represent S&P underlying ratings, where available. If transactions are not rated by S&P, a Moody’s equivalent rating is used. If transactions are not rated by either S&P or Moody’s, an internal equivalent rating is used.
Gross Par Outstanding | ||||||||||||||||
In millions | March 31, 2022 | December 31, 2021 | ||||||||||||||
Rating | Amount | % | Amount | % | ||||||||||||
AAA | $ | 1,614 | 4.6% | $ | 1,682 | 4.6% | ||||||||||
AA | 14,559 | 41.4% | 14,874 | 40.8% | ||||||||||||
A | 10,167 | 28.9% | 10,439 | 28.6% | ||||||||||||
BBB | 5,968 | 17.0% | 6,187 | 17.0% | ||||||||||||
Below investment grade | 2,870 | 8.1% | 3,269 | 9.0% | ||||||||||||
Total | $ | 35,178 | 100.0% | $ | 36,451 | 100.0% | ||||||||||
Gross Par Outstanding | ||||||||||||||||
In millions | March 31, 2023 | December 31, 2022 | ||||||||||||||
Rating | Amount | % | Amount | % | ||||||||||||
AAA | $ | 1,388 | 4.5% | $ | 1,433 | 4.5% | ||||||||||
AA | 13,243 | 42.6% | 13,448 | 42.5% | ||||||||||||
A | 9,524 | 30.7% | 9,672 | 30.5% | ||||||||||||
BBB | 4,870 | 15.7% | 5,055 | 16.0% | ||||||||||||
Below investment grade | 2,026 | 6.5% | 2,044 | 6.5% | ||||||||||||
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Total | $ | 31,051 | 100.0% | $ | 31,652 | 100.0% | ||||||||||
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U.S. Public Finance Insurance Puerto Rico Exposures
In millions | Gross Par Outstanding | Debt Service Outstanding | National Internal Rating | |||||||||
Puerto Rico Electric Power Authority (PREPA) | $ | 809 | $ | 1,063 | d | |||||||
Puerto Rico Highway and Transportation Authority Transportation Revenue (PRHTA) | 523 | 842 | d | |||||||||
Puerto Rico Highway and Transportation Authority—Subordinated Transportation Revenue (PRHTA) | 27 | 33 | d | |||||||||
Puerto Rico Highway and Transportation Authority Highway Revenue (PRHTA) | 39 | (1) | 57 | d | ||||||||
University of Puerto Rico System Revenue | 70 | 90 | d | |||||||||
Inter American University of Puerto Rico Inc. | 17 | 21 | a3 | |||||||||
Total | $ | 1,485 | $ | 2,106 | ||||||||
On May 3, 2017, the Oversight Board certified and filed a petition under Title III of PROMESAthe Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”) for Puerto Rico with the District Court of Puerto Rico thereby commencing a bankruptcy-like case for the Commonwealth GO.General Obligation (“GO”). Under separate petitions, the Oversight Board subsequently commenced Title III proceedings for COFINA, PRHTA,the Puerto Rico Sales Tax Financing Corporation (“COFINA”), the Puerto Rico Highways and Transportation Authority (“PRHTA”), PREPA and PBAthe Public Buildings Authority (“PBA”) on May 5, 2017, May 21, 2017, July 2, 2017 and September 27, 2019, respectively. One of the proceedings was resolved onOn February 4, 2019, when the District of Puerto Rico entered the order confirming the Third Amended Title III Plan of Adjustment for COFINA. The Title III cases for the Commonwealth of Puerto Rico GO and PBA were confirmed on January 18, 2022, and became effective on March 15, 2022. There can be no assurance thatThe confirmation hearing for the PRHTA Title III proceedings for PREPAcase was completed on August 17, 2022, and PRHTA will be resolved with similar outcomes.
As a result of prior defaults, various stays and the Title III cases, Puerto Rico failed to make certain scheduled debt service payments for National insured bonds. As a consequence, National has paid gross claims in the aggregate amount of $2.2$2.9 billion relating to GO bonds, PBA bonds, PREPA bonds and PRHTA bonds through March 31, 2022,2023, inclusive of the commutation payment and the additional payment in the amount of $66 million on December 17,in 2019 related to COFINA and the GO PSAand HTA acceleration and commutation payments of $277 million and $556 million, respectively, in 2022.
Status of Puerto Rico’s Fiscal Plans
The Oversight Board certified fiscal plans for PREPA, University of Puerto Rico (the “University”) and PRHTA on June 28, 2022, May 27, 2022 and October 14, 2022, respectively. The Oversight Board also certified the fiscal year 2023 budgets for Commonwealth, PREPA, the University and PRHTA on June 30, 2022. The University is not a debtor in Title III and continues to be current on its debt service payment. However, the University is subject to a standstill agreement with its senior bondholders, which has been extended to May 31, 2023. National is not a party to the standstill agreement. As of March 31, 2023, National had $83 million of 2022.
PREPA
National’s largest remaining exposure to Puerto Rico, by gross par outstanding, is to PREPA.
45
Item 2. Management’s Discussion and Syncora Guarantee Inc. (collectively, “Movants”) filed a motion in the Title III case for PREPA for relief from the automatic stay to allow Movants to exercise their statutory right to have a receiver appointed at PREPA (the “Receiver Motion”). This motion was stayed pending a resolutionAnalysis of the 9019 Order approving the RSA, but is no longer stayed pursuant to the April 8 Order, discussed below.
RESULTS OF OPERATIONS (continued)
On May 3, 2019, PREPA, the Oversight Board, the AAFAF, the Ad Hoc Group of PREPA bondholders (the “Ad Hoc Group”), and Assured Guaranty Corp. and Assured Guaranty Municipal Corp. (“Assured”) entered into the a restructuring support agreement (“RSA”) which was amended on September 9, 2019 to include National and Syncora Guarantee, Inc. (“Syncora”) as supporting parties.
On June 22, 2020, the Oversight Board and the Puerto Rico P3 Authority announced an agreement and contract with LUMA Energy, LLC (“LUMA”) which calls for LUMA to take full responsibility for the operation and maintenance of PREPA’s transmission and distribution system; the contract runs for
On September 18, 2020, FEMA and the PR COR3 Authority announced the commitment by FEMA to provide approximately $11.6 billion (net of the required 10% cost share) to fund projects built by PREPA and the PR Department of Education; approximately $9.4 billion (net) of this amount is designated for PREPA. LUMA is now involved in the planning of the related projects as well as proceedings related thereto in front the PR Energy Bureau as well as
On January of 2022, National sold $199 million and $231 million, respectively, of PREPA bankruptcy claims related to insurance claims paid on matured National-insured PREPA bonds. These transactions represented approximately 35% of National’s par claims to PREPA, monetized a portion of National’s salvage asset at a discount to National’s previous carrying value, and reduced potential volatility and ongoing risk of remediation around the PREPA credit. Subsequent to the sale of these PREPA bankruptcy claims, National does not have a material amount of additional par claims to PREPA that have matured and can be sold.
The following table presents our scheduled gross debt service due on our Puerto RicoPREPA insured exposures as of March 31, 2023, for the nine months ending December 31, 2022,2023, for each of the subsequent four years ending December 31 and thereafter:
In millions | Nine Months Ending December 31, 2022 | 2023 | 2024 | 2025 | 2026 | Thereafter | Total | |||||||||||||||||||||
Puerto Rico Electric Power Authority (PREPA) | $ | 119 | $ | 137 | $ | 137 | $ | 105 | $ | 57 | $ | 508 | $ | 1,063 | ||||||||||||||
Puerto Rico Highway and Transportation Authority Transportation Revenue (PRHTA) | 13 | 36 | 33 | 36 | 35 | 689 | 842 | |||||||||||||||||||||
Puerto Rico Highway and Transportation Authority—Subordinated Transportation Revenue (PRHTA) | 8 | 1 | 1 | 1 | 1 | 21 | 33 | |||||||||||||||||||||
Puerto Rico Highway and Transportation Authority Highway Revenue (PRHTA) | 2 | 4 | 2 | 2 | 2 | 45 | 57 | |||||||||||||||||||||
University of Puerto Rico System Revenue | 5 | 12 | 11 | 16 | 6 | 40 | 90 | |||||||||||||||||||||
Inter American University of Puerto Rico Inc. | 3 | 3 | 3 | 3 | 2 | 7 | 21 | |||||||||||||||||||||
Total | $ | 150 | $ | 193 | $ | 187 | $ | 163 | $ | 103 | $ | 1,310 | $ | 2,106 | ||||||||||||||
In millions | Nine Months Ending December 31, 2023 | 2024 | 2025 | 2026 | 2027 | Thereafter | Total | |||||||||||||||||||||
Puerto Rico Electric Power Authority (PREPA) | $ | 119 | $ | 137 | $ | 105 | $ | 57 | $ | 20 | $ | 488 | $ | 926 |
Corporate Segment
Our corporate segment consists of general corporate activities, including providing support services to MBIA Inc.’s subsidiaries and asset and capital management. Support services are provided by our service company, MBIA Services, and include, among others, management, legal, accounting, treasury, information technology, and insurance portfolio surveillance, on a
46
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
RESULTS OF OPERATIONS (continued)
The following table summarizes the consolidated results of our corporate segment for the three months ended March 31, 20222023 and 2021:
Three Months Ended March 31, | Percent | |||||||||||
In millions | 2022 | 2021 | Change | |||||||||
Net investment income | $ | 6 | $ | 7 | -14% | |||||||
Net realized investment gains (losses) | (1 | ) | - | n/m | ||||||||
Net gains (losses) on financial instruments at fair value and foreign exchange | 39 | 55 | -29% | |||||||||
Fees | 14 | 16 | -13% | |||||||||
Total revenues | 58 | 78 | -26% | |||||||||
Operating | 16 | 22 | -27% | |||||||||
Interest | 19 | 19 | -% | |||||||||
Total expenses | 35 | 41 | -15% | |||||||||
Income (loss) before income taxes | $ | 23 | $ | 37 | -38% | |||||||
Three Months Ended March 31, | Percent Change | |||||||||||
In millions | 2023 | 2022 | ||||||||||
Net investment income | $ | 6 | $ | 6 | -% | |||||||
Net realized investment gains (losses) | (1 | ) | (1 | ) | -% | |||||||
Net gains (losses) on financial instruments at fair value and foreign exchange | (12 | ) | 39 | -131% | ||||||||
Fees | 14 | 14 | -% | |||||||||
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Total revenues | 7 | 58 | -88% | |||||||||
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Operating | 19 | 16 | 19% | |||||||||
Interest | 19 | 19 | -% | |||||||||
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Total expenses | 38 | 35 | 9% | |||||||||
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Income (loss) from continuing operations before income taxes | $ | (31 | ) | $ | 23 | n/m | ||||||
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n/m - Percent change not meaningful.
NET GAINS (LOSSES) ON FINANCIAL INSTRUMENTS AT FAIR VALUE AND FOREIGN EXCHANGE The change in netNet gains (losses) on financial instruments at fair value and foreign exchange for the three months ended March 31, 2022 compared with same period of 2021 waswere primarily due to variancesdriven by changes in foreign currency gains and net gainsmarket values on interest rate swaps.swaps and changes in the revaluation of euro-denominated liabilities. The three months ended March 31, 2022 includes foreign currency gains of $5 million on Euro-denominated liabilities compared with foreign currency gains of $17 million on these liabilities as a result of the strengthening of the U.S. dollar. In addition, the three months ended March 31, 20222023 includes fair value net gainslosses of $34$8 million on interest rate swaps compared with fair value net gains of $39$34 million on these swaps for the same period of 20212022. This unfavorable change was due to a smaller increasethe impact of declining interest rates for which we receive floating rates in 2023 compared with increases in interest rates.
OPERATING EXPENSE The change in operatingOperating expense increased for the three months ended March 31, 20222023 compared with the same period of 2021 was2022 primarily due to a decreasean increase in compensation expense related to the Company’s deferred compensation plan.
International and Structured Finance Insurance Segment
Our international and structured finance insurance portfolio is managed through MBIA Corp. The financial guarantees issued by MBIA Corp. generally provide unconditional and irrevocable guarantees of the payment of the principal of, and interest or other amounts owing on,
MBIA Corp. insures sovereign-related and
MBIA Corp. has contributed to the Company’s NOL carryforward, which is used in the calculation of our consolidated income taxes. If MBIA Corp. becomes profitable, it is not expected to make any tax payments under our tax sharing agreement. Based on MBIA Corp.’s current projected earnings and our expectation that it will not write significant new business, we believe it is unlikely that MBIA Corp. will generate significant income in the near future. As a result of MBIA Corp.’s capital structure and business prospects, we do not expect its financial performance to have a material economic impact on MBIA Inc.
47
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
RESULTS OF OPERATIONS (continued)
The following table presents our international and structured finance insurance segment results for the three months ended March 31, 20222023 and 2021:
Three Months Ended March 31, | Percent | |||||||||||
In millions | 2022 | 2021 | Change | |||||||||
Net premiums earned | $ | 4 | $ | 6 | -33% | |||||||
Net investment income | 2 | 1 | 100% | |||||||||
Net realized investment gains (losses) | (1 | ) | - | n/m | ||||||||
Net gains (losses) on financial instruments at fair value and foreign exchange | (6 | ) | (1 | ) | n/m | |||||||
Fees and reimbursements | 3 | 4 | -25% | |||||||||
Revenues of consolidated VIEs: | ||||||||||||
Net gains (losses) on financial instruments at fair value and foreign exchange | (4 | ) | (14 | ) | -71% | |||||||
Total revenues | (2 | ) | (4 | ) | -50% | |||||||
Losses and loss adjustment | (38 | ) | (11 | ) | n/m | |||||||
Amortization of deferred acquisition costs | 4 | 4 | -% | |||||||||
Operating | 6 | 7 | -14% | |||||||||
Interest | 28 | 27 | 4% | |||||||||
Expenses of consolidated VIEs: | ||||||||||||
Operating | 2 | 2 | -% | |||||||||
Interest | 1 | 11 | -91% | |||||||||
Total expenses | 3 | 40 | -93% | |||||||||
Income (loss) before income taxes | $ | (5 | ) | $ | (44 | ) | -89% | |||||
Three Months Ended March 31, | Percent Change | |||||||||||
In millions | 2023 | 2022 | ||||||||||
Net premiums earned | $ | 3 | $ | 4 | -25% | |||||||
Net investment income | 3 | 2 | 50% | |||||||||
Net realized investment gains (losses) | - | (1 | ) | -100% | ||||||||
Net gains (losses) on financial instruments at fair value and foreign exchange | (3 | ) | (6 | ) | -50% | |||||||
Fees and reimbursements | 2 | 3 | -33% | |||||||||
Revenues of consolidated VIEs: | ||||||||||||
Net gains (losses) on financial instruments at fair value and foreign exchange | (3 | ) | (4 | ) | -25% | |||||||
Other net realized gains (losses) | (15 | ) | - | n/m | ||||||||
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Total revenues | (13 | ) | (2 | ) | n/m | |||||||
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Losses and loss adjustment | 6 | (38 | ) | -116% | ||||||||
Amortization of deferred acquisition costs | 2 | 4 | -50% | |||||||||
Operating | 6 | 6 | -% | |||||||||
Interest | 38 | 28 | 36% | |||||||||
Expenses of consolidated VIEs: | ||||||||||||
Operating | 4 | 2 | 100% | |||||||||
Interest | - | 1 | -100% | |||||||||
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Total expenses | 56 | 3 | n/m | |||||||||
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Income (loss) from continuing operations before income taxes | $ | (69 | ) | $ | (5 | ) | n/m | |||||
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n/m - Percent change not meaningful.
NET PREMIUMS EARNED Our international and structured finance insurance segment generates net premiums from insurance policies accounted for as financial guarantee contracts. Net premiums earned represent gross premiums earned net of premiums ceded to reinsurers, and include scheduled premium earnings and premium earnings from refunded issues. Certain premiums may be eliminated in our consolidated financial statements as a result of the Company consolidating VIEs. The following table provides net premiums earned from our financial guarantee contracts for the three months ended March 31, 20222023 and 2021:
Three Months Ended March 31, | Percent | |||||||||||
In millions | 2022 | 2021 | Change | |||||||||
Net premiums earned: | ||||||||||||
Non-U.S. | $ | 3 | $ | 5 | -40% | |||||||
U.S. | 1 | 1 | -% | |||||||||
Total net premiums earned | $ | 4 | $ | 6 | -33% | |||||||
VIEs (eliminated in consolidation) | $ | - | $ | 1 | -100% |
Three Months Ended March 31, | Percent Change | |||||||||||
In millions | 2023 | 2022 | ||||||||||
Net premiums earned: | ||||||||||||
Non-U.S. | $ | 2 | $ | 3 | -33% | |||||||
U.S. | 1 | 1 | -% | |||||||||
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Total net premiums earned | $ | 3 | $ | 4 | -25% | |||||||
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NET GAINS (LOSSES) ON FINANCIAL INSTRUMENTS AT FAIR VALUE AND FOREIGN EXCHANGE The net losses for the three months ended March 31, 2023 and 2022 were primarily driven by foreign exchange losses on the revaluation of non-U.S. dollar insurance balances.
REVENUES OF CONSOLIDATED VIEs The unfavorable change for the three months ended March 31, 20222023 compared with the same period of 20212022 was primarily due to the reclassification of $14 million of credit risk losses from foreign currency revaluationsaccumulated other comprehensive income related to the deconsolidation of loss reserves denominateda VIE in Unidad de Inversion, as a result of the weakening of U.S. dollar.
LOSSES AND LOSS ADJUSTMENT EXPENSES Our international and structured finance insured portfolio management group is responsible for monitoring international and structured finance insured obligations. The level and frequency of monitoring of any insured obligation depends on the type, size, rating and our assessed performance of the insured issue. Refer to “Note 5: Loss and Loss Adjustment Expense Reserves” in the Notes to Consolidated Financial Statements for a description of the Company’s loss reserving policy and additional information related to its loss reserves.
48
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
RESULTS OF OPERATIONS (continued)
For the three months ended March 31, 2023 and 2022, the loss and LAE expense, compared to a loss and LAE benefit, respectively, primarily related to changes in the risk-free rates used to discount expected claims payments, primarily on our insured first-lien RMBS transactions. For the three months ended March 31, 2023, a decrease in risk-free rates caused loss liabilities to increase, whereas for the three months ended March 31, 2022, an increase in risk-free rates caused loss liabilities to decline.
As a result of the consolidation of VIEs, loss and LAE excludes losses and LAE benefits of $36 million and $9 million and $16 million, for the three months ended March 31, 20222023 and 2021,2022, respectively, as VIE losses and LAE activity is eliminated in consolidation.
Refer to “Note 5: Loss and Loss Adjustment Expense Reserves” in the Notes to Consolidated Financial Statements for further information about our insurance loss recoverable and loss and LAE reserves. The following table presents information about our insurance loss recoverable and loss and LAE reserves as of March 31, 20222023 and December 31, 2021:
In millions | March 31, 2022 | December 31, 2021 | Percent Change | |||||||||
Assets: | ||||||||||||
Insurance loss recoverable | $ | 238 | $ | 242 | -2% | |||||||
Reinsurance recoverable on paid and unpaid losses (1) | 4 | 5 | -20% | |||||||||
Liabilities: | ||||||||||||
Loss and LAE reserves | 426 | 469 | -9% | |||||||||
Net reserve (salvage) | $ | 184 | $ | 222 | -17% | |||||||
In millions | March 31, 2023 | December 31, 2022 | Percent Change | |||||||||
Assets: | ||||||||||||
Insurance loss recoverable | $ | 32 | $ | 30 | 7% | |||||||
Reinsurance recoverable on paid and unpaid losses (1) | 2 | 4 | -50% | |||||||||
Liabilities: | ||||||||||||
Loss and LAE reserves | 294 | 285 | 3% | |||||||||
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Net reserve (salvage) | $ | 260 | $ | 251 | 4% | |||||||
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(1) – Reported within “Other assets” on our consolidated balance sheets.
The insurance loss recoverable primarily relates to reimbursement rights arising from the payment of claims on MBIA Corp.’s policies insuring certain CDOs and RMBS.RMBS transactions. Such payments also entitle MBIA Corp. to exercise certain rights and remedies to seek recovery of its reimbursement entitlements. The decrease in the insurance loss recoverable from 2021 is due to an increase in risk-free rates used to discount future recoveries of paid claims, which lowered the present value of those recoveries, and the collection of RMBS recoveries. The decline inMBIA Corp.‘s loss and LAE reserves from 2021 is2022 was primarily due to the increasea decline in risk-free rates, which caused future liabilities net of recoveries to increase, and from the present valueweakening of the U.S. dollar which caused liabilities to increase on foreign denominated case reserves net of future recoveries, to decline.
Refer to “Note 1: Business Developments and Risks and Uncertainties” in the Notes to Consolidated Financial Statements for information regarding risks and uncertainties related to future collections of estimated recoveries. Refer to “Note 5: Loss and Loss Adjustment Expense Reserves” in the Notes to Consolidated Financial Statements for additional information about our loss reserving policy, loss reserves and recoverables.
POLICY ACQUISITION COSTS AND OPERATING EXPENSES International and structured finance insurance segment expenses for the three months ended March 31, 20222023 and 20212022 are presented in the following table:
Three Months Ended March 31, | Percent Change | |||||||||||
In millions | 2022 | 2021 | ||||||||||
Gross expenses | $ | 6 | $ | 7 | -14% | |||||||
Amortization of deferred acquisition costs | $ | 4 | $ | 4 | -% | |||||||
Operating | 6 | 7 | -14% | |||||||||
Total insurance operating expenses | $ | 10 | $ | 11 | -9% | |||||||
Three Months Ended March 31, | Percent | |||||||||||
In millions | 2023 | 2022 | Change | |||||||||
Gross expenses | $ | 6 | $ | 6 | -% | |||||||
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Amortization of deferred acquisition costs | $ | 2 | $ | 4 | -50% | |||||||
Operating | 6 | 6 | -% | |||||||||
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Total insurance operating expenses | $ | 8 | $ | 10 | -20% | |||||||
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Gross expenses represent total insurance expenses before the deferral of any policy acquisition costs. We did not defer a material amount of policy acquisition costs during 20222023 or 20212022 as no new business was written. Policy acquisition costs in these periods were primarily related to ceding commissions and premium taxes on installment policies written in prior periods.
49
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
RESULTS OF OPERATIONS (continued)
INTEREST EXPENSE OF CONSOLIDATED VIEs Interest expense of consolidated VIEs decreasedrelates to MBIA Corp.’s surplus notes which are indexed to the London Interbank Offered Rate (“LIBOR”). The increase in interest expense for the three months ended March 31, 20222023 compared with the same period of 20212022 was due to the repayment of the outstanding insured senior notes of the Refinanced Facility during 2021.
International and Structured Finance Insurance Portfolio Exposures
Credit Quality
The credit quality of our international and structured finance insured portfolio is assessed in the same manner as our U.S. public finance insured portfolio. As of March 31, 20222023 and December 31, 2021, 29%2022, 28% and 26%30%, respectively, of our international and structured finance insured portfolio was rated below investment grade, before giving effect to MBIA’s guarantees, based on MBIA’s internal ratings, which are generally more current than the underlying ratings provided by S&P and Moody’s for this subset of our insured portfolio. Below investment grade insurance policies primarily include our first-lien RMBS and CDO exposures.
Selected Portfolio Exposures
MBIA Corp. insures RMBS backed by residential mortgage loans, including first-lien alternative
In addition, as of March 31, 20222023 and December 31, 2021,2022, MBIA Corp. insured $228$129 million and $231$201 million, respectively, of CDOs and related instruments.
We may experience considerable incurred losses in certain of these sectors. There can be no assurance that the loss reserves recorded in our financial statements will be sufficient or that we will not experience losses on transactions on which we currently have no loss reserves, in particular if the economy deteriorates. We may seek to purchase, directly or indirectly, obligations guaranteed by MBIA Corp. or seek to commute policies. The amount of insurance exposure reduced, if any, and the nature of any such actions will depend on market conditions, pricing levels from time to time, and other considerations. In some cases, these activities may result in a reduction of loss reserves, but in all cases they are intended to limit our ultimate losses and reduce the future volatility in loss development on the related policies. Our ability to purchase guaranteed obligations and to commute policies will depend on management’s assessment of available liquidity.
Effective in the first quarter of 2022, MBIA Corp. was granted a permitted practice by the New York State Department of Financial Services (“NYSDFS”) related to the purchase of certain MBIA Corp.-insured securities with gross case base loss reserves (“Remediation Securities”). The Remediation Securities are being acquired with the intent to terminate or commute the related insurance policies. MBIA Corp. may elect to sell the Remediation Securities to facilitate a termination or commutation.
U.S. Public Finance and International and Structured Finance Reinsurance
Reinsurance enables the Company to cede exposure for purposes of syndicating risk. The Company generally retains the right to reassume the business ceded to reinsurers under certain circumstances, including a reinsurer’s rating downgrade below specified thresholds. Currently, we do not intend to use reinsurance to decrease the insured exposure in our portfolio.
As of March 31, 2022,2023, the aggregate amount of insured par outstanding ceded by MBIA to reinsurers under reinsurance agreements was $994$872 million compared with $1.0 billion$897 million as of December 31, 2021.2022. Under National’s reinsurance agreement with MBIA Corp., if a reinsurer of MBIA Corp. is unable to pay claims ceded by MBIA Corp. on U.S. public finance exposure, National will assume liability for such ceded claim payments. For a further discussion of the Company’s reinsurance, refer to “Note 13: Insurance in Force” in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form
50
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
We use a liquidity risk management framework, the primary objective of which is to match liquidity resources to needs. We monitor our cash and liquid asset resources using cash forecasting and stress-scenario testing. Members of MBIA’s senior management meet regularly to review liquidity metrics, discuss contingency plans and establish target liquidity levels. We evaluate and manage liquidity on a legal-entity basis to take into account the legal, regulatory and other limitations on available liquidity resources within the enterprise.
Consolidated Cash Flows
Information about our consolidated cash flows by category is presented on our consolidated statements of cash flows. The following table summarizes our consolidated cash flows for the three months ended March 31, 20222023 and 2021:
Three Months Ended March 31, | ||||||||||||
In millions | 2022 | 2021 | Percent Change | |||||||||
Statement of cash flow data: | ||||||||||||
Net cash provided (used) by: | ||||||||||||
Operating activities | $ | 273 | $ | 529 | -48% | |||||||
Investing activities | (254 | ) | (418 | ) | -39% | |||||||
Financing activities | (29 | ) | (157 | ) | -82% | |||||||
Effect of exchange rate changes on cash and cash equivalents | 1 | - | n/m | |||||||||
Cash and cash equivalents - beginning of period | 160 | 167 | -4% | |||||||||
Cash and cash equivalents - end of period | $ | 151 | $ | 121 | 25% | |||||||
Three Months Ended March 31, | Percent Change | |||||||||||
In millions | 2023 | 2022 | ||||||||||
Statement of cash flow data: | ||||||||||||
Net cash provided (used) by: | ||||||||||||
Operating activities | $ | (36 | ) | $ | 273 | -113% | ||||||
Investing activities | 71 | (254 | ) | -128% | ||||||||
Financing activities | (20 | ) | (29 | ) | -31% | |||||||
Effect of exchange rate changes on cash and cash equivalents | - | 1 | -100% | |||||||||
Cash and cash equivalents - beginning of period | 78 | 160 | -51% | |||||||||
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Cash and cash equivalents - end of period | $ | 93 | $ | 151 | -38% | |||||||
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Operating activities
Net cash provided by operating activities decreased for the three months ended March 31, 20222023 compared with the same period of 20212022 primarily due to proceeds received in the first quartera decrease of 2021 from loan repurchase commitments of $600 million as a result of the settlement of the Credit Suisse litigation and an increase of $278 million of losses and LAE paid in the first quarter of 2022 when compared to the same period of 2021. This was partially offset by an increase of $605$619 million of proceeds from insurance recoveries and reinsurance in the first quarter of 2022 when compared to the same period of 2021, primarily from the GO PSAreinsurance. Recoveries and the sale of certain PREPA bankruptcy claims.
Investing activities
Net cash provided by investing activities increased for the three months ended March 31, 2023 compared with the same period of 20212022 primarily due to less cash receivedan increase of $162 million of proceeds from operating activities forthe sale of fair value investments and a decrease of $105 million of purchases and paydownsof AFS investments in the first quarter of 20222023 compared withto the same period of 2021.
Financing activities
Net cash used by financing activities decreased for the three months ended March 31, 20222023 compared with the same period of 20212022 primarily due to a decrease of $17 million in principal paydowns of long-term debt, partially offset by an increase of $10 million of principal paydowns of VIE notesdebt in 2023 when compared to the same period of $145 million, driven by the partial repayment of the MZ Funding senior notes in the first quarter of 2021.
Consolidated Investments
The following discussion of investments, including references to consolidated investments, excludes investments reported under “Assets of consolidated variable interest entities” on our consolidated balance sheets. Investments of VIEs support the repayment of VIE obligations and are not available to settle obligations of MBIA. Fixed-maturity securities purchased by the Company are generally designated as AFS. Our AFS investments comprise high-quality fixed-income securities and short-term investments.
The credit quality distribution of the Company’s AFS fixed-maturity investment portfolios, excluding short-term investments, are based on ratings from Moody’s and alternate ratings sources, such as S&P or the best estimate of the ratings assigned by the Company, have been used for a small percentage of securities that are not rated by Moody’s. As of March 31, 2022,2023, the weighted average credit quality rating of the Company’s AFS fixed-maturity investment portfolio, excluding short-term investments, was AAa and 75%94% of the investments were investment grade. The investments in investment grade decreased from 92% in 2021 to 75% in 2022 as a result
51
Item 2. Management’s Discussion and Analysis of the GO PSAFinancial Condition and the receiptResults of the GO bonds.
LIQUIDITY AND CAPITAL RESOURCES (continued)
The fair values of securities in the Company’s AFS fixed-maturity investment portfolio are sensitive to changes in interest rates. Decreases in interest rates generally result in increases in the fair values of fixed-maturity securities and increases in interest rates generally result in decreases in the fair values of fixed-maturity securities.
As of March 31, 20222023 and December 31, 2021,2022, the Company had $33$186 million and $233 million of unrealized losses, and $139 million of unrealized gains, respectively, net of deferred taxes related to its investment portfolio recorded in accumulated other comprehensive income within equity. The decrease in unrealized losses during 20222023 resulted from higherlower interest rates, andpartially offset by wider credit spreads.
Refer to “Note 2: Significant Accounting Policies,” and “Note 7: Investments” in the Notes to Consolidated Financial Statements for further information about our accounting policies and investments.
Insured Investments
MBIA’s consolidated investment portfolio includes investments that are insured by various financial guarantee insurers (“Insured Investments”), including investments insured by National and MBIA Corp. (“Company-Insured Investments”). When purchasing Insured Investments, the Company’s third-party portfolio manager independently assesses the underlying credit quality, structure and liquidity of each investment, in addition to the creditworthiness of the insurer. Insured Investments are diverse by sector, issuer and size of holding. The third-party portfolio manager assigns underlying ratings to Insured Investments without giving effect to financial guarantees based on underlying ratings assigned by Moody’s, or S&P when a rating is not published by Moody’s. When a Moody’s or S&P underlying rating is not available, the underlying rating is based on the portfolio manager’s best estimate of the rating of such investment. If the Company determines that declines in the fair values of third-party Insured Investments are related to credit loss, the Company will establish an allowance for credit losses and recognize the credit component through earnings.
As of March 31, 2022,2023, Insured Investments at fair value represented $256$188 million or 7% of consolidated investments, of which $231$179 million or 7% of consolidated investments were Company-Insured Investments. As of March 31, 2022,2023, based on the actual or estimated underlying ratings of our consolidated investment portfolio, without giving effect to financial guarantees, the weighted average rating of only the Insured Investments in the investment portfolio would be in the below investment grade range. Without giving effect to the National and MBIA Corp. guarantees of the Company-Insured Investments in the consolidated investment portfolio, as of March 31, 2022,2023, based on actual or estimated underlying ratings, the weighted average rating of the consolidated investment portfolio was in the A range. The weighted average rating of only the Company-Insured Investments was in the below investment grade range, and investments rated below investment grade in the Company-Insured Investments were 6% of the total consolidated investment portfolio.
National Liquidity
The primary sources of cash available to National are:
principal and interest receipts on assets held in its investment portfolio, including proceeds from the sale of assets;
recoveries associated with insurance loss payments; and
installment premiums.
The primary uses of cash by National are:
loss payments and LAE on insured transactions;
payments of dividends; and
payments of operating expenses, taxes and investment portfolio asset purchases.purchases; and
funding share repurchases.
As of March 31, 20222023 and December 31, 2021,2022, National held cash and investments of $2.7$2.1 billion, and $2.0 billion, respectively, of which $310$263 million and $199$230 million, respectively, were cash and cash equivalents or short-term investments comprised of highly rated commercial paper, money market funds and municipal, U.S. agency and corporate bonds.
The insurance policies issued or reinsured by National provide unconditional and irrevocable guarantees of payments of the principal of, and interest or other amounts owing on, insured obligations when due. In the event of a default in payment of principal, interest or other insured amounts by an issuer, National generally promises to make funds available in the insured amount within one to three business days following notification. In some cases, the amount due can be substantial, particularly if the default occurs on a transaction to which National has a large notional exposure or on a transaction structured with large, bullet-type principal maturities. The U.S. public finance insurance segment’s financial guarantee contracts generally cannot be accelerated by a party other than the insurer which helps to mitigate liquidity risk in this segment.
52
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES (continued)
Corporate Liquidity
The primary sources of cash available to MBIA Inc. are:
dividends from National;
available cash and liquid assets not subject to collateral posting requirements;
principal and interest receipts on assets held in its investment portfolio, including proceeds from the sale of assets; and
access to capital markets.
The primary uses of cash by MBIA Inc. are:
servicing outstanding unsecured corporate debt obligations and MTNs;
meeting collateral posting requirements under investment agreements and derivative arrangements;
payments related to interest rate swaps;
payments of operating expenses; and
funding share repurchases and debt buybacks.
As of March 31, 20222023 and December 31, 2021,2022, the liquidity positions of MBIA Inc. were $216$214 million and $239$230 million, respectively, and included cash and cash equivalents and other investments comprised of highly rated commercial paper and U.S. government and asset-backed bonds.
Based on our projections of National’s and MBIA Corp.’s future earnings and losses, we expect that for the foreseeable future National will be the primary source of payments to MBIA Inc. There can be no assurance as to the amount and timing of any future dividends from National. Also, absent a special dividend subject to the approval of the NYSDFS, we expect the declared and paid dividend amounts from National to be limited to the prior twelve months of adjusted net investment income as reported in its most recent statutory filings. Refer to the following “Liquidity and Capital Resources- Capital Resources” section for additional information on payments of dividends. We do not expect MBIA Inc. to receive dividends from MBIA Corp.
Currently, a significant portion of the cash and securities held by MBIA Inc. is pledged against investment agreement liabilities, the Asset Swap (simultaneous repurchase and reverse repurchase agreement) and derivatives, which limits its ability to raise liquidity through asset sales. As the market value or rating eligibility of the assets pledged against MBIA Inc.’s obligations declines, we are required to pledge additional eligible assets in order to meet minimum required collateral amounts against these liabilities. To mitigate these risks, we seek to maintain cash and liquidity resources that we believe will be sufficient to make all payments due on our obligations and to meet other financial requirements, such as posting collateral. Contingent liquidity resources include: (1) sales of invested assets exposed to credit spread stress risk, which may occur at losses; (2) termination and settlement of interest rate swap agreements; and (3) accessing the capital markets. These actions, if taken, are expected to result in either additional liquidity or reduced exposure to adverse credit spread movements. There can be no assurance that these actions will be sufficient to fully mitigate this risk.
MBIA Corp. Liquidity
The primary sources of cash available to MBIA Corp. are:
recoveries associated with insurance loss payments;
installment premiums and fees; and
principal and interest receipts on assets held in its investment portfolio, including the proceeds from the sale of assets.
The primary uses of cash by MBIA Corp. are:
loss and LAE or commutation payments on insured transactions; and
payments of operating expenses.
As of March 31, 20222023 and December 31, 2021,2022, MBIA Corp. held cash and investments of $560$398 million and $544$386 million, respectively, of which $272$51 million and $310$41 million, respectively, were cash and cash equivalents or liquid investments comprised of money market funds and municipal, U.S. Treasury and corporate bonds that were immediately available to MBIA Insurance Corporation.
53
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES (continued)
Insured transactions that require payment of scheduled debt service payments insured when due or payment in full of the principal insured at maturity could present liquidity risk for MBIA Corp., as any salvage recoveries from such payments could be recovered over an extended period of time after the payment is made. MBIA Corp. is generally required to satisfy claims within one to three business days, and as a result seeks to identify potential claims in advance through our monitoring process. In order to monitor liquidity risk and maintain appropriate liquidity resources, we use the same methodology as we use to monitor credit quality and losses within our insured portfolio, including stress scenarios.
Contractual Obligations
For a discussion of the Company’s contractual obligations, refer to “Liquidity and Capital Resources-Liquidity-Contractual Obligations” in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Annual Report on Form
Capital Resources
The Company manages its capital resources to minimize its cost of capital while maintaining appropriate claims-paying resources (“CPR”) for National and MBIA Corp. The Company’s capital resources consist of total shareholders’ equity, total debt issued by MBIA Inc. for general corporate purposes and surplus notes issued by MBIA Corp. Total capital resources were $0.7 billion and $0.9$0.3 billion as of March 31, 20222023 and December 31, 2021, respectively.
In addition to scheduled debt maturities, from time to time, we reduce unsecured debt through calls or repurchases. Also, MBIA Inc. may repurchase or National may purchase outstanding MBIA Inc. common shares when we deem it beneficial to our shareholders. Purchases or repurchases of debt and common stock may be made from time to time in the open market or in private transactions as permitted by securities laws and other legal requirements. We may also choose to redeem debt obligations where permitted by the relevant agreements. MBIA Inc. or National may acquire or redeem outstanding common shares of MBIA Inc. and outstanding debt obligations at prices when we deem it beneficial to our shareholders. We seek to maintain sufficient liquidity and capital resources to meet the Company’s general corporate needs and debt service. Based on MBIA Inc.’s debt service requirements and expected operating expenses, we expect that MBIA Inc. will have sufficient resources to satisfy its debt obligations and its general corporate needs over time from distributions from National; however, there can be no assurance that MBIA Inc. will have sufficient resources to do so. In addition, the Company may also consider raising third-party capital. Refer to “Capital, Liquidity and Market Related Risk Factors” in Part I, Item 1A of our Form
Insurance Statutory Capital
National and MBIA Insurance Corporation are incorporated and licensed in, and are subject to primary insurance regulation and supervision by New York State Department of Financial Services (“NYSDFS”).the NYSDFS. MBIA Mexico is regulated by the Comisión Nacional de Seguros y Fianzas in Mexico. MBIA Corp.’s Spanish Branch iswas subject to local regulation in Spain. In May of 2023, MBIA Corp.’s Spanish Branch was legally closed. National and MBIA Insurance Corporation each are required to file detailed annual financial statements, as well as interim financial statements, with the NYSDFS and similar supervisory agencies in each of the other jurisdictions in which it is licensed. These financial statements are prepared in accordance with New York State and the National Association of Insurance Commissioners’ statements of statutory accounting principlesU.S. STAT and assist our regulators in evaluating minimum standards of solvency, including minimum capital requirements, and business conduct.
National – Statutory Capital and Surplus
National had statutory capital of $2.1$1.9 billion as of March 31, 2022 compared with $2.0 billion as of2023 and December 31, 2021.2022. As of March 31, 2022,2023, National’s unassigned surplus was $1.1 billion.$977 million. For the three months ended March 31, 2022,2023, National had statutory net income of $104$11 million. Refer to the “National—Claims-Paying Resources (Statutory Basis)” section below for additional information on National’s statutory capital.
In order to maintain its New York State financial guarantee insurance license, National is required to maintain a minimum of $65 million of policyholders’ surplus. National is also required to maintain contingency reserves to provide protection to policyholders in the event of extreme losses in adverse economic events. As of March 31, 2022,2023, National was in compliance with its aggregate risk limits under New York Insurance Law (“NYIL”), but was not in compliance with certain of its single risk limits. Since National does not comply with certain of its single risk limits, the NYSDFS could prevent National from transacting any new financial guarantee insurance business.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES (continued)
NYIL regulates the payment of dividends by financial guarantee insurance companies and provides that such companies may not declare or distribute dividends except out of statutory earned surplus. Under NYIL, the sum of (i) the amount of dividends declared or distributed during the preceding
National had positive earned surplus as of March 31, 20222023 from which it may pay dividends, subject to the limitations described above. We expect the
National -– Claims-Paying Resources (Statutory Basis)
CPR is a key measure of the resources available to National to pay claims under its insurance policies. CPR consists of total financial resources and reserves calculated on a statutory basis. CPR has been a common measure used by financial guarantee insurance companies to report and compare resources and continues to be used by MBIA’s management to evaluate changes in such resources. We have provided CPR to allow investors and analysts to evaluate National using the same measure that MBIA’s management uses to evaluate National’s resources to pay claims under its insurance policies. There is no directly comparable GAAP measure. Our calculation of CPR may differ from the calculation of CPR reported by other companies.
National’s CPR and components thereto, as of March 31, 20222023 and December 31, 20212022 are presented in the following table:
In millions | As of March 31, 2022 | As of December 31, 2021 | ||||||
Policyholders’ surplus | $ | 1,671 | $ | 1,569 | ||||
Contingency reserves | 399 | 402 | ||||||
Statutory capital | 2,070 | 1,971 | ||||||
Unearned premiums | 294 | 311 | ||||||
Present value of installment premiums (1) | 122 | 121 | ||||||
Premium resources (2) | 416 | 432 | ||||||
Net loss and LAE reserves (1) | (201) | (386) | ||||||
Salvage reserves on paid claims (1) | 661 | 944 | ||||||
Gross loss and LAE reserves | 460 | 558 | ||||||
Total claims-paying resources | $ | 2,946 | $ | 2,961 | ||||
In millions | As of March 31, 2023 | As of December 31, 2022 | ||||||
Policyholders’ surplus | $ | 1,567 | $ | 1,545 | ||||
Contingency reserves | 379 | 379 | ||||||
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Statutory capital | 1,946 | 1,924 | ||||||
Unearned premiums | 253 | 262 | ||||||
Present value of installment premiums (1) | 110 | 110 | ||||||
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Premium resources (2) | 363 | 372 | ||||||
Net loss and LAE reserves (1) | 25 | (140 | ) | |||||
Salvage reserves on paid claims (1) | 63 | 288 | ||||||
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Gross loss and LAE reserves | 88 | 148 | ||||||
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Total claims-paying resources | $ | 2,397 | $ | 2,444 | ||||
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(1) - Calculated | using a discount rate of |
(2) - Includes | financial guarantee and insured derivative related premiums. |
MBIA Insurance Corporation – Statutory Capital and Surplus
MBIA Insurance Corporation had statutory capital of $131$147 million as of March 31, 20222023 compared with $134$169 million as of December 31, 2021.2022. As of March 31, 2022,2023, MBIA Insurance Corporation’s negative unassigned surplus was $1.9 billion. For the three months ended March 31, 2022,2023, MBIA Insurance Corporation had a statutory net loss of $14$20 million. Refer to the “MBIA Insurance Corporation—Claims-Paying Resources (Statutory Basis)” section below for additional information on MBIA Insurance Corporation’s statutory capital.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES (continued)
In order to maintain its New York State financial guarantee insurance license, MBIA Insurance Corporation is required to maintain a minimum of $65 million of policyholders’ surplus. In addition, under NYIL, MBIA Insurance Corporation is also required to maintaininvest its minimum surplus and contingency reserves to provide protection to policyholdersand 50% of its loss reserves and unearned premium reserves in the event of extreme losses in adverse economic events.certain qualifying assets. As of March 31, 2022,2023, MBIA Insurance Corporation maintained its minimum requirement of policyholders’ surplus but did not have enough qualifying assets to support its contingency reserves and 50% of its loss reserves and unearned premium reserves. As of March 31, 2023, MBIA Insurance Corporation was in compliance with its aggregate risk limits under the NYIL, but was not in compliance with certain of its single risk limits. Since MBIA Insurance Corporation does not comply with its single risk limits, the NYSDFS could prevent MBIA Insurance Corporation from transacting any new financial guarantee insurance business.
MBIA Insurance Corporation is also required to maintain contingency reserves to provide protection to policyholders in the event of extreme losses in adverse economic events. MBIA Corp. maintains a fixed $5 million of contingency reserves.
Due to its significant earned surplus deficit, MBIA Insurance Corporation has not had the statutory capacity to pay dividends since December 31, 2009. Based on estimated future income, MBIA Insurance Corporation is not expected to have any statutory capacity to pay dividends.
The NYSDFS has not approved MBIA Insurance Corporation’s requests to make interest payments on MBIA Insurance Corporation’s Surplus Notes due January 15, 2033 (the “Surplus Notes”) since, and including, the January 15, 2013 interest payment. The NYSDFS has cited both MBIA Insurance Corporation’s liquidity and financial condition as well as the availability of “free and divisible surplus” as the basis for such
MBIA Insurance Corporation - Corporation—Claims-Paying Resources (Statutory Basis)
CPR is a key measure of the resources available to MBIA Corp. to pay claims under its insurance policies. CPR consists of total financial resources and reserves calculated on a statutory basis. CPR has been a common measure used by financial guarantee insurance companies to report and compare resources, and continues to be used by MBIA’s management to evaluate changes in such resources. We have provided CPR to allow investors and analysts to evaluate MBIA Corp., using the same measure that MBIA’s management uses to evaluate MBIA Corp.’s resources to pay claims under its insurance policies. There is no directly comparable GAAP measure. Our calculation of CPR may differ from the calculation of CPR reported by other companies.
MBIA Corp.’s CPR and components thereto, as of March 31, 20222023 and December 31, 20212022 are presented in the following table:
In millions | As of March 31, 2022 | As of December 31, 2021 | ||||||
Policyholders’ surplus | $ | 94 | $ | 97 | ||||
Contingency reserves | 37 | 37 | ||||||
Statutory capital | 131 | 134 | ||||||
Unearned premiums | 45 | 46 | ||||||
Present value of installment premiums (1) | 48 | 48 | ||||||
Premium resources (2) | 93 | 94 | ||||||
Net loss and LAE reserves (1) | 203 | 266 | ||||||
Salvage reserves on paid claims (1) (3) | 299 | 231 | ||||||
Gross loss and LAE reserves | 502 | 497 | ||||||
Total claims-paying resources | $ | 726 | $ | 725 | ||||
As of March 31, | As of December 31, | |||||||
In millions | 2023 | 2022 | ||||||
Policyholders’ surplus | $ | 142 | $ | 164 | ||||
Contingency reserves | 5 | 5 | ||||||
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Statutory capital | 147 | 169 | ||||||
Unearned premiums | 36 | 36 | ||||||
Present value of installment premiums (1) | 33 | 34 | ||||||
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Premium resources (2) | 69 | 70 | ||||||
Net loss and LAE reserves (1) | 64 | 35 | ||||||
Salvage reserves on paid claims (1) (3) | 328 | 395 | ||||||
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Gross loss and LAE reserves | 392 | 430 | ||||||
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Total claims-paying resources | $ | 608 | $ | 669 | ||||
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(1) - | Calculated | using a discount rate of |
(2) - | Includes | financial guarantee and insured derivative related premiums. |
(3) - | This | amount primarily consists of expected recoveries related to the payment of claims on insured CDOs and RMBS. In addition, the |
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
We prepare our consolidated financial statements in accordance with GAAP, which requires the use of estimates and assumptions. Management has discussed and reviewed the development, selection, and disclosure of critical accounting estimates with the Company’s Audit Committee. Our most critical accounting estimates include loss and LAE reserves and valuation of financial instruments, since these estimates require significant judgment. Any modifications in these estimates could materially impact our financial results.
For a discussion of the Company’s critical accounting estimates, refer to “Critical Accounting Estimates” in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Annual Report on Form
RECENT ACCOUNTING PRONOUNCEMENTS
Refer to “Note 3: Recent Accounting Pronouncements” in the Notes to Consolidated Financial Statements for a discussion of accounting guidance recently adopted by the Company.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company’s market risk exposures relate to changes in interest rates, foreign exchange rates and credit spreads that affect the fair value of its financial instruments, primarily investment securities, MTNs and investment agreement liabilities. The Company’s investments are primarily U.S. dollar-denominated fixed-income securities including municipal bonds, U.S. government bonds, corporate bonds, MBS and asset-backed securities. In periods of rising and/or volatile interest rates, foreign exchange rates and credit spreads, profitability could be adversely affected should the Company have to liquidate these securities. The Company minimizes its exposure to interest rate risk, foreign exchange risk and credit spread movement through active portfolio management to ensure a proper mix of the types of securities held and to stagger the maturities of its fixed-income securities. There were no material changes in market risk since December 31, 20212022 related to interest rates, foreign exchange rates and credit spreads. For a discussion of our quantitative and qualitative disclosures about market risk related to these risks,foreign exchange rates, refer to Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” included in the Company’s Annual Report on Form
Item 4. Controls and Procedures
As of the end of the period covered by this report, an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as such term is defined in Rules
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings
For a discussion of the Company’s litigation and related matters, see “Note 13: Commitments and Contingencies” in the Notes to Consolidated Financial Statements of MBIA Inc. and Subsidiaries in Part I, Item 1. In the normal course of operating its businesses, MBIA Inc. may be involved in various legal proceedings. As a courtesy, the Company posts on its website under the section “Legal Proceedings,” selected information and documents in reference to selected legal proceedings in which the Company is the plaintiff or the defendant. The Company will not necessarily post all documents for each proceeding and undertakes no obligation to revise or update them to reflect changes in events or expectations. The complete official court docket can be publicly accessed by contacting the clerk’s office of the respective court where each litigation is pending.
Item 1A. Risk Factors
The following should be read in conjunction with and supplements the risk factors described under Part I, Item 1A, “Risk Factors” of the Company’s Annual Report on Form
Insured Portfolio Loss Related Risk Factors
Some of the state, local and territorial governments and finance authorities and other providers of public services, located in the U.S. or abroad, that issued public finance obligations we insured are experiencing fiscal stress that could result in increased credit losses or impairments on those obligations.
Certain issuers are reporting fiscal stress that has resulted in a significant increase in taxes and/or a reduction in spending or other measures in efforts to satisfy their financial obligations. In particular, certain jurisdictions have significantly underfunded pension liabilities which are placing additional stress on their finances and are particularly challenging to restructure either through negotiation or under Chapter 9 of the United States Bankruptcy Code. If the issuers of the obligations in our public finance portfolio are unable to raise taxes, or increase other revenues, cut spending, reduce liabilities, and/or receive state or federal assistance, we may experience losses or impairments on those obligations, which could materially and adversely affect our business, financial condition and results of operations. The financial stress experienced by certain municipal issuers could result in the filing of Chapter 9 proceedings in states where municipal issuers are permitted to seek bankruptcy protection. In these proceedings, which remain rare, the resolution of bondholder claims (and by extension, those of bond insurers) may be subject to legal challenge by other creditors.
In particular, while the Commonwealth of Puerto Rico has completed its court-ordered restructuring pursuant to the Puerto Rico Oversight, Management and Economic Stability Act (“PROMESA”), two of its public corporations and instrumentalities, the Puerto Rico Highway and Transportation Authority (“HTA”) and the Puerto Rico Electric Power Authority (“PREPA”), are currently remains in a bankruptcy-like proceedingsproceeding under PROMESA in the United States District Court for the District of Puerto Rico.
As of March 31, 2022,2023, National had $2.1$1.0 billion of debt service outstanding related to Puerto Rico. Since 2016, Puerto Rico has been unable or unwilling to pay its obligations as and when due, and National has been required to pay claims of unpaid principal and interest when due under its insurance policies as a consequence. Puerto Rico may continue to fail to make payments when due, which could cause National to make additional claims payments which could be material. On January 1, 2022, Puerto Rico2023, PREPA defaulted on scheduled debt service for certain National insured bonds and National paid gross claims in the aggregate of $47$18 million. WhileOn January 31, 2023, National will seek to recover any claim payments it makes under its guarantees, there is no assurance that it will be able to recover such payments. To the extent that its claims payments are ultimately substantially greater than its claims recoveries, National would experience losses on those obligations, which could materially and adversely affect our business, financial condition and results of operations.
Refer to the “U.S. Public Finance Insurance Puerto Rico Exposures” section in Part I, Item 2 of this Form
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The table below presents purchases or repurchases made by the Company or National in each month during the first quarter of 2022:
Total Number | Maximum | |||||||||||||||
Total | Average | of Shares | Amount That May | |||||||||||||
Number | Price | Purchased as | Be Purchased | |||||||||||||
of Shares | Paid Per | Part of Publicly | Under the Plan | |||||||||||||
Month | Purchased (1) | Share | Announced Plan | (in millions) | ||||||||||||
January | - | $ | - | - | $ | - | ||||||||||
February | 1,260 | 15.22 | - | - | ||||||||||||
March | 179,428 | 14.10 | - | - | ||||||||||||
180,688 | $ | 14.11 | - | $ | - |
Month | Total Number of Shares Purchased (1) | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plan | Maximum Amount That May Be Purchased Under the Plan (in millions) (2) | ||||||||||||
January | 23,506 | $ | 12.89 | - | $ | - | ||||||||||
February | 1,154 | 13.81 | - | - | ||||||||||||
March | 267,601 | 12.43 | - | - | ||||||||||||
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292,261 | $ | 12.47 | - | $ | - |
(1) | Includes 23,506 shares in January and 267,533 shares in March that were withheld from participants for income tax purposes whose shares of restricted stock vested during the period. Such restricted stock was originally issued to participants under the Company’s long-term incentive plan. 1,154 shares in February and non-qualified deferred compensation plan. |
(2) | On May 3, 2023, the Company’s Board of Directors approved a share repurchase program authorizing the Company and/or National to purchase up to $100 million of the Company’s shares in open market transactions, |
Item 5. Other Information
On May 8, 2023, Charles R. Rinehart, Chairman of the Board of Directors of the Company, notified the Company of his decision to resign from the Company’s Board effective immediately. Mr. Rinehart has served on the Board Since 2008, and has served as its Chairman Since 2015.
Item 6. Exhibits
Chief Executive | ||
Chief Financial | ||
**32.1. | Chief Executive | |
**32.2. | Sarbanes-Oxley Act of 2002. | |
*101.INS. | XBRL Instance Document – the instance document does not appear in the Interactive Data File because iXBRL tags are embedded within the Inline XBRL document. | |
*101.SCH. | XBRL Taxonomy Extension Schema Document. | |
*101.CAL. | XBRL Taxonomy Extension Calculation Linkbase Document. | |
*101.DEF. | XBRL Taxonomy Extension Definition Linkbase Document. | |
*101.LAB. | XBRL Taxonomy Extension Label Linkbase Document. | |
*101.PRE. | XBRL Taxonomy Extension Presentation Linkbase Document. | |
*104. | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
* Filed herewith.
** Furnished herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
MBIA Inc. Registrant | ||||||
Date: May 9, | /s/ Anthony McKiernan | |||||
Anthony McKiernan | ||||||
Chief Financial Officer | ||||||
Date: May 9, | /s/ Joseph R. Schachinger | |||||
Joseph R. Schachinger | ||||||
Controller (Chief Accounting Officer) |
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