Schedule II- Parent Company Financials

12 Months Ended

Dec. 31, 2023

Condensed Financial Information Disclosure [Abstract]

Condensed Financial Information of Parent Company Only Disclosure

SCHEDULE II

MBIA INC. (PARENT COMPANY)

CONDENSED BALANCE SHEETS

(In millions except share and per share amounts)

			December 31, 2023			December 31, 2022
Assets
Investments:
	Fixed-maturity securities held as available-for-sale, at fair value (amortized cost $131 and $463)		$	127		$	431
	Short-term investments held as available-for-sale, at fair value (amortized cost $480 and $95)			480			95
		Total investments		607			526
Cash and cash equivalents				33			16
Other assets				26			9
		Total assets	$	666		$	551
Liabilities and Shareholders' Equity
Liabilities:
	Investment agreements		$	221		$	233
	Long-term debt			278			278
	Affiliate loans payable			533			535
	Derivative liabilities			1			48
	Accumulated loss of wholly-owned subsidiaries			1,290			333
	Other liabilities			-			6
		Total liabilities		2,323			1,433
Shareholders' Equity:
	Preferred stock, par value $1 per share; authorized shares--10,000,000; issued and outstanding--none			-			-
	Common stock, par value $1 per share; authorized shares--400,000,000; issued shares--283,186,115 and 283,186,115			283			283
	Additional paid-in capital			2,515			2,925
	Retained earnings (deficit)			(1,144	)		(653	)
	Accumulated other comprehensive income (loss), net of tax			(139	)		(283	)
	Treasury stock, at cost--232,323,184 and 228,333,444 shares			(3,172	)		(3,154	)
		Total shareholders' equity of MBIA Inc.		(1,657	)		(882	)
		Total liabilities and shareholders' equity	$	666		$	551

The condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto and the accompanying notes.

SCHEDULE II

MBIA INC. (PARENT COMPANY)

CONDENSED STATEMENTS OF OPERATIONS

(In millions)

			Years ended December 31,
			2023			2022			2021
Revenues:
	Net investment income		$	21		$	20		$	26
	Net realized investment gains (losses)			(32	)		(10	)		3
	Net gains (losses) on financial instruments at fair value and foreign exchange			4			110			49
	Net gains (losses) on extinguishment of debt			1			5			30
	Other net realized gains (losses)			-			-			(6	)
		Total revenues		(6	)		125			102
Expenses:
	Operating			15			11			10
	Interest			76			76			75
		Total expenses		91			87			85
	Gain (loss) before income taxes and equity in earnings of subsidiaries			(97	)		38			17
Provision (benefit) for income taxes				(1	)		(3	)		(3	)
	Gain (loss) before equity in earnings of subsidiaries			(96	)		41			20
Equity in net income (loss) of subsidiaries				(395	)		(236	)		(465	)
		Net income (loss)	$	(491	)	$	(195	)	$	(445	)

The condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto and the accompanying notes.

SCHEDULE II

MBIA INC. (PARENT COMPANY)

CONDENSED STATEMENTS OF CASH FLOWS

(in millions)

				Years ended December 31,
				2023			2022			2021
Cash flows from operating activities:
	Investment income received			$	369		$	89		$	80
	Operating expenses paid and other operating				(16	)		(25	)		(14	)
	Interest paid, net of interest converted to principal				(72	)		(51	)		(50	)
	Income taxes (paid) received				1			(1	)		6
			Net cash provided (used) by operating activities		282			12			22
Cash flows from investing activities:
	Purchases of available-for-sale investments				(67	)		(86	)		(150	)
	Sales of available-for-sale investments				289			149			202
	Paydowns and maturities of available-for-sale investments				65			18			20
	Purchases of investments at fair value				-			-			(2	)
	Sales, paydowns and maturities of investments at fair value				-			-			3
	Sales, paydowns and maturities (purchases) of short-term investments, net				(380	)		(41	)		(27	)
	(Payments) proceeds for derivative settlements				(38	)		(10	)		(17	)
	Return of capital from subsidiaries				295			74			11
			Net cash provided (used) by investing activities		164			104			40
Cash flows from financing activities:
	Proceeds from investment agreements				7			8			2
	Principal paydowns of investment agreements				(12	)		(54	)		(2	)
	Dividends paid				(409	)		-			-
	Payments for affiliate loans				(15	)		(74	)		(81	)
	Purchases of treasury stock				(6	)		-			-
	Restricted stock awards settlements				6			6			8
			Net cash provided (used) by financing activities		(429	)		(114	)		(73	)
Effect of exchange rates on cash and cash equivalents					-			(1	)		-
Net increase (decrease) in cash and cash equivalents					17			1			(11	)
Cash and cash equivalents - beginning of year					16			15			26
Cash and cash equivalents - end of year				$	33		$	16		$	15
Reconciliation of net income (loss) to net cash provided (used) by operating activities:
	Net income (loss)			$	(491	)	$	(195	)	$	(445	)
	Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
		Change in:
			Intercompany accounts receivable		(20	)		(25	)		(7	)
			Current income taxes		1			(1	)		6
		Equity in earnings of subsidiaries			395			235			465
		Dividends from subsidiaries			352			72			60
		Net realized investment gains (losses)			32			10			-
		Net (gains) losses on financial instruments at fair value and foreign exchange			(4	)		(110	)		(52	)
		Deferred income tax provision (benefit)			(1	)		(3	)		(3	)
		(Gains) losses on extinguishment of debt			(1	)		(5	)		(30	)
		Other operating			19			34			28
		Total adjustments to net income (loss)			773			207			467
			Net cash provided (used) by operating activities	$	282		$	12		$	22

The condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto and the accompanying notes.

SCHEDULE II

MBIA INC. (PARENT COMPANY)

NOTES TO CONDENSED FINANCIAL STATEMENTS

1. Condensed Financial Statements

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. This includes the statements of comprehensive income (loss) which is exactly the same as the Company’s consolidated statements of comprehensive income (loss). It is suggested that these condensed financial statements be read in conjunction with the Company’s consolidated financial statements and the notes thereto.

The activities of MBIA Inc. (the “Parent Company”) consist of general corporate activities and funding activities, which principally include holding and managing investments, servicing outstanding corporate debt, investment agreements issued by the Parent Company and its subsidiaries, and posting collateral under investment agreement and derivative contracts.

The Parent Company is subject to the same liquidity risks and uncertainties as described in footnote 1 to the Company’s consolidated financial statements. As of December 31, 2023, the liquidity position of the Parent Company, which included 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 for general corporate purposes, excluding the amount held in escrow under its tax sharing agreement, was $411 million.

During 2022, MBIA Corp. purchased $24 million principal amount of MBIA Inc. 6.625% Debentures due 2028, $4 million principal amount of MBIA Inc. 7.150% Debentures due 2027 and $1 million principal amount of MBIA Inc. 7.000% Debentures due 2025. As of December 31, 2023, National owned $308 million principal amount of the 5.700% Senior Notes due 2034 and $10 million principal amount of MBIA Inc. 7.000% Debentures due 2025; MBIA Corp. owned $29 million principal amount of MBIA Inc. 6.625% Debentures due 2028, $5 million principal amount of MBIA Inc. 7.150% Debentures due 2027 and $1 million principal amount of MBIA Inc. 7.000% Debentures due 2025; and MBIA Inc., through its corporate segment, owned $13 million of MBIA Corp. surplus notes. These amounts are eliminated in the Company’s consolidated financial statements.

2. Accounting Policies

The Parent Company carries its investments in subsidiaries under the equity method.

For a further discussion of significant accounting policies and recent accounting pronouncements, refer to footnotes 2 and 3 to the Company’s consolidated financial statements.

3. Dividends from Subsidiaries

During 2023, National declared and paid a special dividend of $550 million and an as-of-right dividend of $97 million to its ultimate parent, MBIA Inc.

During 2022, National declared and paid dividends of $72 million to its ultimate parent, MBIA Inc.

During 2021, National declared and paid dividends of $60 million to its ultimate parent, MBIA Inc.

4. Deferred Tax Asset, Net of Valuation Allowance

The Parent Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on tax assets and liabilities is recognized in income in the period that includes the enactment date. Valuation allowances are established to reduce deferred tax assets to the amount that more likely than not will be realized.

SCHEDULE II

MBIA INC. (PARENT COMPANY)

NOTES TO CONDENSED FINANCIAL STATEMENTS (continued)

The Parent Company assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of its existing deferred tax assets. A significant piece of objective negative evidence evaluated was the Parent Company having a three-year cumulative loss. Such objective evidence limits the ability to consider other subjective evidence, such as the Parent Company’s projections of pre-tax income. On the basis of this evaluation, the Parent Company has recorded a full valuation allowance against its net deferred tax asset.

For a further discussion of the net deferred tax asset, refer to footnote 11 to the Company’s consolidated financial statements.

5. Obligations under Investment Agreements

Refer to footnote 10 to the Company’s consolidated financial statements for information of investment agreements.

6. Pledged Collateral

Substantially all of the obligations under investment agreements require the Parent Company and its subsidiaries to pledge securities as collateral. As of December 31, 2023 and 2022, the fair value of securities pledged as collateral with respect to these investment agreements approximated $241 million and $251 million, respectively. The Parent Company’s collateral as of December 31, 2023, consisted principally of U.S. Treasury and government agency and state and municipal bonds, and was primarily held with major U.S. banks.

Under derivative contracts entered into by the Parent Company, collateral postings were required by either the Parent Company or the counterparty when the aggregate market value of derivative contracts entered into with the same counterparty exceeds a predefined threshold. As of December 31, 2022, the Parent Company and its subsidiaries had securities with a fair value of $73 million, posted to derivative counterparties. For a further discussion of the Company's derivative contracts, refer to footnote 9 to the Company’s consolidated financial statements.

7. Affiliate Loans Payable

Affiliate loans payable consists of loans payable to MBIA Global Funding, LLC (“GFL”). GFL raised funds through the issuance of medium-term notes with varying maturities, which were, in turn, guaranteed by MBIA Corp. GFL lent the proceeds of these medium-term note issuances to the Parent Company.

8. Extraordinary Cash Dividend

On December 7, 2023, the Company's Board of Directors declared an extraordinary cash dividend on MBIA’s common stock of $8.00 per share. The dividend was paid on December 22, 2023 to shareholders of record as of the close of business on December 18, 2023. The remainder of the dividends from National are being retained by MBIA Inc. and are intended to be used for general corporate purposes including, but not limited to, future operating expenses and debt service obligations.