Investments

9 Months Ended

Sep. 30, 2024

Note 7: Investments

Investments, excluding equity instruments, and those elected under the fair value option, primarily consist of debt instruments classified as AFS.

The following tables present the amortized cost, allowance for credit losses, corresponding gross unrealized gains and losses and fair value for AFS investments in the Company’s consolidated investment portfolio as of September 30, 2024 and December 31, 2023:


			September 30, 2024
					Allowance		Gross		Gross
			Amortized		for Credit		Unrealized		Unrealized			Fair
In millions			Cost		Losses		Gains		Losses			Value
AFS Investments
Fixed-maturity investments:
	U.S. Treasury and government agency		$	548	$	-	$	2	$	(14	)	$	536
	State and municipal bonds			110		-		3		(6	)		107
	Foreign governments			19		-		-		(2	)		17
	Corporate obligations			493		-		3		(82	)		414
	Mortgage-backed securities:
		Residential mortgage-backed agency		133		-		-		(12	)		121
		Residential mortgage-backed non-agency		30		-		1		(4	)		27
		Commercial mortgage-backed		10		-		-		-			10
	Asset-backed securities:
		Collateralized debt obligations		76		-		1		-			77
		Other asset-backed		37		-		-		(1	)		36
Total AFS investments			$	1,456	$	-	$	10	$	(121	)	$	1,345


			December 31, 2023
					Allowance		Gross		Gross
			Amortized		for Credit		Unrealized		Unrealized			Fair
In millions			Cost		Losses		Gains		Losses			Value
AFS Investments
Fixed-maturity investments:
	U.S. Treasury and government agency		$	721	$	-	$	1	$	(18	)	$	704
	State and municipal bonds			128		-		3		(8	)		123
	Foreign governments			19		-		1		(2	)		18
	Corporate obligations			505		-		2		(90	)		417
	Mortgage-backed securities:
		Residential mortgage-backed agency		149		-		-		(14	)		135
		Residential mortgage-backed non-agency		31		-		1		(5	)		27
		Commercial mortgage-backed		13		-		-		-			13
	Asset-backed securities:
		Collateralized debt obligations		96		-		1		(1	)		96
		Other asset-backed		26		-		-		(2	)		24
Total AFS investments			$	1,688	$	-	$	9	$	(140	)	$	1,557

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Note 7: Investments (continued)

The following table presents the distribution by contractual maturity of AFS fixed-maturity securities at amortized cost, net of allowance for credit losses, and fair value as of September 30, 2024. Contractual maturity may differ from expected maturity as borrowers may have the right to call or prepay obligations.


	AFS Securities
	Net
	Amortized		Fair
In millions	Cost		Value
Due in one year or less	$	382	$	382
Due after one year through five years		149		148
Due after five years through ten years		204		185
Due after ten years		435		359
Mortgage-backed and asset-backed		286		271
Total fixed-maturity investments	$	1,456	$	1,345

Deposited and Pledged Securities

The fair value of securities on deposit with various regulatory authorities as of September 30, 2024 and December 31, 2023 was $11 million. These deposits are required to comply with state insurance laws.

Investment agreement obligations require the Company to pledge securities as collateral. Securities pledged in connection with investment agreements may not be repledged by the investment agreement counterparty. As of September 30, 2024 and December 31, 2023, the fair value of securities pledged as collateral for these investment agreements were $211 million and $241 million, respectively. The Company’s collateral as of September 30, 2024 consisted principally of U.S. Treasury and government agency and corporate obligations, and was primarily held with major U.S. banks.

Impaired Investments

The following tables present the non-credit related gross unrealized losses related to AFS investments as of September 30, 2024 and December 31, 2023:


			September 30, 2024
			Less than 12 Months				12 Months or Longer					Total
			Fair		Unrealized		Fair		Unrealized			Fair		Unrealized
In millions			Value		Losses		Value		Losses			Value		Losses
AFS Investments
Fixed-maturity investments:
	U.S. Treasury and government agency		$	5	$	-	$	143	$	(14	)	$	148	$	(14	)
	State and municipal bonds			-		-		67		(6	)		67		(6	)
	Foreign governments			6		-		5		(2	)		11		(2	)
	Corporate obligations			3		-		325		(82	)		328		(82	)
	Mortgage-backed securities:
		Residential mortgage-backed agency		-		-		108		(12	)		108		(12	)
		Residential mortgage-backed non-agency		-		-		22		(4	)		22		(4	)
		Commercial mortgage-backed		4		-		-		-			4		-
	Asset-backed securities:
		Collateralized debt obligations		5		-		12		-			17		-
		Other asset-backed		6		-		14		(1	)		20		(1	)
Total AFS investments			$	29	$	-	$	696	$	(121	)	$	725	$	(121	)

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Note 7: Investments (continued)


			December 31, 2023
			Less than 12 Months					12 Months or Longer					Total
			Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
In millions			Value		Losses			Value		Losses			Value		Losses
AFS Investments
Fixed-maturity investments:
	U.S. Treasury and government agency		$	11	$	-		$	143	$	(18	)	$	154	$	(18	)
	State and municipal bonds			23		(1	)		57		(7	)		80		(8	)
	Foreign governments			-		-			6		(2	)		6		(2	)
	Corporate obligations			17		-			337		(90	)		354		(90	)
	Mortgage-backed securities:
		Residential mortgage-backed agency		-		-			118		(14	)		118		(14	)
		Residential mortgage-backed non-agency		3		-			21		(5	)		24		(5	)
		Commercial mortgage-backed		4		-			3		-			7		-
	Asset-backed securities:
		Collateralized debt obligations		-		-			89		(1	)		89		(1	)
		Other asset-backed		-		-			22		(2	)		22		(2	)
Total AFS investments			$	58	$	(1	)	$	796	$	(139	)	$	854	$	(140	)

Gross unrealized losses on AFS investments decreased as of September 30, 2024 compared with December 31, 2023 primarily due to lower interest rates.

With the weighting applied on the fair value of each security relative to the total fair value, the weighted average contractual maturity of securities in an unrealized loss position as of September 30, 2024 and December 31, 2023 was 15 and 14 years, respectively. As of September 30, 2024 and December 31, 2023, there were 378 and 450 securities, respectively, that were in an unrealized loss position for a continuous twelve-month period or longer, of which, fair values of 286 and 365 securities, respectively, were below book value by more than 5%.

The following table presents the distribution of securities in an unrealized loss position for a continuous twelve-month period or longer where fair value was below book value by more than 5% as of September 30, 2024:


	AFS Securities
Percentage of Fair Value	Number of		Book Value		Fair Value
Below Book Value	Securities		(in millions)		(in millions)
> 5% to 15%		145	$	301	$	268
> 15% to 25%		79		155		125
> 25% to 50%		60		176		122
> 50%		2		-		-
Total		286	$	632	$	515

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Note 7: Investments (continued)

As of September 30, 2024, the Company concluded that it does not have the intent to sell securities in an unrealized loss position and it is more likely than not, that it would not have to sell these securities before recovery of their cost basis. In making this conclusion, the Company examined the cash flow projections for its investment portfolios, the potential sources and uses of cash in its businesses, and the cash resources available to its business other than sales of securities. It also considered the existence of any risk management or other plans as of September 30, 2024 that would require the sale of impaired securities. For the three and nine months ended September 30, 2023, impairment loss due to intent to sell securities in an unrealized loss position was $8 million and reported in "Other net realized gains (losses)" on the Company's consolidated statements of operations.

Credit Losses on Investments

The Company’s fixed-maturity securities for which fair value is less than amortized cost are reviewed quarterly in order to determine whether a credit loss exists. If the Company determines that the declines in the fair value are related to credit loss, the Company will establish an allowance for credit losses and recognize the credit component through earnings. Refer to “Note 8: Investments” in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 for a discussion of the Company’s policy for its determination of credit losses. The Company did not purchase any credit-deteriorated assets or establish an allowance for credit losses for AFS securities for the three and nine months ended September 30, 2024 and 2023.

The Company does not recognize credit losses on securities insured by MBIA Corp. and National since those securities, whether or not owned by the Company, are evaluated for impairments in accordance with its loss reserving policy. The following table provides information about securities held by the Company as of September 30, 2024 that were in an unrealized loss position and insured by a financial guarantor, along with the amount of insurance loss reserves corresponding to the par amount owned by the Company. The Company did not hold any securities in an unrealized loss position that were insured by a third-party financial guarantor as of September 30, 2024.


			Unrealized			Insurance Loss
In millions	Fair Value		Loss			Reserve (1)
Mortgage-backed	$	16	$	(3	)	$	19
Corporate obligations		84		(34	)		-
Total	$	100	$	(37	)	$	19

(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.

Sales of Available-for-Sale Investments

Gross realized gains and losses from sales of AFS investments are recorded within “Net realized investment gains (losses)” on the Company’s consolidated statements of operations. The proceeds and the gross realized gains and losses from sales of fixed-maturity securities held as AFS for the three and nine months ended September 30, 2024 and 2023 are as follows:


	Three Months Ended September 30,							Nine Months Ended September 30,
In millions	2024				2023			2024				2023
Proceeds from sales		$	45		$	108			$	100		$	380
Gross realized gains		$	1		$	-			$	2		$	1
Gross realized losses		$	(1	)	$	(13	)		$	(4	)	$	(24	)

Equity and Trading Investments

Equity and trading investments when held are included within “Investments carried at fair value” on the Company’s consolidated balance sheets. Unrealized gains and losses recognized on equity and trading investments held as of the end of each period for the three and nine months ended September 30, 2024 and 2023 are as follows:

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Note 7: Investments (continued)


		Three Months Ended September 30,							Nine Months Ended September 30,
In millions		2024			2023				2024			2023
Net gains (losses) recognized during the period on equity and trading securities			$	1		$	(1	)	$	(57	)	$	2
Less:
	Net gains (losses) recognized during the period on equity and trading securities sold during the period			-			(1	)		1			(1	)
Unrealized gains (losses) recognized during the period on equity and trading securities still held at the reporting date			$	1		$	-		$	(58	)	$	3