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Business Segments
 12 Months Ended
Dec. 31, 2014
Text Block [Abstract]  
Business Segments

Note 12: Business Segments

As defined by segment reporting, an operating segment is a component of a company (i) that engages in business activities from which it earns revenue and incurs expenses, (ii) whose operating results are regularly reviewed by the Chief Operating Decision Maker to assess the performance of the segment and to make decisions about the allocation of resources to the segment and, (iii) for which discrete financial information is available.

The Company manages its businesses across five operating segments: 1) U.S. public finance insurance; 2) international and structured finance insurance; 3) corporate; 4) advisory services; and 5) conduit. The Company’s U.S. public finance insurance business is operated through National, its international and structured finance insurance business is operated through MBIA Corp. and its advisory services business is primarily operated through Cutwater. During 2014, the Company dissolved its conduit segment by extinguishing the remaining liabilities of the segment and liquidating the Company’s remaining conduit, Meridian Funding Company, LLC (“Meridian”). In addition, in the fourth quarter of 2014, the Company entered into an agreement to sell Cutwater to a subsidiary of The Bank of New York Mellon Corporation. This transaction was effective on January 1, 2015 in which, the Company exited its advisory services business.

The Company regularly evaluates its business segment reporting to ensure it reflects management’s perspective and provides discrete financial information on which to assess segment performance. During 2014, the Company continued to realize its business strategy, which included the liquidation of its conduit and advisory services businesses and realigning the management of its asset/liability products and corporate activities. Effective in the fourth quarter of 2014, the Company’s previously reported asset/liability products segment and its corporate segment are managed and reported as a single operating segment referred to as the corporate segment since 1) the previous asset/liability products segment did not represent a future business prospect for the Company and is in wind-down; 2) the Company manages and reports the invested assets and debt obligation liabilities as a single activity; 3) the activities are economically similar as the servicing of the debt obligation liabilities are funded by the same financial resources; and 4) the Company evaluates the performance and resource needs of these activities collectively. The Company’s new segment reporting structure is reflected in its reporting to its Chief Operating Decision Maker, as well as the senior management team and Board of Directors, who use this information to make key business decisions, assess performance and allocate resources to its segments. Certain prior period amounts within the corporate segment results have been retrospectively revised to reflect the changes in the Company’s reportable segments. Such revisions have no impact on total consolidated revenues, expenses, assets, liabilities, shareholders’ equity, operating cash flows, investing cash flows, or financing cash flows for all periods presented.

The following sections provide a description of each of the Company’s reportable operating segments.

U.S. Public Finance Insurance

The Company’s U.S. public finance insurance segment is principally conducted 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, U.S. public finance insured obligations when due. The obligations are not subject to acceleration, except that National may have the right, at its discretion, to accelerate insured obligations upon default or otherwise. National issues financial guarantees for municipal bonds, including tax-exempt and taxable indebtedness of U.S. political subdivisions, as well as utility districts, airports, health care institutions, higher educational facilities, student loan issuers, housing authorities and other similar agencies and obligations issued by private entities that finance projects that serve a substantial public purpose. Municipal bonds and privately issued bonds used for the financing of public purpose projects are generally supported by taxes, assessments, fees or tariffs related to the use of these projects, lease payments or other similar types of revenue streams.

International and Structured Finance Insurance

The Company’s international and structured finance insurance segment is principally conducted through MBIA Corp. The financial guarantees issued by MBIA Corp. generally provide unconditional and irrevocable guarantees of the payment of principal of, and interest or other amounts owing on, non-U.S. public finance and global structured finance insured obligations when due, or in the event MBIA Corp. has the right, at its discretion, to accelerate insured obligations upon default or otherwise, upon MBIA Corp.’s acceleration. Certain guaranteed investment contracts written by MBIA Inc. are insured by MBIA Corp., and if MBIA Inc. were to have insufficient assets to pay amounts due upon maturity or termination, MBIA Corp. would make such payments. MBIA Corp. also insures debt obligations of the following affiliates:

  • MBIA Inc.;
  • GFL;
  • MBIA Investment Management Corp. (“IMC”); and
  • LaCrosse Financial Products, LLC, a wholly-owned affiliate, in which MBIA Corp. has written insurance policies guaranteeing the obligations under CDS, including termination payments that may become due upon certain events including the insolvency or payment default of the financial guarantor or the CDS issuer.

MBIA Corp. insures non-U.S. public finance and global structured finance, including asset-backed obligations. MBIA Corp. has insured sovereign-related and sub-sovereign bonds, utilities, privately issued bonds used for the financing of projects that include toll roads, bridges, airports, public transportation facilities, and other types of infrastructure projects serving a substantial public purpose. Global structured finance and asset-backed obligations typically are securities repayable from expected cash flows generated by a specified pool of assets, such as residential and commercial mortgages, insurance policies, consumer loans, corporate loans and bonds, trade and export receivables, and leases for equipment, aircraft and real estate property. The Company is no longer insuring new credit derivative contracts except for transactions related to the reduction of existing derivative exposure. MBIA Corp. has not written any meaningful amount of business since 2008.

Corporate

The Company’s corporate segment consists of general corporate activities, including providing general support services to MBIA’s other operating businesses and asset and debt management. General support services are provided by the Company’s service company, MBIA Services Corporation (“MBIA Services”), formerly Optinuity Alliance Resources Corporation. MBIA Services provides various support services including, among others, management, legal, accounting, treasury, information technology, and insurance portfolio surveillance, on a fee-for-service basis. Debt management includes activities related to servicing obligations issued by MBIA Inc. and its subsidiaries, IMC and GFL. MBIA Inc. issued debt to finance the operations of the MBIA group. IMC, along with MBIA Inc., provided customized investment agreements, guaranteed by MBIA Corp., for bond proceeds and other public funds for such purposes as construction, loan origination, escrow and debt service or other reserve fund requirements. It also provided customized products for funds that are invested as part of asset-backed or structured product transactions. GFL raised funds through the issuance of MTNs with varying maturities, which were in turn guaranteed by MBIA Corp. GFL lent the proceeds of these MTN issuances to MBIA Inc. The company ceased issuing these investment agreements and MTNs and the outstanding liability balances and corresponding asset balances have declined over time as liabilities mature, terminate or are retired. All of the debt within the corporate segment is managed collectively and is serviced by the financial resources available to MBIA Inc. Asset management activities support the Company’s funded liabilities, provide for opportunities in investments and provide general liquidity support to MBIA Inc.

Advisory Services

The advisory services segment primarily consists of the operations of Cutwater Investor Services Corp. (“Cutwater-ISC”) and Cutwater Asset Management Corp. (“Cutwater-AMC”) and is a fee-for-service investment management business focused on fixed-income markets. Cutwater-ISC and Cutwater-AMC are Securities and Exchange Commission registered investment advisers. In October of 2014, the Company entered into an agreement to sell Cutwater to a subsidiary of The Bank of New York Mellon Corporation. Effective with the January 1, 2015 sale of Cutwater, MBIA has no business activities within its advisory services segment.

Conduit

The Company’s conduit segment was operated through Meridian and administered through MBIA Asset Finance, LLC. Assets financed by Meridian were funded by MTNs. In 2014, the Company extinguished the remaining liabilities of this segment and liquidated Meridian.

Segments Results

The following tables provide the Company’s segment results for the years ended December 31, 2014, 2013 and 2012:

Year Ended December 31, 2014
U.S. International
Public and Structured
FinanceFinanceAdvisory
In millionsInsuranceInsuranceCorporateServicesConduitEliminationsConsolidated
Revenues(1)$ 373$ 189$ 42$ 12$ -$ -$ 616
Net change in fair value of
insured derivatives 1 458 - - - - 459
Net gains (losses) on financial
instruments at fair value and
foreign exchange 26 - 55 (3) - - 78
Net investment losses related
to other-than-temporary
impairments (15) - - - - - (15)
Net gains (losses) on
extinguishment of debt - - 3 - - - 3
Other net realized gains (losses) 14 12 2 - - - 28
Revenues of consolidated VIEs - 105 - (8) 4 - 101
Inter-segment revenues(2) 44 55 46 22 (1) (166) -
Total revenues 443 819 148 23 3 (166) 1,270
Losses and loss adjustment (10) 143 - - - - 133
Operating 38 72 87 42 - - 239
Interest - 109 101 - - - 210
Expenses of consolidated VIEs - 47 - - - - 47
Inter-segment expenses(2) 78 64 15 6 9 (172) -
Total expenses 106 435 203 48 9 (172) 629
Income (loss) before income taxes 337 384 (55) (25) (6) 6 641
Provision (benefit) for income taxes 115 134 (173) (6) - 2 72
Net income (loss)$ 222$ 250$ 118$ (19)$ (6)$ 4$ 569
Identifiable assets$ 5,887$ 10,086$ 2,846$ 793$ -$ (3,328)(3)$ 16,284
________________
(1) - Represents the sum of third-party financial guarantee net premiums earned, net investment income, insurance-related fees and reimbursements, investment management fees and other fees.
(2) - Represents intercompany premium income and expense, intercompany asset management fees and expenses, intercompany interest income and expense pertaining to intercompany
receivables and payables and intercompany loans.
(3) - Consists of intercompany reinsurance balances, repurchase agreements and deferred income taxes.
Year Ended December 31, 2013
U.S. International
Public and Structured
FinanceFinanceAdvisory
In millionsInsuranceInsuranceCorporateServicesConduitEliminationsConsolidated
Revenues(1)$ 425$ 148$ 55$ 16$ -$ -$ 644
Net change in fair value of
insured derivatives 3 229 - - - - 232
Net gains (losses) on financial
instruments at fair value and
foreign exchange 29 24 15 1 - - 69
Net gains (losses) on
extinguishment of debt - - 22 - - 38(3) 60
Other net realized gains (losses) (29) - - - - - (29)
Revenues of consolidated VIEs - 237 (14) - 10 - 233
Inter-segment revenues(2) 90 78 85 26 (9) (270) -
Total revenues 518 716 163 43 1 (232) 1,209
Losses and loss adjustment 105 12 - - - - 117
Operating 66 108 157 53 - - 384
Interest - 112 124 - - - 236
Expenses of consolidated VIEs - 50 - - 6 - 56
Inter-segment expenses(2) 96 136 7 7 26 (272) -
Total expenses 267 418 288 60 32 (272) 793
Income (loss) before income taxes 251 298 (125) (17) (31) 40 416
Provision (benefit) for income taxes 82 101 (15) (5) (10) 13 166
Net income (loss)$ 169$ 197$ (110)$ (12)$ (21)$ 27$ 250
Identifiable assets$ 6,056$ 11,687$ 2,641$ 44$ 177$ (3,652)(4)$ 16,953
________________
(1) - Represents the sum of third-party financial guarantee net premiums earned, net investment income, insurance-related fees and reimbursements, investment management fees and other fees.
(2) - Represents intercompany premium income and expense, intercompany asset management fees and expenses, intercompany interest income, expenses pertaining to intercompany
receivables and payables and intercompany loans.
(3) - Represents the gain on the debt received as consideration in connection with the settlement with Bank of America.
(4) - Consists of intercompany reinsurance balances, repurchase agreements and deferred income taxes.
Year Ended December 31, 2012
U.S. International
Public and Structured
FinanceFinanceAdvisory
In millionsInsuranceInsuranceCorporateServicesConduitEliminationsConsolidated
Revenues(1)$ 548$ 243$ 68$ 21$ -$ -$ 880
Net change in fair value of
insured derivatives 1 1,463 - - - - 1,464
Net gains (losses) on financial
instruments at fair value and
foreign exchange 121 93 (158) (1) - - 55
Net investment losses related
to other-than-temporary
impairments - (45) (60) - - - (105)
Other net realized gains (losses) - 1 6 - - - 7
Revenues of consolidated VIEs - 71 - - 63 - 134
Inter-segment revenues(2) 168 45 177 34 (2) (422) -
Total revenues 838 1,871 33 54 61 (422) 2,435
Losses and loss adjustment 21 29 - - - - 50
Operating 124 147 114 46 - - 431
Interest - 132 152 - - - 284
Expenses of consolidated VIEs - 59 - - 13 - 72
Inter-segment expenses(2) 124 208 15 13 97 (457) -
Total expenses 269 575 281 59 110 (457) 837
Income (loss) before income taxes 569 1,296 (248) (5) (49) 35 1,598
Provision (benefit) for income taxes 188 432 (179) (1) (17) (59) 364
Net income (loss)$ 381$ 864$ (69)$ (4)$ (32)$ 94$ 1,234
Identifiable assets$ 6,887$ 17,248$ 2,721$ 44$ 694$ (5,870)(3)$ 21,724
________________
(1) - Represents the sum of third-party financial guarantee net premiums earned, net investment income, insurance-related fees and reimbursements, investment management fees and
other fees.
(2) - Represents intercompany premium income and expense, intercompany asset management fees and expenses, and intercompany interest income and expense pertaining to
intercompany receivables and payables.
(3) - Consists of intercompany reinsurance balances, repurchase agreements and loans.

Premiums on financial guarantees and insured derivatives reported within the Company’s insurance segments are generated within and outside the U.S. The following table summarizes premiums earned on financial guarantees and insured derivatives by geographic location of risk for the years ended December 31, 2014, 2013 and 2012:

Years Ended December 31,
In millions201420132012
Total premiums earned:
United States$ 299$ 391$ 530
United Kingdom 36 34 36
Europe (excluding United Kingdom) 7 11 15
Internationally diversified 9 9 16
Central and South America 49 36 48
Asia 4 4 5
Other 12 9 11
Total $ 416$ 494$ 661