Business Segments

6 Months Ended

Jun. 30, 2016

Text Block [Abstract]

Business Segments

Note 10: 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 three operating segments: 1) U.S. public finance insurance; 2)corporate; and 3) international and structured finance insurance. The Company’s U.S. public finance insurance business is operated through National and its international and structured finance insurance business is operated through MBIA Corp. Effective January 1, 2015, the Company exited its advisory services business with the completed sale of Cutwater.

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 utilities, 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.

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 capital management. General support services are provided by the Company’s service company, MBIA Services Corporation (“MBIA Services”). 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. Capital management includes activities related to servicing obligations issued by MBIA Inc. and its subsidiaries, MBIA Global Funding, LLC (“GFL”) and MBIA Investment Management Corp. (“IMC”). MBIA Inc. issued debt to finance the operations of the MBIA group. 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. 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. The company has ceased issuing these MTNs and investment agreements 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 available liquidity.

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. MBIA Corp. insures the investment contracts written by MBIA Inc., 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. insures debt obligations of the following affiliates:

• MBIA Inc.;
• GFL;
• IMC; and
• LaCrosse Financial Products, LLC, a wholly-owned affiliate, in which MBIA Insurance Corporation 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 insured obligations, 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. MBIA Corp. has also written policies guaranteeing obligations under certain other derivative contracts, including termination payments that may become due upon certain insolvency or payment defaults of the financial guarantor or the issuer. The Company is no longer insuring new credit derivative contracts except for transactions related to the restructuring or reduction of existing derivative exposure. MBIA Corp. has not written any meaningful amount of business since 2008.

Segments Results

The following tables provide the Company’s segment results for the three months endedJune 30,2016 and 2015:

			Three Months Ended June 30, 2016
			U.S.				International
			Public				and Structured
			Finance				Finance
In millions			Insurance		Corporate		Insurance		Eliminations			Consolidated
Revenues(1)			$	82	$	6	$	23	$	-		$	111
Net change in fair value of insured derivatives				-		-		(8)		-			(8)
Net gains (losses) on financial instruments at fair value and
	foreign exchange			25		(19)		8		-			14
Net gains (losses) on extinguishment of debt				-		3		-		-			3
Other net realized gains (losses)				-		(1)		1		-			-
Revenues of consolidated VIEs				-		-		(2)		-			(2)
Inter-segment revenues(2)				4		12		11		(27)			-
		Total revenues		111		1		33		(27)			118
Losses and loss adjustment				9		-		68		-			77
Operating				11		14		15		-			40
Interest				-		24		25		-			49
Expenses of consolidated VIEs				-		-		7		-			7
Inter-segment expenses(2)				16		1		11		(28)			-
		Total expenses		36		39		126		(28)			173
Income (loss) before income taxes				75		(38)		(93)		1			(55)
Provision (benefit) for income taxes				25		(18)		(32)		(3)			(28)
Net income (loss)			$	50	$	(20)	$	(61)	$	4		$	(27)
Identifiable assets			$	5,477	$	2,412	$	7,017	$	(2,842)	(3)	$	12,064
________________
(1) - Represents the sum of third-party financial guarantee net premiums earned, net investment income, insurance-related fees and reimbursements and other fees.
(2) - Represents intercompany premium income and expense and intercompany interest income and expense pertaining to intercompany receivables and payables.
(3) - Consists of intercompany deferred income taxes, reinsurance balances and repurchase agreements.

			Three Months Ended June 30, 2015
			U.S.				International
			Public				and Structured
			Finance				Finance
In millions			Insurance		Corporate		Insurance		Eliminations			Consolidated
Revenues(1)			$	93	$	8	$	29	$	-		$	130
Net change in fair value of insured derivatives				-		-		60		-			60
Net gains (losses) on financial instruments at fair value and
	foreign exchange			-		48		(3)		-			45
Net investment losses related to other-than-temporary impairments				(6)		(1)		-		-			(7)
Net gains (losses) on extinguishment of debt				-		(1)		-		-			(1)
Other net realized gains (losses)				-		(1)		-		-			(1)
Revenues of consolidated VIEs				-		-		19		-			19
Inter-segment revenues(2)				8		21		15		(44)			-
		Total revenues		95		74		120		(44)			245
Losses and loss adjustment				8		-		38		-			46
Operating				8		19		18		-			45
Interest				-		24		26		-			50
Expenses of consolidated VIEs				-		-		12		-			12
Inter-segment expenses(2)				22		1		15		(38)			-
		Total expenses		38		44		109		(38)			153
Income (loss) before income taxes				57		30		11		(6)			92
Provision (benefit) for income taxes				20		7		3		(2)			28
Net income (loss)			$	37	$	23	$	8	$	(4)		$	64
Identifiable assets			$	5,412	$	2,707	$	10,393	$	(3,002)	(3)	$	15,510
________________
(1) - Represents the sum of third-party financial guarantee net premiums earned, net investment income, insurance-related fees and reimbursements and other fees.
(2) - Represents intercompany premium income and expense and intercompany interest income and expense pertaining to intercompany receivables and payables.
(3) - Consists of intercompany reinsurance balances, repurchase agreements and deferred income taxes.

Thefollowing tablesprovide theCompany’s segment resultsforthe six months endedJune 30,2016and 2015:

			Six Months Ended June 30, 2016
			U.S.				International
			Public				and Structured
			Finance				Finance
In millions			Insurance		Corporate		Insurance		Eliminations			Consolidated
Revenues(1)			$	166	$	11	$	49	$	-		$	226
Net change in fair value of insured derivatives				-		-		(36)		-			(36)
Net gains (losses) on financial instruments at fair value and
	foreign exchange			34		(103)		14		-			(55)
Net investment losses related to other-than-temporary impairments				-		(1)		-		-			(1)
Net gains (losses) on extinguishment of debt				-		5		-		-			5
Other net realized gains (losses)				-		(2)		1		-			(1)
Revenues of consolidated VIEs				-		-		12		-			12
Inter-segment revenues(2)				10		28		23		(61)			-
		Total revenues		210		(62)		63		(61)			150
Losses and loss adjustment				18		-		81		-			99
Operating				20		36		29		-			85
Interest				-		47		52		-			99
Expenses of consolidated VIEs				-		-		23		-			23
Inter-segment expenses(2)				34		1		25		(60)			-
		Total expenses		72		84		210		(60)			306
Income (loss) before income taxes				138		(146)		(147)		(1)			(156)
Provision (benefit) for income taxes				47		(42)		(55)		(1)			(51)
Net income (loss)			$	91	$	(104)	$	(92)	$	-		$	(105)
Identifiable assets			$	5,477	$	2,412	$	7,017	$	(2,842)	(3)	$	12,064
________________
(1) - Represents the sum of third-party financial guarantee net premiums earned, net investment income, insurance-related fees and reimbursements and other fees.
(2) - Represents intercompany premium income and expense and intercompany interest income and expense pertaining to intercompany receivables and payables.
(3) - Consists of intercompany deferred income taxes, reinsurance balances and repurchase agreements.

			Six Months Ended June 30, 2015
			U.S.				International
			Public				and Structured
			Finance				Finance
In millions			Insurance		Corporate		Insurance		Eliminations			Consolidated
Revenues(1)			$	198	$	13	$	58	$	-		$	269
Net change in fair value of insured derivatives				-		-		88		-			88
Net gains (losses) on financial instruments at fair value and
	foreign exchange			3		80		(8)		-			75
Net investment losses related to other-than-temporary impairments				(6)		(1)		-		-			(7)
Net gains (losses) on extinguishment of debt				-		(1)		-		-			(1)
Other net realized gains (losses)				(4)		23		-		-			19
Revenues of consolidated VIEs				-		-		21		-			21
Inter-segment revenues(2)				18		37		33		(88)			-
		Total revenues		209		151		192		(88)			464
Losses and loss adjustment				2		-		38		-			40
Operating				18		38		37		-			93
Interest				-		49		51		-			100
Expenses of consolidated VIEs				-		-		26		-			26
Inter-segment expenses(2)				46		2		33		(81)			-
		Total expenses		66		89		185		(81)			259
Income (loss) before income taxes				143		62		7		(7)			205
Provision (benefit) for income taxes				49		25		1		(3)			72
Net income (loss)			$	94	$	37	$	6	$	(4)		$	133
Identifiable assets			$	5,412	$	2,707	$	10,393	$	(3,002)	(3)	$	15,510
________________
(1) - Represents the sum of third-party financial guarantee net premiums earned, net investment income, insurance-related fees and reimbursements and other fees.
(2) - Represents intercompany premium income and expense and intercompany interest income and expense pertaining to intercompany receivables and payables.
(3) - Consists of intercompany reinsurance balances, repurchase agreements and deferred income taxes.

Premiumson financial guaranteesandinsured derivativesreported within theCompany’sinsurance segmentsare generated within andoutside the U.S.The following table summarizespremiumsearned on financial guaranteesand insured derivativesbygeographiclocationofrisk forthethree and six months endedJune 30,2016 and 2015:

		Three Months Ended June 30,				Six Months Ended June 30,
In millions			2016		2015		2016		2015
Total premiums earned:
	United States	$	58	$	74	$	117	$	161
	United Kingdom		7		8		14		15
	Europe (excluding United Kingdom)		2		-		3		2
	Internationally diversified		-		1		-		2
	Other Americas		7		7		14		13
	Asia		-		1		1		2
	Other		1		2		2		3
Total		$	75	$	93	$	151	$	198