Business Developments and Risks and Uncertainties	9 Months Ended
Business Developments and Risks and Uncertainties	Sep. 30, 2016
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Business Developments and Risks and Uncertainties	Note 1: Business Developments and Risks and Uncertainties Summary MBIA Inc., together with its consolidated subsidiaries, (collectively, “MBIA” or the “Company”) operates one of the largest financial guarantee insurance businesses in the industry. MBIA manages three operating segments: 1) United States (“U.S.”) public finance insurance; 2) corporate; and 3) international and structured finance insurance. The Company’s U.S. public finance insurance business is primarily operated through National Public Finance Guarantee Corporation (“National”) and its international and structured finance insurance business is primarily operated through MBIA Insurance Corporation and its subsidiaries (“MBIA Corp.”). Unless otherwise indicated or the context otherwise requires, references to “MBIA Corp.” are to MBIA Insurance Corporation, together with its subsidiaries, MBIA UK Insurance Limited (“MBIA UK”) and MBIA Mexico S.A. de C.V (“MBIA Mexico”). Business Developments Sale of MBIA UK and Cutwater In September of 2016, MBIA Insurance Corporation announced that its wholly-owned subsidiary, MBIA UK (Holdings) Limited, entered into an agreement to sell MBIA UK to Assured Guaranty Corp. (“Assured”), a subsidiary of Assured Guaranty Ltd. (the “Sale Transaction”). The Sale Transaction consists of the transfer to the Company of notes issued by Zohar II 2005-1, Limited (“Zohar II”) collateralized debt obligation (“CDO”), (the “Zohar II Notes”), with an aggregate outstanding principal amount of approximately $347 million (the “Assured Zohar II Notes”), in exchange for the shares of MBIA UK and a cash payment to Assured of $23 million. The Sale Transaction is subject to certain closing conditions, including the receipt of regulatory approvals from the Prudential Regulation Authority (“PRA”), the Financial Conduct Authority (“FCA”) of the United Kingdom, the New York State Department of Financial Services (“NYSDFS”) and the Maryland Insurance Administration. The sale of MBIA UK is part of MBIA Corp.’s strategy to address the maturity of the Zohar II Notes on January 20, 2017 (the “Zohar Maturity Date”), which are insured by MBIA Corp. and had $770 million of insured gross par outstanding as of September 30, 2016. MBIA Insurance Corporation expects that on the Zohar Maturity Date, it will be required to pay a claim under its policy for the amount due on the Zohar II Notes (the “Zohar II Claim”). MBIA Insurance Corporation does not expect to have sufficient liquidity to pay such claim on the Zohar II Notes unless it arranges third-party financing to enable it to pay the claim, which it is currently working to arrange. There is no assurance that the Sale Transaction will be completed, that third-party financing will be available, or that MBIA Corp.’s strategies will be successful. Accordingly, the closing of this sale is uncertain. Should the Company satisfactorily resolve these uncertainties, the Sale Transaction is scheduled to close in early January of 2017. Effective on January 1, 2015, the Company exited its advisory services business through the sale of Cutwater Holdings, LLC and its subsidiaries (“Cutwater”) to a subsidiary of The Bank of New York Mellon Corporation. Refer to “Note 10: Business Segments” for further information about the Company’s operating segments. National Ratings and New Business Opportunities National’s ability to write new business and compete with other financial guarantors is largely dependent on the financial strength ratings assigned to National by the rating agencies. As of September 30, 2016, National had the following ratings: AA+ with a stable outlook by Kroll Bond Rating Agency; AA- with a stable outlook by Standard & Poor’s Financial Services LLC (“S&P”); and A3 with a negative outlook by Moody’s Investors Service, Inc. (“Moody’s”). National seeks to generate shareholder value through appropriate risk adjusted pricing; however, current market conditions and the competitive landscape may limit National’s new business opportunities and its abilities to price and underwrite risk with attractive returns. Refer to “Risks and Uncertainties” below for a discussion of business risks related to National’s insured portfolio. Risks and Uncertainties The Company’s financial statements include estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. The outcome of certain significant risks and uncertainties could cause the Company to revise its estimates and assumptions or could cause actual results to differ from the Company’s estimates. The discussion below highlights the significant risks and uncertainties that could have a material effect on the Company’s financial statements and business objectives in future periods. U.S. Public Finance Market Conditions National’s insured portfolio continued to perform satisfactorily against a backdrop of strengthening domestic economic activity. While a stable or growing economy will generally benefit tax revenues and fees charged for essential municipal services which secure National’s insured bond portfolio, some state and local governments and territory obligors National insures remain under financial and budgetary stress. This could lead to an increase in defaults by such entities on the payment of their obligations and losses or impairments on a greater number of the Company’s insured transactions. The Company monitors and analyzes these situations and other stressed credits closely, and the overall extent and duration of this stress is uncertain. In particular, the Commonwealth of Puerto Rico is experiencing significant fiscal stress and constrained liquidity due to, among other things, Puerto Rico’s structural budget imbalance, limited access to the capital markets, a stagnating local economy, net migration of people out of Puerto Rico and a high debt burden. Although Puerto Rico has tried to address its challenges through various fiscal policies, it continues to experience significant fiscal stress. On July 1, 2016, Puerto Rico defaulted on scheduled debt service for certain National insured bonds and National paid gross claims in the aggregate of $173 million as a result. The Company continues to believe, based on its analysis of Puerto Rico’s fiscal and structural circumstances, the details of its insured exposures, and its legal and contractual rights, that all of National’s insured Puerto Rico related debt, and any claims National has made thereon, will ultimately be substantially repaid. MBIA Corp. Insured Portfolio MBIA Corp.’s primary objectives are to satisfy any claims of its policyholders, and to maximize future recoveries, if any, for its surplus note holders and, thereafter, its preferred stock holders. MBIA Corp. is executing this strategy by reducing and mitigating potential losses on its insurance exposures and pursuing various actions focused on maximizing the collection of recoveries. The Company does not expect to write new business in its international and structured finance insurance segment for the foreseeable future. MBIA Corp.’s insured portfolio could deteriorate and result in additional significant loss reserves and claim payments. MBIA Corp.’s ability to meet its obligations is limited by available liquidity and its ability to secure additional liquidity through financing and other transactions. There can be no assurance that MBIA Corp. will be successful in generating sufficient cash to meet its obligations. Zohar At this time, MBIA Insurance Corporation is particularly focused on the policy it issued on the Zohar II Notes. According to the sponsor and former collateral manager of Zohar II (the “Zohar Sponsor”), the assets of Zohar II include, among other things, loans made to, and equity interests in, companies that the Zohar Sponsor purports to control (the “Zohar II Collateral”). MBIA Insurance Corporation expects that on the Zohar Maturity Date, it will be required to pay a claim under its policy for the Zohar II Claim. MBIA Insurance Corporation does not expect to have sufficient liquidity to pay such claim on the Zohar II Notes unless it arranges third-party financing to enable it to pay the claim. MBIA Insurance Corporation is currently seeking to arrange third-party financing to increase its liquid assets to ensure that it has sufficient liquidity to pay the Zohar II Claim. MBIA Insurance Corporation’s ability to arrange such financing, however, is constrained, and there is no assurance that it will be able to secure financing on acceptable terms. MBIA Insurance Corporation believes that any third-party financing will require approval by the NYSDFS. MBIA Insurance Corporation anticipates that the approval by the NYSDFS of the sale of MBIA UK, described herein, and of any third-party financing, if granted, would be based on (among other things) the NYSDFS concluding that MBIA Insurance Corporation will successfully execute its strategies to meet its obligations on the Zohar II Notes in a manner acceptable to the NYSDFS. MBIA Insurance Corporation believes that if the NYSDFS concludes at any time that MBIA Insurance Corporation will not be able to satisfy its obligations under the Zohar II Notes on terms satisfactory to the NYSDFS, while maintaining sufficient assets to readily pay other policyholder claims, the NYSDFS would likely put MBIA Insurance Corporation into a rehabilitation or liquidation proceeding under Article 74 of the New York Insurance Law (“NYIL”) and/or take such other actions as the NYSDFS may deem necessary to protect the interests of MBIA Insurance Corporation’s policyholders. The determination to commence such a proceeding or take other such actions is within the exclusive control of the NYSDFS. The NYSDFS enjoys broad discretion in this regard, and any determination they may make would not be limited to consideration of the matters described above. No assurance is given as to what action, if any, the NYSDFS may take. MBIA Insurance Corporation has also commenced preparing contingency plans with respect to a potential rehabilitation proceeding in the event that it is unable to restructure the Zohar II Notes or arrange financing to pay the amounts due on the Zohar II Notes on the Zohar Maturity Date, in each case on terms acceptable to MBIA Insurance Corporation. In addition, MBIA Insurance Corporation insured the class A-1 and A-2 notes (the “Zohar I Insured Notes”) issued by Zohar CDO 2003-1, Limited (“Zohar I”), a high yield corporate CDO, the assets of which also include, among other things, loans made to, and equity interests in, companies purportedly controlled by the Zohar Sponsor (all the assets of Zohar I, the “Zohar I Assets”). The Zohar I Insured Notes matured on November 20, 2015 and, after Zohar I failed to pay the amounts due on the Zohar I Insured Notes, MBIA Insurance Corporation paid a claim of $149 million on such Zohar I Insured Notes. As a result, MBIA Insurance Corporation is entitled to seek reimbursement of such claim plus interest and expenses (the “MBIA Zohar I Claim”) from Zohar I and/or to exercise certain rights and remedies to seek recovery of such claim. In connection with the exercise of its rights and remedies, MBIA Insurance Corporation has directed the trustee for Zohar I to commence an auction (the “Auction”) of all of the Zohar I Assets. All bids in the Auction are scheduled to be submitted by no later than November 29, 2016. MBIA Insurance Corporation has the right to submit a credit bid in the Auction for some or all of the Zohar I Assets up to the amount of the MBIA Zohar I Claim (the “MBIA Credit Bid”). In the event that any cash bids submitted in the Auction exceeds the MBIA Credit Bid, the Zohar I Assets will be sold for cash, and the cash will be applied pursuant to the Zohar I indenture priority of payments and the amounts remaining after payment of any senior expenses will be distributed to MBIA Insurance Corporation as reimbursement for the MBIA Zohar I Claim. In the event the MBIA Credit Bid is the highest bid submitted in the Auction, the Zohar I Assets will be transferred to MBIA Insurance Corporation in satisfaction of the MBIA Zohar I Claim. While MBIA Insurance Corporation will seek to recover any payments it makes (plus interest and expenses) with respect to the Zohar I Notes and the Zohar II Notes, there can be no assurance that the value of the Zohar I Assets and/or Zohar II Assets will be sufficient to permit MBIA Insurance Corporation to recover all or substantially all of any such payments. Given the separation of MBIA Inc. and MBIA Corp. as distinct legal entities, the absence of any material intercompany lending agreements or cross defaults between the entities, and the lack of reliance by MBIA Inc. on MBIA Corp. for the receipt of dividends, the Company does not believe that a rehabilitation or liquidation proceeding with respect to MBIA Insurance Corporation would have any significant liquidity impact on MBIA Inc. or result in a liquidation or similar proceeding of MBIA UK or MBIA Mexico. Such a proceeding could have material adverse consequences for MBIA Insurance Corporation, including the termination of insured credit default swaps (“CDS”) and other derivative contracts for which counterparties may assert market-based claims, the acceleration of debt obligations issued by affiliates and insured by MBIA Insurance Corporation, the loss of control of MBIA Insurance Corporation to a rehabilitator or liquidator, and unplanned costs. RMBS Recoveries The amount and timing of projected collections from excess spread from residential mortgage-backed securities (“RMBS”) and the put-back recoverable from Credit Suisse Securities (USA) LLC, DLJ Mortgage Capital, Inc., and Select Portfolio Servicing Inc. (collectively, “Credit Suisse”) are uncertain. Refer to “Note 5: Loss and Loss Adjustment Expense Reserves” for information about MBIA Corp.’s loss reserves and recoveries. Corporate Liquidity As of September 30, 2016 and December 31, 2015, the liquidity position of MBIA Inc. was $237 million and $416 million, respectively. The term “liquidity position” refers to cash and liquid assets available for general liquidity purposes. During the nine months ended September 30, 2016, $105 million was released to MBIA Inc. and National paid $73 million for estimated 2016 taxes under the MBIA group’s tax sharing agreement and related escrow agreement (the “Tax Escrow Account”). The $105 million released to MBIA Inc. represented National’s liability under the tax sharing agreement for the 2013 tax year. Subsequent to September 30, 2016, National declared and paid a dividend of $118 million to its ultimate parent, MBIA Inc. Based on the Company’s projections of National’s dividends, payments into the Tax Escrow Account, and other cash inflows, the Company expects that MBIA Inc. will have sufficient cash to satisfy its debt service and general corporate needs. However, MBIA Inc. continues to have liquidity risk which could be triggered by deterioration in the performance of invested assets, interruption of or reduction in dividends or tax payments received from operating subsidiaries, impaired access to the capital markets, as well as other factors which cannot be anticipated at this time. Furthermore, failure by MBIA Inc. to settle liabilities that are also insured by MBIA Corp. could result in claims on MBIA Corp.