Business Segments

12 Months Ended

Dec. 31, 2016

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 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. Prior to 2015, the Company managed two other operating segments, advisory services and conduit. During 2014, the Company dissolved its conduit segment by extinguishing the remaining liabilities of the segment and liquidating the Company’s remaining conduit, Meridian.Effective January 1, 2015, the Company exited its advisory services business with the completed sale of Cutwater to a subsidiary of The Bank of New York Mellon Corporation.

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. Certain policies cover payments potentially due under CDS, including termination payments that may become due in certain circumstances, including the occurrence of certain insolvency or payment defaults under the CDS or derivatives contracts by the insured counterparty or by the guarantor.

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.

Advisory Services

The advisory services segment primarily consisted of the operations of Cutwater Investor Services Corp. and Cutwater Asset Management Corp. and was a fee-for-service investment management business focused on fixed-income markets. 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 endedDecember 31,2016, 2015 and 2014:

			Year Ended December 31, 2016
			U.S.				International
			Public				and Structured
			Finance				Finance
In millions			Insurance		Corporate		Insurance		Eliminations			Consolidated
Revenues(1)			$	335	$	24	$	121	$	-		$	480
Net change in fair value of insured derivatives				-		-		(19)		-			(19)
Net gains (losses) on financial instruments at fair value and
	foreign exchange			72		(14)		26		-			84
Net investment losses related to other-than-temporary impairments				(4)		(1)		-		-			(5)
Net gains (losses) on extinguishment of debt				-		5		-		-			5
Other net realized gains (losses)				2		(5)		(279)		-			(282)
Revenues of consolidated VIEs				-		-		31		-			31
Inter-segment revenues(2)				22		58		51		(131)			-
		Total revenues		427		67		(69)		(131)			294
Losses and loss adjustment				74		-		146		-			220
Operating				40		80		57		-			177
Interest				-		91		106		-			197
Expenses of consolidated VIEs				-		-		39		-			39
Inter-segment expenses(2)				69		4		52		(125)			-
		Total expenses		183		175		400		(125)			633
Income (loss) before income taxes				244		(108)		(469)		(6)			(339)
Provision (benefit) for income taxes				68		(15)		(52)		(2)			(1)
Net income (loss)			$	176	$	(93)	$	(417)	$	(4)		$	(338)
Identifiable assets			$	5,077	$	2,479	$	6,486	$	(2,905)	(3)	$	11,137
________________
(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.

			Year Ended December 31, 2015
			U.S.				International
			Public				and Structured
			Finance				Finance
In millions			Insurance		Corporate		Insurance		Eliminations			Consolidated
Revenues(1)			$	389	$	27	$	114	$	-		$	530
Net change in fair value of insured derivatives				-		-		129		-			129
Net gains (losses) on financial instruments at fair value and
	foreign exchange			14		58		(9)		-			63
Net investment losses related to other-than-temporary impairments				(10)		(3)		-		-			(13)
Net gains (losses) on extinguishment of debt				-		(1)		-		-			(1)
Other net realized gains (losses)				(4)		21		-		-			17
Revenues of consolidated VIEs				-		-		128		-			128
Inter-segment revenues(2)				34		67		63		(164)			-
		Total revenues		423		169		425		(164)			853
Losses and loss adjustment				5		-		118		-			123
Operating				38		79		73		-			190
Interest				-		97		102		-			199
Expenses of consolidated VIEs				-		-		52		-			52
Inter-segment expenses(2)				89		7		64		(160)			-
		Total expenses		132		183		409		(160)			564
Income (loss) before income taxes				291		(14)		16		(4)			289
Provision (benefit) for income taxes				100		7		3		(1)			109
Net income (loss)			$	191	$	(21)	$	13	$	(3)		$	180
Identifiable assets			$	5,265	$	2,599	$	9,870	$	(2,898)	(3)	$	14,836
________________
(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.

			Year Ended December 31, 2014
			U.S.				International
			Public				and Structured
			Finance				Finance		Advisory
In millions			Insurance		Corporate		Insurance		Services		Conduit		Eliminations			Consolidated
Revenues(1)			$	373	$	42	$	189	$	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		2		12		-		-		-			28
Revenues of consolidated VIEs				-		-		105		(8)		4		-			101
Inter-segment revenues(2)				44		46		55		22		(1)		(166)			-
		Total revenues		443		148		819		23		3		(166)			1,270
Losses and loss adjustment				(10)		-		143		-		-		-			133
Operating				38		87		72		42		-		-			239
Interest				-		101		109		-		-		-			210
Expenses of consolidated VIEs				-		-		47		-		-		-			47
Inter-segment expenses(2)				78		15		64		6		9		(172)			-
		Total expenses		106		203		435		48		9		(172)			629
Income (loss) before income taxes				337		(55)		384		(25)		(6)		6			641
Provision (benefit) for income taxes				115		(173)		134		(6)		-		2			72
Net income (loss)			$	222	$	118	$	250	$	(19)	$	(6)	$	4		$	569
Identifiable assets			$	5,887	$	2,838	$	10,073	$	793	$	-	$	(3,328)	(3)	$	16,263
________________
(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 expenses pertaining to
intercompany receivables and payables and intercompany loans.
(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 fortheyears endedDecember 31,2016, 2015and 2014:

		Years Ended December 31,
In millions			2016		2015		2014
Total premiums earned:
	United States	$	238	$	310	$	299
	United Kingdom		27		30		36
	Europe (excluding United Kingdom)		4		4		7
	Internationally diversified		3		3		9
	Other Americas		26		29		49
	Asia		2		3		4
	Other		4		6		12
Total		$	304	$	385	$	416