Schedule II- Parent Company Financials

12 Months Ended

Dec. 31, 2017

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Condensed Financial Information of Parent Company Only Disclosure

SCHEDULE II
MBIA INC. (PARENT COMPANY)
CONDENSED BALANCE SHEETS
(In millions except share and per share amounts)
			December 31, 2017		December 31, 2016
Assets
Investments:
	Fixed-maturity securities held as available-for-sale, at fair value (amortized cost $590 and $687)		$	639	$	725
	Investments carried at fair value			8		6
	Investments pledged as collateral, at fair value (amortized cost $155 and $242)			148		233
	Short-term investments held as available-for-sale, at fair value (amortized cost $283 and $278)			283		278
	Other investments			1		2
		Total investments		1,079		1,244
Cash and cash equivalents				10		13
Investment in wholly-owned subsidiaries				2,290		3,673
Deferred income taxes, net				-		1,003
Other assets				144		107
		Total assets	$	3,523	$	6,040
Liabilities and Shareholders' Equity
Liabilities:
	Investment agreements		$	301	$	361
	Long-term debt			576		576
	Affiliate loans payable			772		901
	Income taxes payable			237		696
	Other liabilities			224		279
		Total liabilities		2,110		2,813
Shareholders' Equity:
	Preferred stock, par value $1 per share; authorized shares--10,000,000; issued and outstanding--none			-		-
	Common stock, par value $1 per share; authorized shares--400,000,000; issued shares--283,717,973
		and 283,989,999		284		284
	Additional paid-in capital			3,171		3,160
	Retained earnings			1,095		2,700
	Accumulated other comprehensive income (loss), net of tax			(19)		(128)
	Treasury stock, at cost--192,233,526 and 148,789,168 shares			(3,118)		(2,789)
		Total shareholders' equity of MBIA Inc.		1,413		3,227
		Total liabilities and shareholders' equity	$	3,523	$	6,040
The condensed financial statements should be read in conjunction with the
consolidated financial statements and notes thereto and the accompanying notes.

SCHEDULE II
MBIA INC. (PARENT COMPANY)
CONDENSED STATEMENTS OF OPERATIONS
(In millions)
				Years ended December 31,
				2017		2016		2015
Revenues:
	Net investment income			$	35	$	29	$	35
	Net gains (losses) on financial instruments at fair value and foreign exchange				(34)		(13)		59
	Investment losses related to other-than-temporary impairments:
		Investment losses related to other-than-temporary impairments			-		(1)		(3)
		Other-than-temporary impairments recognized in accumulated other
			comprehensive income (loss)		-		-		(1)
			Net investment losses related to other-than-temporary impairments		-		(1)		(4)
	Net gains (losses) on extinguishment of debt				28		5		-
	Other net realized gains (losses)				(3)		(5)		21
			Total revenues		26		15		111
Expenses:
	Operating				13		16		24
	Interest				87		90		95
			Total expenses		100		106		119
	Gain (loss) before income taxes and equity in earnings of subsidiaries				(74)		(91)		(8)
Provision (benefit) for income taxes					507		(15)		1
	Gain (loss) before equity in earnings of subsidiaries				(581)		(76)		(9)
Equity in net income (loss) of subsidiaries					(1,024)		(262)		189
			Net income (loss)	$	(1,605)	$	(338)	$	180
The condensed financial statements should be read in conjunction with the
consolidated financial statements and notes thereto and the accompanying notes.

SCHEDULE II
MBIA INC. (PARENT COMPANY)
CONDENSED STATEMENTS OF CASH FLOWS
(In millions)
				Years ended December 31,
				2017		2016		2015
Cash flows from operating activities:
	Fees and reimbursements received			$	-	$	4	$	-
	Investment income received				141		144		142
	Operating expenses paid				(27)		(18)		(24)
	Interest paid, net of interest converted to principal				(78)		(84)		(88)
	Income taxes (paid) received				26		73		108
			Net cash provided (used) by operating activities		62		119		138
Cash flows from investing activities:
	Purchases of available-for-sale investments				(164)		(129)		(606)
	Sales of available-for-sale investments				172		165		325
	Paydowns and maturities of available-for-sale investments				152		90		186
	Purchases of investments at fair value				(70)		(57)		(144)
	Sales, paydowns and maturities of investments at fair value				71		58		171
	Sales, paydowns and maturities (purchases) of short-term investments, net				(34)		1		232
	(Payments) proceeds for derivative settlements				(30)		(37)		43
	Collateral (to) from counterparty				4		52		(31)
	Contributions to subsidiaries, net				(12)		(10)		16
	Advances to subsidiaries, net				(3)		-		-
	Other investing				-		-		24
			Net cash provided (used) by investing activities		86		133		216
Cash flows from financing activities:
	Proceeds from investment agreements				15		16		21
	Principal paydowns of investment agreements				(81)		(80)		(111)
	Proceeds from long-term debt				127		-		-
	Principal paydowns of long-term debt				-		-		(11)
	Payments for affiliate loans				(156)		(111)		(103)
	Purchases of treasury stock				(65)		(108)		(234)
	Restricted stock awards settlements				11		8		19
			Net cash provided (used) by financing activities		(149)		(275)		(419)
Effect of exchange rates on cash and cash equivalents					(2)		1		-
Net increase (decrease) in cash and cash equivalents					(3)		(22)		(65)
Cash and cash equivalents - beginning of year					13		35		100
Cash and cash equivalents - end of year				$	10	$	13	$	35
Reconciliation of net income (loss) to net cash provided (used) by operating activities:
	Net income (loss)			$	(1,605)	$	(338)	$	180
	Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
		Change in:
			Intercompany accounts receivable		(22)		(8)		(20)
			Current income taxes		48		78		109
		Equity in earnings of subsidiaries			1,024		262		(189)
		Dividends from subsidiaries			118		118		116
		Net investment losses related to other-than-temporary impairments			-		1		4
		Net (gains) losses on financial instruments at fair value and foreign exchange			34		13		(59)
		Other net realized (gains) losses			3		5		(21)
		Deferred income tax provision (benefit)			485		(20)		-
		(Gains) losses on extinguishment of debt			(28)		(5)		-
		Other operating			5		13		18
		Total adjustments to net income (loss)			1,667		457		(42)
			Net cash provided (used) by operating activities	$	62	$	119	$	138
The condensed financial statements should be read in conjunction with the
consolidated financial statements and notes thereto and the accompanying notes.

SCHEDULE II

MBIA INC. (PARENT COMPANY)

NOTES TO CONDENSED FINANCIAL STATEMENTS

1. Condensed Financial Statements

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the Company’s consolidated financial statements and the notes thereto.

The activities of MBIA Inc.(the “Parent Company”) consist of general corporate activities and funding activities, which principally include holding and managing investments, servicing outstanding corporate debt, investment agreements issued by the Parent Company and its subsidiaries, and posting collateral under investment agreement and derivative contracts.

The Parent Company is subject to the same liquidity risks and uncertainties as described in footnote 1 to the Company’s consolidated financial statements. As of December 31,2017, the liquidity position of the Parent Company,which included cash and cash equivalents or short-term investments comprised of highly rated commercial paper, money market funds and municipal, U.S. agency and corporate bonds for general corporate purposes, excluding the amount held in escrow under its tax sharing agreement, was $419 million.

During 2017, National purchased from the Parent Company, $129 million principal amount of MBIA Inc. 5.700% Senior Notes due 2034 that were previously repurchased by the Parent Company and had not been retired. The MBIA Inc. 5.700% Senior Notes due 2034 that were purchased by National were eliminated from the Parent Company’s condensed balance sheet.

2. Accounting Policies

The Parent Company carries its investments in subsidiaries under the equity method.

Certain amounts have been reclassified in prior years’ financial statements to conform to the current presentation. This includes a change in the presentation of cash paid when withholding shares for tax-withholding purposes in “Purchases of treasury stock” on the Parent Company’s condensed statement of cash flows as required under Accounting Standards Update (“ASU”) 2016-09, “Compensation-Stock Compensation (Topic 718)”. The change in presentation effected “Operating expenses paid”, in operating cash flows and “Purchases of treasury stock”, in financing cash flows, on the Parent Company’s condensed statement of cash flows in prior periods. The reclassifications had no material impact on total revenues, expenses, assets, liabilities, shareholders’ equity, operating cash flows, investing cash flows, or financing cash flows for all periods presented.

For a further discussion of significant accounting policies and recent accounting pronouncements, refer to footnotes 2 and 3 to the Company’s consolidated financial statements.

3. Dividends from Subsidiaries

During 2017 and 2016, National Public Finance Guarantee Holdings, Inc. declared and paid a dividend of $118 million to the Parent Company.

During 2015, National Public Finance Guarantee Holdings, Inc. declared and paid a dividend of $114 million to the Parent Company, Trifinium Holdings Limited declared and paid dividends of $1 million to the Parent Company and MBIA Services Corp. declared and paid a dividend of $1 million to the Parent Company.

4. Deferred Tax Asset, Net of Valuation Allowance

The Parent Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on tax assets and liabilities is recognized in income in the period that includes the enactment date. Valuation allowances are established to reduce deferred tax assets to the amount that more likely than not will be realized.

The Parent Company considered all available positive and negative evidence as required by generally accepted accounting principles, to estimate if sufficient taxable income will be generated to use its net deferred tax asset. After considering all positive and negative evidence, including the Parent Company’s inability to objectively identify and forecast future sources of taxable income, the Parent Company concluded in the second quarter of 2017 it did not have sufficient positive evidence to support its ability to use its net deferred tax asset before it would expire. Accordingly, the Parent Company established a full valuation allowance against its net deferred tax asset.

For a further discussion of the net deferred tax asset, refer to footnote11 to the Company’s consolidated financial statements.

5. Obligations under Investment Agreements

Investment agreements, as described in footnote 10 to the Company’s consolidated financial statements, are conducted by both the Parent Company and its wholly-owned subsidiary, MBIA Investment Management Corp.

6. Pledged Collateral

Substantially all of the obligations under investment agreements require the Parent Company to pledge securities as collateral. As of December 31,2017 and 2016, the fair value of securities pledged as collateral with respect to these investment agreements approximated $350 million and $394 million, respectively. The Parent Company’s collateral as of December 31,2017, consisted principally of U.S. Treasury and government agency and state and municipal bonds, and was primarily held with major U.S. banks. Additionally, the Parent Company pledged cash and money market securities as collateral under investment agreements in the amount of $6 million as ofDecember 31,2016.

Under derivative contracts entered into by the Parent Company, collateral postings are required by either the Parent Company or the counterparty when the aggregate market value of derivative contracts entered into with the same counterparty exceeds a predefined threshold. As of December 31,2017and 2016,the Parent Company pledged securities with a fair value of $237 million and $276 million, respectively, to derivative counterparties.

7. Affiliate Loans Payable

Affiliate loans payable consists of loans payable to MBIA Global Funding, LLC (“GFL”). GFL raised funds through the issuance of medium-term notes with varying maturities, which were, in turn, guaranteed by MBIA Corp. GFL lent the proceeds of these medium-term note issuances to the Parent Company.