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,
	2020		2019		2018
Revenues:
Net investment income	$	28	$	35	$	35
Net gains (losses) on financial instruments at fair value and foreign exchange		(67)		(57)		20
Net gains (losses) on extinguishment of debt		—		(1)		3
Other net realized gains (losses)		—		(2)		(2)

Total revenues		(39)		(25)		56

Expenses:
Operating		10		10		11
Interest		83		90		93

Total expenses		93		100		104

Gain (loss) before income taxes and equity in earnings of subsidiaries		(132)		(125)		(48)
Provision (benefit) for income taxes		(4)		(99)		(35)

Gain (loss) before equity in earnings of subsidiaries		(128)		(26)		(13)
Equity in net income (loss) of subsidiaries		(450)		(333)		(283)

Net income (loss)	$	(578)	$	(359)	$	(296)

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,
	2020		2019		2018
Cash flows from operating activities:
Investment income received	$	101	$	156	$	132
Operating expenses paid		(47)		(17)		(17)
Interest paid, net of interest converted to principal		(60)		(88)		(91)
Income taxes (paid) received		5		34		(16)

Net cash provided (used) by operating activities		(1)		85		8

Cash flows from investing activities:
Purchases of available-for-sale investments		(216)		(278)		(495)
Sales of available-for-sale investments		183		319		175
Paydowns and maturities of available-for-sale investments		41		179		101
Purchases of investments at fair value		(2)		5		(9)
Sales, paydowns and maturities of investments at fair value		2		—		10
Sales, paydowns and maturities (purchases) of short-term investments, net		137		(61)		262
(Payments) proceeds for derivative settlements		(16)		(98)		(24)
Contributions (to) from subsidiaries, net		—		(14)		51
Advances (to) from subsidiaries, net		—		—		3

Net cash provided (used) by investing activities		129		52		74

Cash flows from financing activities:
Proceeds from investment agreements		12		15		11
Principal paydowns of investment agreements		(18)		(20)		(35)
Proceeds from long-term debt		—		—		40
Principal paydowns of long-term debt		(115)		(150)		—
Payments for affiliate loans		—		(19)		(71)
Restricted stock awards settlements		8		8		4

Net cash provided (used) by financing activities		(113)		(166)		(51)

Effect of exchange rates on cash and cash equivalents		—		—		(1)
Net increase (decrease) in cash and cash equivalents		15		(29)		30
Cash and cash equivalents—beginning of year		11		40		10

Cash and cash equivalents—end of year	$	26	$	11	$	40

Reconciliation of net income (loss) to net cash provided (used) by operating activities:
Net income (loss)	$	(578)	$	(359)	$	(296)
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
Change in:
Intercompany accounts receivable		(39)		(16)		(9)
Current income taxes		5		23		(15)
Equity in earnings of subsidiaries		450		333		283
Dividends from subsidiaries		81		134		112
Net (gains) losses on financial instruments at fair value and foreign exchange		67		57		(20)
Deferred income tax provision (benefit)		(4)		(88)		(35)
(Gains) losses on extinguishment of debt		—		1		(3)
Other operating		17		—		(9)

Total adjustments to net income (loss)		577		444		304

Net cash provided (used) by operating activities	$	(1)	$	85	$	8

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. This includes the statements of comprehensive income (loss) which is exactly the same as the Company’s consolidated statements of comprehensive income (loss). 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, 2020, 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 $294 million.

During 2020 and 2019, the Parent Company redeemed $115 million and $150 million, respectively, principal amount of its 6.400% Senior Notes due 2022 at a cost of 100% of par value plus accrued interest. As of December 31, 2020, National owned $308 million principal amount of the 5.700% Senior Notes due 2034 and $10 million principal amount of MBIA Inc. 7.000% Debentures due 2025, and MBIA Inc., through its corporate segment, owned $13 million of MBIA Corp. surplus notes. These amounts are eliminated from the Parent Company’s condensed balance sheet.

2. Accounting Policies

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

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 2020, National declared and paid a dividend of

$81 million to its ultimate parent, MBIA Inc.

During 2019, National declared and paid dividends

of $134 million to its ultimate parent, MBIA Inc.

During 2018, National Public Finance Guarantee Holdings, Inc. declared and paid a dividend of $108 million to the Parent Company. In addition, National Public Finance Guarantee Holdings, Inc. declared and paid a dividend of $1

million to the Parent Company and MBIA Capital Corp. declared and paid a dividend of $3 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 assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of its existing deferred tax assets. A significant piece of objective negative evidence evaluated was the Parent Company having a three-year cumulative loss. Such objective evidence limits the ability to consider other subjective evidence, such as the Parent Company’s projections of pre-tax income. On the basis of this evaluation, the Parent Company has recorded a full valuation allowance against its net deferred tax asset.

For a further discussion of the net deferred tax asset, refer to footnote 11 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 and its subsidiaries to pledge securities as collateral. As of December 31, 2020 and 2019, the fair value of securities pledged as collateral with respect to these investment agreements approximated $282 million and $313

million, respectively. The Parent Company’s collateral as of December 31, 2020, consisted principally of U.S. Treasury and government agency and state and municipal bonds, and was primarily held with major U.S. banks.

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, 2020 and 2019, the Parent Company and its subsidiaries pledged securities with a fair value of $214

million and $181 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.