Business Segments

6 Months Ended

Jun. 30, 2021

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.

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 portfolio is managed 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’s guarantees insure municipal bonds, including tax-exempt and taxable indebtedness of U.S. political subdivisions, as well as utilities, airports, health care institutions, higher educational facilities, 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 support services to MBIA Inc.’s subsidiaries as well as asset and capital management. Support services are provided by the Company’s service company, MBIA Services, and include, 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, 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 new MTNs and investment agreements and the outstanding liability balances and corresponding asset balances have declined over time as liabilities matured, terminated or were called or repurchased. During 2020, the remaining investment agreements issued by IMC matured, and as of December 31, 2020, there were no outstanding investment agreements issued by IMC. 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;

• MZ Funding LLC; and

• LaCrosse Financial Products, LLC, a wholly-owned affiliate, to which MBIA Insurance Corporation had written insurance policies guaranteeing the obligations under CDS. Certain policies covered 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 derivative contracts by the insured counterparty or by the guarantor. The Company no longer insures new CDS contracts except for potential transactions related to the restructuring of existing exposures.

MBIA Corp. insures non-U.S. public finance and global structured finance 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, and aircraft leases. 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. MBIA Corp. has not written any meaningful amount of business since 2008.

Subsequent to June 30, 2021, there was a reduction to MBIA Corp.’s total insured gross par outstanding of $441 million as a result of the termination of an insurance policy for an international public finance credit. In connection with this policy termination, the Company expects to earn net premiums and fees of approximately $19 million in the third quarter of 2021.

Segments Results

The following tables provide the Company’s segment results for the three months ended June 30, 2021 and 2020:

	Three Months Ended June 30, 2021
	U.S.						International
	Public						and Structured
	Finance						Finance
In millions	Insurance			Corporate			Insurance			Eliminations			Consolidated
Revenues(1)	$	21		$	2		$	6		$	-		$	29
Net gains (losses) on financial instruments at fair value and foreign exchange		3			(18	)		(5	)		-			(20	)
Net gains (losses) on extinguishment of debt		-			14			-			-			14
Revenues of consolidated VIEs		-			-			(5	)		-			(5	)
Inter-segment revenues(2)		6			18			4			(28	)		-
Total revenues		30			16			-			(28	)		18
Losses and loss adjustment		(42	)		-			51			-			9
Operating		4			17			3			-			24
Interest		-			14			27			-			41
Expenses of consolidated VIEs		-			-			5			-			5
Inter-segment expenses(2)		11			4			11			(26	)		-
Total expenses		(27	)		35			97			(26	)		79
Income (loss) before income taxes	$	57		$	(19	)	$	(97	)	$	(2	)	$	(61	)
Identifiable assets	$	3,593		$	852		$	3,346		$	(2,539	)(3)	$	5,252

(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 principally of intercompany reinsurance balances.

	Three Months Ended June 30, 2020
	U.S.						International
	Public						and Structured
	Finance						Finance
In millions	Insurance			Corporate			Insurance			Eliminations			Consolidated
Revenues(1)	$	26		$	5		$	8		$	-		$	39
Net gains (losses) on financial instruments at fair value and foreign exchange		25			-			(1	)		-			24
Revenues of consolidated VIEs		-			-			51			-			51
Inter-segment revenues(2)		8			17			3			(28	)		-
Total revenues		59			22			61			(28	)		114
Losses and loss adjustment		72			-			64			-			136
Operating		3			19			3			-			25
Interest		-			16			29			-			45
Expenses of consolidated VIEs		-			-			14			-			14
Inter-segment expenses(2)		11			6			11			(28	)		-
Total expenses		86			41			121			(28	)		220
Income (loss) before income taxes	$	(27	)	$	(19	)	$	(60	)	$	-		$	(106	)

(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.

The following tables provide the Company’s segment results for the six months ended June 30, 2021 and 2020:

	Six Months Ended June 30, 2021
	U.S.					International
	Public					and Structured
	Finance					Finance
In millions	Insurance			Corporate		Insurance			Eliminations			Consolidated
Revenues(1)	$	44		$	7	$	13		$	-		$	64
Net gains (losses) on financial instruments at fair value and foreign exchange		-			37		(6	)		-			31
Net gains (losses) on extinguishment of debt		-			14		-			-			14
Revenues of consolidated VIEs		-			-		(19	)		-			(19	)
Inter-segment revenues(2)		14			36		8			(58	)		-
Total revenues		58			94		(4	)		(58	)		90
Losses and loss adjustment		67			-		40			-			107
Operating		8			38		6			-			52
Interest		-			28		54			-			82
Expenses of consolidated VIEs		-			-		16			-			16
Inter-segment expenses(2)		25			10		21			(56	)		-
Total expenses		100			76		137			(56	)		257
Income (loss) before income taxes	$	(42	)	$	18	$	(141	)	$	(2	)	$	(167	)
Identifiable assets	$	3,593		$	852	$	3,346		$	(2,539	)(3)	$	5,252

(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  principally of intercompany reinsurance balances.

	Six Months Ended June 30, 2020
	U.S.						International
	Public						and Structured
	Finance						Finance
In millions	Insurance			Corporate			Insurance			Eliminations			Consolidated
Revenues(1)	$	57		$	11		$	14		$	-		$	82
Net gains (losses) on financial instruments at fair value and foreign exchange		7			(56	)		10			-			(39	)
Revenues of consolidated VIEs		-			-			65			-			65
Inter-segment revenues(2)		14			35			8			(57	)		-
Total revenues		78			(10	)		97			(57	)		108
Losses and loss adjustment		120			-			259			-			379
Operating		5			34			6			-			45
Interest		-			32			60			-			92
Expenses of consolidated VIEs		-			-			31			-			31
Inter-segment expenses(2)		25			11			21			(57	)		-
Total expenses		150			77			377			(57	)		547
Income (loss) before income taxes	$	(72	)	$	(87	)	$	(280	)	$	-		$	(439	)

(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.