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Business Segments
 9 Months Ended
Sep. 30, 2015
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) international and structured finance insurance; and 3) corporate. 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, and 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 utility districts, 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.

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, upon MBIA Corp.’s acceleration. Certain guaranteed investment contracts written by MBIA Inc. are insured by MBIA Corp., 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. also insures debt obligations of the following affiliates:

  • MBIA Inc.;
  • MBIA Global Funding, LLC (“GFL”);
  • MBIA Investment Management Corp. (“IMC”); and
  • LaCrosse Financial Products, LLC, a wholly-owned affiliate, in which MBIA Corp. has written insurance policies guaranteeing the obligations under CDS, including termination payments that may become due upon certain events including the insolvency or payment default of the financial guarantor or the CDS issuer.

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.

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, GFL and IMC. MBIA Inc. issued debt to finance the operations of the MBIA group. It also provided customized products for funds that are invested as part of asset-backed or structured product transactions. 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 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 the financial resources available to MBIA Inc. Asset management activities provide for opportunities in investments and provide general liquidity support to MBIA Inc.

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 three months ended September 30, 2015 and 2014:

Three Months Ended September 30, 2015
U.S. International
Public and Structured
FinanceFinance
In millionsInsuranceCorporateInsuranceEliminationsConsolidated
Revenues(1)$90$5$28$-$123
Net change in fair value of insured derivatives--3-3
Net gains (losses) on financial instruments at fair value and
foreign exchange1(45)(11)-(55)
Net investment losses related to other-than-temporary impairments(3)---(3)
Other net realized gains (losses) -(1)--(1)
Revenues of consolidated VIEs--25-25
Inter-segment revenues(2)81615(39)-
Total revenues96(25)60(39)92
Losses and loss adjustment(7)-46-39
Operating111817-46
Interest-2425-49
Expenses of consolidated VIEs--13-13
Inter-segment expenses(2)21117(39)-
Total expenses2543118(39)147
Income (loss) before income taxes71(68)(58)-(55)
Provision (benefit) for income taxes25(25)(20)-(20)
Net income (loss)$46$(43)$(38)$-$(35)
Identifiable assets$5,432$2,514$10,084$(2,979)(3)$15,051
________________
(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 reinsurance balances, repurchase agreements and deferred income taxes.

Three Months Ended September 30, 2014
U.S. International
Public and Structured
FinanceFinanceAdvisory
In millionsInsuranceCorporateInsuranceServicesEliminationsConsolidated
Revenues(1)$100$7$67$3$-$177
Net change in fair value of
insured derivatives--24--24
Net gains (losses) on financial
instruments at fair value and
foreign exchange268(13)--57
Net investment losses related
to other-than-temporary
impairments(14)----(14)
Net gains (losses) on
Other net realized gains (losses) 18111--30
Revenues of consolidated VIEs--21(4)-17
Inter-segment revenues(2)712125(36)-
Total revenues113881224(36)291
Losses and loss adjustment (8)-28--20
Operating925178-59
Interest-2626--52
Expenses of consolidated VIEs--12--12
Inter-segment expenses(2)18-162(36)-
Total expenses19519910(36)143
Income (loss) before income taxes943723(6)-148
Provision (benefit) for income taxes38(70)9(2)-(25)
Net income (loss)$56$107$14$(4)$-$173
Identifiable assets$6,132$2,735$10,373$481$(3,520) (3)$16,201
________________
(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 and intercompany interest income and expense pertaining to intercompany
receivables and payables.
(3) - Consists of intercompany reinsurance balances, repurchase agreements and deferred income taxes.

The following tables provide the Company’s segment results for the nine months ended September 30, 2015 and 2014:

Nine Months Ended September 30, 2015
U.S. International
Public and Structured
FinanceFinance
In millionsInsuranceCorporateInsuranceEliminationsConsolidated
Revenues(1)$288$18$86$-$392
Net change in fair value of insured derivatives--91-91
Net gains (losses) on financial instruments at fair value and
foreign exchange435(19)-20
Net investment losses related to other-than-temporary impairments(9)(1)--(10)
Net gains (losses) on extinguishment of debt-(1)--(1)
Other net realized gains (losses) (4)22--18
Revenues of consolidated VIEs--46-46
Inter-segment revenues(2)265348(127)-
Total revenues305126252(127)556
Losses and loss adjustment (5)-84-79
Operating295654-139
Interest-7376-149
Expenses of consolidated VIEs--39-39
Inter-segment expenses(2)67350(120)-
Total expenses91132303(120)406
Income (loss) before income taxes214(6)(51)(7)150
Provision (benefit) for income taxes74-(19)(3)52
Net income (loss)$140$(6)$(32)$(4)$98
Identifiable assets$5,432$2,514$10,084$(2,979)(3)$15,051
________________
(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 reinsurance balances, repurchase agreements and deferred income taxes.

Nine Months Ended September 30, 2014
U.S. International
Public and Structured
FinanceFinanceAdvisory
In millionsInsuranceCorporateInsuranceServicesConduitEliminationsConsolidated
Revenues(1)$272$30$142$10$-$-$454
Net change in fair value of
insured derivatives1-445---446
Net gains (losses) on financial
instruments at fair value and
foreign exchange2156(11)(3)--63
Net investment losses related
to other-than-temporary
impairments(14)-----(14)
Net gains (losses) on
extinguishment of debt-3----3
Other net realized gains (losses) 18211---31
Revenues of consolidated VIEs--72(4)4-72
Inter-segment revenues(2)30383617(1)(120)-
Total revenues328129695203(120)1,055
Losses and loss adjustment (5)-87---82
Operating29644930--172
Interest-7880---158
Expenses of consolidated VIEs--36---36
Inter-segment expenses(2)5675159(128)-
Total expenses80149303359(128)448
Income (loss) before income taxes248(20)392(15)(6)8607
Provision (benefit) for income taxes90(167)137(3)(2)358
Net income (loss)$158$147$255$(12)$(4)$5$549
Identifiable assets$6,132$2,735$10,373$481$-$(3,520)(3)$16,201
________________
(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 and intercompany interest income and expense pertaining to intercompany
receivables and payables.
(3) - Consists of intercompany reinsurance balances, repurchase agreements and deferred income taxes.

Premiums on financial guarantees and insured derivatives reported within the Company’s insurance segments are generated within and outside the U.S. The following table summarizes premiums earned on financial guarantees and insured derivatives by geographic location of risk for the three and nine months ended September 30, 2015 and 2014:

Three Months Ended September 30,Nine Months Ended September 30,
In millions2015201420152014
Total premiums earned:
United States$71$78$232$216
United Kingdom892328
Europe (excluding United Kingdom)2246
Internationally diversified1437
Central and South America7262042
Asia-123
Other1246
Total $90$122$288$308