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Business Developments and Risks and Uncertainties | 12 Months Ended
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Dec. 31, 2015
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Business Developments and Risks and Uncertainties | Note 1: Business Developments and Risks and Uncertainties Summary MBIA Inc., together with its consolidated subsidiaries, (collectively, “MBIA” or the “Company”) operates one of the largest financial guarantee insurance businesses in the industry. MBIA manages three operating segments: 1) United States (“U.S.”) public finance insurance; 2) international and structured finance insurance; and 3) corporate. The Company’s U.S. public finance insurance business is primarily operated through National Public Finance Guarantee Corporation (“National”) and its international and structured finance insurance business is primarily operated through MBIA Insurance Corporation and its subsidiaries (“MBIA Corp.”). Unless otherwise indicated or the context otherwise requires, references to “MBIA Corp.” are to MBIA Insurance Corporation, together with its subsidiaries, MBIA UK Insurance Limited (“MBIA UK”) and MBIA Mexico S.A. de C.V (“MBIA Mexico”). Prior to 2015, MBIA managed two other operating segments, advisory services and conduit. The advisory services segme nt was primarily operated through Cutwater Holdings, LLC and its subsidiaries (“Cutwater”). Effective on January 1, 2015, the Company exited its advisory services business through the sale of Cutwater. During the second quarter of 2014, the Company dissolv ed its conduit segment through the liquidation of Meridian Funding Company, LLC (“Meridian”). Refer to “Note 12: Business Segments” for further information about the Company’s operating segments. Business Developments National Ratings and New Business Opportunities Natio nal’s ability to write new business and compete with other financial guarantors is largely dependent on the financial strength ratings assigned to National by the rating agencies. As of December 31, 2015, the rating agencies affirmed the followi ng ratings of National: AA+ with a stable outlook by Kroll Bond Rating Agency; AA- with a stable outlook by Standard & Poor’s Financial Services LLC (“S&P”); and A3 with a negative outlook by Moody’s Investors Service, Inc. (“Moody’s”). National seeks to generate shareholder value through appropriate risk adjusted pricing; however, current market conditions and the competitive landscape may limit National’s new business opportunities and its abilities to price and underwrite risk with attractive returns. R efer to “Risks and Uncertainties” below for a discussion of business risks related to National’s insured portfolio. Sale of MBIA Inc. Common Stock During the year ended December 31, 2015, certain investment funds affiliated with Warburg Pincus LLC (“Warburg”) sold all of their 45.7 million shares of MBIA Inc. common stock. At the time of each sale, Warburg was the largest holder of the Company’s common stock. Warburg received all of the net proceeds from this offering. In connection with the sales, N ational and the Company repurchased 8 million shares and 7.6 million shares, respectively. Held For Sale Classifications Armonk, New York Facility During the year ended December 31, 2015, the Company sold its Armonk, New York facility and recorded an impairment charge of $4 million to adjust the carrying amount to the sale price less costs to sell. The impairment charge was reflected in the results of the Company’s U.S. public finance insurance segment and included in “Other net realized gains (losses)” on the Company’s consolidated statements of operations. Cutwater As a result of the agreement to sell Cutwater, the assets and liabilities of Cutwater were classified as held for sale as of December 31, 2014 and presented within “Assets held for sale” and “Liabilities held for sale” on the Company’s consolidated balance sheet and measured at the lower of its carrying value or fair value less costs to sell. The Company completed this sale effective January 1, 2015, and recorded a gain of approximately $24 million. This gain was reflected in the results of the Company’s corporate segment and included in “Other net realized gains (losses)” on the Company’s consolidated statements of operations. Assets and L iabilities Held for Sale by Major Category As of December 31, 2015, there are no assets and liabilities held for sale on the Company’s consolidated balance sheet. The following table summarizes the components of assets and liabilities held for sale as of December 31, 2014:
| In millions |  | December 31, 2014 |
| Assets |  |  |  |
|  | Investments carried at fair value |  | $ | 6 |
|  | Cash and cash equivalents |  |  | 15 |
|  | Facility |  |  | 26 |
|  | Other assets |  |  | 4 |
|  | Assets of consolidated variable interest entities: |  |  |  |
|  |  | Cash |  |  | 40 |
|  |  | Loans receivable at fair value |  |  | 711 |
|  |  | Total assets held for sale |  | $ | 802 |
| Liabilities |  |  |  |
|  | Other liabilities |  | $ | 18 |
|  | Liabilities of consolidated variable interest entities: |  |  |  |
|  |  | Variable interest entity notes |  |  | 431 |
|  |  | Payable for loans purchased |  |  | 323 |
|  |  | Total liabilities held for sale |  | $ | 772 |
Risks and Uncertainties The Company’s financial statements include estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. The outcome of certain significant risks and uncertainties could cause the Company to revise its estimates and assumptions or could cause actual results to differ from the Com pany’s estimates. The discussion below highlights the significant risks and uncertainties that could have a material effect on the Company’s financial statements and business objectives in future periods. U.S. Public Finance Market Conditions National’s insured portfolio continued to perform satisfactorily against a backdrop of strengthening domestic economic activity. While a stable or growing economy will generally benefit tax revenues and fees charged for essential municipal services which secure Natio nal’s insured bond portfolio, some state and local governments and territory obligors National insures remain under financial and budgetary stress. This could lead to an increase in defaults by such entities on the payment of their obligations and losses o r impairments on a greater number of the Company’s insured transactions. The Company monitors and analyzes these situations and other stressed credits closely, and the overall extent and duration of this stress is uncertain. Puerto Rico is experiencing f iscal stress and constrained liquidity due to, among other things, Puerto Rico’s structural budget imbalance, limited access to the capital markets, a stagnating local economy, net migration of people out of Puerto Rico and a high debt burden. Although Pue rto Rico has tried to address its significant financial challenges through various fiscal policies and by the passage of a balanced general fund budget, it continues to experience significant fiscal stress. The Company continue s to believe, based on its an alysis of Puerto Rico’s fiscal and structural circumstances, the details of its insured exposures, and its legal and contractual rights, that all of National’s insured Puerto Rico related debt will ultimately be substantially repaid. In addition, in Decemb er of 2015, National and other stakeholders entered into a restructuring support agreement with Puerto Rico Electric Power Authority (“PREPA”) addressing, among other things, the treatment of approximately $8.1 billion of outstanding PREPA bonds, including approximately $1.4 billion of PREPA bonds insured by National. MBIA Corp. Recoveri es and Insured Portfolio MBIA Corp.’s primary focus is the collection of excess spread and put-back recoveries and loss mitigation, primarily through remediation of stressed credits including through commutations of insurance policies. The amount and timing of projected collections from excess spread from second-lien residential mortgage-backed securities (“RMBS”) and the put-back recoverable from Credit Suisse Securities (U SA) LLC, DLJ Mortgage Capital, Inc., and Select Portfolio Servicing Inc. (collectively, “Credit Suisse”) are uncertain. Refer to “Note 6: Loss and Loss Adjustment Expense Reserves” for information about MBIA Corp.’s loss reserves and recoveries. Further, the remaining insured portfolio, aside from these exposures, could deteriorate and result in additional significant loss reserves and claim payments. MBIA Corp.’s ability to meet its obligations is limited by available liquidity and its ability to secure liquidity through financing transaction s, therefore, there can be no assurance that MBIA Corp. will be successful in generating sufficient cash to meet its obligations. In particular, MBIA Corp. insures $77 6 million of gross par outstanding, as of February of 2016, of notes issued by Zohar II 2005-1, a high yield corporate collateralized debt obligations (“CDO”), which matures in January of 2017. If cash flows generated by this high yield corporate CDO are insufficient to pay the insured amount in full, MBIA Corp. will be called up on to make the unpaid insured amount at maturity. Unless a substantial amount of the insured exposure is paid at maturity, or if MBIA Corp. is unsuccessful at reaching a n agreed upo n restructuring of the insured exposure, MBIA Corp. may ultimately have ins ufficient resources to continue to pay claims. Such failure could cause the New York State Department of Financial Services (“NYSDFS”) to put MBIA Insurance Corporation, exclusive of MBIA UK and MBIA Mexico, into a rehabilitation or liquidation proceeding or to order MBIA Corp. to cease paying any claims under its policies. Given the separation of MBIA Inc. and MBIA Corp. as distinct legal entities, the absence of any material intercompany lending agreements or cross defaults between the entities, and the l ack of reliance by MBIA Inc. on MBIA Corp. for the receipt of dividends, the Company does not believe that a rehabilitation or liquidation proceeding of MBIA Insurance Corporation by the NYSDFS would have any significant long-term liquidity impact on MBIA Inc. or result in a liquidation or similar proceeding of MBIA UK or MBIA Mexico. Such a proceeding could have material adverse consequences for MBIA Corp., including the termination of insured credit default swap (“CDS”) contracts for which counterparties may assert market-based claims, the acceleration of debt obligations issued by affiliates and insured by MBIA Corp., the loss of control of MBIA Insurance Corporation to a rehabilitator or liquidator, and unplanned costs. Corporate Liquidity As of December 31, 2015 and 2014, the liquidity position of MBIA Inc. was $416 million and $498 million, respectively. The term “liquidity position” refers to cash and liquid assets available for general liquidity purposes. During the year ended December 31, 2015, $228 million was released to MBIA Inc. under the MBIA group’s tax sharing agreement (the “Tax Escrow Account”) and National declared and paid a dividend of $114 million to its ultimate parent, MBIA Inc. Su bsequent to December 31, 2015, an additional $1 05 million was released to MBIA Inc. from the Tax Escrow Account. Based on the Company’s projections of National’s dividends, payments into the Tax Escrow Account, and other cash inflows, the Company expect s that MBIA Inc. will have sufficient cash to satisfy its debt service and general corporate needs. However, MBIA Inc. continues to have liquidity risk which could be triggered by deterioration in the performance of invested assets, interruption of or redu ction in dividends or tax payments received from operating subsidiaries, impaired access to the capital markets, as well as other factors which cannot be anticipated at this time. Furthermore, failure by MBIA Inc. to settle liabilities that are also insure d by MBIA Corp. could result in claims on MBIA Corp.

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