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What changed in MBIA INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of MBIA INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+369 added−370 removedSource: 10-K (2024-02-28) vs 10-K (2023-02-28)

Top changes in MBIA INC's 2023 10-K

369 paragraphs added · 370 removed · 267 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

66 edited+49 added−7 removed132 unchanged
Biggest changeAvitabile has worked at MBIA since 2000, where he has held positions in insured portfolio management, remediation, corporate strategy and structured finance new business. Prior to joining MBIA, he held positions at The Chase Manhattan Bank and State Street Bank. The Board of Directors of MBIA Inc. and MBIA Insurance Corporation appointed Mr.
Biggest changePrior to being named Chief Risk Officer in 2016, Mr. Avitabile managed MBIA Corp.’s Special Situations Group, which was responsible for remediation and commutation activity. Mr. Avitabile has worked at MBIA since 2000, where he has held positions in insured portfolio management, remediation, corporate strategy and structured finance new business.
The extent of state and national insurance regulation and supervision varies by jurisdiction, but New York, Spain, Mexico and most other jurisdictions have laws and regulations prescribing minimum standards of solvency, including minimum capital requirements, and business conduct which must be maintained by insurance companies, and if our insurance companies fail to meet such requirements our regulators may impose certain remedial actions.
The extent of state and national insurance regulation and supervision varies by jurisdiction, but New York, Mexico and most other jurisdictions have laws and regulations prescribing minimum standards of solvency, including minimum capital requirements, and business conduct which must be maintained by insurance companies, and if our insurance companies fail to meet such requirements our regulators may impose certain remedial actions.
Capital, Liquidity and Market Related Risk Factors We are a holding company and rely to a significant degree on cash flow from National. A disruption in this cash flow or an inability to access third-party capital could materially and adversely affect our business, operating results and financial condition and ultimately adversely affect liquidity.
Risk Factors (continued) Capital, Liquidity and Market Related Risk Factors We are a holding company and rely to a significant degree on cash flow from National. A disruption in this cash flow or an inability to access third-party capital could materially and adversely affect our business, operating results and financial condition and ultimately adversely affect liquidity.
New York law provides that the sum of (i) the amount of dividends declared or distributed during the preceding 12-month period and (ii) the dividend to be declared may not exceed the lesser of (a) 10% of policyholders’ surplus, as shown by the most recent statutory financial statement on file with the NYSDFS, or (b) 100% of adjusted net investment income for such 12-month period (the net investment income for such 12-month period plus the excess, if any, of net investment income over dividends declared or distributed during the two-year period preceding such 12-month period), unless the Superintendent of Financial Services of the State of New York (the “Superintendent”) approves a greater dividend distribution based upon a finding that the insurer will retain sufficient surplus to support its obligations and writings.
New York law provides that the sum of (i) the amount of dividends declared or distributed during the preceding 12-month period and (ii) the dividend to be declared may not exceed the lesser of (a) 10% of policyholders’ surplus, as shown by the most recent statutory financial statement on file with the NYSDFS, or (b) 100% of adjusted net investment income for such 12-month period (the net investment income for such 12-month period plus the excess, if any, of net investment income over dividends declared or distributed during the two-year period preceding such 12-month period), unless the Superintendent of Financial Services of the State of New York (the “Superintendent”) approves a greater dividend distribution based upon a finding that the insurer will retain sufficient surplus to support its obligations and writings. 9 Item 1.
The Company will not necessarily post all documents for each proceeding and undertakes no obligation to revise or update them to reflect changes in events or expectations. The complete official court docket can be publicly accessed by contacting the clerk’s office of the respective court where each litigation matter is pending. 12 Table of Contents Item 1.
The Company will not necessarily post all documents for each proceeding and undertakes no obligation to revise or update them to reflect changes in events or expectations. The complete official court docket can be publicly accessed by contacting the clerk’s office of the respective court where each litigation matter is pending. 12 Item 1.
Due to its significant earned surplus deficit, MBIA Insurance Corporation has not had the statutory capacity to pay dividends since December 31, 2009, is not expected to have any statutory capacity to pay dividends, and has agreed that it will not pay any dividends without receiving prior approval from the NYSDFS in connection with certain prior approvals to release excessive contingency reserves.
Business (continued) Due to its significant earned surplus deficit, MBIA Insurance Corporation has not had the statutory capacity to pay dividends since December 31, 2009, is not expected to have any statutory capacity to pay dividends, and has agreed that it will not pay any dividends without receiving prior approval from the NYSDFS in connection with certain prior approvals to release excessive contingency reserves.
Additionally, failure to remediate a material weakness or otherwise failing to maintain effective internal control over financial reporting may materially and adversely affect our business, financial condition, results of operations and reputation, and could impair our ability to timely file our periodic reports with the SEC, subject us to litigation and regulatory actions and cause us to incur substantial additional costs in future periods relating to the implementation of remedial measures.
Additionally, failure to remediate a material weakness or otherwise failing to maintain effective internal control over financial reporting may materially and adversely affect our business, financial condition, results of operations and reputation, and could impair our ability to timely file our periodic reports with the SEC, subject us to litigation and regulatory actions and cause us to incur substantial additional costs in future periods relating to the implementation of remedial measures. 17 Item 1A.
Item 1. Business (continued) The Company’s Risk Oversight Committee (the “Risk Oversight Committee”) reviews material transactions and provides firm-wide review of policies and decisions related to credit, market, operational, legal, financial and business risks. The Company and its subsidiaries’ respective Loss Reserve Committees review loss reserving activity.
Business (continued) The Company’s Risk Oversight Committee (the “Risk Oversight Committee”) reviews material transactions and provides firm-wide review of policies and decisions related to credit, market, operational, legal, financial and business risks. The Company and its subsidiaries’ respective Loss Reserve Committees review loss reserving activity.
General global unrest, including fraud, terrorism, catastrophic events, natural disasters, pandemics such as the novel coronavirus COVID-19 (“COVID-19”), or similar events could disrupt the economy in the U.S. and other countries where we have insured exposure or operate our businesses.
General global unrest, including fraud, terrorism, catastrophic events, natural disasters, pandemics such as the novel coronavirus COVID-19, or similar events could disrupt the economy in the U.S. and other countries where we have insured exposure or operate our businesses.
Business (continued) New York State Dividend Limitations The laws of New York regulate the payment of dividends by National and MBIA Insurance Corporation and provide that a New York domestic stock property/casualty insurance company may not declare or distribute dividends except out of statutory earned surplus.
New York State Dividend Limitations The laws of New York regulate the payment of dividends by National and MBIA Insurance Corporation and provide that a New York domestic stock property/casualty insurance company may not declare or distribute dividends except out of statutory earned surplus.
We also analyze stressed liquidity scenarios and stressed counterparty exposures. The analyses are used in testing investment portfolio guidelines. The Risk Oversight Committee and the Finance and Risk Committee of the Company’s Board of Directors receive periodic reports on market risk. 6 Table of Contents Item 1.
We also analyze stressed liquidity scenarios and stressed counterparty exposures. The analyses are used in testing investment portfolio guidelines. The Risk Oversight Committee and the Finance and Risk Committee of the Company’s Board of Directors receive periodic reports on market risk. 6 Item 1.
FINANCIAL INFORMATION Refer to “Note 12: Business Segments” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K for information on the Company’s financial information by segment and premiums earned by geographic location.
FINANCIAL INFORMATION Refer to “Note 12: Business Segments” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K for information on the Company’s financial information by segment and premiums earned by geographic location. 11 Item 1.
Business (continued) RATING AGENCIES The Company does not maintain a contractual relationship with Moody’s Investor Services (“Moody’s”), Standard & Poor’s Financial Services LLC, or Kroll Bond Rating Agency, other than a required contract that MBIA Mexico maintains with Moody’s.
RATING AGENCIES The Company does not maintain a contractual relationship with Moody’s Investor Services (“Moody’s”), Standard & Poor's Financial Services LLC, or Kroll Bond Rating Agency, other than a required contract that MBIA Mexico maintains with Moody’s.
Business (continued) EXECUTIVE OFFICERS OF THE REGISTRANT The executive officers of the Company and their present ages and positions with the Company as of February 28, 2023 are set forth below: Name Age Position and Term of Office William C.
Business (continued) EXECUTIVE OFFICERS OF THE REGISTRANT The executive officers of the Company and their present ages and positions with the Company as of February 28, 2024 are set forth below: Name Age Position and Term of Office William C.
Public Finance: For U.S. public finance, our ongoing credit surveillance focuses on economic and political trends, issuer or project debt and financial management, construction and start up risk, adequacy of historical and anticipated cash flows under stress, satisfactory legal structure and bond security provisions, viable tax and economic bases, including consideration of tax limitations and unemployment trends, adequacy of stressed loss coverage and project feasibility, including satisfactory reports from consulting engineers, traffic advisors and others, if applicable.
Public Finance: For U.S. public finance, our ongoing credit surveillance focuses on economic and political trends, issuer or project debt and financial management, adequacy of historical and anticipated cash flows under stress, satisfactory legal structure and bond security provisions, viable tax and economic bases, including consideration of tax limitations and unemployment trends, adequacy of stressed loss coverage and project feasibility, including satisfactory reports from consulting engineers, traffic advisors and others, if applicable.
Risk Factors (continued) In addition to the Superintendent’s authority to commence a rehabilitation or liquidation proceeding, if the Superintendent finds that the liabilities of MBIA Insurance Corporation exceed its admitted assets, the Superintendent could use its authority under Section 1310 of the NYIL to order MBIA Insurance Corporation to cease making claims payments (a “1310 Order”).
In addition to the Superintendent’s authority to commence a rehabilitation or liquidation proceeding, if the Superintendent finds that the liabilities of MBIA Insurance Corporation exceed its admitted assets, the Superintendent could use its authority under Section 1310 of the NYIL to order MBIA Insurance Corporation to cease making claims payments (a “1310 Order”).
The holding company statutes impose standards on certain transactions with related companies, which include, among other requirements, that all transactions be fair and reasonable and those transactions not in the ordinary course of business exceeding specified limits receive prior regulatory approval.
The holding company statutes impose standards on certain transactions with related companies, which include, among other requirements, that all transactions be fair and reasonable and those transactions not in the ordinary course of business exceeding specified limits receive prior regulatory approval. 10 Item 1.
Change of Control Prior approval by the NYSDFS is required for any entity seeking to acquire, directly or indirectly, “control” of National or MBIA Insurance Corporation.
Business (continued) Change of Control Prior approval by the NYSDFS is required for any entity seeking to acquire, directly or indirectly, “control” of National or MBIA Insurance Corporation.
At this time we do not intend to utilize reinsurance to decrease the insured exposure in our portfolio; however, we may, from time to time, look to enter into transactions to reduce risks embedded in our insured portfolios on an individual and portfolio-wide basis.
At this time we do not intend to utilize reinsurance to decrease the insured exposure in our portfolio; however, we may, from time to time, look to enter into transactions to reduce risks embedded in our insured portfolios on an individual and portfolio-wide basis. 8 Item 1.
See Risk Factor “An MBIA Insurance Corporation rehabilitation or liquidation proceeding could accelerate certain of the Company’s other obligations and have other adverse consequences” under “MBIA Corp. Risk Factors” for the potential impacts of an MBIA Insurance Corporation rehabilitation or liquidation proceeding, or a 1310 Order.
See Risk Factor “An MBIA Insurance Corporation rehabilitation or liquidation proceeding could accelerate certain of the Company’s other obligations and have other adverse consequences” under “MBIA Corp. Risk Factors” for the potential impacts of an MBIA Insurance Corporation rehabilitation or liquidation proceeding, or a 1310 Order. 16 Item 1A.
Business (continued) Holding Company Regulation MBIA Inc., National and MBIA Insurance Corporation also are subject to regulation under the insurance holding company statutes of New York.
Holding Company Regulation MBIA Inc., National and MBIA Insurance Corporation also are subject to regulation under the insurance holding company statutes of New York.
The Company’s loss and LAE reserves as of December 31, 2022 represent case basis reserves and estimates for LAE to be incurred.
The Company’s loss and LAE reserves as of December 31, 2023 represent case basis reserves and estimates for LAE to be incurred.
Young to the offices set forth opposite his name above on February 13, 2018 and March 5, 2009, respectively. Joseph R. Schachinger is the Company’s Controller. Prior to being named Controller in May of 2017, since 2009 Mr. Schachinger served as Deputy Controller. The Board of Directors of MBIA Inc. appointed Mr.
The Board of Directors of MBIA Inc. and National Public Finance Guarantee Corporation appointed Mr. Young to the offices set forth opposite his name above on February 13, 2018 and March 5, 2009, respectively. Joseph R. Schachinger is the Company’s Controller. Prior to being named Controller in May of 2017, since 2009 Mr. Schachinger served as Deputy Controller.
Estimates of our claims payments, in particular, may materially impact our liquidity position. We may make changes to our estimated claims payments, loss reserves or fair value models from time to time. These changes could materially impact our financial results. Our risk management policies and procedures may not adequately detect or prevent future losses.
Estimates of our claims payments, in particular, may materially impact our liquidity position. We may make changes to our estimated claims payments, loss reserves or fair value models from time to time. These changes could materially impact our financial results. 15 Item 1A. Risk Factors (continued) Our risk management policies and procedures may not adequately detect or prevent future losses.
EMPLOYEES AND HUMAN CAPITAL MANAGEMENT As of December 31, 2022, MBIA had 75 employees at our single corporate headquarters located at 1 Manhattanville Road, Purchase, New York, none of whom are covered by collective bargaining agreements. In recent years, we have experienced only modest employee turnover and consider our employee relations to be satisfactory.
Business (continued) EMPLOYEES AND HUMAN CAPITAL MANAGEMENT As of December 31, 2023, MBIA had 61 employees at our single corporate headquarters located at 1 Manhattanville Road, Purchase, New York, none of whom are covered by collective bargaining agreements. In recent years, we have experienced only modest employee turnover and consider our employee relations to be satisfactory.
However, because the reserves are based on management’s judgment and estimates, there can be no assurance that the ultimate liability will not exceed such estimates or that the timing of claims payments and the realization of recoveries will not create liquidity issues for the corresponding insurance company. 8 Table of Contents Item 1.
However, because the reserves are based on management’s judgment and estimates, there can be no assurance that the ultimate liability will not exceed such estimates or that the timing of claims payments and the realization of recoveries will not create liquidity issues for the corresponding insurance company.
In 2001, MBIA formed the MBIA Foundation, a 501(c)(3) tax-exempt organization, whose mission is to help improve the quality of life in the communities where the Company conducts business and where its employees live and work.
In 2001, MBIA formed the MBIA Foundation, a 501(c)(3) tax-exempt organization, with a mission of helping to improve the quality of life in the communities where the Company conducts business and where its employees live and work.
The investment objectives of the corporate segment are to provide sufficient liquidity to meet maturing liabilities and, in the case of the investment agreement business collateral posting obligations, while maximizing the total long-term return. 11 Table of Contents Item 1.
The investment objectives of the corporate segment are to provide sufficient liquidity to meet maturing liabilities and, in the case of the investment agreement business collateral posting obligations, while maximizing the total long-term return.
Private litigation claims could materially adversely affect our reputation, business, results of operations and financial condition.
Risk Factors (continued) Private litigation claims could materially adversely affect our reputation, business, results of operations and financial condition.
Our substantial indebtedness and other liabilities could have material consequences because: • we may be unable to obtain additional financing, should such a need arise, which may limit our ability to satisfy obligations with respect to our debt; • a large portion of MBIA Inc.’s financial resources must be dedicated to the payment of principal and interest on our debt, thereby reducing the funds available to use for other purposes; • it may be more difficult for us to satisfy our obligations to our creditors, resulting in possible defaults on, and acceleration of, such debt; • we may be more vulnerable to general adverse economic and industry conditions; • our ability to refinance debt may be limited or the associated costs may increase; • our flexibility to adjust to changing market conditions could be limited; and 18 Table of Contents
Our substantial indebtedness and other liabilities could have material consequences because: • we may be unable to obtain additional financing, should such a need arise, which may limit our ability to satisfy obligations with respect to our debt; • a large portion of MBIA Inc.’s financial resources must be dedicated to the payment of principal and interest on our debt, thereby reducing the funds available to use for other purposes; • it may be more difficult for us to satisfy our obligations to our creditors, resulting in possible defaults on, and acceleration of, such debt; • we may be more vulnerable to general adverse economic and industry conditions; • our ability to refinance debt may be limited or the associated costs may increase; • our flexibility to adjust to changing market conditions could be limited; and • we are exposed to the risk of fluctuations in interest rates and foreign currency exchange rates because a portion of our liabilities are at variable rates of interest or denominated in foreign currencies.
If the Superintendent were to take any such action as to National, it could result in the reduction or elimination of the payment of dividends to MBIA Inc. 16 Table of Contents Item 1A.
If the Superintendent were to take any such action as to National, it could result in the reduction or elimination of the payment of dividends to MBIA Inc.
During 2022 and 2021, National and MBIA Insurance Corporation reported single risk limit overages to the NYSDFS due to changes in their statutory capital. National and MBIA Insurance Corporation were in compliance with their aggregate risk limits as of December 31, 2022 and 2021. 10 Table of Contents Item 1.
During 2023 and 2022, National and MBIA Insurance Corporation reported single risk limit overages to the NYSDFS due to changes in their statutory capital. National and MBIA Insurance Corporation were in compliance with their aggregate risk limits as of December 31, 2023 and 2022.
We also use internal models for ongoing insurance portfolio monitoring and to estimate case basis loss reserves and, where applicable, to report our obligations 15 Table of Contents Item 1A. Risk Factors (continued) under our contracts at fair value. We may supplement such models with third-party models or use third-party experts to consult with our internal modeling specialists.
We also use internal models for ongoing insurance portfolio monitoring and to estimate case basis loss reserves and, where applicable, to report our obligations under our contracts at fair value. We may supplement such models with third-party models or use third-party experts to consult with our internal modeling specialists.
Amendments to the statutes or regulations governing financial guarantee insurers are possible, but the adoption or timing of any such amendments is uncertain. 9 Table of Contents Item 1.
Amendments to the statutes or regulations governing financial guarantee insurers are possible, but the adoption or timing of any such amendments is uncertain.
(executive officer since September 2017) Adam T. Bergonzi 59 Assistant Vice President and Chief Risk Officer of National (executive officer since September 2017) Christopher H. Young 50 Assistant Vice President, and Chief Financial Officer of National (executive officer since September 2017) Joseph R. Schachinger 54 Controller (executive officer since May 2017) William C.
Bergonzi 60 Assistant Vice President and Chief Risk Officer of National (executive officer since September 2017) Christopher H. Young 51 Assistant Vice President, and Chief Financial Officer of National (executive officer since September 2017) Joseph R. Schachinger 55 Controller (executive officer since May 2017) William C.
Risk Factors (continued) future, such failure could result in a material misstatement of our annual or quarterly financial statements that would not be prevented or detected on a timely basis and which could cause investors and other users to lose confidence in our financial statements, limit our ability to raise capital and have a negative effect on the trading price of our common stock.
If we fail to remediate a material weakness or fail to otherwise maintain effective internal control over financial reporting in the future, such failure could result in a material misstatement of our annual or quarterly financial statements that would not be prevented or detected on a timely basis and which could cause investors and other users to lose confidence in our financial statements, limit our ability to raise capital and have a negative effect on the trading price of our common stock.
As of December 31, 2022, National had $1.0 billion of debt service outstanding related to Puerto Rico. During 2022, Puerto Rico defaulted on scheduled debt service for certain National insured bonds and National paid gross claims in the aggregate of $189 million.
As of December 31, 2023, National had $896 million of debt service outstanding related to Puerto Rico. During 2023, PREPA defaulted on scheduled debt service for National insured bonds and National paid gross claims in the aggregate of $137 million.
The foregoing dividend limitations are determined in accordance with statutory accounting principles (“U.S. STAT”). Contingency Reserves As financial guarantee insurers, our domestic insurance companies are required by the laws and regulations of New York and other states to maintain, as applicable, contingency reserves on their municipal bond, asset-backed securities (“ABS”) or other financial guarantee liabilities.
Contingency Reserves As financial guarantee insurers, our domestic insurance companies are required by the laws and regulations of New York and other states to maintain, as applicable, contingency reserves on their municipal bond, asset-backed securities (“ABS”) or other financial guarantee liabilities and reflect such reserves in their financial statements prepared in accordance with U.S. STAT.
Intercompany Reinsurance Arrangements MBIA Corp. and National are parties to a reinsurance agreement pursuant to which National reinsures certain public finance financial guarantee policies originally written by MBIA Corp. In addition, National entered into a second-to-pay policy covering the reinsurance agreement.
Business (continued) Intercompany Reinsurance Arrangements MBIA Corp. and National are parties to a reinsurance agreement pursuant to which National reinsures certain public finance financial guarantee policies originally written by MBIA Corp. In addition, National entered into a second-to-pay policy covering the reinsurance agreement. MBIA Insurance Corporation provided 100% reinsurance to its subsidiary, MBIA Mexico S.A. de C.V. ("MBIA Mexico").
U.S. public finance credits/exposures are monitored by reviewing trustee, issuer and project financial and operating reports as well as reports provided by technical advisors and counsel. Projects may be periodically visited by MBIA personnel. • International Public Finance: International public finance credits are monitored and remediated in a manner relatively consistent with U.S. public finance transactions.
U.S. public finance credits/exposures are monitored by reviewing trustee, issuer and project financial and operating reports as well as reports provided by technical advisors and counsel. Projects may be periodically visited by MBIA personnel. 5 Item 1.
Business (continued) Reinsurance We currently have third-party reinsurance agreements in place covering 3% of our insured par outstanding.
Reinsurance We currently have third-party reinsurance agreements in place covering approximately 2.5% of our insured par outstanding.
Schachinger to the office set forth opposite his name above on May 3, 2017. Item 1A. Risk Factors References in the risk factors to the “Company” are to MBIA Inc., together with its domestic and international subsidiaries. References to “we,” “our” and “us” are to MBIA Inc. or the Company, as the context requires.
The Board of Directors of MBIA Inc. appointed Mr. Schachinger to the office set forth opposite his name above on May 3, 2017. Item 1A. Risk Factors References in the risk factors to the “Company” are to MBIA Inc., together with its domestic and international subsidiaries.
As of December 31, 2022, MBIA Inc. had $501 million of medium-term note liabilities, $277 million of Senior Notes liabilities and $233 million of investment agreement liabilities.
As of December 31, 2023, MBIA Inc. had $497 million of medium-term note liabilities, $278 million of Senior Notes liabilities and $221 million of investment agreement liabilities.
We do not use actuarial approaches that are customarily used by other types of insurance companies to determine our loss reserves.
Under substantially all of our policies, we do not have a right to cancel the policy. We do not use actuarial approaches that are customarily used by other types of insurance companies to determine our loss reserves.
Prior to being named National’s Chief Financial Officer in March of 2009, Mr. Young worked at MBIA Insurance Corporation, from 2001 to 2009, in a variety of Structured Finance positions and in Corporate Strategy. The Board of Directors of MBIA Inc. and National Public Finance Guarantee Corporation appointed Mr.
Business (continued) Christopher H. Young is an Assistant Vice President of the Company and Chief Financial Officer of National. Prior to being named National’s Chief Financial Officer in March of 2009, Mr. Young worked at MBIA Insurance Corporation, from 2001 to 2009, in a variety of Structured Finance positions and in Corporate Strategy.
Fallon 63 Chief Executive Officer and Director (executive officer since July 2005) Anthony McKiernan 53 Executive Vice President and Chief Financial Officer (executive officer since August 2011) Jonathan C. Harris 51 General Counsel and Secretary (executive officer since September 2017) Daniel M. Avitabile 49 Assistant Vice President, and President and Chief Risk Officer of MBIA Corp.
Fallon 64 Chief Executive Officer and Director (executive officer since July 2005) Anthony McKiernan 54 Executive Vice President and Chief Financial Officer (executive officer since August 2011) Daniel M. Avitabile 50 Assistant Vice President, and President and Chief Risk Officer of MBIA Corp. (executive officer since September 2017) Adam T.
Investment objectives, policies and guidelines related to investment activity on behalf of our insurance companies are also subject to review and approval by the respective Investment Committee of their Boards of Directors or similar body. Insight North America, LLC manages the investment portfolios of the Company and its subsidiaries in accordance with the guidelines adopted for each such portfolio.
Investment objectives, policies and guidelines related to investment activity on behalf of our insurance companies are also subject to review and approval by the respective Investment Committee of their Boards of Directors or similar body.
McKiernan joined MBIA in 2000 as a vice president in the Credit Analytics Group, and managed the Corporate Insured Portfolio Management Group prior to becoming the Head of the Structured Finance Insured Portfolio Management Group in 2007. The Board of Directors of MBIA Inc. appointed Mr.
McKiernan joined MBIA in 2000 as a vice president in the Credit Analytics Group, and managed the Corporate Insured Portfolio Management Group prior to becoming the Head of the Structured Finance Insured Portfolio Management Group in 2007. Daniel M. Avitabile is an Assistant Vice President of the Company and President and Chief Risk Officer of MBIA Corp.
Our risk factors are grouped into categories and are presented in the following order: “Insured Portfolio Loss Related Risk Factors”, “Legal, Regulatory and Other Risk Factors”, “Capital, Liquidity and Market Related Risk Factors”, “MBIA Corp. Risk Factors”, and “General Risk Factors”. Risk Factors are generally listed in order of significance within each category.
References to “we,” “our” and “us” are to MBIA Inc. or the Company, as the context requires. Our risk factors are grouped into categories and are presented in the following order: “Insured Portfolio Loss Related Risk Factors”, “Legal, Regulatory and Other Risk Factors”, “Capital, Liquidity and Market Related Risk Factors”, “MBIA Corp. Risk Factors”, and “General Risk Factors”.
The MBIA Foundation has also been active in supporting disaster relief efforts through direct donations from the Foundation and by increasing the customary match of 2:1 to 4:1 to further encourage employees donations. Additionally, MBIA promotes employee volunteerism through its annual company-wide days of service and various volunteer initiatives.
The MBIA Foundation has also been active in supporting disaster relief efforts through direct donations from the Foundation and by increasing the customary match of 2:1 to 4:1 to further encourage employees' donations. The MBIA Foundation is in the process of being legally wound down.
In addition, credit analysts consider 5 Table of Contents Item 1. Business (continued) country risk, including economic and political factors, the type and quality of local regulatory oversight, the strength of the legal framework in each country and the stability of the local institutional framework.
In addition, credit analysts consider country risk, including economic and political factors, the type and quality of local regulatory oversight, the strength of the legal framework in each country and the stability of the local institutional framework. Analysts also monitor local accounting and legal requirements, local financial market developments, the impact of exchange rates and local demand dynamics.
To continue to optimize capital resources and provide for claims-paying capabilities, the investment objectives and policies of our operations are tailored to reflect their various strategies and operating conditions. The investment objectives of National set preservation of capital as the primary objective, subject to an appropriate degree of liquidity, and optimization of after-tax income and total return as secondary objectives.
The investment objectives of National set preservation of capital as the primary objective, subject to an appropriate degree of liquidity, and optimization of after-tax income and total return as secondary objectives.
Pursuant to a non-disapproval from the NYSDFS, and in accordance with the NYIL and the National Association of Insurance Commissioners’ statutory accounting principles, MBIA Insurance Corporation released to surplus $32 million of excess contingency reserves during 2022. In accordance with this contingency reserve release, MBIA Insurance Corporation will maintain a fixed $5 million contingency reserve.
STAT, MBIA Insurance Corporation released to surplus $32 million of excess contingency reserves during 2022. In accordance with this contingency reserve release, MBIA Insurance Corporation maintains a fixed $5 million contingency reserve.
Analysts also monitor local accounting and legal requirements, local financial market developments, the impact of exchange rates and local demand dynamics. Furthermore, exposures are reviewed periodically; the frequency and scope of review is often increased when an exposure is downgraded.
Furthermore, exposures are reviewed periodically; the frequency and scope of review is often increased when an exposure is downgraded.
Business (continued) MBIA reasonably accommodates employees and applicants with disabilities (including temporary disabilities), those who are pregnant, nursing mothers, and those with sincerely held religious beliefs, in accordance with applicable law.
MBIA prohibits retaliation or adverse employment action against any individual who, in good faith, reports discrimination or harassment or participates in an investigation of such reports. 7 Item 1. Business (continued) MBIA reasonably accommodates employees and applicants with disabilities (including temporary disabilities), those who are pregnant, nursing mothers, and those with sincerely held religious beliefs, in accordance with applicable law.
The MBIA Foundation is expected to be legally wound down in 2023. Losses and Reserves Loss and loss adjustment expense (“LAE”) reserves are established by Loss Reserve Committees in each of our operating insurance companies and are reviewed by our executive Loss Reserve Committee, which consists of members of senior management.
Additionally, MBIA promotes employee volunteerism through its annual company-wide days of service and various volunteer initiatives. Losses and Reserves Loss and loss adjustment expense (“LAE”) reserves are established by Loss Reserve Committees in each of our operating insurance companies and are reviewed by our executive Loss Reserve Committee, which consists of members of senior management.
There is no assurance that the Amended Plan or a plan that is substantially similar in the treatment of National’s claims and rights will ultimately be confirmed and go effective. 14 Table of Contents Item 1A. Risk Factors (continued) Refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—U.S.
There is no assurance that the Amended Plan or a plan that is substantially similar in the treatment of National's claims and rights will ultimately be confirmed and become effective.
Our insurance companies issued financial guarantee policies that insure the financial performance of the obligations guaranteed over a long period of time which are unconditional and irrevocable. Under substantially all of our policies, we do not have a right to cancel the policy.
Loss reserve estimates and credit impairments are subject to additional uncertainties and loss reserves may not be adequate to cover potential claims. Our insurance companies issued financial guarantee policies that insure the financial performance of the obligations guaranteed over a long period of time which are unconditional and irrevocable.
Prior to being named Chief Risk Officer of National in 2010 when he rejoined the Company, Mr. Bergonzi was employed at Municipal and Infrastructure Assurance Corporation, which he co-founded and served as its Chief Risk Officer, from 2008 to 2010. The Board 13 Table of Contents Item 1.
Bergonzi was employed at Municipal and Infrastructure Assurance Corporation, which he co-founded and served as its Chief Risk Officer, from 2008 to 2010. The Board of Directors of MBIA Inc. and National Public Finance Guarantee Corporation appointed Mr. Bergonzi to the offices set forth opposite his name above on May 3, 2016 and November 15, 2010, respectively. 13 Item 1.
The agreements with Insight Investment provide generally that Insight Investment will have the right to manage the fixed-income investment portfolios of the Company and its subsidiaries and guarantee certain minimum revenues thereunder. The agreements can be terminated with six-month notice by either party or as otherwise agreed to by the parties.
Insight North America, LLC ("Insight Investment") manages the investment portfolios of the Company and its subsidiaries in accordance with the guidelines adopted for each such portfolio. The agreements with Insight Investment provide generally that Insight Investment will have the right to manage the fixed-income investment portfolios of the Company and its subsidiaries and guarantee certain minimum revenues thereunder.
Insurance Regulation National and MBIA Insurance Corporation are incorporated in and subject to primary insurance regulation and supervision by the State of New York. MBIA Corp.’s Spanish Branch is subject to local regulation in Spain. MBIA Mexico is organized and subject to primary regulation and supervision in Mexico.
In August 2023, the reinsurance agreement was terminated after the termination of MBIA Mexico's last insurance policy. Insurance Regulation National and MBIA Insurance Corporation are incorporated in and subject to primary insurance regulation and supervision by the State of New York.
Public Finance Insurance Puerto Rico Exposures” section in Part II, Item 7 of this Form 10-K for additional information on our Puerto Rico exposures. Loss reserve estimates and credit impairments are subject to additional uncertainties and loss reserves may not be adequate to cover potential claims.
Risk Factors (continued) Refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations––Results of Operations––U.S. Public Finance Insurance Puerto Rico Exposures” section in Part II, Item 7 of this Form 10-K for additional information on our Puerto Rico exposures.
On January 31, 2023, National and the Oversight Board entered into a Plan Support Agreement, resolving National’s claims in the PREPA Title III case (the “PREPA PSA”), and on February 9, 2023, the Oversight Board filed its Amended Plan of Adjustment for PREPA (the “Amended Plan”), including the PREPA PSA.
On January 1, 2024 PREPA also defaulted on scheduled debt service for National insured bonds and National paid gross claims in the aggregate of $16 million. On August 25, 2023, National and the Oversight Board entered into a First Amendment to the Plan Support Agreement, resolving National's claims in the PREPA Title III case (the "PREPA PSA").
The Finance and Risk Committee oversees the Company’s credit risk governance framework, market risk, liquidity risk and other material financial risks.
For additional information relating to cybersecurity, refer to the “Item 1C. Cybersecurity” section in Part I, Item 1C of this Form 10-K. The Finance and Risk Committee oversees the Company’s credit risk governance framework, market risk, liquidity risk and other material financial risks.
Avitabile to the offices set forth opposite his name above on February 13, 2018, September 15, 2017 and March 11, 2016, respectively. Adam T. Bergonzi is an Assistant Vice President of the Company and Chief Risk Officer of National, overseeing all of National’s risk and insured portfolio management activities.
Bergonzi is an Assistant Vice President of the Company and Chief Risk Officer of National, overseeing all of National’s risk and insured portfolio management activities. Prior to being named Chief Risk Officer of National in 2010 when he rejoined the Company, Mr.
Fallon to the office set forth opposite his name above on September 15, 2017 and appointed Mr. McKiernan to the offices set forth opposite his name above on May 1, 2012 and March 11, 2016. Jonathan C. Harris is General Counsel and Secretary of the Company. Prior to being named General Counsel and Secretary, Mr.
Prior to joining MBIA, he held positions at The Chase Manhattan Bank and State Street Bank. The Board of Directors of MBIA Inc. and MBIA Insurance Corporation appointed Mr. Avitabile to the offices set forth opposite his name above on February 13, 2018, September 15, 2017 and March 11, 2016, respectively. Adam T.
Removed
MBIA prohibits retaliation or adverse employment action against any individual who, in good faith, reports discrimination or harassment or participates in an investigation of such reports. 7 Table of Contents Item 1.
Added
Item 1. Business (continued) All of the policies were underwritten on the assumption that the insurance will remain in force until maturity or early retirement of the insured obligations. National estimates that the average life of its domestic public finance insurance policies in force as of December 31, 2023 is 9 years.
Removed
MBIA Insurance Corporation maintains a reinsurance agreement and net worth maintenance agreement with MBIA Mexico pursuant to which MBIA Insurance Corporation reinsures 100% of the business underwritten by MBIA Mexico and agrees to maintain the amount of capital in MBIA Mexico required by applicable law or regulation, subject to certain New York State regulatory requirements as well as certain contract restrictions.
Added
The average life was determined by applying a weighted average calculation, using the remaining years to contractual maturity and weighting them on the basis of the remaining debt service insured. No assumptions were made for any future refundings, early redemptions or terminations of insured issues.
Removed
Harris served as Assistant Vice President and Head of Litigation. Mr. Harris joined the Company as Head of Litigation in 2009. Prior to joining the Company, Mr. Harris was litigation counsel at Lehman Brothers, and practiced in the litigation department of Willkie Farr & Gallagher. The Board of Directors of MBIA Inc. appointed Mr.
Added
Average annual insured debt service on the portfolio as of December 31, 2023 was $4.1 billion. National’s underwriting guidelines limited the insurance in force for any one insured credit, and for other categories such as geography. In addition, National is subject to regulatory single-risk limits with respect to any insured bond issue.
Removed
Harris to the offices set forth opposite his name above on May 3, 2017. Daniel M. Avitabile is an Assistant Vice President of the Company and President and Chief Risk Officer of MBIA Corp. Prior to being named Chief Risk Officer in 2016, Mr. Avitabile managed MBIA Corp.’s Special Situations Group, which was responsible for remediation and commutation activity. Mr.
Added
See the “Insurance Regulation” section below for a description of these regulatory requirements. As of December 31, 2023, National’s gross par amount outstanding for its ten largest insured U.S. public finance credits totaled $7.8 billion, representing 27.5% of National’s total U.S. public finance gross par amount outstanding.
Removed
Business (continued) of Directors of MBIA Inc. and National Public Finance Guarantee Corporation appointed Mr. Bergonzi to the offices set forth opposite his name above on May 3, 2016 and November 15, 2010, respectively. Christopher H. Young is an Assistant Vice President of the Company and Chief Financial Officer of National.
Added
Refer to “Note 13: Insurance in Force” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K for further information regarding the Company’s operating companies' insured portfolios. MBIA Corp.
Removed
In addition, National made acceleration and commutation payments related to the GO PSA and HTA PSA of $277 million and $556 million, respectively, in 2022. On January 1, 2023, PREPA also defaulted on scheduled debt service for certain National insured bonds and National paid gross claims in the aggregate of $18 million.
Added
Insured Portfolio MBIA Corp.’s insured portfolio consists of policies that insure various types of international public finance and global structured finance obligations that were sold in the new issue and secondary markets.
Removed
If we fail to remediate a material weakness or fail to otherwise maintain effective internal control over financial reporting in the 17 Table of Contents Item 1A.
Added
International public finance obligations include bonds and loans extended to entities located outside of the U.S., including utilities, infrastructure projects and sovereign-related and sub-sovereign issuers, such as regions, authorities or their equivalent as well as sovereign owned entities that might be supported by a sovereign state, region or authority.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

11 edited+2 added−24 removed21 unchanged
Biggest changeWhile the investment agreements are fully collateralized with high quality collateral, the settlements of these amounts could reduce MBIA Inc.’s liquidity resources, and to the extent MBIA Inc. fails to pay the accelerated amounts under these investment agreements or the collateral securing these investment agreements is deemed insufficient to pay the accelerated amounts due, the holders of the investment agreements would have policy claims against MBIA Insurance Corporation; • The payment of installment premiums due to National from MBIA Insurance Corporation under the reinsurance agreement between National and MBIA Insurance Corporation (Refer to Item 1, “Our Insurance Operations”, “Reinsurance” for a description of the agreement) could be disrupted, delayed or subordinated to the claims of policyholders of MBIA Insurance Corporation; • The rehabilitator or liquidator would replace the Board of Directors of MBIA Insurance Corporation and take control of the operations and assets of MBIA Insurance Corporation, which would result in the Company losing control of MBIA Insurance Corporation and possible changes to MBIA Insurance Corporation’s strategies and management; and 21 Table of Contents Item 1A.
Biggest changeWhile the investment agreements are fully collateralized with high quality collateral, the settlements of these amounts could reduce MBIA Inc.’s liquidity resources, and to the extent MBIA Inc. fails to pay the accelerated amounts under these investment agreements or the collateral securing these investment agreements is deemed insufficient to pay the accelerated amounts due, the holders of the investment agreements would have policy claims against MBIA Insurance Corporation; • The payment of installment premiums due to National from MBIA Insurance Corporation under the reinsurance agreement between National and MBIA Insurance Corporation (Refer to Item 1, “Our Insurance Operations”, “Reinsurance” for a description of the agreement) could be disrupted, delayed or subordinated to the claims of policyholders of MBIA Insurance Corporation; • The rehabilitator or liquidator would replace the Board of Directors of MBIA Insurance Corporation and take control of the operations and assets of MBIA Insurance Corporation, which would result in the Company losing control of MBIA Insurance Corporation and possible changes to MBIA Insurance Corporation’s strategies and management; and • Unplanned costs on MBIA Inc., as well as significant additional expenses for MBIA Insurance Corporation arising from the appointment of a rehabilitator or liquidator, as receiver, and payment of the fees and expenses of the advisors to such rehabilitator or liquidator.
These transactions are also subject to servicer risk, which relates to problems with the transaction’s servicer that could adversely affect performance of the underlying assets. As of December 31, 2022, MBIA Corp. recorded expected RMBS recoveries of $63 million, including recoveries related to consolidated VIEs, on our RMBS transactions, in reimbursement of our past and future expected claims.
These transactions are also subject to servicer risk, which relates to problems with the transaction’s servicer that could adversely affect performance of the underlying assets. As of December 31, 2023, MBIA Corp. recorded expected RMBS recoveries of $57 million, including recoveries related to consolidated VIEs, on our RMBS transactions, in reimbursement of our past and future expected claims.
Of this amount, $23 million is included in “Insurance loss recoverable” and $40 million is included in “Loss and loss adjustment expense reserves” on the Company’s consolidated balance sheets. RMBS recoveries relate to structural features within the trust structures that allow for the Company to be reimbursed for prior claims paid.
Of this amount, $24 million is included in “Insurance loss recoverable” and $33 million is included in “Loss and loss adjustment expense reserves” on the Company’s consolidated balance sheets. RMBS recoveries relate to structural features within the trust structures that allow for the Company to be reimbursed for prior claims paid.
An MBIA Insurance Corporation rehabilitation or liquidation proceeding could accelerate certain of the Company’s other obligations and have other adverse consequences. As noted above, MBIA Insurance Corporation continues to face a number of significant risks and contingencies, which could, if realized, result in MBIA Insurance Corporation being placed into a rehabilitation or liquidation proceeding by the NYSDFS.
As noted above, MBIA Insurance Corporation continues to face a number of significant risks and contingencies, which could, if realized, result in MBIA Insurance Corporation being placed into a rehabilitation or liquidation proceeding by the NYSDFS.
Further, MBIA Insurance Corporation believes that if the NYSDFS concludes at any time that MBIA Insurance Corporation will not be able to satisfy its obligations under its other issued policies, the NYSDFS would likely put MBIA Insurance Corporation into a rehabilitation or liquidation proceeding under Article 74 of the NYIL and/or take such other 20 Table of Contents Item 1A.
Further, MBIA Insurance Corporation believes that if the NYSDFS concludes at any time that MBIA Insurance Corporation will not be able to satisfy its obligations under its other issued policies, the NYSDFS would likely put MBIA Insurance Corporation into a rehabilitation or liquidation proceeding under Article 74 of the NYIL and/or take such other actions as the NYSDFS may deem necessary to protect the interests of MBIA Insurance Corporation’s policyholders.
These reimbursements for specific trusts include recoveries that are generated from the excess spread of the transactions. Excess spread within insured RMBS securitizations is the difference between interest inflows on mortgage loan collateral and interest outflows on the insured RMBS notes. There can be no assurance that this recovery will be received in its entirety or in the expected timeframe.
These reimbursements for specific trusts include recoveries that are generated from the excess spread of the transactions. Excess spread within insured RMBS securitizations is the difference between interest inflows on mortgage loan collateral and interest outflows on the insured RMBS notes.
The NYSDFS enjoys broad discretion in this regard, and any determination they may make would not be limited to consideration of the matters described above.
The determination to commence such a proceeding or take other such actions is within the exclusive control of the NYSDFS. The NYSDFS enjoys broad discretion in this regard, and any determination they may make would not be limited to consideration of the matters described above.
Interruption in information technology and other operational systems, or a failure to maintain the security, confidentiality or privacy of sensitive data residing on such systems, whether due to actions or inactions by us or others, could delay or disrupt our ability to do business, harm our reputation, subject us to regulatory sanctions and other claims, lead to a loss of revenues and/or otherwise adversely affect our business.
Interruption in information technology and other operational systems, or a failure to maintain the security, confidentiality or privacy of sensitive data residing on such systems, whether due to actions or inactions by us or others, could delay or disrupt 21 Item 1A.
Due to the installment nature of a significant percentage of its premium income, MBIA Corp. has an embedded future revenue stream.
Revenues and liquidity would be adversely impacted by a decline in realization of installment premiums. Due to the installment nature of a significant percentage of its premium income, MBIA Corp. has an embedded future revenue stream.
The Company is dependent on key executives and the loss of any of these executives, or its inability to retain other key personnel, could adversely affect its business.
Risk Factors (continued) our ability to do business, harm our reputation, subject us to regulatory sanctions and other claims, lead to a loss of revenues and/or otherwise adversely affect our business. The Company is dependent on key executives and the loss of any of these executives, or its inability to retain other key personnel, could adversely affect its business.
Exchange rates have fluctuated significantly in recent periods and may continue to do so in the future, which could adversely impact the Company’s financial position, results of operations and cash flows. MBIA Corp. Risk Factors As described further and for the reasons stated herein, we believe that MBIA Corp. will not provide significant economic or shareholder value to MBIA Inc.
Item 1A. Risk Factors (continued) MBIA Corp. Risk Factors As described further and for the reasons stated herein, we believe that MBIA Corp. will not provide significant economic or shareholder value to MBIA Inc.
Removed
Item 1A. Risk Factors (continued) • we are exposed to the risk of fluctuations in interest rates and foreign currency exchange rates because a portion of our liabilities are at variable rates of interest or denominated in foreign currencies.
Added
There can be no assurance that this recovery will be received in its entirety or in the expected timeframe. 20 Item 1A. Risk Factors (continued) An MBIA Insurance Corporation rehabilitation or liquidation proceeding could accelerate certain of the Company’s other obligations and have other adverse consequences.
Removed
Adverse developments in the credit markets may materially and adversely affect MBIA Inc.’s ability to post collateral and meet other liquidity needs. Currently, a significant portion of the cash and securities of MBIA Inc. are pledged against investment agreement liabilities, intercompany financing arrangements and derivatives, which limit its ability to raise liquidity through asset sales.
Added
For additional information relating to cybersecurity, refer to the “Item 1C. Cybersecurity” section in Part I, Item 1C of this Form 10-K.
Removed
If the market value or rating eligibility of the assets which are pledged against MBIA Inc.’s obligations were to decline, we would be required to pledge additional eligible assets in order to meet minimum required collateral amounts against these liabilities.
Removed
In such an event, we may sell assets, potentially with substantial losses, finance unencumbered assets through intercompany facilities, or use free cash or other assets, although there can be no assurance that these strategies will be available or adequate to meet liquidity requirements.
Removed
The level of interest rates and foreign currency exchange rates, and the discontinuance of certain interbank offered rates, could materially and adversely affect our financial condition. Increases in prevailing interest rate levels can adversely affect the value of our investment portfolios and, therefore, our financial condition.
Removed
In the event that investments must be sold in order to make payments on insured exposures or other liabilities, such investments would likely be sold at discounted prices. Increases in interest rates also adversely affect the values of investments collateralizing our investment agreement liabilities in our corporate operations, which would require the Company to post additional collateral to its counterparties.
Removed
In the insurance operations, with respect to credit risk, increasing interest rates could lead to increased stress on transactions in our insured portfolio with floating rate liabilities. Increasing interest rates could also result in a lower present value of salvage reserves while declining interest rates could result in a higher present value of future loss payments.
Removed
Lower interest rates can result in lower net interest income since a substantial amount of assets are now held in cash and cash equivalents given the increased focus on liquidity.
Removed
Lower interest rates would also adversely impact the value of our interest rate swap contracts in our corporate operations, and would require the Company to post additional collateral to its counterparties.
Removed
Further, a number of our debt issuances, interest rate swap contracts and financial investments are indexed to an interbank offered rate, including the London Interbank Offered Rate (“LIBOR”), and the assets or liabilities related to insured credit transactions may be indexed to LIBOR, as the applicable reference rate. In July 2017, The U.K.
Removed
Financial Conduct Authority announced that after 2021, it will no longer persuade or require banks to submit rates for LIBOR.
Removed
Subsequently, on November 30, 2020, ICE Benchmark Administration, the administrator for LIBOR, announced plans to cease publication (i) immediately after December 31, 2021 of one week and two month USD LIBOR settings and (ii) immediately following the LIBOR publication on June 30, 2023 of the remaining USD LIBOR settings i.e., overnight and one, three, six and twelve month settings.
Removed
On March 15, 2022, President Biden signed legislation into law that includes the Adjustable Interest Rate (LIBOR) Act (the “LIBOR Act”) to establish a clear and uniform process for replacing LIBOR in existing contracts and preclude litigation, among other things.
Removed
As a general matter, the LIBOR Act provides that on the first London banking day after June 30, 2023, a benchmark replacement recommended by the Board of Governors of the Federal Reserve System (the “Board”) will automatically replace the USD LIBOR benchmark in existing contracts that (after disregarding certain types of fallback provisions invalidated by the LIBOR Act) contain no LIBOR fallback provisions or contain LIBOR fallback provisions that identify neither a benchmark replacement nor a person with authority to determine a benchmark replacement.
Removed
The Board-recommended benchmark replacement will be based on the Secured Overnight Financing Rate (“SOFR”) published by the Federal Reserve Bank of New York, including any recommended spread adjustment and benchmark replacement conforming changes.
Removed
The Federal Reserve Board adopted a final rule in December 2022 that implements the LIBOR Act by identifying benchmark rates based on SOFR that will replace LIBOR in certain financial contracts after June 30, 2023.
Removed
Pursuant to the LIBOR Act and the regulations, the Board has identified (i) the one-, three, six-, or 12-month CME Term SOFR plus (ii) the applicable tenor spread adjustment specified in the LIBOR Act, as the board selected benchmark replacement for references to the corresponding one-, three-, six-, and 12-month LIBOR in contracts governing a cash transaction that is not a consumer loan, an FHFA-regulated-entity contract or a FFELP ABS, as referenced in the LIBOR Regulations. 19 Table of Contents Item 1A.
Removed
Risk Factors (continued) These announcements, among other developments, about the discontinuance of LIBOR as a benchmark rate may adversely affect the value of, return on and trading market for our financial assets and liabilities that are based on or are linked to LIBOR.
Removed
Furthermore, there can be no assurance that we and other market participants will be adequately prepared for the discontinuation of LIBOR which could have an unpredictable impact on contractual mechanics that could also produce an adverse economic impact.
Removed
In addition, the Company is exposed to foreign currency exchange rate fluctuation risk in respect of assets and liabilities denominated in currencies other than U.S. dollars.
Removed
In addition to insured liabilities denominated in foreign currencies, some of the remaining liabilities in our corporate segment are denominated in currencies other than U.S. dollars and the assets of our corporate segment are predominantly denominated in U.S. dollars. Accordingly, the weakening of the U.S. dollar versus foreign currencies could substantially increase our potential obligations and statutory capital exposure.
Removed
Conversely, the Company makes investments denominated in a foreign currency and the weakening of the foreign currency versus the U.S. dollar will diminish the value of such non-U.S. dollar denominated asset.
Removed
Risk Factors (continued) actions as the NYSDFS may deem necessary to protect the interests of MBIA Insurance Corporation’s policyholders. The determination to commence such a proceeding or take other such actions is within the exclusive control of the NYSDFS.
Removed
Risk Factors (continued) • Unplanned costs on MBIA Inc., as well as significant additional expenses for MBIA Insurance Corporation arising from the appointment of a rehabilitator or liquidator, as receiver, and payment of the fees and expenses of the advisors to such rehabilitator or liquidator. Revenues and liquidity would be adversely impacted by a decline in realization of installment premiums.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 2. Properties The Company maintains office space located in Purchase, New York, in which the Company, National, MBIA Corp., and MBIA Services Corporation have their headquarters. The Company also leases office space in Mexico City, Mexico. The Company generally believes that these facilities are adequate and suitable for its current needs. 22 Table of Contents
Biggest changeItem 2. Pr operties The Company leases office space located in Purchase, New York, in which the Company, National, MBIA Corp., and MBIA Services Corporation have their headquarters. The Company also leases office space in Mexico City, Mexico. The Company generally believes that these facilities are adequate and suitable for its current needs.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed3 unchanged
Biggest changeMine Safety Disclosures Not applicable. 23 Table of Contents PART II
Biggest changeMine Safety Disclosures Not applicable. 23 PA RT II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

82 edited+31 added−43 removed41 unchanged
Biggest changeManagement’s Discussion and Analysis of Financial Condition and Results of Operations (continued) RESULTS OF OPERATIONS (continued) 2022 vs. 2021 GAAP Results Income (loss) from Continuing Operations Before Income Taxes The decrease in consolidated total revenues was principally due to losses from fair valuing investments, sales of investments and impairing investments to fair value for investments we intend to sell, as well as lower gains from extinguishing debt and a decrease in net premiums earned. 2022 includes $51 million of losses from fair valuing investments, $41 million of net realized losses from investments sold and $21 million of impairments on investments as a result of our intent to sell these securities before they recover their cost bases.
Biggest changeRefer to the following Non-GAAP Adjusted Net Income (Loss) section for a discussion of adjusted net income (loss) and adjusted net income (loss) per diluted share and a reconciliation of GAAP net income (loss) to adjusted net income (loss) and GAAP net income (loss) per diluted share to adjusted net income (loss) per diluted share. 2023 vs. 2022 GAAP Results Income (loss) from Continuing Operations Before Income Taxes The decrease in consolidated total revenues was principally due to unfavorable changes in fair value gains on interest rate swaps, revenues from variable interest entities (“VIEs”), net realized investment losses and foreign exchange rates.
(2)—Reported within “Other net realized gains (losses)” on the Company’s consolidated statements of operations. (3)—Adjusted net income (loss) per diluted common share is calculated by taking adjusted net income (loss) divided by GAAP weighted average number of diluted common shares outstanding.
(2) - Reported within “Other net realized gains (losses)” on the Company’s consolidated statements of operations. (3) - Adjusted net income (loss) per diluted common share is calculated by taking adjusted net income (loss) divided by the GAAP weighted average number of diluted common shares outstanding.
Zohar CDOs • Pursuant to a plan of liquidation that became effective in August of 2022, MBIA Corp.’s interest in the remaining collateral of the Zohar collateralized debt obligation (“CDO”) 2003-1, Limited (“Zohar I”) and Zohar II 2005-1, Limited (“Zohar II”) (collectively, the “Zohar CDOs”) was distributed to MBIA Corp. either directly or in the form of interests in certain asset recovery entities.
Zohar CDOs Pursuant to a plan of liquidation that became effective in August of 2022, MBIA Corp.'s interest in the remaining collateral of the Zohar collateralized debt obligation (“CDO”) 2003-1, Limited (“Zohar I”) and Zohar II 2005-1, Limited (“Zohar II”) (collectively, the "Zohar CDOs") was distributed to MBIA Corp. either directly or in the form of interests in certain asset recovery entities.
Given the possibility of volatility in foreign exchange markets, we exclude the impact of foreign exchange gains (losses) to provide a measurement of comparability of adjusted net income (loss). • Net realized investment gains (losses), impaired securities and extinguishment of debt – We remove realized gains (losses) on the sale of investments, net investment losses related to impairment of securities and net gains (losses) on extinguishment of debt since the timing of these transactions are subject to management’s assessment of market opportunities and conditions and capital liquidity positions. • Income taxes – We apply a zero effective tax rate for federal income tax purposes to our pre-tax adjustments, if applicable, consistent with our consolidated effective tax rate. 30 Table of Contents Item 7.
Given the possibility of volatility in foreign exchange markets, we exclude the impact of foreign exchange gains (losses) to provide a measurement of comparability of adjusted net income (loss). • Net realized investment gains (losses), impaired securities and extinguishment of debt – We remove realized gains (losses) on the sale of investments, net investment losses related to impairment of securities and net gains (losses) on extinguishment of debt since the timing of these transactions are subject to management’s assessment of market opportunities and conditions and capital liquidity positions. • Income taxes –We apply a zero effective tax rate for federal income tax purposes to our pre-tax adjustments, if applicable, consistent with our consolidated effective tax rate. 30 Item 7.
The table below presents repurchases made by the Company or National in each month during the fourth quarter of 2022. See “Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” in Part III for a further discussion of securities authorized for issuance under long-term incentive plans.
The table below presents repurchases made by the Company or National in each month during the fourth quarter of 2023. See “Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” in Part III for a further discussion of securities authorized for issuance under long-term incentive plans.
Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 results not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 results not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
On February 9, 2023, the Oversight Board filed an amendment to the Plan of Adjustment originally filed with the Title III court on December 16, 2022 (the “Amended Plan”), that reflects the entry into the PREPA PSA and the settlement described therein.
On February 9, 2023, the Oversight Board filed an amendment to the Plan of Adjustment originally filed with the Title III court on December 16, 2022, that reflects the entry into the PREPA PSA and the settlement described therein.
Some state and local governments and territory obligors that National insures are experiencing financial and budgetary stress which could lead to an increase in defaults by such entities on the payment of their obligations and, while such has not yet occurred materially, losses or impairments on a greater number of the Company’s insured transactions.
Regarding its insured portfolio, some state and local governments and territory obligors that National insures are experiencing financial and budgetary stress which could lead to an increase in defaults by such entities on the payment of their obligations and, while such stress has not yet occurred materially, losses or impairments on a greater number of the Company’s insured transactions.
Status of Puerto Rico’s Fiscal Plans The Oversight Board certified fiscal plans for PREPA, University of Puerto Rico (the “University”) and PRHTA on June 28, 2022, May 27, 2022 and October 14, 2022, respectively. The Oversight Board also certified the fiscal year 2023 budgets for Commonwealth, PREPA, the University and PRHTA on June 30, 2022.
Status of Puerto Rico’s Fiscal Plans The Oversight Board certified fiscal plans for PREPA, University of Puerto Rico (the “University”) and HTA on June 28, 2022, May 27, 2022 and October 14, 2022, respectively. The Oversight Board also certified the fiscal year 2023 budgets for Commonwealth, PREPA, the University and HTA on June 30, 2022.
The following table presents the credit quality distribution of National’s U.S. public finance outstanding gross par insured as of December 31, 2022 and 2021. Capital appreciation bonds (“CABs”) are reported at the par amount at the time of issuance of the insurance policy. All ratings are as of the period presented and represent S&P underlying ratings, where available.
The following table presents the credit quality distribution of National’s U.S. public finance outstanding gross par insured as of December 31, 2023 and 2022. Capital appreciation bonds are reported at the par amount at the time of issuance of the insurance policy. All ratings are as of the period presented and represent S&P underlying ratings, where available.
As a result of MBIA Corp.’s capital structure and business prospects, we do not expect its financial performance to have a material economic impact on MBIA Inc. 38 Table of Contents
As a result of MBIA Corp.’s capital structure and business prospects, we do not expect its financial performance to have a material economic impact on MBIA Inc. 38
LUMA is now involved in the planning of the related projects as well as proceedings related thereto in front the PR Energy Bureau as well as PR-COR3. 36 Table of Contents Item 7.
LUMA is now involved in the planning of the related projects as well as proceedings related thereto in front the PR Energy Bureau as well as PR-COR3. 36 Item 7.
Municipal bonds and privately issued bonds used for the financing of public purpose projects are generally supported by taxes, assessments, user fees or tariffs related to the use of these projects, lease payments or other similar types of revenue streams. As of December 31, 2022, National had total insured gross par outstanding of $31.7 billion.
Municipal bonds and privately issued bonds used for the financing of public purpose projects are generally supported by taxes, assessments, user fees or tariffs related to the use of these projects, lease payments or other similar types of revenue streams. As of December 31, 2023, National had total insured gross par outstanding of $28.4 billion.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The Company’s common stock is listed on the New York Stock Exchange under the symbol “MBI.” As of February 21, 2023, there were 221 shareholders of record of the Company’s common stock.
Item 5. Market for Registrant’s Common Equity , Related Stockholder Matters and Issuer Purchases of Equity Securities The Company’s common stock is listed on the New York Stock Exchange under the symbol “MBI.” As of February 21, 2024, there were 202 shareholders of record of the Company’s common stock.
Provision for Income Taxes For 2022 and 2021, our effective tax rate applied to our loss before income taxes was below the the U.S. statutory tax rate of 21% due to the full valuation allowance on the changes in our net deferred tax asset, which includes our net operating loss (“NOL”).
Provision for Income Taxes For 2023 and 2022, our effective tax rate applied to our loss before income taxes was below the U.S. statutory tax rate of 21% due to the full valuation allowance on the changes in our net deferred tax asset, which included our net operating loss (“NOL”).
These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. Refer to “Risk Factors” in Part II, Item 1A and “Forward-Looking and Cautionary Statements” and “Risk Factors” in Part I, Item 1A of this Form 10-K for a further discussion of risks and uncertainties.
These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. Refer to “Risk Factors” in Part I, Item 1A of this Form 10-K for a further discussion of risks and uncertainties.
This section of this Form 10-K generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021 results.
This section of this Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022 results.
As of December 31, 2022 and 2021, the Company’s valuation allowance against its net deferred tax asset was $1.2 billion and $1.1 billion, respectively.
As of December 31, 2023 and 2022, the Company’s valuation allowance against its net deferred tax asset was $1.2 billion.
(37.76) (35.94) Remove net unrealized gains (losses) on available-for-sale securities included in other comprehensive income (loss) (3.96) 2.02 Include net unearned premium revenue in excess of expected losses 3.08 3.58 U.S. Public Finance Insurance Segment Our U.S. public finance insurance portfolio is managed through National.
(44.91 ) (37.76 ) Remove net unrealized gains (losses) on available-for-sale securities included in other comprehensive income (loss) (2.40 ) (3.96 ) Include net unearned premium revenue in excess of expected losses 2.91 3.08 U.S. Public Finance Insurance Segment Our U.S. public finance insurance portfolio is managed through National.
As a consequence, National has paid gross claims in the aggregate amount of $2.9 billion relating to GO bonds, PBA bonds, PREPA bonds and PRHTA bonds through December 31, 2022, inclusive of the commutation payment and the additional payment in the amount of $66 million in 2019 related to COFINA and the GO PSA and HTA PSA acceleration and commutation payments of $277 million and $556 million, respectively, in 2022.
As a consequence, National has paid gross claims in the aggregate amount of $3.0 billion relating to GO bonds, PBA bonds, PREPA bonds and HTA bonds through December 31, 2023, inclusive of the commutation payment and the additional payment in the amount of $66 million in 2019 related to COFINA and the GO and HTA acceleration and commutation payments of $277 million and $556 million, respectively, in 2022.
Public Finance Insurance Puerto Rico Exposures On May 3, 2017, the Oversight Board certified and filed a petition under Title III of PROMESA for Puerto Rico with the District Court of Puerto Rico thereby commencing a bankruptcy-like case for the Commonwealth GO.
Public Finance Insurance Puerto Rico Exposures On May 3, 2017, the Oversight Board certified and filed a petition under Title III of the Puerto Rico Oversight, Management, and Economic Stability Act for Puerto Rico with the District Court of Puerto Rico thereby commencing a bankruptcy-like case for GO.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) RESULTS OF OPERATIONS (continued) The following table presents our adjusted net income (loss) and adjusted net income (loss) per diluted common share and provides a reconciliation of GAAP net income (loss) to adjusted net income (loss) for the years ended December 31, 2022, 2021 and 2020: Years Ended December 31, In millions, except share and per share amounts 2022 2021 2020 Net income (loss) $ (195) $ (445) $ (578) Less: adjusted net income adjustments: Income (loss) from discontinued operations, net of income taxes (46) — — Income (loss) before income taxes of our international and structured finance insurance segment and eliminations (20) (283) (391) Adjustments to income before income taxes of our U.S. public finance insurance and corporate segments: Mark-to-market gains (losses) on financial instruments (1) 58 39 (27) Foreign exchange gains (losses) (1) 15 25 (35) Net realized investment gains (losses) (40) 5 48 Net gains (losses) on extinguishment of debt 5 30 — Net investment losses related to impairments of securities (2) (21) — — Adjusted net income adjustment to the (provision) benefit for income tax (1) — — Adjusted net income (loss) $ (145) $ (261) $ (173) Adjusted net income (loss) per diluted common share (3) $ (2.90) $ (5.27) $ (2.93) (1)—Reported within “Net gains (losses) on financial instruments at fair value and foreign exchange” on the Company’s consolidated statements of operations.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) RESULTS OF OPERATIONS (continued) The following table presents our adjusted net income (loss) and adjusted net income (loss) per diluted common share and provides a reconciliation of GAAP net income (loss) to adjusted net income (loss) for the years ended December 31, 2023, 2022 and 2021: Year Ended December 31, In millions except share and per share amounts 2023 2022 2021 Net income (loss) $ (491 ) $ (195 ) $ (445 ) Less: adjusted net income (loss) adjustments: Income (loss) from discontinued operations, net of noncontrolling interest (7 ) (46 ) - Income (loss) before income taxes of our international and structured finance insurance segment and eliminations (249 ) (20 ) (283 ) Adjustments to income before income taxes of our U.S. public finance insurance and corporate segments: Mark-to-market gains (losses) on financial instruments (1) 19 58 39 Foreign exchange gains (losses) (1) (6 ) 15 25 Net realized investment gains (losses) (72 ) (40 ) 5 Net gains (losses) on extinguishment of debt 1 5 30 Net investment losses related to impairments of securities (2) (8 ) (21 ) - Adjusted net income adjustment to the (provision) benefit for income tax - (1 ) - Adjusted net income (loss) $ (169 ) $ (145 ) $ (261 ) Adjusted net income (loss) per diluted common share (3) $ (3.49 ) $ (2.90 ) $ (5.27 ) ___________________ (1) - Reported within “Net gains (losses) on financial instruments at fair value and foreign exchange” on the Company’s consolidated statements of operations.
The confirmation hearing for the PRHTA Title III case was completed on August 17, 2022, and the confirmation order was entered on October 12, 2022, which became effective on December 6, 2022. 35 Table of Contents Item 7.
The confirmation hearing for the HTA Title III case was completed on August 17, 2022, and the confirmation order was entered on October 12, 2022, which became effective on December 6, 2022. 35 Item 7.
Economic improvement at the state and local level strengthens the credit quality of the issuers of our insured municipal bonds, improves the performance of our insured U.S. public finance portfolio and could reduce the amount of National’s potential incurred losses.
Economic and financial market trends could impact the Company’s financial results. Economic improvement at the state and local level strengthens the credit quality of the issuers of our insured municipal bonds, improves the performance of our insured U.S. public finance portfolio and could reduce the amount of National’s potential incurred losses.
NET GAINS (LOSSES) ON FINANCIAL INSTRUMENTS AT FAIR VALUE AND FOREIGN EXCHANGE Net gains (losses) on financial instruments at fair value and foreign exchange were primarily driven by changes in market values on interest rate swaps and investments and changes in the revaluation of euro-denominated liabilities. 2022 includes fair value net gains of $89 million on interest rate swaps compared with fair value net gains of $36 million on these swaps for 2021.
NET GAINS (LOSSES) ON FINANCIAL INSTRUMENTS AT FAIR VALUE AND FOREIGN EXCHANGE Net gains (losses) on financial instruments at fair value and foreign exchange were primarily driven by changes in market values on interest rate swaps and changes in the revaluation of euro-denominated liabilities. 2023 included fair value net gains of $14 million on interest rate swaps compared with fair value net gains of $89 million on these swaps for 2022.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) RESULTS OF OPERATIONS (continued) POLICY ACQUISITION COSTS AND OPERATING EXPENSES U.S. public finance insurance segment expenses for the years ended December 31, 2022, 2021 and 2020 are presented in the following table: Years Ended December 31, Percent Change In millions 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 Gross expenses $ 41 $ 51 $ 48 -20% 6% Amortization of deferred acquisition costs $ 11 $ 11 $ 11 —% —% Operating 41 51 48 -20% 6% Total insurance expenses $ 52 $ 62 $ 59 -16% 5% Gross expenses represent total insurance expenses before the deferral of any policy acquisition costs.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) RESULTS OF OPERATIONS (continued) POLICY ACQUISITION COSTS AND OPERATING EXPENSES U.S. public finance insurance segment expenses for the years ended December 31, 2023, 2022 and 2021 are presented in the following table: Years Ended December 31, Percent Change In millions 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Gross expenses $ 40 $ 41 $ 51 -2 % -20 % Amortization of deferred acquisition costs $ 7 $ 11 $ 11 -36 % - % Operating 40 41 51 -2 % -20 % Total insurance operating expenses $ 47 $ 52 $ 62 -10 % -16 % Gross expenses represent total insurance expenses before the deferral of any policy acquisition costs.
The losses on the fair value option investments were driven by increases in interest rates and widening of credit spreads during 2022. The losses on the trading investments were driven by mark-to-market changes on the Puerto Rico GO and HTA CVI.
The losses on the fair value option investments were driven by increases in interest rates and widening of credit spreads during 2022. The losses on the trading investments were driven by mark-to-market changes on the Puerto Rico Puerto Rico Commonwealth GO (“GO”) and Puerto Rico Highway and Transportation Authority (“HTA”) CVI.
This decline was due to a smaller increase in the strength of the U.S. dollar against the euro in 2022 compared with 2021. NET GAINS (LOSSES) ON EXTINGUISHMENT OF DEBT Net gains (losses) on extinguishment of debt for all periods include gains from purchases, at discounts, of MTNs issued by the Company.
This decline was due to the weakening of the U.S. dollar against the euro in 2023 compared with the strengthening of the U.S. dollar against the euro in 2022. NET GAINS (LOSSES) ON EXTINGUISHMENT OF DEBT Net gains (losses) on extinguishment of debt for all periods include gains from purchases, at discounts, of MTNs issued by the Company.
Refunding activity can vary significantly from period to period based on issuer refinancing behavior. For 2022 and 2021, scheduled premiums earned were $32 million and $36 million, respectively, and refunded premiums earned were $15 million and $13 million, respectively.
Refunding activity can vary significantly from period to period based on issuer refinancing behavior. For 2023 and 2022, scheduled premiums earned were $28 million and $32 million, respectively, and refunded premiums earned were $2 million and $15 million, respectively.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) RESULTS OF OPERATIONS (continued) The following table presents our scheduled gross debt service due on our PREPA insured exposures as of December 31, 2022, for each of the subsequent five years ending December 31 and thereafter: In millions 2023 2024 2025 2026 2027 Thereafter Total Puerto Rico Electric Power Authority (PREPA) $ 137 $ 138 $ 105 $ 57 $ 20 $ 488 $ 945 Corporate Segment Our corporate segment consists of general corporate activities, including providing support services to MBIA Inc.’s subsidiaries and asset and capital management.
The following table presents our scheduled gross debt service due on our PREPA insured exposures as of December 31, 2023, for each of the subsequent five years ending December 31, and thereafter: In millions 2024 2025 2026 2027 2028 Thereafter Total Puerto Rico Electric Power Authority (PREPA) $ 137 $ 105 $ 57 $ 20 $ 20 $ 469 $ 808 Corporate Segment Our corporate segment consists of general corporate activities, including providing support services to MBIA Inc.’s subsidiaries and asset and capital management.
The following table summarizes the consolidated results of our corporate segment for the years ended 2022, 2021 and 2020: Years Ended December 31, Percent Change In millions 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 Net investment income $ 22 $ 29 $ 30 -24% -3% Net realized investment gains (losses) (10) 3 11 n/m -73% Net gains (losses) on financial instruments at fair value and foreign exchange 99 56 (74) 77% n/m Net gains (losses) on extinguishment of debt 5 30 — -83% n/m Fees and reimbursements 51 55 56 -7% -2% Other net realized gains (losses) — (7) — -100% n/m Total revenues 167 166 23 1% n/m Operating 58 74 72 -22% 3% Interest 76 75 84 1% -11% Total expenses 134 149 156 -10% -4% Income (loss) from continuing operations before income taxes $ 33 $ 17 $ (133) 94% -113% n/m—Percent change not meaningful.
The following table summarizes the consolidated results of our corporate segment for the years ended December 31, 2023, 2022 and 2021: Years Ended December 31, Percent Change In millions 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Net investment income $ 25 $ 22 $ 29 14 % -24 % Net realized investment gains (losses) (33 ) (10 ) 3 n/m n/m Net gains (losses) on financial instruments at fair value and foreign exchange 8 99 56 -92 % 77 % Net gains (losses) on extinguishment of debt 1 5 30 -80 % -83 % Fees 50 51 55 -2 % -7 % Other net realized gains (losses) - - (7 ) - % -100 % Total revenues 51 167 166 -69 % 1 % Operating 77 58 74 33 % -22 % Interest 76 76 75 - % 1 % Total expenses 153 134 149 14 % -10 % Income (loss) from continuing operations before income taxes $ (102 ) $ 33 $ 17 n/m 94 % ____________________ n/m - Percent change not meaningful. 37 Item 7.
Item 6. [Reserved] 25 Table of Contents Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of financial condition and results of operations of MBIA Inc. should be read in conjunction with the other sections of this Form 10-K.
Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of financial condition and results of operations of MBIA Inc. should be read in conjunction with the other sections of this Form 10-K.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) RESULTS OF OPERATIONS (continued) The following table presents our U.S. public finance insurance segment results for the years ended December 31, 2022, 2021 and 2020: Years Ended December 31, Percent Change In millions 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 Net premiums earned $ 47 $ 49 $ 57 -4% -14% Net investment income 81 58 70 40% -17% Net realized investment gains (losses) (30) 2 37 n/m -95% Net gains (losses) on financial instruments at fair value and foreign exchange (47) (2) 2 n/m n/m Fees and reimbursements 3 3 3 —% —% Other net realized gains (losses) (19) — (1) n/m -100% Total revenues 35 110 168 -68% -35% Losses and loss adjustment 143 227 163 -37% 39% Amortization of deferred acquisition costs 11 11 11 —% —% Operating 41 51 48 -20% 6% Total expenses 195 289 222 -33% 30% Income (loss) from continuing operations before income taxes $ (160) $ (179) $ (54) -11% n/m n/m—Percent change not meaningful.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) RESULTS OF OPERATIONS (continued) The following table presents our U.S. public finance insurance segment results for the years ended December 31, 2023, 2022 and 2021: Years Ended December 31, Percent Change In millions 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Net premiums earned $ 30 $ 47 $ 49 -36 % -4 % Net investment income 93 81 58 15 % 40 % Net realized investment gains (losses) (39 ) (30 ) 2 30 % n/m Net gains (losses) on financial instruments at fair value and foreign exchange 8 (47 ) (2 ) -117 % n/m Fees and reimbursements 2 3 3 -33 % - % Other net realized gains (losses) (8 ) (19 ) - -58 % n/m Total revenues 86 35 110 146 % -68 % Losses and loss adjustment 170 143 227 19 % -37 % Amortization of deferred acquisition costs 7 11 11 -36 % - % Operating 40 41 51 -2 % -20 % Total expenses 217 195 289 11 % -33 % Income (loss) from continuing operations before income taxes $ (131 ) $ (160 ) $ (179 ) -18 % -11 % _______________ n/m - Percent change not meaningful.
The following table provides the Company’s GAAP book value per share and management’s adjustments to book value per share used in our internal analysis: As of December 31, As of December 31, In millions except share and per share amounts 2022 2021 Total shareholders’ equity of MBIA Inc. $ (882) $ (313) Common shares outstanding 54,852,671 54,556,112 GAAP book value per share $ (16.07) $ (5.73) Management’s adjustments described above: Remove negative book value per share of MBIA Corp.
The following table provides the Company’s GAAP book value per share and management’s adjustments to book value per share used in our internal analysis: As of December 31, As of December 31, In millions except share and per share amounts 2023 2022 Total shareholders' equity of MBIA Inc. $ (1,657 ) $ (882 ) Common shares outstanding 50,862,931 54,852,671 GAAP book value per share $ (32.56 ) $ (16.07 ) Management's adjustments described above: Remove negative book value per share of MBIA Corp.
Stock Performance Graph The following graph compares the cumulative total shareholder return (rounded to the nearest whole dollar) of our common stock, the S&P 500 Index (“S&P 500 Index”) and the S&P 500 Financials Sector Index (“S&P Financials Index”) for the last five fiscal years.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities (continued) Stock Performance Graph The following graph compares the cumulative total shareholder return (rounded to the nearest whole dollar) of our common stock, the S&P 500 Index (“S&P 500 Index”) and the S&P 500 Financials Sector Index (“S&P Financials Index”) for the last five fiscal years.
The Company did not pay cash dividends on its common stock during 2022 or 2021. For information on the ability for certain subsidiaries of the Company to transfer funds to the Company in the form of cash dividends or otherwise, refer to “Item 1. Business—Insurance Regulation” in this annual report.
For information on the ability for certain subsidiaries of the Company to transfer funds to the Company in the form of cash dividends or otherwise, refer to “Item 1. Business—Insurance Regulation” in this annual report.
The graph assumes a $100 investment at the closing price on December 31, 2022 and reinvestment of dividends in the security/index on the respective dividend payment dates without commissions. This graph does not forecast future performance of our common stock. 24 Table of Contents Item 5.
The graph assumes a $100 investment at the closing price on December 31, 2023 and reinvestment of dividends in the security/index on the respective dividend payment dates without commissions. This graph does not forecast future performance of our common stock. 2018 2019 2020 2021 2022 2023 MBIA Inc.
Refer to “Note 1: Business Developments and Risks and Uncertainties” in the Notes to Consolidated Financial Statements for a further discussion of our discontinued operations. 29 Table of Contents Item 7.
Refer to “Note 1: Business Developments and Risks and Uncertainties” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K for a further discussion of our discontinued operations. 29 Item 7.
On January 31, 2023, National entered into the PREPA Plan Support Agreement (“PREPA PSA”) with the Oversight Board, on behalf of itself and as the sole Title III representative of PREPA. An amended reorganization plan for PREPA and related disclosure statement, including the PREPA PSA, was filed on February 9, 2023.
An amended plan of adjustment for PREPA and related disclosure statement was filed on February 9, 2023. On August 25, 2023, National entered into the First Amendment to the PREPA Plan Support Agreement (the “Amended PSA”) with the Oversight Board, on behalf of itself and as the sole Title III representative of PREPA.
The following table presents information about our U.S. public finance insurance loss recoverable assets and loss and LAE reserves liabilities as of December 31, 2022 and 2021: In millions December 31, 2022 December 31, 2021 Percent Change Assets: Insurance loss recoverable $ 107 $ 1,054 -90% Reinsurance recoverable on paid and unpaid losses (1) 6 3 100% Liabilities: Loss and LAE reserves 154 425 -64% Insurance loss recoverable—ceded (2) 1 55 -98% Net reserve (salvage) $ 42 $ (577) -107% (1)—Reported within “Other assets” on our consolidated balance sheets.
The following table presents information about our U.S. public finance insurance loss recoverable asset and loss and LAE reserves liabilities as of December 31, 2023 and 2022: December 31, December 31, Percent In millions 2023 2022 Change Assets: Insurance loss recoverable $ 152 $ 107 42 % Reinsurance recoverable on paid and unpaid losses (1) 11 6 83 % Liabilities: Loss and LAE reserves 230 154 49 % Insurance loss recoverable - ceded (2) 1 1 - % Net reserve (salvage) $ 68 $ 42 62 % _______________ (1) - Reported within "Other assets" on our consolidated balance sheets.
NET REALIZED INVESTMENT GAINS (LOSSES) Net realized investment losses in 2022 compared with gains in 2021 was primarily due to losses from the sales of securities from the ongoing management of our U.S. public finance investment portfolio, including to generate liquidity to pay claims.
NET REALIZED INVESTMENT GAINS (LOSSES) The net realized investment losses for 2023 and 2022 related to sales of securities from the ongoing management of our U.S. public finance investment portfolio, including to generate liquidity to pay dividends and claims.
Month Total Number of Shares Purchased (1) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plan Maximum Amount That May Be Purchased Under the Plan (in millions) October 7,968 9.49 — $ — November 98 12.11 — — December 92 12.76 — — (1) Represents 113 shares in October, 98 shares in November and 92 shares in December repurchased in open market transactions as investments in the Company’s non-qualified deferred compensation plan.
Total Number Maximum Total Average of Shares Amount That May Number Price Purchased as Be Purchased of Shares Paid Per Part of Publicly Under the Plan Month Purchased (1) Share Announced Plan (in millions) (2) October 168 6.52 — $ 71 November 164 7.25 — 71 December 353,578 6.90 — 71 (1) Represents 168 shares in October, 164 shares in November and 330,055 shares in December repurchased in open market transactions as investments in the Company's non-qualified deferred compensation plan.
Years Ended December 31, In millions except for per share, percentage and share amounts 2022 2021 2020 Total revenues $ 154 $ 189 $ 282 Total expenses 302 634 860 Income (loss) from continuing operations before income taxes (148) (445) (578) Provision (benefit) for income taxes 1 — — Net income (loss) from continuing operations (149) (445) (578) Income (loss) from discontinued operations, net of income taxes (54) — — Net income (loss) (203) (445) (578) Less: Net income (loss) from discontinued operations attributable to noncontrolling interests (8) — — Net income (loss) attributable to MBIA Inc. $ (195) $ (445) $ (578) Net income (loss) per basic and diluted common share attributable to MBIA Inc. $ (3.92) $ (8.99) $ (9.78) Adjusted net income (loss) (1) $ (145) $ (261) $ (173) Adjusted net income (loss) per diluted share (1) $ (2.90) $ (5.27) $ (2.93) Weighted average basic and diluted common shares outstanding 49,803,739 49,472,281 59,071,843 (1)—Adjusted net income (loss) and adjusted net income (loss) per diluted share are non-GAAP measures.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) RESULTS OF OPERATIONS Summary of Consolidated Results The following table presents a summary of our consolidated financial results for the years ended December 31, 2023, 2022 and 2021: Years Ended December 31, In millions except for per share, percentage and share amounts 2023 2022 2021 Total revenues $ 7 $ 154 $ 189 Total expenses 491 302 634 Income (loss) from continuing operations before income taxes (484 ) (148 ) (445 ) Provision (benefit) for income taxes - 1 - Net income (loss) from continuing operations (484 ) (149 ) (445 ) Income (loss) from discontinued operations, net of income taxes (3 ) (54 ) - Net income (loss) (487 ) (203 ) (445 ) Less: Net income (loss) from discontinued operations attributable to noncontrolling interests 4 (8 ) - Net income (loss) attributable to MBIA Inc. $ (491 ) $ (195 ) (445 ) Net income (loss) per basic and diluted common share attributable to MBIA Inc. $ (10.18 ) $ (3.92 ) $ (8.99 ) Adjusted net income (loss) (1) $ (169 ) $ (145 ) $ (261 ) Adjusted net income (loss) per diluted share (1) $ (3.49 ) $ (2.90 ) $ (5.27 ) Weighted average basic and diluted common shares outstanding 48,207,574 49,803,739 49,472,281 ___________________ (1) - Adjusted net income (loss) and adjusted net income (loss) per diluted share are non-GAAP measures.
In addition, an increase in risk-free rates during 2022 contributed to the decrease in our estimated present value of expected PREPA recoveries. This was partially offset by loss incurred benefits on our HTA and GO recoveries to reflect the fair values of the consideration received as of the acquisition dates, which were higher than our previous estimates.
This was partially offset by loss incurred benefits on our HTA and GO recoveries to reflect the fair values of the consideration received as of the acquisition dates, which were higher than our previous estimates.
Gross Par Outstanding In millions December 31, 2022 December 31, 2021 Rating Amount % Amount % AAA $ 1,433 4.5% $ 1,682 4.6% AA 13,448 42.5% 14,874 40.8% A 9,672 30.5% 10,439 28.6% BBB 5,055 16.0% 6,187 17.0% Below investment grade 2,044 6.5% 3,269 9.0% Total $ 31,652 100.0% $ 36,451 100.0% U.S.
Gross Par Outstanding In millions December 31, 2023 December 31, 2022 Rating Amount % Amount % AAA $ 1,283 4.5 % $ 1,433 4.5 % AA 11,919 42.0 % 13,448 42.5 % A 10,539 37.1 % 9,672 30.5 % BBB 2,394 8.5 % 5,055 16.0 % Below investment grade 2,242 7.9 % 2,044 6.5 % Total $ 28,377 100.0 % $ 31,652 100.0 % U.S.
Based on MBIA Corp.’s current projected earnings and our expectation that it will not write significant new business, we believe it is unlikely that MBIA Corp. will generate significant income in the near future.
If MBIA Corp. becomes profitable, it is not expected to make any tax payments under our tax sharing agreement. Based on MBIA Corp.’s current projected earnings and our expectation that it will not write new business outside of remediation activities, we believe it is unlikely that MBIA Corp. will generate significant income in the near future.
For 2022, losses and LAE incurred primarily related to changes in our estimate of expected recoveries on National’s PREPA exposure, partially offset by benefits related to Puerto Rico HTA and GO recoveries. National’s expected recoveries on PREPA reflect assumptions based on the PREPA PSA agreed to in January of 2023.
For 2023, losses and LAE incurred related to updating PREPA scenarios to reflect the Amended PSA and extending the effective date of a settlement into 2024. For 2022, losses and LAE incurred primarily related to changes in our estimated recoveries on National’s PREPA exposure, partially offset by benefits related to Puerto Rico HTA and GO recoveries.
There is no assurance that the Company will reverse any of its valuation allowance on its net deferred tax asset in the future. Refer to “Note 11: Income Taxes” in the Notes to Consolidated Financial Statements for a further discussion of income taxes, including the valuation allowance against the Company’s net deferred tax asset and its accounting for tax uncertainties.
Refer to “Note 11: Income Taxes” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K for a further discussion of income taxes, including the valuation allowance against the Company’s net deferred tax asset and its accounting for tax uncertainties.
As of December 31, 2022, National had $1.0 billion of debt service outstanding related to Puerto Rico, of which $945 million related to the Puerto Rico Electric Power Authority (“PREPA”). On January 1, 2023, PREPA defaulted on scheduled debt service for National insured bonds and National paid gross claims in the aggregate of $18 million.
As of December 31, 2023, National had $808 million of debt service outstanding related to PREPA. On January 1, 2024, PREPA defaulted on scheduled debt service for National insured bonds and National paid gross claims in the aggregate of $16 million. 26 Item 7.
Income (loss) from discontinued operations, net of income taxes The Company classifies certain portfolio companies that the Company acquired from the Zohar CDOs bankruptcy distribution as discontinued operations. Included in this amount are the results of operations for the period from August 2, 2022 to December 31, 2022.
Income (loss) from discontinued operations, net of income taxes The Company classifies certain portfolio companies that the Company acquired from the Zohar CDOs bankruptcy distribution as discontinued operations.
On January 31, 2023, National entered into the PREPA PSA with the Oversight Board, on behalf of itself and as the sole Title III representative of PREPA.
PREPA National’s largest remaining exposure to Puerto Rico, by gross par outstanding, is to PREPA. On January 31, 2023, National entered into the PREPA RSA with the Oversight Board, on behalf of itself and as the sole Title III representative of PREPA.
Refer to “Note 1: Business Developments and Risks and Uncertainties” and “Note 6: Loss and Loss Adjustment Expense Reserves” in the Notes to Consolidated Financial Statements for a further discussion of the Zohar CDOs.
Refer to “Note 1: Business Developments and Risks and Uncertainties” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K for a further discussion of the Zohar CDOs. 27 Item 7.
Refer to the following “Losses and Loss Adjustment Expenses” sections in the Results of Operations of our U.S. Public Finance Insurance and International and Structured Finance Insurance segments for additional information on our insurance losses and LAE.
In addition, there was a net increase in net losses and LAE on Puerto Rico related credits in 2023 compared with 2022. Refer to the following “Loss and Loss Adjustment Expenses” sections of the U.S. Public Finance Insurance and International and Structured Finance Insurance segments for additional information on our losses and LAE.
National uses both an internally developed credit rating system as well as third-party rating sources in the analysis of credit quality measures of its insured portfolio.
INSURED PORTFOLIO EXPOSURE Financial guarantee insurance companies use a variety of approaches to assess the underlying credit risk profile of their insured portfolios. National uses both an internally developed credit rating system as well as third-party rating sources in the analysis of credit quality measures of its insured portfolio.
The Title III cases for the Commonwealth of Puerto Rico and PBA were confirmed on January 18, 2022, and became effective on March 15, 2022.
On February 4, 2019, the District of Puerto Rico entered the order confirming the Third Amended Title III Plan of Adjustment for COFINA. The Title III cases for GO and PBA were confirmed on January 18, 2022, and became effective on March 15, 2022.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) RESULTS OF OPERATIONS (continued) • Net unearned premium revenue in excess of expected losses of National - We include net unearned premium revenue in excess of expected losses.
Gains and losses from sales and impairments of AFS securities are recorded in book value through earnings. 31 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) RESULTS OF OPERATIONS (continued) • Net unearned premium revenue in excess of expected losses of National - We include net unearned premium revenue in excess of expected losses.
These unfavorable changes in revenues were partially offset by fair value gains on interest rate swaps, an increase in net gains of consolidated variable interest entities (“VIEs”) and an increase in net investment income. Fair value gains on our interest rate swaps for 2022 was $89 million compared with gains of $36 million for 2021.
These unfavorable changes were partially offset by a decrease in losses from fair valuing investments and an increase in net investment income. Fair value gains on our interest rate swaps for 2023 were $14 million compared with gains of $89 million for 2022. The decrease was primarily due to the impact of a larger increase in interest rates in 2022.
OTHER NET REALIZED GAINS (LOSSES) For 2022, other net realized losses were primarily related to impairments of certain investments with fair values below amortized cost and for which we intend to sell before recovery of their amortized cost.
OTHER NET REALIZED GAINS (LOSSES) For 2023 and 2022, other net realized losses were primarily related to impairments of certain investments that were in an unrealized loss position and which we intended to sell before their values recovered to their amortized cost basis. 33 Item 7.
In particular, Puerto Rico had been experiencing significant fiscal stress and constrained liquidity. Refer to the “U.S. Public Finance Insurance Puerto Rico Exposures” section for additional information on our Puerto Rico exposures.
In particular, PREPA had been experiencing significant fiscal stress and constrained liquidity. Refer to the “U.S. Public Finance Insurance Puerto Rico Exposures” section for additional information on our PREPA exposures. We continue to monitor and analyze these situations and other stressed credits closely, and the overall extent and duration of stress affecting our insured credits remains uncertain. 32 Item 7.
The University is not a debtor in Title III and continues to be current on its debt service payment. However, the University is subject to a standstill agreement with its senior bondholders, which has been extended to May 31, 2023. National is not a party to the standstill agreement.
However, the University is subject to a standstill agreement with its senior bondholders, which has been extended to May 31, 2024. National is not a party to the standstill agreement. As of December 31, 2023, National had $73 million of debt service outstanding related to the University.
Consolidated total expenses for 2022 and 2021 included net insurance losses and loss adjustment expense (“LAE”) of $38 million and $350 million, respectively.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) RESULTS OF OPERATIONS (continued) Consolidated total expenses for 2023 and 2022 included net insurance losses and loss adjustment expense ("LAE") of $177 million and $38 million, respectively.
Under separate petitions, the Oversight Board subsequently commenced Title III proceedings for COFINA, PRHTA, PREPA and PBA on May 5, 2017, May 21, 2017, July 2, 2017 and September 27, 2019, respectively. On February 4, 2019, the District of Puerto Rico entered the order confirming the Third Amended Title III Plan of Adjustment for COFINA.
Under separate petitions, the Oversight Board subsequently commenced Title III proceedings for the Puerto Rico Sales Tax Financing Corporation (“COFINA”), HTA, PREPA and the Public Buildings Authority (“PBA”) on May 5, 2017, May 21, 2017, July 2, 2017 and September 27, 2019, respectively.
The decrease in losses and LAE was primarily due to favorable changes from insured CDOs, an incurred benefit from increases in risk-free interest rates on the present value of first-lien RMBS loss reserves in 2022 and a decrease in net losses and LAE on certain Puerto Rico insured credits to reflect actual and anticipated settlement.
The increase in losses and LAE was primarily due to incurred losses and LAE in 2023 compared with an incurred loss and LAE benefit in 2022 on our insured first-lien residential mortgage-backed securities ("RMBS") exposure. These changes were primarily related to the impact of changes in risk-free interest rates on the present value of loss reserves.
MBIA Insurance Corporation provides 100% reinsurance to its subsidiary, MBIA Mexico S.A. de C.V. (“MBIA Mexico”). As of December 31, 2022, MBIA Corp.’s total insured gross par outstanding was $3.4 billion. In addition, MBIA Corp. consolidates insured transactions as VIEs if it determines it is the primary beneficiary, and deconsolidates such VIEs when it is no longer the primary beneficiary.
MBIA Insurance Corporation provided 100% reinsurance to its subsidiary, MBIA Mexico S.A. de C.V. (“MBIA Mexico”). In August of 2023, MBIA Insurance Corporation’s reinsurance agreement with MBIA Mexico terminated after the termination of MBIA Mexico's last insurance policy. As of December 31, 2023, MBIA Corp.’s total insured gross par outstanding was $2.9 billion.
We did not defer a material amount of policy acquisition costs during 2022 or 2021 as we did not write any new insurance business in those years. INSURED PORTFOLIO EXPOSURE Financial guarantee insurance companies use a variety of approaches to assess the underlying credit risk profile of their insured portfolios.
When an insured obligation refunds, we accelerate to expense any remaining deferred acquisition costs associated with the policy covering the refunded insured obligation. We did not defer a material amount of policy acquisition costs during 2023 or 2022 as we did not write any new insurance business in those years.
Fair value losses on investments was $11 million for 2022 compared with gains of $6 million for 2021. 2022 also includes foreign currency gains of $16 million on euro-denominated liabilities compared with foreign currency gains of $26 million on these liabilities for 2021.
Net realized investment losses from sales of investments for 2023 were $76 million compared with $41 million for 2022. Foreign exchange losses for 2023 on euro-denominated liabilities was $6 million compared with gains of $16 million for 2022.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) RESULTS OF OPERATIONS (continued) insured issue. Refer to “Note 6: Loss and Loss Adjustment Expense Reserves” in the Notes to Consolidated Financial Statements for additional information related to the Company’s loss reserves.
The level and frequency of monitoring of any insured obligation depends on the type, size, rating and our assessed performance of the insured issue. Refer to “Note 6: Loss and Loss Adjustment Expense Reserves” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K for additional information related to the Company’s loss reserves.
LOSSES AND LOSS ADJUSTMENT EXPENSES Our U.S. public finance insured portfolio management group is responsible for monitoring our U.S. public finance segment’s insured obligations. The level and frequency of monitoring of any insured obligation depends on the type, size, rating and our assessed performance of the 33 Table of Contents Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) RESULTS OF OPERATIONS (continued) LOSSES AND LOSS ADJUSTMENT EXPENSES Our U.S. public finance insured portfolio management group is responsible for monitoring our U.S. public finance segment’s insured obligations.
MBIA Corp. has contributed to the Company’s NOL carryforward, which is used in the calculation of our consolidated income taxes. If MBIA Corp. becomes profitable, it is not expected to make any tax payments under our tax sharing agreement.
In addition, MBIA Corp. consolidates insured transactions as VIEs if it determines it is the primary beneficiary, and deconsolidates such VIEs when it is no longer the primary beneficiary. MBIA Corp. has contributed to the Company’s NOL carryforward, which is used in the calculation of our consolidated income taxes.
In addition, higher yields on investments also contributed to the increase in net investment income in 2022 compared with 2021.
NET INVESTMENT INCOME The increase in net investment income for 2023 compared with 2022 was primarily due to higher yields on investments as a result of investing in a rising interest rate environment.
With the Federal Open Market Committee (“FOMC”) seeking to achieve maximum employment and 2% inflation, the FOMC has increased its target range for the federal funds rate to 4.50% to 4.75% at its most recent meetings. Economic and financial market trends could impact the Company’s financial results.
Economic Environment U.S. economic activity indicators point to modest growth in spending and production, with robust job gains and a low unemployment rate. Inflation remains elevated. With the Federal Open Market Committee (“FOMC”) seeking to achieve maximum employment and 2% inflation, the FOMC has maintained its target range for the federal funds rate at 5.25% to 5.50%.
In October, 7,855 shares were repurchased by the Company in open market transactions for settling awards under the Company’s long term incentive plan. As of December 31, 2022, 283,186,115 shares of Common Stock of the Company, par value $1 per share, were issued and 54,852,671 shares were outstanding.
As of December 31, 2023, 283,186,115 shares of Common Stock of the Company, par value $1 per share, were issued and 50,862,931 shares were outstanding. 24 Item 5.
(2)—Reported within “Other liabilities” on our consolidated balance sheets. The insurance loss recoverable as of December 31, 2022 decreased compared with December 31, 2021, primarily due to the receipt of recoveries pursuant to the implemented GO PSA and the HTA settlement, whereby National received cash and new GO and HTA bonds and CVIs.
(2) - Reported within "Other liabilities" on our consolidated balance sheets. The insurance loss recoverable as of December 31, 2023 increased compared with December 31, 2022, primarily due to anticipated recoveries on the 2023 PREPA debt service payments, as well as a change in scenarios to reflect the PREPA Amended PSA.
Operating expense decreased in 2022 compared with 2021 primarily due to a decrease in compensation expense related to the Company’s deferred compensation plan and lower litigation expenses.
OPERATING EXPENSE Operating expense increased for 2023 compared with 2022 primarily due to an increase in compensation expense primarily related to the Company’s non-qualified deferred compensation plan. Compensation expense related to the Company's non-qualified deferred compensation plan will fluctuation primarily based on plan activity and changes in the value of the plan liability.
The PREPA PSA remains subject to a number of conditions, including (but not limited to) the Title III Court’s approval, and confirmation and effectiveness, of the Amended Plan. There is no assurance the Amended Plan or a substantially similar plan of adjustment will ultimately be confirmed and go effective.
The Amended PSA also provides National with additional consideration in the form of two types of contingent values instruments, whose value cannot be assured. The Amended PSA remains subject to a number of conditions, including (but not limited to) the Title III Court’s confirmation and effectiveness of the Amended Plan, as it may be further amended with the Court’s approval.
National continues to monitor and remediate its existing insured portfolio and may also pursue strategic alternatives that could enhance shareholder value.
National continues to monitor and remediate its existing insured portfolio and has pursued and may continue to pursue other transactions that could enhance shareholder value, including receiving NYSDFS approval of a $550 million special dividend that was paid to its ultimate parent, MBIA Inc., in 2023.
The PREPA PSA provides that, upon the effective date of a plan of adjustment, National shall receive in exchange for its bond and reimbursement claims newly issued PREPA secured revenue bonds together with certain fees and expense reimbursement payments, including an interim payment subject to regulatory approval. The PREPA PSA also provides National with the potential to receive additional consideration.
The Amended PSA provides that, upon effective date of the Amended Plan, National shall receive cash, together with certain fees and expense reimbursement payments, in an amount based in part on the ultimate participation, if any, of certain currently non-accepting holders of uninsured PREPA bonds.
This increase in net gains is due to the impact of larger increases in interest 37 Table of Contents Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) RESULTS OF OPERATIONS (continued) rates in 2022 on swaps for which we receive floating rates.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) RESULTS OF OPERATIONS (continued) NET REALIZED INVESTMENT GAINS (LOSSES) The increase in net realized investment losses for 2023 compared with 2022 primarily related to sales of securities to generate liquidity to terminate interest rate swaps.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) OVERVIEW (continued) 2022 Business Developments The following is a summary of 2022 business developments: Puerto Rico • During 2022, the Commonwealth of Puerto Rico and certain of its instrumentalities (“Puerto Rico”) defaulted on scheduled debt service for National insured bonds and National paid gross claims in the aggregate of $189 million.
Higher interest rates could adversely affect the values of our Company’s investment portfolio, but increase investment portfolio yield and income, and decrease the present value of loss reserves. 2023 Business Developments The following is a summary of 2023 business developments: Puerto Rico • During 2023, the Puerto Rico Electric Power Authority (“PREPA”) defaulted on scheduled debt service for National insured bonds and National paid gross claims in the aggregate of $137 million.
Public Finance Insurance Puerto Rico Exposures” section for additional information on our Puerto Rico exposures.
Public Finance Insurance Puerto Rico Exposures” section for additional information on our Puerto Rico exposures. Dividends In November of 2023, National declared and paid an as-of-right dividend of $97 million to its ultimate parent, MBIA Inc.

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Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeManagement’s Discussion and Analysis of Financial Condition and Results of Operations (continued) RESULTS OF OPERATIONS (continued) The following table presents our international and structured finance insurance segment results for the years ended December 31, 2022, 2021 and 2020: Years Ended December 31, Percent Change In millions 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 Net premiums earned $ 11 $ 32 $ 24 -66% 33% Net investment income 17 6 5 n/m 20% Net realized investment gains (losses) (1) — — n/m n/m Net gains (losses) on financial instruments at fair value and foreign exchange (7) (14) (8) -50% 75% Fees and reimbursements 14 17 12 -18% 42% Other net realized gains (losses) 7 1 1 n/m —% Revenues of consolidated VIEs: Net investment income — — 18 n/m -100% Net gains (losses) on financial instruments at fair value and foreign exchange (14) (8) 108 75% -107% Other net realized gains (losses) 19 (15) 37 n/m -141% Total revenues 46 19 197 142% -90% Losses and loss adjustment (105) 123 367 n/m -66% Amortization of deferred acquisition costs 12 13 16 -8% -19% Operating 22 24 27 -8% -11% Interest 127 109 116 17% -6% Expenses of consolidated VIEs: Operating 8 6 5 33% 20% Interest 3 26 57 -88% -54% Total expenses 67 301 588 -78% -49% Income (loss) from continuing operations before income taxes $ (21) $ (282) $ (391) -93% -28% n/m—Percent change not meaningful.
Biggest changeManagement’s Discussion and Analysis of Financial Condition and Results of Operations (continued) RESULTS OF OPERATIONS (continued) The following table presents our international and structured finance insurance segment results for the years ended December 31, 2023, 2022 and 2021: Years Ended December 31, Percent Change In millions 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Net premiums earned $ 10 $ 11 $ 32 -9 % -66 % Net investment income 23 17 6 35 % n/m Net realized investment gains (losses) (4 ) (1 ) - n/m n/m Net gains (losses) on financial instruments at fair value and foreign exchange (12 ) (7 ) (14 ) 71 % -50 % Fees and reimbursements 7 14 17 -50 % -18 % Other net realized gains (losses) 3 7 1 -57 % n/m Revenues of consolidated VIEs: Net gains (losses) on financial instruments at fair value and foreign exchange (45 ) (14 ) (8 ) n/m 75 % Other net realized gains (losses) (25 ) 19 (15 ) n/m n/m Total revenues (43 ) 46 19 n/m 142 % Losses and loss adjustment 7 (105 ) 123 -107 % n/m Amortization of deferred acquisition costs 8 12 13 -33 % -8 % Operating 22 22 24 - % -8 % Interest 158 127 109 24 % 17 % Expenses of consolidated VIEs: Operating 11 8 6 38 % 33 % Interest 1 3 26 -67 % -88 % Total expenses 207 67 301 n/m -78 % Income (loss) from continuing operations before income taxes $ (250 ) $ (21 ) $ (282 ) n/m -93 % _______________ n/m - Percent change not meaningful.
This deferred interest payment will be due on the first business day on or after which MBIA Insurance Corporation obtains approval to make such payment from NYSDFS. No interest will accrue on the deferred interest.
This deferred interest payment will be due on the first business day on or after which MBIA Insurance Corporation obtains approval to make such payment from the NYSDFS. No interest will accrue on the deferred interest.
Treasury offerings are used to discount loss reserves denominated in U.S. dollars, which represent the majority of our loss reserves. Similarly, yields on foreign government offerings are used to discount loss reserves denominated in currencies other than the U.S. dollar.
Yields on U.S. Treasury offerings are used to discount loss reserves denominated in U.S. dollars, which represent the majority of our loss reserves. Similarly, yields on foreign government offerings are used to discount loss reserves denominated in currencies other than the U.S. dollar.
Insurance Statutory Capital National and MBIA Insurance Corporation are incorporated and licensed in, and are subject to primary insurance regulation and supervision by the NYSDFS. MBIA Mexico is regulated by the Comisión Nacional de Seguros y Fianzas in Mexico. MBIA Corp.’s Spanish Branch is subject to local regulation in Spain.
Insurance Statutory Capital National and MBIA Insurance Corporation are incorporated and licensed in, and are subject to primary insurance regulation and supervision by the NYSDFS. MBIA Mexico is regulated by the Comisión Nacional de Seguros y Fianzas in Mexico. MBIA Corp.’s Spanish Branch was subject to local regulation in Spain.
As of December 31, 2022 and December 31, 2021, 30% and 26%, respectively, of our international and structured finance insured portfolio was rated below investment grade, before giving effect to MBIA’s guarantees, based on MBIA’s internal ratings, which are generally more current than the underlying ratings provided by S&P and Moody’s for this subset of our insured portfolio.
As of December 31, 2023 and 2022, 26% and 30%, respectively, of our international and structured finance insured portfolio was rated below investment grade, before giving effect to MBIA’s guarantees, based on MBIA’s internal ratings, which are generally more current than the underlying ratings provided by S&P and Moody’s for this subset of our insured portfolio.
Principal and interest on callable obligations or obligations that allow investors to withdraw funds prior to legal maturity are based on the expected call or withdrawal dates of such obligations. Liabilities denominated in foreign currencies are presented in U.S. dollars using applicable exchange rates as of December 31, 2022.
Principal and interest on callable obligations or obligations that allow investors to withdraw funds prior to legal maturity are based on the expected call or withdrawal dates of such obligations. Liabilities denominated in foreign currencies are presented in U.S. dollars using applicable exchange rates as of December 31, 2023.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES We prepare our consolidated financial statements in accordance with GAAP, which requires the use of estimates and assumptions.
CRITICAL ACCOUNTING ESTIMATES We prepare our consolidated financial statements in accordance with GAAP, which requires the use of estimates and assumptions.
Advances by National cannot exceed 3% of its net admitted assets as of the last quarter end. As of December 31, 2022 and 2021, there were no amounts drawn under the agreement. Contractual Obligations The following table summarizes the Company’s future estimated cash payments relating to contractual obligations as of December 31, 2022.
Advances by National cannot exceed 3% of its net admitted assets as of the last quarter end. As of December 31, 2023 and 2022, there were no amounts drawn under the agreement. Contractual Obligations The following table summarizes the Company’s future estimated cash payments relating to contractual obligations as of December 31, 2023.
We did not defer a material amount of policy acquisition costs during 2022 or 2021 as no new business was written. Policy acquisition costs in these periods were primarily related to ceding commissions and premium taxes on installment policies written in prior periods.
We did not defer a material amount of policy acquisition costs during 2023 or 2022 as no new business was written. Policy acquisition costs in these periods were primarily related to ceding commissions and premium taxes on installment policies written in prior periods.
As of December 31, 2022, MBIA Insurance Corporation was in compliance with its aggregate risk limits under the NYIL, but was not in compliance with certain of its single risk limits. Since MBIA Insurance Corporation does not comply with its single risk limits, the NYSDFS could prevent MBIA Insurance Corporation from transacting any new financial guarantee insurance business.
As of December 31, 2023, MBIA Insurance Corporation was in compliance with its aggregate risk limits under the NYIL, but was not in compliance with certain of its single risk limits. Since MBIA Insurance Corporation does not comply with its single risk limits, the NYSDFS could prevent MBIA Insurance Corporation from transacting any new financial guarantee insurance business.
As of December 31, 2022, based on the actual or estimated underlying ratings of our consolidated investment portfolio, without giving effect to financial guarantees, the weighted average rating of only the Insured Investments in the investment portfolio would be in the below investment grade range.
As of December 31, 2023, based on the actual or estimated underlying ratings of our consolidated investment portfolio, without giving effect to financial guarantees, the weighted average rating of only the Insured Investments in the investment portfolio would be in the below investment grade range.
Without giving effect to the National and MBIA Corp. guarantees of the Company-Insured Investments in the consolidated investment portfolio, as of December 31, 2022, based on actual or estimated underlying ratings, the weighted average rating of the consolidated investment portfolio was in the Aa range.
Without giving effect to the National and MBIA Corp. guarantees of the Company-Insured Investments in the consolidated investment portfolio, as of December 31, 2023, based on actual or estimated underlying ratings, the weighted average rating of the consolidated investment portfolio was in the Aa range.
(2)—Includes financial guarantee and insured derivative related premiums. (3)—This amount primarily consists of expected recoveries related to the payment of claims on insured CDOs and RMBS. In addition, the 2022 balance includes salvage related to a permitted practice granted by NYSDFS.
(2) - Includes financial guarantee and insured derivative related premiums. (3) - This amount primarily consists of expected recoveries related to the payment of claims on insured CDOs and RMBS. In addition, the amount includes salvage related to a permitted practice granted by NYSDFS.
We have provided CPR to allow investors and analysts to evaluate MBIA Corp., using the same measure that MBIA’s management uses to evaluate MBIA Corp.’s resources to pay claims under its insurance policies. There is no directly comparable GAAP measure. Our calculation of CPR may differ from the calculation of CPR reported by other companies.
We have provided CPR to allow investors and analysts to evaluate MBIA Corp., using the same measure that MBIA’s management uses to evaluate MBIA Corp.’s resources to pay claims under its insurance policies. There is no directly comparable GAAP measure. Our calculation of CPR may differ from the calculation of CPR reported by other companies. 50 Item 7.
Also included in Level 3 are financial instruments that have significant unobservable inputs deemed significant to the instrument’s overall fair value. Level 3 assets represented approximately 7% and 3% of total assets measured at fair value on a recurring basis as of December 31, 2022 and 2021, respectively.
Also included in Level 3 are financial instruments that have significant unobservable inputs deemed significant to the instrument’s overall fair value. Level 3 assets represented approximately 7% of total assets measured at fair value on a recurring basis as of December 31, 2023 and 2022.
Under Section 1307 of the NYIL and the Fiscal Agency Agreement governing the surplus notes, Surplus Note payments may be made only with the prior approval by the NYSDFS and if MBIA Insurance Corporation has sufficient “Eligible Surplus”, or as we believe, “free and divisible surplus” as an appropriate calculation of “Eligible Surplus.” As of December 31, 2022, MBIA Insurance Corporation had “free and divisible surplus” of $146 million.
Under Section 1307 of the NYIL and the Fiscal Agency Agreement governing the surplus notes, Surplus Note payments may be made only with the prior approval by the NYSDFS and if MBIA Insurance Corporation has sufficient “Eligible Surplus”, or as we believe, “free and divisible surplus” as an appropriate calculation of “Eligible Surplus.” As of December 31, 2023, MBIA Insurance Corporation had “free and divisible surplus” of $129 million.
Also, any adverse developments on macroeconomic factors could result in new or additional losses on insured obligations. Our remediation strategy for an insured obligation that has defaulted or is expected to default may also have an impact on our loss reserves.
Also, any adverse developments on macroeconomic factors could result in new or additional losses on insured obligations. Our remediation strategy for an insured obligation that has defaulted or is expected to default may also have an impact on our loss reserves. 51 Item 7.
The NYSDFS has cited both MBIA Insurance Corporation’s liquidity and financial condition as well as the availability of “free and divisible surplus” as the basis for such non-approvals. As of January 15, 2023, the most recent scheduled interest payment date, there was $1.2 billion of unpaid interest on the par amount outstanding of $953 million of the Surplus Notes.
The NYSDFS has cited both MBIA Insurance Corporation’s liquidity and financial condition as well as the availability of “free and divisible surplus” as the basis for such non-approvals. As of January 15, 2024, the most recent scheduled interest payment date, there was $1.4 billion of unpaid interest on the par amount outstanding of $953 million of the Surplus Notes.
Obligations of these VIEs are collateralized by assets held by the VIEs, and investors in such obligations do not have recourse to the general credit of MBIA. As of December 31, 2022, VIE notes issued by issuer-sponsored consolidated VIEs totaled $172 million and are not considered contractual obligations of MBIA beyond MBIA’s insurance claim obligation.
Obligations of these VIEs are collateralized by assets held by the VIEs, and investors in such obligations do not have recourse to the general credit of MBIA. As of December 31, 2023, VIE notes issued by issuer-sponsored consolidated VIEs totaled $78 million and are not considered contractual obligations of MBIA beyond MBIA’s insurance claim obligation.
Included in the international and structured finance insurance segment’s surplus notes due within one year is $1.2 billion of unpaid interest related to 2013 through 2022 interest payments for which MBIA Insurance Corporation’s requests for approval to pay was not approved by the NYSDFS.
Included in the international and structured finance insurance segment’s surplus notes due within one year is $1.4 billion of unpaid interest related to 2013 through 2023 interest payments for which MBIA Insurance Corporation’s requests for approval to pay was not approved by the NYSDFS.
As of December 31, 2022, the weighted average credit quality rating of the Company’s AFS fixed-maturity investment portfolio, excluding short-term investments, was Aa and 92% of the investments were investment grade. The fair values of securities in the Company’s AFS fixed-maturity investment portfolio are sensitive to changes in interest rates.
As of December 31, 2023, the weighted average credit quality rating of the Company’s AFS fixed-maturity investment portfolio, excluding short-term investments, was Aa and 96% of the investments were investment grade. The fair values of securities in the Company’s AFS fixed-maturity investment portfolio are sensitive to changes in interest rates.
We categorize our financial instruments based on the lowest level category at which we can generate reliable fair values. The determination of reliability requires management to exercise judgment. The degree of judgment used to determine the fair values of financial instruments generally correlates to the degree that pricing is not observable. 51 Table of Contents Item 7.
We categorize our financial instruments based on the lowest level category at which we can generate reliable fair values. The determination of reliability requires management to exercise judgment. The degree of judgment used to determine the fair values of financial instruments generally correlates to the degree that pricing is not observable.
National Liquidity The primary sources of cash available to National are: • principal and interest receipts on assets held in its investment portfolio, including proceeds from the sale of assets; • recoveries associated with insurance loss payments; and • installment premiums.
National Liquidity The primary sources of cash available to National are: • principal and interest receipts on assets held in its investment portfolio, including proceeds from the sale of assets; and • recoveries associated with insurance loss payments; 44 Item 7.
As of December 31, 2022 and December 31, 2021, National held cash and investments of $2.1 billion and $2.0 billion, respectively, of which $230 million and $199 million, respectively, were 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.
As of December 31, 2023 and 2022, National held cash and investments of $1.3 billion and $2.1 billion, respectively, of which $75 million and $230 million, respectively, were 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.
As a result of the consolidation of VIEs, loss and LAE excludes losses and LAE benefits of $9 million and $21 million for 2022 and 2021, respectively, as VIE losses and LAE activity is eliminated in consolidation.
As a result of the consolidation of VIEs, loss and LAE excludes losses and LAE benefits of $30 million and $9 million, for 2023 and 2022, respectively, as VIE losses and LAE activity is eliminated in consolidation.
Currently, we do not intend to use reinsurance to decrease the insured exposure in our portfolio. Refer to “Note 13: Insurance in Force” in the Notes to Consolidated Financial Statements included in this Form 10-K for a further discussion about reinsurance agreements.
Currently, we do not intend to use reinsurance to decrease the insured exposure in our portfolio. Refer to “Note 13: Insurance in Force” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K for a further discussion about reinsurance agreements.
Level 3 liabilities represented approximately 82% and 75% of total liabilities measured at fair value on a recurring basis as of December 31, 2022 and 2021, respectively.
Level 3 liabilities represented approximately 99% and 82% of total liabilities measured at fair value on a recurring basis as of December 31, 2023 and 2022, respectively.
Refer to the “National—Claims-Paying Resources (Statutory Basis)” section below for additional information on National’s statutory capital. In order to maintain its New York State financial guarantee insurance license, National is required to maintain a minimum of $65 million of policyholders’ surplus.
Refer to the “MBIA Insurance Corporation — Claims - Paying Resources (Statutory Basis)” section below for additional information on MBIA Insurance Corporation’s statutory capital. In order to maintain its New York State financial guarantee insurance license, MBIA Insurance Corporation is required to maintain a minimum of $65 million of policyholders’ surplus.
Effective in the first quarter of 2022, MBIA Corp. was granted a permitted practice by the New York State Department of Financial Services (“NYSDFS”) related to the purchase of certain MBIA Corp.-insured securities with gross case base loss reserves (“Remediation Securities”). The Remediation Securities are being acquired with the intent to terminate or commute the related insurance policies.
Effective in the first quarter of 2022, MBIA Corp. was granted a permitted practice by the NYSDFS related to the purchase of certain MBIA Corp.-insured securities with gross case base loss reserves (“Remediation Securities”). The Remediation Securities are being acquired with the intent to terminate or commute the related insurance policies.
For 2022, the losses and LAE benefit primarily related to an increase in risk free rates during 2022 which resulted in the value of expected future payments, net of future recoveries to decline, primarily on our first-lien RMBS portfolio and an increase in expected salvage collections from insured CDOs.
For 2022, the losses and LAE benefit primarily related to an increase in risk-free rates used to discount net loss reserves, which resulted in a decline in the value of expected future payments, net of future recoveries, primarily on our first-lien RMBS portfolio. An increase in expected salvage collections from insured CDOs also contributed to the losses and LAE benefit.
As of December 31, 2022 and December 31, 2021, the liquidity positions of MBIA Inc. were $230 million and $239 million, respectively, and included cash and cash equivalents and other investments comprised of highly rated commercial paper and U.S. government and asset-backed bonds.
As of December 31, 2023 and 2022, the liquidity positions of MBIA Inc. were $411 million and $230 million, respectively, and included cash and cash equivalents and other investments comprised of highly rated commercial paper and U.S. government and asset-backed bonds. 45 Item 7.
The MBIA Advances Agreement permits National to make advances to MBIA Inc. and other MBIA group companies that are party to the agreement at a rate per annum equal to LIBOR plus 0.25%. The agreement also permits other affiliates to make advances to National or MBIA Insurance Corporation at a rate per annum equal to LIBOR minus 0.10%.
The MBIA Advances Agreement permits National to make advances to MBIA Inc. and other MBIA group companies that are party to the agreement at a rate per annum equal to SOFR plus 0.51161%. The agreement also permits other affiliates to make advances to National or MBIA Insurance Corporation at a rate per annum equal to SOFR plus 0.16161%.
The credit quality distribution of the Company’s AFS fixed-maturity investment portfolios, excluding short-term investments, are based on ratings from Moody’s and alternate ratings sources, such as S&P or the best estimate of the ratings assigned by the Company, have been used for a small percentage of securities that are not rated by Moody’s.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) LIQUIDITY AND CAPITAL RESOURCES (continued) The credit quality distribution of the Company’s AFS fixed-maturity investment portfolios, excluding short-term investments, are based on ratings from Moody’s and alternate ratings sources, such as S&P or the best estimate of the ratings assigned by the Company, have been used for a small percentage of securities that are not rated by Moody’s.
Our AFS investments comprise high-quality fixed-income securities and short-term investments.
Our AFS investments comprise high-quality fixed-income securities and short-term investments. 43 Item 7.
Refer to “Note 6: Loss and Loss Adjustment Expense Reserves” in the Notes to Consolidated Financial Statements for further information on our loss reserves and recoveries, including critical accounting estimates used in the determination of these amounts.
Refer to “Note 6: Loss and Loss Adjustment Expense Reserves” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K for further information on our loss reserves and recoveries, including critical accounting estimates used in the determination of these amounts.
Refer to “Note 7: Fair Value of Financial Instruments” in the Notes to Consolidated Financial Statements for further information about our financial assets and liabilities that are accounted for at fair value, including valuation techniques and significant inputs used to estimate fair values.
Refer to “Note 7: Fair Value of Financial Instruments” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K for further information about our financial assets and liabilities that are accounted for at fair value, including valuation techniques and significant inputs used to estimate fair values. 52
As of December 31, 2022, MBIA Insurance Corporation maintained its minimum requirement of policyholders’ surplus but did not have enough qualifying assets to support its contingency reserves and 50% of its loss reserves and unearned premium reserves.
As of December 31, 2023, MBIA Insurance Corporation maintained its minimum requirement of policyholders’ surplus and had enough qualifying assets to support its contingency reserves and 50% of its loss reserves and unearned premium reserves.
POLICY ACQUISITION COSTS AND OPERATING EXPENSES International and structured finance insurance segment expenses for the years ended December 31, 2022, 2021 and 2020 are presented in the following table: Years Ended December 31, Percent Change In millions 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 Gross expenses $ 22 $ 25 $ 28 -12% -11% Amortization of deferred acquisition costs $ 12 $ 13 $ 16 -8% -19% Operating 22 24 27 -8% -11% Total insurance expenses $ 34 $ 37 $ 43 -8% -14% Gross expenses represent total insurance expenses before the deferral of any policy acquisition costs.
POLICY ACQUISITION COSTS AND OPERATING EXPENSES International and structured finance insurance segment expenses for the years ended December 31, 2023, 2022 and 2021 are presented in the following table: Years Ended December 31, Percent Change In millions 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Gross expenses $ 23 $ 22 $ 25 5 % -12 % Amortization of deferred acquisition costs $ 8 $ 12 $ 13 -33 % -8 % Operating 22 22 24 - % -8 % Total insurance operating expenses $ 30 $ 34 $ 37 -12 % -8 % Gross expenses represent total insurance expenses before the deferral of any policy acquisition costs.
Refer to the Notes to the Consolidated Financial Statements for additional information about these contractual obligations, including “Note 6: Loss and Loss Adjustment Expense Reserves” and “Note 13: Insurance in Force” for additional information about our insurance claim obligations and exposures under our insurance contracts.
Refer to the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K for additional information about these contractual obligations, including “Note 6: Loss and Loss Adjustment Expense Reserves” and “Note 13: Insurance in Force” for additional information about our insurance claim obligations and exposures under our insurance contracts.
National and MBIA Insurance Corporation each are required to file detailed annual financial statements, as well as interim financial statements, with the NYSDFS and similar supervisory agencies in each of the other jurisdictions in which it is licensed.
In May of 2023, MBIA Corp.’s Spanish Branch was legally closed. National and MBIA Insurance Corporation each are required to file detailed annual financial statements, as well as interim financial statements, with the NYSDFS and similar supervisory agencies in each of the other jurisdictions in which it is licensed.
The insurance loss recoverable primarily relates to reimbursement rights arising from the payment of claims on MBIA Corp.’s policies insuring certain CDOs and RMBS. Such payments also entitle MBIA Corp. to exercise certain rights and remedies to seek recovery of its reimbursement entitlements.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) RESULTS OF OPERATIONS (continued) The insurance loss recoverable primarily relates to reimbursement rights arising from the payment of claims on MBIA Corp.’s policies insuring certain RMBS transactions. Such payments also entitle MBIA Corp. to exercise certain rights and remedies to seek recovery of its reimbursement entitlements.
The primary uses of cash by MBIA Inc. are: • servicing outstanding unsecured corporate debt obligations and MTNs; • meeting collateral posting requirements under investment agreements and derivative arrangements; • payments related to interest rate swaps; • payments of operating expenses; and • funding share repurchases and debt buybacks.
The primary uses of cash by MBIA Inc. are: • servicing outstanding unsecured corporate debt obligations and MTNs; • meeting collateral posting requirements under investment agreements; • payments related to interest rate swaps (substantially all were terminated in 2023); • payments of operating expenses; • funding share repurchases and debt buybacks; and • payment of dividends to shareholders.
As of December 31, 2022, Insured Investments at fair value represented $198 million or 7% of consolidated investments, of which $173 million or 6% of consolidated investments were Company-Insured Investments.
As of December 31, 2023, Insured Investments at fair value represented $135 million or 7% of consolidated investments, of which $125 million or 6% of consolidated investments were Company-Insured Investments.
Currently, a significant portion of the cash and securities held by MBIA Inc. is pledged against investment agreement liabilities, the Asset Swap (simultaneous repurchase and reverse repurchase agreement) and derivatives, which limits its ability to raise liquidity through asset sales.
We do not expect MBIA Inc. to receive dividends from MBIA Corp. Currently, a portion of the cash and securities held by MBIA Inc. is pledged against investment agreement liabilities, the Asset Swap (simultaneous repurchase and reverse repurchase agreement), which limits its ability to raise liquidity through asset sales of these securities.
International and Structured Finance Insurance Portfolio Exposures Credit Quality The credit quality of our international and structured finance insured portfolio is assessed in the same manner as our U.S. public finance insured portfolio.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) RESULTS OF OPERATIONS (continued) International and Structured Finance Insurance Portfolio Exposures Credit Quality The credit quality of our international and structured finance insured portfolio is assessed in the same manner as our U.S. public finance insured portfolio.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) CRITICAL ACCOUNTING POLICIES AND ESTIMATES (continued) The fair value measurements of financial instruments held or issued by the Company are determined through the use of observable market data when available. Market data is obtained from a variety of third-party sources, including dealer quotes.
The fair value measurements of financial instruments held or issued by the Company are determined through the use of observable market data when available. Market data is obtained from a variety of third-party sources, including dealer quotes.
The following table summarizes our consolidated cash flows for the years ended December 31, 2022, 2021, and 2020: Years Ended December 31, Percent Change In millions 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 Statement of cash flow data: Net cash provided (used) by: Operating activities $ (418) $ 511 $ (390) n/m n/m Investing activities 623 (61) 1,738 n/m -104% Financing activities (285) (457) (1,265) -38% -64% Effect of exchange rate changes on cash and cash equivalents (2) — 1 n/m -100% Cash and cash equivalents—beginning of year 160 167 83 -4% 101% Cash and cash equivalents—end of year $ 78 $ 160 $ 167 -51% -4% n/m—Percent change not meaningful. 42 Table of Contents Item 7.
The following table summarizes our consolidated cash flows for the years ended December 31, 2023, 2022 and 2021: Years Ended December 31, Percent Change In millions 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Statement of cash flow data: Net cash provided (used) by: Operating activities $ (195) $ (418 ) $ 511 -53 % n/m Investing activities 767 623 (61 ) 23 % n/m Financing activities (542) (285 ) (457 ) 90 % -38 % Effect of exchange rate changes on cash and cash equivalents - (2 ) - -100 % n/m Cash and cash equivalents - beginning of period 78 160 167 -51 % -4 % Cash and cash equivalents - end of period $ 108 $ 78 $ 160 38 % -51 % _________________________________ n/m - Percent change not meaningful.
These financial statements are prepared in accordance with New York State and the National Association of Insurance Commissioners’ statements of statutory accounting principles and assist our regulators in evaluating minimum standards of solvency, including minimum capital requirements, and business conduct.
These financial statements are prepared in accordance with New York State and with statutory accounting principles (“U.S. STAT”) and assist our regulators in evaluating minimum standards of solvency, including minimum capital requirements, and business conduct. 48 Item 7.
National’s CPR and components thereto, as of December 31, 2022 and December 31, 2021 are presented in the following table: In millions As of December 31, 2022 As of December 31, 2021 Policyholders’ surplus $ 1,545 $ 1,569 Contingency reserves 379 402 Statutory capital 1,924 1,971 Unearned premiums 262 311 Present value of installment premiums (1) 110 121 Premium resources (2) 372 432 Net loss and LAE reserves (1) (140) (386) Salvage reserves on paid claims (1) 288 944 Gross loss and LAE reserves 148 558 Total claims-paying resources $ 2,444 $ 2,961 (1)—Calculated using a discount rate of 4.29% and 3.65% as of December 31, 2022 and 2021, respectively.
National’s CPR and components thereto, as of December 31, 2023 and 2022 are presented in the following table: As of December 31, As of December 31, In millions 2023 2022 Policyholders' surplus $ 763 $ 1,545 Contingency reserves 354 379 Statutory capital 1,117 1,924 Unearned premiums 237 262 Present value of installment premiums (1) 101 110 Premium resources (2) 338 372 Net loss and LAE reserves (1) 75 (140 ) Salvage reserves on paid claims (1) 151 288 Gross loss and LAE reserves 226 148 Total claims-paying resources $ 1,681 $ 2,444 ________________ (1) - Calculated using a discount rate of 4.67% and 4.29% as of December 31, 2023 and 2022, respectively .
These amounts include the gross par outstanding related to transactions that the Company consolidates under accounting guidance for VIEs and includes international exposure of $149 million and $238 million, as of December 31, 2022 and December 31, 2021, respectively.
These amounts include the gross par outstanding related to transactions that the Company consolidates under accounting guidance for VIEs and includes international exposure of $39 million and $149 million, as of December 31, 2023 and 2022, respectively. In addition, as of December 31, 2023 and 2022, MBIA Corp. insured $117 million and $201 million, respectively, of CDOs and related instruments.
Below investment grade insurance policies primarily include our first-lien RMBS and CDO exposures. Selected Portfolio Exposures MBIA Corp. insures RMBS backed by residential mortgage loans, including first-lien alternative A-paper and subprime mortgage loans directly through RMBS securitizations.
Below investment grade insurance policies primarily include our first-lien RMBS and CDO exposures. Selected Portfolio Exposures MBIA Corp. insures RMBS backed by residential mortgage loans, including first-lien alternative A-paper and subprime mortgage loans directly through RMBS securitizations. As of December 31, 2023 and 2022, MBIA Corp. had $596 million and $802 million, respectively, of first-lien RMBS gross par outstanding.
In establishing case basis loss reserves, we calculate the present value of probability-weighted estimated loss payments, net of estimated recoveries, using a discount rate equal to the risk-free rate applicable to the currency and the weighted average remaining life of the insurance contract. Yields on U.S.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) CRITICAL ACCOUNTING ESTIMATES (continued) In establishing case basis loss reserves, we calculate the present value of probability-weighted estimated loss payments, net of estimated recoveries, using a discount rate equal to the risk-free rate applicable to the currency and the weighted average remaining life of the insurance contract.
The U.S. public finance insurance segment’s financial guarantee contracts generally cannot be accelerated by a party other than the insurer which helps to mitigate liquidity risk in this segment.
The U.S. public finance insurance segment’s financial guarantee contracts generally cannot be accelerated by a party other than the insurer which helps to mitigate liquidity risk in this segment. As of December 31, 2023, National has a stand-alone NOL carryforward of $474 million.
Refer to “Note 2: Significant Accounting Policies” in the Notes to Consolidated Financial Statements for a discussion of our significant accounting policies and methods used in the preparation of our consolidated financial statements. 50 Table of Contents Item 7.
Refer to “Note 2: Significant Accounting Policies” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K for a discussion of our significant accounting policies and methods used in the preparation of our consolidated financial statements.
As of December 31, 2022 and 2021, the Company had $233 million of unrealized losses and $139 million of unrealized gains, respectively, net of deferred taxes related to its investment portfolio recorded in accumulated other comprehensive income within equity. The unrealized losses during 2022 resulted from higher interest rates and wider credit spreads.
As of December 31, 2023 and 2022, the Company had $133 million and $233 million of unrealized losses, respectively, net of deferred taxes related to its investment portfolio recorded in accumulated other comprehensive income within equity.
Refer to “Note 6: Loss and Loss Adjustment Expense Reserves” in the Notes to Consolidated Financial Statements for a description of the Company’s loss reserving policy and additional information related to its loss reserves.
Refer to "Note 6: Loss and Loss Adjustment Expense Reserves" in the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K for a description of the Company’s loss reserving policy and additional information related to its loss reserves and recoverables.
In order to maintain its New York State financial guarantee insurance license, MBIA Insurance Corporation is required to maintain a minimum of $65 million of policyholders’ surplus. In addition, under NYIL, MBIA Insurance Corporation is required to invest its minimum surplus and contingency reserves and 50% of its loss reserves and unearned premium reserves in certain qualifying assets.
In addition, under NYIL, MBIA Insurance Corporation is required to invest its minimum surplus and contingency reserves and 50% of its loss reserves and unearned premium reserves in certain qualifying assets.
National had positive earned surplus as of December 31, 2022 from which it may pay dividends, subject to the limitations described above. During 2022 and 2021, National declared and paid a dividend of $72 million and $60 million, respectively, to its ultimate parent, MBIA Inc.
National had positive earned surplus as of December 31, 2023 from which it may pay dividends, subject to the limitations described above. During 2023, National paid a $550 million special dividend that was approved by the NYSDFS to its ultimate parent, MBIA Inc.
MBIA Corp.’s CPR and components thereto, as of December 31, 2022 and December 31, 2021 are presented in the following table: As of December 31, As of December 31, In millions 2022 2021 Policyholders’ surplus $ 164 $ 97 Contingency reserves 5 37 Statutory capital 169 134 Unearned premiums 36 46 Present value of installment premiums (1) 34 48 Premium resources (2) 70 94 Net loss and LAE reserves (1) 35 266 Salvage reserves on paid claims (1) (3) 395 231 Gross loss and LAE reserves 430 497 Total claims-paying resources $ 669 $ 725 (1)—Calculated using a discount rate of 5.53% and 4.99% as of December 31, 2022 and 2021, respectively.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) LIQUIDITY AND CAPITAL RESOURCES (continued) MBIA Corp.’s CPR and components thereto, as of December 31, 2023 and 2022 are presented in the following table: As of December 31, As of December 31, In millions 2023 2022 Policyholders’ surplus $ 147 $ 164 Contingency reserves 5 5 Statutory capital 152 169 Unearned premiums 30 36 Present value of installment premiums (1) 26 34 Premium resources (2) 56 70 Net loss and LAE reserves (1) 27 35 Salvage reserves on paid claims (1) (3) 269 395 Gross loss and LAE reserves 296 430 Total claims-paying resources $ 504 $ 669 ________________ (1) - Calculated using a discount rate of 5.48% and 5.53% as of December 31, 2023 and 2022, respectively.
Gross insurance claim obligations represent the future value of probability-weighted payments the Company’s insurance companies expect to make (before reinsurance and the consolidation of VIEs) under insurance policies 46 Table of Contents Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) LIQUIDITY AND CAPITAL RESOURCES (continued) for which the Company has recorded loss reserves.
Gross insurance claim obligations represent the future value of probability-weighted payments the Company’s insurance companies expect to make (before reinsurance and the consolidation of VIEs) under insurance policies for which the Company has recorded loss reserves.
Total capital resources were $0.3 billion and $0.9 billion as of December 31, 2022 and 2021, respectively. In addition to scheduled debt maturities, from time to time, we reduce unsecured debt through calls or repurchases. Also, MBIA Inc. may repurchase or National may purchase outstanding MBIA Inc. common shares when we deem it beneficial to our shareholders.
In addition to scheduled debt maturities, from time to time, we reduce unsecured debt through calls or repurchases. Also, MBIA Inc. may repurchase or National may purchase outstanding MBIA Inc. common shares when we deem it beneficial to our shareholders.
In millions Total Due Within 1 Year U.S. public finance insurance segment: Gross insurance claim obligations (1) $ 821 $ 137 Lease liability 23 3 Corporate segment: Long-term debt 373 18 Investment agreements 311 25 Medium-term notes 730 18 International and structured finance insurance segment: Gross insurance claim obligations (1) 828 96 Surplus notes 3,598 1,325 Total $ 6,684 $ 1,622 (1)—Amounts exclude any recoveries the Company expects to receive related to these estimated payments or to prior paid claims.
Due Within In millions Total 1 Year U.S. public finance insurance segment: Gross insurance claim obligations (1) $ 665 $ 641 Lease liability 20 3 Corporate segment: Long-term debt 355 18 Investment agreements 286 30 Medium-term notes 707 38 International and structured finance insurance segment: Gross insurance claim obligations (1) 550 68 Surplus notes 3,744 1,492 Total $ 6,327 $ 2,290 ________________ (1) - Amounts exclude any recoveries the Company expects to receive related to these estimated payments or to prior paid claims.
There can be no assurance that the loss reserves recorded in our financial statements will be sufficient or that we will not experience losses on transactions on which we currently have no loss reserves, in particular if the economy deteriorates. We may seek to purchase, directly or indirectly, obligations guaranteed by MBIA Corp. or seek to commute policies.
We may experience considerable incurred losses in certain of these sectors. There can be no assurance that the loss reserves recorded in our financial statements will be sufficient or that we will not experience losses on transactions on which we currently have no loss reserves, in particular if the economy deteriorates.
The amount of insurance exposure reduced, if any, and the nature of any such actions will depend on market conditions, pricing levels from time to time, and other considerations.
We may seek to purchase, directly or indirectly, obligations guaranteed by MBIA Corp. or seek to commute policies. The amount of insurance exposure reduced, if any, and the nature of any such actions will depend on market conditions, pricing levels from time to time, and other considerations.
In accordance with this contingency reserve release, MBIA Corp. will maintain a fixed $5 million of contingency reserves. Due to its significant earned surplus deficit, MBIA Insurance Corporation has not had the statutory capacity to pay dividends since December 31, 2009.
MBIA Insurance Corporation is also required to maintain contingency reserves to provide protection to policyholders in the event of extreme losses in adverse economic events. MBIA Corp. maintains a fixed $5 million of contingency reserves. Due to its significant earned surplus deficit, MBIA Insurance Corporation has not had the statutory capacity to pay dividends since December 31, 2009.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) CRITICAL ACCOUNTING POLICIES AND ESTIMATES (continued) The following accounting estimates are viewed by management to be critical because they require significant judgment on the part of management. Management has discussed and reviewed the development, selection, and disclosure of critical accounting estimates with the Company’s Audit Committee.
The following accounting estimates are viewed by management to be critical because they require significant judgment on the part of management. Management has discussed and reviewed the development, selection, and disclosure of critical accounting estimates with the Company’s Audit Committee. Financial results could be materially different if other methodologies were used or if management modified its assumptions.
CPR has been a common measure used by financial guarantee insurance companies to report and compare resources and continues to be 48 Table of Contents Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) LIQUIDITY AND CAPITAL RESOURCES (continued) used by MBIA’s management to evaluate changes in such resources.
CPR has been a common measure used by financial guarantee insurance companies to report and compare resources, and continues to be used by MBIA’s management to evaluate changes in such resources.
The primary uses of cash by National are: • loss payments and LAE on insured transactions; • payments of dividends; and • payments of operating expenses, taxes and investment portfolio asset purchases.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) LIQUIDITY AND CAPITAL RESOURCES (continued) The primary uses of cash by National are: • loss payments and LAE on insured transactions; • payments of dividends; • payments of operating expenses, taxes and investment portfolio asset purchases; and • funding share repurchases.
To mitigate these risks, we seek to maintain cash and liquidity resources that we believe will be sufficient to make all payments due on our obligations and to meet other financial requirements, such as posting collateral.
To mitigate these risks, we seek to maintain cash and liquidity resources that we believe will be sufficient to make all payments due on our obligations and to meet other financial requirements, such as posting collateral. Contingent liquidity resources include sales of invested assets exposed to credit spread stress risk, which may occur at losses, and accessing the capital markets.
December 31, December 31, Percent In millions 2022 2021 Change Assets: Insurance loss recoverable $ 30 $ 242 -88% Reinsurance recoverable on paid and unpaid losses (1) 4 5 -20% Liabilities: Loss and LAE reserves 285 469 -39% Net reserve (salvage) $ 251 $ 222 13% (1)—Reported within “Other assets” on our consolidated balance sheets.
December 31, December 31, Percent In millions 2023 2022 Change Assets: Insurance loss recoverable $ 31 $ 30 3 % Reinsurance recoverable on paid and unpaid losses (1) 2 4 -50 % Liabilities: Loss and LAE reserves 243 285 -15 % Net reserve (salvage) $ 210 $ 251 -16 % _______________ (1) - Reported within "Other assets" on our consolidated balance sheets. 40 Item 7.
We evaluate and manage liquidity on a legal-entity basis to take into account the legal, regulatory and other limitations on available liquidity resources within the enterprise. Consolidated Cash Flows Information about our consolidated cash flows by category is presented on our consolidated statements of cash flows.
We evaluate and manage liquidity on a legal-entity basis to take into account the legal, regulatory and other limitations on available liquidity resources within the enterprise. 42 Item 7.
Since National does not comply with certain of its single risk limits, the NYSDFS could prevent National from transacting any new financial guarantee insurance business. NYIL regulates the payment of dividends by financial guarantee insurance companies and provides that such companies may not declare or distribute dividends except out of statutory earned surplus.
NYIL regulates the payment of dividends by financial guarantee insurance companies and provides that such companies may not declare or distribute dividends except out of statutory earned surplus.
We expect the as-of-right declared and paid dividend amounts from National to be limited to prior year adjusted net investment income for the foreseeable future. National—Claims-Paying Resources (Statutory Basis) CPR is a key measure of the resources available to National to pay claims under its insurance policies. CPR consists of total financial resources and reserves calculated on a statutory basis.
National – Claims-Paying Resources (Statutory Basis) CPR is a key measure of the resources available to National to pay claims under its insurance policies. CPR consists of total financial resources and reserves calculated on a statutory basis.
Based on our projections of National’s and MBIA Corp.’s future earnings and losses, we expect that for the foreseeable future National will be the primary source of payments to MBIA Inc. There can be no assurance as to the amount and timing of any future dividends from National.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) LIQUIDITY AND CAPITAL RESOURCES (continued) Based on our projections of National’s and MBIA Corp.’s future earnings and losses, we expect that for the foreseeable future National will be the primary source of payments to MBIA Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) RESULTS OF OPERATIONS (continued) NET INVESTMENT INCOME The increase in net investment income for 2022 compared with 2021 was primarily due to higher yields on investment assets in 2022.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) RESULTS OF OPERATIONS (continued) FEES AND REIMBURSEMENTS The decrease in fees and reimbursements for 2023 compared with 2022 was primarily due to a decrease in waiver and consent fees in 2023.
The following table provides net premiums earned from our financial guarantee contracts for the years ended December 31, 2022, 2021 and 2020: Years Ended December 31, Percent Change In millions 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 Net premiums earned: Non-U.S. $ 9 $ 29 $ 18 -69% 61% U.S. 2 3 6 -33% -50% Total net premiums earned $ 11 $ 32 $ 24 -66% 33% VIEs (eliminated in consolidation) $ — $ 3 $ (7) -100% -143% Net premiums earned represent gross premiums earned net of premiums ceded to reinsurers, and include scheduled premium earnings and premium earnings from refunded issues.
The following table provides net premiums earned from our financial guarantee contracts for the years ended December 31, 2023, 2022 and 2021: Years Ended December 31, Percent Change In millions 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Net premiums earned: U.S. $ 2 $ 2 $ 3 - % -33 % Non-U.S. 8 9 29 -11 % -69 % Total net premiums earned $ 10 $ 11 $ 32 -9 % -66 % _______________ n/m - Percent change not meaningful.
NET GAINS (LOSSES) ON FINANCIAL INSTRUMENTS AT FAIR VALUE AND FOREIGN EXCHANGE The net losses in 2022 and 2021 were primarily driven by foreign exchange losses on the revaluation of non-U.S. dollar insurance balances. The favorable change for 2022 compared with 2021 was primarily due to fair value net gains on investments in 2022.
NET GAINS (LOSSES) ON FINANCIAL INSTRUMENTS AT FAIR VALUE AND FOREIGN EXCHANGE The increase in net losses for 2023 compared with 2022 was primarily due to fair value losses on investments for which the fair value option was elected in 2023 compared with fair value gains in 2022.
Refer to “Note 6: Loss and Loss Adjustment Expense Reserves” in the Notes to Consolidated Financial Statements for further information about our insurance loss recoverable and loss and LAE reserves. The following table presents information about our insurance loss recoverable and loss and LAE reserves as of December 31, 2022 and December 31, 2021.
Refer to "Note 6: Loss and Loss Adjustment Expense Reserves" in the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K for further information about our insurance loss recoverable and loss and LAE reserves.
In order to monitor liquidity risk and maintain appropriate liquidity resources, we use the same methodology as we use to monitor credit quality and losses within our insured portfolio, including stress scenarios. During the second quarter of 2022, MBIA Corp. repaid in full the outstanding amount of the subordinated notes between MZ Funding and MBIA Inc. of the Refinanced Facility.
In order to monitor liquidity risk and maintain appropriate liquidity resources, we use the same methodology as we use to monitor credit quality and losses within our insured portfolio, including stress scenarios. 46 Item 7.
For the year ended December 31, 2022, MBIA Insurance Corporation had statutory net income of $46 million. Refer to the “MBIA Insurance Corporation—Claims-Paying Resources (Statutory Basis)” section below for additional information on MBIA Insurance Corporation’s statutory capital.
For 2023 and 2022, National had statutory net loss of $142 million and statutory net income of $75 million, respectively. Refer to the “National — Claims - Paying Resources (Statutory Basis)” section below for additional information on National’s statutory capital.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe following table presents the estimated pre-tax change in fair value of the Company’s financial instruments as of December 31, 2022 from instantaneous shifts in interest rates: Change in Interest Rates In millions 300 Basis Point Decrease 200 Basis Point Decrease 100 Basis Point Decrease 100 Basis Point Increase 200 Basis Point Increase 300 Basis Point Increase Estimated change in fair value $ 260 $ 154 $ 69 $ (56) $ (102) $ (139) FOREIGN EXCHANGE RATE SENSITIVITY The Company is exposed to foreign exchange rate risk in respect of liabilities denominated in currencies other than U.S. dollars.
Biggest changeThe following table presents the estimated pre-tax change in fair value of the Company’s financial instruments as of December 31, 2023 from instantaneous shifts in interest rates: Change in Interest Rates 300 Basis 200 Basis 100 Basis 100 Basis 200 Basis 300 Basis Point Point Point Point Point Point In millions Decrease Decrease Decrease Increase Increase Increase Estimated change in fair value $ 182 $ 106 $ 47 $ (37 ) $ (67 ) $ (90 ) FOREIGN EXCHANGE RATE SENSITIVITY The Company is exposed to foreign exchange rate risk in respect of liabilities denominated in currencies other than U.S. dollars.
The following table presents the estimated pre-tax change in fair value of the Company’s financial instruments as of December 31, 2022 from instantaneous shifts in credit spread curves. It was assumed that all credit spreads move by the same amount. It is more likely that the actual changes in credit spreads will vary by security.
The following table presents the estimated pre-tax change in fair value of the Company’s financial instruments as of December 31, 2023 from instantaneous shifts in credit spread curves. It was assumed that all credit spreads move by the same amount. It is more likely that the actual changes in credit spreads will vary by security.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk The Company’s market risk exposures relate to changes in interest rates, foreign exchange rates and credit spreads that affect the fair value of its financial instruments, primarily investment securities, MTNs and investment agreement liabilities.
Item 7A. Quantit ative and Qualitative Disclosures About Market Risk The Company’s market risk exposures relate to changes in interest rates, foreign exchange rates and credit spreads that affect the fair value of its financial instruments, primarily investment securities, MTNs and investment agreement liabilities.
The following table presents the estimated pre-tax change in fair value of the Company’s financial instruments as of December 31, 2022 from instantaneous shifts in foreign exchange rates: Change in Foreign Exchange Rates Dollar Weakens Dollar Strengthens In millions 20% 10% 10% 20% Estimated change in fair value $ (17) $ (9) $ 9 $ 17 CREDIT SPREAD SENSITIVITY Credit spread sensitivity can be estimated by projecting a hypothetical instantaneous increase or decrease in credit spreads.
The following table presents the estimated pre-tax change in fair value of the Company’s financial instruments as of December 31, 2023 from instantaneous shifts in foreign exchange rates: Change in Foreign Exchange Rates Dollar Weakens Dollar Strengthens In millions 20% 10% 10% 20% Estimated change in fair value $ (28 ) $ (14 ) $ 14 $ 28 CREDIT SPREAD SENSITIVITY Credit spread sensitivity can be estimated by projecting a hypothetical instantaneous increase or decrease in credit spreads.
The changes in fair value reflect partially offsetting effects as the value of the investment portfolios generally changes in an opposite direction from the liability portfolio: Change in Credit Spreads In millions 50 Basis Point Decrease 50 Basis Point Increase 200 Basis Point Increase Estimated change in fair value $ 71 $ (65) $ (222) 53 Table of Contents P0YP0YP3Yhttp://fasb.org/us-gaap/2022#OtherAssetshttp://fasb.org/us-gaap/2022#OtherLiabilitieshttp://fasb.org/us-gaap/2022#RealizedInvestmentGainsLosseshttp://fasb.org/us-gaap/2022#GainsLossesOnExtinguishmentOfDebthttp://www.mbia.com/20221231#NetGainsLossesOnFinancialInstrumentsAtFairValueAndForeignExchangehttp://www.mbia.com/20221231#NetGainsLossesOnFinancialInstrumentsAtFairValueAndForeignExchange
The changes in fair value reflect partially offsetting effects as the value of the investment portfolios generally changes in an opposite direction from the liability portfolio: Change in Credit Spreads 50 Basis 50 Basis 200 Basis Point Point Point In millions Decrease Increase Increase Estimated change in fair value $ 33 $ (30 ) $ (104 ) 53

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