[PART I FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents MBIA Inc.'s unaudited consolidated financial statements for the quarter ended June 30, 2021, highlighting a $61 million net loss and a decrease in total assets to $5.3 billion [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) MBIA Inc.'s balance sheet as of June 30, 2021, shows total assets decreased to $5.25 billion, total liabilities to $5.28 billion, and shareholders' equity shifted to a $36 million deficit Consolidated Balance Sheet Highlights (in millions) | Metric | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Total Assets** | $5,252 | $5,751 | | **Total Liabilities** | $5,275 | $5,602 | | **Total Shareholders' Equity of MBIA Inc.** | $(36) | $136 | | Cash and cash equivalents | $342 | $158 | | Total investments | $2,797 | $2,736 | | Loss and loss adjustment expense reserves | $954 | $990 | | Long-term debt | $2,283 | $2,229 | - A significant change in assets was the settlement of 'Loan repurchase commitments', which were valued at **$604 million** as of December 31, 2020, and are **zero** as of June 30, 2021[12](index=12&type=chunk) [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) MBIA reported a net loss of $61 million for Q2 2021, an improvement from a $106 million loss in Q2 2020, primarily due to significantly lower loss adjustment expenses Statement of Operations Highlights (in millions, except per share data) | Metric | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $18 | $114 | $90 | $108 | | Losses and loss adjustment | $9 | $136 | $107 | $379 | | Total Expenses | $79 | $220 | $257 | $547 | | **Net Income (Loss)** | **$(61)** | **$(106)** | **$(167)** | **$(439)** | | **Diluted EPS** | **$(1.23)** | **$(1.69)** | **$(3.38)** | **$(6.51)** | [Consolidated Statements of Comprehensive Income (Loss)](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) The company reported comprehensive income of $3 million for Q2 2021, a significant turnaround from a $68 million comprehensive loss in Q2 2020, driven by unrealized gains on available-for-sale securities Comprehensive Income (Loss) Summary (in millions) | Metric | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) | $(61) | $(106) | $(167) | $(439) | | Total other comprehensive income (loss) | $64 | $38 | $(12) | $131 | | **Comprehensive income (loss)** | **$3** | **$(68)** | **$(179)** | **$(308)** | [Consolidated Statement of Changes in Shareholders' Equity](index=7&type=section&id=Consolidated%20Statement%20of%20Changes%20in%20Shareholders%27%20Equity) MBIA Inc.'s total shareholders' equity decreased by $172 million to a $36 million deficit for the six months ended June 30, 2021, primarily due to a net loss and accumulated other comprehensive income losses - Total shareholders' equity of MBIA Inc. declined from **$136 million** at the beginning of the period to a deficit of **$(36) million** at the end of the six months ended June 30, 2021[21](index=21&type=chunk) - The company did not repurchase any shares under its share repurchase program in the first six months of 2021, compared to acquiring **17.8 million shares** for **$136 million** in the same period of 2020[21](index=21&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities significantly improved to $545 million for H1 2021, driven by $600 million from loan repurchase commitments, while investing and financing cash flows saw notable shifts Cash Flow Summary (in millions) | Cash Flow Activity | H1 2021 | H1 2020 | | :--- | :--- | :--- | | Net cash provided (used) by operating activities | $545 | $(89) | | Net cash provided (used) by investing activities | $(110) | $941 | | Net cash provided (used) by financing activities | $(255) | $(481) | | **Net increase (decrease) in cash** | **$180** | **$371** | - A key driver for the positive operating cash flow in H1 2021 was the receipt of **$600 million** from the settlement of loan repurchase commitments[24](index=24&type=chunk) [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes provide detailed explanations of the company's financial position and performance, covering business developments, litigation settlements, COVID-19 risks, loss reserves, fair value measurements, and segment performance [Note 1: Business Developments and Risks and Uncertainties](index=9&type=section&id=Note%201%3A%20Business%20Developments%20and%20Risks%20and%20Uncertainties) This note details significant business events and risks, including Puerto Rico debt restructuring, a $600 million Credit Suisse litigation settlement, and ongoing uncertainties from the COVID-19 pandemic - National paid aggregate gross claims of **$277 million** in H1 2021 related to defaults on its insured Puerto Rico bonds[28](index=28&type=chunk) - As of June 30, 2021, National had **$2.9 billion** of debt service outstanding related to Puerto Rico[28](index=28&type=chunk) - In February 2021, MBIA Corp. received a **$600 million** settlement payment from Credit Suisse, resolving litigation over ineligible loans in an RMBS transaction[34](index=34&type=chunk) - The company continues to assess the financial impact of the COVID-19 pandemic, noting that adverse macroeconomic factors could materially affect the performance of its insured portfolios, particularly those sensitive to economic slowdowns[38](index=38&type=chunk) [Note 4: Variable Interest Entities](index=13&type=section&id=Note%204%3A%20Variable%20Interest%20Entities) This note details the company's involvement with Variable Interest Entities (VIEs), reporting consolidated VIE assets of $218 million and liabilities of $450 million, with a maximum exposure to loss of $3.2 billion for nonconsolidated VIEs Consolidated VIEs (in millions) | Metric | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Assets of consolidated VIEs | $218 | $830 | | Liabilities of consolidated VIEs | $450 | $623 | - The company's maximum exposure to loss for nonconsolidated VIEs was **$3.2 billion** as of June 30, 2021, down from **$4.3 billion** at year-end 2020[65](index=65&type=chunk)[67](index=67&type=chunk) - This exposure is primarily related to financial guarantees on global structured finance obligations[65](index=65&type=chunk)[67](index=67&type=chunk) [Note 5: Loss and Loss Adjustment Expense Reserves](index=15&type=section&id=Note%205%3A%20Loss%20and%20Loss%20Adjustment%20Expense%20Reserves) This note details the methodology for estimating loss reserves, which decreased to $954 million, and insurance loss recoverable, which decreased to $1.56 billion, influenced by Puerto Rico and structured finance exposures Loss and LAE Reserves and Recoveries (in millions) | Metric | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Loss and LAE reserves** | **$954** | **$990** | | U.S. Public Finance | $484 | $469 | | International & Structured Finance | $470 | $521 | | **Insurance loss recoverable** | **$1,561** | **$1,677** | | U.S. Public Finance | $1,226 | $1,220 | | International & Structured Finance | $335 | $457 | - For the six months ended June 30, 2021, loss and LAE reserves declined primarily due to payments on Puerto Rico exposures and the impact of higher risk-free rates on RMBS reserves, partially offset by unfavorable changes in recovery assumptions for Puerto Rico[89](index=89&type=chunk) - The 'Classified List' surveillance category contains the vast majority of risk, with **$4.3 billion** in gross insured contractual payments outstanding and a gross claim liability of **$983 million** as of June 30, 2021[99](index=99&type=chunk) [Note 6: Fair Value of Financial Instruments](index=20&type=section&id=Note%206%3A%20Fair%20Value%20of%20Financial%20Instruments) This note details the fair value measurement of financial instruments, with total assets at $3.36 billion and liabilities at $566 million as of June 30, 2021, including significant Level 3 valuations Fair Value Hierarchy Summary as of June 30, 2021 (in millions) | Category | Level 1 | Level 2 | Level 3 | Total | | :--- | :--- | :--- | :--- | :--- | | **Total Assets at Fair Value** | $1,198 | $2,010 | $150 | $3,358 | | **Total Liabilities at Fair Value** | $0 | $171 | $395 | $566 | - Level 3 assets decreased significantly from **$744 million** at year-end 2020 to **$150 million** at June 30, 2021, primarily due to the settlement of 'Loan repurchase commitments' which were valued at **$604 million**[140](index=140&type=chunk)[154](index=154&type=chunk) - The company elected the fair value option for certain financial instruments, including VIE loans and notes, resulting in a net loss of **$1 million** from these instruments for Q2 2021[165](index=165&type=chunk)[168](index=168&type=chunk) [Note 7: Investments](index=34&type=section&id=Note%207%3A%20Investments) This note details the company's investment portfolio, primarily available-for-sale fixed-maturity securities, with a fair value of $2.47 billion as of June 30, 2021, and no allowance for credit losses established Available-for-Sale (AFS) Investments as of June 30, 2021 (in millions) | Metric | Amount | | :--- | :--- | | Amortized Cost | $2,335 | | Gross Unrealized Gains | $146 | | Gross Unrealized Losses | $(8) | | **Fair Value** | **$2,473** | - As of June 30, 2021, **35 securities** were in an unrealized loss position for twelve months or longer[183](index=183&type=chunk) - The company concluded it does not have the intent to sell these securities and it is more likely than not that it would not have to sell them before recovery[184](index=184&type=chunk) - The company did not establish an allowance for credit losses for AFS securities as of June 30, 2021, nor did it purchase any credit-deteriorated assets during the first half of the year[188](index=188&type=chunk) [Note 8: Derivative Instruments](index=39&type=section&id=Note%208%3A%20Derivative%20Instruments) The company uses derivative instruments, primarily interest rate swaps and insured credit derivatives, with a total notional amount of $2.44 billion and a net liability fair value of $140 million as of June 30, 2021 Derivative Instruments Outstanding as of June 30, 2021 (in millions) | Instrument Type | Notional Amount | Fair Value Asset | Fair Value Liability | | :--- | :--- | :--- | :--- | | Insured swaps | $1,719 | $0 | $(1) | | Interest rate swaps | $427 | $1 | $(139) | | Interest rate swaps-embedded | $243 | $0 | $(9) | | Currency swaps-VIE | $51 | $8 | $0 | | **Total** | **$2,440** | **$9** | **$(149)** | - As of June 30, 2021, the company had posted securities with a fair value of **$166 million** as collateral to derivative counterparties[207](index=207&type=chunk) [Note 10: Business Segments](index=42&type=section&id=Note%2010%3A%20Business%20Segments) MBIA operates in U.S. Public Finance, Corporate, and International/Structured Finance segments, with Q2 2021 showing U.S. Public Finance income of $57 million and losses in Corporate and International segments Segment Income (Loss) Before Income Taxes for Q2 2021 (in millions) | Segment | Q2 2021 | Q2 2020 | | :--- | :--- | :--- | | U.S. Public Finance Insurance | $57 | $(27) | | Corporate | $(19) | $(19) | | International and Structured Finance Insurance | $(97) | $(60) | | Eliminations | $(2) | $0 | | **Consolidated** | **$(61)** | **$(106)** | - The U.S. Public Finance segment's profitability in Q2 2021 was driven by a significant benefit from 'Losses and loss adjustment' of **$(42) million**, compared to an expense of **$72 million** in Q2 2020[237](index=237&type=chunk)[239](index=239&type=chunk) [Note 13: Commitments and Contingencies](index=48&type=section&id=Note%2013%3A%20Commitments%20and%20Contingencies) This note updates significant legal matters, including a $600 million Credit Suisse settlement, ongoing lawsuits related to Lynn Tilton, and complex legal proceedings concerning Puerto Rico's debt restructuring - The litigation `MBIA Insurance Corp. v. Credit Suisse` was settled in February 2021, with Credit Suisse paying MBIA Corp. **$600 million**[255](index=255&type=chunk) - Multiple legal proceedings involving Lynn Tilton and the Zohar Funds remain active, including claims of fraudulent inducement and equitable subordination[256](index=256&type=chunk)[257](index=257&type=chunk)[258](index=258&type=chunk)[259](index=259&type=chunk) - The company is deeply involved in litigation related to the Puerto Rico debt crisis, with active cases concerning PREPA, PBA, HTA, and GO bonds[260](index=260&type=chunk)[266](index=266&type=chunk)[267](index=267&type=chunk)[271](index=271&type=chunk) - Many of these are stayed pending restructuring negotiations and court approvals[260](index=260&type=chunk)[266](index=266&type=chunk)[267](index=267&type=chunk)[271](index=271&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=53&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition and results, covering COVID-19 impacts, Puerto Rico restructurings, the Credit Suisse settlement, non-GAAP measures, segment performance, capital resources, and liquidity management [Executive Overview](index=53&type=section&id=Executive%20Overview) The executive overview highlights continued COVID-19 uncertainty, key business developments including $277 million in Puerto Rico claims and a $600 million Credit Suisse settlement, and a Q2 2021 GAAP net loss of $61 million - National paid **$277 million** in gross claims on defaulted Puerto Rico bonds during the first half of 2021[289](index=289&type=chunk) - MBIA Corp. received a **$600 million** settlement from Credit Suisse in February 2021[293](index=293&type=chunk) Financial Highlights (in millions) | Metric | Q2 2021 | Q2 2020 | | :--- | :--- | :--- | | Net income (loss) | $(61) | $(106) | | Adjusted net income (loss) (Non-GAAP) | $37 | $(72) | [Results of Operations](index=57&type=section&id=Results%20of%20Operations) This section details financial results, showing an improved Q2 2021 consolidated net loss of $61 million due to lower insurance loss expenses, and introduces non-GAAP measures like Adjusted Net Income and Adjusted Book Value - The decrease in consolidated total expenses for Q2 2021 was driven by a significant reduction in net insurance loss and LAE, which were **$9 million** compared to **$136 million** in Q2 2020[310](index=310&type=chunk) - The company uses non-GAAP Adjusted Net Income (ANI) which removes the results of the international segment and certain mark-to-market items[317](index=317&type=chunk) - For Q2 2021, ANI was **$37 million** versus a GAAP net loss of **$61 million**[318](index=318&type=chunk) - Management also uses Adjusted Book Value (ABV) per share, which adjusts GAAP book value for items like the negative book value of MBIA Corp and unrealized gains/losses[321](index=321&type=chunk) - GAAP book value per share was **$(0.66)** as of June 30, 2021[324](index=324&type=chunk) [Capital Resources](index=71&type=section&id=Capital%20Resources) The company's total capital resources were $1.3 billion as of June 30, 2021, with National's statutory capital stable at $2.0 billion and MBIA Insurance Corporation's capital decreasing to $160 million, alongside $1.1 billion in unpaid surplus note interest - The company's Board of Directors has no current authorization for share repurchases[413](index=413&type=chunk) - No shares were repurchased under the program in H1 2021[414](index=414&type=chunk) Statutory Claims-Paying Resources (CPR) (in millions) | Entity | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | National | $3,106 | $3,115 | | MBIA Insurance Corporation | $786 | $992 | - As of July 15, 2021, there was **$1.1 billion** of unpaid interest on MBIA Insurance Corporation's Surplus Notes due to non-approval from the NYSDFS[430](index=430&type=chunk) [Liquidity](index=75&type=section&id=Liquidity) The company manages liquidity on a legal-entity basis, with National holding $2.1 billion in cash and investments, MBIA Inc. at $238 million, and MBIA Corp.'s liquidity increasing to $664 million due to the Credit Suisse settlement Liquidity Position by Entity (in millions) | Entity | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | National (Cash & Investments) | $2,100 | Not Stated | | MBIA Inc. (Holding Co.) | $238 | $294 | | MBIA Corp. (Cash & Investments) | $664 | $243 | - Consolidated net cash provided by operating activities was **$545 million** for H1 2021, primarily due to the **$600 million** received from the Credit Suisse litigation settlement[451](index=451&type=chunk) - MBIA Inc. expects National to be its primary source of payments, but dividends are limited[442](index=442&type=chunk) - MBIA Inc. does not expect to receive dividends from MBIA Corp[442](index=442&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=79&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks include interest rate, foreign exchange, and credit spread exposures, with no material changes reported since December 31, 2020 - The company's main market risks are interest rate, foreign exchange, and credit spread risks[462](index=462&type=chunk) - There were no material changes in market risk exposure since the year-end 2020 report[462](index=462&type=chunk) [Controls and Procedures](index=79&type=section&id=Item%204.%20Controls%20and%20Procedures) The company concluded its disclosure controls and procedures were effective as of June 30, 2021, with no material changes to internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[463](index=463&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are likely to materially affect, these controls[463](index=463&type=chunk) [PART II OTHER INFORMATION](index=80&type=section&id=PART%20II%20OTHER%20INFORMATION) [Legal Proceedings](index=80&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 13 for detailed discussion of the company's legal proceedings and related matters, with selected information available on the company's website - For details on legal proceedings, the report directs readers to Note 13 of the financial statements[465](index=465&type=chunk) [Risk Factors](index=80&type=section&id=Item%201A.%20Risk%20Factors) This section supplements risk factors, emphasizing ongoing fiscal stress for public finance issuers and significant risks from Puerto Rico exposures, including debt restructuring uncertainties - A key risk is the fiscal stress experienced by public finance issuers, which could lead to increased credit losses[467](index=467&type=chunk) - This is particularly acute for jurisdictions with underfunded pension liabilities[468](index=468&type=chunk) - The company highlights significant risk from its Puerto Rico exposure, where National had **$2.9 billion** of debt service outstanding as of June 30, 2021[471](index=471&type=chunk) - The company paid **$277 million** in claims on Puerto Rico bonds in H1 2021[471](index=471&type=chunk) - Uncertainty surrounds the effectiveness and timing of restructuring agreements for Puerto Rico's GO, PBA, HTA, and PREPA debt, which could materially impact National's losses[473](index=473&type=chunk)[474](index=474&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=81&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q2 2021, the company repurchased a small number of shares in open market transactions related to its non-qualified deferred compensation plan, not as part of a publicly announced repurchase program Share Purchases in Q2 2021 | Month | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | April | 86 | $10.00 | | May | 97 | $9.46 | | June | 86 | $10.51 | | **Total** | **269** | **$9.97** | - The shares purchased were related to the company's non-qualified deferred compensation plan and not part of a publicly announced share repurchase program[477](index=477&type=chunk) [Exhibits](index=82&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL interactive data files - The exhibits include certifications from the Chief Executive Officer and Chief Financial Officer as required by the Sarbanes-Oxley Act[478](index=478&type=chunk)[479](index=479&type=chunk)[480](index=480&type=chunk) - Interactive Data Files (XBRL) are also included as part of the filing[480](index=480&type=chunk)

Financial Data and Key Metrics Changes - The company reported a consolidated GAAP net loss of $106 million or a negative $2.16 per share for Q1 2021, an improvement from a net loss of $333 million or a negative $4.62 per share in Q1 2020 [9] - The adjusted net loss for Q1 2021 was $116 million or a negative $2.36 per diluted share, compared to an adjusted net loss of $47 million or negative $0.65 per diluted share in Q1 2020 [11] - Book value per share decreased to a negative $0.76 as of March 31, 2021, down from $2.55 as of December 31, 2020 [11] Business Line Data and Key Metrics Changes - National's insured portfolio gross par outstanding declined to $40.5 billion at March 31, 2021, down $1.4 billion from year-end 2020 [8] - National reported a statutory net loss of $35 million for Q1 2021, an improvement from a statutory net loss of $80 million in Q1 2020 [13] - MBIA Insurance Corp. had a statutory net loss of $34 million for Q1 2021, compared to a statutory net loss of $91 million in Q1 2020 [15] Market Data and Key Metrics Changes - The leverage ratio of National's gross par to statutory capital was 21:1 as of March 31, 2021 [8] - National's total fixed income investment portfolio had a book-adjusted carrying value of $2 billion as of March 31, 2021 [14] Company Strategy and Development Direction - The company has reached an agreement with the Oversight Board to resolve its Puerto Rico Highways and Transportation Authority exposure, indicating a focus on Puerto Rico credits as a top priority [6][24] - Management is considering strategic alternatives, including potential consolidation in the industry, and is likely to be a seller in the future [24] Management Comments on Operating Environment and Future Outlook - Management expressed hope that the process for implementing the restructuring support agreement for PREPA will regain momentum soon [7] - The company anticipates that the restructuring of Puerto Rico credits could be resolved by early to late 2022, although no specific dates are set [7][24] Other Important Information - The Corporate segment had total assets of approximately $900 million as of March 31, 2021, with unencumbered cash and liquid assets totaling $298 million [12] - Cash and liquid assets for MBIA Insurance Corp. increased to $503 million as of March 31, 2021, up from $130 million as of December 31, 2020 [15] Q&A Session Summary Question: What is the timeline for PREPA negotiations? - Management indicated there is no specific date set for PREPA negotiations but expects attention to turn towards it now that other agreements have been made [19] Question: Can you discuss the Board's thinking on potential buybacks at National? - National currently does not have the capacity to buy back shares due to regulatory constraints, but future capacity may open up depending on surplus increases or stock price decreases [22] Question: What actions are being considered to create value for shareholders in the interim? - The company is focused on executing Puerto Rico deals and expects the portfolio to continue to decline, which is seen as beneficial [24] Question: Are the settlement agreements consistent with Assured Guaranty? - Management confirmed that the agreements on HTA are consistent with those of Assured Guaranty [26]

Financial Data and Key Metrics Changes - The company reported a consolidated GAAP net loss of $81 million for Q4 2020, an improvement from a net loss of $243 million in Q4 2019 [12] - For the full year 2020, the consolidated GAAP net loss was $578 million, compared to a net loss of $359 million in 2019 [14] - Adjusted net loss for Q4 2020 was $36 million, compared to an adjusted net loss of $95 million in Q4 2019 [14] - Book value per share decreased to $2.55 as of December 31, 2020, down from $10.40 a year earlier [16] Business Line Data and Key Metrics Changes - National's insured portfolio declined to $42 billion at year-end 2020, down $2 billion from the previous quarter [11] - National reported statutory net income of $41 million for Q4 2020, up from $4 million in Q4 2019 [20] - MBIA Insurance Corp. reported a statutory net loss of $54 million for Q4 2020, an improvement from a net loss of $73 million in Q4 2019 [22] Market Data and Key Metrics Changes - The outstanding gross par of the insured portfolios continues to reduce, with National's leverage ratio gross par to statutory capital at 21:1 [11] - National's total fixed income investment portfolio had a book-adjusted carrying value of $2 billion as of December 31, 2020 [21] Company Strategy and Development Direction - The company is focused on resolving Puerto Rico-related exposures to enhance shareholder value by moving cash from National to the holding company [42][43] - Management believes that running off the insured portfolio and maximizing cash flow to shareholders is the best strategy moving forward [42] Management's Comments on Operating Environment and Future Outlook - Management highlighted the importance of resolving Puerto Rico issues as a key to freeing up cash for shareholders [37] - The company is optimistic about the performance of its portfolio, indicating that the stress on municipalities has not been as severe as initially feared [72] Other Important Information - The company received a $600 million settlement from Credit Suisse, which will improve liquidity and is reflected in the fourth quarter results [8][22] - National's claims paying resources totaled $3.1 billion as of December 31, 2020 [21] Q&A Session Summary Question: Conditions for continuing support of the planned support agreement - Management indicated that the focus is now on the Highway and Transportation Authority (HTA) and that the situation is confidential [25][27] Question: Progress toward HTA resolution - Management stated that discussions are confidential but emphasized that parties are focused on the March 31 deadline [27] Question: Impact of risk-free discount rates on expected recoveries - Management confirmed that the rates were based on year-end figures and adjustments would be made based on future rates [28][30] Question: Upstream sources of capital to the holding company - Management provided details on expected dividends and tax escrow releases, indicating limited contributions from tax escrow in the future [31][32] Question: Post-Puerto Rico plans to enhance shareholder value - Management stated that the focus will be on running off the insured portfolio and maximizing cash flow to shareholders [42][43] Question: Plans for the $600 million from Credit Suisse - Management discussed optimizing the investment portfolio and potentially repaying some debt with the funds [46] Question: Timing for resolving Puerto Rico exposures - Management indicated that timing is uncertain and varies based on the complexity of negotiations [62] Question: Credit Suisse settlement impact on financials - Management confirmed that the settlement has been reflected in the fourth quarter results [64] Question: Capacity for share repurchases - Management noted that there is capacity for share repurchases but emphasized the need for liquidity considerations [60][67]

Financial Performance - As of December 31, 2020, National had $41.9 billion of insured gross par outstanding on U.S. public finance obligations covering 2,470 policies[29]. - Insurance in force as of December 31, 2020 was $81.5 billion, with an average annual insured debt service of $5.5 billion[30]. - MBIA Corp.'s gross par amount outstanding of insured obligations was $7.7 billion, with insurance in force totaling $9.9 billion as of December 31, 2020[32]. - National declared and paid dividends of $81 million in Q4 2020, compared to $134 million in Q4 2019[16]. - The Company redeemed $115 million principal amount of its 6.400% Senior Notes due 2022 during 2020[16]. Insurance and Risk Management - The average life of National's domestic public finance insurance policies in force was estimated at 9 years as of December 31, 2020[29]. - MBIA Corp. estimates the average life of its international and structured finance insurance policies in force is 6 years as of December 31, 2020[33]. - National's ten largest insured U.S. public finance credits totaled $9.1 billion, representing 21.7% of its total U.S. public finance gross par amount outstanding[30]. - The Company conducts ongoing credit surveillance for U.S. public finance, focusing on economic and political trends, issuer debt management, and cash flow adequacy under stress[43]. - The Company monitors international public finance credits by assessing country risk, local regulatory oversight, and economic factors, with increased review frequency for downgraded exposures[43]. - The Company uses an internal credit rating system to rank credits, with performance issues categorized into "Caution List" and "Classified List" for potential claims[45]. - The Company measures market risk on a consolidated basis, focusing on interest rates, credit spreads, and foreign exchange rates, using various models to test exposure under market stress scenarios[49]. - The Operational Risk function identifies vulnerabilities to operational disruptions and reports periodically to the Risk Oversight Committee and Audit Committee[50]. - The company currently has third-party reinsurance agreements covering 3% of its insured par outstanding, with no immediate plans to reduce insured exposure through reinsurance[66]. - National reported non-compliance with certain single risk limits as of December 31, 2020, due to changes in statutory capital, although it was compliant with aggregate risk limits[77]. Corporate Governance and Management - The executive officers of the Company include William C. Fallon as CEO since July 2005 and Anthony McKiernan as CFO since May 2012[95][96]. - The Board of Directors appointed William C. Fallon as CEO on September 15, 2017, and Anthony McKiernan as CFO on March 11, 2016[96]. - Jonathan C. Harris serves as General Counsel and Secretary, appointed on May 3, 2017[97]. - Daniel M. Avitabile is the Chief Risk Officer of MBIA Corp., appointed on March 11, 2016[98]. - Adam T. Bergonzi oversees risk and insured portfolio management activities as Chief Risk Officer of National since 2010[99]. - Christopher H. Young has been the Chief Financial Officer of National since March 2009[100]. - Joseph R. Schachinger has served as Controller since May 2017[100]. Operational and Strategic Initiatives - The Company maintains a stable liquidity position, expected to service obligations over the next several years without needing to access capital markets[14]. - The Company has a designated Model Governance Team to enhance the consistency, reliability, and transparency of its models, mitigating model risk on an enterprise-wide basis[42]. - The Company has invested in imaging technology to reduce paper usage, promoting a paperless office environment[52]. - The Company has paid out over $20 million in matching gifts and nearly $12 million in grants through the MBIA Foundation since its inception[61]. - The Company implemented business continuity plans in response to the COVID-19 pandemic, with all employees working remotely until conditions permit a safe return[63]. Regulatory and Compliance - The company is subject to insurance regulation and supervision by the State of New York, with specific requirements for solvency and business conduct[68]. - MBIA Insurance Corporation is exempt from assessments by insurance guarantee funds in most states where it operates, as it primarily writes municipal bond insurance and financial guarantee insurance[82]. - The company is required to maintain contingency reserves, contributing 50% of premiums earned on policies written prior to July 1, 1989, and over a period of 15 or 20 years for policies written after that date[75]. - The company does not maintain a capital facility and relies on its investment policies to optimize capital resources[86]. - The company does not maintain a contractual relationship with major rating agencies, but Moody's continues to maintain ratings at its discretion[85]. - The Company has made available certain confidential information subject to a non-disclosure agreement[91]. - The Company maintains a website where it provides access to SEC filings, but this information is not incorporated by reference into its Form 10-K[89].

Financial Data and Key Metrics Changes - The company reported a consolidated GAAP net loss of $58 million or a negative $1.11 per share for Q3 2020, compared to a net income of $83 million or $1 per share for Q3 2019, driven by higher loss and LAE expenses and lower gains from investment portfolio security sales [11][12] - Book value per share decreased to $4.25 as of September 30, 2020, from $10.40 as of December 31, 2019, primarily due to a year-to-date net loss of $497 million [13] - The adjusted net loss for Q3 2020 was $18 million or a negative $0.34 per diluted share, compared to an adjusted net income of $115 million or $1.46 per diluted share for Q3 2019 [13][14] Business Line Data and Key Metrics Changes - National's insured portfolio declined to $44 billion, down $2 billion from the last quarter, with a leverage ratio of gross par to statutory capital at 22:1 as of September 30, 2020 [9] - National reported statutory income before taxes of $36 million for Q3 2020, down from $112 million for Q3 2019, primarily due to lower capital gains and lower premium and investment income [16] - National's statutory net loss was $8 million for Q3 2020, compared to a net income of $87 million for the same quarter in the previous year [17] Market Data and Key Metrics Changes - The outstanding gross par of the insured portfolios continued to reduce, with National's insured gross par outstanding now at $43.9 billion, down $1.9 billion during the quarter [18] - As of September 30, 2020, National's total fixed income investment portfolio had a book adjusted carrying value of $2 billion, with claims paying resources totaling $3.2 billion [18] Company Strategy and Development Direction - The company remains focused on resolving National's Puerto Rico exposure, which includes credits from the Commonwealth's General Obligation Bonds, PREPA, and HTA [8] - The company has paused share repurchases to assess the situation in Puerto Rico and ensure sufficient liquidity at National [27][48] - Future share repurchases will depend on the progress of the Puerto Rico restructuring and the new Oversight Board's actions [27][48] Management's Comments on Operating Environment and Future Outlook - Management noted that there has been no material impact on financial performance due to the COVID-19 pandemic, but they continue to monitor risks associated with insured portfolios [9] - The company expects the resolution of Puerto Rico's restructuring to take time, with no material changes to loss scenarios made this quarter [22] - Management expressed confidence in the fiscal state of Puerto Rico, noting substantial cash balances and federal aid that could improve recovery prospects [36][37] Other Important Information - National purchased 8.6 million shares of MBIA's common stock at an average price of $7.23 per share during Q3 2020, with a total of 26.4 million shares repurchased year-to-date [10] - The company received an annual dividend from National amounting to $81 million, ensuring sufficient assets to cover foreseeable obligations through at least the end of 2022 [15] Q&A Session Summary Question: Impact of COVID-19 on Puerto Rico restructuring - Management indicated that while COVID-19 has caused delays, there were no material changes to expected losses on Puerto Rico credits [20][22] Question: Focus on top credits outside Puerto Rico - Management stated they are monitoring the situation closely but have not identified any substantial reserves needed due to COVID-19 impacts [24] Question: Future share repurchase plans - Management confirmed a pause in share repurchases while assessing the situation in Puerto Rico, with plans to evaluate future buybacks based on developments [27][48] Question: Current fiscal state of Puerto Rico - Management acknowledged Puerto Rico's significant cash balances and federal aid, suggesting a potentially better recovery outlook than previously indicated [36][37] Question: Remaining capacity for stock buybacks - Management noted that as of September 30, National had about $250 million of remaining capacity for purchasing shares [49]

Financial Performance - In Q3 2020, MBIA reported total revenues of $71 million, a decrease of 58.8% from $172 million in Q3 2019[203]. - The company incurred a net loss of $58 million in Q3 2020, compared to a net income of $83 million in Q3 2019, reflecting a significant decline in performance[203]. - Adjusted net income for Q3 2020 was a loss of $18 million, down from an adjusted net income of $115 million in Q3 2019[199]. - The total expenses for Q3 2020 were $129 million, up from $83 million in Q3 2019, indicating increased operational costs[203]. - The company’s diluted net income (loss) per share was $(1.11) in Q3 2020, compared to $1.00 in Q3 2019[203]. - Consolidated total revenues for the three months ended September 30, 2020 decreased due to unfavorable changes in revenues from consolidated variable interest entities (VIEs) and net gains (losses) on financial instruments at fair value and foreign exchange[204]. - Consolidated total expenses for the three months ended September 30, 2020 included net insurance loss and LAE of $48 million, compared to a loss and LAE benefit of $13 million for the same period in 2019[204]. - For the nine months ended September 30, 2020, consolidated total revenues decreased primarily due to unfavorable changes in net gains (losses) on financial instruments at fair value and foreign exchange, and net investment income[205]. - Net insurance loss and LAE for the nine months ended September 30, 2020 was $427 million, significantly higher than $89 million for the same period in 2019[205]. - Adjusted net income (loss) for the three months ended September 30, 2020 was $(18) million, compared to $115 million for the same period in 2019[209]. - Adjusted net income (loss) per diluted common share for the three months ended September 30, 2020 was $(0.34), down from $1.46 in the same period of 2019[209]. Market and Economic Conditions - The COVID-19 pandemic has led to increased stress on municipal budgets, which could adversely affect the performance of MBIA's insured portfolios[193]. - Economic conditions remain challenging, with many states and municipalities experiencing financial distress due to delayed tax collections and increased unemployment[200]. - Federal legislation, including the $2.7 trillion CARES Act, has provided significant aid to public sector issuers, which may help mitigate financial distress in the municipal sector[195]. Risk Management - MBIA has recorded significant loss reserves on its residential mortgage-backed securities (RMBS) and collateralized debt obligations (CDO) exposures due to the pandemic[195]. - The company continues to monitor its liquidity position, with potential impacts from declines in market value or rating eligibility of pledged assets[196]. - The company continues to manage market risk through active portfolio management to minimize exposure to interest rate risk, foreign exchange risk, and credit spread movement[291]. Valuation and Book Value - As of September 30, 2020, the total insured gross par outstanding for National's U.S. public finance insurance portfolio was $43.9 billion[213]. - GAAP book value per share as of September 30, 2020 was $4.25, a decrease from $10.40 as of December 31, 2019[212]. - Management's adjustments to GAAP book value included removing the negative book value of MBIA Corp. of $(30.83) per share[212]. Interest Rate and Credit Spread Sensitivity - As of September 30, 2020, a 300 basis point decrease in interest rates would result in an estimated pre-tax change in fair value of $275 million[292]. - A 200 basis point decrease in interest rates would lead to an estimated pre-tax change in fair value of $153 million[292]. - A 100 basis point increase in interest rates would result in an estimated pre-tax change in fair value of $(53) million[292]. - A 50 basis point decrease in credit spreads would lead to an estimated pre-tax change in fair value of $45 million[293]. - A 200 basis point increase in credit spreads would result in an estimated pre-tax change in fair value of $(160) million[293]. - A 50 basis point increase in credit spreads would lead to an estimated pre-tax change in fair value of $(43) million[293].

MBIA Inc. (NYSE:MBI) Q2 2020 Results Conference Call August 6, 2020 8:00 AM ET Company Participants Greg Diamond - Managing Director-Investor and Media Relations Bill Fallon - Chief Executive Officer Anthony McKiernan - Executive Vice President and Chief Financial Officer Conference Call Participants Tommy McJoynt - KBW Mark Palmer - BTIG Joshua Esterov - CreditSights Operator Welcome to the MBIA Inc. Second Quarter 2020 Financial Results Conference Call. I would now like to turn the call over to Greg Diamo ...

United States SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2020 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 1-9583 MBIA INC. (Exact name of registrant as specified in its charter) Connecticut 06-1185706 (State or other jurisdiction of incorporation or ...

MBIA Inc. (NYSE:MBI) Q1 2020 Earnings Conference Call May 12, 2020 8:00 AM ET Company Participants Greg Diamond – Managing Director-Investor and Media Relations Bill Fallon – Chief Executive Officer Anthony McKiernan – Executive Vice President and Chief Financial Officer Conference Call Participants Tommy McJoynt – KBW Giuliano Bologna – BTIG Geoffrey Dunn – Dowling Partners Paul Saunders – Hutch Capital Operator Welcome to the MBIA Inc. First Quarter 2020 Financial Results Conference Call. I would now like ...