MBIA Insurance Corporation

Statutory-Basis Financial Statements

December 31, 2023 and 2022

MBIA Insurance Corporation

Table of Contents

December 31, 2023 and 2022

Page(s)

Report of Independent Auditors

1-3

Statutory-Basis Financial Statements

Statements of Admitted Assets, Liabilities and Capital and Surplus

4

Statements of Income

5

Statements of Changes in Capital and Surplus

6

Statements of Cash Flows

7

Notes to Statutory-Basis Financial Statements

8

- 39

Supplemental Schedules

Summary Investment Schedule

40

Supplemental Investment Risks Interrogatories

41

- 44

Supplemental Schedule of Reinsurance Disclosures

45

- 46

Report of Independent Auditors

To the Board of Directors of MBIA Insurance Corporation

Opinions

We have audited the accompanying statutory-basis financial statements of MBIA Insurance Corporation (the "Company"), which comprise the statutory-basis statements of admitted assets, liabilities and capital and surplus as of December 31, 2023 and 2022, and the related statutory- basis statements of income and changes in capital and surplus, and of cash flows for the years then ended, including the related notes (collectively referred to as the "financial statements").

Unmodified Opinion on Statutory Basis of Accounting

In our opinion, the accompanying financial statements present fairly, in all material respects, the admitted assets, liabilities and capital and surplus of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, in accordance with the accounting practices prescribed or permitted by the New York State Department of Financial Services described in Note 2.

Adverse Opinion on U.S. Generally Accepted Accounting Principles

In our opinion, because of the significance of the matter discussed in the Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles section of our report, the accompanying financial statements do not present fairly, in accordance with accounting principles generally accepted in the United States of America, the financial position of the Company as of December 31, 2023 and 2022, or the results of its operations or its cash flows for the years then ended.

Basis for Opinions

We conducted our audit in accordance with auditing standards generally accepted in the United States of America (US GAAS). Our responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles

As described in Note 2 to the financial statements, the financial statements are prepared by the Company on the basis of the accounting practices prescribed or permitted by the New York State Department of Financial Services, which is a basis of accounting other than accounting principles generally accepted in the United States of America.

The effects on the financial statements of the variances between the statutory basis of accounting described in Note 2 and accounting principles generally accepted in the United States of America, although not reasonably determinable, are presumed to be material.

Responsibilities of Management for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with the accounting practices prescribed or permitted by the New York State Department of Financial Services. Management is also responsible for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern for one year after the date the financial statements are available to be issued.

Auditors' Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with US GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with US GAAS, we:

  • Exercise professional judgment and maintain professional skepticism throughout the audit.
  • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
  • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, no such opinion is expressed.
  • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

2

  • Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

Other Information

Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The supplemental Summary Investment Schedule, Supplemental Investment Risks Interrogatories, and Supplemental Schedule of Reinsurance Disclosures (collectively referred to as the "supplemental schedules") of the Company as of December 31, 2023 and for the year then ended are presented to comply with the National Association of Insurance Commissioners' Annual Statement Instructions and Accounting Practices and Procedures Manual and for purposes of additional analysis and are not a required part of the financial statements. The supplemental schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The supplemental schedules have been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves and other additional procedures, in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplemental schedules are fairly stated, in all material respects, in relation to the financial statements taken as a whole.

New York, New York

March 6, 2024

3

MBIA INSURANCE CORPORATION

STATUTORY-BASIS STATEMENTS OF ADMITTED ASSETS, LIABILITIES and CAPITAL and SURPLUS

(Dollars in thousands except share and per share amounts)

Admitted Assets

December 31, 2023

December 31, 2022

Investments:

Fixed-maturity securities, (fair value $142,254 and $170,334)

$

145,196

$

177,914

Investments in subsidiaries

14,903

13,876

Receivable for securities sold

-

1

Total investments

160,099

191,791

Cash and cash equivalents

46,759

45,059

Total cash and investments

206,858

236,850

Accrued investment income

2,033

2,321

Other assets

1,313

2,633

Total admitted assets

$

210,204

$

241,804

Liabilities, Capital and Surplus

Liabilities:

Deferred premium revenue

$

29,728

$

35,582

Loss and loss adjustment expense reserves

(net of salvage and subrogation recoverable)

26,555

35,043

Contingency reserve

5,000

5,000

Other liabilities

2,420

2,247

Total liabilities

63,703

77,872

Capital and Surplus:

Common stock, par value $220.80 per share;

authorized, issued and outstanding - 67,936 shares

15,000

15,000

Series A non-cumulative perpetual preferred stock,

par value $1,000 per share;

liquidation value $100,000 per share;

authorized - 4,000.08 shares, issued and outstanding - 2,759.08 shares

2,759

2,759

Surplus notes

952,655

952,655

Additional paid-in capital

1,055,941

1,055,941

Unassigned surplus (deficit)

(1,879,854)

(1,862,423)

Total capital and surplus

146,501

163,932

Total liabilities, capital and surplus

$

210,204

$

241,804

The accompanying notes are an integral part of the statutory-basis financial statements.

4

MBIA INSURANCE CORPORATION

STATUTORY-BASIS STATEMENTS OF INCOME

(Dollars in thousands)

Years ended December 31,

2023

2022

Revenues:

Gross premiums written

$

18,848

$

21,109

Ceded premiums

(10,622)

(10,929)

Net premiums written

8,226

10,180

Decrease in deferred premium revenue

6,296

11,704

Net premiums earned

14,522

21,884

Fees and reimbursements

290

4,187

Total revenues

14,812

26,071

Expenses:

Losses incurred (benefit)

31,489

(36,143)

Loss adjustment expenses incurred

4,262

1,814

Other underwriting expenses

16,325

16,294

Total underwriting expenses (benefit)

52,076

(18,035)

Net underwriting income (loss)

(37,264)

44,106

Investment income:

Net investment (loss) income

14,071

11,062

Net realized gains (losses)

(6,743)

(1,653)

Net investment (loss) gain

7,328

9,409

Other income (expense), net

1,810

(7,099)

Income (loss) before income taxes

(28,126)

46,416

Provision for income taxes

144

797

Net income (loss)

$

(28,270)

$

45,619

The accompanying notes are an integral part of the statutory-basis financial statements.

5

MBIA INSURANCE CORPORATION

STATUTORY-BASIS STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS

For the years ended December 31, 2023 and 2022

(Dollars in thousands except share amounts)

Additional

Unassigned

Total

Common Stock

Preferred Stock

Surplus

Paid-in

Surplus

Capital and

Shares

Amount

Shares

Amount

Notes

Capital

(Deficit)

Surplus

Balance, January 1, 2022

67,936

$

15,000

2,759.08

$

2,759

$

952,655

$

1,055,941

$

(1,929,031)

$

97,324

Net income (loss)

-

-

-

-

-

-

45,619

45,619

Change in non-admitted assets

-

-

-

-

-

-

(2,060)

(2,060)

Change in net unrealized foreign

capital gain (loss)

-

-

-

-

-

-

86

86

Change in contingency reserve

-

-

-

-

-

-

31,898

31,898

Change in net unrealized (gain) on

investments

-

-

-

-

-

-

(8,935)

(8,935)

Balance, December 31, 2022

67,936

15,000

2,759.08

2,759

952,655

1,055,941

(1,862,423)

163,932

Net income (loss)

-

-

-

-

-

-

(28,270)

(28,270)

Change in non-admitted assets

-

-

-

-

-

-

8,778

8,778

Change in net unrealized foreign

capital gain (loss)

-

-

-

-

-

-

(2,012)

(2,012)

Change in net unrealized loss on

investments

-

-

-

-

-

-

4,073

4,073

Balance, December 31, 2023

67,936

$

15,000

2,759.08

$

2,759

$

952,655

$

1,055,941

$

(1,879,854)

$

146,501

The accompanying notes are an integral part of the statutory-basis financial statements.

6

MBIA INSURANCE CORPORATION

STATUTORY-BASIS STATEMENTS OF CASH FLOWS

(Dollars in thousands)

Years ended December 31,

2023

2022

Cash from operations

Premiums collected, net of reinsurance

$

8,064

$

15,727

Net investment income/expense received (paid)

11,467

10,660

Miscellaneous expense paid

(133)

-

Total

19,398

26,387

Loss related payments (receipts)

38,500

165,338

Loss adjustment expenses, commissions and expenses paid

21,057

24,888

Federal and foreign income taxes paid (recovered)

690

797

Total

60,247

191,023

Net cash provided (used) by operations

(40,849)

(164,636)

Cash from investments

Proceeds from investments sold, matured or repaid:

Fixed-maturity securities

38,780

56,724

Common stocks

1,927

Other invested assets

-

8,844

Miscellaneous proceeds

458

151

Total investment proceeds

41,165

65,719

Cost of investments acquired:

Fixed-maturity securities

-

90,954

Common stocks

502

1,468

Other invested assets

-

8,589

Miscellaneous uses

-

851

Total investments acquired

502

101,862

Net cash provided (used) by investments

40,663

(36,143)

Cash from financing

Repayments to the Refinanced Facility

-

(69,274)

Other cash applied (used)

1,886

10,923

Net cash provided (used) for financing

1,886

(58,351)

Net change in cash and cash equivalents

1,700

(259,130)

Cash and cash equivalents and short-term investments - beginning of year

45,059

304,189

Cash and cash equivalents and short-term investments - end of year

$

46,759

$

45,059

Note: Supplemental disclosures of cash flow information for non-cash transactions:

Paid interest in kind on the Refinanced Facility

$

-

$

1,118

Permitted practice securities transferred from investments

$

-

$

29,264

The accompanying notes are an integral part of the statutory-basis financial statements.

7

MBIA INSURANCE CORPORATION

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS

As of and for the years ended December 31, 2023 and 2022

1. Business Developments and Risks and Uncertainties

Summary

MBIA Insurance Corporation, an entity domiciled in the state of New York ("MBIA," "MBIA Corp." or the "Company"), is a wholly- owned subsidiary of MBIA Inc. ("Parent Company"). MBIA Inc. was incorporated in Connecticut on November 12, 1986 as a licensed insurer and, through a series of transactions during December of 1986, became the successor to the business of the Municipal Bond Insurance Association, a voluntary unincorporated association of insurers writing municipal bond and note insurance as agent for the member insurance companies.

The guarantees of MBIA Corp. generally provide unconditional and irrevocable guarantees of the payments of the principal of, and interest or other amounts owing on, insured obligations when due or, in the event MBIA Corp. has the right at its discretion to accelerate insured obligations upon default or otherwise, upon MBIA Corp.'s acceleration. MBIA Corp.'s guarantees insure structured finance and asset- backed obligations and privately issued bonds used for the financing of public purpose projects, which are primarily located outside of the United States ("U.S.") that include toll roads, bridges, public transportation facilities, utilities and other types of infrastructure projects serving a substantial public purpose, and obligations of sovereign-related and sub-sovereign issuers. Structured finance and asset-backed securities typically are securities repayable from expected cash flows generated by a specified pool of assets, such as residential and commercial mortgages, structured settlements, consumer loans, and corporate loans and bonds.

MBIA Corp. insures certain financial obligations written by affiliates of MBIA Corp. If these affiliates were to have insufficient assets to pay amounts due, MBIA Corp. would be called upon to make such payments under its insurance policies.

MBIA Corp. issued financial guarantee insurance in Mexico, through its wholly-owned subsidiary, MBIA México, S.A. de C.V. ("MBIA Mexico"). MBIA Insurance Corporation provided 100% reinsurance to its subsidiary, MBIA Mexico S.A. de C.V. ("MBIA Mexico"). In August 2023, the reinsurance agreement was terminated after the termination of MBIA Mexico's last insurance policy.

Risks and Uncertainties

Insured Portfolio

MBIA Corp.'s primary objectives are to satisfy claims for its policyholders and to maximize future recoveries, if any, for its surplus note holders and then, its preferred stock holders. MBIA Corp. is executing this strategy by, among other things, taking steps to maximize the collection of recoveries and reducing and mitigating potential losses on its insurance exposures. MBIA Corp.'s insured portfolio could deteriorate and result in additional significant loss reserves and claim payments. MBIA Corp.'s ability to meet its obligations is limited by available liquidity and its ability to secure additional liquidity through financing and other transactions. There can be no assurance that MBIA Corp. will be successful in generating sufficient resources to meet its obligations.

Zohar CDOs and RMBS Recoveries

Payment of claims on MBIA Corp.'s policies insuring the Class A-1 and A-2 notes issued by Zohar collateralized debt obligation ("CDO") 2003-1, Limited ("Zohar I") and Zohar II 2005-1, Limited ("Zohar II") (collectively, the "Zohar CDOs"), entitled MBIA Corp. to reimbursement of such amounts plus interest and expenses and/or to exercise certain rights and remedies to seek recovery of such amounts. MBIA Corp. has anticipated that it would receive substantial recoveries on the loans made to, and equity interests in, companies that, until late March of 2020, were purportedly controlled and managed by the sponsor and former collateral manager of the Zohar CDOs (collectively, the "Zohar Collateral"). Since March of 2018 MBIA Corp. had been pursuing those recoveries in a Delaware bankruptcy proceeding filed by the Zohar CDOs ("Zohar Funds Bankruptcy Cases"). Pursuant to a plan of liquidation that became effective in August of 2022, all remaining Zohar Collateral was distributed to MBIA Corp. either directly or in the form of interests in certain asset recovery entities. There still remains significant uncertainty with respect to the realizable value of the remaining loans and equity interests that formerly constituted the Zohar Collateral. Further, as the monetization of these assets unfolds, and new information concerning the financial condition of the portfolio companies is disclosed, the Company will continue to revise its expectations for recoveries.

MBIA Corp. also projects to collect recoveries from prior claims associated with insured residential mortgage-backed securities ("RMBS"); however, the amount and timing of these collections are uncertain. Refer to "Note 9. Loss and Loss Adjustment Expense Reserves" for information about MBIA Corp.'s recoveries.

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MBIA Incorporated published this content on 06 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 11 March 2024 15:50:04 UTC.