MBIA INC – 10-Q – 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 our Annual Report on
Form 10-K for the year ended December 31, 2020 and the consolidated financial
statements and notes thereto included in this Form 10-Q. In addition, this
discussion and analysis of financial condition and results of operations
includes statements of the opinion of MBIA Inc.'s management which may be
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. 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
Statements" and "Risk Factors" in Part I, Item 1A of MBIA Inc.'s Annual Report
on Form 10-K for the year ended December 31, 2020 for a further discussion of
risks and uncertainties.
INTRODUCTION
MBIA Inc., together with its consolidated subsidiaries, (collectively, "MBIA",
the "Company", "we", "us", or "our") operates within the financial guarantee
insurance industry. MBIA manages its business within three operating segments:
1) United States ("U.S.") public finance insurance; 2) corporate; and 3)
international and structured finance insurance. Our U.S. public finance
insurance portfolio is managed through National Public Finance Guarantee
Corporation ("National"), our corporate segment is managed through MBIA Inc. and
several of its subsidiaries, including our service company, MBIA Services
Corporation ("MBIA Services") and our international and structured finance
insurance business is primarily managed through MBIA Insurance Corporation and
its subsidiary ("MBIA Corp.").
National's primary objectives are to maximize the performance of its existing
insured portfolio through effective surveillance and remediation activity and
effectively manage its investment portfolio. Our corporate segment consists of
general corporate activities, including providing support services to MBIA's
operating subsidiaries and asset and capital management. MBIA Corp.'s primary
objectives are to satisfy all claims by its policyholders and to maximize future
recoveries, if any, for its senior lending and 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. We do not expect
National or MBIA Corp. to write significant new business.
EXECUTIVE OVERVIEW
COVID-19
The number of novel coronavirus COVID-19 ("COVID-19") cases, hospitalizations
and deaths continues to decrease. Nevertheless, the current and longer-term
impacts of the virus, including those caused by any new strains, continues to
remain uncertain. In addition, the attendant governmental policy and social
responses, and economic and financial consequences, continue to be the subject
of considerable attention.
Insured portfolios
Any adverse developments on macroeconomic factors resulting from COVID-19,
including without limitation reduced economic activity and certainty, increased
unemployment, increased loan defaults or delinquencies, and increased stress on
municipal budgets, including due to reduced tax revenues and the ability to
raise taxes or limit spending, could materially and adversely affect the
performance of the Company's insured portfolios. Any impact of the pandemic on
the Company's financial guarantee credits would vary based on the nature of the
taxes, fees and revenues pledged to debt repayment and their sensitivity to the
related slowdown in economic activity. The duration of the pandemic, the
efficacy of vaccines, spending of federal aid to state and local governments,
and the breadth and speed of economic recovery will determine the degree of
economic stress, if any, incurred by the credits in the Company's insured
portfolios. Further, any economic impact that may result from the pandemic and
its aftermath could present additional but yet unknown credit risks to the
Company's insured portfolios.
Federal legislation passed to combat the economic impact of the pandemic has
been significant, including the $2.7 trillion Coronavirus Aid, Relief, and
Economic Security ("CARES") Act in 2020, which included significant aid to
offset COVID-19 related expenditures of public sector issuers including states,
territories, healthcare, higher education and transportation issuers. Also, the
Federal Reserve has shown a willingness to promote the stability of the
financial system that is directly supportive of the municipal market, such as
the Municipal Lending Facility created in 2020. In March of 2021, the American
Rescue Plan Act of 2021 was enacted, a $1.9 trillion economic stimulus package
designed to further stabilize the financial system. This law allocated nearly
$350 billion of aid to state and local governments to replace lost revenues
resulting from the pandemic with relatively few restrictions on use of said
funds. While the unprecedented amount of federal aid directed to state and local
municipalities has blunted the impact of the pandemic, not all of the issuers of
the obligations in National's insured portfolio are eligible to receive it.
Further, if issuers are unable to raise taxes, reduce spending, or receive
federal assistance, the Company may experience new or additional losses or
impairments on those obligations, which could materially and adversely affect
its business, financial condition and financial results.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

EXECUTIVE OVERVIEW (continued)

Certain of MBIA Corp.'s structured finance policies, including those in which
the underlying principal obligations are comprised of residential or commercial
mortgages and mortgage-backed securities ("MBS"), could be negatively impacted
by delays or failures of borrowers to make payments of principal and interest
when due, or delays or moratoriums on foreclosures or enforcement actions with
respect to delinquent or defaulted mortgages imposed by governmental
authorities. MBIA Corp. has recorded significant loss reserves on its
residential mortgage-backed securities ("RMBS") and collateralized debt
obligations ("CDO") exposures, and there can be no assurance that these reserves
will be sufficient if the pandemic causes further deterioration to the economy.
These transactions are also subject to servicer risks, which relate to problems
with the transaction's servicer that could adversely impact performance of the
underlying assets. Additionally, several of our credits, particularly within our
international public finance sector, feature large, near term debt-service
payments, and there can be no assurance that the liquidity position of MBIA
Corp. will enable it to satisfy any claims that arise if the issuers of such
credits are unable or unwilling to refinance or repay their obligations. MBIA
Corp. has recorded expected recoveries on certain RMBS transactions, and the
forbearance options that mortgage borrowers who were facing financial
difficulties took advantage of under the CARES Act may delay or impair
collections on these recoveries.
Liquidity
The Company continues to monitor its cash and liquid asset resources using cash
forecasting and stress-scenario testing. Members of the Company's senior
management meet regularly to review liquidity metrics, discuss contingency plans
and establish target liquidity levels. The full long-term impact the pandemic
may have on our future liquidity position and needs remains uncertain. Declines
in the market value or rating eligibility of assets pledged against the
Company's obligations as a result of credit market deterioration caused by
COVID-19 or other factors may require additional eligible assets to be pledged
in order to meet minimum required collateral amounts against these obligations.
This could require the Company to sell assets, potentially with substantial
losses or use free cash or other assets to meet the collateral requirements,
thus negatively impacting the Company's liquidity position. Additionally,
declines in the yields in our insurance companies' fixed-income portfolios could
materially impact investment income.
2021 Business Developments
The following is a summary of 2021 business developments:
Puerto Rico (Refer to the "U.S. Public Finance Insurance Puerto Rico Exposures"
section for additional information on our Puerto Rico exposures)

• On January 1, 2021 and July 1, 2021, 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 $277 million. As of September 30, 2021, National had
          $2.6 billion of debt service outstanding related to Puerto Rico.



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Item 2. Management's Discussion and Analysis of Financial Condition and Results
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EXECUTIVE OVERVIEW (continued)

• In January of 2021, the reconstitution of the Oversight Board with the

reappointment of three existing members and appointment of four new

members for three year terms, including the newly elected Governor

          sitting as an ex officio member, was confirmed.

• On February 22, 2021, National agreed to join a plan support agreement,

          dated as of February 22, 2021 (the "GO PSA"), among the Financial
          Oversight and Management Board for Puerto Rico (the "Oversight Board"),
          certain holders of GO Bonds and PBA Bonds, Assured Guaranty Corp. and

Assured Guaranty Municipal Corp, and Syncora Guarantee Inc. in connection

with the GO and PBA Title III cases. The GO PSA provides that, among

other things, National shall receive a pro rata share of allocable cash,

newly issued General Obligation bonds, a contingent value instrument and

          certain fees. On April 12, 2021, National, Assured Guaranty Corp.,
          Assured Guaranty Municipal Corp. and the Oversight Board reached an

agreement in principle settling certain clawback claims and providing for

a distribution of cash, bonds and a contingent value instrument to Puerto

Rico Highway and Transportation Authority ("HTA") bondholders subject to

completing negotiations on a plan support agreement in respect of an HTA

plan of adjustment (the "HTA PSA"). On May 5, 2021, National, Assured

Guaranty Corp., Assured Guaranty Municipal Corp. and the Oversight Board

entered into the HTA PSA. The Oversight Board has committed to filing a

plan of adjustment for HTA by January 31, 2022. The GO PSA contemplates a

Commonwealth plan becoming effective on or before December 15, 2021;

however there can be no assurance that such plans will become effective,

          or on the contemplated timeline.

• On July 12, 2021, the Oversight Board filed the Fifth Amended Title III

Plan of Adjustment and Disclosure Statement, incorporating certain

changes in connection with the disclosure statement objections. The

Disclosure Statement hearing for the Fifth Amended Plan began on July 13,

          2021, and on July 14, 2021, the Bankruptcy Court (i) continued the
          hearing until July 27, 2021 for the sole purpose of considering a
          possible settlement of objections by Ambac Assurance Corporation and
          Financial Guaranty Insurance Company, and (ii) overruled all other
          objections to the Disclosure Statement but required the Oversight Board

to include certain additional disclosure on financial and legislative

risks. The Court also approved confirmation procedures, subject to the

approval of the Disclosure Statement at the continued hearing, including

commencing the confirmation hearing on November 8, 2021 and concluding on

November 23, 2021. On July 27, 2021, the Oversight Board filed the Sixth

Amended Plan and Disclosure Statement, and on July 29, 2021 the Court

approved the amended Disclosure Statement for distribution to

claimholders of record. On July 30, 2021, the Oversight Board filed the

          Seventh Amended Plan of Adjustment.

• On July 30, 2021, the Oversight Board filed the Seventh Amended Plan of

Adjustment. Bondholders were required to choose between commuting their

insurance policy with National or having their insurance policy

accelerated and receiving a one-time payment of par and accrued interest

from National. Approximately 27% of bondholders voted by the deadline of

October 18, 2021 to commute their insurance policies with National. The

expected commutation and acceleration should occur shortly after Plan

effectiveness and will reduce National's insured Puerto Rico Commonwealth

          GO ("GO") exposure to zero.

• In October of 2021, National sold certain bankruptcy claims in a private

transaction through the transfer of ownership of $199 million face amount

of bonds, representing approximately 16% of the principal amount of the

current bond claims in the Puerto Rico Electric Power Authority ("PREPA")

Title III case. The bonds included in this transaction had been fully

satisfied by National's insurance claim payments. This transaction

monetizes a portion of National's salvage asset at a discount to

National's previous carrying value, and reduces potential volatility and

          ongoing risk of remediation around the PREPA credit. Subsequent to the
          sale of these PREPA bankruptcy claims, National has approximately $230
          million of additional par claims to PREPA that have matured and can be
          sold.



     •    On October 25, 2021, Judge Swain held an emergency hearing in light of

the failure of the Puerto Rico legislature to agree by Friday, October 22

to enabling legislation authorizing the distributions under the Plan.

Judge Swain ruled at this hearing that mediation with the interested

parties commence in order to resolve the legislation needed by the Plan.

On October 26, 2021, the Governor of Puerto Rico signed the enabling

legislation after it was adopted by both houses of the Puerto Rico

legislature. On October 28, 2021, the mediation team filed its statement

with the court that the interested parties had engaged in good faith best

efforts and it reasonably believed that the Confirmation Hearing can be

expected to move forward as currently scheduled, commencing November 8,

          2021.



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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

EXECUTIVE OVERVIEW (continued)

Credit Suisse
In January of 2021, the Court overseeing MBIA Corp.'s litigation against Credit
Suisse Securities (USA) LLC and DLJ Mortgage Capital, Inc. (collectively,
"Credit Suisse"), involving the ineligibility of a majority of the loans in the
HEMT 2007-2 RMBS transaction sponsored by Credit Suisse, issued an order
declaring that Credit Suisse was liable to MBIA for approximately $604 million
in damages. In February of 2021, the parties to the litigation entered into a
settlement agreement pursuant to which Credit Suisse paid MBIA Corp. $600
million, and the Court entered an order dismissing the case. Refer to "Note 5:
Loss and Loss Adjustment Expense Reserves" in the Notes to Consolidated
Financial Statements for a discussion of our Credit Suisse put-back claims.
Financial Highlights
The following table presents our financial highlights. A detailed discussion of
our financial results is presented within the "Results of Operations" section
included herein. Refer to the "Capital Resources-Insurance Statutory Capital"
section for a discussion of National's and MBIA Insurance Corporation's capital
position under statutory accounting principles ("U.S. STAT").


                                                Three Months Ended September 30,                 Nine Months Ended September 30,
In millions except per share amounts             2021                     2020                    2021                     2020
Net income (loss)                           $         (123)          $      

(58) $ (290) $ (497)
Net income (loss) per diluted share $ (2.49) $

(1.11) $ (5.87) $ (7.97)
Adjusted net income (loss)
(1)

                                         $          (76)          $          (18)         $         (155)          $         (137)
Adjusted net income (loss) per
diluted share
(1)                                         $        (1.54)          $        (0.34)         $        (3.14)          $        (2.20)
Cost of shares repurchased                  $            -           $            62         $            -           $           198




         (1) - Adjusted net income (loss) and adjusted net income (loss) per
               diluted share are non-GAAP measures. Refer to the following
               "Results of Operations" 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.


Economic and Financial Market Trends
The U.S. economy continued to improve during the third quarter of 2021 as
progress on vaccinations dramatically reduced the spread of COVID-19, which
along with strong policy support, has bolstered economic activity and
employment. Certain sectors of the economy most negatively impacted by the
COVID-19 pandemic are improving, but remain relatively weak largely due to the
prevalence of the highly transmissible Delta variant.
Financial conditions have improved due to measures taken by Congress and the
Federal Reserve to support the economy and enhance access to credit for U.S.
households and businesses. However, economic activity, employment and inflation
remain at risk as the path of economic recovery will still be significantly
affected by the course of the virus, including new variants, and the continuing
progress on vaccinations throughout the country. Inflation remained elevated
during the third quarter of 2021, however, according to the Federal Reserve this
increase is largely due to transitory factors and until the labor market has
improved it will allow inflation to run above its 2 percent target. The
enactment of the $1.9 trillion American Rescue Plan, along with potential
additional government spending in the form of an infrastructure plan, will
continue to support economic growth. The Federal Open Market Committee currently
projects an increase in gross domestic product in the range of 6 percent for
2021.
The Federal Open Market Committee maintained its target range for the federal
funds rate at 0 to
1
/
4
percent at its most recent meeting. The Federal Reserve has committed to keeping
interest rates at or near zero in order to lower borrowing costs until they are
confident that the economy has stabilized and the health crisis has subsided.
Furthermore, the Federal Reserve has remained committed to using all of its
resources and tools to support the economy by assisting households, employers,
and state and local governments during the coronavirus pandemic.
Economic and financial market trends could impact the Company's financial
results. As a result of the pandemic, many states and municipalities will
experience financial distress through delayed tax collections, inability to
reduce spending and not receiving timely financial assistance. Economic
deterioration at the state and local level weakens the credit quality of the
issuers of our insured municipal bonds, reduces the performance of our insured
U.S. public finance portfolio and could increase the amount of National's
potential incurred losses. In addition, lower interest rates could result in
decreased returns on our Company's investment portfolios. Refer to the
"COVID-19" section above for further information about the pandemic.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

CRITICAL ACCOUNTING POLICIES AND ESTIMATES
We prepare our consolidated financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"), which
requires the use of estimates and assumptions. Management has discussed and
reviewed the development, selection, and disclosure of critical accounting
estimates with the Company's Audit Committee. Our most critical accounting
estimates include loss and loss adjustment expense ("LAE") reserves and
valuation of financial instruments, since these estimates require significant
judgment. Any modifications in these estimates could materially impact our
financial results.
For a discussion of the Company's critical accounting estimates, refer to
"Critical Accounting Estimates" in Part II, Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2020. In
addition, refer to "Note 5: Loss and Loss Adjustment Expense Reserves" and "Note
6: Fair Value of Financial Instruments" in the Notes to Consolidated Financial
Statements for a current description of estimates used in our insurance loss
reserving process and information about our financial assets and liabilities
that are accounted for at fair value, including valuation techniques and
significant inputs.
RECENT ACCOUNTING PRONOUNCEMENTS
Refer to "Note 3: Recent Accounting Pronouncements" in the Notes to Consolidated
Financial Statements for a discussion of accounting guidance recently adopted by
the Company.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

RESULTS OF OPERATIONS

Summary of Consolidated Results
The following table presents a summary of our consolidated financial results for
the three and nine months ended September 30, 2021 and 2020:


                                                             Three Months Ended September 30,             Nine Months Ended September 30,
In millions except for per share amounts                         2021                  2020                  2021                  2020
Total revenues                                            $          72          $          71        $         162          $         179
Total expenses                                                      195                    129                  452                    676

Income (loss) before income taxes                                  (123 )                  (58 )               (290 )                 (497 )
Provision (benefit) for income taxes                                  -                      -                    -                      -

Net income (loss)                                         $        (123 )        $         (58 )      $        (290 )        $        (497 )

Net income (loss) per common share:
Basic                                                     $       (2.49 )   

$ (1.11 ) $ (5.87 ) $ (7.97 )
Diluted

                                                   $       (2.49 )        $       (1.11 )      $       (5.87 )        $       (7.97 )
Weighted average number of common shares outstanding:
Basic                                                              49.6                   52.6                 49.4                   62.4
Diluted                                                            49.6                   52.6                 49.4                   62.4


Three Months Ended September 30, 2021 vs. Three Months Ended September 30, 2020
The slight increase in consolidated total revenues in the third quarter of 2021
was primarily due to favorable changes in gains on extinguishment of debt in
2021 as a result of gains from purchases, at discounts, of medium-term notes
("MTNs") issued by the Company and an increase in net premiums earned as a
result of the acceleration of premium earnings related to the termination of an
international public finance insurance policy, partially offset by unfavorable
changes in revenues of consolidated variable interest entities ("VIEs"). Net VIE
losses during the third quarter of 2021 were due to the deconsolidation of a
VIE. Net VIE gains in the third quarter of 2020 were primarily related to the
reversal of an allowance for credit losses on the assets of a VIE.
Consolidated total expenses for the three months ended September 30, 2021 and
2020 included net insurance loss and LAE of $125 million and $48 million,
respectively. Partially offsetting the increase in loss and LAE was a decrease
in interest expense of VIEs, which resulted from the deconsolidation of VIEs and
the repayment of VIE debt in 2021. The increase in loss and LAE was primarily
due to changes in loss reserving assumptions on certain Puerto Rico credits.
Refer to the following "Loss and Loss Adjustment Expenses" sections of National
and MBIA Corp. for additional information on our insurance losses and LAE.
Nine Months Ended September 30, 2021 vs. Nine Months Ended September 30, 2020
The decrease in consolidated total revenues was primarily due to net losses of
consolidated VIEs during 2021 compared with net gains during 2020, partially
offset by fair value gains during 2021 on our interest rate swaps for which we
receive floating rates compared with fair value losses during 2020 on our
interest rate swaps and gains during 2021 from purchases, at discounts, of MTNs
issued by the Company. The unfavorable changes in VIE revenues were primarily
due to gains in 2020 from an increase in the Credit Suisse put-back recoveries.
These put-back claims were settled and received in the first quarter of 2021. In
addition, the nine months ended September 30, 2021 included losses from the
deconsolidation of VIEs compared with gains primarily related to the reversal of
an allowance for credit losses on the assets of a VIE in the same period of
2020. Also, the nine months ended September 30, 2020 included net investment
income of VIEs with no comparable income for the same period of 2021 due to the
deconsolidation of VIEs in 2020. The fair value gains on our interest rate swaps
in 2021 were due to favorable changes in interest rates compared with the same
period of 2020.
Consolidated total expenses for the nine months ended September 30, 2021 and
2020 included net insurance loss and LAE of $232 million and $427 million,
respectively. The decrease in loss and LAE was primarily due to less of a
decline in expected salvage collections from insured CDOs in 2021 when compared
with 2020 and an incurred benefit from changes in risk-free rates on first-lien
RMBS in 2021. Refer to the following "Loss and Loss Adjustment Expenses"
sections of National and MBIA Corp. for additional information on our insurance
losses and LAE.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

RESULTS OF OPERATIONS (continued)

Non-GAAP Adjusted Net Income (Loss)
In addition to our results prepared in accordance with GAAP, we also analyze the
operating performance of the Company using adjusted net income (loss) and
adjusted net income (loss) per diluted common share, both non-GAAP measures.
Since adjusted net income (loss) is used by management to assess performance and
make business decisions, we consider adjusted net income (loss) and adjusted net
income (loss) per diluted common share fundamental measures of periodic
financial performance which are useful in understanding our results. Adjusted
net income (loss) and adjusted net income (loss) per diluted common share are
not substitutes for net income (loss) and net income (loss) per diluted common
share determined in accordance with GAAP, and our definitions of adjusted net
income (loss) and adjusted net income (loss) per diluted common share may differ
from those used by other companies.
Adjusted net income (loss) and adjusted net income (loss) per diluted common
share include the after-tax results of the Company and remove the after-tax
results of our international and structured finance insurance segment,
comprising the results of MBIA Corp. which given its capital structure and
business prospects, we do not expect its financial performance to have a
material economic impact on MBIA Inc., as well as the following:

• Mark-to-market gains (losses) on financial instruments

- We remove the impact of mark-to-market gains (losses) on financial

instruments that primarily include interest rate swaps and hybrid

financial instruments. These amounts fluctuate based on market interest

          rates, credit spreads and other market factors.



     •    Foreign exchange gains (losses)
          - We remove foreign exchange gains (losses) on the remeasurement of
          certain assets and liabilities and transactions in non-functional

currencies. 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 gains (losses) on sales of investments, impaired securities and
          extinguishment of debt

- We remove 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.

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 three and nine months ended
September 30, 2021 and 2020:


                                                              Three Months Ended September 30,             Nine Months Ended September 30,
In millions except share and per share amounts                    2021                  2020                  2021                  2020
Net income (loss)                                          $        (123 )        $         (58 )      $        (290 )        $        (497 )
Less: adjusted net income (loss) adjustments:
Income (loss) before income taxes of our international
and structured finance insurance segment and
eliminations                                                         (80 )                  (59 )               (223 )                 (338 )

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)

                                                                   10                     13                   39                    (47 )
Foreign exchange gains (losses)
(1)                                                                    5                    (16 )                 18                    (16 )
Net gains (losses) on sales of investments
(1)                                                                    2                     22                    1                     41
Net gains (losses) on extinguishment of debt                          16                      -                   30                      -
Adjusted net income adjustment to the (provision)
benefit for income tax
(2)                                                                    -                      -                    -                      -

Adjusted net income (loss)                                 $         (76 )        $         (18 )      $        (155 )        $        (137 )

Adjusted net income (loss) per diluted common share
(3)                                                        $       (1.54 )        $       (0.34 )      $       (3.14 )        $       (2.20 )



(1) - Reported within "Net gains (losses) on financial instruments at fair value
and foreign exchange" on the Company's consolidated statements of operations.
(2) - Reported within "Provision (benefit) for income taxes" 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.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

RESULTS OF OPERATIONS (continued)

Book Value Adjustments Per Share
In addition to GAAP book value per share, for internal purposes management also
analyzes adjusted book value ("ABV") per share, changes to which we view as an
important indicator of financial performance. ABV is also used by management in
certain components of management's compensation. Since many of the Company's
investors and analysts continue to use ABV to evaluate MBIA's share price and as
the basis for their investment decisions, we present GAAP book value per share
as well as the individual adjustments used by management to calculate its
internal ABV metric.
Management adjusts GAAP book value to remove the book value of MBIA Corp. and
for certain items which the Company believes will reverse from GAAP book value
through GAAP earnings and comprehensive income, as well as add in the impact of
certain items which the Company believes will be realized in GAAP book value in
future periods. The Company has limited such adjustments to those items that it
deems to be important to fundamental value and performance and for which the
likelihood and amount can be reasonably estimated. The following provides a
description of management's adjustments to GAAP book value:

• Negative Book value of MBIA Corp.

- We remove the negative book value of MBIA Corp. based on our view that

given MBIA Corp.'s current financial condition, the regulatory regime in

which it operates, the priority given to its policyholders, surplus note

holders and preferred stock holders with respect to the distribution of

assets, and its legal structure, it is not and will not likely be in a

position to upstream any economic benefit to MBIA Inc. Further, MBIA Inc.

          does not face any material financial liability arising from MBIA Corp.



     •    Net unrealized (gains) losses on available-for-sale ("AFS") securities

excluding MBIA Corp.

- We remove net unrealized gains and losses on AFS securities recorded in

accumulated other comprehensive income since they will reverse from GAAP

book value when such securities mature. Gains and losses from sales and

          impairments of AFS securities are recorded in book value through
          earnings.

• Net unearned premium revenue in excess of expected losses of National

- We include net unearned premium revenue in excess of expected losses.

Net unearned premium revenue in excess of expected losses consists of the

financial guarantee unearned premium revenue of National in excess of

expected insurance losses, net of reinsurance and deferred acquisition

costs. In accordance with GAAP, a loss reserve on a financial guarantee

          policy is only recorded when expected losses exceed the amount of
          unearned premium revenue recorded for that policy. As a result, we only
          add to GAAP book value the amount of unearned premium revenue in excess

of expected losses for each policy in order to reflect the full amount of

          our expected losses. The Company's net unearned premium revenue will be
          recognized in GAAP book value in future periods, however, actual amounts
          could differ from estimated amounts due to such factors as credit
          defaults and policy terminations, among others.


Since the Company has a full valuation allowance against its net deferred tax
asset, the book value per share adjustments were adjusted by applying a zero
effective tax rate.
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             As of
                                                           September 30,     December 31,
In millions except share and per share amounts                 2021         

2020

Total shareholders' equity of MBIA Inc.                   $       (170 )    $        136
Common shares outstanding                                   54,406,076        53,677,148
GAAP book value per share                                 $      (3.12 )    $       2.55
Management's adjustments described above:
Remove negative book value per share of MBIA Corp.              (35.00 )          (31.97 )
Remove net unrealized gains (losses) on
available-for-sale securities included in other
comprehensive income (loss)                                       1.81      

2.86

Include net unearned premium revenue in excess of
expected losses                                                   3.71              4.29



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Item 2. Management's Discussion and Analysis of Financial Condition and Results
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RESULTS OF OPERATIONS (continued)

U.S. Public Finance Insurance
Our U.S. public finance insurance portfolio is managed through National. The
financial guarantees issued by National provide unconditional and irrevocable
guarantees of the payment of the principal of, and interest or other amounts
owing on, insured obligations when due or, in the event National has exercised,
at its discretion, the right to accelerate the payment under its policies upon
the acceleration of the underlying insured obligations due to default or
otherwise. National's guarantees insure municipal bonds, including tax-exempt
and taxable indebtedness of U.S. political subdivisions, as well as utility
districts, airports, healthcare institutions, higher educational facilities,
housing authorities and other similar agencies and obligations issued by private
entities that finance projects that serve a substantial public purpose.
Municipal bonds and privately issued bonds used for the financing of public
purpose projects are generally supported by taxes, assessments, user fees or
tariffs related to the use of these projects, lease payments or other similar
types of revenue streams. As of September 30, 2021, National had total insured
gross par outstanding of $37.7 billion.
National continues to monitor and remediate its existing insured portfolio and
may also pursue strategic alternatives that could enhance shareholder value.
Some state and local governments and territory obligors that National insures
are experiencing financial and budgetary stress which may be exacerbated by
COVID-19. As a result of COVID-19, we have increased our monitoring of certain
credits. Financial and budgetary stress could lead to an increase in defaults by
such entities on the payment of their obligations and losses or impairments on a
greater number of the Company's insured transactions. In particular, Puerto Rico
had been experiencing significant fiscal stress and constrained liquidity, and
in response, Congress passed PROMESA, which established the Oversight Board
vested with the sole power to certify fiscal plans for Puerto Rico. Refer to the
"U.S. Public Finance Insurance Puerto Rico Exposures" section for additional
information on PROMESA and our Puerto Rico 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.
The following table presents our U.S. public finance insurance segment results
for the three and nine months ended September 30, 2021 and 2020:



                                    Three Months Ended September 30,          Percent          Nine Months Ended September 30,          Percent

In millions                             2021                  2020            Change              2021                  2020            Change

Net premiums earned              $          13          $          12             8%       $          41          $          42            -2%
Net investment income                       15                     15             -%                  43                     55           -22%
Fees and reimbursements                      -                      1          -100%                   2                      2             -%
Net gains (losses) on
financial instruments at
fair value and foreign
exchange                                     1                     23           -96%                   1                     30           -97%

Total revenues                              29                     51           -43%                  87                    129           -33%

Losses and loss adjustment                  68                     14            n/m                 135                    134             1%
Amortization of deferred
acquisition costs                            2                      -            n/m                   9                      7            29%
Operating                                   15                     12            25%                  41                     35            17%

Total expenses                              85                     26            n/m                 185                    176             5%

Income (loss) before income
taxes                            $         (56 )        $          25            n/m       $         (98 )        $         (47 )         109%




n/m - Percent change not meaningful.
NET PREMIUMS EARNED Net premiums earned on financial guarantees represent gross
premiums earned net of premiums ceded to reinsurers, and include scheduled
premium earnings and premium earnings from refunded issues. Refunding activity
over the past several years has accelerated premium earnings in prior years and
reduced the amount of scheduled premiums that would have been earned in the
current year. Refunding activity can vary significantly from period to period
based on issuer refinancing behavior.
NET INVESTMENT INCOME The decrease in net investment income for the nine months
ended September 30, 2021 compared with the same period of 2020 was primarily due
to a lower average invested asset base resulting from claim payments, payment of
a dividend to MBIA Inc., and purchases of MBIA Inc. common shares.
NET GAINS (LOSSES) ON FINANCIAL INSTRUMENTS AT FAIR VALUE AND FOREIGN EXCHANGE
For the three and nine months ended September 30, 2020, net gains on financial
instruments at fair value and foreign exchange included gains from the sales of
securities from the ongoing management of our U.S. public finance investment
portfolio.

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RESULTS OF OPERATIONS (continued)

LOSS 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
insured issue. As a result of COVID-19, we have increased our monitoring of
certain credits. Refer to "Note 5: Loss and Loss Adjustment Expense Reserves" in
the Notes to Consolidated Financial Statements for additional information
related to the Company's loss reserves.
For the three months ended September 30, 2021, the loss and LAE incurred
primarily related to the changes in loss scenario assumptions on the Puerto Rico
GO and PREPA credits. In the third quarter of 2021, National modified its GO
scenario assumptions to incorporate the final terms of the Plan of Adjustment.
This includes a commutation of 27% of National's outstanding insured bonds and
an acceleration of National's remaining insured bonds. In addition, National
updated its GO loss reserve scenarios to include certain assumptions about
recovery valuation on the date it expects to receive cash, bonds and a
contingent value instrument. These assumption changes decreased expected GO
recoveries. Also in the third quarter of 2021, National modified its PREPA
scenario assumptions to reflect the market insight gained from the anticipated
sale of a portion of the recoverable on PREPA bankruptcy claims that had been
fully satisfied by National's insurance claim payments, which decreased its
expected PREPA recoveries, partially offset by additional expected recoveries
under the PREPA RSA.
For the nine months ended September 30, 2021, the loss and LAE incurred
primarily related to the changes in loss reserve scenario assumptions on the
PREPA credit discussed above, and reflects changes in loss reserve scenario
assumptions on HTA exposure to reflect the most recent Plan of Adjustment. In
addition, an increase in the risk-free rates used to discount the value of
long-dated future recoveries on Puerto Rico exposures contributed to loss and
LAE incurred.
For the three months ended September 30, 2020, losses and LAE primarily related
to certain Puerto Rico exposures. For the nine months ended September 30, 2020,
losses and LAE incurred reflect changes in assumptions on HTA exposure and
losses incurred on an investor owned utility exposure. These losses were
partially offset by a decrease in the risk-free rates used to discount the value
of long-dated future recoveries on Puerto Rico exposures.
The following table presents information about our U.S. public finance insurance
loss recoverable asset and loss and LAE reserves liabilities as of September 30,
2021 and December 31, 2020:


                                                      September 30,      December 31,      Percent
In millions                                               2021               2020          Change
Assets:
Insurance loss recoverable                           $      1,286       $     1,220            5%
Reinsurance recoverable on paid and unpaid losses
(1)                                                             3                 6          -50%
Liabilities:
Loss and LAE reserves                                         386               469          -18%
Insurance loss recoverable - ceded
(2)                                                            53                48           10%

Net reserve (salvage)                                $       (850 )     $      (709 )         20%




(1) - Reported within "Other assets" on our consolidated balance sheets.
(2) - Reported within "Other liabilities" on our consolidated balance sheets.
The insurance loss recoverable as of September 30, 2021 increased compared with
December 31, 2020 primarily as a result of expected recoveries related to claims
paid on certain Puerto Rico exposures, which was partially offset by a change in
recovery assumptions surrounding certain Puerto Rico exposures as well as
increases in discount rates used to present value future expected recoveries on
paid claims. The change in recovery assumptions is primarily the result of the
changes in GO and PREPA loss reserve scenario assumptions discussed above. Loss
and LAE reserves as of September 30, 2021 declined compared with December 31,
2020 primarily due to actual payments made related to certain Puerto Rico
exposures, partially offset by an increase in expected payments and unfavorable
changes in future recoveries of unpaid losses due to changes in assumptions and
an increase in risk-free discount rates.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results
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RESULTS OF OPERATIONS (continued)

POLICY ACQUISITION COSTS AND OPERATING EXPENSES U.S. public finance insurance
segment expenses for the three and nine months ended September 30, 2021 and 2020
are presented in the following table:



                                      Three Months Ended September 30,            Percent            Nine Months Ended September 30,             Percent

In millions                             2021                    2020              Change               2021                    2020              Change
Gross expenses                   $            15          $            12            25%        $            41          $            35            17%

Amortization of deferred
acquisition costs                $             2          $             -            n/m        $             9          $             7            29%
Operating                                     15                       12            25%                     41                       35            17%

Total insurance operating
expenses                         $            17          $            12            42%        $            50          $            42            19%




n/m - Percent change not meaningful.
Gross expenses represent total insurance expenses before the deferral of any
policy acquisition costs. Operating expenses increased for the three and nine
months ended September 30, 2021 compared with the same periods of 2020 primarily
due to increases in legal costs.
When an insured obligation refunds, we accelerate 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 the nine months ended September 30, 2021 or 2020.
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. In evaluating credit risk, we obtain, when available, the
underlying rating(s) of the insured obligation before the benefit of National's
insurance policy from nationally recognized rating agencies, Moody's Investor
Services ("Moody's") and Standard & Poor's Financial Services LLC ("S&P"). Other
companies within the financial guarantee industry may report credit quality
information based upon internal ratings that would not be comparable to our
presentation. We maintain internal ratings on our entire portfolio, and our
ratings may be higher or lower than the underlying ratings assigned by Moody's
or S&P.
The following table presents the credit quality distribution of National's U.S.
public finance outstanding gross par insured as of September 30, 2021 and
December 31, 2020. 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. If
transactions are not rated by S&P, a Moody's equivalent rating is used. If
transactions are not rated by either S&P or Moody's, an internal equivalent
rating is used.


                                       Gross Par Outstanding
In millions                September 30, 2021          December 31, 2020
Rating                     Amount          %          Amount          %
AAA                      $    1,744         4.6%     $   2,080         5.0%
AA                           15,035        39.9%        16,299        39.0%
A                            10,986        29.1%        12,888        30.8%
BBB                           6,611        17.5%         7,019        16.7%
Below investment grade        3,339         8.9%         3,570         8.5%

Total                    $   37,715       100.0%     $  41,856       100.0%




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Item 2. Management's Discussion and Analysis of Financial Condition and Results
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RESULTS OF OPERATIONS (continued)

U.S. Public Finance Insurance Puerto Rico Exposures
The following is a summary of exposures within the insured portfolio of our U.S.
public finance insurance segment related to Puerto Rico as of September 30,
2021.


                                                                          Debt           National
                                                     Gross Par           Service         Internal
In millions                                         Outstanding       

Outstanding Rating
Puerto Rico Electric Power Authority (PREPA) $ 809 $ 1,084

              d
Puerto Rico Commonwealth GO                               224                 295              d
Puerto Rico Public Buildings Authority (PBA)
(1)                                                       155                 199              d
Puerto Rico Highway and Transportation
Authority Transportation Revenue (PRHTA)                  523                 856              d
Puerto Rico Highway and Transportation
Authority-Subordinated Transportation Revenue
(PRHTA)                                                    27                  34              d
Puerto Rico Highway and Transportation                        (2)
Authority Highway Revenue (PRHTA)                          39                  58              d
University of Puerto Rico System Revenue                   70                  91              d
Inter American University of Puerto Rico Inc.              19                  23             a3

Total                                              $    1,866         $     2,640




(1) - Additionally secured by the guarantee of the Commonwealth of Puerto Rico.
(2) - Includes CABs that reflect the gross par amount at the time of issuance of
the insurance policy. As of September 30, 2021, gross par outstanding plus CABs
accreted interest was $41 million.
On June 30, 2016, PROMESA was signed into law by the President of the United
States. PROMESA provides for the creation of the Oversight Board with powers
relating to the development and implementation of a fiscal plan for the
Commonwealth and each of its instrumentalities as well as a court-supervised
Title III process that allows Puerto Rico to restructure its debt if voluntary
agreements cannot be reached with creditors through a collective action process.
Following the resignation and replacement of several Oversight Board members,
the Oversight Board has been reconstituted with four new members while three
existing members have been reappointed by the President for another three year
term. The newly elected Governor of Puerto Rico has appointed himself as a
non-voting member of the reconstituted Oversight Board.
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. 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. One of the proceedings was resolved on
February 4, 2019, when the District of Puerto Rico entered the order confirming
the Third Amended Title III Plan of Adjustment for COFINA. The plan became
effective on February 12, 2019, and as of December 31, 2019, we no longer have
exposure to COFINA. There can be no assurance that the other Title III
proceedings will be resolved with similar outcomes.
As a result of prior defaults, various stays and the Title III cases, Puerto
Rico failed to make certain scheduled debt service payments for National insured
bonds. As a consequence, National has paid gross claims in the aggregate amount
of $1.8 billion relating to GO bonds, PBA bonds, PREPA bonds and PRHTA bonds
through June 30, 2021, inclusive of the commutation payment and the additional
payment in the amount of $66 million on December 17, 2019 related to COFINA.
On May 2, 2019, the Oversight Board and the Official Committee of Unsecured
Creditors of all Title III Debtors (other than COFINA) (the "Committee") filed
lien avoidance adversary complaints against several hundred defendants,
including National, challenging the existence, extent, and enforceability of GO
bondholders' liens. After an approximately five-month stay of litigation entered
by the Court on July 24, 2019, these adversary proceedings resumed pursuant to
an interim schedule entered by the Court in December 2019. On February 5, 2020,
National and Assured Guaranty Municipal Corp. filed a motion to dismiss the
adversary proceeding. The adversary proceeding hearing was stayed indefinitely
by further order of the Court.

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RESULTS OF OPERATIONS (continued)

On February 22, 2021, National agreed to join a plan support agreement, dated as
of February 22, 2021 (the "GO PSA"), among the Oversight Board, certain holders
of GO Bonds and PBA Bonds, Assured Guaranty Corp. and Assured Guaranty Municipal
Corp, and Syncora Guarantee Inc. in connection with the GO and PBA Title III
cases. The GO PSA provides that, among other things, National shall receive a
pro rata share of allocable cash, newly issued General Obligation bonds, a
contingent value instrument and certain fees. The GO PSA contemplates a
Commonwealth plan becoming effective on or before December 15, 2021; however
there can be no assurance that such plans will become effective, or on the
contemplated timeline. Pursuant to the GO PSA, the Oversight Board and National
jointly obtained the entry of an order in the Title III court staying National's
participation in actions related to the clawback of HTA funds from the
Commonwealth, and National shall take no further action with respect to those
proceedings subject to the Commonwealth plan becoming effective. On April 12,
2021, National, Assured Guaranty Corp., Assured Guaranty Municipal Corp. and the
Oversight Board reached an agreement in principle settling certain clawback
claims and providing for a distribution of cash, bonds and a contingent value
instrument to HTA bondholders subject to completing negotiations on a plan
support agreement in respect of the HTA PSA. On May 5, 2021, National, Assured
Guaranty Corp., Assured Guaranty Municipal Corp. and the Oversight Board entered
into the HTA PSA. The Oversight Board has committed to filing a plan of
adjustment for HTA by January 31, 2022.
On July 12, 2021, the Oversight Board filed the Fifth Amended Title III Plan of
Adjustment and Disclosure Statement, incorporating certain changes in connection
with certain disclosure statement objections. On July 14, 2021, the Bankruptcy
Court (i) continued the disclosure statement hearing until July 27, 2021 for the
sole purpose of considering a possible settlement of objections by Ambac
Assurance Corporation and Financial Guaranty Insurance Company, and
(ii) overruled all other objections to the disclosure statement but required the
Oversight Board to include certain additional disclosure on financial and
legislative risks. The court also approved confirmation procedures, subject to
the approval of the disclosure statement at the continued hearing, including
commencing the confirmation hearing on November 8, 2021 and concluding on
November 23, 2021. On July 27, 2021, the Oversight Board filed the Sixth Amended
Plan and Disclosure Statement, and on July 29, 2021 the Court approved the
amended Disclosure Statement for distribution to claimholders of record. On
July 30, 2021, the Oversight Board filed the Seventh Amended Plan of Adjustment.
On October 25, 2021, Judge Swain held an emergency hearing in light of the
failure of the Puerto Rico legislature to agree by Friday, October 22 to
enabling legislation authorizing the distributions under the Plan. Judge Swain
ruled at this hearing that mediation with the interested parties commence in
order to resolve the legislation needed by the Plan. On October 26, 2021, the
Governor of Puerto Rico signed the enabling legislation after it was adopted by
both houses of the Puerto Rico legislature. On October 28, 2021, the mediation
team filed its statement with the court that the interested parties had engaged
in good faith best efforts and it reasonably believed that the Confirmation
Hearing can be expected to move forward as currently scheduled, commencing
November 8, 2021.
In October of 2021, bondholders voted to approve the GO PSA which included the
option for National insured bondholders to choose between commuting their
insurance policy with National or receiving a one-time cash payment equal to
outstanding par and accrued interest via an acceleration of National's insurance
policy. Insured bondholders were required to choose one of these two options.
Therefore, shortly after implementation of the PSA National's insured GO
exposure will be reduced to zero.
On July 24, 2019, Judge Swain entered an order staying certain adversary
proceedings and contested matters until December 31, 2019, and imposing
mandatory mediation under Judge Houser. Among the matters stayed in which
National is either a party in interest or intervenor are the (i) PBA adversary
proceeding seeking to recharacterize the PBA bonds as financings and (ii) GO
adversary and HTA adversary proceedings, both challenging bondholder liens.
Pursuant to interim schedules entered by the Court in December 2019, the PBA
adversary proceeding and the HTA adversary proceeding were to remain stayed
until March 11, 2020, but the Court subsequently stayed all such adversary
proceedings indefinitely subject to the progress of the GO confirmation process.
As part of the GO PSA, National's participation in this litigation will be
stayed subject to the effective date of the Commonwealth plan of adjustment.

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PBA

On December 21, 2018, the Oversight Board filed an adversary complaint seeking
to disallow the PBA's administrative rent claims against the Commonwealth. The
PBA bonds are payable from the rent the Commonwealth pays under its lease
agreements with the PBA. The Oversight Board alleges that the Commonwealth has
no obligation to make rent payments under section 365(d)(3) of the Bankruptcy
Code and that the PBA is not entitled to a priority administrative expense claim
under the leases. On April 16, 2019, Judge Swain entered an order setting a
discovery schedule. On September 27, 2019, the Oversight Board filed a Title III
petition for the PBA.
The proceeding is currently stayed in the Title III court subject to the
occurrence of the effective date of the Commonwealth plan of adjustment.
PREPA
National's largest exposure to Puerto Rico, by gross par outstanding, is to
PREPA.
On October 3, 2018, National, together with Assured Guaranty Corp., Assured
Guaranty Municipal Corp., and Syncora Guarantee Inc. (collectively, "Movants")
filed a motion in the Title III case for PREPA for relief from the automatic
stay to allow Movants to exercise their statutory right to have a receiver
appointed at PREPA (the "Receiver Motion"). This motion is stayed pending a
resolution of the 9019 Order, discussed below.
On May 3, 2019, PREPA, the Oversight Board, the Puerto Rico Fiscal Agency and
Financial Advisory Authority ("AAFAF"), the Ad Hoc Group of PREPA bondholders
(the "Ad Hoc Group"), and Assured Guaranty Corp. and Assured Guaranty Municipal
Corp. ("Assured") entered into the a restructuring support agreement ("RSA")
which was amended on September 9, 2019 to include National and Syncora
Guarantee, Inc. ("Syncora") as supporting parties. Approximately 90% of PREPA's
bondholders have joined the RSA.
The RSA initially contemplated the filing of a plan of adjustment for PREPA by
March 31, 2020; the timing of that action is now uncertain. The Oversight Board
filed a status report with the Court on October 5, 2021 in which it stated its
intention to file a PREPA plan of adjustment by the end of 2021 or early 2022.
Pursuant to the RSA, the Oversight Board filed a Rule 9019 motion with the Title
III court in May 2019 seeking approval of the RSA (the "Settlement Motion") and
a Motion to Dismiss the Receiver Motion. The RSA requires, upon entry of the
order approving the Settlement Motion (the "9019 Order"), that Movants will
withdraw the Receiver Motion, and the Ad Hoc Group will support such withdrawal.
The Receiver Motion and the Motion to Dismiss the Receiver Motion have been
delayed several times, and most recently were adjourned due to the outbreak of
COVID-19 until further notice. The debt restructuring contemplated by the RSA
will not be effective until (i) confirmation of a plan of adjustment under the
Puerto Rico Oversight, Management and Economic Stability Act ("PROMESA"),
(ii) negotiation and consummation of definitive documentation and legal
opinions, (iii) enactment and implementation of supportive Puerto Rico
legislation and (iv) receipt of Puerto Rico regulatory approval, each of which
outcome is uncertain and subject to varying degrees of risk. In addition, the
restructuring the RSA contemplates has received criticism from various parties
including members of the Puerto Rico government and other stakeholders. This
opposition could adversely affect the ability of the Oversight Board and RSA
Parties to obtain the Rule 9019 Order and approve the RSA.
As contemplated by the RSA, on July 1, 2019 the Oversight Board and AAFAF also
filed an adversary complaint against the Trustee for the PREPA Bonds,
challenging the validity of the liens arising under the Trust Agreement that
secure insured obligations of National. The adversary proceeding is stayed until
the earlier of (a) 60 days after the Court denies the 9019 Motion,
(b) consummation of a Plan, (c) 60 days after the filing by the Oversight Board
and AAFAF of a Litigation Notice, or (d) further order of the Court.
Certain objectors to the RSA have filed adversary proceedings challenging the
payment priority arising under the PREPA Trust Agreement, alleging that they are
entitled to be paid in full before National and other bondholders have any lien
on or recourse to PREPA's assets, including pursuant to the RSA. All litigation
on this matter has been stayed until the Court places the 9019 Motion back on
the calendar for hearing.
On June 22, 2020, the Oversight Board and the Puerto Rico P3 Authority announced
an agreement and contract with LUMA Energy, LLC ("LUMA") which calls for LUMA to
take full responsibility for the operation and maintenance of PREPA's
transmission and distribution system; the contract runs for 15-years following a
transition period expected to take 12 months. PREPA retains ownership of the
system as well as responsibility for the power generation system. LUMA assumed
responsibility for operations on June 1, 2021.

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RESULTS OF OPERATIONS (continued)

On September 18, 2020, FEMA and the PR COR3 Authority announced the commitment
by FEMA to provide approximately $11.6 billion (net of the required 10% cost
share) to fund projects built by PREPA and the PR Department of Education;
approximately $9.4 billion (net) of this amount is designated for PREPA. 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.
In October of 2021, National sold certain bankruptcy claims in a private
transaction through the transfer of ownership of $199 million face amount of
bonds, representing approximately 16% of the principal amount of the current
bond claims in the PREPA Title III case. The bonds included in this transaction
had been fully satisfied by National's insurance claim payments. Subsequent to
the sale of these PREPA bankruptcy claims, National has approximately $230
million of additional par claims to PREPA that have matured and can be sold.
PRHTA
On May 20, 2019, the Oversight Board and the Committee filed a lien avoidance
adversary complaint against fiscal agents, holders, and insurers of certain
PRHTA bonds, including National. The complaint challenges the extent and
enforceability of certain security interests in PRHTA's revenues. Pursuant to an
interim schedule entered by the Court in December 2019, the Court has stayed the
proceedings, with the understanding that the issues raised in these proceedings
would be addressed in new adversary proceedings filed by the Oversight Board on
January 16, 2020. Subsequent to those filings, these proceedings were stayed by
order of the Court.
On April 12, 2021, National, Assured Guaranty Corp., Assured Guaranty Municipal
Corp. and the Oversight Board reached an agreement in principle settling certain
HTA clawback claims in the Commonwealth Title III case and providing for a
distribution to HTA holders of cash, bonds and a contingent value instrument
subject to completing negotiations on a plan support agreement in respect of the
HTA PSA. On May 5, 2021, National, Assured Guaranty Corp., Assured Guaranty
Municipal Corp. and the Oversight Board entered into the HTA PSA. The Oversight
Board has committed to filing a plan of adjustment for HTA by January 31, 2022.
Status of Puerto Rico's Fiscal Plans
In January of 2021, the Oversight Board requested that the Puerto Rico
government submit a proposed updated Fiscal Plan for the Commonwealth. The
Commonwealth submitted a revised fiscal plan on March 8, 2021. On March 15,
2021, the Oversight Board deemed the Puerto Rico government's fiscal plan to be
non-compliant, and has required the government to submit a revised updated
fiscal plan, including all financial and supporting models. The Oversight Board
certified the government's fiscal plan on April 23, 2021. For the remaining
component units, the Oversight Board certified fiscal plans for PREPA, the
University of Puerto Rico (the "University") and PRHTA on May 27, 2021. The
Oversight Board also certified the fiscal year 2022 budgets for Commonwealth,
PREPA, the University and PRHTA on June 27, 2021.
University of Puerto Rico
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 November 30,
2021. National is not a party to the standstill agreement.
The following table presents our scheduled gross debt service due on our Puerto
Rico insured exposures for the three months ending December 31, 2021, for each
of the subsequent four years ending December 31 and thereafter:


                                             Three Months
                                                Ending
In millions                                December 31, 2021      2022     

2023 2024 2025 Thereafter Total
Puerto Rico Electric Power Authority
(PREPA)

                                   $               -     $   140     

$ 137 $ 137 $ 105 $ 565 $ 1,084
Puerto Rico Commonwealth GO

                               -          19          14          13          75             174         295
Puerto Rico Public Buildings Authority
(PBA)                                                     -           9          27          43          36              84         199
Puerto Rico Highway and Transportation
Authority Transportation Revenue
(PRHTA)                                                   -          27          36          33          36             724         856
Puerto Rico Highway and Transportation
Authority-Subordinated Transportation
Revenue (PRHTA)                                           -           9           1           1           1              22          34
Puerto Rico Highway and Transportation
Authority Highway Revenue (PRHTA)                         -           2           4           2           2              48          58
University of Puerto Rico System
Revenue                                                   -           7          12          11          16              45          91
Inter American University of Puerto
Rico Inc.                                                 3           3           3           3           3               8          23

Total                                     $               3     $   216     $   234     $   243     $   274     $     1,670     $ 2,640




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RESULTS OF OPERATIONS (continued)

Corporate

Our corporate segment consists of general corporate activities, including
providing support services to MBIA Inc.'s subsidiaries and asset and capital
management. Support services are provided by our service company, MBIA Services,
and include, among others, management, legal, accounting, treasury, information
technology, and insurance portfolio surveillance, on a fee-for-service basis.
Capital management includes activities related to servicing obligations issued
by MBIA Inc. and its subsidiaries, MBIA Global Funding, LLC ("GFL") and MBIA
Investment Management Corp. ("IMC"). During 2020, the remaining investment
agreements issued by IMC matured, and as of December 31, 2020, there were no
outstanding investment agreements issued by IMC. MBIA Inc. issued debt to
finance the operations of the MBIA group. GFL raised funds through the issuance
of medium-term notes ("MTNs") with varying maturities, which were in turn
guaranteed by MBIA Corp. GFL lent the proceeds of these MTN issuances to MBIA
Inc. IMC, along with MBIA Inc., provided customized investment agreements,
guaranteed by MBIA Corp., for bond proceeds and other public funds for such
purposes as construction, loan origination, escrow and debt service or other
reserve fund requirements. The Company has ceased issuing new MTNs and
investment agreements and the outstanding liability balances and corresponding
asset balances have declined over time as liabilities matured, terminated or
were called or repurchased. All of the debt within the corporate segment is
managed collectively and is serviced by available liquidity.
The following table summarizes the consolidated results of our corporate segment
for the three and nine months ended September 30, 2021 and 2020:



                                    Three Months Ended September 30,          Percent          Nine Months Ended September 30,          Percent

In millions                            2021                  2020             Change             2021                  2020             Change
Net investment income            $           7        $           7               -%       $          21        $          23              -9%
Fees                                        13                   13               -%                  42                   43              -2%
Net gains (losses) on
financial instruments at
fair value and foreign
exchange                                    13                   (6 )            n/m                  50                  (62 )            n/m
Net gains (losses) on
extinguishment of debt                      16                    -              n/m                  30                    -              n/m

Total revenues                              49                   14              n/m                 143                    4              n/m

Operating                                   15                   17             -12%                  54                   52               4%
Interest                                    19                   21             -10%                  56                   63             -11%

Total expenses                              34                   38             -11%                 110                  115              -4%

Income (loss) before income
taxes                            $          15        $         (24 )            n/m       $          33        $        (111 )          -130%




n/m-Percent change not meaningful.
NET GAINS (LOSSES) ON FINANCIAL INSTRUMENTS AT FAIR VALUE AND FOREIGN EXCHANGE
The favorable change in net gains (losses) on financial instruments at fair
value and foreign exchange for the three months ended September 30, 2021 was
primarily due to foreign currency gains on Euro denominated liabilities as a
result of the strengthening of the U.S. dollar in 2021 compared with foreign
exchange losses as a result of the weakening of the U.S. dollar in the same
period of 2020. The favorable change in net gains (losses) on financial
instruments at fair value and foreign exchange for the nine months ended
September 30, 2021 was primarily due to the impact of increases in interest
rates during the first nine months of 2021 on the fair values of interest rate
swaps compared with fair value losses on these swaps in the same period of 2020
due to decreases in interest rates and foreign currency gains on Euro
denominated liabilities as a result of the strengthening of the U.S. dollar in
2021 compared with foreign exchange losses as a result of the weakening of the
U.S. dollar in the same period of 2020.
NET GAINS (LOSSES) ON EXTINGUISHMENT OF DEBT Net gains (losses) on
extinguishment of debt for the three and nine months ended September 30, 2021
include gains from purchases, at discounts, of MTNs issued by the Company.
INTEREST EXPENSE Interest expense decreased for the three and nine months ended
September 30, 2021 compared with the same periods of 2020 primarily due to the
redemption of debt in December of 2020.
International and Structured Finance Insurance
Our international and structured finance insurance portfolio is managed through
MBIA Corp. The financial guarantees issued by MBIA Corp. generally provide
unconditional and irrevocable guarantees of the payment of the principal of, and
interest or other amounts owing on, non-U.S. public finance and global
structured finance insured obligations when due or, in the event MBIA Corp. has
the right, at its discretion, to accelerate insured obligations upon default or
otherwise.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

RESULTS OF OPERATIONS (continued)

MBIA Corp. has insured sovereign-related and sub-sovereign bonds, privately
issued bonds used for the financing of utilities, toll roads, bridges, airports,
public transportation facilities, and other types of infrastructure projects
serving a substantial public purpose. Global structured finance and asset-backed
obligations typically are securities repayable from cash flows generated by a
specified pool of assets, such as residential and commercial mortgages,
insurance policies, consumer loans, corporate loans and bonds, and aircraft
leases. MBIA Insurance Corporation insures the investment agreements written by
MBIA Inc., and if MBIA Inc. were to have insufficient assets to pay amounts due
upon maturity or termination, MBIA Insurance Corporation would be required to
make such payments under its insurance policies. MBIA Insurance Corporation also
insured debt obligations of other affiliates, including GFL, IMC and MZ Funding
LLC ("MZ Funding"). MBIA Corp. had also written insurance policies guaranteeing
the obligations under credit default swap ("CDS") contracts of an affiliate,
LaCrosse Financial Products, LLC and certain other derivative contracts. Certain
policies covered payments potentially due under CDS, including termination
payments that may become due in certain circumstances, including the occurrence
of certain insolvency or payment defaults under the CDS or derivative contracts
by the insured counterparty or by the guarantor. We no longer insure new CDS
contracts except for potential transactions related to the restructuring of
existing exposures. MBIA Insurance Corporation provides 100% reinsurance to its
subsidiary, MBIA Mexico S.A. de C.V. ("MBIA Mexico").
MBIA Corp. has contributed to the Company's net operating loss ("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. 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. 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.
The following table presents our international and structured finance insurance
segment results for the three and nine months ended September 30, 2021 and 2020:



                                      Three Months Ended September 30,        Percent        Nine Months Ended September 30,         Percent

In millions                               2021                 2020           Change             2021                 2020           Change
Net premiums earned                $          17         $           5           n/m      $          28         $          18           56%
Net investment income                          1                     1            -%                  4                     3           33%
Fees and reimbursements                        8                     2           n/m                 15                     9           67%
Net gains (losses) on financial
instruments at fair value and
foreign exchange                              (3 )                  (4 )        -25%                 (9 )                   6           n/m
Revenues of consolidated VIEs:
Net investment income                          -                     5         -100%                  -                    18         -100%
Net gains (losses) on financial
instruments at fair value and
foreign exchange                               4                    (4 )         n/m                (10 )                  34         -129%
Other net realized gains
(losses)                                      (9 )                  23         -139%                (14 )                  37         -138%

Total revenues                                18                    28          -36%                 14                   125          -89%

Losses and loss adjustment                    57                    34            -%                 97                   293          -67%
Amortization of deferred
acquisition costs                              3                     4          -25%                 11                    12           -8%
Operating                                      5                     6          -17%                 18                    20          -10%
Interest                                      26                    27           -4%                 82                    88           -7%
Expenses of consolidated VIEs:
Operating                                      2                     1          100%                  5                     4           25%
Interest                                       7                    15          -53%                 24                    47          -49%

Total expenses                               100                    87           15%                237                   464          -49%

Income (loss) before income
taxes                              $         (82 )       $         (59 )          -%      $        (223 )       $        (339 )        -34%




n/m-Percent change not meaningful.
As of September 30, 2021, MBIA Corp.'s total insured gross par outstanding was
$5.7 billion.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

RESULTS OF OPERATIONS (continued)

NET PREMIUMS EARNED Our international and structured finance insurance segment
generates net premiums from insurance policies accounted for as financial
guarantee contracts. Certain premiums may be eliminated in our consolidated
financial statements as a result of the Company consolidating VIEs. The
following table provides net premiums earned from our financial guarantee
contracts for the three and nine months ended September 30, 2021 and 2020:

                                     Three Months Ended September 30,           Percent          Nine Months Ended September 30,          Percent

In millions                             2021                   2020             Change             2021                  2020             Change
Net premiums earned:
U.S.                             $             -         $             1         -100%       $           2        $           2               0%
Non-U.S.                                      17                       4           n/m                  26                   14              86%

Total net premiums earned        $            17         $             5           n/m       $          28        $          16              75%

VIEs (eliminated in
consolidation)                   $             2         $             1          100%       $           3        $          (2 )            n/m

n/m - Percent change not meaningful.

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 increase in net premiums earned for the three and nine
months ended September 30, 2021 compared with the same periods of 2020 was due
to the acceleration of premium earnings related to the termination of an
international public finance insurance policy during the third quarter of 2021.
The negative VIE net premiums earned (eliminated in consolidation) for 2020 was
primarily due to the termination of a policy, resulting in the reversal of
previously eliminated net premiums in excess of cash received.
FEES AND REIMBURSEMENTS The increases in fees and reimbursements for the three
and nine months ended September 30, 2021 compared with the same periods of 2020
were primarily due to an increase in waiver and consent fees related to the
termination of an international public finance insurance policy during the third
quarter of 2021. Due to the transaction-specific nature inherent in fees and
reimbursements, these revenues can vary significantly from period to period.
NET GAINS (LOSSES) ON FINANCIAL INSTRUMENTS AT FAIR VALUE AND FOREIGN EXCHANGE
The losses for the nine months ended September 30, 2021 were primarily due to
losses from foreign currency revaluations of premiums receivables denominated in
Chilean unidad de fomento as a result of the strengthening of the U.S. dollar.
The gains for the nine months ended September 30, 2020 were primarily due to
gains from foreign currency revaluations of Mexican peso-denominated loss
reserves as a result of the strengthening of the U.S. dollar, partially offset
by foreign exchange losses from foreign currency revaluations of premiums
receivables denominated in Chilean unidad de fomento as a result of the
strengthening of the U.S. dollar.
REVENUES OF CONSOLIDATED VIEs The decreases in revenues of consolidated VIEs for
the three and nine months ended September 30, 2021 compared with the same
periods of 2020 were primarily due to gains related to reversals of allowances
for credit losses, the increase in expected recoveries from the Credit Suisse
put-back claims and higher net investment income in 2020 with no comparable
income for the same periods of 2021. During 2020, we deconsolidated all
remaining VIEs for which net investment income was recorded. The losses included
in other net realized gains (losses) for the three and nine months ended
September 30, 2021 related to losses from the deconsolidation of VIEs compared
with a gains from the deconsolidation of a VIE in 2020.
LOSSES AND LOSS ADJUSTMENT EXPENSES Our international and structured finance
insured portfolio management group is responsible for monitoring international
and structured finance insured obligations. The level and frequency of
monitoring of any insured obligation depends on the type, size, rating and our
assessed performance of the insured issue. As a result of COVID-19, we have
increased our monitoring of certain credits. Refer to "Note 5: 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.
Losses and LAE incurred increased for the three months ended September 30, 2021
when compared with the same period of 2020 primarily due to more of a decline in
expected salvage collections from insured CDOs in 2021 when compared with 2020,
partially offset by a decrease in losses and LAE incurred on insured RMBS
transactions.
Losses and LAE incurred decreased for the nine months ended September 30, 2021
when compared with the same period of 2020 primarily due to favorable changes in
risk-free rates used to discount the present value net loss reserves for
first-lien RMBS transactions and less of a decline in expected salvage
collections from insured CDOs in 2021 when compared with 2020. The first-lien
RMBS risk-free rates increased in 2021 which decreased the present value of loss
reserves compared with a decrease in risk-free rates in 2020 which increased the
present value of loss reserves.
As a result of the consolidation of VIEs, loss and LAE excludes losses and LAE
benefits of $9 million and $24 million for the three and nine months ended
September 30, 2021, respectively, and excludes losses and LAE benefits of $10
million and $75 million for the three and nine months ended September 30, 2020,
respectively, as VIE losses and LAE are eliminated in consolidation.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

RESULTS OF OPERATIONS (continued)

Refer to "Note 5: 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
September 30, 2021 and December 31, 2020.


                                               September 30,          December 31,          Percent
In millions                                        2021                   2020               Change
Assets:
Insurance loss recoverable                    $           251         $         457             -45%
Reinsurance recoverable on paid and
unpaid losses
(1)                                                         4                     5             -20%
Liabilities:
Loss and LAE reserves                                     464                   521             -11%

Net reserve (salvage)                         $           209         $          59              n/m




  (1) - Reported with in "Other assets" on our consolidated balance sheets.



  n/m -  Percent change not meaningful.


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. Refer to "Note 1:
Business Developments and Risks and Uncertainties" in the Notes to Consolidated
Financial Statements for additional information regarding our estimates of
recoveries.
Refer to "Note 5: Loss and Loss Adjustment Expense Reserves" in the Notes to
Consolidated Financial Statements for additional information about our loss
reserving policy, loss reserves and recoverables.
POLICY ACQUISITION COSTS AND OPERATING EXPENSES International and structured
finance insurance segment expenses for the three and nine months ended
September 30, 2021 and 2020 are presented in the following table:



                                      Three Months Ended September 30,            Percent            Nine Months Ended September 30,             Percent

In millions                             2021                    2020              Change               2021                    2020              Change
Gross expenses                   $             6          $             7           -14%        $            19          $            21           -10%

Amortization of deferred
acquisition costs                $             3          $             4           -25%        $            11          $            12            -8%
Operating                                      5                        6           -17%                     18                       20           -10%

Total insurance operating
expenses                         $             8          $            10           -20%        $            29          $            32            -9%



Gross expenses represent total insurance expenses before the deferral of any
policy acquisition costs. We did not defer a material amount of policy
acquisition costs during the first nine months of 2021 or 2020. Policy
acquisition costs in these periods were primarily related to ceding commissions
and premium taxes on installment policies written in prior periods.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

RESULTS OF OPERATIONS (continued)

INTEREST EXPENSE OF CONSOLIDATED VIEs For the three and nine months ended
September 30, 2021, total interest expense of consolidated VIEs decreased
compared with the same periods of 2020 due to the deconsolidation of VIEs in
2020 and the repayment of MBIA Corp.'s financing facility between MZ Funding and
certain purchasers, pursuant to which the purchasers or their affiliates agreed
to refinance the outstanding insured senior notes of MZ Funding ("Refinanced
Facility") during 2021.
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. As
of September 30, 2021 and December 31, 2020, 24% 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.
Selected Portfolio Exposures
The following is a summary of selected significant exposures within our
residential mortgage insured portfolio of our international and structured
finance insurance segment. In addition, as of September 30, 2021, MBIA Corp.
insured $232 million of CDOs and related instruments. 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. 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 some cases, these
activities may result in a reduction of loss reserves, but in all cases they are
intended to limit our ultimate losses and reduce the future volatility in loss
development on the related policies. Our ability to purchase guaranteed
obligations and to commute policies will depend on management's assessment of
available liquidity.
Residential Mortgage Exposure
MBIA Corp. insures RMBS backed by residential mortgage loans, including
second-lien RMBS transactions (revolving home equity lines of credit ("HELOC")
loans and closed-end second ("CES") mortgages). MBIA Corp. also insures MBS
backed by first-lien alternative A-paper ("Alt-A") and subprime mortgage loans
directly through RMBS securitizations. The following table presents the gross
par outstanding of MBIA Corp.'s total direct RMBS insured exposure as of
September 30, 2021 and December 31, 2020. Amounts include the gross par
outstanding related to transactions that the Company consolidates under
accounting guidance for VIEs.


In millions              Gross Par Outstanding as of
                      September 30,        December 31,      Percent
Collateral Type            2021                2020           Change
HELOC Second-lien     $           10       $         269         -96%
CES Second-lien                    1                 104         -99%
Alt-A First-lien
(1)                              768                 825          -7%
Subprime First-lien              233                 285         -18%
Prime First-lien                   5                   6         -17%

Total                 $        1,017       $       1,489         -32%




       (1) - Includes international exposure of $233 million and $237 million as
                      of September 30, 2021 and December 31, 2020, respectively.



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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

RESULTS OF OPERATIONS (continued)

U.S. Public Finance and International and Structured Finance Reinsurance
Reinsurance enables the Company to cede exposure for purposes of syndicating
risk. The Company generally retains the right to reassume the business ceded to
reinsurers under certain circumstances, including a reinsurer's rating downgrade
below specified thresholds. Currently, we do not intend to use reinsurance to
decrease the insured exposure in our portfolio.
As of September 30, 2021, the aggregate amount of insured par outstanding ceded
by MBIA to reinsurers under reinsurance agreements was $1.0 billion compared
with $1.5 billion as of December 31, 2020. Under National's reinsurance
agreement with MBIA Corp., if a reinsurer of MBIA Corp. is unable to pay claims
ceded by MBIA Corp. on U.S. public finance exposure, National will assume
liability for such ceded claim payments. For a further discussion of the
Company's reinsurance, refer to "Note 13: Insurance in Force" in the Notes to
Consolidated Financial Statements included in the Company's Annual Report on
Form 10-K for the year ended December 31, 2020.
Taxes
Provision for Income Taxes
The Company's income taxes and the related effective tax rates for the three and
nine months ended September 30, 2021 and 2020 are presented in the following
table:


                                           Three Months Ended September 30,          Nine Months Ended September 30,
In millions                                    2021                 2020                 2021                 2020

Income (loss) before income taxes $ (123 ) $ (58 ) $ (290 ) $ (497 )
Provision (benefit) for income taxes $

           -         $           -       $           -         $           -
Effective tax rate                               0.0%                  0.0%                0.0%                  0.0%


For the nine months ended September 30, 2021 and 2020, our effective tax rate
applied to our loss before income taxes was lower than the U.S. statutory tax
rate of 21% due to the full valuation allowance on the changes in our net
deferred tax asset.
As of September 30, 2021 and December 31, 2020, the Company's valuation
allowance against its net deferred tax asset was $1.0 billion and $966 million,
respectively. Notwithstanding the full valuation allowance on its net deferred
tax asset, the Company believes that it may be able to use some of its net
deferred tax asset before the expirations associated with that asset based upon
expected earnings at National and potential future sources of taxable income to
be identified by the Company. Accordingly, the Company will continue to
re-evaluate its net deferred tax asset on a quarterly basis. 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 9: 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.
The CARES Act established new tax provisions including, but not limited to:
(1) five-year carryback of NOLs generated in 2018, 2019 and 2020;
(2) accelerated refund of alternative minimum tax ("AMT") credit carryforwards;
and (3) retroactive changes to allow accelerated depreciation for certain
depreciable property. The legislation did not have a material impact on the
Company's tax positions due to the lack of taxable income in the carryback
periods.
On December 21, 2020, The Consolidated Appropriations Act ("Act") was passed by
Congress to respond to the health and economic impacts of COVID-19. The Act
includes a number of tax law changes, including the expansion of the Employee
Retention Credit, important changes to the Paycheck Protection Program, and
extension of a variety of expiring tax provisions. On March 6, 2021, The
American Rescue Plan Act was passed by Congress to further respond to the health
and economic impacts of COVID-19. Among other changes, the legislation provides
for an extension of the Employee Retention Credit through 2021. These two
legislations do not have a material impact on the Company's tax positions.
CAPITAL RESOURCES
The Company manages its capital resources to minimize its cost of capital while
maintaining appropriate claims-paying resources ("CPR") for National and MBIA
Corp. The Company's capital resources consist of total shareholders' equity,
total debt issued by MBIA Inc. for general corporate purposes, surplus notes
issued by MBIA Corp., and the Refinanced Facility. Total capital resources were
$1.1 billion and $1.6 billion as of September 30, 2021 and December 31, 2020,
respectively.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

CAPITAL RESOURCES (continued)

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. Purchases or repurchases of debt and common stock may be made
from time to time in the open market or in private transactions as permitted by
securities laws and other legal requirements. We may also choose to redeem debt
obligations where permitted by the relevant agreements. MBIA Inc. or National
may acquire or redeem outstanding common shares of MBIA Inc. and outstanding
debt obligations at prices when we deem it beneficial to our shareholders. MBIA
Inc. supports the MTN and investment agreement obligations issued by the
Company. We seek to maintain sufficient liquidity and capital resources to meet
the Company's general corporate needs and debt service. Based on MBIA Inc.'s
debt service requirements and expected operating expenses, we expect that MBIA
Inc. will have sufficient resources to satisfy its debt obligations and its
general corporate needs over time from distributions from its operating
subsidiaries; however, there can be no assurance that MBIA Inc. will have
sufficient resources to do so. In addition, the Company may also consider
raising third-party capital. Refer to "Capital, Liquidity and Market Related
Risk Factors" in Part I, Item 1A of our Form 10-K for the year ended
December 31, 2020 and the "Liquidity-Corporate Liquidity" section included
herein for additional information about MBIA Inc.'s liquidity.
Equity securities
Currently, MBIA Inc. or National does not have an authorization approved by the
Company's Board of Directors to repurchase or purchase outstanding MBIA Inc.
common shares. MBIA Inc. or National did not repurchase or purchase any MBIA
Inc. common shares during 2021. For the nine months ended September 30, 2020,
National purchased 26 million common shares of MBIA Inc. with an average price
paid of $7.50 per share.
Debt securities
During the nine months ended September 30, 2021, MBIA Corp. repaid the remaining
outstanding balance of the Refinanced Facility and the Company repurchased $106
million par value outstanding of GFL MTNs with maturity dates between 2024 and
2036 issued by our corporate segment at a weighted average cost of approximately
72% of par value.
During the nine months ended September 30, 2021, MBIA Corp. purchased $3 million
principal amount of MBIA Inc. 6.625% Debentures due 2028 and $1 million
principal amount of MBIA Inc. 7.15% Debentures due 2027 at a weighted average
cost of approximately 103% of par value.
Insurance Statutory Capital
National and MBIA Insurance Corporation are incorporated and licensed in, and
are subject to primary insurance regulation and supervision by New York State
Department of Financial Services ("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. 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. These financial
statements are prepared in accordance with New York State and the National
Association of Insurance Commissioners' statements of U.S. STAT and assist our
regulators in evaluating minimum standards of solvency, including minimum
capital requirements, and business conduct.
National
Capital and Surplus
National had statutory capital of $2.0 billion as of September 30, 2021 and
December 31, 2020. As of September 30, 2021, National's unassigned surplus was
$1.0 billion. For the nine months ended September 30, 2021, National had
statutory net income of $49 million. Refer to the "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. National is also required to maintain contingency reserves to provide
protection to policyholders in the event of extreme losses in adverse economic
events. As of September 30, 2021, National was in compliance with its aggregate
risk limits under New York Insurance Law ("NYIL"), but was not in compliance
with certain of its single risk limits. 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.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

CAPITAL RESOURCES (continued)

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. Under NYIL, 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 reported in the latest statutory financial statements
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 the NYSDFS
approves a greater dividend distribution based upon a finding that the insurer
will retain sufficient surplus to support its obligations.
National had positive earned surplus as of September 30, 2021 from which it may
pay dividends, subject to the limitations described above. 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.
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. 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. We have
provided CPR to allow investors and analysts to evaluate National using the same
measure that MBIA's management uses to evaluate National'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.
National's CPR and components thereto, as of September 30, 2021 and December 31,
2020 are presented in the following table:


                                         As of September 30,      As of December 31,
In millions                                     2021                     2020
Policyholders' surplus                  $               1,615     $             1,526
Contingency reserves                                      410                     445

Statutory capital                                       2,025                   1,971
Unearned premiums                                         319                     355
Present value of installment premiums
(1)                                                       126                     129

Premium resources
(2)                                                       445                     484
Net loss and LAE reserves
(1)                                                     (577)                   (301)
Salvage reserves on paid claims
(1)                                                     1,126                     961

Gross loss and LAE reserves                               549                     660

Total claims-paying resources           $               3,019     $             3,115




(1) - Calculated using a discount rate of 3.49% as of September 30, 2021 and
December 31, 2020.
(2) - Includes financial guarantee and insured derivative related premiums.
MBIA Insurance Corporation
Capital and Surplus
MBIA Insurance Corporation had statutory capital of $143 million as of
September 30, 2021 compared with $273 million as of December 31, 2020. As of
September 30, 2021, MBIA Insurance Corporation's negative unassigned surplus was
$1.9 billion. For the nine months ended September 30, 2021, MBIA Insurance
Corporation had a statutory net loss of $89 million. Refer to the "Claims-Paying
Resources (Statutory Basis)" section below for additional information on MBIA
Insurance Corporation's statutory capital.
In the first quarter of 2021, MBIA received a court decision against Credit
Suisse holding it liable to MBIA Corp. for approximately $604 million in damages
relating to put-back claims and the parties to the litigation subsequently
entered into a settlement agreement pursuant to which Credit Suisse paid MBIA
Corp. $600 million. As of September 30, 2021, MBIA Insurance Corporation's
estimated salvage on a statutory basis primarily related to recoveries on CDOs
and excess spread recoveries on RMBS.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

CAPITAL RESOURCES (continued)

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. 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. Pursuant to a non-disapproval by the
NYSDFS, and in accordance with NYIL, MBIA Insurance Corporation released to
surplus $125 million of excessive contingency reserves during the nine months
ended September 30, 2021. As of September 30, 2021, 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.
Due to its significant earned surplus deficit, MBIA Insurance Corporation has
not had the statutory capacity to pay dividends since December 31, 2009. Based
on estimated future income, MBIA Insurance Corporation is not expected to have
any statutory capacity to pay dividends.
The NYSDFS has not approved MBIA Insurance Corporation's requests to make
interest payments on MBIA Insurance Corporation's Surplus Notes due January 15,
2033 (the "Surplus Notes") since, and including, the January 15, 2013 interest
payment. 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 October 15, 2021, the most recent
scheduled interest payment date, there was $1.1 billion of unpaid interest on
the par amount outstanding of $953 million of the Surplus Notes. 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 September 30, 2021, MBIA Insurance Corporation had
"free and divisible surplus" of $88 million. There is no assurance the NYSDFS
will approve Surplus Note payments, notwithstanding the sufficiency of MBIA
Insurance Corporation's liquidity and financial condition. The unpaid interest
on the Surplus Notes will become due on the first business day on or after which
MBIA Insurance Corporation obtains approval to pay some or all of such unpaid
interest. No interest has been accrued or will accrue on the deferred interest.
Claims-Paying Resources (Statutory Basis)
CPR is a key measure of the resources available to MBIA Corp. to pay claims
under its insurance policies. CPR consists of total financial resources and
reserves calculated on a statutory basis. 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.
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.
MBIA Corp.'s CPR and components thereto, as of September 30, 2021 and
December 31, 2020 are presented in the following table:


                                                As of September 30,               As of December 31,
In millions                                            2021                              2020
Policyholders' surplus                         $                 106              $               106
Contingency reserves                                              37                              167

Statutory capital                                                143                              273
Unearned premiums                                                 50                               79
Present value of installment premiums
(1)                                                               51                               73

Premium resources
(2)                                                              101                              152
Net loss and LAE reserves
(1)                                                              240                            (478)
Salvage reserves on paid claims                                      (3)                              (4)
(1)                                                              244                            1,045

Gross loss and LAE reserves                                      484                              567

Total claims-paying resources                  $                 728              $               992




(1) - Calculated using a discount rate of 5.10% as of September 30, 2021 and
December 31, 2020.
(2) - Includes financial guarantee and insured derivative related premiums.
(3) - This amount primarily consists of expected recoveries related to the
Company's CDOs and excess spread.
(4) - This amount primarily consists of expected recoveries related to the
Company's put-back, CDOs and excess spread.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

LIQUIDITY

We use a liquidity risk management framework, the primary objective of which is
to match liquidity resources to needs. We monitor our cash and liquid asset
resources using cash forecasting and stress-scenario testing. Members of MBIA's
senior management meet regularly to review liquidity metrics, discuss
contingency plans and establish target liquidity levels. 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.
Additionally, we continue to monitor the current COVID-19 pandemic with respect
to our cash and liquid asset positions and resources. Refer to the "Executive
Overview - COVID-19" section for additional information about liquidity and
COVID-19. The following is a discussion of our liquidity resources and
requirements for our holding company and our insurance subsidiaries.
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.

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.


As of September 30, 2021 and December 31, 2020, National held cash and
investments of $1.9 billion and $2.1 billion, respectively, of which $182
million and $359 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.
The insurance policies issued or reinsured by National provide unconditional and
irrevocable guarantees of payments of the principal of, and interest or other
amounts owing on, insured obligations when due. In the event of a default in
payment of principal, interest or other insured amounts by an issuer, National
generally promises to make funds available in the insured amount within one to
three business days following notification. In some cases, the amount due can be
substantial, particularly if the default occurs on a transaction to which
National has a large notional exposure or on a transaction structured with
large, bullet-type principal maturities. 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.
In October of 2021, National sold certain bankruptcy claims in a private
transaction through the transfer of ownership of $199 million face amount of
bonds, representing approximately 16% of the principal amount of the current
bond claims in the PREPA Title III case. The bonds included in this transaction
had been fully satisfied by National's insurance claim payments. This
transaction monetizes a portion of National's salvage asset at a discount to
National's previous carrying value and, as a result, strengthens National's
balance sheet, increases National's projected investment income and furthers the
Company's objective of reducing its exposure to Puerto Rico over the short to
medium term. Subsequent to the sale of these PREPA bankruptcy claims, National
has approximately $230 million of additional par claims to PREPA that have
matured and can be sold.
Corporate Liquidity
The primary sources of cash available to MBIA Inc. are:

  •   dividends from National;



     •    available cash and liquid assets not subject to collateral posting
          requirements;

• principal and interest receipts on assets held in its investment

          portfolio, including proceeds from the sale of assets; and



  •   access to capital markets.

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.


As of September 30, 2021 and December 31, 2020, the liquidity positions of MBIA
Inc. were $210 million and $294 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.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

LIQUIDITY (continued)

During the nine months ended September 30, 2021, MBIA Inc. returned $10 million
of tax payments to National as a result of tax losses incurred by National. The
return was pursuant to the terms of the tax sharing agreement. Under the CARES
Act, National's 2020 taxable loss became subject to a five-year NOL carry-back,
which allowed it to recover taxes paid in years in which the tax rate was 35%.
There can be no assurance that any future payments under the Tax Escrow Account
from subsidiaries will be released to MBIA Inc. due to deductible or creditable
tax attributes of those subsidiaries and/or the market value performance of the
assets supporting the Tax Escrow Account.
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 such future dividends or payments from the tax escrow account
under the tax sharing agreement. Also, absent a special dividend subject to the
approval of the NYSDFS, we expect the declared and paid dividend amounts from
National to be limited to the prior twelve months of adjusted net investment
income as reported in its most recent statutory filings. Refer to the "Capital
Resources - Insurance Statutory Capital" section for additional information on
payments of dividends. We do not expect MBIA Inc. to receive dividends or
utilize the Company's tax escrow account from MBIA Corp.
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. As the market value or rating
eligibility of the assets which are pledged against MBIA Inc.'s obligations
declines, we are required to pledge additional eligible assets in order to meet
minimum required collateral amounts against these liabilities. 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: (1) sales of invested assets exposed to credit spread stress
risk, which may occur at losses; (2) termination and settlement of interest rate
swap agreements; and (3) accessing the capital markets. These actions, if taken,
are expected to result in either additional liquidity or reduced exposure to
adverse credit spread movements. There can be no assurance that these actions
will be sufficient to fully mitigate this risk.
MBIA Corp. Liquidity
The primary sources of cash available to MBIA Corp. are:

  •   recoveries associated with insurance loss payments;



  •   installment premiums and fees; and

• principal and interest receipts on assets held in its investment

portfolio, including the proceeds from the sale of assets.

The primary uses of cash by MBIA Corp. are:

  •   loss and LAE or commutation payments on insured transactions;



  •   repayment of MZ Funding's debt obligations; and



  •   payments of operating expenses.


As of September 30, 2021 and December 31, 2020, MBIA Corp. held cash and
investments of $573 million and $243 million, respectively, of which $341
million and $130 million, respectively, were cash and cash equivalents or liquid
investments comprised of money market funds and municipal, U.S. Treasury and
corporate bonds that were immediately available to MBIA Insurance Corporation.
The increase in cash and investments for the nine months ended September 30,
2021 was due to the collection of proceeds from the settlement of the Credit
Suisse litigation.
Insured transactions that require payment of scheduled debt service payments
insured when due or payment in full of the principal insured at maturity could
present liquidity risk for MBIA Corp., as any salvage recoveries from such
payments could be recovered over an extended period of time after the payment is
made. MBIA Corp. is generally required to satisfy claims within one to three
business days, and as a result seeks to identify potential claims in advance
through our monitoring process. 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. Refer to "Note 5: Loss and Loss Adjustment Expense Reserves" in the
Notes to Consolidated Financial Statements for a discussion of our loss process.
As of September 30, 2021, MBIA Corp. repaid in full the outstanding amount of
the Refinanced Facility. As of September 30, 2021, the amended subordinated
notes between MZ Funding and MBIA Inc. remained outstanding. These amended
subordinated notes and related interest are eliminated in our consolidated
financial statements. For additional information on these notes, refer to "Note
10: Debt" in the Notes to Consolidated Financial Statements included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2020.

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