ANNUAL STATEMENT
OF THE
MBIA INSURANCE
CORPORATION
OF
ARMONK
IN THE
STATE OF NEW YORK
TO THE
INSURANCE DEPARTMENT
OF THE
STATE OF
___________________
FOR THE YEAR ENDED
DECEMBER 31, 2012
PROPERTY AND CASUALTY
ASSETS
Current Year Prior Year 1
Assets
2
Nonadmitted Assets
3 Net Admitted Assets
(Cols. 1 - 2) 4 Net Admitted Assets 1. Bonds (Schedule D) 457,328,129 0 457,328,129 692,460,193 2. Stocks (Schedule D): 2.1 Preferred stocks 0 0 0 0 2.2 Common stocks 442,750,980 0 442,750,980 473,816,175
3. Mortgage loans on real estate (Schedule B):
3.1 First liens 0 0 0 0
3.2 Other than first liens 0 0 0 0
4. Real estate (Schedule A):
4.1 Properties occupied by the company (less
$ 0 encumbrances) 0 0 0 0
4.2 Properties held for the production of income
(less $ 0 encumbrances) 0 0 0 0
4.3 Properties held for sale (less
$ 0 encumbrances) 0 0 0 0
5. Cash ($ 81,776,548 , Schedule E-Part 1), cash equivalents ($ 0 , Schedule E-Part 2) and short-term
investments ($ 16,383,242 , Schedule DA) 98,159,789 0 98,159,789 126,401,091
6. Contract loans (including $ 0 premium notes) 0 0 0 0
7. Derivatives (Schedule DB) 0 0 0 0
8. Other invested assets (Schedule BA) 724,508 0 724,508 1,079,861
9. Receivables for securities 64,673 0 64,673 224,370
10. Securities lending reinvested collateral assets (Schedule DL) 0 0 0 0
11. Aggregate write-ins for invested assets 0 0 0 300,000,000
12. Subtotals, cash and invested assets (Lines 1 to 11) 999,028,079 0 999,028,079 1,593,981,690
13. Title plants less $ 0 charged off (for Title insurers
only) 0 0 0 0
14. Investment income due and accrued 1,492,227 0 1,492,227 3,803,501
15. Premiums and considerations:
15.1 Uncollected premiums and agents’ balances in the course of
collection 4,630,345 809,341 3,821,004 2,929,629
15.2 Deferred premiums, agents’ balances and installments booked but deferred and not yet due (including $ 0 earned
but unbilled premiums) 0 0 0 0
15.3 Accrued retrospective premiums 0 0 0 0
16. Reinsurance:
16.1 Amounts recoverable from reinsurers 1,090,463 0 1,090,463 1,333,833
16.2 Funds held by or deposited with reinsured companies 0 0 0 0
16.3 Other amounts receivable under reinsurance contracts 0 0 0 0
17. Amounts receivable relating to uninsured plans 0 0 0 0
18.1 Current federal and foreign income tax recoverable and interest thereon 1,372,759 0 1,372,759 4,628,364
18.2 Net deferred tax asset 0 0 0 0
19. Guaranty funds receivable or on deposit 0 0 0 0
20. Electronic data processing equipment and software 1,645,509 1,609,151 36,358 57,842
21. Furniture and equipment, including health care delivery assets
($ 0 ) 36,878 36,878 0 0
22. Net adjustment in assets and liabilities due to foreign exchange rates 0 0 0 0
23. Receivables from parent, subsidiaries and affiliates 4,161,872 1,768 4,160,104 2,640,656
24. Health care ($ 0 ) and other amounts receivable 0 0 0 0
25. Aggregate write-ins for other than invested assets 4,309,706 2,571,087 1,738,619 3,084,662
26. Total assets excluding Separate Accounts, Segregated Accounts and
Protected Cell Accounts (Lines 12 to 25) 1,017,767,838 5,028,225 1,012,739,613 1,612,460,177
27. From Separate Accounts, Segregated Accounts and Protected
Cell Accounts 0 0 0 0
28. Total (Lines 26 and 27) 1,017,767,838 5,028,225 1,012,739,613 1,612,460,177
DETAILS OF WRITE-INS
1101. Secured loan with parent 0 0 0 300,000,000
1102. 0 0 0 0
1103. 0 0 0 0
1198. Summary of remaining write-ins for Line 11 from overflow page 0 0 0 0
1199. Totals (Lines 1101 through 1103 plus 1198) (Line 11 above) 0 0 0 300,000,000
2501. Prepaid expenses and other non-admitted assets 2,565,308 2,565,308 0 0
2502. Premium tax receivable 1,731,097 0 1,731,097 3,026,126
2503. Contingent commission receivable 7,522 0 7,522 7,522
2598. Summary of remaining write-ins for Line 25 from overflow page 5,779 5,779 0 51,014
Current Year Prior Year 1. Losses (Part 2A, Line 35, Column 8) (2,659,352,450) (2,380,606,593)
2. Reinsurance payable on paid losses and loss adjustment expenses (Schedule F, Part 1, Column 6) 0 0
3. Loss adjustment expenses (Part 2A, Line 35, Column 9) 53,122,646 46,116,076
4. Commissions payable, contingent commissions and other similar charges 0 0
5. Other expenses (excluding taxes, licenses and fees) 28,252,065 25,649,193
6. Taxes, licenses and fees (excluding federal and foreign income taxes) 0 0
7.1 Current federal and foreign income taxes (including $ 0 on realized capital gains (losses)) 0 0
7.2 Net deferred tax liability 0 0
8. Borrowed money $ 1,651,408,134 and interest thereon $ 29,137,174 1,680,545,308 1,134,174,722
9. Unearned premiums (Part 1A, Line 38, Column 5) (after deducting unearned premiums for ceded reinsurance of $ 1,577,586,003 and including warranty reserves of $ 0 and accrued accident and health experience rating refunds including $ 0 for medical loss ratio rebate per the Public Health
Service Act) 427,244,546 435,353,874
10. Advance premium 0 0
11. Dividends declared and unpaid:
11.1 Stockholders 0 0
11.2 Policyholders 0 0
12. Ceded reinsurance premiums payable (net of ceding commissions) 3,939,976 3,800,209
13. Funds held by company under reinsurance treaties (Schedule F, Part 3, Column 19) 0 0
14. Amounts withheld or retained by company for account of others 9,066,351 8,610,755
15. Remittances and items not allocated 0 0
16. Provision for reinsurance (including $ 0 certified) (Schedule F, Part 8) 0 0
17. Net adjustments in assets and liabilities due to foreign exchange rates 0 0
18. Drafts outstanding 0 0
19. Payable to parent, subsidiaries and affiliates 11,787,475 36,351,103
20. Derivatives 0 0
21. Payable for securities 0 34,305
22. Payable for securities lending 0 0
23. Liability for amounts held under uninsured plans 0 0
24. Capital notes $ 0 and interest thereon $ 0 0 0
25. Aggregate write-ins for liabilities 493,047,777 706,420,516
26. Total liabilities excluding protected cell liabilities (Lines 1 through 25) 47,653,694 15,904,160
27. Protected cell liabilities 0 0
28. Total liabilities (Lines 26 and 27) 47,653,694 15,904,160
29. Aggregate write-ins for special surplus funds 0 0
30. Common capital stock 15,000,269 15,000,269
31. Preferred capital stock 275,908,000 275,908,000
32. Aggregate write-ins for other than special surplus funds 0 0
33. Surplus notes 952,655,000 952,655,000
34. Gross paid in and contributed surplus 781,783,857 780,282,397
35. Unassigned funds (surplus) (1,060,261,207) (427,289,649)
36. Less treasury stock, at cost:
36.1 0 shares common (value included in Line 30 $ 0 ) 0 0
36.2 0 shares preferred (value included in Line 31 $ 0 ) 0 0
37. Surplus as regards policyholders (Lines 29 to 35, less 36) (Page 4, Line 39) 965,085,919 1,596,556,017
38. Totals (Page 2, Line 28, Col. 3) 1,012,739,613 1,612,460,177
DETAILS OF WRITE-INS
2501. Contingency reserve 493,047,777 706,420,516
2502. 0 0
2503. 0 0
2598. Summary of remaining write-ins for Line 25 from overflow page 0 0
2599. Totals (Lines 2501 through 2503 plus 2598) (Line 25 above) 493,047,777 706,420,516
2901. 0 0
2902. 0 0
2903. 0 0
2998. Summary of remaining write-ins for Line 29 from overflow page 0 0
2999. Totals (Lines 2901 through 2903 plus 2998) (Line 29 above) 0 0
3201. 0 0
3202. 0 0
3203. 0 0
3298. Summary of remaining write-ins for Line 32 from overflow page 0 0
Current Year Prior Year
UNDERWRITING INCOME
1. Premiums earned (Part 1, Line 35, Column 4) 240,986,170 360,851,375
DEDUCTIONS:
2. Losses incurred (Part 2, Line 35, Column 7) 682,749,509 758,494,436
3. Loss adjustment expenses incurred (Part 3, Line 25, Column 1) 133,792,596 109,177,417
4. Other underwriting expenses incurred (Part 3, Line 25, Column 2) 47,707,131 91,547,077
5. Aggregate write-ins for underwriting deductions 0 0
6. Total underwriting deductions (Lines 2 through 5) 864,249,236 959,218,930
7. Net income of protected cells 0 0
8. Net underwriting gain (loss) (Line 1 minus Line 6 plus Line 7) (623,263,066) (598,367,555)
INVESTMENT INCOME
9. Net investment income earned (Exhibit of Net Investment Income, Line 17) (192,297,791) 34,452,368
10. Net realized capital gains (losses) less capital gains tax of $ 0 (Exhibit of Capital Gains (Losses)) (1,689,186) 68,389,956
11. Net investment gain (loss) (Lines 9 + 10) (193,986,977) 102,842,324
OTHER INCOME
12. Net gain (loss) from agents' or premium balances charged off (amount recovered $ 0 amount
charged off $ 0 ) 0 0
13. Finance and service charges not included in premiums 0 0
14. Aggregate write-ins for miscellaneous income (19,032,052) 24,421,220
15. Total other income (Lines 12 through 14) (19,032,052) 24,421,220
16. Net income before dividends to policyholders, after capital gains tax and before all other federal and foreign income taxes
(Lines 8 + 11 + 15) (836,282,095) (471,104,011)
17. Dividends to policyholders 0 0
18. Net income, after dividends to policyholders, after capital gains tax and before all other federal and foreign income taxes
(Line 16 minus Line 17) (836,282,095) (471,104,011)
19. Federal and foreign income taxes incurred 7,069,453 6,111,443
20. Net income (Line 18 minus Line 19) (to Line 22) (843,351,548) (477,215,454)
CAPITAL AND SURPLUS ACCOUNT
21. Surplus as regards policyholders, December 31 prior year (Page 4, Line 39, Column 2) 1,596,556,017 1,074,702,160
22. Net income (from Line 20) (843,351,548) (477,215,454)
23. Net transfers (to) from Protected Cell accounts 0 0
24. Change in net unrealized capital gains or (losses) less capital gains tax of $ 0 99,989,823 (7,534,145)
25. Change in net unrealized foreign exchange capital gain (loss) (28,757,479) 1,138,620
26. Change in net deferred income tax 0 (912,364,653)
27. Change in nonadmitted assets (Exhibit of Nonadmitted Assets, Line 28, Col. 3) 475,704 883,367,390
28. Change in provision for reinsurance (Page 3, Line 16, Column 2 minus Column 1) 0 0
29. Change in surplus notes 0 0
30. Surplus (contributed to) withdrawn from protected cells 0 0
31. Cumulative effect of changes in accounting principles 0 0
32. Capital changes:
32.1 Paid in 0 0
32.2 Transferred from surplus (Stock Dividend) 0 0
32.3 Transferred to surplus 0 0
33. Surplus adjustments:
33.1 Paid in 1,501,460 1,882,635
33.2 Transferred to capital (Stock Dividend) 0 0
33.3 Transferred from capital 0 0
34. Net remittances from or (to) Home Office 0 0
35. Dividends to stockholders 0 0
36. Change in treasury stock (Page 3, Lines 36.1 and 36.2, Column 2 minus Column 1) 0 0
37. Aggregate write-ins for gains and losses in surplus 138,671,942 1,032,579,464
38. Change in surplus as regards policyholders for the year (Lines 22 through 37) (631,470,098) 521,853,857
39. Surplus as regards policyholders, December 31 current year (Line 21 plus Line 38) (Page 3, Line 37) 965,085,919 1,596,556,017
DETAILS OF WRITE-INS
0501. 0 0
0502. 0 0
0503. 0 0
0598. Summary of remaining write-ins for Line 5 from overflow page 0 0
0599. Totals (Lines 0501 through 0503 plus 0598) (Line 5 above) 0 0
1401. Foreign exchange on premium (19,379,756) 22,272,216
1402. Miscellaneous income 347,704 2,149,004
1403. 0 0
1498. Summary of remaining write-ins for Line 14 from overflow page 0 0
1499. Totals (Lines 1401 through 1403 plus 1498) (Line 14 above) (19,032,052) 24,421,220
3701. Change in contingency reserve 213,372,739 949,315,667
3702. Correction of error (74,700,797) 83,263,797
3703. 0 0
3798. Summary of remaining write-ins for Line 37 from overflow page 0 0
1
Current Year Prior Year2
Cash from Operations
1. Premiums collected net of reinsurance 202,657,235 403,903,142
2. Net investment income (118,045,330) (15,533,599)
3. Miscellaneous income 391,728 2,287,311
4. Total (Lines 1 through 3) 85,003,633 390,656,854
5. Benefit and loss related payments 961,239,475 3,122,251,949
6. Net transfers to Separate Accounts, Segregated Accounts and Protected Cell Accounts 0 0
7. Commissions, expenses paid and aggregate write-ins for deductions 171,890,291 325,311,339
8. Dividends paid to policyholders 0 0
9. Federal and foreign income taxes paid (recovered) net of $ 0 tax on capital gains (losses) 3,813,848 2,404,428
10. Total (Lines 5 through 9) 1,136,943,614 3,449,967,716
11. Net cash from operations (Line 4 minus Line 10) (1,051,939,981) (3,059,310,862)
Cash from Investments
12. Proceeds from investments sold, matured or repaid:
12.1 Bonds 618,976,972 1,116,708,075
12.2 Stocks 7,598,111 152,095,267
12.3 Mortgage loans 0 0
12.4 Real estate 0 0
12.5 Other invested assets 0 0
12.6 Net gains or (losses) on cash, cash equivalents and short-term investments 181,125 (1,103,670)
12.7 Miscellaneous proceeds 318,766,234 675,857,445
12.8 Total investment proceeds (Lines 12.1 to 12.7) 945,522,442 1,943,557,117
13. Cost of investments acquired (long-term only):
13.1 Bonds 336,498,441 469,716,742
13.2 Stocks 0 3,802,037
13.3 Mortgage loans 0 0
13.4 Real estate 0 0
13.5 Other invested assets 0 385,307
13.6 Miscellaneous applications 18,324,138 475,631
13.7 Total investments acquired (Lines 13.1 to 13.6) 354,822,579 474,379,717
14. Net increase (decrease) in contract loans and premium notes 0 0
15. Net cash from investments (Line 12.8 minus Line 13.7 minus Line 14) 590,699,863 1,469,177,400
Cash from Financing and Miscellaneous Sources
16. Cash provided (applied):
16.1 Surplus notes, capital notes 0 0
16.2 Capital and paid in surplus, less treasury stock 1,501,460 1,882,635
16.3 Borrowed funds 443,000,000 1,130,000,000
16.4 Net deposits on deposit-type contracts and other insurance liabilities 0 0
16.5 Dividends to stockholders 0 0
16.6 Other cash provided (applied) (11,502,644) 60,174,362
17. Net cash from financing and miscellaneous sources (Lines 16.1 to 16.4 minus Line 16.5 plus Line 16.6) 432,998,816 1,192,056,997
RECONCILIATION OF CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
18. Net change in cash, cash equivalents and short-term investments (Line 11, plus Lines 15 and 17) (28,241,302) (398,076,465)
19. Cash, cash equivalents and short-term investments:
19.1 Beginning of year 126,401,091 524,477,556
Line of Business 1 Net Premiums Written per Column 6, Part 1B 2 Unearned Premiums
Dec. 31 Prior Year -per Col. 3, Last Year’s
Part 1
3 Unearned Premiums
Dec. 31 Current Year - per Col. 5
Part 1A 4 Premiums Earned During Year (Cols. 1 + 2 - 3) 1. Fire 0 0 0 0 2. Allied lines 0 0 0 0
3. Farmowners multiple peril 0 0 0 0
4. Homeowners multiple peril 0 0 0 0
5. Commercial multiple peril 0 0 0 0
6. Mortgage guaranty 0 0 0 0
8. Ocean marine 0 0 0 0
9. Inland marine 0 0 0 0
10. Financial guaranty 204,218,183 323,737,589 286,969,602 240,986,170
11.1 Medical professional liability-occurrence 0 0 0 0
11.2 Medical professional liability-claims-made 0 0 0 0
12. Earthquake 0 0 0 0
13. Group accident and health 0 0 0 0
14. Credit accident and health (group and individual) 0 0 0 0
15. Other accident and health 0 0 0 0
16. Workers' compensation 0 0 0 0
17.1 Other liability - occurrence 0 0 0 0
17.2 Other liability - claims-made 0 0 0 0
17.3 Excess workers’ compensation 0 0 0 0
18.1 Products liability-occurrence 0 0 0 0
18.2 Products liability-claims-made 0 0 0 0
19.1,19.2 Private passenger auto liability 0 0 0 0
19.3,19.4 Commercial auto liability 0 0 0 0
21. Auto physical damage 0 0 0 0
22. Aircraft (all perils) 0 0 0 0
23. Fidelity 0 0 0 0
24. Surety 0 0 0 0
26. Burglary and theft 0 0 0 0
27. Boiler and machinery 0 0 0 0
28. Credit 0 0 0 0
29. International 0 0 0 0
30. Warranty 0 0 0 0
31. Reinsurance-nonproportional assumed property 0 0 0 0
32. Reinsurance-nonproportional assumed liability 0 0 0 0
33. Reinsurance-nonproportional assumed financial lines 0 0 0 0
34. Aggregate write-ins for other lines of business 0 0 0 0
35. TOTALS 204,218,183 323,737,589 286,969,602 240,986,170
DETAILS OF WRITE-INS
3401. 0 0 0 0
3402. 0 0 0 0
3403. 0 0 0 0
3498. Sum. of remaining write-ins for Line 34 from overflow page 0 0 0 0
PART 1A - RECAPITULATION OF ALL PREMIUMS
Line of Business
1 Amount Unearned (Running One Year or
Less from Date of Policy)
(a)
2 Amount Unearned (Running More Than One Year from Date
of Policy) (a) 3 Earned but Unbilled Premium 4 Reserve for Rate
Credits and Retrospective Adjustments Based on Experience 5 Total Reserve for Unearned Premiums Cols. 1 + 2 + 3 + 4 1. Fire 0 0 0 0 0 2. Allied lines 0 0 0 0 0
3. Farmowners multiple peril 0 0 0 0 0
4. Homeowners multiple peril 0 0 0 0 0
5. Commercial multiple peril 0 0 0 0 0
6. Mortgage guaranty 0 0 0 0 0
8. Ocean marine 0 0 0 0 0
9. Inland marine 0 0 0 0 0
10. Financial guaranty 12,777 286,956,825 0 0 286,969,602
11.1 Medical professional liability-occurrence 0 0 0 0 0
11.2 Medical professional liability-claims-made 0 0 0 0 0
12. Earthquake 0 0 0 0 0
13. Group accident and health 0 0 0 0 0
14. Credit accident and health (group and individual) 0 0 0 0 0
15. Other accident and health 0 0 0 0 0
16. Workers' compensation 0 0 0 0 0
17.1 Other liability-occurrence 0 0 0 0 0
17.2 Other liability-claims-made 0 0 0 0 0
17.3 Excess workers’ compensation 0 0 0 0 0
18.1 Products liability-occurrence 0 0 0 0 0
18.2 Products liability-claims-made 0 0 0 0 0
19.1,19.2 Private passenger auto liability 0 0 0 0 0
19.3,19.4 Commercial auto liability 0 0 0 0 0
21. Auto physical damage 0 0 0 0 0
22. Aircraft (all perils) 0 0 0 0 0
23. Fidelity 0 0 0 0 0
24. Surety 0 0 0 0 0
26. Burglary and theft 0 0 0 0 0
27. Boiler and machinery 0 0 0 0 0
28. Credit 0 0 0 0 0
29. International 0 0 0 0 0
30. Warranty 0 0 0 0 0
31. Reinsurance-nonproportional assumed property 0 0 0 0 0
32. Reinsurance-nonproportional assumed liability 0 0 0 0 0
33. Reinsurance-nonproportional assumed financial
lines 0 0 0 0 0
34. Aggregate write-ins for other lines of business 0 0 0 0 0
35. TOTALS 12,777 286,956,825 0 0 286,969,602
36. Accrued retrospective premiums based on experience 0
37. Earned but unbilled premiums 0
38. Balance (Sum of Lines 35 through 37) 286,969,602
DETAILS OF WRITE-INS
3401. 0 0 0 0 0
3402. 0 0 0 0 0
3403. 0 0 0 0 0
3498. Sum. of remaining write-ins for Line 34 from
overflow page 0 0 0 0 0
3499. Totals (Lines 3401 through 3403 plus 3498) (Line
34 above) 0 0 0 0 0
PART 1B - PREMIUMS WRITTEN
1 Reinsurance Assumed Reinsurance Ceded 6
Line of Business Direct Business (a) 2 From Affiliates 3 From Non-Affiliates 4 To Affiliates 5 To Non-Affiliates Net Premiums Written Cols. 1 + 2 + 3 - 4 - 5 1. Fire 0 0 0 0 0 0 2. Allied lines 0 0 0 0 0 0
3. Farmowners multiple peril 0 0 0 0 0 0
4. Homeowners multiple peril 0 0 0 0 0 0
5. Commercial multiple peril 0 0 0 0 0 0
6. Mortgage guaranty 0 0 0 0 0 0 8. Ocean marine 0 0 0 0 0 0 9. Inland marine 0 0 0 0 0 0 10. Financial guaranty 205,479,415 4,798,987 973,824 (1,258,225) 8,292,268 204,218,183 11.1 Medical professional liability-occurrence 0 0 0 0 0 0 11.2 Medical professional liability-claims-made 0 0 0 0 0 0 12. Earthquake 0 0 0 0 0 0
13. Group accident and health 0 0 0 0 0 0
14. Credit accident and health
(group and individual) 0 0 0 0 0 0
15. Other accident and health 0 0 0 0 0 0
16. Workers' compensation 0 0 0 0 0 0 17.1 Other liability-occurrence 0 0 0 0 0 0 17.2 Other liability-claims-made 0 0 0 0 0 0 17.3 Excess workers’ compensation 0 0 0 0 0 0 18.1 Products liability-occurrence 0 0 0 0 0 0 18.2 Products liability-claims-made 0 0 0 0 0 0
19.1,19.2 Private passenger auto
liability 0 0 0 0 0 0
19.3,19.4 Commercial auto liability 0 0 0 0 0 0
21. Auto physical damage 0 0 0 0 0 0
22. Aircraft (all perils) 0 0 0 0 0 0
23. Fidelity 0 0 0 0 0 0
24. Surety 0 0 0 0 0 0
26. Burglary and theft 0 0 0 0 0 0
27. Boiler and machinery 0 0 0 0 0 0
28. Credit 0 0 0 0 0 0 29. International 0 0 0 0 0 0 30. Warranty 0 0 0 0 0 0 31. Reinsurance-nonproportional assumed property XXX 0 0 0 0 0 32. Reinsurance-nonproportional assumed liability XXX 0 0 0 0 0 33. Reinsurance-nonproportional assumed financial lines XXX 0 0 0 0 0
34. Aggregate write-ins for other
lines of business 0 0 0 0 0 0 35. TOTALS 205,479,415 4,798,987 973,824 (1,258,225) 8,292,268 204,218,183 DETAILS OF WRITE-INS 3401. 0 0 0 0 0 0 3402. 0 0 0 0 0 0 3403. 0 0 0 0 0 0
3498. Sum. of remaining write-ins for Line 34 from
overflow page 0 0 0 0 0 0
3499. Totals (Lines 3401 through 3403
plus 3498) (Line 34 above) 0 0 0 0 0 0
(a) Does the company’s direct premiums written include premiums recorded on an installment basis? Yes [ X ] No [ ]
If yes: 1. The amount of such installment premiums $ 205,479,415
Losses Paid Less Salvage 5 6 7 8 Line of Business 1 Direct Business 2 Reinsurance Assumed 3 Reinsurance Recovered 4 Net Payments (Cols. 1 + 2 - 3) Net Losses Unpaid Current Year (Part 2A, Col. 8)
Net Losses Unpaid Prior Year Losses Incurred Current Year (Cols. 4 + 5 - 6) Percentage of Losses Incurred (Col. 7, Part 2) to Premiums Earned (Col. 4, Part 1) 1. Fire 0 0 0 0 0 0 0 0.0 2. Allied lines 0 0 0 0 0 0 0 0.0
3. Farmowners multiple peril 0 0 0 0 0 0 0 0.0
4. Homeowners multiple peril 0 0 0 0 0 0 0 0.0
5. Commercial multiple peril 0 0 0 0 0 0 0 0.0
6. Mortgage guaranty 0 0 0 0 0 0 0 0.0
8. Ocean marine 0 0 0 0 0 0 0 0.0
9. Inland marine 0 0 0 0 0 0 0 0.0
10. Financial guaranty 1,066,002,668 (1,578) 104,632,847 961,368,243 (2,659,352,451) (2,380,606,594) 682,622,386 283.3
11.1 Medical professional liability-occurrence 0 0 0 0 0 0 0 0.0
11.2 Medical professional liability-claims-made 0 0 0 0 0 0 0 0.0
12. Earthquake 0 0 0 0 0 0 0 0.0
13. Group accident and health 0 0 0 0 0 0 0 0.0
14. Credit accident and health (group and individual) 0 0 0 0 0 0 0 0.0
15. Other accident and health 0 0 0 0 0 0 0 0.0
16. Workers' compensation 0 0 0 0 0 0 0 0.0
17.1 Other liability-occurrence 0 0 0 0 0 0 0 0.0
17.2 Other liability-claims-made 0 0 0 0 0 0 0 0.0
17.3 Excess workers’ compensation 0 0 0 0 0 0 0 0.0
18.1 Products liability-occurrence 0 0 0 0 0 0 0 0.0
18.2 Products liability-claims-made 0 0 0 0 0 0 0 0.0
19.1,19.2 Private passenger auto liability 0 0 0 0 0 0 0 0.0
19.3,19.4 Commercial auto liability 0 0 0 0 0 0 0 0.0
21. Auto physical damage 0 0 0 0 0 0 0 0.0
22. Aircraft (all perils) 0 0 0 0 0 0 0 0.0
23. Fidelity 0 0 0 0 0 0 0 0.0
24. Surety 0 0 0 0 0 0 0 0.0
26. Burglary and theft 0 0 0 0 0 0 0 0.0
27. Boiler and machinery 0 0 0 0 0 0 0 0.0
28. Credit 0 0 0 0 0 0 0 0.0
29. International 0 0 0 0 0 0 0 0.0
30. Warranty 0 0 0 0 0 0 0 0.0
31. Reinsurance-nonproportional assumed property XXX 0 0 0 0 0 0 0.0
32. Reinsurance-nonproportional assumed liability XXX 0 0 0 0 0 0 0.0
33. Reinsurance-nonproportional assumed financial lines XXX 0 0 0 0 0 0 0.0
34. Aggregate write-ins for other lines of business 0 0 0 0 0 0 0 0.0
35. TOTALS 1,066,002,668 (1,578) 104,632,847 961,368,243 (2,659,352,451) (2,380,606,594) 682,622,386 283.3
DETAILS OF WRITE-INS
3401. 0 0 0 0 0 0 0 0.0
3402. 0 0 0 0 0 0 0 0.0
3403. 0 0 0 0 0 0 0 0.0
3498. Sum. of remaining write-ins for Line 34 from overflow page 0 0 0 0 0 0 0 0.0
3499. Totals (Lines 3401 through 3403 + 3498) (Line 34 above) 0 0 0 0 0 0 0 0.0
Reported Losses Incurred But Not Reported 8 9 Line of Business 1 Direct 2 Reinsurance Assumed 3 Deduct Reinsurance Recoverable from Authorized and Unauthorized Companies 4 Net Losses Excl.
Incurred But Not Reported (Cols. 1 + 2 - 3) 5 Direct 6 Reinsurance Assumed 7 Reinsurance Ceded Net Losses Unpaid (Cols. 4 +5 + 6 - 7)
Net Unpaid Loss Adjustment
Expenses
1. Fire 0 0 0 0 0 0 0 0 0
2. Allied lines 0 0 0 0 0 0 0 0 0
3. Farmowners multiple peril 0 0 0 0 0 0 0 0 0
4. Homeowners multiple peril 0 0 0 0 0 0 0 0 0
5. Commercial multiple peril 0 0 0 0 0 0 0 0 0
6. Mortgage guaranty 0 0 0 0 0 0 0 0 0
8. Ocean marine 0 0 0 0 0 0 0 0 0
9. Inland marine 0 0 0 0 0 0 0 0 0
10. Financial guaranty (2,775,285,738) 29,585,796 (86,347,491) (2,659,352,451) 0 0 0 (2,659,352,451) 53,122,646
11.1 Medical professional liability-occurrence 0 0 0 0 0 0 0 0 0
11.2 Medical professional liability-claims-made 0 0 0 0 0 0 0 0 0
12. Earthquake 0 0 0 0 0 0 0 0 0
13. Group accident and health 0 0 0 0 0 0 0 (a) 0 0
14. Credit accident and health (group and individual) 0 0 0 0 0 0 0 0 0
15. Other accident and health 0 0 0 0 0 0 0 (a) 0 0
16. Workers' compensation 0 0 0 0 0 0 0 0 0
17.1 Other liability-occurrence 0 0 0 0 0 0 0 0 0
17.2 Other liability-claims-made 0 0 0 0 0 0 0 0 0
17.3 Excess workers’ compensation 0 0 0 0 0 0 0 0 0
18.1 Products liability-occurrence 0 0 0 0 0 0 0 0 0
18.2 Products liability-claims-made 0 0 0 0 0 0 0 0 0
19.1,19.2 Private passenger auto liability 0 0 0 0 0 0 0 0 0
19.3,19.4 Commercial auto liability 0 0 0 0 0 0 0 0 0
21. Auto physical damage 0 0 0 0 0 0 0 0 0
22. Aircraft (all perils) 0 0 0 0 0 0 0 0 0
23. Fidelity 0 0 0 0 0 0 0 0 0
24. Surety 0 0 0 0 0 0 0 0 0
26. Burglary and theft 0 0 0 0 0 0 0 0 0
27. Boiler and machinery 0 0 0 0 0 0 0 0 0
28. Credit 0 0 0 0 0 0 0 0 0
29. International 0 0 0 0 0 0 0 0 0
30. Warranty 0 0 0 0 0 0 0 0 0
31. Reinsurance-nonproportional assumed property XXX 0 0 0 XXX 0 0 0 0
32. Reinsurance-nonproportional assumed liability XXX 0 0 0 XXX 0 0 0 0
33. Reinsurance-nonproportional assumed financial lines XXX 0 0 0 XXX 0 0 0 0
34. Aggregate write-ins for other lines of business 0 0 0 0 0 0 0 0 0
35. TOTALS (2,775,285,738) 29,585,796 (86,347,491) (2,659,352,451) 0 0 0 (2,659,352,451) 53,122,646
DETAILS OF WRITE-INS
3401. 0 0 0 0 0 0 0 0 0
3402. 0 0 0 0 0 0 0 0 0
3403. 0 0 0 0 0 0 0 0 0
3498. Sum. of remaining write-ins for Line 34 from overflow page 0 0 0 0 0 0 0 0 0
3499. Totals (Lines 3401 through 3403 + 3498) (Line 34 above) 0 0 0 0 0 0 0 0 0
(a) Including $ 0 for present value of life indemnity claims.
1
PART 3 - EXPENSES 1 Loss Adjustment Expenses 2 Other Underwriting Expenses 3 Investment Expenses 4 Total 1. Claim adjustment services:
1.1 Direct 135,088,936 0 0 135,088,936
1.2 Reinsurance assumed 0 0 0 0
1.3 Reinsurance ceded 9,528,729 0 0 9,528,729
1.4 Net claim adjustment services (1.1 + 1.2 - 1.3) 125,560,207 0 0 125,560,207
2. Commission and brokerage:
2.1 Direct, excluding contingent 0 0 0 0
2.2 Reinsurance assumed, excluding contingent 0 354,593 0 354,593
2.3 Reinsurance ceded, excluding contingent 0 7,449,757 0 7,449,757
2.4 Contingent-direct 0 0 0 0
2.5 Contingent-reinsurance assumed 0 0 0 0
2.6 Contingent-reinsurance ceded 0 0 0 0
2.7 Policy and membership fees 0 0 0 0
2.8 Net commission and brokerage (2.1 + 2.2 - 2.3 + 2.4 + 2.5 - 2.6 + 2.7) 0 (7,095,164) 0 (7,095,164)
3. Allowances to manager and agents 0 0 0 0
4. Advertising 0 25,000 69,529 94,529
5. Boards, bureaus and associations 0 1,158,407 4,313 1,162,720
6. Surveys and underwriting reports 641,890 454,860 182,408 1,279,158
7. Audit of assureds' records 0 0 0 0
8. Salary and related items:
8.1 Salaries 4,091,986 31,293,172 1,977,223 37,362,381
8.2 Payroll taxes 92,460 1,378,224 95,858 1,566,542
9. Employee relations and welfare 1,421,662 7,126,807 450,461 8,998,930
10. Insurance 0 1,746,317 54,507 1,800,824
11. Directors' fees 0 0 0 0
12. Travel and travel items 18,324 815,328 70,022 903,674
13. Rent and rent items 0 812,015 88,402 900,417
14. Equipment 604,352 301,506 147,736 1,053,594
15. Cost or depreciation of EDP equipment and software 0 71,025 171,210 242,235
16. Printing and stationery 1,964 14,051 3,827 19,842
17. Postage, telephone and telegraph, exchange and express 41,279 187,971 19,580 248,830
18. Legal and auditing 874,141 40,152,500 57,920 41,084,561
19. Totals (Lines 3 to 18) 7,788,058 85,537,183 3,392,996 96,718,237
20. Taxes, licenses and fees:
20.1 State and local insurance taxes deducting guaranty association
credits of $ 0 0 2,243,177 0 2,243,177
20.2 Insurance department licenses and fees 0 67,190 5,645 72,835
20.3 Gross guaranty association assessments 0 0 0 0
20.4 All other (excluding federal and foreign income and real estate) 0 2,368,806 0 2,368,806
20.5 Total taxes, licenses and fees (20.1 + 20.2 + 20.3 + 20.4) 0 4,679,173 5,645 4,684,818
21. Real estate expenses 0 81,042 0 81,042
22. Real estate taxes 0 0 0 0
23. Reimbursements by uninsured plans 0 0 0 0
24. Aggregate write-ins for miscellaneous expenses 444,331 (35,495,103) 0 (35,050,772)
25. Total expenses incurred 133,792,596 47,707,131 3,398,641 (a) 184,898,368
26. Less unpaid expenses-current year 53,122,646 28,252,060 0 81,374,706
27. Add unpaid expenses-prior year 46,116,076 25,649,196 0 71,765,272
28. Amounts receivable relating to uninsured plans, prior year 0 0 0 0
29. Amounts receivable relating to uninsured plans, current year 0 0 0 0
30. TOTAL EXPENSES PAID (Lines 25 - 26 + 27 - 28 + 29) 126,786,026 45,104,267 3,398,641 175,288,934
DETAILS OF WRITE-INS
2401. Fee reimbursement net of consulting & temporary help 316,033 (36,282,300) 0 (35,966,267)
2402. Corporate Service Fees 128,298 0 0 128,298
2403. Contributions 0 343,472 0 343,472
2498. Summary of remaining write-ins for Line 24 from overflow page 0 443,725 0 443,725
2499. Totals (Lines 2401 through 2403 plus 2498) (Line 24 above) 444,331 (35,495,103) 0 (35,050,772)
1 Collected During Year 2 Earned During Year 1. U.S. Government bonds (a) 1,232,620 982,086
1.1 Bonds exempt from U.S. tax (a) 854 109
1.2 Other bonds (unaffiliated) (a) 44,849,493 44,045,809
1.3 Bonds of affiliates (a) 0 0
2.1 Preferred stocks (unaffiliated) (b) 0 0
2.11 Preferred stocks of affiliates (b) 0 0
2.2 Common stocks (unaffiliated) 0 0
2.21 Common stocks of affiliates 0 0
3. Mortgage loans (c) 0 0
4. Real estate (d) 0 0
5. Contract loans 0 0
6. Cash, cash equivalents and short-term investments (e) 2,828,857 2,772,806
7. Derivative instruments (f) 0 0
8. Other invested assets 0 42,326
9. Aggregate write-ins for investment income 0 0
10. Total gross investment income 48,911,824 47,843,136
11. Investment expenses (g) 3,392,999
12. Investment taxes, licenses and fees, excluding federal income taxes (g) 5,642
13. Interest expense (h) 236,742,286
14. Depreciation on real estate and other invested assets (i) 0
15. Aggregate write-ins for deductions from investment income 0
16. Total deductions (Lines 11 through 15) 240,140,927
17. Net investment income (Line 10 minus Line 16) (192,297,791)
DETAILS OF WRITE-INS
0901. 0 0
0902. 0 0
0903. 0 0
0998. Summary of remaining write-ins for Line 9 from overflow page 0 0
0999. Totals (Lines 0901 through 0903) plus 0998 (Line 9 above) 0 0
1501. 0
1502. 0
1503. 0
1598. Summary of remaining write-ins for Line 15 from overflow page 0
1599. Totals (Lines 1501 through 1503) plus 1598 (Line 15 above) 0
(a) Includes $ 40,360,624 accrual of discount less $ 8,209,835 amortization of premium and less $ 291,231 paid for accrued interest on purchases. (b) Includes $ 0 accrual of discount less $ 0 amortization of premium and less $ 0 paid for accrued dividends on purchases. (c) Includes $ 0 accrual of discount less $ 0 amortization of premium and less $ 0 paid for accrued interest on purchases. (d) Includes $ 0 for company’s occupancy of its own buildings; and excludes $ 0 interest on encumbrances.
(e) Includes $ 53,954 accrual of discount less $ 635,562 amortization of premium and less $ 0 paid for accrued interest on purchases. (f) Includes $ 0 accrual of discount less $ 0 amortization of premium.
(g) Includes $ 0 investment expenses and $ 0 investment taxes, licenses and fees, excluding federal income taxes, attributable to segregated and Separate Accounts.
(h) Includes $ 133,371,700 interest on surplus notes and $ 0 interest on capital notes.
(i) Includes $ 0 depreciation on real estate and $ 0 depreciation on other invested assets.
EXHIBIT OF CAPITAL GAINS (LOSSES)
1 Realized Gain (Loss) On Sales or Maturity 2 Other Realized Adjustments 3
Total Realized Capital Gain (Loss) (Columns 1 + 2) 4 Change in Unrealized Capital Gain (Loss) 5 Change in Unrealized Foreign Exchange Capital Gain (Loss) 1. U.S. Government bonds (92,392) 0 (92,392) 0 0
1.1 Bonds exempt from U.S. tax 27,742 0 27,742 0 0
1.2 Other bonds (unaffiliated) 21,235,310 (42,297,092) (21,061,782) 37,149,954 (827,843)
1.3 Bonds of affiliates 0 0 0 0 0
2.1 Preferred stocks (unaffiliated) 0 0 0 0 0 2.11 Preferred stocks of affiliates 0 0 0 0 0
2.2 Common stocks (unaffiliated) 1,293,317 0 1,293,317 (1,293,880) (107,617) 2.21 Common stocks of affiliates 0 0 0 (11,377,205) 0
3. Mortgage loans 0 0 0 0 0
4. Real estate 0 0 0 0 0
5. Contract loans 0 0 0 0 0
6. Cash, cash equivalents and short-term investments 0 0 0 0 181,125
7. Derivative instruments 0 0 0 0 0
8. Other invested assets 0 0 0 (215,570) 0 9. Aggregate write-ins for capital gains (losses) 0 18,143,929 18,143,929 75,726,527 0
10. Total capital gains (losses) 22,463,977 (24,153,163) (1,689,186) 99,989,826 (754,335)
DETAILS OF WRITE-INS
0901. Foreign exchange gain on investments 0 18,708,819 18,708,819 0 0
0902. Foreign exchange gain on cash 0 799,773 799,773 0 0 0903. Correction of error 0 0 0 74,700,797 0
0998. Summary of remaining write-ins for Line 9 from
overflow page 0 (1,364,663) (1,364,663) 1,025,730 0
0999. Totals (Lines 0901 through 0903) plus 0998 (Line 9
EXHIBIT OF NONADMITTED ASSETS
1 Current Year Total Nonadmitted Assets
2 Prior Year Total Nonadmitted Assets 3 Change in Total Nonadmitted Assets (Col. 2 - Col. 1) 1. Bonds (Schedule D) 0 0 0 2. Stocks (Schedule D): 2.1 Preferred stocks 0 0 0 2.2 Common stocks 0 0 0
3. Mortgage loans on real estate (Schedule B):
3.1 First liens 0 0 0
3.2 Other than first liens 0 0 0
4. Real estate (Schedule A):
4.1 Properties occupied by the company 0 0 0
4.2 Properties held for the production of income 0 0 0
4.3 Properties held for sale 0 0 0
5. Cash (Schedule E-Part 1), cash equivalents (Schedule E-Part 2) and
short-term investments (Schedule DA) 0 0 0
6. Contract loans 0 0 0
7. Derivatives (Schedule DB) 0 0 0
8. Other invested assets (Schedule BA) 0 0 0
9. Receivables for securities 0 496,912 496,912
10. Securities lending reinvested collateral assets (Schedule DL) 0 0 0
11. Aggregate write-ins for invested assets 0 0 0
12. Subtotals, cash and invested assets (Lines 1 to 11) 0 496,912 496,912
13. Title plants (for Title insurers only) 0 0 0
14. Investment income due and accrued 0 0 0
15. Premiums and considerations:
15.1 Uncollected premiums and agents’ balances in the course of
collection 809,341 0 (809,341)
15.2 Deferred premiums, agents’ balances and installments booked but deferred
and not yet due 0 0 0
15.3 Accrued retrospective premiums 0 0 0
16. Reinsurance:
16.1 Amounts recoverable from reinsurers 0 12,521 12,521
16.2 Funds held by or deposited with reinsured companies 0 0 0
16.3 Other amounts receivable under reinsurance contracts 0 0 0
17. Amounts receivable relating to uninsured plans 0 0 0
18.1 Current federal and foreign income tax recoverable and interest thereon 0 0 0
18.2 Net deferred tax asset 0 0 0
19. Guaranty funds receivable or on deposit 0 0 0
20. Electronic data processing equipment and software 1,609,151 2,274,757 665,606
21. Furniture and equipment, including health care delivery assets 36,878 42,345 5,467
22. Net adjustment in assets and liabilities due to foreign exchange rates 0 0 0
23. Receivables from parent, subsidiaries and affiliates 1,768 86,105 84,337
24. Health care and other amounts receivable 0 0 0
25. Aggregate write-ins for other than invested assets 2,571,087 2,591,289 20,202
26. Total assets excluding Separate Accounts, Segregated Accounts and
Protected Cell Accounts (Lines 12 to 25) 5,028,225 5,503,929 475,704
27. From Separate Accounts, Segregated Accounts and Protected Cell Accounts 0 0 0
28. Total (Lines 26 and 27) 5,028,225 5,503,929 475,704
DETAILS OF WRITE-INS
1101. 0 0 0
1102. 0 0 0
1103. 0 0 0
1198. Summary of remaining write-ins for Line 11 from overflow page 0 0 0
1199. Totals (Lines 1101 through 1103 plus 1198) (Line 11 above) 0 0 0
2501. Prepaid expenses and other non-admitted assets 2,565,308 2,585,389 20,081
2502. Deposits 5,779 5,900 121
2503. 0 0 0
2598. Summary of remaining write-ins for Line 25 from overflow page 0 0 0
1. Summary of Significant Accounting Policies A. Accounting Practices
The statutory financial statements of MBIA Insurance Corporation (“MBIA Corp.” or the “Company”) are presented on the basis of accounting practices prescribed or permitted by the New York State Department of Financial Services (“NYSDFS”, previously referred to as the New York State Insurance Department or “NYSID”). The NYSDFS recognizes only statutory accounting practices prescribed or permitted by the State of New York for determining and reporting the financial condition and results of operations of an insurance company and determining its solvency under the New York Insurance Law (“NYIL”). The National Association of Insurance Commissioners (“NAIC”) Accounting Practices and Procedures Manual (“NAIC SAP”) has been adopted as a component of prescribed or permitted practices by the State of New York. The Superintendent of the NYSDFS has the right to permit other specific practices that deviate from prescribed practices.
As of December 31, 2012, MBIA Corp. does not have any accounting practices which are permitted, rather than prescribed, by the NYSDFS.
B. Use of Estimates in the Preparation of the Financial Statements
The preparation of financial statements in conformity with Statutory Accounting Principles (“SAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities. It also requires disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. As additional information becomes available or actual amounts become determinable, the recorded estimates are revised and reflected in operating results.
C. Accounting Policy
MBIA Corp.’s premiums written consist of upfront premiums and installment premiums received and accrued for policies issued in current and prior years. Upfront premiums are earned proportionately to the scheduled periodic maturity of principal and payment of interest (debt service) to the original total principal and interest insured. Installment premiums are earned on a straight-line basis over each installment period, generally one year or less. Unearned premiums represent the portion of premiums written in prior years that is applicable to the unexpired risk of insured obligations. When an insured obligation is retired early, is called by the issuer, or is in substance paid in advance through a refunding accomplished by placing United States (“U.S.”) Government securities in escrow, the remaining unearned premium is earned at that time, since there is no longer risk to MBIA Corp. As the outstanding principal of an installment-based policy is paid down by the issuer of an MBIA-insured obligation, less premium is collected and recognized by MBIA Corp. Additionally, MBIA Corp. may receive premiums upon the early termination of installment-based policies, which are earned when received.
Premiums ceded to reinsurers reduce the amount of earned premium MBIA Corp. will recognize from its insurance policies. For both upfront and installment policies, ceded premium is recognized in earnings in proportion to and at the same time the related gross premium revenue is recognized.
Ceding commission income and expense are recognized in earnings at the same time the related premium is recognized. However, ceding commission income that exceeds the anticipated acquisition costs of the business ceded will be established as a liability, equal to the difference between the anticipated acquisition cost and the reinsurance commission received. The excess ceding commission income is amortized pro-rata over the period which the ceded unearned premium is amortized.
Expenses incurred in connection with the acquisition of new insurance business are charged to operations as incurred. Expenses incurred are reduced for ceding commissions received or receivable, to the extent admissible.
MBIA Corp. collects insurance related fees for services performed in connection with certain transactions. In addition, MBIA Corp. may be entitled to reimbursement of third-party insurance expenses that it incurs in connection with certain transactions. These fees are included as a reduction to “Other underwriting expenses incurred” within the Statement of Income.
Borrowed money is accounted for as a collateralized transaction and is recorded at contract value plus accrued and capitalized interest.
In addition, MBIA Corp. uses the following accounting policies:
(1) Short-term investments are stated at amortized cost, net of any unrealized foreign exchange gains and losses, which approximates fair value. Cash and cash equivalents include cash on hand and demand deposits with banks with an original maturity of less than 90 days. Cash equivalents also include bonds and commercial paper with a maturity of less than 90 days at time of purchase.
(2) Bonds with an NAIC designation of 1 or 2 that are not backed by other loans are reported at amortized cost. Amortized cost is calculated using the effective yield method. For bonds purchased at a price below par value, discounts are accreted over the remaining term of the bond. For bonds purchased at a price above par value, which have call features, premiums are amortized to the call date that produces the lowest yield. For premium bonds that do not have call features, such premium is amortized over the remaining term of the bond.
by management. Accordingly, the estimates presented are not necessarily indicative of the amount MBIA Corp. could realize in the market.
Realized gains or losses on the sale of investments are determined by utilizing the first-in, first-out method to identify the investments sold and are included in the Statement of Income as a separate component of revenues. Unrealized gains and losses from the revaluation of bonds and common stocks not valued at amortized cost are credited or charged to unassigned surplus.
MBIA Corp.’s securities for which fair value is less than amortized cost are reviewed no less than quarterly in order to determine whether such a decline in value is other-than-temporary. This evaluation includes both qualitative and quantitative considerations. In assessing whether a decline in value is other-than-temporary, MBIA Corp. considers several factors, including but not limited to (a) the magnitude and duration of the decline, (b) credit indicators and the reasons for the decline, such as general interest rate or credit spread movements, credit rating downgrades, issuer-specific changes in credit spreads, and the financial condition of the issuer, and (c) any guarantees associated with a security such as those provided by investment-grade financial guarantee insurance companies. Based on this assessment, if MBIA Corp. believes that either (a) the investment’s fair value will not recover to an amount equal to its amortized cost or (b) MBIA Corp. does not have the ability and intent to hold the investment to maturity or until the fair value recovers to an amount at least equal to amortized cost, it will consider the decline in value to be other-than-temporary. If MBIA Corp. determines that a decline in the value of an investment is other-than-temporary, the investment is written down to its fair value and a realized loss is recorded in the Statement of Income.
For loan-backed and structured securities, MBIA Corp. estimates cash flows expected to be collected over the life of the security. If MBIA Corp. determines that if, based on current information and events, there is a decrease in cash flows expected to be collected (that is they will be unable to collect all cash flows expected at acquisition plus any additional cash flows expected to be collected arising from changes in estimates after acquisition) an other-than-temporary impairment (“OTTI”) shall be considered to have occurred. For loan-backed securities that management has no intent to sell and believes that it is more likely than not such securities will not be required to be sold prior to recovery, only the credit loss component of the OTTI is recognized as a realized loss, while the rest of the fair value loss is recognized as a reduction to unassigned surplus. If management intends to sell the security or if management believes that it is more likely than not such securities will be required to be sold prior to recovery, the entire amount of the unrealized loss is recognized as a realized loss. These assessments require management to exercise judgment as to whether an investment is impaired based on market conditions and trends and the availability of relevant data.
(3) Common stocks are stated at fair value except for investments in stocks of uncombined subsidiaries and affiliates in which MBIA Corp. has an interest of 20% or more are carried on an equity basis.
(4) MBIA Corp. did not hold any preferred stocks as of December 31, 2012.
(5) MBIA Corp. did not hold investments in mortgage loans as of December 31, 2012.
(6) Statements of Statutory Accounting Principles (“SSAP”) No. 43R “Loan-Backed and Structured Securities-Revised” establishes principles for investments in loan-backed and structured securities and increased disclosures regarding OTTI. The Company utilizes the retrospective adjustment method to value all loan-backed securities except for interest-only securities or securities where the yield has become negative. These securities are valued using the prospective method. Loan-backed bonds and structured securities with an NAIC designation of 1 or 2 are reported at amortized cost using the effective yield method, including anticipated prepayments at the date of purchase. Changes in the estimated cash flows from the original purchase assumptions are accounted for using the retrospective method.
Loan-backed bonds and structured securities with a NAIC designation of 3 through 6 are reported at the lower of amortized cost or fair value as determined by the SVO. In the event the SVO has not determined the fair value of a security, fair value amounts are determined by using independent third-party sources, when available, and appropriate valuation methodologies when market quotes are not available. In cases where specific market quotes are unavailable, interpreting market data and estimating market values require considerable judgment by management. Accordingly, the estimates presented are not necessarily indicative of the amount MBIA Corp. could realize in the market.
(7) MBIA UK Holdings (“UK Holdings”) and MBIA Mexico, S.A. de C.V. (“MBIA Mexico”) are wholly owned insurance subsidiaries of MBIA Corp. organized in the United Kingdom (“U.K.”) and Mexico, respectively, and are accounted for on the equity-method as an investment in subsidiaries as described in paragraph 9 of SSAP No. 97 “Investments in Subsidiary, Controlled and Affiliated Entities” and Section 1414 Valuation of Investments of the NYIL. Investments in these audited foreign insurance subsidiaries are admitted assets on MBIA Corp.’s balance sheet and are reflected on Schedule D-Part 2-Section 2. MBIA Corp. does not have any investments in non-insurance subsidiaries. MBIA Corp. owns no investment in its parent, MBIA Inc.
(8) At December 31, 2012, MBIA Corp. has no material ownership interests in joint ventures, partnerships and limited liability companies.
(9) There are no outstanding derivative transactions as of December 31, 2012.
(10) MBIA Corp. does not utilize anticipated investment income as a factor in its premium deficiency calculation. MBIA Corp. did not have a premium deficiency as of December 31, 2012.
consists of members of senior management, and require the use of judgment and estimates with respect to the occurrence, timing and amount of a loss on an insured obligation.
MBIA Corp. recognizes loss reserves on a contract-by-contract basis where an insured event has occurred (i.e., a payment default on the insured obligation) or an insured event is expected in the future based upon credit deterioration which has already occurred and has been identified. Case reserves are measured based on the probability-weighted present value of expected net cash inflows and outflows to be paid under the contract, discounted using a rate equal to the yield-to-maturity of MBIA Corp.’s fixed-income investment portfolio, excluding cash and cash equivalents, and other investments not intended to defease long-term liabilities. The loss reserve is subsequently remeasured each reporting period for expected increases or decreases due to changes in the likelihood of default and potential recoveries. Subsequent changes to the measurement of the loss reserve are recognized as losses incurred in the period of change. Measurement and recognition of loss reserves is reported net of any reinsurance. MBIA Corp. estimates the likelihood of possible claims payments and possible recoveries using probability-weighted expected cash flows based on information available as of the measurement date, including market information. The methods for making such estimates are continually reviewed and any adjustments are reflected in the period determined. Once a case basis reserve is established for an insured obligation, MBIA Corp. continues to record premium revenue to the extent premiums have been or are expected to be collected on that obligation.
The Company does not establish loss reserves for all payments that may be due under an insured obligation. Case basis reserves cover the estimated amount of principal and interest the Company expects to pay on its insured obligations and the costs of settlement and other loss mitigation expenses, net of expected recoveries. MBIA Corp. recognizes potential salvage and subrogation recoveries on paid losses based on a similar probability-weighted net cash flow projection discounted using the same rate discussed above, as of the measurement date. Such recovery amounts are reported within “Loss and LAE reserves” on MBIA Corp.’s balance sheet as a contra liability.
When MBIA Corp. becomes entitled to potential recoveries which are typically based on either, salvage rights, the rights conferred to MBIA Corp. through the transactional documents (inclusive of the insurance agreement), subrogation rights embedded within insurance policies, or the underlying collateral of an insured obligation, it reports this type of salvage and subrogation as a contra liability within “Loss and LAE reserves” on MBIA Corp.’s balance sheet. References in the aforementioned and following disclosures to these items should be considered to be salvage and subrogation for purposes of financial reporting on a statutory basis.
A number of variables are taken into account in establishing specific case basis reserves for individual policies. These variables include the creditworthiness of the underlying issuer of the insured obligation, whether the obligation is secured or unsecured and the expected recovery rates on the insured obligation, the projected cash flow or market value of any assets that support the insured obligation and the historical and projected loss rates on such assets. Factors that may affect the actual ultimate underwriting losses for any policy include the state of the economy, changes in interest rates, rates of inflation and the salvage values of specific collateral. Management believes that the Company’s reserves are adequate to cover the net cost of claims. However, because the reserves are based on management’s judgment and estimates, there can be no assurance that the ultimate liability will not exceed such estimates.
Refer to “Note 25: Changes in Incurred Losses and Loss Adjustment Expenses” for additional information regarding the Company’s reserving methodology.
Contingency Reserves
A contingency reserve is established for the protection of all policyholders by direct charges to unassigned surplus and is established by MBIA Corp. for past business and new business, as follows:
• For policies in force prior to July 1, 1989, MBIA Corp. establishes and maintains a contingency reserve equal to 50% of the cumulative earned premiums on such policies.
• For policies written on or after July 1, 1989, a contingency reserve, which represents the greater of 50% of premiums written or a stated percentage of the principal guaranteed dependent on the category of obligation insured, is established over a 15 to 20 year period. The stated percentage ranges from 0.55% on municipal general obligation bonds to 2.5% on certain industrial development bonds and non-investment grade obligations.
Contingency reserves are established and maintained net of collateral and reinsurance. The reserves may be released in the same manner in which they were established and withdrawals, to the extent there may be excess, may be made with either the prior written approval of the Superintendent of the NYSDFS or upon thirty days prior written notice, depending upon the circumstances specified in Article 69, Financial Guaranty Insurance Corporations, Section 6903 of the NYIL. Contingency reserves established for policies which are terminated, matured or net of refundings to the extent that the refunded issue is paid off or secured by obligations which are directly payable or guaranteed by the U.S. Government may be released without prior approval or notice. Refer to “Note 21: Other Items” for more information about MBIA Corp.’s release of excessive contingency reserves.
(12) MBIA Corp. has not modified its capitalization policy from the prior year.
2. Accounting Changes and Correction of Errors Accounting Change
Effective January 1, 2012, SSAP No. 10R “Income Taxes - Revised” was replaced by SSAP No. 101 “Income Taxes - A Replacement of SSAP No. 10R and SSAP No. 10.” SSAP No. 101 provides revised statutory accounting principles for federal and state income taxes.
SSAP No. 101 retains the expanded net deferred tax asset (“DTA”) admissibility of SSAP No. 10R, including the possibility of a three-year reversal period and a 15 percent surplus limitation. The expanded admissibility under SSAP No. 101 is subject to the new “realization threshold limitation criteria” which determines the future realization period under which reversals are considered (0, 1, or 3 years) and the applicable percentage of adjusted statutory surplus (0%, 10%, or 15%). However, due to the Company having established a full valuation allowance for the period ending December 31, 2012 and 2011, MBIA Corp. will not be able to realize its DTA and therefore cannot admit any DTA either upon transition at January 1, 2012 or as of December 31, 2012.
In addition to SSAP No. 101, SSAP No. 5 “Liabilities, Contingencies and Impairments of Assets” was replaced with SSAP No. 5R “Liabilities, Contingencies and Impairments of Assets – Revised.” SSAP No. 5R changes the recognition and measurement guidance on uncertain tax positions by reducing the recognition threshold from “probable and reasonably estimated” criterion to “more likely
than not and reasonably estimated.” SSAP No. 5R and SSAP No. 101 did not have an impact on the balance sheets, statement of
income, or cash flows for the period ended December 31, 2012. Refer to “Note 9: Income Taxes” for further discussion on the Company’s income taxes.
Correction of Errors
During 2012, MBIA Corp. discovered it had understated a realized loss impairment of its investment in an unaffiliated common stock and overstated the amount of unrealized losses reflected in policyholders’ surplus for the year ended December 31, 2009. The result was an unrealized loss of $75 million which was not reversed and should have been recorded as a realized loss in MBIA Corp.’s 2009 Statement of Income. MBIA Corp. has recorded the impairment in 2012 as an adjustment to unassigned surplus in accordance with SSAP No. 3 “Accounting Changes and Corrections of Errors.” This correction does not impact total policyholders’ surplus or earned surplus.
During 2011, MBIA Corp. discovered two errors:
The first was an error in the recognition of net premiums earned related to refunding activities prior to December 31, 2010 on reinsurance between National Public Finance Guarantee Corporation (“National”) and MBIA Corp. Certain financial guarantee policies ceded by MBIA Corp. and assumed by National were subsequently found to have been refunded by the issuers of the insured obligations prior to the date of the reinsurance agreement, which was January 1, 2009, and related premiums of $83 million, net of ceding commission, should have been returned to and earned by MBIA Corp. but were instead earned by National. The correction of this error resulted in an increase in unassigned surplus of $83 million.
The correction of the second error resulted in the net loss reported in the audited statutory financial statements of $435 million being $42 million lower than the net loss of $477 million reported in the 2011 Annual Statement. The error related to the recognition of an OTTI loss on an investment in a structured security (an NAIC 6 designated security). During 2011, MBIA Corp. determined that the security was impaired by $57 million; $42 million of this impairment should have been recognized as a net realized loss in the Statement of Income in prior periods. As this amount of impairment was previously included in unrealized losses on the Statement of Changes in Capital and Surplus, this error and its correction did not have an impact on statutory capital.
3. Business Combinations and Goodwill
A. Statutory Purchase - Not applicable. B. Statutory Merger - Not applicable. C. Impairment Loss - Not applicable.
4. Discontinued Operations
MBIA Corp. did not have any discontinued operations during 2012.
5. Investments
A. MBIA Corp. did not hold mortgage loans as investments during 2012. B. MBIA Corp. is not party to any restructured debt transactions during 2012. C. MBIA Corp. did not hold investments in reverse mortgages during 2012. D. Loan-Backed Securities
(1) Prepayment assumptions for loan-backed and structured securities were obtained from an independent third-party data service or internal estimates.
The following table summarizes by quarter OTTI for loan-backed securities recorded during the year because the Company had either the intent to sell the securities or the inability or lack of intent to retain as cited in the table:
(1) (2) (3)
Amortized Cost OTTI Recognized Fair Value In thousands Basis Before OTTI in Loss 1-2 OTTI recognized in 1st Quarter
a. Intent to sell $ 64,079 $ 38,411 $ 25,668
b. Inability or lack of intent to retain the investment in the security for a period of time sufficient to recover the
amortized cost basis - -
-c. Total 1st Quarter $ 64,079 $ 38,411 $ 25,668
Amortized Cost OTTI Recognized
In thousands Basis Before OTTI in Loss Fair Value OTTI recognized in 2nd Quarter
d. Intent to sell $ 25,668 $ 1,704 $ 23,964
e. Inability or lack of intent to retain the investment in the security for a period of time sufficient to recover the
amortized cost basis - -
-f. Total 2nd Quarter $ 25,668 $ 1,704 $ 23,964
Amortized Cost OTTI Recognized
In thousands Basis Before OTTI in Loss Fair Value OTTI recognized in 3rd Quarter
g. Intent to sell $ 23,964 $ 2,182 $ 21,782
h. Inability or lack of intent to retain the investment in the security for a period of time sufficient to recover the
amortized cost basis - -
-i. Total 3rd Quarter $ 23,964 $ 2,182 $ 21,782
Amortized Cost OTTI Recognized
In thousands Basis Before OTTI in Loss Fair Value OTTI recognized in 4th Quarter
j. Intent to sell $ - $ - $
-k. Inability or lack of intent to retain the investment in the security for a period of time sufficient to recover the
amortized cost basis - -
-l. Total 4th Quarter $ - $ - $
-m. Annual Aggregate Total $ 42,297
(3) As of December 31, 2012, MBIA Corp. does not own any impaired securities.
(4) The following table sets forth the gross unrealized losses of the Company’s loan-backed and structured securities as of December 31, 2012 and 2011, that have been in a continuous unrealized loss position for less than twelve months from those that have been in a continuous unrealized loss position for twelve months or longer:
In thousands
a. The aggregate amount of unrealized losses:
1. Less than 12 Months $ (3,488) 2. 12 Months or Longer $ (2) b. The aggregate related fair value of securities
with unrealized losses:
1. Less than 12 Months $ 7,110 2. 12 Months or Longer $ 43
As of December 31, 2012
adjusted/carry value to fair value. As of December 31, 2012, the total fair value and unrealized loss for these securities was $4.2 million and $0.2 million, respectively.
In thousands
a. The aggregate amount of unrealized losses:
1. Less than 12 Months $ (9) 2. 12 Months or Longer $ (451) b. The aggregate related fair value of securities
with unrealized losses:
1. Less than 12 Months $ 224 2. 12 Months or Longer $ 1,363
As of December 31, 2011
The table above excludes unrealized losses on NAIC rated 3 through 6 securities that were carried at fair value where the fair value of the securities was lower than amortized cost. The Company has recorded unrealized losses on these securities to bring the book adjusted/carry value to fair value. As of December 31, 2011, the total fair value and unrealized loss for these securities was $33 million and $37 million, respectively.
(5) Refer to “Note 1: Summary of Significant Accounting Policies” Section C (2) for a description of the general categories of information MBIA Corp. considers in determining whether a security is OTTI.
E. There were no repurchase agreement transactions outstanding as of December 31, 2012 or 2011. F. MBIA Corp. does not have any investments in real estate as of December 31, 2012 or 2011. G. MBIA Corp. did not hold low income housing tax credits as investments during 2012 or 2011.
6. Joint Ventures, Partnerships and Limited Liability Companies
A. MBIA Corp. has no investments in joint ventures, partnerships or limited liability companies that exceed 10% of its admitted assets.
B. MBIA Corp. did not recognize any impairment write-down for investments in joint ventures, partnerships and limited liability companies due to impairments during 2012.
7. Investment Income
A. Due and accrued income was excluded from surplus on the following basis:
All investment income due and accrued with amounts that are over 90 days past due are non-admitted. B. There were no amounts excluded as of December 31, 2012 or 2011.
8. Derivative Instruments
There were no derivatives outstanding as of December 31, 2012.
9. Income Taxes
A. The components of DTAs and deferred tax liabilities (“DTLs”)
(1) The components of the net deferred tax asset/(liability) at December 31 are as follows:
(1) (2) (3)
(Col 1+2)
Ordinary Capital Total
(a) Gross Deferred Tax Assets $ 1,016,718 $ 59,537 $ 1,076,255 (b) Statutory Valuation Allowance Adjustments 1,016,718 59,537 1,076,255 (c) Adjusted Gross Deferred Tax Assets (1a - 1b) - - - (d) Deferred Tax Assets Nonadmitted - - - (e) Subtotal Net Admitted Deferred Tax Asset (1c -1d ) - - - (f) Deferred Tax Liabilities - - - (g) Net Admitted Deferred Tax Asset/(Net Deferred Tax
Liability) (1e - 1f) $ - $ - $ -
(4) (5) (6)
(Col 1+2)
Ordinary Capital Total
(a) Gross Deferred Tax Assets $ 726,303 $ 52,857 $ 779,160 (b) Statutory Valuation Allowance Adjustments 726,303 52,857 779,160 (c) Adjusted Gross Deferred Tax Assets (1a - 1b) - - - (d) Deferred Tax Assets Nonadmitted - - - (e) Subtotal Net Admitted Deferred Tax Asset (1c -1d ) - - - (f) Deferred Tax Liabilities - - - (g) Net Admitted Deferred Tax Asset/(Net Deferred Tax
Liability) (1e - 1f) $ - $ - $ -
(7) (8) (9)
(Col 1+2)
Ordinary Capital Total
(a) Gross Deferred Tax Assets $ 290,415 $ 6,680 $ 297,095 (b) Statutory Valuation Allowance Adjustments 290,415 6,680 297,095 (c) Adjusted Gross Deferred Tax Assets (1a - 1b) - - - (d) Deferred Tax Assets Nonadmitted - - - (e) Subtotal Net Admitted Deferred Tax Asset (1c -1d ) - - - (f) Deferred Tax Liabilities - - - (g) Net Admitted Deferred Tax Asset/(Net Deferred Tax
Liability) (1e - 1f) $ - $ - $ - 12/31/2011
Change
In thousands
(2) Admission Calculation Components SSAP No. 101
(1) (2) (3)
(Col 1+2)
In thousands Ordinary Capital Total
(a) $ - $ - $
-(b)
- - - 1. Adjusted Gross Deferred Tax Assets Expected to be Realized Following the Balance
Sheet Date. - - - 2. Adjusted Gross Deferred Tax Assets Allowed per Limitation Threshold. XXX XXX $ - (c) - - - -$ $ - $ -(4) (5) (6) (Col 1+2) Ordinary Capital Total
(a) $ $ $
-(b)
- - - 1. Adjusted Gross Deferred Tax Assets Expected to be Realized Following the Balance
Sheet Date. - - - 2. Adjusted Gross Deferred Tax Assets Allowed per Limitation Threshold. XXX XXX $ 121,467 (c) - - - -$ $ - $ -(7) (8) (9) (Col 1+2) Ordinary Capital Total
(a) $ - $ - $
-(b)
- - - 1. Adjusted Gross Deferred Tax Assets Expected to be Realized Following the Balance
Sheet Date. - - - 2. Adjusted Gross Deferred Tax Assets Allowed per Limitation Threshold. XXX XXX $ (121,467) (c) - - - -$ $ - $ -12/31/2012 (d)
Adjusted Gross Deferred Tax Assets Expected To Be Realized (Excluding The Amount Of Deferred Tax Assets From 2(a) above) After Application of the Threshold Limitation. (The Lesser of 2(b)1 and 2(b)2 Below)
12/31/2011
Change Adjusted Gross Deferred Tax Assets (Excluding The Amount Of Deferred Tax Assets
From 2(a) and 2(b) above) Offset by Gross Deferred Tax Liabilities.
Federal Income Taxes Paid In Prior Years Recoverable Through Loss Carrybacks. Adjusted Gross Deferred Tax Assets Expected To Be Realized (Excluding The Amount Of Deferred Tax Assets From 2(a) above) After Application of the Threshold Limitation. (The Lesser of 2(b)1 and 2(b)2 Below)
Adjusted Gross Deferred Tax Assets (Excluding The Amount Of Deferred Tax Assets From 2(a) and 2(b) above) Offset by Gross Deferred Tax Liabilities.
Deferred Tax Assets Admitted as the result of application of SSAP No. 101. Total (2(a) + 2(b) + 2(c))
Federal Income Taxes Paid In Prior Years Recoverable Through Loss Carrybacks.
Adjusted Gross Deferred Tax Assets (Excluding The Amount Of Deferred Tax Assets From 2(a) and 2(b) above) Offset by Gross Deferred Tax Liabilities.
(d) Deferred Tax Assets Admitted as the result of application of SSAP No. 101. Total (2(a) + 2(b) + 2(c))
(d) Deferred Tax Assets Admitted as the result of application of SSAP No. 101. Total (2(a) + 2(b) + 2(c))
Adjusted Gross Deferred Tax Assets Expected To Be Realized (Excluding The Amount Of Deferred Tax Assets From 2(a) above) After Application of the Threshold Limitation. (The Lesser of 2(b)1 and 2(b)2 Below)
Federal Income Taxes Paid In Prior Years Recoverable Through Loss Carrybacks.
(3) Other Admissibility Criteria
2012 2011
(a) Ratio Percentage Used To Determine Recovery Period And Threshold Limitation Amount.
96% N/A
(b) Amount Of Adjusted Capital And Surplus Used To Determine
