# Mbia Inc: Form 10-Q for the period ended Sep 30, 2022

- Company: [Mbia Inc](/companies/mbi.md) (CIK 814585)
- Form: 10-Q
- Filed: 2022-11-02
- Accepted by EDGAR: Nov 2, 2022, 16:49 ET
- Period: 2022-09-30
- Accession: 0001193125-22-275889
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/814585/000119312522275889/d408781d10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/814585/000119312522275889/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2022-07-01 to 2022-09-30 | $17.0m | us-gaap:Revenues |
| Revenue | 9 months, 2022-01-01 to 2022-09-30 | $97.0m | us-gaap:Revenues |
| Interest expense | 3 months, 2022-07-01 to 2022-09-30 | $46.0m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2022-01-01 to 2022-09-30 | $130.0m | us-gaap:InterestExpense |
| Income tax | 3 months, 2022-07-01 to 2022-09-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2022-01-01 to 2022-09-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2022-07-01 to 2022-09-30 | −$34.0m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2022-01-01 to 2022-09-30 | −$143.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2022-07-01 to 2022-09-30 | −$0.67 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2022-01-01 to 2022-09-30 | −$2.87 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2022-07-01 to 2022-09-30 | −$0.67 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2022-01-01 to 2022-09-30 | −$2.87 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2022-07-01 to 2022-09-30 | 49,878,191 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2022-01-01 to 2022-09-30 | 49,779,681 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2022-01-01 to 2022-09-30 | $140.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Share repurchases | 9 months, 2022-01-01 to 2022-09-30 | $3.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Total assets | at 2022-09-30 | $4.01bn | us-gaap:Assets |
| Total liabilities | at 2022-09-30 | $4.86bn | us-gaap:Liabilities |
| Shareholders' equity | at 2022-09-30 | −$863.0m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 702 characters.

The table below presents purchases or repurchases made by the Company or National in each month during the third quarter of 2022:

| Month | Total Number of Shares Purchased (1) | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plan | Maximum Amount That May Be Purchased Under the Plan (in millions) |
| --- | ---: | ---: | ---: | ---: |
| July | 73 | $12.39 | - | $- |
| August | 71 | 12.84 | - | - |
| September | 89 | 10.67 | - | - |
|  | 233 | $11.87 | - | $- |

(1) 73 shares in July, 71 shares in August and 89 shares in September were repurchased in open market transactions as investments in the Company’s non-qualified deferred compensation plan.

## Market risk

As filed, 3,457 characters.

The Company’s market risk exposures relate to changes in interest rates, foreign exchange rates and credit spreads that affect the fair value of its financial instruments, primarily investment securities, MTNs and investment agreement liabilities. The Company’s investments are primarily U.S. dollar-denominated fixed-income securities including municipal bonds, U.S. government bonds, corporate bonds, MBS and asset-backed securities. In periods of rising and/or volatile interest rates, foreign exchange rates and credit spreads, profitability could be adversely affected should the Company have to liquidate these securities. The Company minimizes its exposure to interest rate risk, foreign exchange risk and credit spread movement through active portfolio management to ensure a proper mix of the types of securities held and to stagger the maturities of its fixed-income securities. The following table presents updates in our market risk exposures since December 31, 2021.

### INTEREST RATE SENSITIVITY

Interest rate sensitivity can be estimated by projecting a hypothetical instantaneous increase or decrease in interest rates. The following table presents the estimated pre-tax change in fair value of the Company’s financial instruments as of September 30, 2022 from instantaneous shifts in interest rates:

*In millions*

|  | Change in Interest Rates 300 Basis Point Decrease | 200 Basis Point Decrease | 100 Basis Point Decrease | 100 Basis Point Increase | 200 Basis Point Increase | 300 Basis Point Increase |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Estimated change in fair value | $264 | $155 | $69 | $(56) | $(101) | $(138) |

### FOREIGN EXCHANGE RATE SENSITIVITY

The Company is exposed to foreign exchange rate risk in respect of liabilities denominated in currencies other than U.S. dollars. Certain liabilities included in our corporate segment are denominated in currencies other than U.S. dollars. The majority of the Company’s foreign exchange rate risks is with the Euro. Foreign exchange rate sensitivity can be estimated by projecting a hypothetical instantaneous increase or decrease in foreign exchange rates. The following table presents the estimated pre-tax change in fair value of the Company’s financial instruments as of September 30, 2022 from instantaneous shifts in foreign exchange rates:

|  | Change in Foreign Exchange Rates Dollar Weakens |  | Dollar Strengthens |  |
| --- | ---: | ---: | ---: | ---: |
| **In millions** | **20%** | **10%** | **10%** | **20%** |
| Estimated change in fair value | $(3) | $(2) | $2 | $3 |

### CREDIT SPREAD SENSITIVITY

Credit spread sensitivity can be estimated by projecting a hypothetical instantaneous increase or decrease in credit spreads. The following table presents the estimated pre-tax change in fair value of the Company’s financial instruments as of September 30, 2022 from instantaneous shifts in credit spread curves. It was assumed that all credit spreads move by the same amount. It is more likely that the actual changes in credit spreads will vary by security. The changes in fair value reflect partially offsetting effects as the value of the investment portfolios generally changes in an opposite direction from the liability portfolio:

*In millions*

|  | Change in Credit Spreads 50 Basis Point Decrease | 50 Basis Point Increase | 200 Basis Point Increase |
| --- | ---: | ---: | ---: |
| Estimated change in fair value | $59 | $(53) | $(176) |

## Controls and procedures

As filed, 1,077 characters.

As of the end of the period covered by this report, an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934) was performed under the supervision and with the participation of the Company’s senior management, including the Chief Executive Officer and the Chief Financial Officer. Based on that evaluation, the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report. In addition, there have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) during the fiscal quarter to which this report relates that have materially affected, or are likely to materially affect, the Company’s internal control over financial reporting.

## Risk factors

As filed, 5,575 characters.

On March 8, 2022, the Puerto Rico Fiscal Agency and Financial Advisory Authority (“AAFAF”) and PREPA terminated a Definitive Restructuring Support Agreement (as amended, the “RSA”). On April 8, 2022, the Court appointed a new panel of judges to commence mediation among the Oversight Board, the Ad Hoc creditor group as holders of PREPA Senior Bonds, Assured, National and Syncora (the “April 8 Order”). The mediation initially terminated on September 16, 2022; however on September 29, 2022 the Court entered an order restarting mediation through December 31, 2022, but simultaneously permitting litigation to recommence on an expedited schedule concerning the objections by the Oversight Board to bondholder liens and claims. The Oversight Board filed an amended complaint addressing these objections on September 30, 2022. The parties and intervenor defendants, including National, filed their answer, affirmative defenses and counterclaims on October 17, 2022. Litigation over the counterclaims has been stayed by Court order. In addition, in its September 29, 2022 Order, the Court directed the Oversight Board to file a plan of adjustment for PREPA by December 1, 2022. The Court stayed the pending bondholder motion seeking the appointment of a receiver or to dismiss the case until the earlier of (a) the day after the deadline set by the Court for filing a proposed plan, if such plan deadline is not met, or (b) the termination of the plan confirmation process.

Refer to the “U.S. Public Finance Insurance Puerto Rico Exposures” section in Part I, Item 2 of this Form 10-Q for additional information on our Puerto Rico exposures.

### MBIA Corp. Risk Factors

***Continuing elevated loss payments and delay or failure in realizing expected recoveries on insured transactions may materially and adversely affect MBIA Insurance Corporation’s statutory capital and its ability to meet liquidity needs and could cause the NYSDFS to put MBIA Insurance Corporation into a rehabilitation or liquidation proceeding if the NYSDFS concludes that MBIA Insurance Corporation will not be able to pay expected claims.***

MBIA Insurance Corporation is particularly sensitive to the risk that it will not have sufficient capital or liquid resources to meet contractual payment obligations when due or to make settlement payments in order to terminate insured exposures to avoid losses. While management’s expected liquidity and capital forecasts for MBIA Insurance Corporation reflect adequate resources to pay expected claims, there are risks to the capital and liquidity forecasts as MBIA Insurance Corporation’s remaining insured exposures and its expected salvage recoveries are potentially volatile. Such volatility exists in salvage that MBIA Insurance Corporation may collect, including in particular recoveries on the claims it paid in respect of the insured notes issued by Zohar collateralized debt obligation (“CDO”) 2003-1, Limited and Zohar II 2005-1 CDO (collectively, the “Zohar Claims Payments”), and the exposure in its remaining insured portfolio, which could deteriorate and result in significant additional loss reserves and claim payments, including claims on insured exposures that in some cases may require large bullet payments.

In July of 2019, MBIA Insurance Corporation consummated a financing facility (the “Refinanced Facility”) between MZ Funding LLC (“MZ Funding”) and certain purchasers, pursuant to which the purchasers or their affiliates (collectively, the “Senior Lenders”), agreed to refinance the outstanding insured senior notes of MZ Funding, and MBIA Inc. received amended subordinated notes of MZ Funding. In connection with the Refinanced Facility, the Senior Lenders purchased new senior notes issued by MZ Funding with an aggregate principal amount of $278 million. During 2021, MBIA Corp. repaid in full the outstanding amount of the insured senior notes and in April of 2022, the remaining subordinated notes of MZ Funding matured and MBIA Corp. repaid in full. The Refinanced Facility is described in more detail in “Note 10: Debt” in the Notes to Consolidated Financial Statements of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 and in the “Liquidity and Capital Resources” section in Part I, Item 2 of this Form 10-Q.

MBIA Insurance Corporation has anticipated that it would receive substantial recoveries on the loans made to, and equity interests in, companies that, until late March of 2020, were purportedly controlled and managed by the sponsor and former collateral manager of the Zohar CDOs (collectively, the “Zohar Collateral”). Since March of 2018 MBIA Corp. had been pursuing those recoveries in a Delaware bankruptcy proceeding filed by the Zohar CDOs. Pursuant to a plan of liquidation that became effective in August of 2022, all remaining Zohar collateral was distributed to MBIA Corp. in the form of interests in certain asset recovery entities, which will be managed by a special manager. There still remains significant uncertainty with respect to the realizable value of the remaining loans and equity interests that formerly constituted the Zohar Collateral and that comprise the assets of the asset recovery entities. Further, as the monetization of these assets unfolds in coordination with the special manager of the asset recovery entities and the directors and managers in place at the portfolio companies, and new information concerning the financial condition of the portfolio companies is disclosed, the Company will continue to revise its expectations for recoveries.

Filed Nov 2, 2022.
Source: SEC EDGAR, the filing index for accession 0001193125-22-275889. Last ingested by Listed: Nov 4, 2026, 17:36 ET. No prices; not investment advice.