Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2025

Note 6: Fair Value of Financial Instruments

Fair Value Measurement

Financial Assets and Liabilities

Financial assets held by the Company primarily consist of investments in debt and equity securities and loans receivables at fair value. Financial liabilities issued by the Company primarily consist of debt issued for general corporate purposes within its corporate segment, medium-term notes ("MTNs"), investment agreements, and debt issued by consolidated VIEs.

Valuation Techniques

Valuation techniques for financial instruments measured at fair value are described below.

Fixed-Maturity Securities Held as Available-For-Sale, Investments Carried at Fair Value and Short-term Investments

These investments include investments in U.S. Treasury and government agencies, state and municipal bonds, foreign governments, corporate obligations, mortgage-backed securities ("MBS"), asset-backed securities, money market securities, equity investments and loans carried at fair value.

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Note 6: Fair Value of Financial Instruments (continued)

Substantially all of these investments are valued based on recently executed transaction prices or quoted market prices by independent third parties, including pricing services and brokers. When quoted market prices are not available, fair value is generally determined using quoted prices of similar investments or a valuation model based on observable and unobservable inputs. Inputs vary depending on the type of investment. Observable inputs include contractual cash flows, interest rate yield curves, credit default swap (“CDS”) spreads, prepayment and volatility scores, diversity scores, cross-currency basis index spreads, and credit spreads for structures similar to the financial instrument in terms of issuer, maturity and seniority. Unobservable inputs include cash flow projections, the value of any credit enhancement and currently for certain equity investments, a discount rate, EBITDA multiple, and EBITDA royalty share.

Investments based on quoted market prices of identical investments in active markets are classified as Level 1 of the fair value hierarchy. Level 1 investments generally consist of U.S. Treasury and government agency, money market securities and certain equity investments. Quoted market prices of investments in less active markets, as well as investments which are valued based on other than quoted prices for which the inputs are observable, such as interest rate yield curves, are categorized in Level 2 of the fair value hierarchy. Investments that contain significant inputs that are not observable are categorized as Level 3.

Cash and Cash Equivalents

The carrying amounts of cash and cash equivalents approximate fair value due to the short-term nature and credit worthiness of these instruments and are categorized in Level 1 of the fair value hierarchy.

Variable Interest Entity Loans Receivable at Fair Value

Loans receivable at fair value are assets held by a consolidated VIE consisting of residential mortgage loans and are categorized in Level 3 of the fair value hierarchy. Fair values of residential mortgage loans are determined using quoted prices for similar securities, adjusted for the fair values of the financial guarantees provided by MBIA Corp. on the related MBS. The fair values of the financial guarantees consider expected claim payments, net of recoveries, under MBIA Corp.’s policies.

Medium-term Notes at Fair Value

The fair values of certain MTNs are based on quoted market prices provided by third-party sources, where available. When quoted market prices are not available, the Company applies a matrix pricing grid to determine fair value based on the quoted market prices received for similar instruments and considering the MTNs’ stated maturity and interest rate. Nonperformance risk is included in the quoted market prices and the matrix pricing grid. MTNs are categorized in Level 3 of the fair value hierarchy and do not include accrued interest.

Variable Interest Entity Debt

The fair values of VIE debt are determined based on recently executed transaction prices or quoted prices where observable. When position-specific quoted prices are not observable, fair values are based on quoted prices of similar securities. Fair values based on quoted prices of similar securities may be adjusted for factors unique to the securities, including any credit enhancement. Observable inputs include interest rate yield curves, bond spreads of similar securities and MBIA Corp.’s CDS spreads. Unobservable inputs include the value of any credit enhancement. VIE debt are categorized in Level 3 of the fair value hierarchy based on the lowest level input that is significant to the fair value measurement in its entirety.

Derivatives

A VIE consolidated by the Company entered into a derivative instrument consisting of a cross currency swap that as of June 30, 2025 and December 31, 2024 had outstanding notional amounts of $30 million and $36 million, respectively. The cross currency swap was entered into to manage the variability in cash flows resulting from fluctuations in foreign currency rates. The fair value of the VIE derivative was determined based on the valuation provided by an independent third-party, which is included in “Liabilities of consolidated variable interest entities – Derivative liabilities” on the Company’s consolidated balance sheets. As the significant inputs are unobservable, the derivative contract is categorized in Level 3 of the fair value hierarchy.

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Note 6: Fair Value of Financial Instruments (continued)

Significant Unobservable Inputs

The following tables provide quantitative information regarding the significant unobservable inputs used by the Company for assets measured at fair value on a recurring basis as of June 30, 2025 and December 31, 2024:


		Fair Value as of				Range
		June 30,				(Weighted
In millions		2025		Valuation Techniques	Unobservable Input	Average)
Assets:
	Equity Investments	$	52	Discounted cash flow	Discount rate (1)
					EBITDA multiple (1)
				Type certificate	Discount rate (1)
					EBITDA royalty share (1)
	Loans carried at fair value		15	Discounted cash flow	Discount rate (1)
Assets of consolidated VIEs:
	Loans receivable at fair value		33	Market prices of similar liabilities adjusted for financial guarantees provided to VIE obligations	Impact of financial guarantee	5% - 5% (5%) (2)

(1) - Ranges for discount rate, EBITDA multiple and EBITDA royalty share are not meaningful.

(2) - Weighted average represents the total MBIA guarantees as a percentage of total instrument fair value.


		Fair Value as of				Range
		December 31,				(Weighted
In millions		2024		Valuation Techniques	Unobservable Input	Average)
Assets:
	Equity Investments	$	52	Discounted cash flow	Discount rate (1)
					EBITDA multiple (1)
				Type certificate	Discount rate (1)
					EBITDA royalty share (1)
	Loans carried at fair value		15	Discounted cash flow	Discount rate (1)
Assets of consolidated VIEs:
	Loans receivable at fair value		28	Market prices of similar liabilities adjusted for financial guarantees provided to VIE obligations	Impact of financial guarantee	27% - 27% (27%) (2)

(1) - Ranges for discount rate, EBITDA multiples, EBITDA royalty share are not meaningful.

(2) - Weighted average represents the total MBIA guarantees as a percentage of total instrument fair value.

Sensitivity of Significant Unobservable Inputs

The significant unobservable inputs used in the fair value measurement of the Company’s equity investments at fair value are the discount rate, EBITDA multiple and EBITDA royalty share. The fair value of equity investments is determined as the mid-point of a range of valuation scenarios. If there had been lower or higher EBITDA multiple or EBITDA royalty share, the value of equity investments would have been lower or higher, respectively. If there had been a lower or higher discount rate, the value of equity investments would have been higher or lower, respectively.

The significant unobservable input used in the fair value measurement of the loans carried at fair value is the discount rate. The loans carried at fair value is determined by discounting cash flows. The discount rate includes the credit spread which primarily reflects the credit quality of the obligor. If there had been a lower or higher discount rate, the value of loans carried at fair value would have been higher or lower, respectively.

The significant unobservable input used in the fair value measurement of the Company’s residential loans receivable at fair value of consolidated VIEs is the impact of the financial guarantee. The fair value of residential loans receivable is calculated by subtracting the value of the financial guarantee from the market value of similar instruments to that of the VIE liabilities. The value of a financial guarantee is estimated by the Company as the present value of expected cash payments, net of recoveries, under the policy. If there had been a lower expected cash flow on the underlying loans receivable of the VIE, the value of the financial guarantee provided by the Company under the insurance policy would have been higher. This would have resulted in a lower fair value of the residential loans receivable in relation to the obligations of the VIE.

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Note 6: Fair Value of Financial Instruments (continued)

Fair Value Measurements

The following tables present the fair value of the Company’s assets (including short-term investments) and liabilities measured and reported at fair value on a recurring basis as of June 30, 2025 and December 31, 2024:


				Fair Value Measurements at Reporting Date Using
				Quoted Prices in		Significant
				Active Markets		Other		Significant
				for Identical		Observable		Unobservable			Balance as of
				Assets		Inputs		Inputs			June 30,
In millions				(Level 1)		(Level 2)		(Level 3)			2025
Assets:
Fixed-maturity investments:
	U.S. Treasury and government agency			$	524	$	-	$	-		$	524
	State and municipal bonds				-		99		-			99
	Foreign governments				-		5		-			5
	Corporate obligations				-		386		16	(1)		402
	Mortgage-backed securities:
		Residential mortgage-backed agency			-		117		-			117
		Residential mortgage-backed non-agency			-		15		-			15
		Commercial mortgage-backed			-		19		-			19
	Asset-backed securities:
		Collateralized debt obligations			-		61		-			61
		Other asset-backed			-		146		-			146
			Total fixed-maturity investments		524		848		16			1,388
Money market securities					49		-		-			49
Equity investments					41		6		52			109	(2)
Cash and cash equivalents					165		-		-			165
Assets of consolidated VIEs:
	Cash				2		-		-			2
	Loans receivable at fair value:
		Residential loans receivable			-		-		33			33
Total assets				$	781	$	854	$	101		$	1,746
Liabilities:
Medium-term notes				$	-	$	-	$	38		$	38
Other liabilities:
	Insured credit derivatives				-		1		-			1
Liabilities of consolidated VIEs:
	Variable interest entity notes				-		-		26			26
	Currency derivatives				-		-		10			10
Total liabilities				$	-	$	1	$	74		$	75

(1) - Includes loans carried at fair value of $15 million.

(2) - Includes $10 million of an exchange-traded bond fund that seeks to track the investment results of an index composed of U.S. dollar-denominated, high yield corporate bonds. The fund is measured at fair value by applying the net asset value per share practical expedient, and is not required to be classified in the fair value hierarchy.

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Note 6: Fair Value of Financial Instruments (continued)


				Fair Value Measurements at Reporting Date Using
				Quoted Prices in		Significant
				Active Markets		Other		Significant
				for Identical		Observable		Unobservable			Balance as of
				Assets		Inputs		Inputs			December 31,
In millions				(Level 1)		(Level 2)		(Level 3)			2024
Assets:
Fixed-maturity investments:
	U.S. Treasury and government agency			$	481	$	-	$	-		$	481
	State and municipal bonds				-		102		-			102
	Foreign governments				-		10		-			10
	Corporate obligations				-		435		16	(1)		451
	Mortgage-backed securities:
		Residential mortgage-backed agency			-		111		-			111
		Residential mortgage-backed non-agency			-		41		-			41
		Commercial mortgage-backed			-		7		-			7
	Asset-backed securities:
		Collateralized debt obligations			-		101		-			101
		Other asset-backed			-		52		-			52
			Total fixed-maturity investments		481		859		16			1,356
Money market securities					181		-		-			181
Equity investments					48		7		52			117	(2)
Cash and cash equivalents					84		-		-			84
Assets of consolidated VIEs:
	Cash				3		-		-			3
	Loans receivable at fair value:
		Residential loans receivable			-		-		28			28
Total assets				$	797	$	866	$	96		$	1,769
Liabilities:
Medium-term notes				$	-	$	-	$	35		$	35
Other liabilities:
	Insured credit derivatives				-		1		-			1
Liabilities of consolidated VIEs:
	Variable interest entity notes				-		-		31			31
	Currency derivatives				-		-		6			6
Total liabilities				$	-	$	1	$	72		$	73

(1) - Includes loans carried at fair value of $15 million.

Level 3 assets at fair value as of June 30, 2025 and December 31, 2024 represented approximately 6% and 5%, respectively, of total assets measured at fair value. Level 3 liabilities at fair value as of June 30, 2025 and December 31, 2024 represented approximately 99% of total liabilities measured at fair value.

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Note 6: Fair Value of Financial Instruments (continued)

The following tables present the fair values and carrying values of the Company’s assets and liabilities that are disclosed at fair value but not reported at fair value on the Company’s consolidated balance sheets as of June 30, 2025 and December 31, 2024. The majority of the financial assets and liabilities that the Company requires fair value reporting or disclosures are valued based on the Company’s or a third-party’s estimate of discounted cash flow model estimates, or quoted market values for identical or similar products.


		Fair Value Measurements at Reporting Date Using
		Quoted Prices in		Significant		Significant		Fair Value		Carry Value
		Active Markets for		Other Observable		Unobservable		Balance as of		Balance as of
		Identical Assets		Inputs		Inputs		June 30,		June 30,
In millions		(Level 1)		(Level 2)		(Level 3)		2025		2025
Assets:
	Other investments	$	-	$	-	$	1	$	1	$	1
Total assets		$	-	$	-	$	1	$	1	$	1
Liabilities:
	Long-term debt	$	-	$	311	$	-	$	311	$	2,814
	Medium-term notes		-		-		225		225		416	(1)
	Investment agreements		-		-		218		218		203
Liabilities of consolidated VIEs:
	Variable interest entity loans payable		-		-		6		6		6
Total liabilities		$	-	$	311	$	449	$	760	$	3,439
Financial Guarantees:
	Gross liability (recoverable)	$	-	$	-	$	758	$	758	$	527
	Ceded recoverable (liability)		-		-		17		17		17

(1) - The carry value includes the complex interest calculations embedded in an MTN elected to be accounted for as a separate derivative that is reported together with the host contract. As of June 30, 2025, the Company had an embedded derivative liability of $1 million.


		Fair Value Measurements at Reporting Date Using
		Quoted Prices in		Significant		Significant		Fair Value		Carry Value
		Active Markets for		Other Observable		Unobservable		Balance as of		Balance as of
		Identical Assets		Inputs		Inputs		December 31,		December 31,
In millions		(Level 1)		(Level 2)		(Level 3)		2024		2024
Assets:
	Other investments	$	-	$	-	$	1	$	1	$	1
Total assets		$	-	$	-	$	1	$	1	$	1
Liabilities:
	Long-term debt	$	-	$	305	$	-	$	305	$	2,741
	Medium-term notes		-		-		217		217		403	(1)
	Investment agreements		-		-		217		217		204
Liabilities of consolidated VIEs:
	Variable interest entity loans payable		-		-		12		12		12
Total liabilities		$	-	$	305	$	446	$	751	$	3,360
Financial Guarantees:
	Gross liability (recoverable)	$	-	$	-	$	764	$	764	$	540
	Ceded recoverable (liability)		-		-		19		19		18

(1) - The carry value includes the complex interest calculations embedded in an MTN elected to be accounted for as a separate derivative that is reported together with the host contract. As of December 31, 2024, the Company had an embedded derivative liability of $2 million.

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Note 6: Fair Value of Financial Instruments (continued)

The following tables present information about changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the three months ended June 30, 2025 and 2024:

Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Three Months Ended June 30, 2025


																							Change in		Change in
																							Unrealized		Unrealized
																							Gains		Gains
																							(Losses) for		(Losses) for
																							the Period		the Period
																							Included in		Included in
			Total																				Earnings		OCI
			Gains /		Unrealized																		for Assets		for Assets
			(Losses)		Gains /																		still held		still held
	Balance,		Included		(Losses)											Transfers		Transfers					as of		as of
	Beginning		in		Included											into		out of		Ending			June 30,		June 30,
In millions	of Period		Earnings		in OCI(1)		Purchases		Issuances		Settlements			Sales		Level 3		Level 3		Balance			2025		2025(1)
Assets:
Corporate obligations	$	15	$	-	$	-	$	1	$	-	$	-		$	-	$	-	$	-	$	16	(3)	$	-	$	-
Equity investments		52		-		-		-		-		-			-		-		-		52			-		-
Assets of consolidated VIEs:
Loans receivable - residential		30		4		-		-		-		(1	)		-		-		-		33			3		-
Total assets	$	97	$	4	$	-	$	1	$	-	$	(1	)	$	-	$	-	$	-	$	101		$	3	$	-


																							Change in		Change in
																							Unrealized		Unrealized
																							(Gains)		(Gains)
																							Losses for		Losses for
																							the Period		the Period
																							Included in		Included in
			Total		Unrealized																		Earnings for		OCI for
			(Gains) /		(Gains) /																		Liabilities		Liabilities
			Losses		Losses																		still held		still held
	Balance,		Included		Included												Transfers		Transfers				as of		as of
	Beginning		in		in												into		out of		Ending		June 30,		June 30,
In millions	of Period		Earnings		in OCI(2)			Purchases		Issuances		Settlements			Sales		Level 3		Level 3		Balance		2025		2025(2)
Liabilities:
Medium-term notes	$	37	$	3	$	(2	)	$	-	$	-	$	-		$	-	$	-	$	-	$	38	$	3	$	(2	)
Liabilities of consolidated VIEs:
VIE notes		27		1		-			-		-		(2	)		-		-		-		26		-		-
Currency derivatives		6		4		-			-		-		-			-		-		-		10		4		-
Total liabilities	$	70	$	8	$	(2	)	$	-	$	-	$	(2	)	$	-	$	-	$	-	$	74	$	7	$	(2	)

(1) - Reported within the "Unrealized gains (losses) on available-for-sale securities" on the Company's consolidated statements of comprehensive income (loss).

(2) - Reported within the "Instrument-specific credit risk of liabilities measured at fair value" on the Company's consolidated statements of comprehensive income (loss).

(3) - Includes loans carried at fair value of $15 million.

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Note 6: Fair Value of Financial Instruments (continued)

Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Three Months Ended June 30, 2024


																									Change in			Change in
																									Unrealized			Unrealized
																									Gains			Gains
																									(Losses) for			(Losses) for
																									the Period			the Period
																									Included in			Included in
			Total																						Earnings for			OCI for
			Gains /			Unrealized																			Assets			Assets
			(Losses)			Gains /																			still held			still held
	Balance,		Included			(Losses)												Transfers		Transfers					as of			as of
	Beginning		in			Included												into		out of		Ending			June 30,			June 30,
In millions	of Period		Earnings			in OCI(1)		Purchases		Issuances		Settlements			Sales			Level 3		Level 3		Balance			2024			2024(1)
Assets:
Corporate obligations	$	7	$	(3	)	$	-	$	6	$	-	$	-		$	-		$	-	$	-	$	10	(3)	$	(2	)	$	-
Equity investments		102		(57	)		-		-		-		-			-			-		-		45			(57	)		-
Assets of consolidated VIEs:
Loans receivable- residential		36		(4	)		-		-		-		(1	)		-			-		-		31			(5	)		-
Other		2		-			-		-		-		-			(2	)		-		-		-			-			-
Total assets	$	147	$	(64	)	$	-	$	6	$	-	$	(1	)	$	(2	)	$	-	$	-	$	86		$	(64	)	$	-


																									Change in			Change in
																									Unrealized			Unrealized
																									(Gains)			(Gains)
																									Losses for			Losses for
																									the Period			the Period
																									Included in			Included in
			Total																						Earnings for			OCI for
			(Gains) /			Unrealized																			Liabilities			Liabilities
			Losses			(Gains) /																			still held			still held
	Balance,		Included			Losses													Transfers		Transfers				as of			as of
	Beginning		in			Included													into		out of		Ending		June 30,			June 30,
In millions	of Period		Earnings			in OCI(2)			Purchases		Issuances		Settlements			Sales			Level 3		Level 3		Balance		2024			2024(2)
Liabilities:
Medium-term notes	$	36	$	(4	)	$	4		$	-	$	-	$	-		$	-		$	-	$	-	$	36	$	(4	)	$	4
Liabilities of consolidated VIEs:
VIE notes		46		14			(7	)		-		-		(2	)		(20	)		-		-		31		-			-
Currency derivatives		15		(6	)		-			-		-		-			-			-		-		9		(6	)		-
Total liabilities	$	97	$	4		$	(3	)	$	-	$	-	$	(2	)	$	(20	)	$	-	$	-	$	76	$	(10	)	$	4

(1) - Reported within the "Unrealized gains (losses) on available-for-sale securities" on the Company's consolidated statements of comprehensive income (loss).

(2) - Reported within the "Instrument-specific credit risk of liabilities measured at fair value" on the Company's consolidated statements of comprehensive income (loss).

(3) - Includes loans carried at fair value of $9 million.

For the three months ended June 30, 2024, sales include the impact of the deconsolidation of VIEs. Refer to “Note 4: Variable Interest Entities” for additional information about the deconsolidation of VIEs.

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Note 6: Fair Value of Financial Instruments (continued)

The following tables present information about changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the six months ended June 30, 2025 and 2024:

Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Six Months Ended June 30, 2025


																								Change in			Change in
																								Unrealized			Unrealized
																								Gains			Gains
																								(Losses) for			(Losses) for
																								the Period			the Period
																								Included in			Included in
			Total																					Earnings for			OCI for
			Gains /			Unrealized																		Assets			Assets
			(Losses)			Gains /																		still held			still held
	Balance		Included			(Losses)											Transfers		Transfers					as of			as of
	Beginning		in			Included											into		out of		Ending			June 30,			June 30,
In millions	of Year		Earnings			in OCI(1)		Purchases		Issuances		Settlements			Sales		Level 3		Level 3		Balance			2025			2025(1)
Assets:
Corporate obligations	$	16	$	(1	)	$	-	$	1	$	-	$	-		$	-	$	-	$	-	$	16	(3)	$	(1	)	$	-
Equity investments		52		-			-		-		-		-			-		-		-		52			-			-
Assets of consolidated VIEs:
Loans receivable - residential		28		7			-		-		-		(2	)		-		-		-		33			5			-
Total assets	$	96	$	6		$	-	$	1	$	-	$	(2	)	$	-	$	-	$	-	$	101		$	4		$	-


																							Change in		Change in
																							Unrealized		Unrealized
																							(Gains)		(Gains)
																							Losses for		Losses for
																							the Period		the Period
																							Included in		Included in
			Total		Unrealized																		Earnings for		OCI for
			(Gains) /		(Gains) /																		Liabilities		Liabilities
			Losses		Losses																		still held		still held
	Balance,		Included		Included in												Transfers		Transfers				as of		as of
	Beginning		in		Credit Risk												into		out of		Ending		June 30,		June 30,
In millions	of Year		Earnings		in OCI(2)			Purchases		Issuances		Settlements			Sales		Level 3		Level 3		Balance		2025		2025(2)
Liabilities:
Medium-term notes	$	35	$	5	$	(2	)	$	-	$	-	$	-		$	-	$	-	$	-	$	38	$	5	$	(2	)
Liabilities of consolidated VIEs:
VIE notes		31		3		-			-		-		(8	)		-		-		-		26		1		-
Currency derivatives		6		4		-			-		-		-			-		-		-		10		4		-
Total liabilities	$	72	$	12	$	(2	)	$	-	$	-	$	(8	)	$	-	$	-	$	-	$	74	$	10	$	(2	)

(1) - Reported within the "Unrealized gains (losses) on available-for-sale securities" on the Company's consolidated statements of comprehensive income (loss).

(2) - Reported within the "Instrument-specific credit risk of liabilities measured at fair value" on the Company's consolidated statements of comprehensive income (loss).

(3) - Includes loans carried at fair value of $15 million.

Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Six Months Ended June 30, 2024


																									Change in			Change in
																									Unrealized			Unrealized
																									Gains			Gains
																									(Losses) for			(Losses) for
																									the Period			the Period
																									Included in			Included in
			Total																						Earnings for			OCI for
			Gains /			Unrealized																			Assets			Assets
			(Losses)			Gains /																			still held			still held
	Balance,		Included			(Losses)												Transfers		Transfers					as of			as of
	Beginning		in			Included												into		out of		Ending			June 30,			June 30,
In millions	of Year		Earnings			in OCI(1)		Purchases		Issuances		Settlements			Sales			Level 3		Level 3		Balance			2024			2024(1)
Assets:
Corporate obligations	$	1	$	(3	)	$	-	$	12	$	-	$	-		$	-		$	-	$	-	$	10	(3)	$	-		$	-
Equity investments		108		(63	)		-		-		-		-			-			-		-		45			(63	)		-
Assets of consolidated VIEs:
Loans receivable - residential		35		(2	)		-		-		-		(2	)		-			-		-		31			(4	)		-
Other		2		-			-		-		-		-			(2	)		-		-		-			-			-
Total assets	$	146	$	(68	)	$	-	$	12	$	-	$	(2	)	$	(2	)	$	-	$	-	$	86		$	(67	)	$	-

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Note 6: Fair Value of Financial Instruments (continued)


																									Change in			Change in
																									Unrealized			Unrealized
																									(Gains)			(Gains)
																									Losses for			Losses for
																									the Period			the Period
																									Included in			Included in
			Total																						Earnings for			OCI for
			(Gains) /			Unrealized																			Liabilities			Liabilities
			Losses			(Gains) /																			still held			still held
	Balance,		Included			Losses													Transfers		Transfers				as of			as of
	Beginning		in			Included													into		out of		Ending		June 30,			June 30,
In millions	of Year		Earnings			in OCI(2)			Purchases		Issuances		Settlements			Sales			Level 3		Level 3		Balance		2024			2024(2)
Liabilities:
Medium-term notes	$	40	$	(6	)	$	2		$	-	$	-	$	-		$	-		$	-	$	-	$	36	$	(6	)	$	2
Liabilities of consolidated VIEs:
VIE notes		78		39			(27	)		-		-		(39	)		(20	)		-		-		31		-			-
Currency derivatives		14		(5	)		-			-		-		-			-			-		-		9		(5	)		-
Total liabilities	$	132	$	28		$	(25	)	$	-	$	-	$	(39	)	$	(20	)	$	-	$	-	$	76	$	(11	)	$	2

(1) - Reported within the "Unrealized gains (losses) on available-for-sale securities" on the Company's consolidated statements of comprehensive income (loss).

(2) - Reported within the "Instrument-specific credit risk of liabilities measured at fair value" on the Company's consolidated statements of comprehensive income (loss).

(3) - Includes loans carried at fair value of $9 million.

For the six months ended June 30, 2024, sales include the impact of the deconsolidation of VIEs. Refer to “Note 4: Variable Interest Entities” for additional information about the deconsolidation of VIEs.

Gains and losses (realized and unrealized) included in earnings related to Level 3 assets and liabilities for the three and six months ended June 30, 2025 and 2024 are reported on the Company’s consolidated statements of operations as follows:


		Three Months Ended June 30, 2025						Three Months Ended June 30, 2024
					Change in						Change in
					Unrealized						Unrealized
					Gains (Losses)						Gains (Losses)
					for the						for the
					Period Included						Period Included
					in Earnings						in Earnings
					for Assets						for Assets
					and						and
		Total Gains			Liabilities still			Total Gains			Liabilities still
		(Losses)			held as of			(Losses)			held as of
		Included			June 30,			Included			June 30,
In millions		in Earnings			2025			in Earnings			2024
Revenues:
	Net gains (losses) on financial instruments at fair value and foreign exchange	$	(3	)	$	(3	)	$	(56	)	$	(55	)
	Revenues of consolidated VIEs (1)		(1	)		(1	)		(12	)		1
Total		$	(4	)	$	(4	)	$	(68	)	$	(54	)

(1) - Reported within "Net gains (losses) on financial instruments at fair value and foreign exchange-VIE" and "Other net realized gains (losses)-VIE" on the Company's consolidated statements of operations.

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Note 6: Fair Value of Financial Instruments (continued)


		Six Months Ended June 30, 2025						Six Months Ended June 30, 2024
					Change in						Change in
					Unrealized						Unrealized
					Gains (Losses)						Gains (Losses)
					for the						for the
					Period Included						Period Included
					in Earnings						in Earnings
					for Assets						for Assets
					and						and
		Total Gains			Liabilities still			Total Gains			Liabilities still
		(Losses)			held as of			(Losses)			held as of
		Included			June 30,			Included			June 30,
In millions		in Earnings			2025			in Earnings			2024
Revenues:
	Net gains (losses) on financial instruments at fair value and foreign exchange	$	(6	)	$	(6	)	$	(60	)	$	(57	)
	Revenues of consolidated VIEs (1)		-			-			(36	)		1
Total		$	(6	)	$	(6	)	$	(96	)	$	(56	)

Derivative Instruments

The Company's derivatives are comprised of insured swaps, primarily consisting of insured interest rate swaps and inflation-linked swaps related to its insured debt issuance, embedded derivatives containing the complex interest rate calculations and a cross currency swap entered into by a consolidated VIE. The following tables present the effects of derivative instruments on the Company's consolidated statements of operations for the three and six months ended June 30, 2025 and 2024:


In millions
Derivatives Not Designated		Three Months Ended June 30,
as Hedging Instruments	Location of Gain (Loss) Recognized in Income on Derivative	2025			2024
Currency swaps-VIE	Net gains (losses) on financial instruments at fair value and foreign exchange-VIE	$	(4	)	$	6
Total		$	(4	)	$	6


In millions
Derivatives Not Designated		Six Months Ended June 30,
as Hedging Instruments	Location of Gain (Loss) Recognized in Income on Derivative	2025				2024
Currency swaps-VIE	Net gains (losses) on financial instruments at fair value and foreign exchange-VIE		$	(4	)		$	5
Total			$	(4	)		$	5

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Note 6: Fair Value of Financial Instruments (continued)

Fair Value Option

The Company elected to record at fair value certain financial instruments, including certain equity investments and financial instruments that are consolidated in connection with the adoption of the accounting guidance for consolidation of VIEs.

The following table presents the gains and (losses) included in the Company's consolidated statements of operations for the three and six months ended June 30, 2025 and 2024 for financial instruments for which the fair value option was elected:


		Three Months Ended June 30,						Six Months Ended June 30,
In millions		2025			2024			2025			2024
Investments carried at fair value (1)		$	1		$	(60	)	$	-		$	(63	)
Fixed-maturity securities held at fair value-VIE (2)			-			(1	)		-			(1	)
Loans receivable at fair value:
	Residential mortgage loans (2)		4			(4	)		7			(2	)
Medium-term notes (1)			(3	)		4			(5	)		6
Variable interest entity notes (2)			(1	)		(14	)		(3	)		(39	)

(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 "Net gains (losses) on financial instruments at fair value and foreign exchange-VIE" and/or "Other net realized gains (losses)-VIE" on the Company's consolidated statements of operations.

The following table reflects the difference between the aggregate fair value and the aggregate remaining contractual principal balance outstanding as of June 30, 2025 and December 31, 2024 for loans and notes for which the fair value option was elected:


		As of June 30, 2025						As of December 31, 2024
		Contractual						Contractual
		Outstanding		Fair				Outstanding		Fair
In millions		Principal		Value		Difference		Principal		Value		Difference
Loans receivable at fair value:
	Residential mortgage loans - current	$	13	$	13	$	-	$	12	$	12	$	-
	Residential mortgage loans (90 days or more past due)		53		20		33		48		16		32
	Corporate loans - current		18		15		3		16		15		1
Total loans receivable at fair value		$	84	$	48	$	36	$	76	$	43	$	33
Variable interest entity notes		$	40	$	26	$	14	$	45	$	31	$	14
Medium-term notes		$	59	$	38	$	21	$	52	$	35	$	17

The differences between the contractual outstanding principal and the fair values on residential mortgage loans receivable, VIE notes and MTNs in the preceding table are primarily attributable to credit risk. This is due to the high rate of defaults on loans (90 days or more past due), the collateral supporting the VIE notes and the nonperformance risk of the Company on its MTNs, all of which resulted in depressed pricing of the financial instruments.

Instrument-Specific Credit Risk of Liabilities Elected Under the Fair Value Option

As of June 30, 2025 and December 31, 2024, the cumulative changes in instrument-specific credit risk of liabilities elected under the fair value option were gains of $29 million and $27 million, respectively, reported in AOCI on the Company’s consolidated balance sheets. Changes in value attributable to instrument-specific credit risk were derived principally from changes in the Company’s credit spread. For liabilities of VIEs, additional adjustments to instrument-specific credit risk are required, which is determined by an analysis of deal specific performance of collateral that support these liabilities. During the three and six months ended June 30, 2025 the portions of instrument-specific credit risk included in AOCI that was recognized in earnings due to settlement of liabilities were not material. During the three and six months ended June 30, 2024 the portions of instrument-specific credit risk included in AOCI that was recognized in earnings due to settlement of liabilities was $9 million and $28 million, respectively.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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+ Details