Net investment income for the structured finance and international insurance segment was $4 million in the second quarter of 2013, compared with $6 million in the comparable period of 2012. The drop in net investment income was primarily due to declining average asset balances in 2013 due to sales of investments to fund claim and commutation payments. Net investment income in both periods was impacted by MBIA Corp.’s decision to enhance its liquidity by holding a greater proportion of cash and short-term investments.

Fees and reimbursements were $23 million in the second quarter, down 44% from $41 million in the second quarter of 2012, reflecting certain one-time work, waiver and consent fees in the second quarter of 2012 that did not recur in the second quarter of 2013. Fees in the second quarter included $21 million representing the amortization of ceding commission income received by MBIA Corp. from National in connection with the Company's Transformation.

In the second quarter of 2013, the structured finance and international insurance segment recorded $182 million of net losses on the fair value of insured derivatives compared with $775 million of net gains for the same period of 2012. Realized losses on insured derivatives totaled $1.5 billion in the second quarter of 2013 and $428 million in the second quarter of 2012, representing net payments driven by commutation activity. Unrealized gains on insured derivatives of $1.3 billion in the second quarter of 2013 were principally associated with the reversal of unrealized losses from commutations, partially offset by the effects of MBIA Corp.’s nonperformance risk on its derivative liabilities. Unrealized gains on insured derivatives of $1.2 billion in the second quarter of 2012 were principally associated with the reversal of unrealized losses from commutations and the effects of MBIA’s nonperformance risk on its derivative liabilities.

Net gains on financial instruments at fair value and foreign exchange totaled $12 million in the second quarter of 2013, as gains on the sale of investments were partially offset by foreign exchange losses. Net losses on financial instruments at fair value and foreign exchange of $14 million in the second quarter of 2012 were almost entirely from foreign exchange losses.

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