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Variable Interest Entities | 9 Months Ended
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Sep. 30, 2011
Variable Interest Entities [Abstract] |
Variable Interest Entities | Note 4: Variable Interest Entities Structured Finance and International Insurance Through MBIA's structured finance and international insurance segment, the Company provides credit protection to issuers of obligations that may involve issuer-sponsored special purpose entities ("SPEs"). An SPE may be considered a VIE to the extent the SPE's total equity at risk is not sufficient to permit the SPE to finance its activities without additional subordinated financial support or its equity investors lack any one of the following characteristics (i) the power to direct the activities of the SPE that most significantly impact the entity's economic performance or (ii) the obligation to absorb the expected losses of the entity or the right to receive the expected residual returns of the entity. A holder of a variable interest or interests in a VIE is required to assess whether it has a controlling financial interest, and thus is required to consolidate the entity as primary beneficiary. An assessment of a controlling financial interest identifies the primary beneficiary as the variable interest holder that has both of the following characteristics (i) the power to direct the activities of the VIE that most significantly impact the entity's economic performance and (ii) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. The primary beneficiary is required to consolidate the VIE. An ongoing reassessment of controlling financial interest is required to be performed based on any substantive changes in facts and circumstances involving the VIE and its variable interests. The Company evaluates issuer-sponsored SPEs initially to determine if an entity is a VIE, and is required to reconsider its initial determination if certain events occur. For all entities determined to be VIEs, MBIA performs an ongoing reassessment to determine whether its guarantee to provide credit protection on obligations issued by VIEs provides the Company with a controlling financial interest. Based on its ongoing reassessment of controlling financial interest, the Company determines whether a VIE is required to be consolidated or deconsolidated. The Company makes its determination for consolidation based on a qualitative assessment of the purpose and design of a VIE, the terms and characteristics of variable interests of an entity, and the risks a VIE is designed to create and pass through to holders of variable interests. The Company generally provides credit protection on obligations issued by VIEs, and holds certain contractual rights according to the purpose and design of a VIE. The Company may have the ability to direct certain activities of a VIE depending on facts and circumstances, including the occurrence of certain contingent events, and these activities may be considered the activities of a VIE that most significantly impact the entity's economic performance. The Company generally considers its guarantee of principal and interest payments of insured obligations, given nonperformance by a VIE, to be an obligation to absorb losses of the entity that could potentially be significant to the VIE. At the time the Company determines it has the ability to direct the activities of a VIE that most significantly impact the economic performance of the entity based on facts and circumstances, MBIA is deemed to have a controlling financial interest in the VIE and is required to consolidate the entity as primary beneficiary. The Company performs an ongoing reassessment of controlling financial interest that may result in consolidation or deconsolidation of any VIE. Wind-down Operations In its asset/liability products segment, the Company invests in obligations issued by issuer-sponsored SPEs which are included in fixed-maturity securities held as available-for-sale. The Company evaluates issuer-sponsored SPEs to determine if the entity is a VIE. For all entities determined to be VIEs, the Company evaluates whether its investment is determined to have both of the characteristics of a controlling financial interest in the VIE. The Company performs an ongoing reassessment of controlling financial interests in issuer-sponsored VIEs based on investments held. MBIA's wind-down operations do not have a controlling financial interest in any issuer-sponsored VIEs and is not the primary beneficiary of any issuer-sponsored VIEs. The Company's exposure to the aforementioned VIEs is limited to its investments in these entities. In the third quarter of 2011, the one VIE that the Company formed, sponsored and was the primary beneficiary, included in the asset/liability products segment, was dissolved and deconsolidated by the Company. The Company was the sole variable interest holder of the VIE and retained all the fixed-maturity securities, consisting of alternative A-paper ("Alt-A") non-agency RMBS securities, and recognized no gain or loss upon deconsolidation. In the conduit segment, the Company manages and administers two multi-seller conduit SPEs ("Conduits"). The Conduits invest primarily in debt securities and fund the investments through the issuance of VIE notes and long-term debt. The liabilities and certain of the assets of the Conduits are supported by credit enhancement provided through MBIA Corp. The Conduits were designed to provide issuers an efficient source of funding for issued obligations, and to provide an opportunity for MBIA Corp. to issue financial guarantee insurance policies. The Conduits are VIEs and are consolidated by the Company as primary beneficiary. Nonconsolidated VIEs The following tables present the total assets of nonconsolidated VIEs in which the Company holds a variable interest as of September 30, 2011 and December 31, 2010. The following tables present the Company's maximum exposure to loss for nonconsolidated VIEs as well as the value of the assets and liabilities the Company has recorded for its interest in these VIEs as of September 30, 2011 and December 31, 2010. The Company has aggregated nonconsolidated VIEs based on the underlying credit exposure of the insured obligation. The nature of the Company's variable interests in nonconsolidated VIEs is related to financial guarantees, insured credit default swaps ("CDS") and any investments in obligations issued by nonconsolidated VIEs.
|  | September 30, 2011 |
|  |  |  |  |  |  |  | Carrying Value of Assets |  |  | Carrying Value of Liabilities |
In millions |  | VIE Assets |  |  | Maximum Exposure to Loss |  |  | Investments (1) |  |  | Premiums Receivable (2) |  |  | Insurance Loss Recoverable (3) |  |  | Unearned Premium Revenue (4) |  |  | Loss and Loss Adjustment Expense Reserves (5) |  |  | Derivative Liabilities (6) |
Insurance: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Global structured finance: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Collateralized debt obligations |  | $ | 27,830 |  |  | $ | 15,690 |  |  | $ | 61 |  |  | $ | 66 |  |  | $ | - |  |  | $ | 57 |  |  | $ | - |  |  | $ | 122 |
Mortgage-backed residential |  |  | 49,725 |  |  |  | 16,537 |  |  |  | 63 |  |  |  | 88 |  |  |  | 2,505 |  |  |  | 87 |  |  |  | 469 |  |  |  | 4 |
Mortgage-backed commercial |  |  | 5,293 |  |  |  | 2,906 |  |  |  | - |  |  |  | 2 |  |  |  | - |  |  |  | 2 |  |  |  | - |  |  |  | - |
Consumer asset-backed |  |  | 8,396 |  |  |  | 4,854 |  |  |  | 17 |  |  |  | 27 |  |  |  | - |  |  |  | 26 |  |  |  | 30 |  |  |  | - |
Corporate asset-backed |  |  | 30,640 |  |  |  | 16,235 |  |  |  | 245 |  |  |  | 209 |  |  |  | 27 |  |  |  | 224 |  |  |  | - |  |  |  | 1 |
Total global structured finance |  | $ | 121,884 |  |  | $ | 56,222 |  |  | $ | 386 |  |  | $ | 392 |  |  | $ | 2,532 |  |  | $ | 396 |  |  | $ | 499 |  |  | $ | 127 |
Global public finance |  |  | 41,272 |  |  |  | 21,879 |  |  |  | - |  |  |  | 211 |  |  |  | - |  |  |  | 265 |  |  |  | - |  |  |  | - |
Total insurance |  | $ | 163,156 |  |  | $ | 78,101 |  |  | $ | 386 |  |  | $ | 603 |  |  | $ | 2,532 |  |  | $ | 661 |  |  | $ | 499 |  |  | $ | 127 |
(1) - Reported within "Investments" on MBIA's consolidated balance sheets. (2) - Reported within "Premiums receivable" on MBIA's consolidated balance sheets. (3) - Reported within "Insurance loss recoverable" on MBIA's consolidated balance sheets. (4) - Reported within "Unearned premium revenue" on MBIA's consolidated balance sheets. (5) - Reported within "Loss and loss adjustment expense reserves" on MBIA's consolidated balance sheets. (6) - Reported within "Derivative liabilities" on MBIA's consolidated balance sheets.
|  | December 31, 2010 |
|  |  |  |  |  |  |  | Carrying Value of Assets |  |  | Carrying Value of Liabilities |
In millions |  | VIE Assets |  |  | Maximum Exposure to Loss |  |  | Investments (1) |  |  | Premiums Receivable (2) |  |  | Insurance Loss Recoverable (3) |  |  | Unearned Premium Revenue (4) |  |  | Loss and Loss Adjustment Expense Reserves (5) |  |  | Derivative Liabilities (6) |
Insurance: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Global structured finance: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Collateralized debt obligations |  | $ | 30,628 |  |  | $ | 18,068 |  |  | $ | 126 |  |  | $ | 78 |  |  | $ | - |  |  | $ | 68 |  |  | $ | - |  |  | $ | 360 |
Mortgage-backed residential |  |  | 56,828 |  |  |  | 18,494 |  |  |  | 71 |  |  |  | 95 |  |  |  | 2,270 |  |  |  | 93 |  |  |  | 598 |  |  |  | 3 |
Mortgage-backed commercial |  |  | 5,547 |  |  |  | 3,138 |  |  |  | - |  |  |  | 2 |  |  |  | - |  |  |  | 2 |  |  |  | - |  |  |  | - |
Consumer asset-backed |  |  | 11,709 |  |  |  | 6,780 |  |  |  | 19 |  |  |  | 30 |  |  |  | - |  |  |  | 29 |  |  |  | - |  |  |  | - |
Corporate asset-backed |  |  | 42,380 |  |  |  | 22,468 |  |  |  | 246 |  |  |  | 325 |  |  |  | 5 |  |  |  | 340 |  |  |  | - |  |  |  | - |
Total global structured finance |  | $ | 147,092 |  |  | $ | 68,948 |  |  | $ | 462 |  |  | $ | 530 |  |  | $ | 2,275 |  |  | $ | 532 |  |  | $ | 598 |  |  | $ | 363 |
Global public finance |  |  | 42,370 |  |  |  | 21,201 |  |  |  | - |  |  |  | 225 |  |  |  | - |  |  |  | 280 |  |  |  | - |  |  |  | - |
Total insurance |  | $ | 189,462 |  |  | $ | 90,149 |  |  | $ | 462 |  |  | $ | 755 |  |  | $ | 2,275 |  |  | $ | 812 |  |  | $ | 598 |  |  | $ | 363 |
(1) - Reported within "Investments" on MBIA's consolidated balance sheets. (2) - Reported within "Premiums receivable" on MBIA's consolidated balance sheets. (3) - Reported within "Insurance loss recoverable" on MBIA's consolidated balance sheets. (4) - Reported within "Unearned premium revenue" on MBIA's consolidated balance sheets. (5) - Reported within "Loss and loss adjustment expense reserves" on MBIA's consolidated balance sheets. (6) - Reported within "Derivative liabilities" on MBIA's consolidated balance sheets. The Company's maximum exposure to loss as a result of its variable interests in nonconsolidated VIEs is represented by insurance in force. Insurance in force is the maximum future payments of principal and interest that may be required under commitments to make payments on insured obligations issued by nonconsolidated VIEs. Consolidated VIEs The carrying amounts of assets and liabilities of consolidated VIEs were $12.1 billion and $11.3 billion, respectively, as of September 30, 2011, and $14.1 billion and $13.1 billion, respectively, as of December 31, 2010. The carrying amounts of assets and liabilities are presented separately in "Assets of consolidated variable interest entities" and "Liabilities of consolidated variable interest entities" on the Company's consolidated balance sheets. Additional VIEs are consolidated or deconsolidated based on an ongoing reassessment of controlling financial interest, when events occur or circumstances arise, and whether the ability to exercise rights that constitute power to direct activities of any VIEs are present according to the design and characteristics of these entities. No gains or losses were recognized on initial consolidation of additional VIEs during the nine months ended September 30, 2011 and net realized losses of $74 million were recognized on initial consolidation of additional VIEs during the nine months ended September 30, 2010. Net realized gains related to the deconsolidation of VIEs were immaterial for the nine months ended September 30, 2011 and 2010. Holders of insured obligations of issuer-sponsored VIEs related to the Company's structured finance and international insurance segment do not have recourse to the general assets of MBIA. In the event of nonpayment of an insured obligation issued by a consolidated VIE, the Company is obligated to pay principal and interest, when due, on the respective insured obligation only. The Company's exposure to consolidated VIEs is limited to the credit protection provided on insured obligations and any additional variable interests held by MBIA. Creditors of the Conduits do not have recourse to the general assets of MBIA apart from the financial guarantee insurance policies provided by MBIA Corp. on insured obligations issued by the Conduits.

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- Definition Tabular disclosure of the significant judgments and assumptions made in determining whether a variable interest (as defined) held by the entity requires the variable interest entity (VIE) (as defined) to be consolidated and (or) disclose information about its involvement with the VIE, individually or in aggregate (as applicable); the nature of restrictions, if any, on the consolidated VIE's assets and on the settlement of its liabilities reported by an entity in its statement of financial position, including the carrying amounts of such assets and liabilities; the nature of, and changes in, the risks associated with involvement in the VIE; how involvement with the VIE affects the entity's financial position, financial performance, and cash flows; the lack of recourse if creditors (or beneficial interest holders) of the consolidated VIE have no recourse to the general credit of the primary beneficiary (if applicable); the terms of arrangements, giving consideration to both explicit arrangements and implicit variable interests, if any, that could require the entity to provide financial support to the VIE, including events or circumstances that could expose the entity to a loss; the methodology used by the entity for determining whether or not it is the primary beneficiary of the variable interest entity; the significant factors considered and judgments made in determining that the power to direct the activities of a VIE that most significantly impact the VIE's economic performance are shared (as defined); the carrying amounts and classification of assets and liabilities of the VIE included in the statement of financial position; the entity's maximum exposure to loss, if any, as a result of its involvement with the VIE, including how the maximum exposure is determined and significant sources of the entity's exposure to the VIE; a comparison of the carrying amounts of the assets and liabilities and the entity's maximum exposure to loss; information about any liquidity arrangements, guarantees, and (or) other commitments by third parties that may affect the fair value or risk of the entity's variable interest in the VIE; whether or not the entity has provided financial support or other support (explicitly or implicitly) to the VIE that it was not previously contractually required to provide or whether the entity intends to provide that support, including the type and amount of the support and the primary reasons for providing the support; and supplemental information the entity determines necessary to provide. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6970148&loc=SL6228884-111685 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Glossary Variable Interest Entity -URI http://asc.fasb.org/extlink&oid=6528138 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 167 -Appendix D -Paragraph 23A Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name FASB Interpretation (FIN) -Number 46R -Paragraph 2, 14, 15, 16, 23, 24, 25, 26 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 167 -Appendix D -Paragraph 22E Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -SubTopic 10 -Section 50 -Paragraph 5A -URI http://asc.fasb.org/extlink&oid=6970148&loc=SL6759159-111685 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 140 -Paragraph 35 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 167 -Appendix D -Paragraph 22B Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name FASB Interpretation (FIN) -Number 46R -Paragraph 4 -Subparagraph g -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name FASB Staff Position (FSP) -Number FAS140-4/FIN46(R)-8 -Paragraph C4 -Subparagraph d -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 167 -Appendix D -Paragraph 24 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6970148&loc=d3e5710-111685 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6970148&loc=d3e5728-111685 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=6970148&loc=d3e5747-111685 + Details
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