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Variable Interest Entities | 9 Months Ended
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Sep. 30, 2014
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Variable Interest Entities | Note 4: Variable Interest Entities 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 an y 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 expect ed 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 contro lling 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 a nd (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 fina ncial 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 t o 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 cr edit 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 occ urrence 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 insur ed 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 significan tly 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 reasses sment of controlling financial interest that may result in consolidation or deconsolidation of any VIE. In the advisory services segment, t he Company provides asset management and advisory services to a VIE, and holds approximately $4 million of the subordinated notes issued by the VIE. The Company consolidated the VIE as the primary beneficiary in the third quarter of 2014. The Company has no obligation or commitm ent to provide additional financial support or liquidity to the VIE. In the conduit segment, the Company has managed and administered a c onduit that invested primarily in debt securitie s and w as funded through the issuance of VIE notes. T he Company consolidated the conduit as the primary beneficiary. In 2014, all outstanding VIE notes were repaid by the conduit, and the conduit was subsequently dissolved. The Company no longer provides a ny related credit protection. N o n c o n s o l i d a t e d V I Es Insurance T h e f ol l owin g t able s p r e s en t t h e t o t a l a ss e t s o f n o n c on s oli d a t e d V I E s i n whi ch t h e Co m p a n y ho l d s a v a r iab l e i n t e r e s t as o f September 30, 2014 a n d December 31, 2013, through its insurance operations. T h e f o l lowi n g t abl e s al so p r e s en t t h e Co m pan y’s m a x i m u m e x po s u re t o l o ss f o r n o n c on s olid a t e d V I Es and carrying v a lu e s o f t h e a s s e t s a n d liab i li t ie s f o r i t s in t e r e st s in t he se V I Es a s o f September 30, 2014 an d December 31, 2013. T h e Co m pa n y ha s agg r eg a t e d non c o n s o lida t e d V I Es b a s e d o n t he und e r l y in g c r e di t e x p o s u r e o f t h e in s u r e d ob l iga t ion. T h e na t u re o f t h e C o m p a n y’s v a r i a bl e in t e r e s t s i n non c on s o l ida t ed V I Es i s r el a t e d t o f in a n c ia l gua r an t ee s, i n s u r e d CD S c on t r a c t s an d an y i n v e s t m en t s i n o b liga t io n s i ss ue d by non c o n s o lida t e d V I Es.
|  |  |  |  | September 30, 2014
|  |  |  |  |  |  |  |  |  |  | Carrying Value of Assets |  | Carrying Value of Liabilities
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Loss and Loss |  |  |
|  |  |  |  |  |  |  | Maximum |  |  |  |  |  |  |  |  |  | Unearned |  | Adjustment |  |  |
|  |  |  |  | VIE |  | Exposure |  |  |  |  | Premiums |  | Insurance Loss |  | Premium |  | Expense |  | Derivative
In millions |  | Assets |  | to Loss |  | Investments(1) |  | Receivable(2) |  | Recoverable(3) |  | Revenue(4) |  | Reserves(5) |  | Liabilities(6)
Insurance: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Global structured finance: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Collateralized debt obligations |  | $ | 9,204 |  | $ | 6,042 |  | $ | 114 |  | $ | 29 |  | $ | - |  | $ | 24 |  | $ | - |  | $ | 96
|  | Mortgage-backed residential |  |  | 14,870 |  |  | 7,906 |  |  | 10 |  |  | 44 |  |  | 548 |  |  | 43 |  |  | 319 |  |  | -
|  | Mortgage-backed commercial |  |  | 590 |  |  | 294 |  |  | - |  |  | 1 |  |  | - |  |  | 1 |  |  | - |  |  | -
|  | Consumer asset-backed |  |  | 6,167 |  |  | 2,063 |  |  | - |  |  | 17 |  |  | - |  |  | 15 |  |  | 9 |  |  | -
|  | Corporate asset-backed |  |  | 9,572 |  |  | 5,764 |  |  | 1 |  |  | 57 |  |  | 11 |  |  | 67 |  |  | - |  |  | -
| Total global structured finance |  |  | 40,403 |  |  | 22,069 |  |  | 125 |  |  | 148 |  |  | 559 |  |  | 150 |  |  | 328 |  |  | 96
| Global public finance |  |  | 52,379 |  |  | 19,320 |  |  | - |  |  | 191 |  |  | - |  |  | 229 |  |  | 5 |  |  | -
Total insurance |  | $ | 92,782 |  | $ | 41,389 |  | $ | 125 |  | $ | 339 |  | $ | 559 |  | $ | 379 |  | $ | 333 |  | $ | 96
__________ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(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, 2013
|  |  |  |  |  |  |  |  |  |  | Carrying Value of Assets |  | Carrying Value of Liabilities
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Loss and Loss |  |  |
|  |  |  |  |  |  |  | Maximum |  |  |  |  |  |  |  |  |  | Unearned |  | Adjustment |  |  |
|  |  |  |  | VIE |  | Exposure |  |  |  |  | Premiums |  | Insurance Loss |  | Premium |  | Expense |  | Derivative
In millions |  | Assets |  | to Loss |  | Investments(1) |  | Receivable(2) |  | Recoverable(3) |  | Revenue(4) |  | Reserves(5) |  | Liabilities(6)
Insurance: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Global structured finance: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Collateralized debt obligations |  | $ | 12,565 |  | $ | 7,693 |  | $ | 120 |  | $ | 43 |  | $ | - |  | $ | 37 |  | $ | 21 |  | $ | 108
|  | Mortgage-backed residential |  |  | 21,738 |  |  | 9,251 |  |  | 10 |  |  | 53 |  |  | 658 |  |  | 51 |  |  | 327 |  |  | 5
|  | Mortgage-backed commercial |  |  | 1,367 |  |  | 447 |  |  | - |  |  | 1 |  |  | - |  |  | 1 |  |  | - |  |  | -
|  | Consumer asset-backed |  |  | 7,830 |  |  | 2,740 |  |  | 9 |  |  | 19 |  |  | - |  |  | 19 |  |  | 13 |  |  | -
|  | Corporate asset-backed |  |  | 13,028 |  |  | 7,248 |  |  | 2 |  |  | 80 |  |  | 18 |  |  | 96 |  |  | - |  |  | -
| Total global structured finance |  |  | 56,528 |  |  | 27,379 |  |  | 141 |  |  | 196 |  |  | 676 |  |  | 204 |  |  | 361 |  |  | 113
| Global public finance |  |  | 52,317 |  |  | 20,162 |  |  | - |  |  | 206 |  |  | - |  |  | 248 |  |  | 5 |  |  | -
Total insurance |  | $ | 108,845 |  | $ | 47,541 |  | $ | 141 |  | $ | 402 |  | $ | 676 |  | $ | 452 |  | $ | 366 |  | $ | 113
__________ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(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.
T he maximum exposure to loss as a result of MBIA’s variable interests in VIEs is represented by insurance in force. Insurance in force is the maximum future payments of princip a l a nd i n te r est whic h ma y be r e qu i r ed und e r c o mmitment s t o ma ke p a y me n t s on i n s ur e d ob li g atio ns iss u e d by n on co n s o li d ate d V I E s. Consolidated VIEs The carrying amounts of assets and liabilities of consolidated VIEs were $5.6 billion and $5.3 billion, respectively, as of September 30, 2014 and December 31, 2013. The carrying amounts of assets and liabilities are presented separately in “Assets of conso lidated 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 inte rest, 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. One additional VIE w as cons olidated during the nine months ended September 30, 2014 and n o additional VIEs were consolidated during the nine months ended September 30, 2013. Net realized losses recorded for the three and nine months ended September 30, 2014 were $3 million related to the consolidation of the VIE in the third quarter of 2014, and net realized gains related to the deconsolidation of VIEs were $1 million for the nine months ended September 30, 2013. 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 oblig ated 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.

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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 3 -URI http://asc.fasb.org/extlink&oid=28200181&loc=d3e5710-111685 Reference 2: 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=28200181&loc=SL6759159-111685 Reference 3: 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=28200181&loc=d3e5747-111685 Reference 4: 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=28200181&loc=d3e5728-111685 Reference 5: 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=28200181&loc=SL6228884-111685 Reference 6: 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 + Details
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