XML 27 R16.htm IDEA: XBRL DOCUMENT
v3.7.0.1

Derivative Instruments | 3 Months Ended
--- | ---
Mar. 31, 2017
Text Block [Abstract] |
Derivative Instruments | Note 8: Derivative Instruments U.S. Public Finance Insurance The Company’s derivative exposure within its U.S. public finance insurance operations primarily consists of insured interest rate and inflation-linked swaps related to insured U.S. public finance debt issues. These derivatives do not qualify for the financial guarantee scope exception and are accounted for as derivative instruments. Corporate The Company has entered into derivative instrument s primarily consisting of interest rate swaps to manage the risks a ssociated with fluctuations in interest rates affecting the value of certain assets. I n t e r na t i on a l and S t r u c t u r e d F i n an c e I n s u r an c e The Company has entered into derivative instrument s to provide financial guarantee insurance to structured finance transactions that do not qualify for the financial guarantee scope exception and, therefore, are accounted for as derivative s. These insured CDS contracts, primarily referencing CMBS, R MBS and A BS, are intended to be held f or the entire term of the contract unless a settlement with the counterparty is negotiated. The Company no longer insures new CDS contracts except for transactions related to the restructuring or reduction of existing derivative exposure. The Company’s derivative exposure within its international and structured finance insurance segment also includes insured interest rate and inflation-linked swaps related to insured debt issues. The Company has also entered into a derivative contract as a result of a commutation occurring in 2014. Changes in the fair value of the Company’s non-insured derivative are i ncluded in “Net gains (losses) on financial instruments at fair value and foreign exchange” on the Company’s consolidated statements of operations. Variable Interest Entities VIEs consolidated by the Company have entered into derivative instrument s consis ting of interest rate swaps, interest rate caps and cross currency swaps. Interest rate swaps and i nterest rate caps are entered into to mitigate the risks associated with fluctuations in interest rates or fair values of certain contracts. Cross currency s waps are entered into to manage the variability in cash flows resulting from fluctuations in foreign currency rates. Credit Derivatives Sold The following table s present information about credit derivatives sold by the Company’s insurance operations that were outstanding as of March 31, 2017 and December 31, 2016. Credit ratings represent the lower of underlying ratings assigned to the collateral by Moody’s, S&P or MBIA.
$ in millions |  | As of March 31, 2017 |
|  |  |  | Notional Value |  |  |  |
Credit Derivatives Sold |  | Weighted Average Remaining Expected Maturity |  |  | AAA |  |  | AA |  |  | A |  |  | BBB |  |  | Below Investment Grade |  |  | Total Notional |  |  | Fair Value Asset (Liability) |
Insured credit default swaps |  | 3.9 Years |  | $ | - |  | $ | - |  | $ | 115 |  | $ | - |  | $ | 415 |  | $ | 530 |  | $ | (86) |
Insured swaps |  | 16.0 Years |  |  | - |  |  | 133 |  |  | 2,009 |  |  | 731 |  |  | 20 |  |  | 2,893 |  |  | (2) |
Total notional |  |  |  | $ | - |  | $ | 133 |  | $ | 2,124 |  | $ | 731 |  | $ | 435 |  | $ | 3,423 |  |  |  |
Total fair value |  |  |  | $ | - |  | $ | - |  | $ | (1) |  | $ | (1) |  | $ | (86) |  |  |  |  | $ | (88) |
$ in millions |  | As of December 31, 2016
|  |  |  | Notional Value |  |  |
Credit Derivatives Sold |  | Weighted Average Remaining Expected Maturity |  |  | AAA |  |  | AA |  |  | A |  |  | BBB |  |  | Below Investment Grade |  |  | Total Notional |  |  | Fair Value Asset (Liability)
Insured credit default swaps |  | 3.8 Years |  | $ | - |  | $ | - |  | $ | 115 |  | $ | - |  | $ | 473 |  | $ | 588 |  | $ | (64)
Insured swaps |  | 15.7 Years |  |  | - |  |  | 137 |  |  | 2,146 |  |  | 732 |  |  | 20 |  |  | 3,035 |  |  | (2)
Insured swaps - held for sale |  | 14.3 Years |  |  | - |  |  | - |  |  | - |  |  | 420 |  |  | - |  |  | 420 |  |  | -
Total notional |  |  |  | $ | - |  | $ | 137 |  | $ | 2,261 |  | $ | 1,152 |  | $ | 493 |  | $ | 4,043 |  |  |
Total fair value |  |  |  | $ | - |  | $ | - |  | $ | (1) |  | $ | (1) |  | $ | (64) |  |  |  |  | $ | (66)
Internal credit ratings assigned by MBIA on the underlying collateral are derived b y t h e Co m pan y’s s u r v e ill a n ce g r ou p. I n a ss ign i n g a n i n t e r n a l r a t i n g, c u rr en t s t a t u s r epo r t s f r o m i ss ue rs an d t r u s t ee s, a s w el l a s p ubli c l y a v ai l able t r a n s a c t i o n-s p e c i f i c i n f o rm a t ion, a re r e v iew e d. A l s o, whe re ap p r o p r ia t e, c a sh f l o w a n al ys e s an d c ol l a t e r a l v a l ua t ion s a re c on s id e r e d. T h e m a x i m u m p o t e n t i a l a m o u n t o f f u t u re p a y m en t s (u n di sc oun t ed) o n C D S c on t r a c t s a re e s t i m a t e d a s t he no t ion a l v a l u e plu s an y a d di t iona l d e b t s e rv i ce c o s t s, s u ch a s in t e r e st o r o t h e r a m ou n t s owin g o n CD S c on t r a c t s. T he m a x i m u m a m oun t o f f u t u re debt service pa ym en t s t ha t MB I A m a y b e r equi r e d t o m a ke und e r t he se g uarantees as of March 31, 2017 i s $575 million. T h e m a x i m u m po t en t ia l a m ou n t o f f u t u re pa ym en t s (un d i s c o un t ed) o n i n s u r e d s w a p s a re e s t i m a t e d a s t he no t ion a l v a l u e o f s u ch c o n t r a c t s. M B I A m a y hol d r e c ou rse p r o v i s ion s wi t h t hi rd pa r t ie s i n de r i v a t i ve instrument s t h r o u g h s ub r o ga t i on r igh t s, wh e r e b y i f M B I A m a k e s a c lai m pa ym en t, i t may be en t i t l e d t o an y r i gh t s o f t h e in s u r ed c oun t e r pa r t y, in c lu d in g t h e r ig h t t o an y a ss e t s hel d a s c o lla t e r al. Counterparty Credit Risk The Company manages counterparty credit risk on an individual counterparty basis through master netting agreements covering derivative instruments in the corporate segment. These agreements allow the Company to contractually net amounts due from a counterparty with those amounts due to such counterparty when certain triggering events occur. The Company only executes swaps under master netting agreements, which typically contain mutual credit downgrade provisions that generally provide the ability to require assignment or termination in the event either MBIA or the counterparty is downgraded below a specified credit rating. Under these agreements, the Company may receive or provide cash, U.S. Treasury or other highly rated securities to secure counterparties’ exposure to the Company or its exposure to counterparties, respectively. Such collateral is available t o the holder to pay for replacing the counterparty in the event that the counterparty defaults. As of March 31, 2017, the Company did not hold cash collateral to derivative counterparties but posted cash collateral to derivative counterparties of $9 million. All of the $9 million is included within “Other liabilities” as cash collateral netted against accrued interest on derivative liabilities. As of December 31, 2016, the Company did not hold cash collateral to derivative counterparties but posted cash collateral to derivative counterparties of $1 million. All of the $1 million is included within “Other liabilities” as cash collateral netted against accrued interest on derivat ive liabilities. As of March 31, 2017 and December 31, 2016, the Company had securities with a fair value of $257 million and $276 million, respectively, posted to derivative counterparties and th ese amount s are included within “Fixed-maturity securities held as available-for-sale, at fair value” on the Company’s consolidated balance sheets. As of March 31, 2017 and December 31, 2016, the fair value on one Credit Support Annex (“CSA”) was $3 mil lion. This CSA governs collateral posting requirements between MBIA and its derivative counterparties. The Company did not receive collateral due to the Company’s credit rating, which was below the CSA minimum credit ratings level for holding counterparty collateral. As of March 31, 2017 and December 31, 2016, the counterpart y was rated A1 by Moody’s and A by S&P. Financial Statement Presentation The fair value of amounts recognized for eligible derivative contracts executed with the same counterparty under a master netting agreement, including any cash collateral that may have been received or posted by the Company, is presented on a net basis in accordance with accounting guidance for the offsetting of fair value amounts related to derivative instruments. Insured CDS and insured swaps are not subject to master netting agreements. VIE derivative assets and liabilities are not presented net of any m aster netting agreements. Counterparty netting of derivative assets and liabilities offsets balances in “Interest rate swaps” as of March 31, 2017. The followi ng table presents the total fair value of the Company’s derivative assets and liabilities by instrument and balance sheet location, before counterparty netting and posting of cash collateral, as of March 31, 2017:
In millions |  |  |  |  | Derivative Assets (1) |  | Derivative Liabilities (1)
|  |  | Notional |  |  |  |  |  |  |  |  |  |
|  |  | Amount |  |  |  | Fair |  |  |  | Fair
Derivative Instruments |  | Outstanding |  | Balance Sheet Location |  | Value |  | Balance Sheet Location |  | Value
Not designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |  |
| Insured credit default swaps |  | $ | 530 |  | Other assets |  | $ | - |  | Derivative liabilities |  | $ | (86)
| Insured swaps |  |  | 2,893 |  | Other assets |  |  | - |  | Derivative liabilities |  |  | (2)
| Interest rate swaps |  |  | 1,057 |  | Other assets |  |  | 3 |  | Derivative liabilities |  |  | (205)
| Interest rate swaps-embedded |  |  | 382 |  | Medium-term notes |  |  | 2 |  | Medium-term notes |  |  | (15)
| Currency swaps-VIE |  |  | 70 |  | Other assets-VIE |  |  | 13 |  | Derivative liabilities-VIE |  |  | -
| All other |  |  | 83 |  | Other assets |  |  | - |  | Derivative liabilities |  |  | (20)
| All other-VIE |  |  | 3 |  | Other assets-VIE |  |  | - |  | Derivative liabilities-VIE |  |  | -
| All other-embedded |  |  | 2 |  | Other investments |  |  | - |  | Other investments |  |  | -
Total non-designated derivatives |  | $ | 5,020 |  |  |  | $ | 18 |  |  |  | $ | (328)
__________ |  |  |  |  |  |  |  |  |  |  |  |  |
(1) - In accordance with the accounting guidance for derivative instruments and hedging activities, the balance sheet location of the Company’s embedded derivative instruments is determined
| by the location of the related host contract.
The following table presents the total fair value of the Company’s derivat ive assets and liabilities by instrument and balance sheet location, before counterparty netting and posting of cash collateral, as of December 31, 2016:
In millions |  |  |  |  | Derivative Assets (1) |  | Derivative Liabilities (1)
|  |  |  | Notional |  |  |  |  |  |  |  |  |  |
|  |  |  | Amount |  |  |  | Fair |  |  |  | Fair
Derivative Instruments |  |  | Outstanding |  | Balance Sheet Location |  | Value |  | Balance Sheet Location |  | Value
Not designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |  |
| Insured credit default swaps |  | $ | 588 |  | Other assets |  | $ | - |  | Derivative liabilities |  | $ | (64)
| Insured swaps |  |  | 3,035 |  | Other assets |  |  | - |  | Derivative liabilities |  |  | (2)
| Insured swaps - held for sale |  |  | 420 |  | Other assets |  |  | - |  | Derivative liabilities |  |  | -
| Interest rate swaps |  |  | 1,062 |  | Other assets |  |  | 3 |  | Derivative liabilities |  |  | (213)
| Interest rate swaps-embedded |  |  | 376 |  | Medium-term notes |  |  | 2 |  | Medium-term notes |  |  | (17)
| Currency swaps-VIE |  |  | 71 |  | Other assets-VIE |  |  | 20 |  | Derivative liabilities-VIE |  |  | -
| All other |  |  | 83 |  | Other assets |  |  | - |  | Derivative liabilities |  |  | (20)
| All other-VIE |  |  | 35 |  | Other assets-VIE |  |  | - |  | Derivative liabilities-VIE |  |  | -
| All other-embedded |  |  | 5 |  | Other investments |  |  | - |  | Other investments |  |  | -
Total non-designated derivatives |  | $ | 5,675 |  |  |  | $ | 25 |  |  |  | $ | (316)
__________ |  |  |  |  |  |  |  |  |  |  |  |  |
(1) - In accordance with the accounting guidance for derivative instruments and hedging activities, the balance sheet location of the Company’s embedded derivative instruments is determined
| by the location of the related host contract.
T h e f ol l owin g t able p r e s en t s t h e e f f e ct o f d e r i v a t i ve i n s t r u m en t s o n t h e c o n s olida t e d s t a t e m en t s o f ope r a t ion s f o r t h e three months ended March 31, 2017 and 2016:
In millions |  |  |  |  |  |  |
Derivatives Not Designated as |  |  |  | Three Months Ended March 31,
Hedging Instruments |  | Location of Gain (Loss) Recognized in Income on Derivative |  | 2017 |  | 2016
Insured credit default swaps |  | Unrealized gains (losses) on insured derivatives |  | $ | (22) |  | $ | (14)
Insured credit default swaps |  | Realized gains (losses) and other settlements on insured derivatives |  |  | (31) |  |  | (14)
Interest rate swaps |  | Net gains (losses) on financial instruments at fair value and foreign exchange |  |  | 4 |  |  | (50)
Interest rate swaps-VIE |  | Net gains (losses) on financial instruments at fair value and foreign exchange-VIE |  |  | - |  |  | 8
Currency swaps-VIE |  | Net gains (losses) on financial instruments at fair value and foreign exchange-VIE |  |  | (6) |  |  | (5)
All other |  | Net gains (losses) on financial instruments at fair value and foreign exchange |  |  | - |  |  | (2)
Total |  |  |  | $ | (55) |  | $ | (77)

X
- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 45 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6441202&loc=d3e80720-113993 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4C -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5624171-113959 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=64837297&loc=d3e41620-113959 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4B -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5624163-113959 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5579240-113959 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4D -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5624177-113959 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35736893&loc=d3e80784-113994 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=64837297&loc=d3e41641-113959 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1A -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5579245-113959 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4H -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5624258-113959 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35736893&loc=d3e80748-113994 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4K -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5708775-113959 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4J -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5708773-113959 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5618551-113959 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1B -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5580258-113959 Reference 16: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4E -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5624181-113959 Reference 17: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 25 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6886632&loc=d3e76258-113986 Reference 18: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=64837297&loc=d3e41638-113959 Reference 19: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(n)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_TextBlockAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration