XML 27 R16.htm IDEA: XBRL DOCUMENT
v3.10.0.1

Derivative Instruments | 6 Months Ended
--- | ---
Jun. 30, 2018
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 and liabilities. 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 a derivative instrument to provide financial guarantee insurance to a structured finance transaction that do es not qualify for the financial guarantee scope exception and, therefore, is accounted for as a derivative. The insured CDS contract, referencing CMBS, is intended to be held for the entire term of the contract unles s 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 that occurr ed in 2014. Changes in the fair value of the Company’s non-insured derivative are included in “Net gains (losses) on financial instruments at fair value and foreign exchange” on the Company’s consolidated statements of operations. Variable Interest Entities A V IE consolidated by the Company ha s entered into a cross currency swap, which was 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 June 30, 2018 and December 31, 2017. Credit ratings represent the lower of underlying ratings assigned to the collateral by Moody’s, S&P or MBIA.
$ in millions |  | As of June 30, 2018 |
|  |  |  | 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 |  | 0.5 Years |  | $ | - |  | $ | - |  | $ | - |  | $ | - |  | $ | 83 |  | $ | 83 |  | $ | (31) |
Insured swaps |  | 15.7 Years |  |  | - |  |  | 110 |  |  | 1,620 |  |  | 844 |  |  | - |  |  | 2,574 |  |  | (2) |
Total notional |  |  |  | $ | - |  | $ | 110 |  | $ | 1,620 |  | $ | 844 |  | $ | 83 |  | $ | 2,657 |  |  |  |
Total fair value |  |  |  | $ | - |  | $ | - |  | $ | (1) |  | $ | (1) |  | $ | (31) |  |  |  |  | $ | (33) |
$ in millions |  | As of December 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 |  | 1.0 Years |  | $ | - |  | $ | - |  | $ | - |  | $ | - |  | $ | 127 |  | $ | 127 |  | $ | (63)
Insured swaps |  | 15.5 Years |  |  | - |  |  | 117 |  |  | 1,818 |  |  | 846 |  |  | 20 |  |  | 2,801 |  |  | (2)
Total notional |  |  |  | $ | - |  | $ | 117 |  | $ | 1,818 |  | $ | 846 |  | $ | 147 |  | $ | 2,928 |  |  |
Total fair value |  |  |  | $ | - |  | $ | - |  | $ | (1) |  | $ | (1) |  | $ | (63) |  |  |  |  | $ | (65)
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 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 insured CDS and i n s u r e d s w a p s is 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 to the holder to pay for replacing the counterparty in the event that the counterparty defaults. As of June 30, 2018 and December 31, 2017, the Company did not hold or post cash collateral to derivative counterparties. As of June 30, 2018 and December 31, 2017, the Company had securities with a fair value of $199 mi llion and $237 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 June 30, 2018 and December 31, 2017, the fair value on one Credit Support Annex (“CSA”) was $2 million. This CSA governs collateral posting requirements between MBIA and its derivative counterparties. The Company did not receive collateral due t o the Company’s credit rating, which was below the CSA minimum credit ratings level for holding counterparty collateral. As of June 30, 2018 and December 31, 2017, 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”, when applicable. The following table presents the total fair value of the Company’s derivative assets and liabilities by instrume nt and balance sheet location, before counterparty netting and posting of cash collateral, as of June 30, 2018:
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 |  | $ | 83 |  | Other assets |  | $ | - |  | Derivative liabilities |  | $ | (31)
| Insured swaps |  |  | 2,574 |  | Other assets |  |  | - |  | Derivative liabilities |  |  | (2)
| Interest rate swaps |  |  | 722 |  | Other assets |  |  | 2 |  | Derivative liabilities |  |  | (152)
| Interest rate swaps-embedded |  |  | 298 |  | Medium-term notes |  |  | 1 |  | Medium-term notes |  |  | (8)
| Currency swaps-VIE |  |  | 62 |  | Other assets-VIE |  |  | 14 |  | Derivative liabilities-VIE |  |  | -
| All other |  |  | 49 |  | Other assets |  |  | - |  | Derivative liabilities |  |  | (4)
Total non-designated derivatives |  | $ | 3,788 |  |  |  | $ | 17 |  |  |  | $ | (197)
__________ |  |  |  |  |  |  |  |  |  |  |  |  |
(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, 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 |  | $ | 127 |  | Other assets |  | $ | - |  | Derivative liabilities |  | $ | (63)
| Insured swaps |  |  | 2,801 |  | Other assets |  |  | - |  | Derivative liabilities |  |  | (2)
| Interest rate swaps |  |  | 747 |  | Other assets |  |  | 2 |  | Derivative liabilities |  |  | (193)
| Interest rate swaps-embedded |  |  | 305 |  | Medium-term notes |  |  | 1 |  | Medium-term notes |  |  | (6)
| Currency swaps-VIE |  |  | 69 |  | Other assets-VIE |  |  | 19 |  | Derivative liabilities-VIE |  |  | -
| All other |  |  | 49 |  | Other assets |  |  | - |  | Derivative liabilities |  |  | (4)
| All other-embedded |  |  | 2 |  | Other investments |  |  | - |  | Other investments |  |  | (1)
Total non-designated derivatives |  | $ | 4,100 |  |  |  | $ | 22 |  |  |  | $ | (269)
__________ |  |  |  |  |  |  |  |  |  |  |  |  |
(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 June 30, 2018 and 2017:
In millions |  |  |  |  |  |  |
Derivatives Not Designated as |  |  |  | Three Months Ended June 30,
Hedging Instruments |  | Location of Gain (Loss) Recognized in Income on Derivative |  | 2018 |  | 2017
Insured credit default swaps |  | Unrealized gains (losses) on insured derivatives |  | $ | 18 |  | $ | 6
Insured credit default swaps |  | Realized gains (losses) and other settlements on insured derivatives |  |  | (25) |  |  | (3)
Interest rate swaps |  | Net gains (losses) on financial instruments at fair value and foreign exchange |  |  | 7 |  |  | (9)
Currency swaps-VIE |  | Net gains (losses) on financial instruments at fair value and foreign exchange-VIE |  |  | - |  |  | (3)
All other |  | Net gains (losses) on financial instruments at fair value and foreign exchange |  |  | - |  |  | (18)
Total |  |  |  | $ | - |  | $ | (27)
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 six months ended June 30, 2018 and 2017:
In millions |  |  |  |  |  |  |
Derivatives Not Designated as |  |  |  | Six Months Ended June 30,
Hedging Instruments |  | Location of Gain (Loss) Recognized in Income on Derivative |  | 2018 |  | 2017
Insured credit default swaps |  | Unrealized gains (losses) on insured derivatives |  | $ | 32 |  | $ | (16)
Insured credit default swaps |  | Realized gains (losses) and other settlements on insured derivatives |  |  | (44) |  |  | (34)
Interest rate swaps |  | Net gains (losses) on financial instruments at fair value and foreign exchange |  |  | 25 |  |  | (5)
Currency swaps-VIE |  | Net gains (losses) on financial instruments at fair value and foreign exchange-VIE |  |  | (5) |  |  | (10)
All other |  | Net gains (losses) on financial instruments at fair value and foreign exchange |  |  | - |  |  | (19)
Total |  |  |  | $ | 8 |  | $ | (84)

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 -URI http://asc.fasb.org/topic&trid=2229140 + 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