XML 140 R12.htm IDEA: XBRL DOCUMENT v3.19.3.a.u2
Derivative Financial Instruments
 12 Months Ended
Dec. 31, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments Derivative Financial Instruments
We primarily invest in the following types of derivative financial instruments: interest rate swaps, futures, forward contracts, put and call options, swaptions, embedded derivatives and warrants. We also enter into master netting agreements which reduce credit risk by permitting net settlement of transactions. At December 31, 2019 we had received collateral of $22 related to our derivative financial instruments. As of December 31, 2018 we had posted collateral of $1 related to our derivative financial instruments.
A summary of the aggregate contractual or notional amounts and estimated fair values related to derivative financial instruments at December 31, 2019 and 2018 is as follows:
 
Contractual/
Notional
Amount
 
Balance Sheet Location
 
Estimated Fair Value
 
Asset
 
(Liability)
December 31, 2019
 
 
 
 
 
 
 
Hedging instruments
 
 
 
 
 
 
 
Interest rate swaps - fixed to floating
$
1,200

 
Other assets/other liabilities
 
$
22

 
$
(1
)
 
 
 
 
 
 
 
 
Non-hedging instruments
 
 
 
 
 
 
 
Interest rate swaps
1

 
Equity securities 
 
—

 
—

Futures
134

 
Equity securities 
 
1

 
—

Subtotal non-hedging
135

 
Subtotal non-hedging
 
1

 
—

Total derivatives
$
1,335

 
Total derivatives
 
23

 
(1
)
 
 
 
Amounts netted
 
(1
)
 
1

 
 
 
Net derivatives
 
$
22

 
$
—

 
 
 
 
 
 
 
 
December 31, 2018
 
 
 
 
 
 
 
Hedging instruments
 
 
 
 
 
 
 
Interest rate swaps - fixed to floating
$
1,200

 
Other assets/other liabilities
 
$
7

 
$
(11
)
 
 
 
 
 
 
 
 
Non-hedging instruments
 
 
 
 
 
 
 
Interest rate swaps
164

 
Equity securities 
 
4

 
(1
)
Options
100

 
Other assets/other liabilities
 
—

 
—

Futures
415

 
Equity securities 
 
5

 
(5
)
Subtotal non-hedging
679

 
Subtotal non-hedging
 
9

 
(6
)
Total derivatives
$
1,879

 
Total derivatives
 
16

 
(17
)
 
 
 
Amounts netted
 
(14
)
 
14

 
 
 
Net derivatives
 
$
2

 
$
(3
)

Fair Value Hedges
We have entered into various interest rate swap contracts to convert a portion of our interest rate exposure on our long-term debt from fixed rates to floating rates. The floating rates payable on all of our fair value hedges are benchmarked to the London Interbank Offered Rate, or LIBOR. A summary of our outstanding fair value hedges at December 31, 2019 and 2018 is as follows:
Type of Fair Value Hedges
 
Year
Entered
Into
 
Outstanding Notional Amount
 
Interest Rate
Received
 
Expiration Date
 
2019
 
2018
 
Interest rate swap
 
2018
 
$
50

 
$
50

 
4.101
%
 
September 1, 2027
Interest rate swap
 
2018
 
450

 
450

 
3.300
 
 
January 15, 2023
Interest rate swap
 
2018
 
90

 
90

 
4.350
 
 
August 15, 2020
Interest rate swap
 
2017
 
50

 
50

 
4.350

 
August 15, 2020
Interest rate swap
 
2015
 
200

 
200

 
4.350
 
 
August 15, 2020
Interest rate swap
 
2014
 
150

 
150

 
4.350
 
 
August 15, 2020
Interest rate swap
 
2013
 
10

 
10

 
4.350
 
 
August 15, 2020
Interest rate swap
 
2012
 
200

 
200

 
4.350
 
 
August 15, 2020
Total notional amount outstanding
 
 
 
$
1,200

 
$
1,200

 
 
 
 
 

The following amounts were recorded on our consolidated balance sheets related to cumulative basis adjustments for fair value hedges at December 31, 2019 and 2018:
Balance Sheet Classification in Which Hedged Item is Included
 
Carrying Amount of Hedged Liability
 
Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Liability
 
2019
 
2018
 
2019
 
2018
Current portion of long term-debt
 
$
1,598

 
$
849

 
$
22

 
$
7

Long-term debt
 
17,787

 
17,217

 
(1
)
 
(11
)

Cash Flow Hedges
We have entered into a series of forward starting pay fixed interest rate swaps with the objective of eliminating the variability of cash flows in the interest payments on anticipated future financings. During 2019, swaps in the notional amount of $425 were terminated. We paid an aggregate of $35 to the swap counter parties upon termination.
The unrecognized loss for all expired and terminated cash flow hedges included in accumulated other comprehensive loss, net of tax, was $262 and $246 at December 31, 2019 and 2018, respectively. As of December 31, 2019, the total amount of amortization over the next twelve months for all cash flow hedges is estimated to increase interest expense by approximately $15. No amounts were excluded from effectiveness testing.
A summary of the effect of cash flow hedges in accumulated other comprehensive loss for the years ended December 31, 2019, 2018 and 2017 is as follows:
 
 
Hedge
Loss
Recognized
in Other
Comprehensive
Income (Loss)
 
Income Statement
Location of
Loss
Reclassification
from Accumulated
Other
Comprehensive Loss
 
Hedge Loss
Reclassified from
Accumulated
Other
Comprehensive
Loss
Type of Cash Flow Hedge
 
 
 
Year ended December 31, 2019
 
 
 
 
 
 
Forward starting pay fixed swaps
 
$
(35
)
 
Interest expense
 
$
(15
)
Year ended December 31, 2018
 
 
 
 
 
 
Forward starting pay fixed swaps
 
(33
)
 
Interest expense
 
(14
)
Year ended December 31, 2017
 
 
 
 
 
 
Forward starting pay fixed swaps
 
(112
)
 
Interest expense
 
(7
)
Forward starting pay fixed swaps
 
 
 
Net realized gains (losses) on financial instruments
 
(7
)

Income Statement Relationship of Fair Value and Cash Flow Hedging
A summary of the relationship between the effects of fair value and cash flow hedges on the total amount of income and expense presented in our consolidated statements of income for the years ended December 31, 2019, 2018 and 2017 is as follows:
 
Classification and Amount of Gain (Loss) Recognized in Income on Fair Value and Cash Flow Hedging Relationships
 
2019
 
2018
 
2017
 
Net Realized Gains (Losses) on Financial Instruments
 
Interest Expense
 
Net Realized Gains (Losses) on Financial Instruments
 
Interest Expense
 
Net Realized Gains (Losses) on Financial Instruments
 
Interest Expense
Total amount of income or expense in the income statement in which the effects of fair value or cash flow hedges are recorded
$
114

 
$
(746
)
 
$
(180
)
 
$
(753
)
 
$
145

 
$
(739
)
 
 
 
 
 
 
 
 
 
 
 
 
Gain (loss) on fair value hedging relationships:
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps:
 
 
 
 
 
 
 
 
 
 
 
Hedged items
—

 
2

 
—

 
—

 
—

 
—

Derivatives designated as hedging instruments
—

 
(2
)
 
—

 
—

 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
Loss on cash flow hedging relationships:
 
 
 
 
 
 
 
 
 
 
 
Forward starting pay fixed swaps:
 
 
 
 
 
 
 
 
 
 
 
Amount of loss reclassified from accumulated other comprehensive loss into net income
—

 
(15
)
 
—

 
(14
)
 
—

 
(7
)
Amount of loss reclassified from accumulated other comprehensive loss into net income due to ineffectiveness and missed forecasted transactions
—

 
—

 
—

 
—

 
(7
)
 
—


Non-Hedging Derivatives
A summary of the effect of non-hedging derivatives on our consolidated statements of income for the years ended December 31, 2019, 2018 and 2017 is as follows:
Type of Non-hedging Derivatives
 
Income Statement Location of
Gain (Loss) Recognized
 
Derivative
Gain (Loss)
Recognized
Year ended December 31, 2019
 
 
 
 
Interest rate swaps
 
Net realized gains (losses) on financial instruments
 
$
1

Options
 
Net realized gains (losses) on financial instruments
 
(8
)
Futures
 
Net realized gains (losses) on financial instruments
 
(10
)
Total
 
 
 
$
(17
)
Year ended December 31, 2018
 
 
 
 
Interest rate swaps
 
Net realized gains (losses) on financial instruments
 
$
14

Options
 
Net realized gains (losses) on financial instruments
 
1

Futures
 
Net realized gains (losses) on financial instruments
 
8

Total
 
 
 
$
23

Year ended December 31, 2017
 
 
 
 
Interest rate swaps
 
Net realized gains (losses) on financial instruments
 
$
(9
)
Options
 
Net realized gains (losses) on financial instruments
 
(36
)
Futures
 
Net realized gains (losses) on financial instruments
 
(3
)
Total
 
 
 
$
(48
)