Derivatives (Tables)

6 Months Ended

Jun. 30, 2020

Schedule of notional amounts of foreign currency forward contracts

The aggregate equivalent United States dollar notional amounts of foreign currency forward contracts as of June 30, 2020 and December 31, 2019 were as follows (in millions):


	June 30, 2020
Contracts designated as hedges:
Euro	$	320.2
Canadian dollar		81.8
British pound		44.9
Australian dollar		29.0
Swiss franc		26.0
Other ^(a)		39.9
Contracts not designated as hedges:
Euro	$	329.7
Indian rupee		79.2
British pound		65.4
Mexican peso		60.1
Qatari riyal		54.4
Canadian dollar		45.5
Australian dollar		29.8
Japanese yen		27.7
Other^(a)		170.9

(a)	Comprised of exposures to various currencies as of June 30, 2020. None of these individual currency exposures is greater than $25 million.


	December 31, 2019
Contracts designated as hedges:
Euro	$	391.9
Canadian dollar		99.0
British pound		57.2
Australian dollar		36.1
Swiss franc		28.9
Other ^(a)		50.9
Contracts not designated as hedges:
Euro	$	289.0
Canadian dollar		110.3
British pound		78.1
Indian rupee		61.0
Mexican peso		52.3
Japanese yen		37.7
Australian dollar		35.2
Brazilian real		32.5
Other^(a)		145.6

(a)	Comprised of exposures to various currencies as of December 31, 2019. None of these individual currency exposures is greater than $25 million.

Schedule of fair value of derivatives

The following table summarizes the fair value of derivatives reported in the Company’s Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019 (in millions):


	Derivative Assets					Derivative Liabilities
		Fair Value					Fair Value
	Balance Sheet	June 30,		December 31,		Balance Sheet	June 30,		December 31,
	Location	2020		2019		Location	2020		2019
Derivatives designated as hedges:
Foreign currency cash flow hedges	Other assets	$	17.7	$	21.0	Other liabilities	$	1.3	$	4.8
Total derivatives designated as hedges		$	17.7	$	21.0		$	1.3	$	4.8
Derivatives not designated as hedges:
Business Solutions operations - foreign currency ^(a)	Other assets	$	245.8	$	182.0	Other liabilities	$	202.9	$	151.0
Foreign currency	Other assets		3.0		1.5	Other liabilities		2.1		3.7
Total derivatives not designated as hedges		$	248.8	$	183.5		$	205.0	$	154.7
Total derivatives		$	266.5	$	204.5		$	206.3	$	159.5

(a)

In many circumstances, the Company allows its Business Solutions customers to settle part or all of their derivative contracts prior to maturity. However, the offsetting positions originally entered into with financial institution counterparties do not allow for similar settlement. To mitigate this, additional foreign currency contracts are entered into with financial institution counterparties to offset the original economic hedge contracts. This frequently results in changes in the Company’s derivative assets and liabilities that may not directly align with the performance in the underlying derivatives business.

Schedule of gross and net fair value of derivative assets

The following tables summarize the gross and net fair value of derivative assets and liabilities as of June 30, 2020 and December 31, 2019 (in millions):

Offsetting of Derivative Assets


			Gross		Net Amounts		Derivatives
	Gross		Amounts Offset		Presented		Not Offset
	Amounts of		in the Condensed		in the Condensed		in the Condensed
	Recognized		Consolidated		Consolidated		Consolidated
June 30, 2020	Assets		Balance Sheets		Balance Sheets		Balance Sheets		Net Amounts
Derivatives subject to a master netting arrangement or similar agreement	$	117.6	$	—	$	117.6	$	(84.8)	$	32.8
Derivatives that are not or may not be subject to master netting arrangement or similar agreement		148.9
Total	$	266.5

December 31, 2019
Derivatives subject to a master netting arrangement or similar agreement	$	95.3	$	—	$	95.3	$	(74.7)	$	20.6
Derivatives that are not or may not be subject to master netting arrangement or similar agreement		109.2
Total	$	204.5

Schedule of gross and net fair value of derivative liabilities

Offsetting of Derivative Liabilities


			Gross		Net Amounts		Derivatives
	Gross		Amounts Offset		Presented		Not Offset
	Amounts of		in the Condensed		in the Condensed		in the Condensed
	Recognized		Consolidated		Consolidated		Consolidated
June 30, 2020	Liabilities		Balance Sheets		Balance Sheets		Balance Sheets		Net Amounts
Derivatives subject to a master netting arrangement or similar agreement	$	160.5	$	—	$	160.5	$	(84.8)	$	75.7
Derivatives that are not or may not be subject to master netting arrangement or similar agreement		45.8
Total	$	206.3

December 31, 2019
Derivatives subject to a master netting arrangement or similar agreement	$	121.8	$	—	$	121.8	$	(74.7)	$	47.1
Derivatives that are not or may not be subject to master netting arrangement or similar agreement		37.7
Total	$	159.5

Schedule of amount and location of gains/(losses) from hedging activities

The following table presents the pre-tax amount of unrealized gains/(losses) recognized in other comprehensive income from cash flow hedges for the three and six months ended June 30, 2020 and 2019 (in millions):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Foreign currency derivatives ^(a)	$	(15.1)	$	(3.9)	$	12.2	$	0.5

(a)

Gains/(losses) of $(0.7) million and $1.2 million, for the three months ended June 30, 2020 and 2019, respectively, and $2.8 million and $1.7 million for the six months ended June 30, 2020 and 2019, respectively, represent amounts excluded from the assessment of effectiveness that were recognized in other comprehensive income, for which an amortization approach is applied.

The following table presents the location and amounts of pre-tax gains/(losses) from fair value and cash flow hedging relationships recognized in the Condensed Consolidated Statements of Income for the three months ended June 30, 2020 and 2019 (in millions):


	Three Months Ended
	June 30,
	2020				2019
			Interest				Interest
	Revenues		Expense		Revenues		Expense
Total amounts presented in the Condensed Consolidated Statements of Income in which the effects of fair value or cash flow hedges are recorded	$	1,114.7	$	(29.3)	$	1,340.5	$	(38.6)
The effects of fair value and cash flow hedging:
Gain/(loss) on fair value hedges:
Interest rate derivatives:
Hedged items		—		—		—		(0.6)
Derivatives designated as hedging instruments		—		—		—		0.6
Gain/(loss) on cash flow hedges:
Foreign currency derivatives:
Gains/(losses) reclassified from AOCL into earnings		4.2		—		2.1		—
Amount excluded from effectiveness testing recognized in earnings based on an amortization approach		2.8		—		2.8		—
Amount excluded from effectiveness testing recognized in earnings based on changes in fair value		—		—		1.0		—
Interest rate derivatives:
Gains/(losses) reclassified from AOCL into earnings		—		(0.1)		—		—

The following table presents the location and amounts of pre-tax gains/(losses) from fair value and cash flow hedging relationships recognized in the Condensed Consolidated Statements of Income for the six months ended June 30, 2020 and 2019 (in millions):


	Six Months Ended
	June 30,
	2020				2019
			Interest				Interest
	Revenues		Expense		Revenues		Expense
Total amounts presented in the Condensed Consolidated Statements of Income in which the effects of fair value or cash flow hedges are recorded	$	2,304.7	$	(62.2)	$	2,677.5	$	(78.3)
The effects of fair value and cash flow hedging:
Gain/(loss) on fair value hedges:
Interest rate derivatives:
Hedged items		—		—		—		(0.9)
Derivatives designated as hedging instruments		—		—		—		1.0
Gain/(loss) on cash flow hedges:
Foreign currency derivatives:
Gains/(losses) reclassified from AOCL into earnings		10.8		—		3.5		—
Amount excluded from effectiveness testing recognized in earnings based on an amortization approach		6.3		—		5.1		—
Amount excluded from effectiveness testing recognized in earnings based on changes in fair value		—		—		2.3		—
Interest rate derivatives:
Gains/(losses) reclassified from AOCL into earnings		—		(0.3)		—		—

Undesignated Hedges

The following table presents the location and amount of pre-tax net gains/(losses) from undesignated hedges in the Condensed Consolidated Statements of Income on derivatives for the three and six months ended June 30, 2020 and 2019 (in millions):


		Three Months Ended				Six Months Ended
		June 30,				June 30,
Derivatives ^(a)	Location	2020		2019		2020		2019
Foreign currency derivatives ^(b)	Selling, general, and administrative	$	(3.1)	$	1.0	$	26.1	$	7.6
Foreign currency derivatives	Revenues		—		—		—		0.2
Total gain/(loss)		$	(3.1)	$	1.0	$	26.1	$	7.8

(a)

The Company uses foreign currency forward and option contracts as part of its Business Solutions payments operations. These derivative contracts are excluded from this table as they are managed as part of a broader currency portfolio that includes non-derivative currency exposures. The gains and losses on these derivatives are included as part of the broader disclosure of portfolio revenue for this business discussed above.

(b)

The Company uses foreign currency forward contracts to offset foreign exchange rate fluctuations on settlement assets and obligations as well as certain foreign currency denominated positions. Foreign exchange gains/(losses) on settlement assets and obligations, cash balances, and other assets and liabilities, not including amounts related to derivative activity as displayed above and included in Selling, general, and administrative in the Condensed Consolidated Statements of Income, were $3.0 million and $(4.3) million for the three months ended June 30, 2020 and 2019, respectively, and $(48.0) million and $(15.1) million for the six months ended June 30, 2020 and 2019, respectively.