Financial Guaranty Insurance Contracts (Tables)

12 Months Ended

Dec. 31, 2011

Financial Guaranty Insurance Contracts

Net Earned Premiums

	Year Ended December 31,
	2011		2010		2009
	(in millions)
Scheduled net earned premiums	$	764.6	$	1,054.4	$	724.9
Acceleration of premium earnings		125.2		90.0		173.8
Accretion of discount on net premiums receivable		28.5		39.9		28.7
Total financial guaranty		918.3		1,184.3		927.4
Other		1.8		2.4		3.0
Total net earned premiums(1)	$	920.1	$	1,186.7	$	930.4

(1)

Excludes $74.7 million in 2011 and $47.6 million in 2010, related to consolidated FG VIEs.

Gross Premium Receivable, Net of Ceding Commissions Roll Forward

	Year Ended December 31,
	2011			2010			2009
	(in millions)
Gross premium receivable, net of ceding commissions payable:
Balance beginning of period, December 31	$	1,167.6		$	1,418.2		$	15.7
Change in accounting(1)		—			(19.0	)		721.5
Balance beginning of the period, adjusted		1,167.6			1,399.2			737.2
Premiums receivable purchased in AGMH Acquisition on July 1, 2009 after intercompany eliminations		—			—			800.9
Premium written, net(2)		244.6			347.1			594.5
Premium payments received, net		(317.6	)		(486.8	)		(736.4	)
Adjustments to the premium receivable:
Changes in the expected term of financial guaranty insurance contracts		(104.0	)		(101.8	)		(37.5	)
Accretion of discount		31.8			43.1			27.7
Foreign exchange translation		(5.1	)		(31.4	)		37.0
Consolidation of FG VIEs		(9.8	)		(6.5	)		—
Other adjustments		(4.6	)		4.7			(5.2	)
Balance, end of period, December 31(3)	$	1,002.9		$	1,167.6		$	1,418.2

(1)

Represents elimination of premium receivable at January 1, 2010 related to consolidated FG VIEs upon the adoption of the new accounting guidance and the adoption of the financial guaranty insurance accounting model on January 1, 2009.

(2)

Includes $16.1 million of premium written related to financial guaranty insurance contracts which replaced existing credit derivative contracts in 2011.

(3)

Excludes $27.5 million as of December 31, 2011 and $23.4 million as of December 31, 2010 related to consolidated FG VIEs.

Expected Collections of Gross Premiums Receivable, Net of Ceding Commissions (Undiscounted)

	December 31, 2011
	(in millions)
2012 (January 1 – March 31)	$	56.2
2012 (April 1 – June 30)		40.6
2012 (July 1 – September 30)		28.4
2012 (October 1 – December 31)		42.8
2013		104.3
2014		92.1
2015		81.8
2016		75.9
2017-2021		299.1
2022-2026		200.3
2027-2031		146.5
After 2031		178.6
Total(1)	$	1,346.6

(1)

Excludes expected cash collections on FG VIEs of $33.3 million.

Net Unearned Premium Reserve

	As of December 31, 2011									As of December 31, 2010
	Gross			Ceded			Net(1)			Gross			Ceded			Net(1)
	(in millions)
Deferred premium revenue	$	6,046.3		$	727.4		$	5,318.9		$	7,108.2		$	846.2		$	6,262.0
Contra-paid		(92.2	)		(18.8	)		(73.4	)		(146.1	)		(24.8	)		(121.3	)
Total financial guaranty		5,954.1			708.6			5,245.5			6,962.1			821.4			6,140.7
Other		8.7			0.3			8.4			10.8			0.4			10.4
Total	$	5,962.8		$	708.9		$	5,253.9		$	6,972.9		$	821.8		$	6,151.1

(1)

Total net unearned premium reserve excludes $274.2 million and $193.2 million related to FG VIE's as of December 31, 2011 and December 31, 2010, respectively.

Expected Timing of Financial Guaranty Insurance Premium and Loss Recognition

	As of December 31, 2011
	Scheduled Net Earned Premium		Net Expected Loss to be Expensed		Net
	(in millions)
2012 (January 1–March 31)	$	153.5	$	32.1	$	121.4
2012 (April 1–June 30)		147.5		27.5		120.0
2012 (July 1–September 30)		140.5		24.0		116.5
2012 (October 1–December 31)		134.5		20.9		113.6
Subtotal 2012		576.0		104.5		471.5
2013		485.8		61.0		424.8
2014		426.5		44.0		382.5
2015		378.4		34.9		343.5
2016		343.1		30.9		312.2
2017 - 2021		1,297.7		135.3		1,162.4
2022 - 2026		811.8		68.1		743.7
2027 - 2031		492.5		34.4		458.1
After 2031		507.1		24.3		482.8
Total present value basis(1)(2)		5,318.9		537.4		4,781.5
Discount		296.0		276.1		19.9
Total future value	$	5,614.9	$	813.5	$	4,801.4

(1)

Balances represent discounted amounts.

(2)

Consolidation of FG VIEs resulted in reductions of $407.2 million in future scheduled amortization of deferred premium revenue and $222.7 million in net present value of expected loss to be expensed.

Selected Information for Policies Paid in Installments

	As of December 31,
	2011		2010
	(dollars in millions)
Premiums receivable, net of ceding commission payable	$	1,002.9	$	1,167.6
Gross deferred premium revenue		2,192.6		2,933.6
Weighted-average risk-free rate used to discount premiums		3.4		3.5
Weighted-average period of premiums receivable (in years)		9.8		10.1

Rollforward of Deferred Acquisition Costs

	Year Ended December 31,
	2011			2010			2009
	(in millions)
Balance, beginning of period	$	239.8		$	242.0		$	288.6
Change in accounting(1)		—			—			101.8
Settlement of pre-existing relationships(2)		—			—			(114.0	)
Costs deferred during the period:
Ceded and assumed commissions		(12.5	)		(18.2	)		(10.2	)
Premium taxes		6.6			11.6			14.2
Compensation and other acquisition costs		28.8			39.4			25.9
Total		22.9			32.8			29.9
Costs amortized during the period		(30.8	)		(34.1	)		(53.9	)
Foreign exchange translation		0.0			(0.9	)		(10.4	)
Balance, end of period	$	231.9		$	239.8		$	242.0

(1)

Represents the effect of the adoption of financial guaranty accounting guidance on January 1, 2009.

(2)

As discussed in Note 3, Business Combinations, the Company settled the pre-existing relationship with AGMH. This relates to DAC associated with business previously assumed by AG Re from AGMH.

Financial Guaranty Insurance Present Value of Net Expected Loss and LAE to be paid Roll Forward by Sector

	Net Expected Loss to be Paid as of December 31, 2010(4)			Economic Loss Development(2)			(Paid) Recovered Losses(3)			Net Expected Loss to be Paid as of December 31, 2011(4)
	(in millions)
U.S. RMBS:
First lien:
Prime first lien	$	1.4		$	0.4		$	—		$	1.8
Alt-A first lien		184.4			14.6			(64.1	)		134.9
Option ARM		523.7			3.9			(374.7	)		152.9
Subprime		200.4			(43.0	)		(17.1	)		140.3
Total first lien		909.9			(24.1	)		(455.9	)		429.9
Second lien:
Closed-end second lien		56.6			(78.0	)		(58.2	)		(79.6	)
HELOCs		(805.7	)		151.0			623.6			(31.1	)
Total second lien		(749.1	)		73.0			565.4			(110.7	)
Total U.S. RMBS		160.8			48.9			109.5			319.2
Other structured finance		159.1			111.0			(17.3	)		252.8
Public finance		88.9			42.3			(65.2	)		66.0
Total	$	408.8		$	202.2		$	27.0		$	638.0

	Net Expected Loss to be Paid as of December 31, 2009			Economic Loss Development(2)			(Paid) Recovered Losses(3)			Expected Loss to be Paid as of December 31, 2010(4)
	(in millions)
U.S. RMBS:
First lien:
Prime first lien	$	—		$	1.4		$	—		$	1.4
Alt-A first lien		204.4			40.0			(60.0	)		184.4
Option ARM		545.2			160.1			(181.6	)		523.7
Subprime		77.5			126.3			(3.4	)		200.4
Total first lien		827.1			327.8			(245.0	)		909.9
Second lien:
Closed-end second lien		199.3			(73.3	)		(69.4	)		56.6
HELOCs		(206.6	)		(86.3	)		(512.8	)		(805.7	)
Total second lien		(7.3	)		(159.6	)		(582.2	)		(749.1	)
Total U.S. RMBS		819.8			168.2			(827.2	)		160.8
Other structured finance		115.7			52.0			(8.6	)		159.1
Public finance		130.9			9.6			(51.6	)		88.9
Total	$	1,066.4		$	229.8		$	(887.4	)	$	408.8

(1)

Amounts include all expected payments whether or not the insured transaction VIE is consolidated. Amounts exclude reserves for mortgage business of $1.9 million as of December 31, 2011 and $2.1 million as of December 31, 2010.

(2)

Economic loss development includes the effects of changes in assumptions based on observed market trends, changes in discount rates, accretion of discount and the economic effects of loss mitigation efforts.

(3)

Net of ceded paid losses, whether or not such amounts have been settled with reinsurers. Ceded paid losses are typically settled 45 days after the end of the reporting period. Such amounts are recorded in reinsurance recoverable on paid losses included in other assets.

(4)

Includes expected LAE to be paid for mitigating claim liabilities of $35.5 million as of December 31, 2011 and $17.2 million as of December 31, 2010.

Reconciliation of Present Value of Net Expected Loss to be Paid and Net Present Value of Net Expected Loss to be Expensed

	As of December 31,
	2011			2010
	(in millions)
Net expected loss to be paid	$	638.0		$	408.8
Less: net expected loss to be paid for FG VIEs		(106.7	)		49.2
Total		744.7			359.6
Contra-paid, net		73.4			121.3
Salvage and subrogation recoverable		367.7			1,032.4
Ceded salvage and subrogation recoverable(1)		(40.6	)		(129.4	)
Loss and LAE reserve		(676.9	)		(570.8	)
Reinsurance recoverable on unpaid losses		69.1			20.8
Net expected loss to be expensed(2)	$	537.4		$	833.9

(1)

Recorded in reinsurance balances payable on the consolidated balance sheet.

(2)

Excludes $222.7 million and $211.9 million as of December 31, 2011 and 2010, respectively, related to consolidated FG VIEs.

Key Assumptions in Base Case Expected Loss Estimates Second Lien RMBS

HELOC Key Variables	As of December 31, 2011	As of December 31, 2010	As of December 31, 2009
Plateau conditional default rate	4.0 – 27.4%	4.2 – 22.1%	10.7 – 40.0%
Final conditional default rate trended down to	0.4 – 3.2%	0.4 – 3.2%	0.5 – 3.2%
Expected period until final conditional default rate	36 months	24 months	21 months
Initial conditional prepayment rate	1.4 – 25.8%	3.3 – 17.5%	1.9 – 14.9%
Final conditional prepayment rate	10%	10%	10%
Loss severity	98%	98%	95%
Initial draw rate	0.0 – 15.3%	0.0 – 6.8%	0.1 – 2.0%

Closed end second lien Key Variables	As of December 31, 2011	As of December 31, 2010	As of December 31, 2009
Plateau conditional default rate	6.9 – 24.8%	7.3 – 27.1%	21.5 – 44.2%
Final conditional default rate trended down to	3.5 – 9.2%	2.9 – 8.1%	3.3 – 8.1%
Expected period until final conditional default rate	36 months	24 months	21 months
Initial conditional prepayment rate	0.9 – 14.7%	1.3 – 9.7%	0.8 – 3.6%
Final conditional prepayment rate	10%	10%	10%
Loss severity	98%	98%	95%

(1)

Represents assumptions for most heavily weighted scenario (the "base case").

First Lien Liquidation Rates

	December 31, 2011			December 31, 2010			December 31, 2009
30 – 59 Days Delinquent
Alt A and Prime		35	%		50	%		50	%
Option ARM		50			50			50
Subprime		30			45			45
60 – 89 Days Delinquent
Alt A and Prime		55			65			65
Option ARM		65			65			65
Subprime		45			65			65
90+ Days Delinquent
Alt A and Prime		65			75			75
Option ARM		75			75			75
Subprime		60			70			70
Bankruptcy
Alt A and Prime		55			75			75
Option ARM		70			75			75
Subprime		50			70			70
Foreclosure
Alt A and Prime		85			85			85
Option ARM		85			85			85
Subprime		80			85			85
Real Estate Owned (REO)
All		100			100			100

Key Assumptions in Base Case Expected Loss Estimates First Lien RMBS

	As of December 31, 2011	As of December 31, 2010	As of December 31, 2009
Alt-A First Lien
Plateau conditional default rate	2.8% – 41.3%	2.6% – 42.2%	1.5% – 35.7%
Intermediate conditional default rate	0.6% – 8.3%	0.4% – 6.3%	0.2% – 5.4%
Final conditional default rate	0.1% – 2.1%	0.1% – 2.1%	0.1% – 1.8%
Initial loss severity	65%	60%	60%
Initial conditional prepayment rate	0.0% – 24.4%	0.0% – 36.5%	0.0% – 20.5%
Final conditional prepayment rate	15%	10%	10%
Option ARM
Plateau conditional default rate	11.7% – 31.5%	11.7% – 32.7%	13.5% – 27.0%
Intermediate conditional default rate	2.3% – 6.3%	1.8% – 4.9%	2.0% – 4.1%
Final conditional default rate	0.6% – 1.6%	0.6% – 1.6%	0.7% – 1.4%
Initial loss severity	65%	60%	60%
Initial conditional prepayment rate	0.3% – 10.8%	0.0% – 17.7%	0.0% – 3.5%
Final conditional prepayment rate	15%	10%	10%
Subprime
Plateau conditional default rate	8.6% – 29.9%	9.0% – 34.6%	7.1% – 29.5%
Intermediate conditional default rate	1.7% – 6.0%	1.3% – 5.2%	1.1% – 4.4%
Final conditional default rate	0.4% – 1.5%	0.4% – 1.7%	0.4% – 1.5%
Initial loss severity	90%	80%	70%
Initial conditional prepayment rate	0.0% – 16.3%	0.0% – 13.5%	0.0% – 12.0%
Final conditional prepayment rate	15%	10%	10%

Balance Sheet Classification of R&W benefits, Net of Reinsurance

	As of December 31, 2011							As of December 31, 2010
	For all Financial Guaranty Insurance Contracts		Effect of Consolidating FG VIEs			Reported on Balance Sheet		For all Financial Guaranty Insurance Contracts		Effect of Consolidating FG VIEs			Reported on Balance Sheet
	(dollars in millions)
Salvage and subrogation recoverable	$	401.8	$	(197.3	)	$	204.5	$	866.2	$	(52.9	)	$	813.3
Loss and LAE reserve		857.5		(74.6	)		782.9		490.6		(85.8	)		404.8
Unearned premium reserve		175.5		(49.9	)		125.6		243.7		(22.5	)		221.2
Total	$	1,434.8	$	(321.8	)	$	1,113.0	$	1,600.5	$	(161.2	)	$	1,439.3

Rollforward of Estimated Benefit from Recoveries of Representation and Warranty Breaches, Net of Reinsurance

	Future Net R&W Benefit at December 31, 2010		R&W Development and Accretion of Discount During 2011		R&W Recovered During 2011(1)			Future Net R&W Benefit at December 31, 2011(2)
	(in millions)
Prime first lien	$	1.1	$	1.9	$	—		$	3.0
Alt-A first lien		81.0		122.8		(1.1	)		202.7
Option ARM		309.3		496.1		(91.5	)		713.9
Subprime		26.8		74.7		—			101.5
Closed end second lien		178.2		54.6		(9.0	)		223.8
HELOC		1,004.1		139.3		(953.5	)		189.9
Total	$	1,600.5	$	889.4	$	(1,055.1	)	$	1,434.8

	Future Net R&W Benefit at December 31, 2009		R&W Development and Accretion of Discount During 2010		R&W Recovered During 2010(1)			Future Net R&W Benefit at December 31, 2010
	(in millions)
Prime first lien	$	—	$	1.1	$	—		$	1.1
Alt-A first lien		64.2		16.8		—			81.0
Option ARM		203.7		166.6		(61.0	)		309.3
Subprime		—		26.8		—			26.8
Closed end second lien		76.5		101.7		—			178.2
HELOC		828.7		303.5		(128.1	)		1,004.1
Total	$	1,173.1	$	616.5	$	(189.1	)	$	1,600.5

(1)

Gross amounts recovered are $1,191.2 million and $217.6 million for year ended December 31, 2011 and 2010, respectively.

(2)

Includes R&W benefit of $552.2 million attributable to transactions covered by the Bank of America Agreement.

Financial Guaranty Insurance U.S. RMBS Risks with R&W Benefit

	Number of Risks(1) as of December 31,				Debt Service as of December 31,
	2011		2010		2011		2010
	(dollars in millions)
Prime first lien		1		1	$	52.3	$	57.1
Alt-A first lien		22		17		1,781.1		1,882.8
Option ARM		12		10		1,621.4		1,909.8
Subprime		5		1		1,054.0		228.7
Closed-end second lien		4		4		361.4		444.9
HELOC		15		13		2,978.5		2,969.8
Total		59		46	$	7,848.7	$	7,493.1

(1)

A risk represents the aggregate of the financial guaranty policies that share the same revenue source for purposes of making debt service payments.

Breakdown of the development and accretion amount in the rollforward of estimated recoveries associated with alleged breaches of R&W

	Year Ended December 31,
	2011			2010
	(in millions)
Inclusion of new deals with breaches of R&W during period	$	108.2		$	170.5
Change in recovery assumptions as the result of additional file review and recovery success		218.3			253.5
Estimated increase (decrease) in defaults that will result in additional (lower) breaches		(77.1	)		188.1
Results of settlements		622.0			—
Accretion of discount on balance		18.0			4.4
Total	$	889.4		$	616.5

Loss and LAE Reserve, Net of Reinsurance and Salvage and Subrogation Recoverable

	As of December 31, 2011									As of December 31, 2010
	Loss and LAE Reserve(1)			Salvage and Subrogation Recoverable(2)			Net			Loss and LAE Reserve(1)			Salvage and Subrogation Recoverable(2)			Net
	(in millions)
U.S. RMBS:
First lien:
Prime first lien	$	1.2		$	—		$	1.2		$	1.2		$	—		$	1.2
Alt-A first lien		69.8			55.4			14.4			39.2			2.6			36.6
Option ARM		141.7			140.3			1.4			223.3			63.0			160.3
Subprime		51.4			0.3			51.1			108.3			0.1			108.2
Total first lien		264.1			196.0			68.1			372.0			65.7			306.3
Second lien:
Closed-end second lien		11.2			136.2			(125.0	)		7.7			50.3			(42.6	)
HELOC		61.1			177.2			(116.1	)		7.1			843.4			(836.3	)
Total second lien		72.3			313.4			(241.1	)		14.8			893.7			(878.9	)
Total U.S. RMBS		336.4			509.4			(173.0	)		386.8			959.4			(572.6	)
Other structured finance		233.0			5.9			227.1			131.1			1.4			129.7
Public finance		100.0			69.9			30.1			81.6			34.4			47.2
Total financial guaranty		669.4			585.2			84.2			599.5			995.2			(395.7	)
Other		1.9			—			1.9			2.1			—			2.1
Subtotal		671.3			585.2			86.1			601.6			995.2			(393.6	)
Effect of consolidating FG VIEs		(61.6	)		(258.1	)		196.5			(49.5	)		(92.2	)		42.7
Total	$	609.7		$	327.1		$	282.6		$	552.1		$	903.0		$	(350.9	)

(1)

The December 31, 2011 loss and LAE consists of $679.0 million loss and LAE reserve net of $69.3 million of reinsurance recoverable on unpaid losses. The December 31, 2010 loss and LAE consists of $574.4 million loss and LAE reserve net of $22.3 million of reinsurance recoverable on unpaid losses.

(2)

The December 31, 2011 salvage and subrogation recoverable consists of $367.7 million of salvage and subrogation recoverable net of $40.6 million in ceded salvage and subrogation recorded in "reinsurance balances payable." The December 31, 2010 salvage and subrogation recoverable consists of $1,032.4 million of salvage and subrogation recoverable net of $129.4 million in ceded salvage and subrogation recorded in "reinsurance balances payable."

Loss and LAE Reported on the Consolidated Statements of Operations

	Year Ended December 31,
	2011			2010			2009
	(in millions)
Financial Guaranty:
U.S. RMBS:
First lien:
Prime first lien	$	0.1		$	0.9		$	—
Alt-A first lien		52.6			37.4			21.1
Option ARM		202.6			272.4			43.0
Subprime		(39.1	)		85.9			13.1
Total first lien		216.2			396.6			77.2
Second lien:
Closed end second lien		1.0			5.2			47.8
HELOC		171.4			(20.4	)		154.1
Total second lien		172.4			(15.2	)		201.9
Total U.S. RMBS		388.6			381.4			279.1
Other structured finance		117.6			63.6			31.4
Public finance		48.4			32.9			71.2
Total financial guaranty		554.6			477.9			381.7
Other		—			0.2			12.1
Subtotal		554.6			478.1			393.8
Effect of consolidating FG VIEs		(92.7	)		(65.9	)		—
Total loss and LAE	$	461.9		$	412.2		$	393.8

Financial Guaranty Insurance BIG Transaction Loss Summary

Financial Guaranty Insurance BIG Transaction Loss Summary
December 31, 2011

	BIG Categories
	BIG 1						BIG 2						BIG 3
	Gross			Ceded			Gross			Ceded			Gross			Ceded			Total BIG, Net			Effect of Consolidating VIEs			Total
	(dollars in millions)
Number of risks(1)		171			(68	)		71			(26	)		126			(48	)		368			—			368
Remaining weighted-average contract period (in years)		9.8			9.2			12.2			18.9			9.1			6.4			10.1			—			10.1
Net outstanding exposure:
Principal	$	10,005.0		$	(1,382.8	)	$	4,518.7		$	(304.3	)	$	7,948.8		$	(632.0	)	$	20,153.4		$	—		$	20,153.4
Interest		4,378.5			(486.8	)		3,104.9			(411.9	)		2,489.2			(170.1	)		8,903.8			—			8,903.8
Total(2)	$	14,383.5		$	(1,869.6	)	$	7,623.6		$	(716.2	)	$	10,438.0		$	(802.1	)	$	29,057.2		$	—		$	29,057.2
Expected cash outflows (inflows)	$	1,730.6		$	(658.8	)	$	1,833.3		$	(120.3	)	$	2,423.0		$	(133.4	)	$	5,074.4		$	(998.4	)	$	4,076.0
Potential recoveries(3)		(1,798.0	)		664.0			(1,079.3	)		38.5			(2,040.5	)		100.3			(4,115.0	)		1,059.8			(3,055.2	)
Subtotal		(67.4	)		5.2			754.0			(81.8	)		382.5			(33.1	)		959.4			61.4			1,020.8
Discount		15.7			(4.6	)		(240.6	)		31.6			(125.1	)		1.6			(321.4	)		45.3			(276.1	)
Present value of expected cash flows	$	(51.7	)	$	0.6		$	513.4		$	(50.2	)	$	257.4		$	(31.5	)	$	638.0		$	106.7		$	744.7
Deferred premium revenue	$	260.8		$	(69.1	)	$	280.9		$	(12.3	)	$	991.8		$	(126.6	)	$	1,325.5		$	(390.7	)	$	934.8
Reserves (salvage)(4)	$	(96.6	)	$	6.9		$	319.5		$	(41.9	)	$	(110.2	)	$	6.5		$	84.2		$	196.5		$	280.7

Financial Guaranty Insurance BIG Transaction Loss Summary
December 31, 2010

	BIG Categories
	BIG 1						BIG 2						BIG 3
																			Total BIG, Net			Effect of Consolidating VIEs
	Gross			Ceded			Gross			Ceded			Gross			Ceded									Total
	(dollars in millions)
Number of risks(1)		119			(45	)		98			(42	)		115			(42	)		332			—			332
Remaining weighted-average contract period (in years)		11.7			16.0			8.4			7.9			8.8			6.0			9.6			—			9.6
Net outstanding exposure:
Principal	$	6,173.0		$	(723.3	)	$	5,899.3		$	(182.8	)	$	7,954.5		$	(673.6	)	$	18,447.1		$	—		$	18,447.1
Interest		3,599.5			(580.4	)		2,601.6			(70.9	)		2,490.7			(186.3	)		7,854.2			—			7,854.2
Total(2)	$	9,772.5		$	(1,303.7	)	$	8,500.9		$	(253.7	)	$	10,445.2		$	(859.9	)	$	26,301.3		$	—		$	26,301.3
Expected cash outflows (inflows)	$	303.9		$	(20.2	)	$	2,036.6		$	(68.9	)	$	2,256.6		$	(133.2	)	$	4,374.8		$	(384.2	)	$	3,990.6
Potential recoveries(3)		(375.2	)		37.4			(533.0	)		16.6			(2,543.6	)		197.5			(3,200.3	)		354.8			(2,845.5	)
Subtotal		(71.3	)		17.2			1,503.6			(52.3	)		(287.0	)		64.3			1,174.5			(29.4	)		1,145.1
Discount		(21.0	)		(5.5	)		(613.2	)		21.5			(139.6	)		(7.9	)		(765.7	)		(19.8	)		(785.5	)
Present value of expected cash flows	$	(92.3	)	$	11.7		$	890.4		$	(30.8	)	$	(426.6	)	$	56.4		$	408.8		$	(49.2	)	$	359.6
Deferred premium revenue	$	169.9		$	(16.9	)	$	572.4		$	(30.3	)	$	995.9		$	(120.7	)	$	1,570.3		$	(263.9	)	$	1,306.4
Reserves (salvage)(4)	$	(112.9	)	$	12.4		$	424.4		$	(9.5	)	$	(815.9	)	$	105.8		$	(395.7	)	$	42.7		$	(353.0	)

(1)

A risk represents the aggregate of the financial guaranty policies that share the same revenue source for purposes of making debt service payments. The ceded number of risks represents the number of risks for which the Company ceded a portion of its exposure.

(2)

Includes BIG amounts related to FG VIEs which are not eliminated.

(3)

Includes estimated future recoveries for breaches of R&W as well as excess spread, and draws on HELOCs.

(4)

See table "Components of net reserves (salvage)."

Components of Net Reserves (Salvage)

	As of December 31,
	2011			2010
	(in millions)
Loss and LAE reserve	$	679.0		$	574.4
Reinsurance recoverable on unpaid losses		(69.3	)		(22.3	)
Salvage and subrogation recoverable		(367.7	)		(1,032.4	)
Salvage and subrogation payable(1)		40.6			129.4
Total		282.6			(350.9	)
Less: other		1.9			2.1
Financial guaranty net reserves (salvage)	$	280.7		$	(353.0	)

(1)

Recorded as a component of reinsurance balances payable.