Fair Value Measurement (Tables)

12 Months Ended

Dec. 31, 2011

Fair Value Measurement

Information by Credit Spread Type

	As of December 31,
	2011			2010
Based on actual collateral specific spreads		5	%		5	%
Based on market indices		90	%		91	%
Provided by the CDS counterparty		5	%		4	%
Total		100	%		100	%

Schedule of example effects of change in gross spreads, company's own credit spread and cost to buy protection on the on the Company affect the amount of premium the company can demand for credit protection

	Scenario 1					Scenario 2
	bps		% of Total			bps		% of Total
Original gross spread/cash bond price (in bps)		185					500
Bank profit (in bps)		115		62	%		50		10	%
Hedge cost (in bps)		30		16			440		88
The Company premium received per annum (in bps)		40		22			10		2

Fair Value Hierarchy of Financial Instruments Carried at Fair Value

Fair Value Hierarchy of Financial Instruments Carried at Fair Value
As of December 31, 2011

			Fair Value Hierarchy
	Fair Value		Level 1		Level 2		Level 3
	(in millions)
Assets:
Investment portfolio, available-for-sale:
Fixed maturity securities
U.S. government and agencies	$	922.4	$	—	$	922.4	$	—
Obligations of state and political subdivisions		5,455.4		—		5,445.9		9.5
Corporate securities		1,038.4		—		1,038.4		—
Mortgage-backed securities:
RMBS		1,427.9		—		1,294.3		133.6
CMBS		500.0		—		500.0		—
Asset-backed securities		458.1		—		222.6		235.5
Foreign government securities		339.7		—		339.7		—
Total fixed maturity securities		10,141.9		—		9,763.3		378.6
Short-term investments		734.0		210.3		523.7		—
Other invested assets(1)		43.5		—		32.8		10.7
Credit derivative assets		468.9		—		—		468.9
FG VIEs' assets, at fair value		2,819.1		—		—		2,819.1
Other assets(2)		79.5		25.7		—		53.8
Total assets carried at fair value	$	14,286.9	$	236.0	$	10,319.8	$	3,731.1
Liabilities:
Credit derivative liabilities	$	1,772.8	$	—	$	—	$	1,772.8
FG VIEs' liabilities with recourse, at fair value		2,396.9		—		—		2,396.9
FG VIEs' liabilities without recourse, at fair value		1,061.5		—		—		1,061.5
Total liabilities carried at fair value	$	5,231.2	$	—	$	—	$	5,231.2

Fair Value Hierarchy of Financial Instruments Carried at Fair Value
As of December 31, 2010

			Fair Value Hierarchy
	Fair Value		Level 1		Level 2		Level 3
	(in millions)
Assets:
Investment portfolio, available-for-sale:
Fixed maturity securities
U.S. government and agencies	$	1,048.2	$	—	$	1,048.2	$	—
Obligations of state and political subdivisions		4,959.9		—		4,959.9		—
Corporate securities		992.5		—		992.5		—
Mortgage-backed securities:
RMBS		1,171.1		—		1,071.7		99.4
CMBS		379.1		—		379.1		—
Asset-backed securities		502.9		—		292.7		210.2
Foreign government securities		348.6		—		348.6		—
Total fixed maturity securities		9,402.3		—		9,092.7		309.6
Short-term investments		1,055.6		277.4		778.2		—
Other invested assets(1)		33.3		0.2		21.4		11.7
Credit derivative assets		592.9		—		—		592.9
FG VIEs' assets, at fair value		3,657.5		—		—		3,657.5
Other assets(2)		44.4		25.7		18.7		—
Total assets carried at fair value	$	14,786.0	$	303.3	$	9,911.0	$	4,571.7
Liabilities:
Credit derivative liabilities	$	2,462.8	$	—	$	—	$	2,462.8
FG VIEs' liabilities with recourse, at fair value		3,030.9		—		—		3,030.9
FG VIEs' liabilities without recourse, at fair value		1,337.2		—		—		1,337.2
Other liabilities		0.1		—		0.1		—
Total liabilities carried at fair value	$	6,831.0	$	—	$	0.1	$	6,830.9

(1)

Includes mortgage loans that are recorded at fair value on a non-recurring basis. At December 31, 2011 and December 31, 2010, such investments were carried at their market value of $9.0 million and $9.4 million, respectively. The mortgage loans are classified as Level 3 of the fair value hierarchy as there are significant unobservable inputs used in the valuation of such loans. An indicative dealer quote is used to price the non-performing portion of these mortgage loans. The performing loans are valued using management's determination of future cash flows arising from these loans, discounted at the rate of return that would be required by a market participant. This rate of return is based on indicative dealer quotes.

(2)

Includes fair value of CCS and supplemental executive retirement account assets.

Fair Value Level 3 Roll Forward

	Year Ended December 31, 2011
	Fixed Maturity Securities																				FG VIEs' Liabilities with Recourse, at Fair Value			FG VIEs' Liabilities without Recourse, at Fair Value
																		Credit Derivative Asset (Liability), net(5)
	Obligations of State and Political Subdivisions		RMBS			Asset- Backed Securities			Other Invested Assets			FG VIEs' Assets at Fair Value			Other Assets
	(in millions)
Fair value at December 31, 2010	$	—	$	99.4		$	210.2		$	2.3		$	3,657.5		$	—		$	(1,869.9	)	$	(3,030.9	)	$	(1,337.2	)
Total pretax realized and unrealized gains/(losses) recorded in:(1)
Net income (loss)		—		(23.3	)(2)		(7.5	)(2)		—			(314.3	)(3)		34.0	(4)		559.7	(6)		80.3	(3)		55.7	(3)
Other comprehensive income (loss)		0.4		(93.3	)		9.1			(0.7	)		—			—			—			—			—
Purchases		9.1		253.6			47.1			—			—			—			—			—			—
Sales		—		(4.1	)		—			—			—			—			—			—			—
Settlements		—		(35.1	)		(23.4	)		0.1			(806.5	)		—			6.3			826.1			283.1
FG VIE consolidations		—		(63.6	)		—			—			282.4			—			—			(272.4	)		(63.1	)
Transfers into Level 3		—		—			—			—			—			19.8			—			—			—
Fair value at December 31, 2011	$	9.5	$	133.6		$	235.5		$	1.7		$	2,819.1		$	53.8		$	(1,303.9	)	$	(2,396.9	)	$	(1,061.5	)
Change in unrealized gains/(losses) related to financial instruments held at December 31, 2011	$	0.4	$	(92.7	)	$	9.1		$	(0.7	)	$	160.9		$	34.0		$	570.4		$	88.4		$	(78.3	)

	Year Ended December 31, 2010
	Fixed Maturity Securities												Credit Derivative Asset (Liability), net(5)						FG VIEs' Liabilities without Recourse, at Fair Value
										FG VIEs' Assets at Fair Value						FG VIEs' Liabilities with Recourse, at Fair Value
	RMBS			Asset- Backed Securities			Other Invested Assets
	(in millions)
Fair value at December 31, 2009	$	—		$	203.9		$	0.2		$	—		$	(1,542.1	)	$	—		$	—
Adoption of new accounting standard		—			—			—			1,925.3			—			(2,110.9	)		(226.0	)
Fair value at January 1, 2010		—			203.9			0.2			1,925.3			(1,542.1	)		(2,110.9	)		(226.0	)
Total pretax realized and unrealized gains/(losses) recorded in:(1)
Net income (loss)		(0.1	)(2)		(14.6	)(2)		—			84.8	(3)		(1.6	)(6)		(45.4	)(3)		(35.4	)(3)
Other comprehensive income (loss)		(31.2	)		1.2			(0.5	)		—			—			—			—
Purchases, issuances, sales, settlements, net		90.3			0.9			2.6			(282.4	)		(326.2	)		255.3			91.7
FG VIE consolidations, deconsolidations, net		(14.7	)		—			—			1,929.8			—			(1,129.9	)		(1,167.5	)
Transfers in and/or out of Level 3(7)		55.1			18.8			—			—			—			—			—
Fair value at December 31, 2010	$	99.4		$	210.2		$	2.3		$	3,657.5		$	(1,869.9	)	$	(3,030.9	)	$	(1,337.2	)
Change in unrealized gains/(losses) related to financial instruments held at December 31, 2010	$	(31.2	)	$	1.2		$	—		$	243.2		$	(120.9	)	$	(323.8	)	$	(7.5	)

(1)

Realized and unrealized gains (losses) from changes in values of Level 3 financial instruments represent gains (losses) from changes in values of those financial instruments only for the periods in which the instruments were classified as Level 3.

(2)

Included in net realized investment gains (losses) and net investment income.

(3)

Included in net change in fair value of FG VIEs.

(4)

Recorded in fair value gain (loss) on committed capital securities.

(5)

Represents net position of credit derivatives. The consolidated balance sheet presents gross assets and liabilities based on net counterparty exposure.

(6)

Reported in net change in fair value of credit derivatives.

(7)

After analyzing prices provided by a third party pricing service, the Company determined it was necessary to reduce the pricing on one security based on the Company's own cash flow analysis which was deemed a Level 3.

Fair Value of Financial Instruments

	As of December 31, 2011				As of December 31, 2010
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
	(in millions)
Assets:
Fixed maturity securities	$	10,141.9	$	10,141.9	$	9,402.3	$	9,402.3
Short-term investments		734.0		734.0		1,055.6		1,055.6
Other invested assets		170.4		182.4		259.8		269.7
Credit derivative assets		468.9		468.9		592.9		592.9
FG VIEs' assets, at fair value		2,819.1		2,819.1		3,657.5		3,657.5
Other assets		79.5		79.5		44.4		44.4
Liabilities:
Financial guaranty insurance contracts(1)		4,664.0		4,319.8		4,777.6		5,582.8
Long-term debt(2)		1,038.3		1,186.3		1,052.9		1,201.8
Credit derivative liabilities		1,772.8		1,772.8		2,462.8		2,462.8
FG VIEs' liabilities with recourse, at fair value		2,396.9		2,396.9		3,030.9		3,030.9
FG VIEs' liabilities without recourse, at fair value		1,061.5		1,061.5		1,337.2		1,337.2

(1)

Carrying amount includes the balance sheet amounts related to financial guaranty insurance contract premiums and losses, net of reinsurance.

(2)

Carrying amount represented principal less accumulated discount or plus accumulated premium.