Financial Guaranty Contracts Accounted for as Credit Derivatives (Tables)

12 Months Ended

Dec. 31, 2011

Financial Guaranty Contracts Accounted for as Credit Derivatives

Credit Derivatives Net Par Outstanding

	As of December 31, 2011									As of December 31, 2010
Asset Type	Net Par Outstanding		Original Subordination(1)			Current Subordination(1)			Weighted Average Credit Rating	Net Par Outstanding		Original Subordination(1)			Current Subordination(1)			Weighted Average Credit Rating
	(dollars in millions)
Pooled corporate obligations:
Collateralized loan obligation/collateral bond obligations	$	34,567		32.6	%		32.0	%	AAA	$	45,953		32.2	%		30.4	%	AAA
Synthetic investment grade pooled corporate		12,393		20.4			18.7		AAA		14,905		19.2			17.6		AAA
Synthetic high yield pooled corporate		5,049		35.7			30.3		AA+		8,249		39.4			34.6		AA+
TruPS CDOs		4,518		46.6			31.9		BB		5,757		46.8			32.0		BB+
Market value CDOs of corporate obligations		4,546		30.6			28.9		AAA		5,069		36.0			42.9		AAA
Total pooled corporate obligations		61,073		31.2			28.9		AAA		79,933		31.7			29.3		AAA
U.S. RMBS:
Option ARM and Alt-A first lien		4,060		19.6			13.6		BB-		4,767		19.7			17.0		B+
Subprime first lien (including net interest margin)		4,012		30.1			53.9		A+		4,460		27.9			50.4		A+
Prime first lien		398		10.9			8.4		B		468		10.9			10.3		B
Closed end second lien and HELOCs(2)		62		—			—		B		81		—			—		B
Total U.S. RMBS		8,532		24.1			32.2		BBB		9,776		23.1			32.4		BBB-
CMBS		4,612		32.6			38.9		AAA		6,751		29.8			31.3		AAA
Other		10,830		—			—		A		13,311		—			—		A+
Total	$	85,047							AA+	$	109,771							AA+

(1)

Represents the sum of subordinate tranches and over-collateralization and does not include any benefit from excess interest collections that may be used to absorb losses.

(2)

Many of the closed-end second lien transactions insured by the Company have unique structures whereby the collateral may be written down for losses without a corresponding write-down of the obligations insured by the Company. Many of these transactions are currently undercollateralized, with the principal amount of collateral being less than the principal amount of the obligation insured by the Company. The Company is not required to pay principal shortfalls until legal maturity (rather than making timely principal payments), and takes the undercollateralization into account when estimating expected losses for these transactions.

Distribution of Credit Derivative Net Par Outstanding by Internal Rating

	December 31, 2011					December 31, 2010
Ratings	Net Par Outstanding		% of Total			Net Par Outstanding		% of Total
	(dollars in millions)
Super Senior	$	21,802		25.6	%	$	29,344		26.7	%
AAA		40,240		47.3			50,214		45.7
AA		4,084		4.8			8,138		7.4
A		5,830		6.9			7,405		6.7
BBB		5,030		5.9			6,312		5.8
BIG		8,061		9.5			8,358		7.7
Total credit derivative net par outstanding	$	85,047		100.0	%	$	109,771		100.0	%

U.S. Residential Mortgage-Backed Securities

	December 31, 2011
										Full Year 2011 Unrealized Gain (Loss) (in millions)
Vintage	Net Par Outstanding (in millions)		Original Subordination(1)			Current Subordination(1)			Weighted Average Credit Rating
2004 and Prior	$	144		6.3	%		19.4	%	BBB+	$	—
2005		2,525		30.5			64.8		AA		0.8
2006		1,641		29.3			35.5		A-		5.2
2007		4,222		18.6			11.0		B+		375.3
Total	$	8,532		24.1	%		32.2	%	BBB	$	381.3

(1)

Represents the sum of subordinate tranches and overcollateralization and does not include any benefit from excess interest collections that may be used to absorb losses.

Commercial Mortgage-Backed Securities

	December 31, 2011
										Full Year 2011 Unrealized Gain (Loss) (in millions)
Vintage	Net Par Outstanding (in millions)		Original Subordination(1)			Current Subordination(1)			Weighted Average Credit Rating
2004 and Prior	$	173		29.6	%		57.6	%	AAA	$	(0.2	)
2005		674		17.9			32.6		AAA		(0.1	)
2006		2,176		33.6			39.1		AAA		12.1
2007		1,589		38.0			39.3		AAA		(1.4	)
Total	$	4,612		32.6	%		38.9	%	AAA	$	10.4

(1)

Represents the sum of subordinate tranches and over-collateralization and does not include any benefit from excess interest collections that may be used to absorb losses.

Net Change in Fair Value of Credit Derivatives

	Year Ended December 31,
	2011			2010			2009
	(in millions)
Net credit derivative premiums received and receivable	$	184.7		$	206.8		$	168.1
Net ceding commissions (paid and payable) received and receivable		3.4			3.5			2.2
Realized gains on credit derivatives		188.1			210.3			170.3
Termination losses		(22.5	)		—			—
Net credit derivative losses (paid and payable) recovered and recoverable		(159.6	)		(56.8	)		(6.7	)
Total realized gains and other settlements on credit derivatives		6.0			153.5			163.6
Net unrealized gains (losses) on credit derivatives		553.7			(155.1	)		(337.8	)
Net change in fair value of credit derivatives	$	559.7		$	(1.6	)	$	(174.2	)

Net Change in Unrealized Gains (Losses) on Credit Derivatives By Sector

	Year Ended December 31,
Asset Type	2011			2010			2009
	(in millions)
Pooled corporate obligations:
CLOs/Collateral bond obligations	$	10.4		$	2.1		$	152.3
Synthetic investment grade pooled corporate		15.6			(1.9	)		(24.0	)
Synthetic high yield pooled corporate		(1.2	)		10.8			104.7
TruPS CDOs		14.3			59.1			(44.1	)
Market value CDOs of corporate obligations		(0.3	)		(0.1	)		(0.6	)
CDO of CDOs (corporate)		—			—			6.3
Total pooled corporate obligations		38.8			70.0			194.6
U.S. RMBS:
Option ARM and Alt-A first lien		299.9			(280.4	)		(429.3	)
Subprime first lien (including net interest margin)		24.0			(10.1	)		4.9
Prime first lien		46.9			(8.3	)		(85.2	)
Closed end second lien and HELOCs		10.5			(2.0	)		11.6
Total U.S. RMBS		381.3			(300.8	)		(498.0	)
CMBS		10.4			10.1			(41.1	)
Other		123.2			65.6			6.7
Total	$	553.7		$	(155.1	)	$	(337.8	)

CDS Spread on AGC and AGM

	As of December 31,
	2011		2010		2009			2008		2007
Quoted price of CDS contract (in basis points):
AGC		1,140		804		634			1,775		190
AGM		778		650		541	(1)		N/A		N/A

(1)

The quoted price of a CDS contract for AGM was 1,047 basis points at July 1, 2009.

Components of Credit Derivative Assets (Liabilities)

	As of December 31, 2011			As of December 31, 2010
	(in millions)
Credit derivative assets	$	468.9		$	592.9
Credit derivative liabilities		(1,772.8	)		(2,462.8	)
Net fair value of credit derivatives		(1,303.9	)		(1,869.9	)
Less: Effect of AGC and AGM credit spreads		4,291.9			3,669.4
Fair value of credit derivatives before effect of AGC and AGM credit spreads	$	(5,595.8	)	$	(5,539.3	)

Net Fair Value and Expected Losses of Credit Derivatives by Sector

Asset Type	Fair Value of Credit Derivative Asset (Liability), net			Present Value of Expected Claim (Payments) Recoveries(1)
	(in millions)
Pooled corporate obligations:
CLOs/ Collateralized bond obligations	$	(0.7	)	$	—
Synthetic investment grade pooled corporate		(23.8	)		—
Synthetic high-yield pooled corporate		(15.7	)		(5.2	)
TruPS CDOs		(11.9	)		(39.3	)
Market value CDOs of corporate obligations		2.5			—
Total pooled corporate obligations		(49.6	)		(44.5	)
U.S. RMBS:
Option ARM and Alt-A first lien		(596.4	)		(191.2	)
Subprime first lien (including net interest margin)		(22.5	)		(94.9	)
Prime first lien		(44.3	)		—
Closed-end second lien and HELOCs		(14.9	)		6.6
Total U.S. RMBS		(678.1	)		(279.5	)
CMBS		(4.9	)		—
Other		(571.3	)		(94.9	)
Total	$	(1,303.9	)	$	(418.9	)

(1)

Represents amount in excess of the present value of future installment fees to be received of $47.1 million. Includes R&W on credit derivatives of $215.0 million.

Schedule of estimated change in fair values on the net balance of the Company's credit derivative positions assuming immediate parallel shifts in credit spreads

	As of December 31, 2011
Credit Spreads(1)	Estimated Net Fair Value (Pre-Tax)			Estimated Change in Gain/(Loss) (Pre-Tax)
	(in millions)
100% widening in spreads	$	(2,739.7	)	$	(1,435.8	)
50% widening in spreads		(2,023.6	)		(719.7	)
25% widening in spreads		(1,665.7	)		(361.8	)
10% widening in spreads		(1,450.9	)		(147.0	)
Base Scenario		(1,303.9	)		—
10% narrowing in spreads		(1,188.7	)		115.2
25% narrowing in spreads		(1,018.4	)		285.5
50% narrowing in spreads		(741.4	)		562.5

(1)

Includes the effects of spreads on both the underlying asset classes and the Company's own credit spread.