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Financial Guaranty Contracts Accounted for as Credit Derivatives (Tables)

9 Months Ended

Sep. 30, 2011

Financial Guaranty Contracts Accounted for as Credit Derivatives

	As of September 30, 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 obligations/Collateralized bond obligations	$	36,983	32.7	%	32.1	%	AAA	$	45,953	32.2	%	30.4	%	AAA
Synthetic investment grade pooled corporate	13,379		19.8		18.4		AAA	14,905		19.2		17.6		AAA
Synthetic high-yield pooled corporate	6,027		35.6		30.5		AAA	8,249		39.4		34.6		AA+
Trust preferred securities collateralized debt obligations	4,613		46.6		31.8		BB+	5,757		46.8		32.0		BB+
Market value collateralized debt obligations of corporate obligations	5,234		32.1		25.0		AAA	5,069		36.0		42.9		AAA
Total pooled corporate obligations	66,236		31.3		28.6		AAA	79,933		31.7		29.3		AAA
U.S. RMBS:
Option ARM and Alt-A first lien	4,251		19.6		13.0		B+	4,767		19.7		17.0		B+
Subprime first lien (including net interest margin)	4,132		30.1		54.0		A+	4,460		27.9		50.4		A+
Prime first lien	410		10.9		9.1		B	468		10.9		10.3		B
Closed-end second lien and HELOCs(2)	65		—		—		B	81		—		—		B
Total U.S. RMBS	8,858		24.0		31.7		BBB-	9,776		23.1		32.4		BBB-
CMBS	4,480		33.9		40.1		AAA	6,751		29.8		31.3		AAA
Other	11,130		—		—		A	13,311		—		—		A+
Total	$	90,704					AA+	$	109,771					AA+

(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.

(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 Rating

	September 30, 2011				December 31, 2010
Ratings	Net Par Outstanding		% of Total		Net Par Outstanding		% of Total
	(dollars in millions)
Super Senior	$	23,744	26.2	%	$	29,344	26.7	%
AAA	43,350		47.8		50,214		45.7
AA	4,361		4.8		8,138		7.4
A	6,312		7.0		7,405		6.7
BBB	4,784		5.2		6,312		5.8
BIG	8,153		9.0		8,358		7.7
Total credit derivative net par outstanding	$	90,704	100.0	%	$	109,771	100.0	%

U.S. Residential Mortgage-Backed Securities

	September 30, 2011							Net Change in Unrealized Gain (Loss)
Vintage	Net Par Outstanding (in millions)		Original Subordination(1)		Current Subordination(1)		Weighted Average Credit Internal Rating	Third Quarter 2011		Nine Months 2011
								(in millions)
2004 and Prior	$	149	6.2	%	19.4	%	A-	$	2.5	$	(0.5	)
2005	2,623		30.4		64.5		AA	14.1		(3.1		)
2006	1,660		29.3		35.4		BBB+	104.0		3.0
2007	4,426		18.6		10.5		B	879.0		658.3
Total	$	8,858	24.0	%	31.7	%	BBB-	$	999.6	$	657.7

(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

	September 30, 2011							Net Change in Unrealized Gain (Loss)
Vintage	Net Par Outstanding (in millions)		Original Subordination(1)		Current Subordination(1)		Weighted Average Credit Internal Rating	Third Quarter 2011			Nine Months 2011
								(in millions)
2004 and Prior	$	211	29.8	%	57.4	%	AAA	$	0.2		$	—
2005	676		17.8		31.2		AAA	(0.1		)	(0.1		)
2006	2,178		33.6		38.8		AAA	0.7			11.6
2007	1,415		42.6		43.8		AAA	(1.0		)	(1.2		)
Total	$	4,480	33.9	%	40.1	%	AAA	$	(0.2	)	$	10.3

(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.

Net Change in Fair Value of Credit Derivatives

	Third Quarter						Nine Months
	2011			2010			2011			2010
	(in millions)
Net credit derivative premiums received and receivable	$	40.6		$	49.8		$	147.8		$	154.2
Net ceding commissions (paid and payable) received and receivable	0.7			0.9			2.9			2.9
Realized gains on credit derivatives	41.3			50.7			150.7			157.1
Termination losses	—			—			(22.5		)	—
Net credit derivative losses (paid and payable) recovered and recoverable	(40.8		)	1.7			(103.1		)	(39.6		)
Total realized gains and other settlements on credit derivatives	0.5			52.4			25.1			117.5
Net unrealized gains (losses) on credit derivatives	1,155.5			(276.4		)	829.8			10.8
Net change in fair value of credit derivatives	$	1,156.0		$	(224.0	)	$	854.9		$	128.3

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

	Third Quarter						Nine Months
Asset Type	2011			2010			2011			2010
	(in millions)
Pooled corporate obligations:
CLOs/Collateralized bond obligations	$	13.1		$	(1.4	)	$	11.5		$	1.9
Synthetic investment grade pooled corporate	0.8			0.3			10.5			(3.7		)
Synthetic high-yield pooled corporate	(1.3		)	(2.9		)	(0.6		)	11.6
TruPS CDOs	82.5			(11.6		)	46.2			53.6
Market value CDOs of corporate obligations	5.1			(0.4		)	(0.2		)	(0.1		)
Total pooled corporate obligations	100.2			(16.0		)	67.4			63.3
U.S. RMBS:
Option ARM and Alt-A first lien	780.8			(205.1		)	541.3			(44.6		)
Subprime first lien (including net interest margin)	108.6			(8.1		)	17.3			(7.2		)
Prime first lien	101.9			(17.2		)	89.7			2.2
Closed-end second lien and HELOCs	8.3			1.6			9.4			(4.3		)
Total U.S. RMBS	999.6			(228.8		)	657.7			(53.9		)
CMBS	(0.2		)	0.4			10.3			10.2
Other(1)	55.9			(32.0		)	94.4			(8.8		)
Total	$	1,155.5		$	(276.4	)	$	829.8		10.8

(1) “Other” includes all other U.S. and international asset classes, such as commercial receivables, international infrastructure, international RMBS securities and pooled infrastructure securities.

Components of Credit Derivative Assets (Liabilities)

	As of September 30, 2011			As of December 31, 2010
	(in millions)
				(restated)
Credit derivative assets	$	467.2		$	592.9
Credit derivative liabilities	(1,495.3		)	(2,462.8		)
Net fair value of credit derivatives	(1,028.1		)	(1,869.9		)
Less: Effect of AGC and AGM credit spreads	4,938.6			3,669.4
Fair value of credit derivatives before effect of AGC and AGM credit spreads	$	(5,966.7	)	$	(5,539.3	)

Net Fair Value and Expected Losses of Credit Derivatives by Sector

Asset Type	Credit Derivative Asset (Liability), net			Present Value of Expected Claim (Payments) Recoveries(2)
	(in millions)
Pooled corporate obligations:
CLOs/ Collateralized bond obligations	$	0.2		$	—
Synthetic investment grade pooled corporate	(29.0		)	—
Synthetic high-yield pooled corporate	(15.3		)	(6.1		)
TruPS CDOs	20.3			(72.6		)
Market value CDOs of corporate obligations	3.2			—
Total pooled corporate obligations	(20.6		)	(78.7		)
U.S. RMBS:
Option ARM and Alt-A first lien	(354.9		)	(219.3		)
Subprime first lien (including net interest margin)	(29.6		)	(113.8		)
Prime first lien	(1.5		)	—
Closed-end second lien and HELOCs	(16.0		)	5.7
Total U.S. RMBS	(402.0		)	(327.4		)
CMBS	(4.8		)	—
Other(1)	(600.7		)	(102.4		)
Total	$	(1,028.1	)	$	(508.5	)

(2) Represents amount in excess of the present value of future installment fees to be received of $37.2 million. Includes R&W on credit derivatives of $213.0 million.

Effect of the Company's Credit Spread on Credit Derivatives Fair Value

	As of September 30, 2011	As of June 30, 2011	As of December 31, 2010	As of June 30, 2010	As of December 31, 2009

Quoted price of CDS contract (in basis points):
AGC	1,351	634	804	1,010	634
AGM	1,004	472	650	802	541