Fair Value Measurement (Tables)

3 Months Ended

Mar. 31, 2012

Fair Value Measurement

Information by Credit Spread Type

	As of March 31, 2012		As of December 31, 2011
Based on actual collateral specific spreads	5	%	5	%
Based on market indices	90	%	90	%
Provided by the CDS counterparty	5	%	5	%
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

As of March 31, 2012

			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	$	866.7	$	—	$	866.7	$	—
Obligations of state and political subdivisions	5,526.1		—		5,516.6		9.5
Corporate securities	1,042.8		—		1,042.8		—
Mortgage-backed securities:
RMBS	1,424.0		—		1,288.3		135.7
CMBS	501.5		—		501.5		—
Asset-backed securities	482.9		—		224.8		258.1
Foreign government securities	360.9		—		360.9		—
Total fixed maturity securities	10,204.9		—		9,801.6		403.3
Short-term investments	903.4		220.3		683.1		—
Other invested assets(1)	68.5		0.1		59.0		9.4
Credit derivative assets	463.6		—		—		463.6
FG VIEs’ assets, at fair value	2,827.7		—		—		2,827.7
Other assets(2)	67.9		28.0		—		39.9
Total assets carried at fair value	$	14,536.0	$	248.4	$	10,543.7	$	3,743.9
Liabilities:
Credit derivative liabilities	$	2,416.3	$	—	$	—	$	2,416.3
FG VIEs’ liabilities with recourse, at fair value	2,365.2		—		—		2,365.2
FG VIEs’ liabilities without recourse, at fair value	1,085.6		—		—		1,085.6
Total liabilities carried at fair value	$	5,867.1	$	—	$	—	$	5,867.1

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

(1)Includes mortgage loans that are recorded at fair value on a non-recurring basis. At March 31, 2012 and December 31, 2011, such investments were carried at their market value of $7.8 million and $9.0 million, respectively.

(2)Includes fair value of CCS and supplemental executive retirement plan assets.

Fair Value Level 3 Roll Forward

	Three Months Ended March 31, 2012
	Fixed Maturity Securities																					FG VIEs’			FG VIEs’
	Obligations of State and Political Subdivisions			RMBS			Asset- Backed Securities			Other Invested Assets			FG VIEs’ Assets at Fair Value			Other Assets			Credit Derivative Asset (Liability), net(5)			Liabilities with Recourse, at Fair Value			Liabilities without Recourse, at Fair Value
	(in millions)
Fair value as of 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	)
Total pretax realized and unrealized gains/(losses) recorded in:(1)
Net income (loss)	0.2		(2)	0.8		(2)	5.8		(2)	—			135.1		(3)	(13.9		)(4)	(690.6		)(6)	(118.0		)(3)	(79.8		)(3)
Other comprehensive income (loss)	0.4			9.9			0.1			(0.1		)	—			—			—			—			—
Purchases	—			—			18.0			—			—			—			—			—			—
Settlements	(0.6		)	(8.6		)	(1.3		)	—			(141.0		)	—			41.8			170.3			55.7
FG VIE consolidations	—			—			—			—			14.5			—			—			(20.6		)	—
Fair value as of March 31, 2012	$	9.5		$	135.7		$	258.1		$	1.6		$	2,827.7		$	39.9		$	(1,952.7	)	$	(2,365.2	)	$	(1,085.6	)
Change in unrealized gains/(losses) related to financial instruments held as of March 31, 2012	$	0.4		$	9.9		$	0.1		$	(0.1	)	$	231.4		$	(13.9	)	$	(634.6	)	$	(107.0	)	$	(118.1	)

	Three Months Ended March 31, 2011
	Fixed Maturity Securities															FG VIEs’			FG VIEs’
	RMBS			Asset- Backed Securities			Other Invested Assets			FG VIEs’Assets at Fair Value			Credit Derivative Asset (Liability), net(5)			Liabilities with Recourse, at Fair Value			Liabilities without Recourse, at Fair Value
	(in millions)
Fair value as of 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)	3.9		(2)	1.6		(2)	—			234.4		(3)	(236.2		)(6)	(11.1		)(3)	(135.5		)(3)
Other comprehensive income (loss)	(30.8		)	20.3			(0.1		)	—			—			—			—
Purchases	150.6			—			—			—			—			—			—
Sales	(4.1		)	—			—			—			—			—			—
Settlements	(8.9		)	—			—			(212.9		)	(33.9		)	167.8			99.7
Fair value as of March 31, 2011	$	210.1		$	232.1		$	2.2		$	3,679.0		$	(2,140.0	)	$	(2,874.2	)	$	(1,373.0	)
Change in unrealized gains/(losses) related to financial instruments held as of March 31, 2011	$	(30.2	)	$	20.3		$	(0.1	)	$	348.3		$	(282.8	)	$	(35.9	)	$	(172.0	)

(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 fair value gains (losses) on 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.

Schedule of Quantitative Information About Level 3 Fair Value Measurements

Financial Instrument Description	Fair Value at March 31, 2012 (in millions)		Valuation Technique	Significant Unobservable Inputs	Range (Weighted Average)
Assets:
Fixed maturity securities:
Obligations of state and political subdivisions	$	9.5	Discounted cash flow	Rate of inflation Timing of collateral sales Assumed sale proceeds Collateral recovery period	1.0% - 3.0% 3 years - 11 years 0.0% - 11.9% 3 years - 11 years
RMBS	135.7		Discounted cash flow	CPR CDR Severity Yield	0.0% - 7.5% 3.5% - 41.5% 48.5% - 104.5% 6.0% - 16.0%
Asset-backed securities:
Whole business securitization	44.3		Discounted cash flow	Annual gross revenue projections Value of primary financial guaranty policy Liquidity discount	$54 million - $96 million  43.8% 5.0% - 20.0%
Investor owned utility	185.3		Discounted cash flow	Liquidation value Years to liquidation Discount factor	$161.8 million - $261.0 million 0 years - 2 years 0.9% - 1.1%
XXX life insurance transactions	28.1		Discounted cash flow	Yield Discount on asset cash flows	14.5% 40.0%
Other asset-backed	0.4		Discounted cash flow	CPR CDR Severity Yield	0.0% - 10.0% 2.0% - 10.0% 40.0% - 100.0% 3.0% - 15.0%
Other invested assets	9.4		Discounted cash flow	Discount for lack of liquidity Recovery on delinquent loans Default rates Loss severity Prepayment speeds	10% - 20% 20% - 60% 1% - 10% 40% - 90% 6% - 15%
FG VIEs’ assets, at fair value	2,827.7		Discounted cash flow	CPR CDR Severity Yield	0.0% - 10.9% 1.8% - 39.1% 25.5% - 110.1% 4.4% - 22.4%

Financial Instrument Description	Fair Value at March 31, 2012 (in millions)		Valuation Technique	Significant Unobservable Inputs	Range (Weighted Average)
Other assets	39.9		Discounted cash flow	Quotes from third party pricing Term	$40 - $45 3 years
Liabilities:
Credit derivative liabilities, net	(1,952.7	)	Discounted cash flow	Year 1 loss estimates Hedge cost (in bps) Bank profit (in bps) Internal floor (in bps) Internal credit rating	0% - 100% 94.5bps - 743bps 1.0bps -1,271.5bps 7.0bps - 40.0bps AAA - CCC
FG VIEs’ liabilities, at fair value	(3,450.8	)	Discounted	CPR	0.0% - 10.9%
			cash flow	CDR	1.8% - 39.1%
				Severity	25.5% - 110.1%
				Yield	4.4% - 22.4%

Fair Value of Financial Instruments

	As of March 31, 2012				As of December 31, 2011
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
	(in millions)
Assets:
Fixed maturity securities	$	10,204.9	$	10,204.9	$	10,141.9	$	10,141.9
Short-term investments	903.4		903.4		734.0		734.0
Other invested assets	154.1		157.7		170.4		182.4
Credit derivative assets	463.6		463.6		468.9		468.9
FG VIEs’ assets, at fair value	2,827.7		2,827.7		2,819.1		2,819.1
Other assets	169.0		169.0		180.2		180.2
Liabilities:
Financial guaranty insurance contracts(1)	4,827.6		6,102.3		4,664.0		4,319.8
Long-term debt(2)	1,034.7		1,265.6		1,038.3		1,186.3
Credit derivative liabilities	2,416.3		2,416.3		1,772.8		1,772.8
FG VIEs’ liabilities with recourse, at fair value	2,365.2		2,365.2		2,396.9		2,396.9
FG VIEs’ liabilities without recourse, at fair value	1,085.6		1,085.6		1,061.5		1,061.5
Other liabilities	18.3		18.3		7.6		7.6

(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.