Financial Guaranty Contracts Accounted for as Credit Derivatives (Tables)

3 Months Ended

Mar. 31, 2014

Credit Derivatives

Subordination and Ratings



	As of March 31, 2014							As of December 31, 2013
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	$	17,634	32.4	%	36.1	%	AAA	$	19,323	32.4	%	34.0	%	AAA
Synthetic investment grade pooled corporate	9,759		21.6		20.3		AAA	9,754		21.6		20.0		AAA
Synthetic high yield pooled corporate	2,690		47.2		41.3		AAA	2,690		47.2		41.1		AAA
TruPS CDOs	3,436		45.4		33.7		BB	3,554		45.5		32.9		BB+
Market value CDOs of corporate obligations	1,807		23.6		30.6		AAA	2,000		24.4		30.5		AAA
Total pooled corporate obligations	35,326		31.4		31.6		AAA	37,321		31.5		30.6		AAA
U.S. RMBS:
Option ARM and Alt-A first lien	2,520		19.1		7.6		BB-	2,609		19.2		8.6		BB-
Subprime first lien	2,837		30.6		51.3		AA-	2,930		30.5		51.9		AA-
Prime first lien	258		10.9		1.8		CCC	264		10.9		3.2		CCC
Closed-end second lien and HELOCs	22		—		—		B-	23		—		—		B+
Total U.S. RMBS	5,637		24.4		29.2		BBB	5,826		24.4		30.1		BBB
CMBS	2,822		33.5		42.5		AAA	3,744		33.5		42.5		AAA
Other	7,533		—		—		A-	7,591		—		—		A-
Total	$	51,318					AA+	$	54,482					AA+

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(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.



	As of March 31, 2014				As of December 31, 2013
Ratings	Net Par Outstanding		% of Total		Net Par Outstanding		% of Total
	(dollars in millions)
AAA	$	35,157	68.5	%	$	38,244	70.2	%
AA	3,660		7.1		3,648		6.7
A	3,621		7.1		3,636		6.7
BBB	4,304		8.4		4,161		7.6
BIG	4,576		8.9		4,793		8.8
Credit derivative net par outstanding	$	51,318	100.0	%	$	54,482	100.0	%

Net Change in Fair Value of Credit Derivatives Gain (Loss)



	First Quarter
	2014			2013
	(in millions)
Realized gains on credit derivatives (1)	$	20		$	28
Net credit derivative losses (paid and payable) recovered and recoverable	(1		)	(10		)
Realized gains (losses) and other settlements on credit derivatives	19			18
Net change in unrealized gains (losses) on credit derivatives (2)	(230		)	(610		)
Net change in fair value of credit derivatives	$	(211	)	$	(592	)

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(1)	Includes accelerations due to terminations of CDS contracts of $0.2 million and $1 million related to net par of $1.1 billion and $1.1 billion for First Quarter 2014 and First Quarter 2013, respectively.


(2)	Except for net estimated credit impairments (i.e., net expected loss to be paid as discussed in Note 5), the unrealized gains and losses on credit derivatives are expected to reduce to zero as the exposure approaches its maturity date. With considerable volatility continuing in the market, unrealized gains (losses) on credit derivatives may fluctuate significantly in future periods.



	First Quarter
Asset Type	2014			2013
	(in millions)
Pooled corporate obligations	$	(58	)	$	(105	)
U.S. RMBS	(140		)	(457		)
CMBS	0			(3		)
Other	(32		)	(45		)
Total (1)	$	(230	)	$	(610	)

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

Five-Year CDS Spread

on AGC and AGM

Quoted price of CDS contract (in basis points)

One-Year CDS Spread

on AGC and AGM

Quoted price of CDS contract (in basis points)

Fair Value of Credit Derivatives

and Effect of AGC and AGM

Credit Spreads



	As of March 31, 2014			As of December 31, 2013
	(in millions)
Fair value of credit derivatives before effect of AGC and AGM credit spreads	$	(3,095	)	$	(3,442	)
Plus: Effect of AGC and AGM credit spreads	1,172			1,749
Net fair value of credit derivatives	$	(1,923	)	$	(1,693	)

Net Fair Value and Expected Losses In Excess of Premiums

of Credit Derivatives by Sector



	Fair Value of Credit Derivative Asset (Liability), net						Present Value of Expected Claim (Payments) Recoveries In Excess of Premiums (1)
Asset Type	As of March 31, 2014			As of December 31, 2013			As of March 31, 2014			As of December 31, 2013
	(in millions)
Pooled corporate obligations	$	(89	)	$	(30	)	$	(20	)	$	(35	)
U.S. RMBS	(1,448		)	(1,308		)	(154		)	(147		)
CMBS	(2		)	(2		)	—			—
Other	(384		)	(353		)	40			43
Total	$	(1,923	)	$	(1,693	)	$	(134	)	$	(139	)

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(1)	Represents the expected claim payments (recoveries) in excess of the present value of future installment fees to be received of $39 million as of March 31, 2014 and $45 million as of December 31, 2013. Includes R&W benefit of $175 million as of March 31, 2014 and $180 million as of December 31, 2013.

As of March 31, 2014



Credit Spreads(1)	Estimated Net Fair Value (Pre-Tax)			Estimated Change in Gain/(Loss) (Pre-Tax)
	(in millions)
100% widening in spreads	$	(3,936	)	$	(2,013	)
50% widening in spreads	(2,929		)	(1,006		)
25% widening in spreads	(2,426		)	(503		)
10% widening in spreads	(2,124		)	(201		)
Base Scenario	(1,923		)	—
10% narrowing in spreads	(1,737		)	186
25% narrowing in spreads	(1,457		)	466
50% narrowing in spreads	(991		)	932

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(1)	Includes the effects of spreads on both the underlying asset classes and the Company’s own credit spread.