Fair Value Measurement (Tables)

3 Months Ended

Mar. 31, 2015

Fair Value Disclosures [Abstract]

Information by Credit Spread Type

Information by Credit Spread Type (1)

	As of March 31, 2015		As of December 31, 2014
Based on actual collateral specific spreads	9	%	9	%
Based on market indices	81	%	82	%
Provided by the CDS counterparty	10	%	9	%
Total	100	%	100	%

 ____________________

(1)    Based on par.

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 premium the Company receives 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 March 31, 2015

			Fair Value Hierarchy
	Fair Value		Level 1		Level 2		Level 3
	(in millions)
Assets:
Investment portfolio, available-for-sale:
Fixed-maturity securities
Obligations of state and political subdivisions	$	5,458	$	—	$	5,450	$	8
U.S. government and agencies	497		—		497		—
Corporate securities	1,399		—		1,320		79
Mortgage-backed securities:
RMBS	1,185		—		802		383
Commercial mortgage-backed securities ("CMBS")	600		—		600		—
Asset-backed securities	401		—		175		226
Foreign government securities	293		—		293		—
Total fixed-maturity securities	9,833		—		9,137		696
Short-term investments	349		172		177		—
Other invested assets (1)	107		0		26		81
Credit derivative assets	77		—		—		77
FG VIEs’ assets, at fair value (2)	1,495		—		—		1,495
Other assets	84		30		17		37
Total assets carried at fair value	$	11,945	$	202	$	9,357	$	2,386
Liabilities:
Credit derivative liabilities	$	859	$	—	$	—	$	859
FG VIEs’ liabilities with recourse, at fair value	1,278		—		—		1,278
FG VIEs’ liabilities without recourse, at fair value	145		—		—		145
Total liabilities carried at fair value	$	2,282	$	—	$	—	$	2,282

Fair Value Hierarchy of Financial Instruments Carried at Fair Value

As of December 31, 2014

			Fair Value Hierarchy
	Fair Value		Level 1		Level 2		Level 3
	(in millions)
Assets:
Investment portfolio, available-for-sale:
Fixed-maturity securities
Obligations of state and political subdivisions	$	5,795	$	—	$	5,757	$	38
U.S. government and agencies	665		—		665		—
Corporate securities	1,368		—		1,289		79
Mortgage-backed securities:
RMBS	1,285		—		860		425
CMBS	659		—		659		—
Asset-backed securities	417		—		189		228
Foreign government securities	302		—		302		—
Total fixed-maturity securities	10,491		—		9,721		770
Short-term investments	767		359		408		—
Other invested assets (1)	100		0		17		83
Credit derivative assets	68		—		—		68
FG VIEs’ assets, at fair value (2)	1,398		—		—		1,398
Other assets	78		26		17		35
Total assets carried at fair value	$	12,902	$	385	$	10,163	$	2,354
Liabilities:
Credit derivative liabilities	$	963	$	—	$	—	$	963
FG VIEs’ liabilities with recourse, at fair value	1,277		—		—		1,277
FG VIEs’ liabilities without recourse, at fair value	142		—		—		142
Total liabilities carried at fair value	$	2,382	$	—	$	—	$	2,382

____________________

(1) Includes Level 3 mortgage loans that are recorded at fair value on a non-recurring basis.

(2) Exclude restricted cash.

Fair Value Assets Measured on Recurring Basis

Fair Value Level 3 Rollforward

Recurring Basis

First Quarter2015

	Fixed-Maturity Securities
	Obligations of State and Political Subdivisions					Corporate Securities					RMBS					Asset- Backed Securities					Other Invested Assets					FG VIEs’ Assets at Fair Value					Other Assets				Credit Derivative Asset (Liability), net(5)					FG VIEs' Liabilities with Recourse, at Fair Value					FG VIEs’ Liabilities without Recourse, at Fair Value
	(in millions)
Fair value as of December 31, 2014	$	38				$	79				$	425				$	228				$	78				$	1,398				$	35			$	(895	)			$	(1,277	)			$	(142	)
Total pretax realized and unrealized gains/(losses) recorded in:(1)
Net income (loss)	3			(2	)	2			(2	)	9			(2	)	(2		)	(2	)	(4		)	(2	)	23			(3	)	2		(4	)	124			(6	)	93			(3	)	(5		)	(3	)
Other comprehensive income (loss)	(2		)			(2		)			5					1					2					—					—				—					—					—
Purchases	—					—					9					—					—					—					—				—					—					—
Settlements	(31		)	(7	)	—					(65		)			(1		)			0					(30		)			—				(11		)			37					2
FG VIE consolidations	—					—					—					—					—					104					—				—					(131		)			—
FG VIE deconsolidations	—					—					—					—					—					—					—				—					—					—
Fair value as of March 31, 2015	$	8				$	79				$	383				$	226				$	76				$	1,495				$	37			$	(782	)			$	(1,278	)			$	(145	)
Change in unrealized gains/(losses) related to financial instruments held as of March 31, 2015	$	0				$	(2	)			$	7				$	1				$	2				$	34				$	2			$	103				$	(6	)			$	(4	)

Fair Value Level 3 Rollforward

Recurring Basis

First Quarter2014

	Fixed-Maturity Securities
	Obligations of State and Political Subdivisions				Corporate Securities					RMBS					Asset-Backed Securities					Other Invested Assets				FG VIEs’ Assets at Fair Value					Other Assets					Credit Derivative Asset (Liability), net(5)					FG VIEs' Liabilities with Recourse, at Fair Value					FG VIEs’ Liabilities without Recourse, at Fair Value
	(in millions)
Fair value as of December 31, 2013	$	36			$	136				$	290				268					$	2			$	2,565				$	46				$	(1,693	)			$	(1,790	)			$	(1,081	)
Total pretax realized and unrealized gains/(losses) recorded in:(1)
Net income (loss)	1		(2	)	3			(2	)	4			(2	)	7			(2	)	—				82			(3	)	(9		)	(4	)	(211		)	(6	)	(72		)	(3	)	(9		)	(3	)
Other comprehensive income (loss)	1				4					14					8					1				—					—					—					—					—
Purchases	—				—					53					—					45		(7	)	—					—					—					—					—
Settlements	—				(5		)			(15		)			(31		)			—				(286		)			—					(19		)			269					12
FG VIE consolidations	—				—					—					—					—				—					—					—					—					—
FG VIE deconsolidations	—				—					13					—					—				(1,104		)			—					—					247					977
Fair value as of March 31, 2014	$	38			$	138				$	359				$	252				$	48			$	1,257				$	37				$	(1,923	)			$	(1,346	)			$	(101	)
Change in unrealized gains/(losses) related to financial instruments held as of March 31, 2014	$	1			$	4				$	15				$	7				$	1			$	25				$	(9	)			$	(232	)			$	(28	)			$	(10	)

______________

(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 gains (losses) on CCS.

(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) Includes a non-cash transaction.

Fair Value, Liabilities Measured on Recurring Basis

Fair Value Level 3 Rollforward

Recurring Basis

First Quarter2015

	Fixed-Maturity Securities
	Obligations of State and Political Subdivisions					Corporate Securities					RMBS					Asset- Backed Securities					Other Invested Assets					FG VIEs’ Assets at Fair Value					Other Assets				Credit Derivative Asset (Liability), net(5)					FG VIEs' Liabilities with Recourse, at Fair Value					FG VIEs’ Liabilities without Recourse, at Fair Value
	(in millions)
Fair value as of December 31, 2014	$	38				$	79				$	425				$	228				$	78				$	1,398				$	35			$	(895	)			$	(1,277	)			$	(142	)
Total pretax realized and unrealized gains/(losses) recorded in:(1)
Net income (loss)	3			(2	)	2			(2	)	9			(2	)	(2		)	(2	)	(4		)	(2	)	23			(3	)	2		(4	)	124			(6	)	93			(3	)	(5		)	(3	)
Other comprehensive income (loss)	(2		)			(2		)			5					1					2					—					—				—					—					—
Purchases	—					—					9					—					—					—					—				—					—					—
Settlements	(31		)	(7	)	—					(65		)			(1		)			0					(30		)			—				(11		)			37					2
FG VIE consolidations	—					—					—					—					—					104					—				—					(131		)			—
FG VIE deconsolidations	—					—					—					—					—					—					—				—					—					—
Fair value as of March 31, 2015	$	8				$	79				$	383				$	226				$	76				$	1,495				$	37			$	(782	)			$	(1,278	)			$	(145	)
Change in unrealized gains/(losses) related to financial instruments held as of March 31, 2015	$	0				$	(2	)			$	7				$	1				$	2				$	34				$	2			$	103				$	(6	)			$	(4	)

Fair Value Level 3 Rollforward

Recurring Basis

First Quarter2014

	Fixed-Maturity Securities
	Obligations of State and Political Subdivisions				Corporate Securities					RMBS					Asset-Backed Securities					Other Invested Assets				FG VIEs’ Assets at Fair Value					Other Assets					Credit Derivative Asset (Liability), net(5)					FG VIEs' Liabilities with Recourse, at Fair Value					FG VIEs’ Liabilities without Recourse, at Fair Value
	(in millions)
Fair value as of December 31, 2013	$	36			$	136				$	290				268					$	2			$	2,565				$	46				$	(1,693	)			$	(1,790	)			$	(1,081	)
Total pretax realized and unrealized gains/(losses) recorded in:(1)
Net income (loss)	1		(2	)	3			(2	)	4			(2	)	7			(2	)	—				82			(3	)	(9		)	(4	)	(211		)	(6	)	(72		)	(3	)	(9		)	(3	)
Other comprehensive income (loss)	1				4					14					8					1				—					—					—					—					—
Purchases	—				—					53					—					45		(7	)	—					—					—					—					—
Settlements	—				(5		)			(15		)			(31		)			—				(286		)			—					(19		)			269					12
FG VIE consolidations	—				—					—					—					—				—					—					—					—					—
FG VIE deconsolidations	—				—					13					—					—				(1,104		)			—					—					247					977
Fair value as of March 31, 2014	$	38			$	138				$	359				$	252				$	48			$	1,257				$	37				$	(1,923	)			$	(1,346	)			$	(101	)
Change in unrealized gains/(losses) related to financial instruments held as of March 31, 2014	$	1			$	4				$	15				$	7				$	1			$	25				$	(9	)			$	(232	)			$	(28	)			$	(10	)

______________

(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 gains (losses) on CCS.

(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) Includes a non-cash transaction.

Schedule of Quantitative Information About Level 3 Assets, Fair Value Measurements

Quantitative Information About Level 3 Fair Value Inputs

At March 31, 2015

Financial Instrument Description (1)	Fair Value at March 31, 2015 (in millions)		Significant Unobservable Inputs	Range					Weighted Average as a Percentage of Current Par Outstanding
Assets:
Fixed-maturity securities:
Obligations of state and political subdivisions	$	8	Rate of inflation	1.0		%	-	3.0%	2.0%
			Cash flow receipts	0.5		%	-	20.9%	12.9%
			Yield	4.6%
			Collateral recovery period	4 months			-	8.3 years	4.3 years
Corporate securities	79		Yield	18.0%
RMBS	383		CPR	0.3		%	-	7.5%	3.4%
			CDR	2.4		%	-	11.6%	5.5%
			Loss severity	50.0		%	-	100.0%	72.4%
			Yield	4.2		%	-	10.0%	5.9%
Asset-backed securities:
Investor owned utility	96		Cash flow receipts	100.0%
			Collateral recovery period	3.8 years
			Discount factor	7.0%
Triple-X life insurance transactions	130		Yield	6.8%
Other invested assets	81		Discount for lack of liquidity	20.0%
			Recovery on delinquent loans	40.0%
			Default rates	0.0		%	-	7.0%	6.1%
			Loss severity	40.0		%	-	75.0%	68.7%
			Prepayment speeds	6.0		%	-	15.0%	12.0%
			Net asset value (per share)	$	966		-	$1,147	$1,046
FG VIEs’ assets, at fair value	1,495		CPR	0.3		%	-	11.0%	2.6%
			CDR	1.7		%	-	13.1%	4.2%
			Loss severity	36.0		%	-	100.0%	64.2%
			Yield	2.7		%	-	16.7%	6.4%

Financial Instrument Description (1)	Fair Value at March 31, 2015 (in millions)		Significant Unobservable Inputs	Range					Weighted Average as a Percentage of Current Par Outstanding
Other assets	37		Quotes from third party pricing	$	51		-	$60	$56
			Term (years)	5 years
Liabilities:
Credit derivative liabilities, net	(782	)	Year 1 loss estimates	0.0		%	-	50.0%	1.7%
			Hedge cost (in bps)	15.0			-	255.8	57.4
			Bank profit (in bps)	1.0			-	990.0	124.8
			Internal floor (in bps)	7.0			-	100.0	16.3
			Internal credit rating	AAA			-	CCC	AA
FG VIEs’ liabilities, at fair value	(1,423	)	CPR	0.3		%	-	11.0%	2.6%
			CDR	1.7		%	-	13.1%	4.2%
			Loss severity	36.0		%	-	100.0%	64.2%
			Yield	2.7		%	-	16.7%	5.5%

___________________

(1) Discounted cash flow is used as valuation technique for all financial instruments.

Quantitative Information About Level 3 Fair Value Inputs

At December 31, 2014

Financial Instrument Description (1)	Fair Value at December 31, 2014 (in millions)		Significant Unobservable Inputs	Range					Weighted Average as a Percentage of Current Par Outstanding
Assets:
Fixed-maturity securities:
Obligations of state and political subdivisions	$	38	Rate of inflation	1.0		%	-	3.0%	2.0%
			Cash flow receipts	0.5		%	-	74.3%	63.0%
			Discount rates	4.6		%	-	8.0%	7.3%
			Collateral recovery period	1 month			-	34 years	28 years
Corporate securities	79		Yield	17.8%
RMBS	425		CPR	0.3		%	-	8.1%	3.3%
			CDR	2.7		%	-	10.6%	5.3%
			Loss severity	52.6		%	-	100.0%	75.2%
			Yield	4.7		%	-	11.7%	6.4%
Asset-backed securities:
Investor owned utility	95		Cash flow receipts	100%
			Collateral recovery period	4 years
			Discount factor	7.0%
Triple-X life insurance transactions	133		Yield	7.3%
Other invested assets	83		Discount for lack of liquidity	20.0%
			Recovery on delinquent loans	40.0%
			Default rates	0.0		%	-	7.0%	5.8%
			Loss severity	40.0		%	-	75.0%	68.3%
			Prepayment speeds	5.0		%	-	15.0%	12.3%
			Net asset value (per share)	$	965		-	$1,159	$1,082
FG VIEs’ assets, at fair value	1,398		CPR	0.3		%	-	11.0%	3.3%
			CDR	1.6		%	-	11.8%	5.1%
			Loss severity	40.0		%	-	100.0%	82.2%
			Yield	2.7		%	-	17.7%	7.9%

Financial Instrument Description (1)	Fair Value at December 31, 2014 (in millions)		Significant Unobservable Inputs	Range				Weighted Average as a Percentage of Current Par Outstanding
Other assets	35		Quotes from third party pricing	$52		-	$61	$57
			Term (years)	5 years
Liabilities:
Credit derivative liabilities, net	(895	)	Year 1 loss estimates	0.0	%	-	93.0%	2.1%
			Hedge cost (in bps)	20.0		-	243.8	61.5
			Bank profit (in bps)	1.0		-	994.4	127.0
			Internal floor (in bps)	7.0		-	100.0	15.9
			Internal credit rating	AAA		-	CCC	AA+
FG VIEs’ liabilities, at fair value	(1,419	)	CPR	0.3	%	-	11.0%	3.3%
			CDR	1.6	%	-	11.8%	5.1%
			Loss severity	40.0	%	-	100.0%	82.2%
			Yield	2.7	%	-	17.7%	5.8%

____________________

(1) Discounted cash flow is used as valuation technique for all financial instruments.

Schedule of Quantitative Information About Level 3 Liabilities, Fair Value Measurements

At March 31, 2015

Financial Instrument Description (1)	Fair Value at March 31, 2015 (in millions)		Significant Unobservable Inputs	Range					Weighted Average as a Percentage of Current Par Outstanding
Assets:
Fixed-maturity securities:
Obligations of state and political subdivisions	$	8	Rate of inflation	1.0		%	-	3.0%	2.0%
			Cash flow receipts	0.5		%	-	20.9%	12.9%
			Yield	4.6%
			Collateral recovery period	4 months			-	8.3 years	4.3 years
Corporate securities	79		Yield	18.0%
RMBS	383		CPR	0.3		%	-	7.5%	3.4%
			CDR	2.4		%	-	11.6%	5.5%
			Loss severity	50.0		%	-	100.0%	72.4%
			Yield	4.2		%	-	10.0%	5.9%
Asset-backed securities:
Investor owned utility	96		Cash flow receipts	100.0%
			Collateral recovery period	3.8 years
			Discount factor	7.0%
Triple-X life insurance transactions	130		Yield	6.8%
Other invested assets	81		Discount for lack of liquidity	20.0%
			Recovery on delinquent loans	40.0%
			Default rates	0.0		%	-	7.0%	6.1%
			Loss severity	40.0		%	-	75.0%	68.7%
			Prepayment speeds	6.0		%	-	15.0%	12.0%
			Net asset value (per share)	$	966		-	$1,147	$1,046
FG VIEs’ assets, at fair value	1,495		CPR	0.3		%	-	11.0%	2.6%
			CDR	1.7		%	-	13.1%	4.2%
			Loss severity	36.0		%	-	100.0%	64.2%
			Yield	2.7		%	-	16.7%	6.4%

Financial Instrument Description (1)	Fair Value at March 31, 2015 (in millions)		Significant Unobservable Inputs	Range					Weighted Average as a Percentage of Current Par Outstanding
Other assets	37		Quotes from third party pricing	$	51		-	$60	$56
			Term (years)	5 years
Liabilities:
Credit derivative liabilities, net	(782	)	Year 1 loss estimates	0.0		%	-	50.0%	1.7%
			Hedge cost (in bps)	15.0			-	255.8	57.4
			Bank profit (in bps)	1.0			-	990.0	124.8
			Internal floor (in bps)	7.0			-	100.0	16.3
			Internal credit rating	AAA			-	CCC	AA
FG VIEs’ liabilities, at fair value	(1,423	)	CPR	0.3		%	-	11.0%	2.6%
			CDR	1.7		%	-	13.1%	4.2%
			Loss severity	36.0		%	-	100.0%	64.2%
			Yield	2.7		%	-	16.7%	5.5%

___________________

(1) Discounted cash flow is used as valuation technique for all financial instruments.

Quantitative Information About Level 3 Fair Value Inputs

At December 31, 2014

Financial Instrument Description (1)	Fair Value at December 31, 2014 (in millions)		Significant Unobservable Inputs	Range					Weighted Average as a Percentage of Current Par Outstanding
Assets:
Fixed-maturity securities:
Obligations of state and political subdivisions	$	38	Rate of inflation	1.0		%	-	3.0%	2.0%
			Cash flow receipts	0.5		%	-	74.3%	63.0%
			Discount rates	4.6		%	-	8.0%	7.3%
			Collateral recovery period	1 month			-	34 years	28 years
Corporate securities	79		Yield	17.8%
RMBS	425		CPR	0.3		%	-	8.1%	3.3%
			CDR	2.7		%	-	10.6%	5.3%
			Loss severity	52.6		%	-	100.0%	75.2%
			Yield	4.7		%	-	11.7%	6.4%
Asset-backed securities:
Investor owned utility	95		Cash flow receipts	100%
			Collateral recovery period	4 years
			Discount factor	7.0%
Triple-X life insurance transactions	133		Yield	7.3%
Other invested assets	83		Discount for lack of liquidity	20.0%
			Recovery on delinquent loans	40.0%
			Default rates	0.0		%	-	7.0%	5.8%
			Loss severity	40.0		%	-	75.0%	68.3%
			Prepayment speeds	5.0		%	-	15.0%	12.3%
			Net asset value (per share)	$	965		-	$1,159	$1,082
FG VIEs’ assets, at fair value	1,398		CPR	0.3		%	-	11.0%	3.3%
			CDR	1.6		%	-	11.8%	5.1%
			Loss severity	40.0		%	-	100.0%	82.2%
			Yield	2.7		%	-	17.7%	7.9%

Financial Instrument Description (1)	Fair Value at December 31, 2014 (in millions)		Significant Unobservable Inputs	Range				Weighted Average as a Percentage of Current Par Outstanding
Other assets	35		Quotes from third party pricing	$52		-	$61	$57
			Term (years)	5 years
Liabilities:
Credit derivative liabilities, net	(895	)	Year 1 loss estimates	0.0	%	-	93.0%	2.1%
			Hedge cost (in bps)	20.0		-	243.8	61.5
			Bank profit (in bps)	1.0		-	994.4	127.0
			Internal floor (in bps)	7.0		-	100.0	15.9
			Internal credit rating	AAA		-	CCC	AA+
FG VIEs’ liabilities, at fair value	(1,419	)	CPR	0.3	%	-	11.0%	3.3%
			CDR	1.6	%	-	11.8%	5.1%
			Loss severity	40.0	%	-	100.0%	82.2%
			Yield	2.7	%	-	17.7%	5.8%

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(1) Discounted cash flow is used as valuation technique for all financial instruments.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

	As of March 31, 2015				As of December 31, 2014
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
	(in millions)
Assets:
Fixed-maturity securities	$	9,833	$	9,833	$	10,491	$	10,491
Short-term investments	349		349		767		767
Other invested assets	114		116		108		110
Credit derivative assets	77		77		68		68
FG VIEs’ assets, at fair value	1,495		1,495		1,398		1,398
Other assets	189		189		184		184
Liabilities:
Financial guaranty insurance contracts(1)	3,719		6,343		3,823		6,205
Long-term debt	1,304		1,609		1,303		1,603
Credit derivative liabilities	859		859		963		963
FG VIEs’ liabilities with recourse, at fair value	1,278		1,278		1,277		1,277
FG VIEs’ liabilities without recourse, at fair value	145		145		142		142
Other liabilities	72		72		27		27

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(1) Carrying amount includes the assets and liabilities related to financial guaranty insurance contract premiums, losses, and salvage and subrogation and other recoverables net of reinsurance.