Financial Guaranty Contracts Accounted for as Credit Derivatives (Tables)

6 Months Ended

Jun. 30, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Credit Derivatives Subordination and Ratings and Net Par Outstanding by Internal Rating

Distribution of Credit Derivative Net Par Outstanding by Internal Rating

	As of June 30, 2015				As of December 31, 2014
Ratings	Net Par Outstanding		% of Total		Net Par Outstanding		% of Total
	(dollars in millions)
AAA	$	18,018	55.8	%	$	21,817	62.3	%
AA	5,688		17.6		5,398		15.4
A	2,319		7.2		1,982		5.7
BBB	2,784		8.6		2,774		8.0
BIG(1)	3,500		10.8		3,025		8.6
Credit derivative net par outstanding	$	32,309	100.0	%	$	34,996	100.0	%

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(1) The June 30, 2015 BIG amount includes $933 million net par outstanding of credit derivatives acquired from Radian Asset.

Credit Derivatives

Subordination and Ratings

	As of June 30, 2015							As of December 31, 2014
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	$	9,046	30.9	%	37.5	%	AAA	$	11,688	32.0	%	36.9	%	AAA
Synthetic investment grade pooled corporate	7,118		21.7		19.3		AAA	7,640		22.6		20.6		AAA
TruPS CDOs	3,738		45.7		40.5		BBB+	3,119		45.3		35.8		BBB-
Market value CDOs of corporate obligations	1,113		17.0		15.1		AAA	1,174		19.1		20.7		AAA
Total pooled corporate obligations	21,015		29.7		30.7		AAA	23,621		30.1		30.7		AAA
U.S. RMBS:
Option ARM and Alt-A first lien	1,250		15.9		10.6		BB+	1,378		16.3		10.7		BB+
Subprime first lien	1,264		31.5		49.0		A	1,366		31.1		50.5		A
Prime first lien	199		10.9		0.0		BB	223		10.9		0.0		B
Closed-end second lien	18		—		—		CCC	19		—		—		CCC
Total U.S. RMBS	2,731		24.8		32.8		BBB	2,986		24.8		33.9		BBB
CMBS	1,745		29.9		40.0		AA	1,952		35.3		43.6		AAA
Other	6,818		—		—		A	6,437		—		—		A
Total(2)	$	32,309					AA	$	34,996					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.

(2) The June 30, 2015 total amount includes $4.3 billion net par outstanding of credit derivatives acquired from Radian Asset.

Net Change in Fair Value of Credit Derivatives

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

	Second Quarter						Six Months
	2015			2014			2015			2014
	(in millions)
Realized gains on credit derivatives (1)	$	15		$	21		$	38		$	41
Net credit derivative losses (paid and payable) recovered and recoverable and other settlements	(7		)	(6		)	(9		)	(7		)
Realized gains (losses) and other settlements on credit derivatives	8			15			29			34
Net change in unrealized gains (losses) on credit derivatives:
Pooled corporate obligations	7			64			24			6
U.S. RMBS	62			5			137			(135		)
CMBS	4			2			4			2
Other	9			17			20			(15		)
Net change in unrealized gains (losses) on credit derivatives	82			88			185			(142		)
Net change in fair value of credit derivatives	$	90		$	103		$	214		$	(108	)

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(1) Includes realized gain due to terminations of CDS contracts of $1.8 million and $0.5 million for Second Quarter 2015 and Second Quarter 2014, respectively, and $12.6 million and $0.7 million for Six Months 2015 and Six Months 2014, respectively. Net par of $0.5 billion and $0.2 billion were terminated in Second Quarter 2015 and Second Quarter 2014, respectively, and $0.6 billion and $1.3 billion for Six Months 2015 and Six Months 2014, respectively. CDS terminations in Six Months 2015 also included a payment received from the resolution of a dispute related to a termination of CDS in 2008.

CDS Spread on AGC and AGM

Five-Year CDS Spread

on AGC and AGM

Quoted price of CDS contract (in basis points)

	As of June 30, 2015	As of March 31, 2015	As of December 31, 2014	As of June 30, 2014	As of March 31, 2014	As of December 31, 2013
AGC	390	317	323	327	291	460
AGM	410	341	325	346	305	525

One-Year CDS Spread

on AGC and AGM

Quoted price of CDS contract (in basis points)

	As of June 30, 2015	As of March 31, 2015	As of December 31, 2014	As of June 30, 2014	As of March 31, 2014	As of December 31, 2013
AGC	120	60	80	85	55	185
AGM	125	80	85	115	70	220

Fair Value of Credit Derivatives and Effect of AGC and AGM Credit Spreads

Fair Value of Credit Derivatives Assets (Liabilities)

and Effect of AGC and AGM

Credit Spreads

	As of June 30, 2015			As of December 31, 2014
	(in millions)
Fair value of credit derivatives before effect of AGC and AGM credit spreads	$	(2,236	)	$	(2,029	)
Plus: Effect of AGC and AGM credit spreads	1,310			1,134
Net fair value of credit derivatives (1)	$	(926	)	$	(895	)

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(1) June 30, 2015 amount includes $190 million of net fair value loss of credit derivatives acquired from Radian Asset.

Net Fair Value and Expected Losses of Credit Derivatives by Sector

Net Fair Value and Expected Losses

of Credit Derivatives by Sector

	Fair Value of Credit Derivative Asset (Liability), net						Expected Loss to be (Paid) Recovered (1)
Asset Type	As of June 30, 2015			As of December 31, 2014			As of June 30, 2015			As of December 31, 2014
	(in millions)
Pooled corporate obligations	$	(205	)	$	(49	)	$	(71	)	$	(23	)
U.S. RMBS	(357		)	(494		)	(53		)	(73		)
CMBS	(38		)	0			(23		)	—
Other	(326		)	(352		)	34			38
Total	$	(926	)	$	(895	)	$	(113	)	$	(58	)

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(1) Includes R&W benefit of $74 million as of June 30, 2015 and $86 million as of December 31, 2014.

Effects of Changes in Credit Spread

Effect of Changes in Credit Spread

As of June 30, 2015

Credit Spreads(1)	Estimated Net Fair Value (Pre-Tax)			Estimated Change in Gain/(Loss) (Pre-Tax)
	(in millions)
100% widening in spreads	$	(1,883	)	$	(957	)
50% widening in spreads	(1,405		)	(479		)
25% widening in spreads	(1,167		)	(241		)
10% widening in spreads	(1,023		)	(97		)
Base Scenario	(926		)	—
10% narrowing in spreads	(837		)	89
25% narrowing in spreads	(703		)	223
50% narrowing in spreads	(482		)	444

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