XML 74 R35.htm IDEA: XBRL DOCUMENT v3.3.0.814
Fair Value Measurement (Tables)
 9 Months Ended
Sep. 30, 2015
Fair Value Disclosures [Abstract]  
Information by Credit Spread Type
Information by Credit Spread Type (1)
 
 
As of
September 30, 2015
 
As of
December 31, 2014
Based on actual collateral specific spreads
12
%
 
9
%
Based on market indices
76
%
 
82
%
Provided by the CDS counterparty
12
%
 
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 September 30, 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
$
5,958

 
$
—

 
$
5,950

 
$
8

U.S. government and agencies
477

 
—

 
477

 
—

Corporate securities
1,436

 
—

 
1,357

 
79

Mortgage-backed securities:
 

 
 
 
 
 
 
RMBS
1,371

 
—

 
1,010

 
361

CMBS
511

 
—

 
511

 
—

Asset-backed securities
590

 
—

 
155

 
435

Foreign government securities
297

 
—

 
297

 
—

Total fixed-maturity securities
10,640


—

 
9,757

 
883

Short-term investments
522

 
406

 
66

 
50

Other invested assets (1)
59

 
—

 
6

 
53

Credit derivative assets
71

 
—

 
—

 
71

FG VIEs’ assets, at fair value (2)
1,541

 
—

 
—

 
1,541

Other assets
90

 
24

 
21

 
45

Total assets carried at fair value
$
12,923

 
$
430

 
$
9,850

 
$
2,643

Liabilities:
 

 
 

 
 

 
 

Credit derivative liabilities
$
918

 
$
—

 
$
—

 
$
918

FG VIEs’ liabilities with recourse, at fair value
1,315

 
—

 
—

 
1,315

FG VIEs’ liabilities without recourse, at fair value
167

 
—

 
—

 
167

Total liabilities carried at fair value
$
2,400

 
$
—

 
$
—

 
$
2,400

 
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)
Excludes restricted cash.
Fair Value Assets Measured on Recurring Basis
Fair Value Level 3 Rollforward
Recurring Basis
Third Quarter 2015
 
 
Fixed-Maturity Securities
 
Short-Term Investments
 
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 June 30, 2015
$
655

 

$
—

 

$
78

 
$
1,596

 

$
60

 

$
(926
)
 
$
(1,361
)
 
$
(171
)
 
Total pretax realized and unrealized gains/(losses) recorded in: (1)
 
 

 
 

 
 
 
 

 
 

 
 

 
 

 
 

Net income (loss)
(3
)
(2
)
8

(2
)
4

(2
)
(11
)
(3
)
(15
)
(4
)
86

(6
)
6

(3
)
0

(3
)
Other comprehensive income (loss)
(10
)
 

(4
)
 

(4
)
 
—

 

—

 

—

 

—

 

—

 

Purchases
250

 

52

(7
)
—

 
—

 

—

 

—

 

—

 

—

 

Settlements
(9
)
 
(6
)
 
(30
)
 
(44
)
 
—

 

(7
)
 

40

 

4

 

FG VIE consolidations
—

 

—

 

—

 
—

 

—

 

—

 

—

 
—

 

FG VIE deconsolidations
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
Fair value as of
September 30, 2015
$
883

 
$
50

 

$
48

 
$
1,541

 
$
45

 
$
(847
)
 
$
(1,315
)
 
$
(167
)
 
Change in unrealized gains/(losses) related to financial instruments held as of September 30, 2015
$
(10
)
 
$
(4
)
 
$
0

 
$
3

 
$
(15
)
 
$
(19
)
 
$
7

 
$
(1
)
 


Fair Value Level 3 Rollforward
Recurring Basis
Third Quarter 2014

 
Fixed-Maturity 
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 June 30, 2014
$
748

 
$
49

 
$
1,284

 

$
31

 

$
(1,837
)
 
$
(1,366
)
 
$
(124
)
 
Total pretax realized and unrealized gains/(losses) recorded in: (1)
 
 
 
 
 
 

 
 

 
 

 
 

 
 

Net income (loss)
(4
)
(2
)
—

 
43

(3
)
4

(4
)
255

(6
)
7

(3
)
(13
)
(3
)
Other comprehensive income (loss)
25

 
2

 
—

 

—

 

—

 

—

 

—

 

Purchases
159

 
25

 
—

 

—

 

—

 

—

 

—

 

Settlements
(15
)
 
0

 
(31
)
 
—

 

14

 

33

 

4

 

FG VIE consolidations
—

 
—

 
—

 

—

 

—

 

—

 
—

 

FG VIE deconsolidations
—

 
—

 
—

 
—

 
—

 
—

 
—

 
Fair value as of
September 30, 2014
$
913

 
$
76

 
$
1,296

 
$
35

 
$
(1,568
)
 
$
(1,326
)
 
$
(133
)
 
Change in unrealized gains/(losses) related to financial instruments held as of September 30, 2014
$
25

 
$
2

 
$
55

 
$
4

 
$
98

 
$
6

 
$
(5
)
 


Fair Value Level 3 Rollforward
Recurring Basis
Nine Months 2015
 
 
Fixed-Maturity Securities
 
Short-Term Investments
 
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
$
770

 

$
—

 
$
78

 
$
1,398

 

$
35

 

$
(895
)
 
$
(1,277
)
 
$
(142
)
 
Radian Asset Acquisition
4

 
—

 
2

 
122

 
—

 
(215
)
 
(114
)
 
(4
)
 
Total pretax realized and unrealized gains/(losses) recorded in: (1)
 
 

 
 
 
 
 
 

 
 

 
 

 
 

 
 

Net income (loss)
17

(2
)
8

(2
)
8

(2
)
31

(3
)
10

(4
)
300

(6
)
94

(3
)
(30
)
(3
)
Other comprehensive income (loss)
(9
)
 

(4
)
 
(6
)
 
—

 

—

 

—

 

—

 

—

 

Purchases
260

 

52

(7
)
—

 
—

 

—

 

—

 

—

 

—

 

Settlements
(158
)
(7
)
(6
)
 
(34
)
 
(114
)
 
—

 

(37
)
 

113

 

9

 

FG VIE consolidations
(1
)
 

—

 
—

 
104

 

—

 

—

 

(131
)
 
—

 

FG VIE deconsolidations
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
Fair value as of
September 30, 2015
$
883

 

$
50

 
$
48

 
$
1,541

 

$
45

 

$
(847
)
 
$
(1,315
)
 
$
(167
)
 
Change in unrealized gains/(losses) related to financial instruments held as of September 30, 2015
$
(4
)
 
$
(4
)
 
$
(2
)
 
$
68

 
$
10

 
$
166

 
$
(5
)
 
$
(19
)
 
Fair Value Level 3 Rollforward
Recurring Basis
Nine Months 2014
 
 
Fixed-Maturity 
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
$
730

 
$
2

 
$
2,565

 

$
46

 

$
(1,693
)
 
$
(1,790
)
 
$
(1,081
)
 
Total pretax realized and unrealized gains/(losses) recorded in: (1)
 
 
 
 
 
 

 
 

 
 

 
 

 
 

Net income (loss)
14

(2
)
—

 
160

(3
)
(11
)
(4
)
147

(6
)
(90
)
(3
)
(49
)
(3
)
Other comprehensive income (loss)
27

 
4

 
—

 

—

 

—

 

—

 

—

 

Purchases
212

 
70

(7
)
—

 

—

 

—

 

—

 

—

 

Settlements
(83
)
 
0

 
(346
)
 
—

 

(22
)
 

332

 

16

 

FG VIE consolidations
—

 
—

 
46

 

—

 

—

 

(25
)
 
(21
)
 

FG VIE deconsolidations
13

 
—

 
(1,129
)
 
—

 
—

 
247

 
1,002

 
Fair value as of
September 30, 2014
$
913

 
$
76

 
$
1,296

 
$
35

 
$
(1,568
)
 
$
(1,326
)
 
$
(133
)
 
Change in unrealized gains/(losses) related to financial instruments held as of September 30, 2014
$
25

 
$
4

 
$
120

 
$
(11
)
 
$
(47
)
 
$
(46
)
 
$
(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
Third Quarter 2015
 
 
Fixed-Maturity Securities
 
Short-Term Investments
 
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 June 30, 2015
$
655

 

$
—

 

$
78

 
$
1,596

 

$
60

 

$
(926
)
 
$
(1,361
)
 
$
(171
)
 
Total pretax realized and unrealized gains/(losses) recorded in: (1)
 
 

 
 

 
 
 
 

 
 

 
 

 
 

 
 

Net income (loss)
(3
)
(2
)
8

(2
)
4

(2
)
(11
)
(3
)
(15
)
(4
)
86

(6
)
6

(3
)
0

(3
)
Other comprehensive income (loss)
(10
)
 

(4
)
 

(4
)
 
—

 

—

 

—

 

—

 

—

 

Purchases
250

 

52

(7
)
—

 
—

 

—

 

—

 

—

 

—

 

Settlements
(9
)
 
(6
)
 
(30
)
 
(44
)
 
—

 

(7
)
 

40

 

4

 

FG VIE consolidations
—

 

—

 

—

 
—

 

—

 

—

 

—

 
—

 

FG VIE deconsolidations
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
Fair value as of
September 30, 2015
$
883

 
$
50

 

$
48

 
$
1,541

 
$
45

 
$
(847
)
 
$
(1,315
)
 
$
(167
)
 
Change in unrealized gains/(losses) related to financial instruments held as of September 30, 2015
$
(10
)
 
$
(4
)
 
$
0

 
$
3

 
$
(15
)
 
$
(19
)
 
$
7

 
$
(1
)
 


Fair Value Level 3 Rollforward
Recurring Basis
Third Quarter 2014

 
Fixed-Maturity 
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 June 30, 2014
$
748

 
$
49

 
$
1,284

 

$
31

 

$
(1,837
)
 
$
(1,366
)
 
$
(124
)
 
Total pretax realized and unrealized gains/(losses) recorded in: (1)
 
 
 
 
 
 

 
 

 
 

 
 

 
 

Net income (loss)
(4
)
(2
)
—

 
43

(3
)
4

(4
)
255

(6
)
7

(3
)
(13
)
(3
)
Other comprehensive income (loss)
25

 
2

 
—

 

—

 

—

 

—

 

—

 

Purchases
159

 
25

 
—

 

—

 

—

 

—

 

—

 

Settlements
(15
)
 
0

 
(31
)
 
—

 

14

 

33

 

4

 

FG VIE consolidations
—

 
—

 
—

 

—

 

—

 

—

 
—

 

FG VIE deconsolidations
—

 
—

 
—

 
—

 
—

 
—

 
—

 
Fair value as of
September 30, 2014
$
913

 
$
76

 
$
1,296

 
$
35

 
$
(1,568
)
 
$
(1,326
)
 
$
(133
)
 
Change in unrealized gains/(losses) related to financial instruments held as of September 30, 2014
$
25

 
$
2

 
$
55

 
$
4

 
$
98

 
$
6

 
$
(5
)
 


Fair Value Level 3 Rollforward
Recurring Basis
Nine Months 2015
 
 
Fixed-Maturity Securities
 
Short-Term Investments
 
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
$
770

 

$
—

 
$
78

 
$
1,398

 

$
35

 

$
(895
)
 
$
(1,277
)
 
$
(142
)
 
Radian Asset Acquisition
4

 
—

 
2

 
122

 
—

 
(215
)
 
(114
)
 
(4
)
 
Total pretax realized and unrealized gains/(losses) recorded in: (1)
 
 

 
 
 
 
 
 

 
 

 
 

 
 

 
 

Net income (loss)
17

(2
)
8

(2
)
8

(2
)
31

(3
)
10

(4
)
300

(6
)
94

(3
)
(30
)
(3
)
Other comprehensive income (loss)
(9
)
 

(4
)
 
(6
)
 
—

 

—

 

—

 

—

 

—

 

Purchases
260

 

52

(7
)
—

 
—

 

—

 

—

 

—

 

—

 

Settlements
(158
)
(7
)
(6
)
 
(34
)
 
(114
)
 
—

 

(37
)
 

113

 

9

 

FG VIE consolidations
(1
)
 

—

 
—

 
104

 

—

 

—

 

(131
)
 
—

 

FG VIE deconsolidations
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
Fair value as of
September 30, 2015
$
883

 

$
50

 
$
48

 
$
1,541

 

$
45

 

$
(847
)
 
$
(1,315
)
 
$
(167
)
 
Change in unrealized gains/(losses) related to financial instruments held as of September 30, 2015
$
(4
)
 
$
(4
)
 
$
(2
)
 
$
68

 
$
10

 
$
166

 
$
(5
)
 
$
(19
)
 
Fair Value Level 3 Rollforward
Recurring Basis
Nine Months 2014
 
 
Fixed-Maturity 
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
$
730

 
$
2

 
$
2,565

 

$
46

 

$
(1,693
)
 
$
(1,790
)
 
$
(1,081
)
 
Total pretax realized and unrealized gains/(losses) recorded in: (1)
 
 
 
 
 
 

 
 

 
 

 
 

 
 

Net income (loss)
14

(2
)
—

 
160

(3
)
(11
)
(4
)
147

(6
)
(90
)
(3
)
(49
)
(3
)
Other comprehensive income (loss)
27

 
4

 
—

 

—

 

—

 

—

 

—

 

Purchases
212

 
70

(7
)
—

 

—

 

—

 

—

 

—

 

Settlements
(83
)
 
0

 
(346
)
 
—

 

(22
)
 

332

 

16

 

FG VIE consolidations
—

 
—

 
46

 

—

 

—

 

(25
)
 
(21
)
 

FG VIE deconsolidations
13

 
—

 
(1,129
)
 
—

 
—

 
247

 
1,002

 
Fair value as of
September 30, 2014
$
913

 
$
76

 
$
1,296

 
$
35

 
$
(1,568
)
 
$
(1,326
)
 
$
(133
)
 
Change in unrealized gains/(losses) related to financial instruments held as of September 30, 2014
$
25

 
$
4

 
$
120

 
$
(11
)
 
$
(47
)
 
$
(46
)
 
$
(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 September 30, 2015

Financial Instrument Description (1)
 
Fair Value at September 30, 2015
(in millions)
 
Significant Unobservable Inputs
 
Range
 
Weighted Average as a Percentage of Current Par Outstanding
Assets:
 
 

 
 
 
 
 
 
Fixed-maturity securities (2):
 
 

 
 
 
 
 
 
 
 
Corporate securities
 
$
79

 
Yield
 
20.6%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RMBS
 
361

 
CPR
 
0.3
%
-
8.2%
 
2.6%
 
 
CDR
 
2.6
%
-
11.9%
 
5.9%
 
 
Loss severity
 
60.0
%
-
100.0%
 
75.6%
 
 
Yield
 
4.3
%
-
7.8%
 
5.7%
Asset-backed securities:
 
 
 
 
 
 
 
 
 
 
Investor owned utility
 
99

 
Cash flow receipts

100.0%

 
 
 
Collateral recovery period
 
3.3 years
 
 
 
 
Discount factor
 
7.0%
 
 
 
 
 
 
 
 
 
 
 
 
 
Triple-X life insurance transactions
 
336

 
Yield
 
3.0
%
-
7.0%
 
4.5%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Short-term investments
 
50

 
Yield
 
15.0%
 
 
 
 
 
 
 
 
 
 
 
 
 
Other invested assets (3)
 
45

 
Net asset value (per share)
 
$
906

-
$1,113
 
$998
 
 
 
 
 
 
 
 
 
 
 
FG VIEs’ assets, at fair value
 
1,541

 
CPR
 
0.3
%
-
12.0%
 
3.6%
 
 
CDR
 
1.0
%
-
22.0%
 
4.8%
 
 
Loss severity
 
40.0
%
-
100.0%
 
81.7%
 
 
Yield
 
1.5
%
-
17.3%
 
6.3%
 
 
 
 
 
 
 
 
 
 
 
Other assets
 
45

 
Quotes from third party pricing
 
$
48

-
$53
 
$51
 
 
Term (years)
 
5 years
 
 

Financial Instrument Description (1)
 
Fair Value at September 30, 2015
(in millions)
 
Significant Unobservable Inputs
 
Range
 
Weighted Average as a Percentage of Current Par Outstanding
 
 
 
 
 
 
 
 
 
Liabilities:
 
 

 
 
 
 
 
 
 
 
Credit derivative liabilities, net
 
(847
)
 
Year 1 loss estimates
 
0.0
%
-
100.0%
 
4.0%
 
 
Hedge cost (in bps)
 
26.0

-
252.8
 
64.0
 
 
Bank profit (in bps)
 
3.8

-
1,170.4
 
148.9
 
 
Internal floor (in bps)
 
7.0

-
100.0
 
25.6
 
 
Internal credit rating
 
AAA

-
CCC
 
AA
 
 
 
 
 
 
 
 
 
 
 
FG VIEs’ liabilities, at fair value
 
(1,482
)
 
CPR
 
0.3
%
-
12.0%
 
3.6%
 
 
CDR
 
1.0
%
-
22.0%
 
4.8%
 
 
Loss severity
 
40.0
%
-
100.0%
 
81.7%
 
 
Yield
 
1.5
%
-
17.3%
 
5.4%
___________________
(1)
Discounted cash flow is used as valuation technique for all financial instruments.

(2)
Excludes obligations of state and political subdivisions investments with fair value of $8 million.

(3)
Excludes several investments with fair value of $8 million.

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
Quantitative Information About Level 3 Fair Value Inputs
At September 30, 2015

Financial Instrument Description (1)
 
Fair Value at September 30, 2015
(in millions)
 
Significant Unobservable Inputs
 
Range
 
Weighted Average as a Percentage of Current Par Outstanding
Assets:
 
 

 
 
 
 
 
 
Fixed-maturity securities (2):
 
 

 
 
 
 
 
 
 
 
Corporate securities
 
$
79

 
Yield
 
20.6%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RMBS
 
361

 
CPR
 
0.3
%
-
8.2%
 
2.6%
 
 
CDR
 
2.6
%
-
11.9%
 
5.9%
 
 
Loss severity
 
60.0
%
-
100.0%
 
75.6%
 
 
Yield
 
4.3
%
-
7.8%
 
5.7%
Asset-backed securities:
 
 
 
 
 
 
 
 
 
 
Investor owned utility
 
99

 
Cash flow receipts

100.0%

 
 
 
Collateral recovery period
 
3.3 years
 
 
 
 
Discount factor
 
7.0%
 
 
 
 
 
 
 
 
 
 
 
 
 
Triple-X life insurance transactions
 
336

 
Yield
 
3.0
%
-
7.0%
 
4.5%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Short-term investments
 
50

 
Yield
 
15.0%
 
 
 
 
 
 
 
 
 
 
 
 
 
Other invested assets (3)
 
45

 
Net asset value (per share)
 
$
906

-
$1,113
 
$998
 
 
 
 
 
 
 
 
 
 
 
FG VIEs’ assets, at fair value
 
1,541

 
CPR
 
0.3
%
-
12.0%
 
3.6%
 
 
CDR
 
1.0
%
-
22.0%
 
4.8%
 
 
Loss severity
 
40.0
%
-
100.0%
 
81.7%
 
 
Yield
 
1.5
%
-
17.3%
 
6.3%
 
 
 
 
 
 
 
 
 
 
 
Other assets
 
45

 
Quotes from third party pricing
 
$
48

-
$53
 
$51
 
 
Term (years)
 
5 years
 
 

Financial Instrument Description (1)
 
Fair Value at September 30, 2015
(in millions)
 
Significant Unobservable Inputs
 
Range
 
Weighted Average as a Percentage of Current Par Outstanding
 
 
 
 
 
 
 
 
 
Liabilities:
 
 

 
 
 
 
 
 
 
 
Credit derivative liabilities, net
 
(847
)
 
Year 1 loss estimates
 
0.0
%
-
100.0%
 
4.0%
 
 
Hedge cost (in bps)
 
26.0

-
252.8
 
64.0
 
 
Bank profit (in bps)
 
3.8

-
1,170.4
 
148.9
 
 
Internal floor (in bps)
 
7.0

-
100.0
 
25.6
 
 
Internal credit rating
 
AAA

-
CCC
 
AA
 
 
 
 
 
 
 
 
 
 
 
FG VIEs’ liabilities, at fair value
 
(1,482
)
 
CPR
 
0.3
%
-
12.0%
 
3.6%
 
 
CDR
 
1.0
%
-
22.0%
 
4.8%
 
 
Loss severity
 
40.0
%
-
100.0%
 
81.7%
 
 
Yield
 
1.5
%
-
17.3%
 
5.4%
___________________
(1)
Discounted cash flow is used as valuation technique for all financial instruments.

(2)
Excludes obligations of state and political subdivisions investments with fair value of $8 million.

(3)
Excludes several investments with fair value of $8 million.

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.
Fair Value of Financial Instruments
Fair Value of Financial Instruments
 
 
As of
September 30, 2015
 
As of
December 31, 2014
 
Carrying
Amount
 
Estimated
Fair Value
 
Carrying
Amount
 
Estimated
Fair Value
 
(in millions)
Assets:
 

 
 

 
 

 
 

Fixed-maturity securities
$
10,640

 
$
10,640

 
$
10,491

 
$
10,491

Short-term investments
522

 
522

 
767

 
767

Other invested assets
153

 
155

 
108

 
110

Credit derivative assets
71

 
71

 
68

 
68

FG VIEs’ assets, at fair value
1,541

 
1,541

 
1,398

 
1,398

Other assets
194

 
194

 
184

 
184

Liabilities:
 

 
 

 
 

 
 

Financial guaranty insurance contracts(1)
4,019

 
8,807

 
3,823

 
6,205

Long-term debt
1,306

 
1,513

 
1,303

 
1,603

Credit derivative liabilities
918

 
918

 
963

 
963

FG VIEs’ liabilities with recourse, at fair value
1,315

 
1,315

 
1,277

 
1,277

FG VIEs’ liabilities without recourse, at fair value
167

 
167

 
142

 
142

Other liabilities
65

 
65

 
27

 
27

____________________
(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.