Financial Guaranty Contracts Accounted for as Credit Derivatives (Tables)

9 Months Ended

Sep. 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 September 30, 2015				As of December 31, 2014
Ratings	Net Par Outstanding		% of Total		Net Par Outstanding		% of Total
	(dollars in millions)
AAA	$	17,080	57.7	%	$	21,817	62.3	%
AA	5,785		19.5		5,398		15.4
A	2,065		7.0		1,982		5.7
BBB	2,674		9.0		2,774		8.0
BIG(1)	2,029		6.8		3,025		8.6
Credit derivative net par outstanding	$	29,633	100.0	%	$	34,996	100.0	%

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(1) The September 30, 2015 BIG amount includes $489 million net par outstanding of credit derivatives acquired from Radian Asset.

Credit Derivatives

Subordination and Ratings

	As of September 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	$	7,299	31.1	%	39.6	%	AAA	$	11,688	32.0	%	36.9	%	AAA
Synthetic investment grade pooled corporate	7,119		21.7		19.4		AAA	7,640		22.6		20.6		AAA
TruPS CDOs	3,604		45.7		41.6		BBB+	3,119		45.3		35.8		BBB-
Market value CDOs of corporate obligations	1,113		17.0		10.5		AAA	1,174		19.1		20.7		AAA
Total pooled corporate obligations	19,135		29.5		30.8		AAA	23,621		30.1		30.7		AAA
U.S. RMBS:
Option ARM and Alt-A first lien	1,186		15.7		10.5		AAA	1,378		16.3		10.7		BB+
Subprime first lien	1,215		27.2		41.8		AA	1,366		31.1		50.5		A
Prime first lien	183		10.9		0.0		BB	223		10.9		0.0		B
Closed-end second lien	17		—		—		CCC	19		—		—		CCC
Total U.S. RMBS	2,601		22.6		29.6		AA	2,986		24.8		33.9		BBB
CMBS	1,127		28.4		35.8		AAA	1,952		35.3		43.6		AAA
Other	6,770		—		—		A	6,437		—		—		A
Total(2)	$	29,633					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 September 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)

	Third Quarter						Nine Months
	2015			2014			2015			2014
	(in millions)
Realized gains on credit derivatives (1)	$	14		$	17		$	52		$	58
Net credit derivative losses (paid and payable) recovered and recoverable and other settlements	(8		)	(31		)	(17		)	(38		)
Realized gains (losses) and other settlements on credit derivatives	6			(14		)	35			20
Net change in unrealized gains (losses) on credit derivatives:
Pooled corporate obligations	(24		)	4			0			10
U.S. RMBS	11			252			148			117
CMBS	(3		)	0			1			2
Other	96			13			116			(2		)
Net change in unrealized gains (losses) on credit derivatives	80			269			265			127
Net change in fair value of credit derivatives (2)	$	86		$	255		$	300		$	147

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(1) Includes realized gain due to terminations of CDS contracts. CDS terminations in Nine Months 2015 also included a payment received from the resolution of a dispute related to a termination of CDS in 2008.

(2) On October 9, 2015, the Company reached a settlement agreement with a CDS counterparty to terminate five Alt-A first lien CDS transactions. This termination agreement will generate a net fair value gain of approximately $293 million in the Company’s fourth quarter 2015 financial statements. In addition, on October 13, 2015, the Company terminated a CMBS transaction with a CDS counterparty and this termination agreement will generate a net fair value gain of approximately $34 million in the Company's fourth quarter 2015 financial statements.

Par and Accelerations From Termination of CDS Contracts

Net Par and Realized Gain

from Terminations of CDS Contracts

	Third Quarter					Nine Months
	2015		2014			2015		2014
	(in millions)
Net par of terminated CDS contracts	$	405	$	1,631		$	969	$	2,931
Realized gain due to termination of CDS contracts	0.3		(0.1		)	12.9		0.6

CDS Spread on AGC and AGM

Five-Year CDS Spread

on AGC and AGM

Quoted price of CDS contract (in basis points)

	As of September 30, 2015	As of June 30, 2015	As of December 31, 2014	As of September 30, 2014	As of June 30, 2014	As of December 31, 2013
AGC	331	390	323	345	327	460
AGM	337	410	325	344	346	525

One-Year CDS Spread

on AGC and AGM

Quoted price of CDS contract (in basis points)

	As of September 30, 2015	As of June 30, 2015	As of December 31, 2014	As of September 30, 2014	As of June 30, 2014	As of December 31, 2013
AGC	112	120	80	125	85	185
AGM	104	125	85	120	115	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 September 30, 2015			As of December 31, 2014
	(in millions)
Fair value of credit derivatives before effect of AGC and AGM credit spreads	$	(1,973	)	$	(2,029	)
Plus: Effect of AGC and AGM credit spreads	1,126			1,134
Net fair value of credit derivatives (1)	$	(847	)	$	(895	)

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(1) September 30, 2015 amount includes $174 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 September 30, 2015			As of December 31, 2014			As of September 30, 2015			As of December 31, 2014
	(in millions)
Pooled corporate obligations	$	(231	)	$	(49	)	$	(67	)	$	(23	)
U.S. RMBS	(346		)	(494		)	19			(73		)
CMBS	(40		)	0			(7		)	—
Other	(230		)	(352		)	28			38
Total	$	(847	)	$	(895	)	$	(27	)	$	(58	)

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(1) Includes R&W benefit of $82 million as of September 30, 2015 and $86 million as of December 31, 2014.

Effects of Changes in Credit Spread

Effect of Changes in Credit Spread

As of September 30, 2015

Credit Spreads(1)	Estimated Net Fair Value (Pre-Tax)			Estimated Change in Gain/(Loss) (Pre-Tax)
	(in millions)
100% widening in spreads	$	(1,723	)	$	(876	)
50% widening in spreads	(1,285		)	(438		)
25% widening in spreads	(1,067		)	(220		)
10% widening in spreads	(935		)	(88		)
Base Scenario	(847		)	—
10% narrowing in spreads	(765		)	82
25% narrowing in spreads	(643		)	204
50% narrowing in spreads	(441		)	406

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