Financial Guaranty Contracts Accounted for as Credit Derivatives (Tables)

9 Months Ended

Sep. 30, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

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

Credit Derivatives

Subordination and Ratings

	As of September 30, 2016							As of December 31, 2015
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	$	2,583	29.2	%	45.3	%	AAA	$	5,873	30.9	%	42.3	%	AAA
Synthetic investment grade pooled corporate	7,920		22.2		19.9		AAA	7,108		21.7		19.4		AAA
TruPS CDOs	1,771		42.2		41.6		BBB	3,429		45.8		42.6		A-
Market value CDOs of corporate obligations	—		—		—		--	1,113		17.0		30.1		AAA
Total pooled corporate obligations	12,274		26.6		28.4		AAA	17,523		29.2		32.3		AAA
U.S. RMBS:
Option ARM and Alt-A first lien	277		9.4		12.7		AA-	351		10.5		12.7		AA-
Subprime first lien	891		27.8		45.0		AA	981		27.7		45.2		AA
Prime first lien	—		—		—		--	177		10.9		0.0		BB
Closed-end second lien	14		—		—		BB	17		—		—		CCC
Total U.S. RMBS	1,182		25.1		40.3		AA	1,526		24.1		37.4		A+
CMBS	159		56.9		78.9		AAA	530		44.8		52.6		AAA
Other	6,344		—		—		A	6,015		—		—		A
Total(2)	$	19,959					AA	$	25,594					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, 2016 total amount includes $2.3 million net par outstanding of credit derivatives acquired from CIFG.

Distribution of Credit Derivative Net Par Outstanding by Internal Rating

	As of September 30, 2016				As of December 31, 2015
Ratings	Net Par Outstanding		% of Total		Net Par Outstanding		% of Total
	(dollars in millions)
AAA	$	10,778	54.0	%	$	14,808	57.9	%
AA	4,025		20.2		4,821		18.8
A	2,037		10.2		2,144		8.4
BBB	2,040		10.2		2,212		8.6
BIG	1,079		5.4		1,609		6.3
Credit derivative net par outstanding	$	19,959	100.0	%	$	25,594	100.0	%

Net Change in Fair Value of Credit Derivatives

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

	Third Quarter						Nine Months
	2016			2015			2016			2015
	(in millions)
Realized gains on credit derivatives	$	11		$	14		$	39		$	52
Net credit derivative losses (paid and payable) recovered and recoverable and other settlements	4			(8		)	8			(17		)
Realized gains (losses) and other settlements	15			6			47			35
Net unrealized gains (losses):
Pooled corporate obligations	3			(24		)	(37		)	0
U.S. RMBS	(12		)	11			0			148
CMBS	0			(3		)	0			1
Other	15			96			14			116
Net unrealized gains (losses)	6			80			(23		)	265
Net change in fair value of credit derivatives	$	21		$	86		$	24		$	300

Par and Accelerations From Termination of CDS Contracts

Net Par and Realized Gains

from Terminations and Settlements of Credit Derivative Contracts

	Third Quarter				Nine Months
	2016		2015		2016		2015
	(in millions)
Net par of terminated credit derivative contracts	$	1,071	$	405	$	3,507	$	969
Realized gains on credit derivatives	3		0		11		13
Net unrealized gains (losses) on credit derivatives	11		99		81		98

CDS Spread on AGC and AGM

CDS Spread on AGC and AGM

Quoted price of CDS contract (in basis points)

	As of September 30, 2016	As of June 30, 2016	As of December 31, 2015	As of September 30, 2015	As of June 30, 2015	As of December 31, 2014
Five-year CDS spread:
AGC	170	265	376	331	390	323
AGM	170	265	366	337	410	325
One-year CDS spread
AGC	31	45	139	112	120	80
AGM	31	47	131	104	125	85

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, 2016			As of December 31, 2015
	(in millions)
Fair value of credit derivatives before effect of AGC and AGM credit spreads	$	(1,020	)	$	(1,448	)
Plus: Effect of AGC and AGM credit spreads	539			1,083
Net fair value of credit derivatives	$	(481	)	$	(365	)

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
Asset Type	As of September 30, 2016			As of December 31, 2015			As of September 30, 2016			As of December 31, 2015
	(in millions)
Pooled corporate obligations	$	(126	)	$	(82	)	$	(4	)	$	(5	)
U.S. RMBS	(97		)	(98		)	(27		)	(38		)
Other	(258		)	(185		)	26			27
Total	$	(481	)	$	(365	)	$	(5	)	$	(16	)

Effects of Changes in Credit Spread

Effect of Changes in Credit Spread

As of September 30, 2016

Credit Spreads(1)	Estimated Net Fair Value (Pre-Tax)			Estimated Change in Gain/(Loss) (Pre-Tax)
	(in millions)
100% widening in spreads	$	(978	)	$	(497	)
50% widening in spreads	(730		)	(249		)
25% widening in spreads	(606		)	(125		)
10% widening in spreads	(531		)	(50		)
Base Scenario	(481		)	—
10% narrowing in spreads	(435		)	46
25% narrowing in spreads	(365		)	116
50% narrowing in spreads	(251		)	230

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