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Financial Guaranty Contracts Accounted for as Credit Derivatives (Tables)
 6 Months Ended
Jun. 30, 2012
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Credit Derivatives Net Par Outstanding
it Derivatives Net Par Outstanding
 
 
 
As of June 30, 2012
 
As of December 31, 2011
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
 
$
32,210

 
33.1
%
 
32.7
%
 
AAA
 
$
34,567

 
32.6
%
 
32.0
%
 
AAA
Synthetic investment grade pooled corporate
 
10,453

 
20.9

 
19.0

 
AAA
 
12,393

 
20.4

 
18.7

 
AAA
Synthetic high yield pooled corporate
 
4,898

 
35.4

 
30.3

 
AAA
 
5,049

 
35.7

 
30.3

 
AA+
TruPS CDOs
 
4,319

 
46.5

 
31.9

 
BB
 
4,518

 
46.6

 
31.9

 
BB
Market value CDOs of corporate obligations
 
3,911

 
33.0

 
28.5

 
AAA
 
4,546

 
30.6

 
28.9

 
AAA
Total pooled corporate obligations
 
55,791

 
32.1

 
29.6

 
AAA
 
61,073

 
31.2

 
28.9

 
AAA
U.S. RMBS:
 
 

 
 

 
 

 
 
 
 

 
 

 
 

 
 
Option ARM and Alt-A first lien
 
3,701

 
20.1

 
11.8

 
BB-
 
4,060

 
19.6

 
13.6

 
BB-
Subprime first lien
 
3,778

 
29.6

 
53.6

 
A+
 
4,012

 
30.1

 
53.9

 
A+
Prime first lien
 
367

 
10.9

 
7.1

 
B
 
398

 
10.9

 
8.4

 
B
Closed end second lien and HELOCs
 
56

 
—

 
—

 
B-
 
62

 
—

 
—

 
B
Total U.S. RMBS
 
7,902

 
24.1

 
31.5

 
BBB
 
8,532

 
24.1

 
32.2

 
BBB
CMBS
 
4,270

 
33.5

 
41.0

 
AAA
 
4,612

 
32.6

 
38.9

 
AAA
Other
 
10,480

 
—

 
—

 
A
 
10,830

 
—

 
—

 
A
Total
 
$
78,443

 
 

 
 

 
AA+
 
$
85,047

 
 

 
 

 
AA+
____________________
(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.
 
E
Distribution of Credit Derivative Net Par Outstanding by Internal Rating
ribution of Credit Derivative Net Par Outstanding by Internal Rating
 
 
 
As of June 30, 2012
 
As of December 31, 2011
Ratings
 
Net Par
Outstanding
 
% of Total
 
Net Par
Outstanding
 
% of Total
 
 
(dollars in millions)
Super Senior
 
$
19,676

 
25.1
%
 
$
21,802

 
25.6
%
AAA
 
37,504

 
47.8

 
40,240

 
47.3

AA
 
3,500

 
4.5

 
4,342

 
5.1

A
 
5,887

 
7.5

 
5,830

 
6.9

BBB
 
4,776

 
6.1

 
5,030

 
5.9

BIG
 
7,100

 
9.0

 
7,803

 
9.2

Total credit derivative net par outstanding
 
$
78,443

 
100.0
%
 
$
85,047

 
100.0
%
 
C
U.S. Residential Mortgage-Backed Securities
it Derivative
U.S. Residential Mortgage-Backed Securities
 
 
 
As of June 30, 2012
 
Net Change in Unrealized Gain (Loss)
Vintage
 
Net Par
Outstanding
(in millions)
 
Original
Subordination(1)
 
Current
Subordination(1)
 
Weighted
Average
Credit Rating
 
Second Quarter 2012
 
Six Months 2012
 
 
 
 
 
 
 
 
 
 
(in millions)
2004 and Prior
 
$
136

 
6.4
%
 
19.4
%
 
BBB+
 
$
1.6

 
$
0.1

2005
 
2,316

 
30.8

 
65.8

 
AA
 
5.1

 
(0.6
)
2006
 
1,602

 
29.4

 
35.1

 
A-
 
18.9

 
(14.5
)
2007
 
3,848

 
18.4

 
9.8

 
B+
 
224.1

 
(364.7
)
Total
 
$
7,902

 
24.1
%
 
31.5
%
 
BBB
 
$
249.7

 
$
(379.7
)
 
____________________
(1)
Represents the sum of subordinate tranches and overcollateralization and does not include any benefit from excess interest collections that may be used to absorb losses.
Cre
Commercial Mortgage-Backed Securities
it Derivative
Commercial Mortgage-Backed Securities
 
 
 
As of June 30, 2012
 
Net Change in Unrealized
Gain (Loss)
Vintage
 
Net Par
Outstanding
(in millions)
 
Original
Subordination(1)
 
Current
Subordination(1)
 
Weighted
Average
Credit Rating
 
Second Quarter 2012
 
Six Months 2012
 
 
 
 
 
 
 
 
 
 
(in millions)
2004 and Prior
 
$
80

 
27.4
%
 
66.6
%
 
AAA
 
$
—

 
$
(0.1
)
2005
 
669

 
18.0

 
35.0

 
AAA
 
(0.1
)
 
(0.2
)
2006
 
2,077

 
34.0

 
40.7

 
AAA
 
0.4

 
0.9

2007
 
1,444

 
40.2

 
42.7

 
AAA
 
(0.2
)
 
(0.3
)
Total
 
$
4,270

 
33.5
%
 
41.0
%
 
AAA
 
$
0.1

 
$
0.3

____________________
(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.
 
N
Net Change in Fair Value of Credit Derivatives
Change in Fair Value of Credit Derivatives Gain (Loss)
 
 
Second Quarter
 
Six Months
 
2012
 
2011
 
2012
 
2011
 
(in millions)
Net credit derivative premiums received and receivable
$
34.2

 
$
47.6

 
$
63.1

 
$
107.2

Net ceding commissions (paid and payable) received and receivable
(0.1
)
 
0.8

 
(0.2
)
 
2.2

Realized gains on credit derivatives
34.1

 
48.4

 
62.9

 
109.4

Terminations
(0.5
)
 
(22.5
)
 
(0.5
)
 
(22.5
)
Net credit derivative losses (paid and payable) recovered and recoverable
(56.3
)
 
(36.7
)
 
(142.0
)
 
(62.3
)
Total realized gains (losses) and other settlements on credit derivatives
(22.7
)
 
(10.8
)
 
(79.6
)
 
24.6

Net unrealized gains (losses) on credit derivatives
283.4

 
(54.0
)
 
(350.4
)
 
(325.6
)
Net change in fair value of credit derivatives
$
260.7

 
$
(64.8
)
 
$
(430.0
)
 
$
(301.0
)

 
Net Change in Unrealized Gains (Losses) on Credit Derivatives By Sector
Change in Unrealized Gains (Losses) on Credit Derivatives By Sector
 
 
 
Second Quarter
 
Six Months
Asset Type
 
2012
 
2011
 
2012
 
2011
 
 
(in millions)
 
 
 
 
 
 
 
 
 
Pooled corporate obligations:
 
 

 
 

 
 
 
 
CLOs/Collateral bond obligations
 
$
—

 
$
(3.6
)
 
$
7.3

 
$
(1.6
)
Synthetic investment grade pooled corporate
 
7.2

 
(0.8
)
 
8.8

 
9.7

Synthetic high yield pooled corporate
 
(0.2
)
 
3.5

 
10.6

 
0.7

TruPS CDOs
 
17.3

 
(15.5
)
 
3.5

 
(36.3
)
Market value CDOs of corporate obligations
 
0.1

 
(5.2
)
 
(0.3
)
 
(5.3
)
Total pooled corporate obligations
 
24.4

 
(21.6
)
 
29.9

 
(32.8
)
U.S. RMBS:
 
 

 
 

 
 
 
 
Option ARM and Alt-A first lien
 
174.7

 
28.1

 
(343.0
)
 
(239.5
)
Subprime first lien
 
39.0

 
(67.2
)
 
12.9

 
(91.3
)
Prime first lien
 
34.8

 
(12.8
)
 
(51.3
)
 
(12.2
)
Closed end second lien and HELOCs
 
1.2

 
0.8

 
1.7

 
1.1

Total U.S. RMBS
 
249.7

 
(51.1
)
 
(379.7
)
 
(341.9
)
CMBS
 
0.1

 
9.8

 
0.3

 
10.5

Other
 
9.2

 
8.9

 
(0.9
)
 
38.6

Total
 
$
283.4

 
$
(54.0
)
 
$
(350.4
)
 
$
(325.6
)
 
CDS Spread on AGC and AGM
-Year CDS Spread on AGC and AGM
 
 
As of
June 30, 2012
 
As of March 31, 2012
 
As of
December 31, 2011
Quoted price of CDS contract (in basis points):
 

 
 
 
 

AGC
904

 
743

 
1,140

AGM
652

 
555

 
778

 
C
Components of Credit Derivative Assets (Liabilities)
onents of Credit Derivative Assets (Liabilities)
 
 
As of
June 30, 2012
 
As of
December 31, 2011
 
(in millions)
Credit derivative assets
$
429.9

 
$
468.9

Credit derivative liabilities
(2,095.9
)
 
(1,772.8
)
Net fair value of credit derivatives
$
(1,666.0
)
 
$
(1,303.9
)
 
 
As of
June 30, 2012
 
As of
December 31, 2011
 
(in millions)
Fair value of credit derivatives before effect of AGC and AGM credit spreads
$
(5,749.1
)
 
$
(5,595.8
)
Plus: Effect of AGC and AGM credit spreads
4,083.1

 
4,291.9

Net fair value of credit derivatives
$
(1,666.0
)
 
$
(1,303.9
)
 
T
Net Fair Value and Expected Losses of Credit Derivatives by Sector
Fair Value and Expected Losses of Credit Derivatives by Sector
 
 
 
Fair Value of Credit Derivative
Asset (Liability), net
 
Present Value of Expected Claim
(Payments) Recoveries(1)
Asset Type
 
As of
June 30, 2012
 
As of
December 31, 2011
 
As of
June 30, 2012
 
As of
December 31, 2011
 
 
(in millions)
Pooled corporate obligations:
 
 

 
 

 
 

 
 

CLOs/ Collateralized bond obligations
 
$
5.6

 
$
(0.7
)
 
$
—

 
$
—

Synthetic investment grade pooled corporate
 
(15.3
)
 
(23.8
)
 
—

 
—

Synthetic high-yield pooled corporate
 
(5.8
)
 
(15.7
)
 
—

 
(5.2
)
TruPS CDOs
 
(8.6
)
 
(11.9
)
 
(33.2
)
 
(39.3
)
Market value CDOs of corporate obligations
 
0.9

 
2.5

 
—

 
—

Total pooled corporate obligations
 
(23.2
)
 
(49.6
)
 
(33.2
)
 
(44.5
)
U.S. RMBS:
 
 

 
 

 
 

 
 

Option ARM and Alt-A first lien(2)
 
(953.0
)
 
(596.4
)
 
(132.9
)
 
(191.2
)
Subprime first lien
 
(3.7
)
 
(22.5
)
 
(70.1
)
 
(94.9
)
Prime first lien
 
(95.7
)
 
(44.3
)
 
—

 
—

Closed-end second lien and HELOCs
 
(13.0
)
 
(14.9
)
 
11.7

 
6.6

Total U.S. RMBS
 
(1,065.4
)
 
(678.1
)
 
(191.3
)
 
(279.5
)
CMBS
 
(4.3
)
 
(4.9
)
 
—

 
—

Other
 
(573.1
)
 
(571.3
)
 
(97.2
)
 
(94.9
)
Total
 
$
(1,666.0
)
 
$
(1,303.9
)
 
$
(321.7
)
 
$
(418.9
)
 
____________________
(1)          Represents amount in excess of the present value of future installment fees to be received of $53.6 million as of June 30, 2012 and $47.1 million as of December 31, 2011. Includes R&W benefit of $240.7 million as of June 30, 2012 and $215.0 million as of December 31, 2011.
 
(2)          Includes one transaction which is covered under the Bank of America Agreement.
 
R
Schedule of estimated change in fair values on the net balance of the Company's credit derivative positions assuming immediate parallel shifts in credit spreads
ct of Changes in Credit Spread
 
 
 
As of June 30, 2012
Credit Spreads(1)
 
Estimated Net
Fair Value
(Pre-Tax)
 
Estimated Change
in Gain/(Loss)
(Pre-Tax)
 
 
(in millions)
100% widening in spreads
 
$
(3,462.1
)
 
$
(1,796.1
)
50% widening in spreads
 
(2,564.0
)
 
(898.0
)
25% widening in spreads
 
(2,114.9
)
 
(448.9
)
10% widening in spreads
 
(1,845.4
)
 
(179.4
)
Base Scenario
 
(1,666.0
)
 
—

10% narrowing in spreads
 
(1,509.2
)
 
156.8

25% narrowing in spreads
 
(1,275.0
)
 
391.0

50% narrowing in spreads
 
(893.6
)
 
772.4

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