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Note 3 - Derivative Instruments Level 1 (Notes)
9 Months Ended
Sep. 30, 2011
Derivative Instruments [Abstract] 
Derivative Instruments and Hedging Activities Disclosure [Text Block]
Derivative Instruments
The following table sets forth our gross unrealized gains and gross unrealized losses on derivative assets and liabilities as of the dates indicated. Certain contracts are in an asset position because the net present value of the contractual premium we receive exceeds the net present value of our estimate of the expected future premiums that a financial guarantor of similar credit quality to us would charge to provide the same credit protection, assuming a transfer of our obligation to such financial guarantor as of the measurement date.
 
(In millions)
September 30,
2011
 
December 31,
2010
Balance Sheets
 
 
 
Derivative assets:
 
 
 
Financial Guaranty credit derivative assets
$
15.1

 
$
14.5

Net interest margin securities ("NIMS") assets
4.9

 
10.9

Other
0.3

 
0.8

Total derivative assets
20.3

 
26.2

Derivative liabilities:
 
 
 
Financial Guaranty credit derivative liabilities
168.1

 
704.4

Financial Guaranty VIE derivative liabilities
20.8

 
19.2

Total derivative liabilities
188.9

 
723.6

Total derivative liabilities, net
$
168.6

 
$
697.4


The notional value of our derivative contracts at September 30, 2011, and December 31, 2010, was $37.9 billion and $41.6 billion, respectively.
The components of the gains (losses) included in change in fair value of derivative instruments are as follows:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
(In millions)
2011
 
2010
 
2011
 
2010
Statements of Operations
 
 
 
 
 
 
 
Net premiums earned—derivatives
$
10.3

 
$
11.5

 
$
31.7

 
$
35.6

Financial Guaranty credit derivatives
120.1

 
223.7

 
536.6

 
(384.6
)
Financial Guaranty VIE derivatives
(4.5
)
 
(5.2
)
 
(9.4
)
 
(15.9
)
NIMS
0.2

 
(0.9
)
 
(1.3
)
 
(1.4
)
Put options on CPS
—

 
—

 
—

 
(6.3
)
Other
(0.1
)
 
0.7

 
1.0

 
(0.2
)
Change in fair value of derivative instruments
$
126.0

 
$
229.8

 
$
558.6

 
$
(372.8
)

The valuation of derivative instruments may result in significant volatility from period to period in gains and losses as reported on our consolidated statements of operations. Generally, these gains and losses result, in part, from changes in corporate credit or asset-backed spreads and changes in the creditworthiness of underlying corporate entities or the credit performance of the assets underlying asset-backed securities ("ABS"). Additionally, when determining the fair value of our liabilities, we are required to incorporate into the fair value of those liabilities an adjustment that reflects our own non-performance risk and consequently, changes in the market's perception of our non-performance risk also result in gains and losses on our derivative instruments. Any incurred gains or losses (which include any claim payments) on our financial guaranty contracts that are accounted for as derivatives are recognized as a change in fair value of derivative instruments. Because our fair value determinations for derivative and other financial instruments in our mortgage insurance and financial guaranty businesses are based on assumptions and estimates that are inherently subject to risk and uncertainty, our fair value amounts could vary significantly from period to period. See Note 4 for information on our fair value of financial instruments.
 



The following table shows selected information about our derivative contracts:
 
($ in millions)
September 30, 2011
Number of
Contracts
 
Par/
Notional
Exposure
 
Total Net Asset/
(Liability)
Product
 
 
 
 
 
NIMS related and other (1)
—

 
$
—

 
$
5.2

Corporate collateralized debt obligations ("CDOs")
76

 
30,554.3

 
(9.1
)
Non-Corporate CDOs and other derivative transactions:
 
 
 
 
 
Trust Preferred Securities ("TruPs")
19

 
1,932.0

 
(32.4
)
CDOs of commercial mortgage-backed securities ("CMBS")
4

 
1,831.0

 
(50.9
)
Other:
 
 
 
 
 
Structured finance
9

 
777.3

 
(32.3
)
Public finance
27

 
1,695.5

 
(13.2
)
Total Non-Corporate CDOs and other derivative transactions
59

 
6,235.8

 
(128.8
)
Assumed financial guaranty credit derivatives:
 
 
 
 
 
Structured finance
245

 
988.5

 
(13.5
)
Public finance
10

 
168.1

 
(1.6
)
Total Assumed
255

 
1,156.6

 
(15.1
)
Financial Guaranty VIE derivative liabilities (2)
—

 
—

 
(20.8
)
Grand Total
390

 
$
37,946.7

 
$
(168.6
)
 ________________
(1)
Represents NIMS derivative assets related to consolidated NIMS VIEs. Also includes common stock warrants. Because none of these investments represent financial guaranty contracts that we issued, they cannot become liabilities, and therefore, do not represent additional par exposure.
(2)
Represents the fair value of an interest rate swap included in the consolidation of one of our financial guaranty transactions. The notional amount of the interest rate swap does not represent additional par exposure, and therefore, is excluded from this table. See Note 5 for information on our maximum exposure to loss from our consolidated financial guaranty transactions.