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Note 4 - Derivative Instruments Level 1 (Notes)
 12 Months Ended
Dec. 31, 2012
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.
 
 
December 31,
(In thousands)
2012
 
2011
Balance Sheets
 
 
 
Derivative assets:
 
 
 
Financial Guaranty credit derivative assets
$
12,024

 
$
15,432

NIMS related and other
1,585

 
1,780

Total derivative assets
13,609

 
17,212

Derivative liabilities:
 
 
 
Financial Guaranty credit derivative liabilities
196,406

 
106,505

Financial Guaranty VIE derivative liabilities
70,467

(1)
19,501

Total derivative liabilities
266,873

 
126,006

Total derivative liabilities, net
$
253,264

 
$
108,794


________________
(1)
As a result of the CDO Commutation Transactions described in Note 1, we established a VIE. See Note 6 for further details.
The notional value of our derivative contracts at December 31, 2012 and 2011 was $19.2 billion and $36.5 billion, respectively.
The components of the (losses) gains included in change in fair value of derivative instruments are as follows:
 
Year Ended December 31,
(In thousands)
2012
 
2011
 
2010
Statements of Operations
 
 
 
 
 
Net premiums earned—derivatives
$
28,693

 
$
41,753

 
$
47,123

Financial Guaranty credit derivatives
(173,610
)
 
597,969

 
(583,235
)
Financial Guaranty VIE derivatives
1,189

 
(10,696
)
 
(14,523
)
NIMS related and other
(297
)
 
(631
)
 
(1,937
)
Put Options on Money Market Committed Preferred Custodial Trust Securities (“CPS”)
—

 
—

 
(6,140
)
Change in fair value of derivative instruments
$
(144,025
)
 
$
628,395

 
$
(558,712
)

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 underlying assets. 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 5 for information on our fair value of financial instruments.
 The following table shows selected information about our derivative contracts:
 
($ in thousands)
December 31, 2012
Number of
Contracts
 
Par/
Notional
Exposure
 
Total Net Asset/
(Liability)
Product
 
 
 
 
 
NIMS related and other (1)
—

 
$
—

 
$
1,585

Corporate CDOs
35

 
13,770,790

 
2,817

Non-Corporate CDOs and other derivative transactions:
 
 
 
 
 
TruPs
13

 
1,086,583

 
(11,112
)
CDOs of commercial mortgage-backed securities (“CMBS”)
4

 
1,831,000

 
(74,651
)
Other:
 
 
 
 
 
Structured finance
6

 
643,638

 
(42,983
)
Public finance
23

 
1,453,830

 
(44,417
)
Total Non-Corporate CDOs and other derivative transactions
46

 
5,015,051

 
(173,163
)
Assumed financial guaranty credit derivatives:
 
 
 
 
 
Structured finance
34

 
247,891

 
(13,364
)
Public finance
8

 
133,319

 
(672
)
Total Assumed
42

 
381,210

 
(14,036
)
Financial Guaranty VIE derivative liabilities (2)
1

 
76,349

 
(70,467
)
Grand Total
124

 
$
19,243,400

 
$
(253,264
)
________________
(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 a CDS included in a VIE, which we consolidate, relating to the Terminated TruPs CDOs. The assets in the VIE represent the only funds available to pay the CDS Counterparty for amounts due under the contract; therefore, the notional exposure presented for the CDS is limited to the current trust assets. See Notes 1 and 6 for information on the underlying reference securities and on our maximum exposure to loss from this consolidated financial guaranty transaction.