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Financial Guaranty Contracts Accounted for as Credit Derivatives (Tables)
 12 Months Ended
Dec. 31, 2013
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Credit Derivatives Subordination and Ratings
Credit Derivatives
Subordination and Ratings
 
 
 
As of December 31, 2013
 
As of December 31, 2012
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
 
$
19,323

 
32.4
%
 
34.0
%
 
AAA
 
$
29,142

 
32.8
%
 
33.3
%
 
AAA
Synthetic investment grade pooled corporate
 
9,754

 
21.6

 
20.0

 
AAA
 
9,658

 
21.6

 
19.7

 
AAA
Synthetic high yield pooled corporate
 
2,690

 
47.2

 
41.1

 
AAA
 
3,626

 
35.0

 
30.3

 
AAA
TruPS CDOs
 
3,554

 
45.5

 
32.9

 
BB+
 
4,099

 
46.5

 
32.7

 
BB
Market value CDOs of corporate obligations
 
2,000

 
24.4

 
30.5

 
AAA
 
3,595

 
30.1

 
32.0

 
AAA
Total pooled corporate obligations
 
37,321

 
31.5

 
30.6

 
AAA
 
50,120

 
31.7

 
30.4

 
AAA
U.S. RMBS:
 
 

 
 

 
 

 
 
 
 

 
 

 
 

 
 
Option ARM and Alt-A first lien
 
2,609

 
19.2

 
8.6

 
BB-
 
3,381

 
20.2

 
10.4

 
B+
Subprime first lien
 
2,930

 
30.5

 
51.9

 
AA-
 
3,494

 
29.8

 
52.6

 
A+
Prime first lien
 
264

 
10.9

 
3.2

 
CCC
 
333

 
10.9

 
5.2

 
B
Closed end second lien and HELOCs
 
23

 
—

 
—

 
B+
 
49

 
—

 
—

 
B-
Total U.S. RMBS
 
5,826

 
24.4

 
30.1

 
BBB
 
7,257

 
24.2

 
30.4

 
BBB
CMBS
 
3,744

 
33.5

 
42.5

 
AAA
 
4,094

 
33.3

 
41.8

 
AAA
Other
 
7,591

 
—

 
—

 
A-
 
9,310

 
—

 
—

 
A
Total
 
$
54,482

 
 

 
 

 
AA+
 
$
70,781

 
 

 
 

 
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.
Distribution of Credit Derivative Net Par Outstanding by Internal Rating
Distribution of Credit Derivative Net Par Outstanding by Internal Rating
 
 
 
As of December 31, 2013
 
As of December 31, 2012
Ratings
 
Net Par
Outstanding
 
% of Total
 
Net Par
Outstanding
 
% of Total
 
 
(dollars in millions)
AAA
 
$
38,244

 
70.2
%
 
$
50,918

 
71.9
%
AA
 
3,648

 
6.7

 
3,083

 
4.4

A
 
3,636

 
6.7

 
5,487

 
7.8

BBB
 
4,161

 
7.6

 
4,584

 
6.4

BIG
 
4,793

 
8.8

 
6,709

 
9.5

Credit derivative net par outstanding
 
$
54,482

 
100.0
%
 
$
70,781

 
100.0
%
Net Change in Fair Value of Credit Derivatives
Net Change in Fair Value of Credit Derivatives Gain (Loss)
 
 
Year Ended December 31,
 
2013
 
2012
 
2011
 
(in millions)
Net credit derivative premiums received and receivable
$
119

 
$
127

 
$
185

Net ceding commissions (paid and payable) received and receivable
2

 
1

 
3

Realized gains on credit derivatives
121

 
128

 
188

Terminations
0

 
(1
)
 
(23
)
Net credit derivative losses (paid and payable) recovered and recoverable
(163
)
 
(235
)
 
(159
)
Realized gains (losses) and other settlements on credit derivatives
(42
)
 
(108
)
 
6

Net change in unrealized gains (losses) on credit derivatives(1)
107

 
(477
)
 
554

Net change in fair value of credit derivatives
$
65

 
$
(585
)
 
$
560


  ____________________
(1)
Except for net estimated credit impairments (i.e., net expected loss to be paid as discussed in Note 6), the unrealized gains and losses on credit derivatives are expected to reduce to zero as the exposure approaches its maturity date. With considerable volatility continuing in the market, unrealized gains (losses) on credit derivatives may fluctuate significantly in future periods.
Net Par and Accelerations of Credit Derivative Revenues from Termination of CDS Contracts
Net Par and Accelerations of Credit Derivative Revenues
from Terminations of CDS Contracts

 
Year Ended December 31,
 
2013
 
2012
 
2011
 
(in millions)
Net par of terminated CDS contracts
$
4,054

 
$
2,264

 
$
11,543

Accelerations of credit derivative revenues
21

 
3

 
25
Net Change in Unrealized Gains (Losses) on Credit Derivatives By Sector
Net Change in Unrealized Gains (Losses)
on Credit Derivatives
By Sector
 
 
 
Year Ended December 31,
Asset Type
 
2013
 
2012
 
2011
 
 
(in millions)
Pooled corporate obligations
 
$
(32
)
 
$
59

 
$
39

U.S. RMBS
 
(69
)
 
(551
)
 
381

CMBS
 
0

 
2

 
11

Other (1)
 
208

 
13

 
123

Total
 
$
107

 
$
(477
)
 
$
554


  ____________________
(1)
“Other” includes all other U.S. and international asset classes, such as commercial receivables, international infrastructure, international RMBS securities, and pooled infrastructure securities.
CDS Spread on AGC and AGM
Five-Year CDS Spread
on AGC and AGM
Quoted price of CDS contract (in basis points)
 
 
As of
December 31, 2013
 
As of
December 31, 2012
 
As of
December 31, 2011
AGC
460

 
678

 
1,140

AGM
525

 
536

 
778


 
One-Year CDS Spread
on AGC and AGM
Quoted price of CDS contract (in basis points)
 
 
As of
December 31, 2013
 
As of
December 31, 2012
 
As of
December 31, 2011
AGC
185

 
270

 
965

AGM
220

 
257

 
538
Fair Value of Credit Derivatives and Effect of AGC and AGM Credit Spreads
Fair Value of Credit Derivatives
and Effect of AGC and AGM
Credit Spreads
 
 
As of
December 31, 2013
 
As of
December 31, 2012
 
(in millions)
Fair value of credit derivatives before effect of AGC and AGM credit spreads
$
(3,442
)
 
$
(4,809
)
Plus: Effect of AGC and AGM credit spreads
1,749

 
3,016

Net fair value of credit derivatives
$
(1,693
)
 
$
(1,793
)
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
 
Present Value of Expected Claim
(Payments) Recoveries(1)
Asset Type
 
As of
December 31, 2013
 
As of
December 31, 2012
 
As of
December 31, 2013
 
As of
December 31, 2012
 
 
(in millions)
Pooled corporate obligations
 
$
(30
)
 
$
6

 
$
(35
)
 
$
(16
)
U.S. RMBS
 
(1,308
)
 
(1,237
)
 
(147
)
 
(181
)
CMBS
 
(2
)
 
(2
)
 
—

 
—

Other
 
(353
)
 
(560
)
 
43

 
(85
)
Total
 
$
(1,693
)
 
$
(1,793
)
 
$
(139
)
 
$
(282
)
 ____________________
(1) 
Represents the expected claim payments (recoveries) in excess of the present value of future installment fees to be received of $45 million as of December 31, 2013 and $43 million as of December 31, 2012. Includes R&W benefit of $180 million as of December 31, 2013 and $237 million as of December 31, 2012.
Effects of Changes in Credit Spread
Effect of Changes in Credit Spread
As of December 31, 2013

Credit Spreads(1)
 
Estimated Net
Fair Value
(Pre-Tax)
 
Estimated Change
in Gain/(Loss)
(Pre-Tax)
 
 
(in millions)
100% widening in spreads
 
$
(3,499
)
 
$
(1,806
)
50% widening in spreads
 
(2,596
)
 
(903
)
25% widening in spreads
 
(2,145
)
 
(452
)
10% widening in spreads
 
(1,874
)
 
(181
)
Base Scenario
 
(1,693
)
 
—

10% narrowing in spreads
 
(1,527
)
 
166

25% narrowing in spreads
 
(1,276
)
 
417

50% narrowing in spreads
 
(860
)
 
833

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