Contracts Accounted for as Credit Derivatives (Tables)

6 Months Ended

Jun. 30, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

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

The components of the Company’s credit derivative net par outstanding are presented in the table below. The estimated remaining weighted average life of credit derivatives was 11.3 years and 11.5 years as of June 30, 2020 and December 31, 2019, respectively.

Credit Derivatives (1)

	As of June 30, 2020					As of December 31, 2019
	Net Par Outstanding		Net Fair Value Asset (Liability)			Net Par Outstanding		Net Fair Value Asset (Liability)
	(in millions)
U.S. public finance	$	2,195	$	(66	)	$	1,942	$	(83	)
Non-U.S. public finance	2,327		(29		)	2,676		(39		)
U.S. structured finance	1,119		(61		)	1,206		(58		)
Non-U.S. structured finance	124		(5		)	132		(5		)
Total	$	5,765	$	(161	)	$	5,956	$	(185	)

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(1)    Expected recoveries were $14 million as of June 30, 2020 and $4 million as of December 31, 2019.

Distribution of Credit Derivative Net Par Outstanding by Internal Rating

	As of June 30, 2020				As of December 31, 2019
Ratings	Net Par Outstanding		% of Total		Net Par Outstanding		% of Total
	(dollars in millions)
AAA	$	1,594	27.6	%	$	1,730	29.0	%
AA	1,728		30.0		1,695		28.5
A	848		14.7		1,110		18.6
BBB	1,470		25.5		1,292		21.7
BIG (1)	125		2.2		129		2.2
Credit derivative net par outstanding	$	5,765	100.0	%	$	5,956	100.0	%

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(1) All BIG credit derivatives are U.S. RMBS transactions.

Net Change in Fair Value of Credit Derivatives

Net Change in Fair Value of Credit Derivative Gains (Losses)

	Second Quarter						Six Months
	2020			2019			2020			2019
	(in millions)
Realized gains on credit derivatives	$	1		$	1		$	3		$	4
Net credit derivative losses (paid and payable) recovered and recoverable and other settlements	(1		)	(21		)	(3		)	(25		)
Realized gains (losses) and other settlements	—			(20		)	—			(21		)
Net unrealized gains (losses)	100			12			23			(9		)
Net change in fair value of credit derivatives	$	100		$	(8	)	$	23		$	(30	)

CDS Spread on AGC and AGM

CDS Spread on AGC (in bps)

	As of June 30, 2020	As of March 31, 2020	As of December 31, 2019	As of June 30, 2019	As of March 31, 2019	As of December 31, 2018
Five-year CDS spread	159	224	41	56	74	110
One-year CDS spread	32	64	9	13	20	22

Fair Value of Credit Derivatives and Effect of AGC and AGM Credit Spreads

Fair Value of Credit Derivative Assets (Liabilities)

and Effect of AGC

Credit Spread

	As of June 30, 2020			As of December 31, 2019
	(in millions)
Fair value of credit derivatives before effect of AGC credit spread	$	(388	)	$	(261	)
Plus: Effect of AGC credit spread	227			76
Net fair value of credit derivatives	$	(161	)	$	(185	)