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Contracts Accounted for as Credit Derivatives (Tables)

9 Months Ended

Sep. 30, 2023

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 by sector are presented in the table below. The estimated remaining weighted average life of credit derivatives was 11.4 years and 12.8 years as of September 30, 2023 and December 31, 2022, respectively.

Credit Derivatives (1)


	As of September 30, 2023				As of December 31, 2022
Sector	Net Par Outstanding		Net Fair Value Asset (Liability)		Net Par Outstanding		Net Fair Value Asset (Liability)
	(in millions)
U.S. public finance	$	1,074	$	(15)	$	1,175	$	(79)
Non-U.S. public finance	1,478		(19)		1,565		(58)
U.S. structured finance	327		(13)		342		(22)
Non-U.S. structured finance	610		(2)		121		(3)
Total	$	3,489	$	(49)	$	3,203	$	(162)

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(1) Expected loss to be paid was $3 million as of both September 30, 2023 and December 31, 2022.

Distribution of Credit Derivative Net Par Outstanding by Internal Rating


	As of September 30, 2023				As of December 31, 2022
Rating Category	Net Par Outstanding		% of Total		Net Par Outstanding		% of Total
	(dollars in millions)
AAA	$	1,255	36.0	%	$	1,260	39.3	%
AA	1,020		29.2		1,064		33.2
A	689		19.7		232		7.2
BBB	470		13.5		590		18.5
BIG	55		1.6		57		1.8
Credit derivative net par outstanding	$	3,489	100.0	%	$	3,203	100.0	%

Net Change in Fair Value of Credit Derivatives

Fair Value Gains (Losses) on Credit Derivatives


	Third Quarter				Nine Months
	2023		2022		2023		2022
	(in millions)
Realized gains (losses) and other settlements	$	—	$	(1)	$	1	$	(2)
Net unrealized gains (losses)	9		(47)		114		(40)
Fair value gains (losses) on credit derivatives	$	9	$	(48)	$	115	$	(42)

CDS Spread on AGC and AGM

CDS Spread on AGC (in basis points)


	As of September 30, 2023	As of December 31, 2022	As of September 30, 2022	As of December 31, 2021
Five-year CDS spread	98	63	70	49
One-year CDS spread	41	26	28	16

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
	September 30, 2023		December 31, 2022
	(in millions)
Fair value of credit derivatives before effect of AGC credit spread	$	(80)	$	(207)
Plus: Effect of AGC credit spread	31		45
Net fair value of credit derivatives	$	(49)	$	(162)

- Definition

Tabular disclosure of credit derivatives which includes information by sellers of credit derivatives, about each credit derivative, or each group of similar credit derivatives, including (a) the nature of the credit derivative - its term, how it arose, the events or circumstances that would require the seller to perform under the credit derivative, and the current status of the payment/performance risk of the credit derivative; (b) the maximum potential amount of future payments (undiscounted) the seller could be required to make under the credit derivative; (c) the current fair value of the credit derivative; and (d) the nature of any recourse provisions under the credit derivative, and any assets held either as collateral or by third parties. A credit derivative is a derivative instrument (1) in which one or more of its underlyings are related to the credit risk of a specified entity (or a group of entities) or an index based on the credit risk of a group of entities and (2) that exposes the seller to potential loss from credit-risk-related events specified in the contract. Examples of credit derivatives within the scope of this paragraph include, but are not limited to, credit default swaps, credit spread options, and credit index products; also includes a hybrid instrument that has an embedded credit derivative (for example, but not limited to, a credit-linked note).

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