GAAP AGO-06-30-2013-10Q
Table of Contents

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________________________________________
FORM 10-Q
ý
 
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2013
Or
o
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition Period from              to               
Commission File No. 001-32141 
ASSURED GUARANTY LTD.
(Exact name of registrant as specified in its charter) 
Bermuda
 
98-0429991
(State or other jurisdiction
 
(I.R.S. employer
of incorporation)
 
identification no.)
 
30 Woodbourne Avenue
Hamilton HM 08
Bermuda
(Address of principal executive offices)
(441) 279-5700
(Registrant’s telephone number, including area code)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes x No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes x No o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer x
 
Accelerated filer o
 
 
 
Non-accelerated filer o
 
Smaller reporting company o
(Do not check if a smaller reporting company)
 
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes o No x
The number of registrant’s Common Shares ($0.01 par value) outstanding as of August 1, 2013 was 182,986,125 (includes 48,273 unvested restricted shares).
 

Table of Contents


ASSURED GUARANTY LTD.

INDEX TO FORM 10-Q
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Table of Contents

PART I.
FINANCIAL INFORMATION
 
ITEM 1.
FINANCIAL STATEMENTS

Assured Guaranty Ltd.

Consolidated Balance Sheets (unaudited)
 
(dollars in millions except per share and share amounts)
 
 
As of
June 30, 2013
 
As of
December 31, 2012
Assets
 

 
 

Investment portfolio:
 

 
 

Fixed maturity securities, available-for-sale, at fair value (amortized cost of $9,267 and $9,346)
$
9,564

 
$
10,056

Short term investments, at fair value
943

 
817

Other invested assets
130

 
212

Total investment portfolio
10,637

 
11,085

Cash
143

 
138

Premiums receivable, net of ceding commissions payable
915

 
1,005

Ceded unearned premium reserve
510

 
561

Deferred acquisition costs
125

 
116

Reinsurance recoverable on unpaid losses
60

 
58

Salvage and subrogation recoverable
331

 
456

Credit derivative assets
101

 
141

Deferred tax asset, net
850

 
721

Financial guaranty variable interest entities’ assets, at fair value
2,674

 
2,688

Other assets
262

 
273

Total assets
$
16,608

 
$
17,242

Liabilities and shareholders’ equity
 

 
 

Unearned premium reserve
$
4,812

 
$
5,207

Loss and loss adjustment expense reserve
564

 
601

Reinsurance balances payable, net
188

 
219

Long-term debt
827

 
836

Credit derivative liabilities
2,349

 
1,934

Financial guaranty variable interest entities’ liabilities with recourse, at fair value
1,940

 
2,090

Financial guaranty variable interest entities’ liabilities without recourse, at fair value
1,134

 
1,051

Other liabilities
310

 
310

Total liabilities
12,124

 
12,248

Commitments and contingencies (See Note 14)

 

Common stock ($0.01 par value, 500,000,000 shares authorized; 182,901,083 and 194,003,297 shares issued and outstanding)
2

 
2

Additional paid-in capital
2,483

 
2,724

Retained earnings
1,786

 
1,749

Accumulated other comprehensive income, net of tax of $83 and $198
209

 
515

Deferred equity compensation (320,193 and 320,193 shares)
4

 
4

Total shareholders’ equity
4,484

 
4,994

Total liabilities and shareholders’ equity
$
16,608

 
$
17,242

 
The accompanying notes are an integral part of these consolidated financial statements.


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Assured Guaranty Ltd.

Consolidated Statements of Operations (unaudited)
 
(dollars in millions except per share amounts)
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2013
 
2012
 
2013
 
2012
Revenues
 
 
 
 
 
 
 
Net earned premiums
$
163

 
$
219

 
$
411

 
$
413

Net investment income
93

 
101

 
187

 
199

Net realized investment gains (losses):
 
 
 
 
 
 
 
Other-than-temporary impairment losses
(16
)
 
(9
)
 
(17
)
 
(37
)
Less: portion of other-than-temporary impairment loss
recognized in other comprehensive income
(9
)
 
(7
)
 
(5
)
 
(30
)
Other net realized investment gains (losses)
9

 
(1
)
 
42

 
5

Net realized investment gains (losses)
2

 
(3
)
 
30

 
(2
)
Net change in fair value of credit derivatives:
 
 
 
 
 
 
 
Realized gains (losses) and other settlements
(86
)
 
(23
)
 
(68
)
 
(80
)
Net unrealized gains (losses)
160

 
284

 
(450
)
 
(350
)
Net change in fair value of credit derivatives
74

 
261

 
(518
)
 
(430
)
Fair value gains (losses) on committed capital securities
(3
)
 
4

 
(13
)
 
(10
)
Fair value gains (losses) on financial guaranty variable interest entities
143

 
168

 
213

 
127

Other income
(7
)
 
5

 
(21
)
 
96

Total revenues
465

 
755

 
289

 
393

Expenses


 


 
 
 
 
Loss and loss adjustment expenses
62

 
118

 
14

 
360

Amortization of deferred acquisition costs
1

 
5

 
4

 
10

Interest expense
21

 
25

 
42

 
50

Other operating expenses
52

 
53

 
112

 
115

Total expenses
136

 
201

 
172

 
535

Income (loss) before income taxes
329

 
554

 
117

 
(142
)
Provision (benefit) for income taxes
 

 
 

 
 
 
 
Current
3

 
(29
)
 
58

 
0

Deferred
107

 
206

 
(16
)
 
(36
)
Total provision (benefit) for income taxes
110

 
177

 
42

 
(36
)
Net income (loss)
$
219

 
$
377

 
$
75

 
$
(106
)
 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
Basic
$
1.17

 
$
2.02

 
$
0.39

 
$
(0.58
)
Diluted
$
1.16

 
$
2.01

 
$
0.39

 
$
(0.58
)
Dividends per share
$
0.10

 
$
0.09

 
$
0.20

 
$
0.18

 
The accompanying notes are an integral part of these consolidated financial statements.
 

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Assured Guaranty Ltd.

Consolidated Statements of Comprehensive Income (unaudited)
 
(in millions)
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2013
 
2012
 
2013
 
2012
Net income (loss)
$
219

 
$
377

 
$
75

 
$
(106
)
Unrealized holding gains (losses) arising during the period on:
 
 
 
 
 
 
 
Investments with no other-than-temporary impairment, net of tax provision (benefit) of $(79), $8, $(98), and $27
(219
)
 
32

 
(269
)
 
74

Investments with other-than-temporary impairment, net of tax provision (benefit) of $(7), $(1), $(15) and $(8)
(16
)
 
(4
)
 
(32
)
 
(18
)
Unrealized holding gains (losses) arising during the period, net of tax
(235
)
 
28

 
(301
)
 
56

Less: reclassification adjustment for gains (losses) included in net income (loss), net of tax provision (benefit) of $0, $(4), $(2) and $(5)
2

 
(4
)
 
(1
)
 
(5
)
Change in net unrealized gains on investments
(237
)
 
32

 
(300
)
 
61

Other, net of tax provision
(1
)
 
(1
)
 
(6
)
 
1

Other comprehensive income (loss)
$
(238
)
 
$
31

 
$
(306
)
 
$
62

Comprehensive income (loss)
$
(19
)
 
$
408

 
$
(231
)
 
$
(44
)
 
The accompanying notes are an integral part of these consolidated financial statements.
 


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Assured Guaranty Ltd.

Consolidated Statements of Shareholders’ Equity (unaudited)
 
For the Six Months Ended June 30, 2013
 
(dollars in millions, except share data)

 
Common Stock
 
Additional
Paid-in
Capital
 
Retained Earnings
 
Accumulated
Other
Comprehensive Income
 
Deferred
Equity Compensation
 
Total
Shareholders’ Equity
 
Shares
 
Amount
 
 
 
 
 
Balance at December 31, 2012
194,003,297

 
$
2

 
$
2,724

 
$
1,749

 
$
515

 
$
4

 
$
4,994

Net income
—

 
—

 
—

 
75

 
—

 
—

 
75

Dividends ($0.20 per share)
—

 
—

 
—

 
(38
)
 
—

 
—

 
(38
)
Common stock repurchases
(11,489,529
)
 
0

 
(244
)
 
—

 
—

 
—

 
(244
)
Share-based compensation and other
387,315

 
0

 
3

 
—

 
—

 
—

 
3

Other comprehensive loss
—

 
—

 
—

 
—

 
(306
)
 
—

 
(306
)
Balance at June 30, 2013
182,901,083

 
$
2

 
$
2,483

 
$
1,786

 
$
209

 
$
4

 
$
4,484

 
The accompanying notes are an integral part of these consolidated financial statements.


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Assured Guaranty Ltd.

Consolidated Statements of Cash Flows (unaudited)
 
(in millions)
 
 
Six Months Ended June 30,
 
2013
 
2012
Net cash flows provided by (used in) operating activities
$
122

 
$
162

Investing activities
 

 
 

Fixed maturity securities:
 

 
 

Purchases
(987
)
 
(924
)
Sales
632

 
526

Maturities
446

 
515

Net sales (purchases) of short-term investments
(126
)
 
(108
)
Net proceeds from paydowns on financial guaranty variable interest entities’ assets
440

 
283

Acquisition of MAC, net of cash acquired
—

 
(91
)
Other
67

 
72

Net cash flows provided by (used in) investing activities
472

 
273

Financing activities
 

 
 

Proceeds from issuance of common stock
—

 
173

Dividends paid
(38
)
 
(33
)
Repurchases of common stock
(244
)
 
(24
)
Share activity under option and incentive plans
(1
)
 
(2
)
Net paydowns of financial guaranty variable interest entities’ liabilities
(289
)
 
(389
)
Repayment of long-term debt
(13
)
 
(196
)
Net cash flows provided by (used in) financing activities
(585
)
 
(471
)
Effect of exchange rate changes
(4
)
 
(4
)
Increase (decrease) in cash
5

 
(40
)
Cash at beginning of period
138

 
215

Cash at end of period
$
143

 
$
175

Supplemental cash flow information
 

 
 

Cash paid (received) during the period for:
 

 
 

Income taxes
$
69

 
$
(16
)
Interest
$
38

 
$
47

The accompanying notes are an integral part of these consolidated financial statements.

5
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Assured Guaranty Ltd.

Notes to Consolidated Financial Statements (unaudited)
 
June 30, 2013

1.
Business and Basis of Presentation
 
Business
 
Assured Guaranty Ltd. (“AGL” and, together with its subsidiaries, “Assured Guaranty” or the “Company”) is a Bermuda-based holding company that provides, through its operating subsidiaries, credit protection products to the United States (“U.S.”) and international public finance (including infrastructure) and structured finance markets. The Company applies its credit underwriting judgment, risk management skills and capital markets experience to offer insurance that protects holders of debt instruments and other monetary obligations from defaults in scheduled payments, including scheduled interest and principal payments. The Company markets its credit protection products directly to issuers and underwriters of public finance and structured finance securities as well as to investors in such obligations. The Company guarantees obligations issued in many countries, although its principal focus is on the U.S., as well as Europe and Australia.

Financial guaranty insurance policies provide an unconditional and irrevocable guaranty that protects the holder of a financial obligation against non-payment of principal and interest ("Debt Service") when due. Upon an obligor’s default on scheduled principal or interest payments due on the obligation, the Company is required under the financial guaranty policy to pay the principal or interest shortfall. The Company has issued financial guaranty insurance policies on public finance obligations and structured finance obligations. Public finance obligations insured by the Company consist primarily of general obligation bonds supported by the taxing powers of U.S. state or municipal governmental authorities, as well as tax-supported bonds, revenue bonds and other obligations supported by covenants from state or municipal governmental authorities or other municipal obligors to impose and collect fees and charges for public services or specific infrastructure projects. The Company also includes within public finance obligations those obligations backed by the cash flow from leases or other revenues from projects serving substantial public purposes, including utilities, toll roads, health care facilities and government office buildings. Structured finance obligations insured by the Company are generally issued by special purpose entities and backed by pools of assets such as residential or commercial mortgage loans, consumer or trade receivables, securities or other assets having an ascertainable cash flow or market value. The Company also includes within structured finance obligations other specialized financial obligations.
 
In the past, the Company had sold credit protection by issuing policies that guaranteed payment obligations under credit derivatives. Financial guaranty contracts accounted for as credit derivatives are generally structured such that the circumstances giving rise to the Company’s obligation to make loss payments are similar to those for financial guaranty insurance contracts and only occurs upon one or more defined credit events such as failure to pay or bankruptcy, in each case, as defined within the transaction documents, with respect to one or more third party referenced securities or loans. Financial guaranty contracts accounted for as credit derivatives are primarily comprised of credit default swaps (“CDS”). The Company’s credit derivative transactions are governed by International Swaps and Derivative Association, Inc. (“ISDA”) documentation. The Company has not entered into any new CDS in order to sell credit protection since the beginning of 2009, when regulatory guidelines were issued that limited the terms under which such protection could be sold. The capital and margin requirements applicable under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) also contributed to the decision of the Company not to enter into such new CDS in the foreseeable future. The Company actively pursues opportunities to terminate existing CDS, which have the effect of reducing future fair value volatility in income and/or reducing rating agency capital charges.

Basis of Presentation
 
The unaudited interim consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and, in the opinion of management, reflect all adjustments that are of a normal recurring nature, necessary for a fair statement of the financial condition, results of operations and cash flows of the Company and its consolidated financial guaranty variable interest entities (“FG VIEs”) for the periods presented. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. These unaudited interim consolidated financial statements are as of June 30, 2013 and cover the three-month period ended June 30, 2013 ("Second Quarter 2013") and the three-month period ended June 30, 2012 ("Second Quarter

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2012"), six-month period ended June 30, 2013 ("Six Months 2013") and the six-month period ended June 30, 2012 ("Six Months 2012"). Certain financial information that is normally included in annual financial statements prepared in accordance with GAAP, but is not required for interim reporting purposes, has been condensed or omitted.The year-end balance sheet data was derived from audited financial statements.
 
The unaudited interim consolidated financial statements include the accounts of AGL and its direct and indirect subsidiaries (collectively, the “Subsidiaries”) and its consolidated FG VIEs. Intercompany accounts and transactions between and among all consolidated entities have been eliminated. Certain prior year balances have been reclassified to conform to the current year’s presentation.
 
These unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements included in AGL’s Annual Report on Form 10-K for the year ended December 31, 2012, filed with the U.S. Securities and Exchange Commission (the “SEC”).

As of the date of this filing, following a series of transactions in July 2013 to capitalize a new insurance subsidiary, the Company's principal insurance company subsidiaries are:

•
Assured Guaranty Municipal Corp. ("AGM"), domiciled in New York;
•
Assured Guaranty Corp. ("AGC"), domiciled in Maryland;
•
Municipal Assurance Corporation ("MAC"), domiciled in New York, which commenced underwriting U.S. public finance business in August 2013;
•
Assured Guaranty (Europe) Ltd., organized in the United Kingdom; and
•
Assured Guaranty Re Ltd. (“AG Re”), domiciled in Bermuda.
    
The Company’s organizational structure includes various holdings companies, two of which — Assured Guaranty US Holdings Inc. (“AGUS”) and Assured Guaranty Municipal Holdings Inc. (“AGMH”) — have public debt outstanding. See Note 15, Long Term Debt and Credit Facilities.

2.
Business Changes and Accounting Developments
 
Summarized below are updates of the most significant recent events that have had, or may have in the future, a material effect on the financial position, results of operations or business prospects of the Company.
 
Rating Actions
 
When a rating agency assigns a public rating to a financial obligation guaranteed by one of AGL’s insurance company subsidiaries, it generally awards that obligation the same rating it has assigned to the financial strength of the AGL subsidiary that provides the guaranty. Investors in products insured by AGL’s insurance company subsidiaries frequently rely on ratings published by nationally recognized statistical rating organizations (“NRSROs”) because such ratings influence the trading value of securities and form the basis for many institutions’ investment guidelines as well as individuals’ bond purchase decisions. Therefore, the Company manages its business with the goal of achieving high financial strength ratings. If the financial strength ratings of the Company’s insurance subsidiaries were reduced below current levels, the Company expects it could have adverse effects on its future business opportunities as well as the premiums it could charge for its insurance policies and consequently, a further downgrade could harm the Company’s new business production and results of operations in a material respect. However, the models used by NRSROs differ, presenting conflicting goals that may make it inefficient or impractical to reach the highest rating level. The models are not fully transparent, contain subjective data (such as assumptions about future market demand for the Company’s products) and change frequently. Ratings reflect only the views of the respective NRSROs and are subject to continuous review and revision or withdrawal at any time.
    
In the last several years, Standard & Poor’s Ratings Services (“S&P”) and Moody’s Investors Service, Inc. (“Moody’s”) have downgraded the financial strength ratings of the Company’s insurance subsidiaries. On January 17, 2013, Moody’s downgraded the financial strength rating of AGM to A2 from Aa3, the financial strength rating of AGC to A3 from Aa3, and the financial strength rating of AG Re to Baa1 from A1. In the same rating action, Moody's also downgraded the senior unsecured debt ratings of AGUS and AGMH to Baa2 from A3. While the outlook for the ratings from S&P and Moody's is stable, there can be no assurance that S&P and Moody's will not take further action on the Company’s ratings. For a discussion of the effect of rating actions on the Company, see the following:

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•
Note 5, Expected Loss to be Paid
•
Note 8, Financial Guaranty Contracts Accounted for as Credit Derivatives
•
Note 13, Reinsurance and Other Monoline Exposures
•
Note 15, Long Term Debt and Credit Facilities (regarding the impact on the Company's insured leveraged lease transactions)    

In July 2013, MAC was assigned a financial strength rating of AA+ (stable outlook) from Kroll Bond Rating Agency and of AA- (stable outlook) from S&P.
 
Significant Transactions

•
In 2013, the Company was authorized to repurchase a total of $315 million of its common shares. From this authorization, the Company repurchased 1.9 million common shares for a total of $39 million in first quarter 2013 and 9.6 million common shares for a total of $205 million in Second Quarter 2013, including 5.0 million common shares purchased on June 5, 2013 from funds associated with WL Ross & Co. LLC and its affiliates (collectively, the “WLR Funds”) and Wilbur L. Ross, Jr., a director of the Company, for $109.7 million. This share purchase reduced the WLR Funds’ and Mr. Ross’s ownership of Assured Guaranty’s common shares to approximately 14.9 million common shares, or to approximately 8% of Assured Guaranty’s total common shares outstanding, from approximately 10.5% of such outstanding common shares. The purchase of these shares was funded with existing funds and was part of Assured Guaranty’s previously announced common share repurchase plan. After giving effect to the share repurchases in first quarter 2013 and Second Quarter 2013, approximately $71 million remains available under the Company's common share repurchase authorization.

•
On May 6, 2013, the Company entered into an agreement with UBS Real Estate Securities Inc. and affiliates ("UBS") and a third party resolving the Company’s claims and liabilities related to specified residential mortgage-backed securities ("RMBS") transactions that were issued, underwritten or sponsored by UBS and insured by AGM or AGC under financial guaranty insurance policies. See Note 5, Expected Loss to be Paid.

•
On June 21, 2013, AGM entered into a settlement agreement with Flagstar Bank in connection with its litigation for breach of contract against Flagstar on the Flagstar Home Equity Loan Trust, Series 2005-1 and Series 2006-2 second lien transactions. The agreement followed judgments by the court in February and April 2013 in favor of AGM, which Flagstar had planned to appeal. As part of the settlement, AGM received a cash payment of $105 million and Flagstar withdrew its appeal. Flagstar also will reimburse AGM in full for all future claims on AGM’s financial guaranty insurance policies for such transactions. This settlement resolved all RMBS claims that AGM had asserted against Flagstar and each party agreed to release the other from any and all other future RMBS-related claims between them.

•
In August 2013, AGC entered into a settlement agreement with a representations and warranties ("R&W") provider that resolved AGC’s claims relating to specified RMBS transactions that AGC had insured and AGM reached an agreement in principle with a servicer of certain RMBS transactions that AGM had insured.

3.
Outstanding Exposure
 
The Company’s financial guaranty contracts are written in either insurance or credit derivative form, but collectively are considered financial guaranty contracts. The Company seeks to limit its exposure to losses by underwriting obligations that are investment grade at inception, diversifying its insured portfolio and maintaining rigorous subordination or collateralization requirements on structured finance obligations. The Company also has utilized reinsurance by ceding business to third-party reinsurers. The Company provides financial guaranties with respect to debt obligations of special purpose entities, including VIEs. Some of these VIEs are consolidated as described in Note 9, Consolidation of Variable Interest Entities. The outstanding par and Debt Service amounts presented below include outstanding exposures on VIEs whether or not they are consolidated.
 

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Debt Service Outstanding

 
Gross Debt Service
Outstanding
 
Net Debt Service
Outstanding
 
June 30, 2013
 
December 31, 2012
 
June 30, 2013
 
December 31, 2012
 
(in millions)
Public finance
$
678,792

 
$
722,562

 
$
637,104

 
$
677,369

Structured finance
97,754

 
112,388

 
90,893

 
104,811

Total financial guaranty
$
776,546

 
$
834,950

 
$
727,997

 
$
782,180

 
In addition to the amounts shown in the table above, the Company’s net mortgage guaranty insurance in force was approximately $148 million as of June 30, 2013. The net mortgage guaranty insurance in force is assumed excess of loss business written between 2004 and 2006 and comprises $137 million covering loans originated in Ireland and $11 million covering loans originated in the United Kingdom ("U.K.").

Financial Guaranty Portfolio by Internal Rating
As of June 30, 2013 

 
 
Public Finance
U.S.
 
Public Finance
Non-U.S.
 
Structured Finance
U.S
 
Structured Finance
Non-U.S
 
Total
Rating
Category
 
Net Par
Outstanding
 
%
 
Net Par
Outstanding
 
%
 
Net Par
Outstanding
 
%
 
Net Par
Outstanding
 
%
 
Net Par
Outstanding
 
%
 
 
(dollars in millions)
AAA
 
$
4,311

 
1.2
%
 
$
1,657

 
4.9
%
 
$
36,292

 
55.5
%
 
$
11,079

 
65.8
%
 
$
53,339

 
11.0
%
AA
 
115,820

 
31.2

 
487

 
1.4

 
9,808

 
15.0

 
669

 
4.0

 
126,784

 
26.0

A
 
202,440

 
54.6

 
8,965

 
26.6

 
2,872

 
4.4

 
863

 
5.1

 
215,140

 
44.2

BBB
 
43,554

 
11.7

 
20,701

 
61.5

 
3,526

 
5.4

 
2,313

 
13.7

 
70,094

 
14.4

Below-investment-grade (“BIG”)
 
4,930

 
1.3

 
1,890

 
5.6

 
12,898

 
19.7

 
1,914

 
11.4

 
21,632

 
4.4

Total net par outstanding
 
$
371,055

 
100.0
%
 
$
33,700

 
100.0
%
 
$
65,396

 
100.0
%
 
$
16,838

 
100.0
%
 
$
486,989

 
100.0
%
 
Financial Guaranty Portfolio by Internal Rating
As of December 31, 2012 

 
 
Public Finance
U.S.
 
Public Finance
Non-U.S.
 
Structured Finance
U.S
 
Structured Finance
Non-U.S
 
Total
Rating
Category
 
Net Par
Outstanding
 
%
 
Net Par
Outstanding
 
%
 
Net Par
Outstanding
 
%
 
Net Par
Outstanding
 
%
 
Net Par
Outstanding
 
%
 
 
(dollars in millions)
AAA
 
$
4,502

 
1.2
%
 
$
1,706

 
4.5
%
 
$
42,187

 
56.5
%
 
$
13,169

 
66.8
%
 
$
61,564

 
11.9
%
AA
 
124,525

 
32.1

 
875

 
2.3

 
9,589

 
12.8

 
722

 
3.7

 
135,711

 
26.1

A
 
210,124

 
54.1

 
9,781

 
26.1

 
4,670

 
6.2

 
1,409

 
7.2

 
225,984

 
43.4

BBB
 
44,213

 
11.4

 
22,885

 
61.0

 
3,717

 
5.0

 
2,427

 
12.3

 
73,242

 
14.1

BIG
 
4,603

 
1.2

 
2,293

 
6.1

 
14,532

 
19.5

 
1,964

 
10.0

 
23,392

 
4.5

Total net par outstanding
 
$
387,967

 
100.0
%
 
$
37,540

 
100.0
%
 
$
74,695

 
100.0
%
 
$
19,691

 
100.0
%
 
$
519,893

 
100.0
%
 
The Company classifies those portions of risks benefiting from reimbursement obligations collateralized, or expected to be collateralized, by eligible assets held in trust in acceptable reimbursement structures as the higher of 'AA' or their current internal rating.
 
Securities purchased for loss mitigation purposes, which are generally rated BIG, represented $1,193 million and $1,133 million of gross par outstanding as of June 30, 2013 and December 31, 2012, respectively. In addition, under the terms of certain credit derivative contracts, the referenced obligations in such contracts have been delivered to the Company and

9
Table of Contents

recorded in other invested assets in the consolidated balance sheets. Such amounts totaled $219 million and $220 million in gross par outstanding as of June 30, 2013 and December 31, 2012, respectively.

In addition to amounts shown in the tables above, the Company had outstanding commitments to provide guaranties of $1.0 billion for structured finance and $1.5 billion for public finance obligations at June 30, 2013. The structured finance commitments include the unfunded component of pooled corporate and other transactions. Public finance commitments typically relate to primary and secondary public finance debt issuances. The expiration dates for the public finance commitments range between July 1, 2013 and February 25, 2017, with $1.4 billion expiring prior to December 31, 2013. The commitments are contingent on the satisfaction of all conditions set forth in them and may expire unused or be canceled at the counterparty’s request. Therefore, the total commitment amount does not necessarily reflect actual future guaranteed amounts.
 
Economic Exposure to the Selected European Countries

Several European countries continue to experience significant economic, fiscal and/or political strains such that the likelihood of default on obligations with a nexus to those countries may be higher than the Company anticipated when such factors did not exist. The European countries where it believes heightened uncertainties exist are: Greece, Hungary, Ireland, Italy, Portugal and Spain (the “Selected European Countries”). The Company is closely monitoring its exposures in Selected European Countries where it believes heightened uncertainties exist. Published reports have identified countries that may be experiencing reduced demand for their sovereign debt in the current environment. The Company selected these European countries based on these reports and its view that their credit fundamentals are deteriorating. The Company’s economic exposure to the Selected European Countries (based on par for financial guaranty contracts and notional amount for financial guaranty contracts accounted for as derivatives) is shown in the following table net of ceded reinsurance.
 
Net Economic Exposure to Selected European Countries(1)
June 30, 2013

 
Greece
 
Hungary (2)
 
Ireland
 
Italy
 
Portugal
 
Spain (2)
 
Total
 
(in millions)
Sovereign and sub-sovereign exposure:
 

 
 

 
 

 
 

 
 

 
 

 
 

Public finance
$
—

 
$
—

 
$
—

 
$
981

 
$
102

 
$
261

 
$
1,344

Infrastructure finance
—

 
413

 
23

 
83

 
97

 
167

 
783

Sub-total
—

 
413

 
23

 
1,064

 
199

 
428

 
2,127

Non-sovereign exposure:
 

 
 

 
 

 
 

 
 

 
 

 
 

Regulated utilities
—

 
—

 
—

 
215

 
—

 
0

 
215

RMBS
—

 
214

 
137

 
479

 
—

 
—

 
830

Commercial receivables
—

 
1

 
12

 
59

 
14

 
3

 
89

Pooled corporate
22

 
—

 
172

 
224

 
15

 
499

 
932

Sub-total
22

 
215

 
321

 
977

 
29

 
502

 
2,066

Total
$
22

 
$
628

 
$
344

 
$
2,041

 
$
228

 
$
930

 
$
4,193

Total BIG
$
—

 
$
591

 
$
7

 
$
2

 
$
118

 
$
412

 
$
1,130

 ____________________
(1)                             While the Company’s exposures are shown in U.S. dollars, the obligations the Company insures are in various currencies, including U.S. dollars, Euros and British pounds sterling. Included in the table above is $137 million of reinsurance assumed on a 2004 - 2006 pool of Irish residential mortgages that is part of the Company’s remaining legacy mortgage reinsurance business. One of the residential mortgage-backed securities included in the table above includes residential mortgages in both Italy and Germany, and only the portion of the transaction equal to the portion of the original mortgage pool in Italian mortgages is shown in the table.

 (2)
See Note 5, Expected Loss to be Paid.
 
When the Company directly insures an obligation, it assigns the obligation to a geographic location or locations based on its view of the geographic location of the risk. For direct exposure this can be a relatively straight-forward determination as, for example, a debt issue supported by availability payments for a toll road in a particular country. The Company may also

10
Table of Contents

assign portions of a risk to more than one geographic location. The Company may also have direct exposures to the Selected European Countries in business assumed from unaffiliated monoline insurance companies. In the case of assumed business for direct exposures, the Company depends upon geographic information provided by the primary insurer.

The Company has included in the exposure tables above its indirect economic exposure to the Selected European Countries through exposure it provides on (a) pooled corporate and (b) commercial receivables transactions. The Company considers economic exposure to a selected European Country to be indirect when the exposure relates to only a small portion of an insured transaction that otherwise is not related to a Selected European Country. In most instances, the trustees and/or servicers for such transactions provide reports that identify the domicile of the underlying obligors in the pool, although occasionally such information is not available to the Company. The Company has reviewed transactions through which it believes it may have indirect exposure to the Selected European Countries that is material to the transaction and included in the tables above the proportion of the insured par equal to the proportion of obligors so identified as being domiciled in a Selected European Country. The Company may also have indirect exposures to Selected European Countries in business assumed from unaffiliated monoline insurance companies. However, in the case of assumed business for indirect exposures, unaffiliated primary insurers generally do not provide such information to the Company.

The Company no longer guarantees any sovereign bonds of the Selected European Countries. The exposure shown in the “Public Finance Category” is from transactions backed by receivable payments from sub-sovereigns in Italy, Spain and Portugal. Sub-sovereign debt is debt issued by a governmental entity or government backed entity, or supported by such an entity, that is other than direct sovereign debt of the ultimate governing body of the country.

Surveillance Categories
 
The Company segregates its insured portfolio into investment grade and BIG surveillance categories to facilitate the appropriate allocation of resources to monitoring and loss mitigation efforts and to aid in establishing the appropriate cycle for periodic review for each exposure. BIG exposures include all exposures with internal credit ratings below BBB-. The Company’s internal credit ratings are based on internal assessments of the likelihood of default and loss severity in the event of default. Internal credit ratings are expressed on a ratings scale similar to that used by the rating agencies and are generally reflective of an approach similar to that employed by the rating agencies.
 
The Company monitors its investment grade credits to determine whether any new credits need to be internally downgraded to BIG. The Company refreshes its internal credit ratings on individual credits in quarterly, semi-annual or annual cycles based on the Company’s view of the credit’s quality, loss potential, volatility and sector. Ratings on credits in sectors identified as under the most stress or with the most potential volatility are reviewed every quarter. The Company’s insured credit ratings on assumed credits are based on the Company’s reviews of low-rated credits or credits in volatile sectors, unless such information is not available, in which case, the ceding company’s credit rating of the transactions are used. The Company models most assumed RMBS credits with par above $1 million, as well as certain RMBS credits below that amount.
 
Credits identified as BIG are subjected to further review to determine the probability of a loss (see Note 5, Expected Loss to be Paid). Surveillance personnel then assign each BIG transaction to the appropriate BIG surveillance category based upon whether a lifetime loss is expected and whether a claim has been paid. The Company expects “lifetime losses” on a transaction when the Company believes there is at least a 50% chance that, on a present value basis, it will pay more claims over the life of that transaction than it ultimately will have reimbursed. For surveillance purposes, the Company calculates present value using a constant discount rate of 5%. (A risk-free rate is used for recording of reserves for financial statement purposes.)
 
More extensive monitoring and intervention is employed for all BIG surveillance categories, with internal credit ratings reviewed quarterly. The three BIG categories are:
 
•
BIG Category 1: Below-investment-grade transactions showing sufficient deterioration to make lifetime losses possible, but for which none are currently expected. Transactions on which claims have been paid but are expected to be fully reimbursed (other than investment grade transactions on which only liquidity claims have been paid) are in this category.
 
•
BIG Category 2: Below-investment-grade transactions for which lifetime losses are expected but for which no claims (other than liquidity claims which is a claim that the Company expects to be reimbursed within one year) have yet been paid.
 

11
Table of Contents

•
BIG Category 3: Below-investment-grade transactions for which lifetime losses are expected and on which claims (other than liquidity claims) have been paid. Transactions remain in this category when claims have been paid and only a recoverable remains.
 
Financial Guaranty Exposures
(Insurance and Credit Derivative Form)
As of June 30, 2013

 
BIG Net Par Outstanding
 
Net Par
 
BIG Net Par as
a % of Total Net Par
 
BIG 1
 
BIG 2
 
BIG 3
 
Total BIG
 
Outstanding
 
Outstanding
 
 
 
 
 
(in millions)
 
 
 
 
 
 
First lien U.S. RMBS:
 

 
 

 
 

 
 

 
 

 
 

Prime first lien
$
26

 
$
406

 
$
10

 
$
442

 
$
595

 
0.1
%
Alt-A first lien
94

 
1,834

 
1,394

 
3,322

 
4,258

 
0.7

Option ARM
17

 
369

 
314

 
700

 
1,212

 
0.1

Subprime
168

 
1,162

 
1,023

 
2,353

 
6,894

 
0.5

Second lien U.S. RMBS:
 

 
 

 
 

 
 

 
 

 
 

Closed end second lien
—

 
20

 
301

 
321

 
428

 
0.1

Home equity lines of credit (“HELOCs”)
130

 
24

 
2,326

 
2,480

 
2,881

 
0.5

Total U.S. RMBS
435

 
3,815

 
5,368

 
9,618

 
16,268

 
2.0

Trust preferred securities (“TruPS”)
1,488

 
—

 
924

 
2,412

 
5,223

 
0.5

Other structured finance
1,177

 
439

 
1,166

 
2,782

 
60,743

 
0.5

U.S. public finance
3,389

 
659

 
882

 
4,930

 
371,055

 
1.0

Non-U.S. public finance
992

 
898

 
—

 
1,890

 
33,700

 
0.4

Total
$
7,481

 
$
5,811

 
$
8,340

 
$
21,632

 
$
486,989

 
4.4
%


12
Table of Contents

 Financial Guaranty Exposures
(Insurance and Credit Derivative Form)
As of December 31, 2012

 
BIG Net Par Outstanding
 
Net Par
 
BIG Net Par as
a % of Total Net Par
 
BIG 1
 
BIG 2
 
BIG 3
 
Total BIG
 
Outstanding
 
Outstanding
 
 
 
 
 
(in millions)
 
 
 
 
 
 
First lien U.S. RMBS:
 

 
 

 
 

 
 

 
 

 
 

Prime first lien
$
28

 
$
436

 
$
11

 
$
475

 
$
641

 
0.1
%
Alt-A first lien
109

 
1,987

 
1,479

 
3,575

 
4,589

 
0.7

Option ARM
61

 
392

 
643

 
1,096

 
1,550

 
0.2

Subprime (including net interest margin securities)
152

 
1,161

 
1,024

 
2,337

 
7,330

 
0.4

Second lien U.S. RMBS:
 

 
 

 
 

 
 

 
 

 
 

Closed end second lien
—

 
247

 
157

 
404

 
521

 
0.1

HELOCs
91

 
—

 
2,627

 
2,718

 
3,196

 
0.5

Total U.S. RMBS
441

 
4,223

 
5,941

 
10,605

 
17,827

 
2.0

TruPS
1,920

 
—

 
952

 
2,872

 
5,693

 
0.6

Other structured finance
1,310

 
384

 
1,325

 
3,019

 
70,866

 
0.6

U.S. public finance
3,290

 
500

 
813

 
4,603

 
387,967

 
0.9

Non-U.S. public finance
2,293

 
—

 
—

 
2,293

 
37,540

 
0.4

Total
$
9,254

 
$
5,107

 
$
9,031

 
$
23,392

 
$
519,893

 
4.5
%

Below-Investment-Grade Credits
By Category
As of June 30, 2013

 
 
Net Par Outstanding
 
Number of Risks(2)
Description
 
Financial
Guaranty
Insurance(1)
 
Credit
Derivative
 
Total
 
Financial
Guaranty
Insurance(1)
 
Credit
Derivative
 
Total
 
 
(dollars in millions)
BIG:
 
 

 
 

 
 

 
 

 
 

 
 

Category 1
 
$
5,976

 
$
1,505

 
$
7,481

 
144

 
27

 
171

Category 2
 
3,309

 
2,502

 
5,811

 
83

 
25

 
108

Category 3
 
6,549

 
1,791

 
8,340

 
148

 
31

 
179

Total BIG
 
$
15,834

 
$
5,798

 
$
21,632

 
375

 
83

 
458



13
Table of Contents

 Below-Investment-Grade Credits
By Category
As of December 31, 2012

 
 
Net Par Outstanding
 
Number of Risks(2)
Description
 
Financial
Guaranty
Insurance(1)
 
Credit
Derivative
 
Total
 
Financial
Guaranty
Insurance(1)
 
Credit
Derivative
 
Total
 
 
(dollars in millions)
BIG:
 
 

 
 

 
 

 
 

 
 

 
 

Category 1
 
$
7,049

 
$
2,205

 
$
9,254

 
153

 
30

 
183

Category 2
 
2,606

 
2,501

 
5,107

 
76

 
27

 
103

Category 3
 
7,028

 
2,003

 
9,031

 
142

 
32

 
174

Total BIG
 
$
16,683

 
$
6,709

 
$
23,392

 
371

 
89

 
460

_____________________
(1)    Includes net par outstanding for FG VIEs.
 
(2)
A risk represents the aggregate of the financial guaranty policies that share the same revenue source for purposes of making Debt Service payments.
 
4.
Financial Guaranty Insurance Premiums

The portfolio of outstanding exposures discussed in Note 3, Outstanding Exposure, includes financial guaranty contracts that meet the definition of insurance contracts as well as those that meet the definition of a derivative under GAAP. Amounts presented in this note relate only to financial guaranty insurance contracts. See Note 8, Financial Guaranty Contracts Accounted for as Credit Derivatives, for a discussion of credit derivative revenues.

Net Earned Premiums
 
 
Second Quarter
 
Six Months
 
2013
 
2012
 
2013
 
2012
 
(in millions)
Scheduled net earned premiums
$
113

 
$
145

 
$
241

 
$
297

Acceleration of premium earnings
46

 
68

 
159

 
105

Accretion of discount on net premiums receivable
3

 
6

 
10

 
11

  Total financial guaranty insurance
162

 
219

 
410

 
413

Other
1

 
0

 
1

 
0

  Total net earned premiums(1)
$
163

 
$
219

 
$
411

 
$
413

 ___________________
(1)
Excludes $15 million and $16 million for Second Quarter 2013 and 2012, respectively, and $33 million and $33 million for the Six Months 2013 and 2012, respectively, related to consolidated FG VIEs.


14
Table of Contents

Components of Unearned Premium Reserve
 
 
As of June 30, 2013
 
As of December 31, 2012
 
Gross
 
Ceded
 
Net(1)
 
Gross
 
Ceded
 
Net(1)
 
(in millions)
Deferred premium revenue:
 
 
 
 
 
 
 
 
 
 
 
   Financial guaranty
$
4,941

 
$
533

 
$
4,408

 
$
5,349

 
$
586

 
$
4,763

   Other
6

 
—

 
6

 
7

 
—

 
7

Total deferred premium revenue
$
4,947

 
$
533

 
$
4,414

 
$
5,356

 
$
586

 
$
4,770

Contra-paid
(135
)
 
(23
)
 
(112
)
 
(149
)
 
(25
)
 
(124
)
Total
$
4,812

 
$
510

 
$
4,302

 
$
5,207

 
$
561

 
$
4,646

 ____________________
(1)
Excludes $210 million and $262 million of deferred premium revenue, and $58 million and $98 million of contra-paid related to FG VIEs as of June 30, 2013 and December 31, 2012, respectively.

 
Gross Premium Receivable, Net of Ceding Commissions Roll Forward
 
 
Six Months
 
2013
 
2012
 
(in millions)
Balance beginning of period
$
1,005

 
$
1,003

Premium written, net of ceding commissions
32

 
103

Premium payments received, net of ceding commissions
(109
)
 
(167
)
Adjustments:
 
 
 
Changes in the expected term of financial guaranty insurance contracts
1

 
19

Accretion of discount, net of ceding commissions
13

 
13

Foreign exchange translation
(27
)
 
(1
)
Consolidation of FG VIEs
—

 
(5
)
Other adjustments
—

 
(1
)
Balance, end of period (1)
$
915

 
$
964

____________________
(1)
Excludes $20 million and $32 million as of June 30, 2013 and June 30, 2012, respectively, related to consolidated FG VIEs.
 
Gains or losses due to foreign exchange rate changes relate to installment premium receivables denominated in currencies other than the U.S. dollar. Approximately 46%, 47% and 49% of installment premiums at June 30, 2013, December 31, 2012 and June 30, 2012, respectively, are denominated in currencies other than the U.S. dollar, primarily Euro and British Pound Sterling.
 
The timing and cumulative amount of actual collections may differ from expected collections in the tables below due to factors such as foreign exchange rate fluctuations, counterparty collectability issues, accelerations, commutations and changes in expected lives.

15
Table of Contents

 
Expected Collections of Gross Premiums Receivable,
Net of Ceding Commissions (Undiscounted)

 
June 30, 2013
 
(in millions)
2013 (July 1 – September 30)
$
39

2013 (October 1 – December 31)
34

2014
104

2015
91

2016
85

2017
78

2018-2022
307

2023-2027
190

2028-2032
129

After 2032
147

Total(1)
$
1,204

 ____________________
(1)
Excludes expected cash collections on FG VIEs of $25 million.

Scheduled Net Earned Premiums
Financial Guaranty Insurance Contracts
 
 
As of June 30, 2013
 
(in millions)
2013 (July 1 - September 30)
$
119

2013 (October 1–December 31)
113

Subtotal 2013
232

2014
427

2015
374

2016
338

2017
302

2018 - 2022
1,161

2023 - 2027
731

2028 - 2032
436

After 2032
407

Total present value basis(1)
4,408

Discount
247

Total future value
$
4,655

 ____________________
(1)
Excludes scheduled net earned premiums on consolidated FG VIEs of $210 million.

Selected Information for Policies Paid in Installments

 
As of
June 30, 2013
 
As of
December 31, 2012
 
(dollars in millions)
Premiums receivable, net of ceding commission payable
$
915

 
$
1,005

Gross deferred premium revenue
1,725

 
1,908

Weighted-average risk-free rate used to discount premiums
3.4
%
 
3.5
%
Weighted-average period of premiums receivable (in years)
9.4

 
9.6


16
Table of Contents


5.
Expected Loss to be Paid
 
The following table presents a roll forward of the present value of net expected loss to be paid for all contracts, whether accounted for as insurance, credit derivatives or FG VIEs, by sector after the benefit for contractual and expected breaches of R&W. The Company used weighted average risk-free rates for U.S. dollar denominated obligations, which ranged from 0.0% to 4.03% as of June 30, 2013 and 0.0% to 3.28% as of December 31, 2012.

Net Expected Loss to be Paid
After Net Expected Recoveries for Breaches of R&W
Roll Forward
Second Quarter 2013

 
Net Expected
Loss to be
Paid as of
March 31, 2013
 
Economic Loss
Development
 
(Paid)
Recovered
Losses(1)
 
Net Expected
Loss to be
Paid as of
June 30, 2013
 
(in millions)
U.S. RMBS:
 

 
 

 
 

 
 

First lien:
 

 
 

 
 

 
 

Prime first lien
$
11

 
$
7

 
$
—

 
$
18

Alt-A first lien
313

 
(7
)
 
(18
)
 
288

Option ARM
(327
)
 
21

 
286

 
(20
)
Subprime
263

 
23

 
(12
)
 
274

Total first lien
260

 
44

 
256

 
560

Second lien:
 

 
 

 
 

 
 

Closed-end second lien
(21
)
 
6

 
1

 
(14
)
HELOCs
(122
)
 
(31
)
 
56

 
(97
)
Total second lien
(143
)
 
(25
)
 
57

 
(111
)
Total U.S. RMBS
117

 
19

 
313

 
449

TruPS
23

 
1

 
9

 
33

Other structured finance
307

 
(24
)
 
(125
)
 
158

U.S. public finance
(9
)
 
87

 
(7
)
 
71

Non-U.S public finance
62

 
4

 
—

 
66

Other
(13
)
 
—

 
10

 
(3
)
Total
$
487

 
$
87

 
$
200

 
$
774



17
Table of Contents

Net Expected Loss to be Paid
After Net Expected Recoveries for Breaches of R&W
Roll Forward
Second Quarter 2012

 
Net Expected
Loss to be
Paid as of
March 31, 2012
 
Economic Loss
Development
 
(Paid)
Recovered
Losses(1)
 
Net Expected
Loss to be
Paid as of
June 30, 2012
 
(in millions)
U.S. RMBS:
 

 
 

 
 

 
 

First lien:
 

 
 

 
 

 
 

Prime first lien
$
2

 
$
2

 
$
—

 
$
4

Alt-A first lien
268

 
15

 
38

 
321

Option ARM
119

 
11

 
(127
)
 
3

Subprime
248

 
10

 
(22
)
 
236

Total first lien
637

 
38

 
(111
)
 
564

Second lien:
 
 
 
 
 
 
 
Closed-end second lien
(101
)
 
(1
)
 
73

 
(29
)
HELOCs
(43
)
 
14

 
(35
)
 
(64
)
Total second lien
(144
)
 
13

 
38

 
(93
)
Total U.S. RMBS
493

 
51

 
(73
)
 
471

TruPS
58

 
(7
)
 
(1
)
 
50

Other structured finance
296

 
32

 
(8
)
 
320

U.S. public finance
33

 
35

 
(9
)
 
59

Non-U.S public finance
303

 
(16
)
 
15

 
302

Other
2

 
(6
)
 
—

 
(4
)
Total
$
1,185

 
$
89

 
$
(76
)
 
$
1,198



18
Table of Contents

Net Expected Loss to be Paid
After Net Expected Recoveries for Breaches of R&W
Roll Forward
Six Months 2013
 
Net Expected
Loss to be
Paid as of
December 31, 2012
 
Economic Loss
Development
 
(Paid)
Recovered
Losses(1)
 
Net Expected
Loss to be
Paid as of
June 30, 2013
 
(in millions)
U.S. RMBS:
 

 
 

 
 

 
 

First lien:
 

 
 

 
 

 
 

Prime first lien
$
6

 
$
13

 
$
(1
)
 
$
18

Alt-A first lien
315

 
2

 
(29
)
 
288

Option ARM
(131
)
 
(117
)
 
228

 
(20
)
Subprime
242

 
48

 
(16
)
 
274

Total first lien
432

 
(54
)
 
182

 
560

Second lien:
 
 
 
 
 
 
 
Closed-end second lien
(39
)
 
7

 
18

 
(14
)
HELOCs
(111
)
 
(34
)
 
48

 
(97
)
Total second lien
(150
)
 
(27
)
 
66

 
(111
)
Total U.S. RMBS
282

 
(81
)
 
248

 
449

TruPS
27

 
(2
)
 
8

 
33

Other structured finance
312

 
(26
)