XML 43 R16.htm IDEA: XBRL DOCUMENT
v3.25.0.1

Contracts Accounted for as Credit Derivatives | 12 Months Ended
--- | ---
Dec. 31, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Contracts Accounted for as Credit Derivatives | Contracts Accounted for as Credit Derivatives The Company’s credit derivatives primarily consist of insured CDS contracts. The Company does not enter into CDS contracts with the intent to trade these contracts and may not unilaterally terminate a CDS contract absent an event or default or termination event that entitles the Company to terminate the contract. The Company and its counterparties have negotiated the termination of certain contracts from time to time. Transactions are generally terminated for an amount that approximates the present value of future premiums or a negotiated amount, rather than fair value. The terms of the Company’s CDS contracts differ from more standardized credit derivative contracts sold by companies outside the financial guaranty industry. The non-standard terms generally include the absence of collateral support agreements or immediate settlement provisions, and the Company’s insured exposure benefits from relatively high attachment points or other protections. The Company’s credit derivatives are generally governed by International Swaps and Derivatives Association, Inc. documentation and have certain characteristics that differ from financial guaranty insurance contracts. For example, the Company’s control rights with respect to a reference obligation under a CDS may be more limited than when the Company issues a financial guaranty insurance contract. In addition, there are more circumstances under which the Company may be obligated to make payments. Similar to a financial guaranty insurance contract, the Company would be obligated to pay if the obligor failed to make a scheduled payment of principal or interest in full. In certain credit derivative transactions, the Company also specifically agreed to pay if the obligor were to become bankrupt or if the reference obligation were restructured. Furthermore, in certain credit derivative transactions, the Company may be required to make a payment due to an event that is unrelated to the performance of the obligation referenced in the credit derivative. If events of default or termination events specified in the credit derivative documentation were to occur, the non-defaulting or the non-affected party, which may be either the Company or the counterparty, depending upon the circumstances, may decide to terminate a credit derivative prior to maturity. In that case, the Company may be required to make a termination payment to its swap counterparty upon such termination. Absent such an event of default or termination event, the Company may not unilaterally terminate a credit derivative contract; however, the Company on occasion has mutually agreed to terminate certain CDS with related counterparties. Accounting Policy The Company’s credit derivatives qualify as derivatives under GAAP and require fair value measurement, with changes in fair value reported in “fair value gains (losses) on credit derivatives” in the consolidated statement of operations. The fair value of credit derivatives is determined on a contract-by-contract basis and presented as either credit derivative assets reported in “other assets” or credit derivative liabilities reported in “other liabilities” in the consolidated balance sheets. See Note 9, Fair Value Measurement, for a discussion on the fair value methodology for credit derivatives. Credit Derivatives Net Par Outstanding and Fair Value 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 8.4 years and 11.1 years as of December 31, 2024 and December 31, 2023, respectively. Credit Derivatives (1)
|  | As of December 31, 2024 |  | As of December 31, 2023
Sector |  | Net Par Outstanding |  | Net Fair Value Asset (Liability) |  | Net Par Outstanding |  | Net Fair Value Asset (Liability)
|  | (in millions)
U.S. public finance |  | $ | 1,025 |  |  | $ | (12) |  |  | $ | 1,149 |  |  | $ | (15) |
Non-U.S. public finance |  | 2,044 |  |  | (15) |  |  | 1,522 |  |  | (20) |
U.S. structured finance |  | 150 |  |  | (2) |  |  | 322 |  |  | (13) |
Non-U.S. structured finance |  | 993 |  |  | — |  |  | 615 |  |  | (2) |
Total |  | $ | 4,212 |  |  | $ | (29) |  |  | $ | 3,608 |  |  | $ | (50) |
____________________ (1) See Note 4, Expected Loss to be Paid (Recovered), for expected loss to be paid on credit derivatives. Fair Value Gains (Losses) on Credit Derivatives
| Year Ended December 31,
| 2024 |  | 2023 |  | 2022
| (in millions)
Realized gains (losses) and other settlements | $ | 3 |  |  | $ | 2 |  |  | $ | (2) |
Net unrealized gains (losses) | 21 |  |  | 112 |  |  | (9) |
Fair value gains (losses) on credit derivatives | $ | 24 |  |  | $ | 114 |  |  | $ | (11) |
The impact of changes in credit spreads will vary based upon the volume, tenor, interest rates and other market conditions at the time these fair values are determined. In addition, since each transaction has unique collateral and structural terms, the change in fair value of each transaction may vary considerably. The fair value of credit derivative contracts generally also reflects the Company’s own credit cost based on the price to purchase credit protection on AG. The Company determines its own credit risk primarily based on quoted CDS prices traded on AG at each balance sheet date. CDS Spread on AG (in basis points)
| As of December 31,
| 2024 |  | 2023 |  | 2022
Five-year CDS spread | 75 |  |  | 66 |  |  | 63 |
One-year CDS spread | 25 |  |  | 23 |  |  | 26 |
Fair Value of Credit Derivative Assets (Liabilities) and Effect of AG Credit Spread
| As of December 31,
| 2024 |  | 2023
| (in millions)
Fair value of credit derivatives before effect of AG credit spread | $ | (64) |  |  | $ | (76) |
Plus: Effect of AG credit spread | 35 |  |  | 26 |
Net fair value of credit derivatives | $ | (29) |  |  | $ | (50) |
The fair value of CDS contracts as of December 31, 2024, before considering the benefit applicable to AG’s credit spread, is a direct result of the relatively wider credit spreads under current market conditions, sometimes related to downgrades, compared with those at the time of underwriting for certain underlying credits with longer tenor.

X
- References No definition available. + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/815/tableOfContent + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration