Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2012

Summary of Carrying Amount and Fair Value of Ambac's Financial Assets and Liabilities

The following table sets forth the carrying amount and fair value of Ambac’s financial assets and liabilities as of September 30, 2012 and December 31, 2011, including the level within the fair value hierarchy at which fair value measurements are categorized. As required by ASC Topic 820, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.


	Carrying Amount			Total Fair Value			Fair Value Measurements Categorized as:
	Carrying Amount			Total Fair Value			Level 1		Level 2			Level 3
September 30, 2012
Financial assets:
Fixed income securities:
Municipal obligations	$	1,861,774		$	1,861,774		$	—	$	1,861,774		$	—
Corporate obligations		1,122,084			1,122,084			—		1,118,489			3,595
Foreign obligations		70,395			70,395			—		70,395			—
U.S. government obligations		111,586			111,586			111,586		—			—
U.S. agency obligations		84,023			84,023			—		84,023			—
Residential mortgage-backed securities		1,409,026			1,409,026			—		1,409,026			—
Collateralized debt obligations		36,809			36,809			—		29,977			6,832
Other asset-backed securities		744,993			744,993			—		694,698			50,295
Short term investments		713,467			713,467			707,070		6,397			—
Other investments		100			100			—		—			100
Fixed income securities, pledged as collateral:
U.S. government obligations		285,860			285,860			285,860		—			—
Residential mortgage-backed securities		—			—			—		—			—
Cash		90,065			90,065			90,065		—			—
Restricted cash		2,500			2,500			2,500		—			—
Loans		10,380			8,587			—		—			8,587
Derivative assets:
Interest rate swaps—asset position		97,464			97,464			—		43,141			54,323
Interest rate swaps—liability position		—			—			—		—			—
Future contracts		—			—			—		—			—
Other assets		15,021			15,021			—		—			15,021
Variable interest entity assets:
Fixed income securities:
Corporate obligations		2,160,113			2,160,113			—		—			2,160,113
Restricted cash		2,293			2,293			2,293		—			—
Loans		15,188,358			15,175,683			—		191,024			14,984,659

Total financial assets	$	24,006,311		$	23,991,843		$	1,199,374	$	5,508,944		$	17,283,525

Financial liabilities:
Obligations under investment and repurchase agreements	$	415,846		$	414,149		$	—	$	—		$	414,149
Liabilities subject to compromise		1,622,189			469,215			—		469,215			—
Long term debt		146,909			717,126			—		—			717,126
Derivative liabilities:
Credit derivatives		187,121			187,121			—		—			187,121
Interest rate swaps—asset position		(166,345	)		(166,345	)		—		(85,312	)		(81,033	)
Interest rate swaps—liability position		432,581			432,581			—		10,305			422,276
Future contracts		1,975			1,975			1,975		—			—
Currency swaps		—			—			—		—			—
Other contracts		255			255			—		255			—
Liabilities for net financial guarantees written		7,480,962			4,075,022			—		—			4,075,022
Variable interest entity liabilities:
Long-term debt		15,113,094			15,087,683			—		12,094,342			2,993,341
Derivative liabilities:
Interest rate swaps—liability position		1,981,460			1,981,460			—		1,981,460			—
Currency swaps—asset position		—			—			—		—			—
Currency swaps—liability position		79,491			79,491			—		79,491			—

Total financial liabilities	$	27,295,528		$	23,279,733		$	1,975	$	14,549,756		$	8,728,002


	Carrying Amount			Total Fair Value			Fair Value Measurements Categorized as:
	Carrying Amount			Total Fair Value			Level 1		Level 2			Level 3
December 31, 2011
Financial assets:
Fixed income securities:
Municipal obligations	$	2,002,999		$	2,002,999		$	—	$	2,002,999		$	—
Corporate obligations		1,127,500			1,127,500			—		1,119,570			7,930
Foreign obligations		94,795			94,795			—		94,795			—
U.S. government obligations		111,562			111,562			111,562		—			—
U.S. agency obligations		86,871			86,871			—		85,647			1,224
Residential mortgage-backed securities		1,412,517			1,412,517			—		1,412,517			—
Collateralized debt obligations		46,237			46,237			—		33,755			12,482
Other asset-backed securities		947,808			947,808			—		871,922			75,886
Short term investments		783,071			783,071			769,204		13,867			—
Other investments		100			100			—		—			100
Fixed income securities, pledged as collateral:
U.S. government obligations		260,802			260,802			260,802		—			—
Residential mortgage-backed securities		2,728			2,728			—		2,728			—
Cash		15,999			15,999			15,999		—			—
Restricted cash		2,500			2,500			2,500		—			—
Loans		18,996			16,934			—		—			16,934
Derivative assets:
Interest rate swaps—asset position		411,652			411,652			—		260,851			150,801
Interest rate swaps—liability position		(242,500	)		(242,500	)		—		(53	)		(242,447	)
Future contracts		—			—			—		—			—
Call options on long-term debt		6,055			6,055			—		—			6,055
Other assets		16,779			16,779			—		—			16,779
Variable interest entity assets:
Fixed income securities:
Corporate obligations		2,199,338			2,199,338			—		—			2,199,338
Restricted cash		2,140			2,140			2,140		—			—
Loans		14,329,515			14,309,134			—		182,140			14,126,994

Total financial assets	$	23,637,464		$	23,615,021		$	1,162,207	$	6,080,738		$	16,372,076

Financial liabilities:
Obligations under investment and repurchase agreements	$	546,546		$	549,043		$	—	$	—		$	549,043
Liabilities subject to compromise		1,622,189			112,233			—		112,233			—
Long term debt		223,601			562,043			—		—			562,043
Derivative liabilities:
Credit derivatives		190,653			190,653			—		—			190,653
Interest rate swaps—asset position		(30,859	)		(30,859	)		—		—			(30,859	)
Interest rate swaps—liability position		251,303			251,303			—		9,913			241,390
Futures contracts		627			627			627		—			—
Currency swaps		2,423			2,423			—		2,423			—
Other contracts		361			361			—		361			—
Liabilities for net financial guarantees written		7,547,288			2,642,795			—		—			2,642,795
Variable interest entity liabilities:
Long-term debt		14,288,540			14,255,452			—		12,320,810			1,934,642
Derivative liabilities:
Interest rate swaps—liability position		2,023,974			2,023,974			—		2,023,974			—
Currency swaps—asset position		(27,779	)		(27,779	)		—		(27,779	)		—
Currency swaps—liability position		90,857			90,857			—		90,857			—

Total financial liabilities	$	26,729,724		$	20,623,126		$	627	$	14,532,792		$	6,089,707

Information about Valuation Inputs for Fixed Income Securities Classified as Level 3

Significant inputs for the interest only strips valuation at September 30, 2012 and December 31, 2011 include the following weighted averages:

September 30, 2012

Coupon rate: 0.35%

Maturity: 21.39 years

Yield: 6.36%

December 31, 2011

Coupon rate: 0.60%

Maturity: 21.44 years

Yield: 7.20%

U.S. agency obligations: These notes are secured by separate lease rental agreements with the U.S. Government acting through the General Services Administration. There were no U.S. agency obligations classified as Level 3 at September 30, 2012. The fair value of such securities classified as Level 3 was $1,224 at December 31, 2011. Fair value was calculated using a discounted cash flow approach with the yield based on comparable U.S. agency securities. Significant inputs for the valuation at December 31, 2011 include the following weighted averages:

Coupon rate: 6.91%

Maturity: 1.33 years

Yield: 2.13%

Collateralized debt obligations (“CDO”): Securities are floating rate senior notes where the underlying securities of the CDO consist of subordinated bank perpetual preferred securities. The fair value of such securities classified as Level 3 was $6,832 and $12,482 at September 30, 2012 and December 31, 2011, respectively. Fair value was calculated using a discounted cash flow approach with expected future cash flows discounted using a yield curve consistent with the security type and rating. Significant inputs for the valuation at September 30, 2012 and December 31, 2011 include the following weighted averages:

September 30, 2012

Coupon rate: 1.06%

Maturity: 1.50 years

Yield: 8.80%

December 31, 2011

Coupon rate: 0.86%

Maturity: 1.55 years

Yield: 11.79%

Other asset-backed securities: These securities are floating rate investment grade notes collateralized by various asset types. The fair value of such securities classified as Level 3 was $50,295 and $75,886 at September 30, 2012 and December 31, 2011, respectively. Fair value was calculated using a discounted cash flow approach with expected future cash flows discounted using a yield curve consistent with the security type and rating. Significant inputs for the valuation at September 30, 2012 and December 31, 2011 include the following weighted averages:

September 30, 2012

Coupon rate: 0.82%

Maturity: 8.02 years

Yield: 7.50%

December 31, 2011

Coupon rate: 1.41%

Maturity: 3.00 years

Yield: 4.50%

European ABS transactions: The fair value of such obligations classified as Level 3 was $2,993,341 and $1,934,642 at September 30, 2012 and December 31, 2011, respectively. Fair values were calculated by using a discounted cash flow approach. The discount rates used were based on the rates implied from the third party quoted values (Level 2) for comparable notes from the same securitization. Significant inputs for the valuation at September 30, 2012 and December 31, 2011 include the following weighted averages:

September 30, 2012

Coupon rate: 1.82%

Maturity: 12.59 years

Yield: 4.39%

December 31, 2011

Coupon rate: 1.56%

Maturity: 11.99 years

Yield: 3.90%

Summary of Information about Described Model Inputs Used to Determine Fair Value of Each Class of Credit Derivative

Information about the above described model inputs used to determine the fair value of each class of credit derivatives as of September 30, 2012 and December 31, 2011 is summarized below:


As of September 30, 2012
	CLOs			Other⁽¹⁾
Notional outstanding	$	7,067,409		$	3,708,640
Weighted average reference obligation price		95.6			85.9
Weighted average life (WAL) in years		2.1			4.4
Weighted average credit rating		AA-			A
Weighted average relative change ratio		34.4	%		38.3	%
CVA percentage		65	%		65	%
Fair value of derivative liabilities	$	(38,182	)	$	(96,404	)


As of December 31, 2011
	CLOs			Other⁽¹⁾
Notional outstanding	$	8,228,577		$	4,099,766
Weighted average reference obligation price		92.5			84.3
Weighted average life (WAL) in years		2.7			4.7
Weighted average credit rating		AA-			A
Weighted average relative change ratio		34.4	%		38.5	%
CVA percentage		75	%		75	%
Fair value of derivative liabilities	$	(54,320	)	$	(86,526	)

(1)

Excludes contracts for which fair values are based on credit derivative quotes rather than reference obligation quotes. Such contracts have a combined notional outstanding of $1,498,836, WAL of 8.1 years and liability fair value of ($52,535) as of September 30, 2012. Other inputs to the valuation of these transactions at September 30, 2012 include weighted average quotes of 10% of notional, weighted average rating of A and Ambac CVA percentage of 65%. As of December 31, 2011, these contracts had a combined notional outstanding of $1,838,269, WAL of 9.0 years and liability fair value of ($49,807). Other inputs to the valuation of these transactions at December 31, 2011 include weighted average quotes of 11% of notional, weighted average rating of A+ and Ambac CVA percentage of 75%.

Summary of Changes in Level 3 Fair Value Category

the gains and losses presented below include changes in the fair value related to both observable and unobservable inputs.

Level-3 financial assets and liabilities accounted for at fair value


										VIE Assets and Liabilities
Three months ended September 30, 2012	Investments			Other assets			Derivatives			Investments			Loans			Derivatives		Long-term debt			Total
Balance, beginning of period	$	63,770		$	15,792		$	(507,604	)	$	2,162,062		$	14,238,273			—	$	(2,346,060	)	$	13,626,233
Additions of VIEs consolidated		—			—			—			—			—			—		—			—
Total gains/(losses) realized and unrealized:
Included in earnings		(22	)		(771	)		26,285			(64,826	)		439,649			—		(33,245	)		367,070
Included in other comprehensive income		471			—			—			62,877			392,548			—		(69,066	)		386,830
Purchases		—			—			—			—			—			—		—			—
Issuances		—			—			—			—			—			—		—			—
Sales		—			—			—			—			—			—		—			—
Settlements		(3,497	)		—			7,278			—			(85,811	)		—		31,302			(50,728	)
Transfers in Level 3		—			—			—			—			—			—		(576,272	)		(576,272	)
Transfers out of Level 3		—			—			—			—			—			—		—			—
Deconsolidation of VIEs		—			—			—			—			—			—		—			—

Balance, end of period	$	60,722		$	15,021		$	(474,041	)	$	2,160,113		$	14,984,659		$	—	$	(2,993,341	)	$	13,753,133

The amount of total gains/(losses) included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date	$	—		$	(771	)	$	22,792		$	(64,826	)	$	439,649		$	—	$	(33,245	)	$	363,599


										VIE Assets and Liabilities
Nine months ended September 30, 2012	Investments			Other assets			Derivatives			Investments			Loans			Derivatives		Long-term debt			Total
Balance, beginning of period	$	97,522		$	16,779		$	(486,775	)	$	2,199,338		$	14,126,994			—	$	(1,934,642	)	$	14,019,216
Additions of VIEs consolidated		—			—			—			—			—			—		—			—
Total gains/(losses) realized and unrealized:																	—
Included in earnings		17			(1,758	)		67,322			(127,539	)		738,121			—		(148,573	)		527,590
Included in other comprehensive income		6,697			—			—			88,314			541,215			—		(77,761	)		558,465
Purchases		—			—			—			—			—			—		—			—
Issuances		—			—			—			—			—			—		—			—
Sales		—			—			—			—			—			—		—			—
Settlements		(96,118	)		—			(54,588	)		—			(421,671	)		—		64,195			(508,182	)
Transfers in Level 3		58,905			—			—			—			—			—		(1,553,619	)		(1,494,714	)
Transfers out of Level 3		(6,301	)		—			—			—			—			—		657,059			650,758
Deconsolidation of VIEs		—			—			—			—			—			—		—			—

Balance, end of period	$	60,722		$	15,021		$	(474,041	)	$	2,160,113		$	14,984,659		$	—	$	(2,993,341	)	$	13,753,133

The amount of total gains/(losses) included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date	$	—		$	(1,758	)	$	(51,611	)	$	(127,539	)	$	738,602		$	—	$	(148,573	)	$	409,121

Level-3 financial assets and liabilities accounted for at fair value


										VIE Assets and Liabilities
Three months ended September 30, 2011	Investments			Other assets			Derivatives			Investments			Loans			Derivatives		Long-term debt			Total
Balance, beginning of period	$	183,433		$	18,451		$	(262,287	)	$	2,023,513		$	14,442,912		$	—	$	(2,310,972	)	$	14,095,050
Additions of VIEs consolidated		—			—			—			—			—			—		—			—
Total gains/(losses) realized and unrealized:
Included in earnings		(47	)		(1,119	)		(297,927	)		145,804			126,130			—		166,532			139,373
Included in other comprehensive income		(8,451	)		—			—			(62,870	)		(389,166	)		—		52,650			(407,837	)
Purchases		—			—			—			—			—			—		—			—
Issuances		—			—			—			—			—			—		—			—
Sales		—			—			—			—			—			—		—			—
Settlements		(2,099	)		—			70,241			—			(132,909	)		—		12,765			(52,002	)
Transfers in Level 3		—			—			—			—			—			—		(192,773	)		(192,773	)
Transfers out of Level 3		(75,483	)		—			—			—			—			—		116,237			40,754
Deconsolidation of VIEs		—			—			—			—			—			—		—			—

Balance, end of period	$	97,353		$	17,332		$	(489,973	)	$	2,106,447		$	14,046,967		$	—	$	(2,155,561	)	$	13,662,565

The amount of total gains/(losses) included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date	$	—		$	(1,119	)	$	(275,099	)	$	145,830		$	126,156		$	—	$	166,532		$	162,300


										VIE Assets and Liabilities
Nine months ended September 30, 2011	Investments			Other assets			Derivatives			Investments			Loans			Derivatives			Long-term debt			Total
Balance, beginning of period	$	199,172		$	17,909		$	(195,934	)	$	1,904,361		$	15,800,918		$	4,511		$	(1,856,366	)	$	15,874,571
Additions of VIEs consolidated		—			—			—			—			—			—			(350,624	)		(350,624	)
Total gains/(losses) realized and unrealized:
Included in earnings		(3,419	)		(577	)		(328,205	)		210,393			481,446			(4,511	)		63,605			418,732
Included in other comprehensive income		(541	)		—			—			(8,307	)		51,354			—			(41	)		42,465
Purchases		—			—			—			—			—			—			—			—
Issuances		—			—			—			—			—			—			—			—
Sales		(16,600	)		—			—			—			—			—			—			(16,600	)
Settlements		(5,776	)		—			34,166			—			(391,784	)		—			40,113			(323,281	)
Transfers in Level 3		—			—			—			—			—			—			(448,913	)		(448,913	)
Transfers out of Level 3		(75,483	)		—			—			—			—			—			396,665			321,182
Deconsolidation of VIEs		—			—			—			—			(1,894,967	)		—			—			(1,894,967	)

Balance, end of period	$	97,353		$	17,332		$	(489,973	)	$	2,106,447		$	14,046,967		$	—		$	(2,155,561	)	$	13,622,565

The amount of total gains/(losses) included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date	$	—		$	(577	)	$	(323,400	)	$	210,393		$	480,391		$	(4,511	)	$	63,605		$	425,901

Level 3 – Investments by class


Three months ended September 30, 2012	Collateralized Debt Obligations			Other Asset Backed Securities			Corporate Obligations			U.S. Agency Obligations		Total Investments
Balance, beginning of period	$	9,558		$	50,746		$	3,466		$	—	$	63,770
Additions of VIEs consolidated		—			—			—			—		—
Total gains/(losses) realized and unrealized:
Included in earnings		(2	)		—			(20	)		—		(22	)
Included in other comprehensive income		200			122			149			—		471
Purchases		—			—			—			—		—
Issuances		—			—			—			—		—
Sales		—			—			—			—		—
Settlements		(2,924	)		(573	)		—			—		(3,497	)
Transfers in Level 3		—			—			—			—		—
Transfers out of Level 3		—			—			—			—		—

Balance, end of period	$	6,832		$	50,295		$	3,595		$	—	$	60,722

The amount of total gains/(losses) included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date	$	—		$	—		$	—		$	—	$	—


Nine months ended September 30, 2012	Collateralized Debt Obligations			Other Asset Backed Securities			Corporate Obligations			U.S. Agency Obligations			Total Investments
Balance, beginning of period	$	12,482		$	75,886		$	7,930		$	1,224		$	97,522
Additions of VIEs consolidated		—			—			—			—			—
Total gains/(losses) realized and unrealized:
Included in earnings		(5	)		—			24			(2	)		17
Included in other comprehensive income		492			6,498			(284	)		(9	)		6,697
Purchases		—			—			—			—			—
Issuances		—			—			—			—			—
Sales		—			—			—			—			—
Settlements		(6,137	)		(85,157	)		(4,075	)		(749	)		(96,118	)
Transfers in Level 3		—			53,068			5,837			—			58,905
Transfers out of Level 3		—			—			(5,837	)		(464	)		(6,301	)

Balance, end of period	$	6,832		$	50,295		$	3,595		$	—		$	60,722

The amount of total gains/(losses) included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date	$	—		$	—		$	—		$	—		$	—

Level 3 – Investments by class


Three months ended September 30, 2011	Collateralized Debt Obligations			Other Asset Backed Securities			Corporate Obligations			U.S. Agency Obligations			Total Investments
Balance, beginning of period	$	14,713		$	159,768		$	7,968		$	984		$	183,433
Total gains/(losses) realized and unrealized:		—			—			—			—			—
Included in earnings
Included in other comprehensive income		(2	)		—			(45	)		(10	)		(47	)
Purchases		52			(8,719	)		226			—			(8,451	)
Issuances		—			—			—			—			—
Sales		—			—			—			—			—
Settlements		—			—			—			—			—
Transfers in Level 3		(2,099	)		—			—			—			(2,099	)
Transfers out of Level 3		—			(75,483	)		—			—			—
Deconsolidation of VIEs		—			—			—			—			(75,483	)

Balance, end of period	$	12,664		$	75,566		$	8,149		$	974		$	97,353

The amount of total gains/(losses) included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date	$	—		$	—		$	—		$	—		$	—


Nine months ended September 30, 2011	Collateralized Debt Obligations			Other Asset Backed Securities			Corporate Obligations			U.S. Agency Obligations			Total Investments
Balance, beginning of period	$	30,433		$	159,473		$	8,069		$	1,197		$	199,172
Total gains/(losses) realized and unrealized:		—			—			—			—			—
Included in earnings
Included in other comprehensive income		(3,284	)		—			(132	)		(3	)		(3,419	)
Purchases		6,185			(6,931	)		212			(7	)		(541	)
Issuances		—			—			—			—			—
Sales		—			—			—			—			—
Settlements		(16,600	)		—			—			—			(16,600	)
Transfers in Level 3		(4,070	)		(1,493	)		—			(213	)		(5,776	)
Transfers out of Level 3		—			—			—			—			—
Deconsolidation of VIEs		—			(75,483	)		—			—			(75,483	)

Balance, end of period	$	12,664		$	75,566		$	8,149		$	974		$	97,353

The amount of total gains/(losses) included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date	$	—		$	—		$	—		$	—		$	—

Level 3 – Derivatives by class


Three months ended September 30, 2012	Interest Rate Swaps			Credit Derivatives			Call Options on Long-term debt		Total Derivatives
Balance, beginning of period	$	(295,987	)	$	(211,617	)	$	—	$	(507,604	)
Additions of VIEs for consolidated		—			—			—		—
Total gains/(losses) realized and unrealized:
Included in earnings		(1,156	)		27,441			—		26,285
Included in other comprehensive income		—			—			—		—
Purchases		—			—			—		—
Issuances		—			—			—		—
Sales		—			—			—		—
Settlements		10,223			(2,945	)		—		7,278
Transfers in Level 3		—			—			—		—
Transfers out of Level 3		—			—			—		—
Deconsolidation of VIEs		—			—			—		—

Balance, end of period	$	(286,920	)	$	(187,121	)	$	—	$	(474,041	)

The amount of total gains/(losses) included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date	$	(1,156	)	$	23,948		$	—	$	22,792


Nine months ended September 30, 2012	Interest Rate Swaps			Credit Derivatives			Call Options on Long-term debt			Total Derivatives
Balance, beginning of period	$	(302,177	)	$	(190,653	)	$	6,055		$	(486,775	)
Additions of VIEs consolidated		—			—			—			—
Total gains/(losses) realized and unrealized:
Included in earnings		(46,191	)		12,803			100,710			67,322
Included in other comprehensive income		—			—			—			—
Purchases		—			—			—			—
Issuances		—			—			—			—
Sales		—			—			—			—
Settlements		61,448			(9,271	)		(106,765	)		(54,588	)
Transfers in Level 3		—			—			—			—
Transfers out of Level 3		—			—			—			—
Deconsolidation of VIEs		—			—			—			—

Balance, end of period	$	(286,920	)	$	(187,121	)	$	—		$	(474,041	)

The amount of total gains/(losses) included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date	$	(47,419	)	$	(4,192	)	$	—		$	(51,611	)


Three months ended September 30, 2011	Interest Rate Swaps			Credit Derivatives			Call Options on Long-term debt			Total Derivatives
Balance, beginning of period	$	(67,210	)	$	(215,847	)	$	20,770		$	(262,287	)
Additions of VIEs consolidated		—			—			—			—
Total gains/(losses) realized and unrealized:
Included in earnings		(295,523	)		4,506			(6,910	)		(297,927	)
Included in other comprehensive income		—			—			—			—
Purchases		—			—			—			—
Issuances		—			—			—			—
Sales		—			—			—			—
Settlements		74,070			(3,829	)		—			70,241
Transfers in Level 3		—			—			—			—
Transfers out of Level 3		—			—			—			—
Deconsolidation of VIEs		—			—			—			—

Balance, end of period	$	(288,663	)	$	(215,170	)	$	13,860		$	(489,973	)

The amount of total gains/(losses) included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date	$	(257,764	)	$	(10,425	)	$	(6,910	)	$	(275,099	)


Nine months ended September 30, 2011	Interest Rate Swaps			Credit Derivatives			Call Options on Long-term debt			Total Derivatives
Balance, beginning of period	$	25,750		$	(221,684	)	$	—		$	(195,934	)
Additions of VIEs consolidated		—			—			—			—
Total gains/(losses) realized and unrealized:
Included in earnings		(361,955	)		19,890			13,860			(328,205	)
Included in other comprehensive income		—			—			—			—
Purchases		—			—			—			—
Issuances		—			—			—			—
Sales		—			—			—			—
Settlements		47,542			(13,376	)		—			34,166
Transfers in Level 3		—			—			—			—
Transfers out of Level 3		—			—			—			—
Deconsolidation of VIEs		—			—			—			—

Balance, end of period	$	(288,663	)	$	(215,170	)	$	13,860		$	(489,973	)

The amount of total gains/(losses) included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date	$	(327,371	)	$	(9,889	)	$	13,860		$	(323,400	)

Summary of Gains and Losses Realized and Unrealized Relating to Level 3 Assets and Liabilities Included in Earnings

Gains and losses (realized and unrealized) relating to Level 3 assets and liabilities included in earnings for the three and nine months ended September 30, 2012 and 2011 are reported as follows:


	Net investment income			Realized gains or (losses) and other settlements on credit derivative contracts		Unrealized gains or (losses) on credit derivative contracts			Derivative products revenues (interest rate swaps)			Income on variable interest entities		Other income
Three months ended September 30, 2012
Total gains or losses included in earnings for the period	$	(22	)	$	2,944	$	24,496		$	(1,156	)	$	341,578	$	(771	)
Changes in unrealized gains or losses relating to the assets and liabilities still held at the reporting date		—			—		23,948			(1,156	)		341,578		(771	)
Nine months ended September 30, 2012
Total gains or losses included in earnings for the period	$	17		$	9,271	$	3,532		$	(46,191	)	$	462,009	$	98,952
Changes in unrealized gains or losses relating to the assets and liabilities still held at the reporting date		—			—		(4,192	)		(47,419	)		462,490		(1,758	)

Three months ended September 30, 2011
Total gains or losses included in earnings for the period	$	(47	)	$	3,829	$	676		$	(295,523	)	$	438,466	$	(8,029	)
Changes in unrealized gains or losses relating to the assets and liabilities still held at the reporting date		—			—		(10,425	)		(257,764	)		438,518		(8,029	)
Nine months ended September 30, 2011
Total gains or losses included in earnings for the period	$	(3,419	)	$	13,376	$	6,513		$	(361,955	)	$	750,933	$	13,283
Changes in unrealized gains or losses relating to the assets and liabilities still held at the reporting date		—			—		(9,889	)		(327,371	)		749,878		13,283

- Definition

Tabular disclosure of the amount of gains or losses for the period included in earnings or resulted in a change to net assets, have arisen from the use of significant unobservable inputs (level 3) to measure the fair value of assets, liabilities, and financial instruments classified in shareholders' equity.

+ References+ Details

- Definition

Tabular disclosure of the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments, assets, and liabilities. Such certain disclosures about the financial instruments, assets, and liabilities include: (1) the fair value of the required items together with their carrying amounts (as appropriate) and (2) the methodology and assumptions used in developing such estimates of fair value.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

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Reference 2: http://www.xbrl.org/2003/role/presentationRef

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Reference 5: http://www.xbrl.org/2003/role/presentationRef

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Reference 10: http://www.xbrl.org/2003/role/presentationRef

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+ Details