Finance Receivables, net (Tables)

6 Months Ended

Jun. 30, 2020

Receivables [Abstract]

Schedule of Finance Receivables, Net

Finance receivables, net consists of the following at June 30, 2020 (amounts in thousands):

Amortized cost	$	—
Negative allowance for expected recoveries (1)	3,351,532
Balance at end of period	$	3,351,532

(1) The negative allowance balance includes certain portfolios of nonperforming loans for which the Company holds a beneficial interest representing approximately 1% of the balance.

Schedule of Changes in Negative Allowance for Expected Recoveries

Changes in the negative allowance for expected recoveries by portfolio segment for the three months ended June 30, 2020 were as follows (amounts in thousands):

	For the three months ended June 30, 2020
	Core		Insolvency		Total
Balance at beginning of period	$	2,949,384	$	458,690	$	3,408,074
Initial negative allowance for expected recoveries - portfolio acquisitions (1)	144,721		19,778		164,499
Foreign currency translation adjustment	24,215		(130)		24,085
Recoveries applied to negative allowance (2)	(231,435)		(33,492)		(264,927)
Changes in expected recoveries (3)	21,251		(1,450)		19,801
Balance at end of period	$	2,908,136	$	443,396	$	3,351,532

(1) Initial negative allowance for expected recoveries - portfolio acquisitions

Portfolio acquisitions for the three months ended June 30, 2020 were as follows (amounts in thousands):

	For the three months ended June 30, 2020
	Core		Insolvency		Total
Face value	$	1,288,243	$	96,964	$	1,385,207
Noncredit discount	(160,409)		(7,979)		(168,388)
Allowance for credit losses at acquisition	(983,113)		(69,207)		(1,052,320)
Purchase price	$	144,721	$	19,778	$	164,499

The initial negative allowance recorded on portfolio acquisitions for the three months ended June 30, 2020 were as follows (amounts in thousands):

	For the three months ended June 30, 2020
	Core		Insolvency		Total
Allowance for credit losses at acquisition	$	(983,113)	$	(69,207)	$	(1,052,320)
Writeoffs, net	983,113		69,207		1,052,320
Expected recoveries	144,721		19,778		164,499
Initial negative allowance for expected recoveries	$	144,721	$	19,778	$	164,499

(2) Recoveries applied to negative allowance

Recoveries applied to the negative allowance were computed as follows for the three months ended June 30, 2020 (amounts in thousands):

	For the three months ended June 30, 2020
	Core		Insolvency		Total
Recoveries (a)	$	461,238	$	51,973	$	513,211
Less - amounts reclassified to portfolio income (b)	229,803		18,481		248,284
Recoveries applied to negative allowance	$	231,435	$	33,492	$	264,927

(a) Recoveries includes cash collections, buybacks and other adjustments.

(b) The Company reported income on expected recoveries based on the constant effective interest rate in portfolio income on the Company's Consolidated Income Statements.

(3) Changes in expected recoveries

Changes in expected recoveries consists of the following for the three months ended June 30, 2020 (amounts in thousands):

	For the three months ended June 30, 2020
	Core		Insolvency		Total
Changes in expected future recoveries	$	(97,910)	$	(1,788)	$	(99,698)
Recoveries received in excess of forecast	119,161		338		119,499
Changes in expected recoveries	$	21,251	$	(1,450)	$	19,801

Six Months Ended June 30, 2020

Changes in the negative allowance for expected recoveries by portfolio segment for the six months ended June 30, 2020 were as follows (amounts in thousands):

	For the six months ended June 30, 2020
	Core		Insolvency		Total
Balance at beginning of period	$	3,051,426	$	462,739	$	3,514,165
Initial negative allowance for expected recoveries - portfolio acquisitions (1)	378,408		59,328		437,736
Foreign currency translation adjustment	(95,999)		(9,772)		(105,771)
Recoveries applied to negative allowance (2)	(430,473)		(71,110)		(501,583)
Changes in expected recoveries (3)	4,774		2,211		6,985
Balance at end of period	$	2,908,136	$	443,396	$	3,351,532

(1) Initial negative allowance for expected recoveries - portfolio acquisitions

Portfolio acquisitions for the six months ended June 30, 2020 were as follows (amounts in thousands):

	For the six months ended June 30, 2020
	Core		Insolvency		Total
Face value	$	3,179,386	$	274,418	$	3,453,804
Noncredit discount	(373,699)		(21,011)		(394,710)
Allowance for credit losses at acquisition	(2,427,279)		(194,079)		(2,621,358)
Purchase price	$	378,408	$	59,328	$	437,736

The initial negative allowance recorded on portfolio acquisitions for the six months ended was as follows June 30, 2020 (amounts in thousands):

	For the six months ended June 30, 2020
	Core		Insolvency		Total
Allowance for credit losses at acquisition	$	(2,427,279)	$	(194,079)	$	(2,621,358)
Writeoffs, net	2,427,279		194,079		2,621,358
Expected recoveries	378,408		59,328		437,736
Initial negative allowance for expected recoveries	$	378,408	$	59,328	$	437,736

(2) Recoveries applied to negative allowance

Recoveries applied to the negative allowance were computed as follows for the six months ended June 30, 2020 (amounts in thousands):

	For the six months ended June 30, 2020
	Core		Insolvency		Total
Recoveries (a)	$	901,932	$	109,957	$	1,011,889
Less - amounts reclassified to portfolio income (b)	471,459		38,847		510,306
Recoveries applied to negative allowance	$	430,473	$	71,110	$	501,583

(a) Recoveries includes cash collections, buybacks and other adjustments.

(b) The Company reported income on expected recoveries based on the constant effective interest rate in portfolio income on the Company's Consolidated Income Statements.

(3) Changes in expected recoveries

Changes in expected recoveries consists of the following for the six months ended June 30, 2020 (amounts in thousands):

	For the six months ended June 30, 2020
	Core		Insolvency		Total
Changes in expected future recoveries	$	(118,434)	$	(1,890)	$	(120,324)
Recoveries received in excess of forecast	123,208		4,101		127,309
Changes in expected recoveries	$	4,774	$	2,211	$	6,985

Schedule of Changes in Finance Receivables

Changes in finance receivables, net for the three and six months ended June 30, 2019 were as follows (amounts in thousands):

	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Balance at beginning of period	$	3,177,229	$	3,084,777
Acquisitions of finance receivables (1)	284,448		597,894
Foreign currency translation adjustment	(8,477)		(1,041)
Cash collections	(470,274)		(931,445)
Income recognized on finance receivables	249,219		488,055
Net allowance charges	(1,196)		(7,291)
Balance at end of period	$	3,230,949	$	3,230,949

(1) Includes portfolio purchases adjusted for buybacks and acquisition related costs, and portfolios from the acquisition of a business in Canada made during the first quarter of 2019.

Schedule of Cash Collections Applied to Principal

At the time of acquisition and each quarter thereafter, the life of each quarterly accounting pool was estimated based on projected amounts and timing of future cash collections using the proprietary models of the Company. Based upon projections, cash collections expected to be applied to principal were estimated to be as follows for the twelve-month periods ending June 30, (amounts in thousands):

2020	$	845,437
2021	694,169
2023	531,004
2024	393,087
2025	281,166
2026	173,283
2027	101,570
2028	77,943
2029	51,868
2030	35,070
Thereafter	46,352
Total ERC expected to be applied to principal	$	3,230,949

Schedule of Changes in Accretable Yield

Changes in accretable yield for the three and six months ended June 30, 2019 were as follows (amounts in thousands):

	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Balance at beginning of period	$	3,080,168	$	3,058,445
Income recognized on finance receivables	(249,219)		(488,055)
Net allowance charges	1,196		7,291
Additions from portfolio acquisitions	228,796		464,610
Reclassifications from nonaccretable difference	112,901		132,062
Foreign currency translation adjustment	(829)		(1,340)
Balance at end of period	$	3,173,013	$	3,173,013

Schedule of Valuation Allowance Account

The following is a summary of activity within the Company's valuation allowance account, all of which relates to acquired finance receivables, for the three and six months ended June 30, 2019 (amounts in thousands):

	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Beginning balance	$	263,324	$	257,148
Allowance charges	5,532		13,509
Reversal of previously recorded allowance charges	(4,336)		(6,218)
Net allowance charges	1,196		7,291
Foreign currency translation adjustment	71		152
Ending balance	$	264,591	$	264,591