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



	Third Quarter				Nine Months
	2013		2012		2013		2012
	(in millions)
Scheduled net earned premiums	$	117	$	144	$	358	$	441
Acceleration of premium earnings	40		73		199		178
Accretion of discount on net premiums receivable	2		4		12		15
Total financial guaranty insurance	159		221		569		634
Other	0		1		1		1
Total net earned premiums(1)	$	159	$	222	$	570	$	635

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(1)	Excludes $14 million and $17 million for Third Quarter 2013 and 2012, respectively, and $47 million and $50 million for the Nine Months 2013 and 2012, respectively, related to consolidated FG VIEs.

Components of Unearned Premium Reserve



	As of September 30, 2013									As of December 31, 2012
	Gross			Ceded			Net(1)			Gross			Ceded			Net(1)
	(in millions)
Deferred premium revenue:
Financial guaranty	$	4,787		$	503		$	4,284		$	5,349		$	586		$	4,763
Other	6			—			6			7			—			7
Total deferred premium revenue	$	4,793		$	503		$	4,290		$	5,356		$	586		$	4,770
Contra-paid	(117		)	(23		)	(94		)	(149		)	(25		)	(124		)
Total	$	4,676		$	480		$	4,196		$	5,207		$	561		$	4,646

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(1)	Excludes $197 million and $262 million of deferred premium revenue, and $64 million and $98 million of contra-paid related to FG VIEs as of September 30, 2013 and December 31, 2012, respectively.

Gross Premium Receivable, Net of Ceding Commissions Roll Forward



	Nine Months
	2013			2012
	(in millions)
Balance beginning of period	$	1,005		$	1,003
Premium written, net of ceding commissions	72			134
Premium payments received, net of ceding commissions	(167		)	(225		)
Adjustments:
Changes in the expected term of financial guaranty insurance contracts	(14		)	12
Accretion of discount, net of ceding commissions	15			19
Foreign exchange translation	(7		)	10
Consolidation of FG VIEs	—			(5		)
Other adjustments	2			(4		)
Balance, end of period (1)	$	906		$	944

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(1)	Excludes $19 million and $30 million as of September 30, 2013 and September 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 47%, 47% and 50% of installment premiums at September 30, 2013, December 31, 2012 and September 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.

Expected Collections of Gross Premiums Receivable,

Net of Ceding Commissions (Undiscounted)



	As of September 30, 2013
	(in millions)
2013 (October 1 – December 31)	$	40
2014	108
2015	92
2016	85
2017	78
2018-2022	313
2023-2027	191
2028-2032	132
After 2032	153
Total(1)	$	1,192

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(1)	Excludes expected cash collections on FG VIEs of $24 million.

Scheduled Net Earned Premiums

Financial Guaranty Insurance Contracts



	As of September 30, 2013
	(in millions)
2013 (October 1–December 31)	$	112
2014	429
2015	375
2016	331
2017	296
2018 - 2022	1,149
2023 - 2027	734
2028 - 2032	443
After 2032	415
Total present value basis(1)	4,284
Discount	246
Total future value	$	4,530

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(1)	Excludes scheduled net earned premiums on consolidated FG VIEs of $197 million.

Selected Information for Policies Paid in Installments



	As of September 30, 2013			As of December 31, 2012
	(dollars in millions)
Premiums receivable, net of ceding commission payable	$	906		$	1,005
Gross deferred premium revenue	1,647			1,908
Weighted-average risk-free rate used to discount premiums	3.4		%	3.5		%
Weighted-average period of premiums receivable (in years)	9.5			9.6