Expected Loss to be Paid (Tables)

3 Months Ended

Mar. 31, 2015

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

Net Expected Loss to be Paid

After Net Expected Recoveries for Breaches of R&W

Roll Forward by Sector

First Quarter 2015



	Net Expected Loss to be Paid (Recovered) as of December 31, 2014 (2)			Economic Loss Development			(Paid) Recovered Losses (1)			Net Expected Loss to be Paid (Recovered) as of March 31,2015 (2)
	(in millions)
Public Finance:
U.S. public finance	$	303		$	9		$	(2	)	$	310
Non-U.S public finance	45			(3		)	—			42
Public Finance	348			6			(2		)	352
Structured Finance:
U.S. RMBS:
First lien:
Prime first lien	4			0			(1		)	3
Alt-A first lien	304			(5		)	(10		)	289
Option ARM	(16		)	4			(4		)	(16		)
Subprime	303			(1		)	(9		)	293
Total first lien	595			(2		)	(24		)	569
Second lien:
Closed-end second lien	8			1			2			11
HELOCs	(19		)	5			4			(10		)
Total second lien	(11		)	6			6			1
Total U.S. RMBS	584			4			(18		)	570
Triple-X life insurance transactions	161			5			(1		)	165
TruPS	23			(9		)	—			14
Other structured finance	57			(8		)	3			52
Structured Finance	825			(8		)	(16		)	801
Subtotal	1,173			(2		)	(18		)	1,153
Other insurance	(4		)	(1		)	6			1
Total	$	1,169		$	(3	)	$	(12	)	$	1,154

Net Expected Loss to be Paid

After Net Expected Recoveries for Breaches of R&W

Roll Forward by Sector

First Quarter 2014



	Net Expected Loss to be Paid (Recovered) as of December 31, 2013			Economic Loss Development			(Paid) Recovered Losses (1)			Net Expected Loss to be Paid (Recovered) as of March 31,2014
	(in millions)
Public Finance:
U.S. public finance	$	264		$	23		$	(6	)	$	281
Non-U.S public finance	57			—			—			57
Public Finance	321			23			(6		)	338
Structured Finance:
U.S. RMBS:
First lien:
Prime first lien	21			(3		)	—			18
Alt-A first lien	304			8			(4		)	308
Option ARM	(9		)	(15		)	(4		)	(28		)
Subprime	304			(7		)	(2		)	295
Total first lien	620			(17		)	(10		)	593
Second lien:
Closed-end second lien	(11		)	5			2			(4		)
HELOCs	(116		)	2			5			(109		)
Total second lien	(127		)	7			7			(113		)
Total U.S. RMBS	493			(10		)	(3		)	480
Triple-X life insurance transactions	75			13			(1		)	87
TruPS	51			(19		)	—			32
Other structured finance	45			6			—			51
Structured Finance	664			(10		)	(4		)	650
Subtotal	985			13			(10		)	988
Other insurance	(3		)	(1		)	—			(4		)
Total	$	982		$	12		$	(10	)	$	984

____________________


(1)	Net of ceded paid losses, whether or not such amounts have been settled with reinsurers. Ceded paid losses are typically settled 45 days after the end of the reporting period. Such amounts are recorded in reinsurance recoverable on paid losses included in other assets. The Company paid $4 million and $6 million in loss adjustment expenses ("LAE") for First Quarter 2015 and 2014, respectively.


(2)	Includes expected LAE to be paid of $13 million as of March 31, 2015 and $16 million as of December 31, 2014.

Net Expected Recoveries from Breaches of R&W Rollforward

Net Expected Recoveries from

Breaches of R&W Rollforward

First Quarter 2015



	Future Net R&W Benefit as of December 31, 2014		R&W Development and Accretion of Discount During 2015			R&W (Recovered) During 2015			Future Net R&W Benefit as of March 31,2015 (1)
	(in millions)
U.S. RMBS:
First lien:
Prime first lien	$	2	$	(1	)	$	—		$	1
Alt-A first lien	106		(10		)	(2		)	94
Option ARM	15		(20		)	(15		)	(20		)
Subprime	109		(19		)	(3		)	87
Total first lien	232		(50		)	(20		)	162
Second lien:
Closed-end second lien	85		(1		)	(1		)	83
HELOC	—		—			—			—
Total second lien	85		(1		)	(1		)	83
Total	$	317	$	(51	)	$	(21	)	$	245

Net Expected Recoveries from

Breaches of R&W Rollforward

First Quarter 2014



	Future Net R&W Benefit as of December 31, 2013		R&W Development and Accretion of Discount During 2014			R&W (Recovered) During 2014			Future Net R&W Benefit as of March 31, 2014
	(in millions)
U.S. RMBS:
First lien:
Prime first lien	$	4	$	(1	)	$	—		$	3
Alt-A first lien	274		3			(8		)	269
Option ARM	173		9			(30		)	152
Subprime	118		28			—			146
Total first lien	569		39			(38		)	570
Second lien:
Closed-end second lien	98		(3		)	—			95
HELOC	45		12			(1		)	56
Total second lien	143		9			(1		)	151
Total	$	712	$	48		$	(39	)	$	721

___________________

(1) See the section "Breaches of Representations and Warranties" below for eligible assets held in trust.

Net Expected Loss to be Paid By Accounting Model

Net Expected Loss to be Paid (Recovered)

By Accounting Model

As of March 31, 2015



	Financial Guaranty Insurance			FG VIEs(1)		Credit Derivatives(2)			Total
	(in millions)
Public Finance:
U.S. public finance	$	310		$	—	$	—		$	310
Non-U.S. public finance	42			—		—			42
Public Finance	352			—		—			352
Structured Finance:
U.S. RMBS:
First lien:
Prime first lien	3			—		—			3
Alt-A first lien	278			17		(6		)	289
Option ARM	(17		)	—		1			(16		)
Subprime	157			69		67			293
Total first lien	421			86		62			569
Second lien:
Closed-end second lien	(24		)	31		4			11
HELOCs	(15		)	5		—			(10		)
Total second lien	(39		)	36		4			1
Total U.S. RMBS	382			122		66			570
Triple-X life insurance transactions	157			—		8			165
TruPS	0			—		14			14
Other structured finance	98			—		(46		)	52
Structured Finance	637			122		42			801
Subtotal	$	989		$	122	$	42		$	1,153
Other									1
Total									$	1,154

Net Expected Loss to be Paid (Recovered)

By Accounting Model

As of December 31, 2014



	Financial Guaranty Insurance			FG VIEs(1)		Credit Derivatives(2)			Total
	(in millions)
Public Finance:
U.S. public finance	$	303		$	—	$	—		$	303
Non-U.S. public finance	45			—		—			45
Public Finance	348			—		—			348
Structured Finance:
U.S. RMBS:
First lien:
Prime first lien	2			—		2			4
Alt-A first lien	288			17		(1		)	304
Option ARM	(15		)	—		(1		)	(16		)
Subprime	163			71		69			303
Total first lien	438			88		69			595
Second lien:
Closed-end second lien	(27		)	31		4			8
HELOCs	(26		)	7		—			(19		)
Total second lien	(53		)	38		4			(11		)
Total U.S. RMBS	385			126		73			584
Triple-X life insurance transactions	153			—		8			161
TruPS	1			—		22			23
Other structured finance	102			—		(45		)	57
Structured Finance	641			126		58			825
Subtotal	$	989		$	126	$	58		1,173
Other									(4		)
Total									$	1,169

___________________

(1) Refer to Note 9, Consolidated Variable Interest Entities.

(2) Refer to Note 8, Financial Guaranty Contracts Accounted for as Credit Derivatives.

Schedule of Net Economic Loss Development

Net Economic Loss Development (Benefit)

By Accounting Model

First Quarter 2015



	Financial Guaranty Insurance			FG VIEs(1)			Credit Derivatives(2)			Total
	(in millions)
Public Finance:
U.S. public finance	$	9		$	—		$	—		$	9
Non-U.S. public finance	(3		)	—			—			(3		)
Public Finance	6			—			—			6
Structured Finance:
U.S. RMBS:
First lien:
Prime first lien	1			—			(1		)	0
Alt-A first lien	2			—			(7		)	(5		)
Option ARM	1			—			3			4
Subprime	(4		)	4			(1		)	(1		)
Total first lien	0			4			(6		)	(2		)
Second lien:
Closed-end second lien	1			1			(1		)	1
HELOCs	7			(2		)	—			5
Total second lien	8			(1		)	(1		)	6
Total U.S. RMBS	8			3			(7		)	4
Triple-X life insurance transactions	4			—			1			5
TruPS	(1		)	—			(8		)	(9		)
Other structured finance	(5		)	—			(3		)	(8		)
Structured Finance	6			3			(17		)	(8		)
Subtotal	$	12		$	3		$	(17	)	$	(2	)
Other										(1		)
Total										$	(3	)

Net Economic Loss Development (Benefit)

By Accounting Model

First Quarter 2014



	Financial Guaranty Insurance			FG VIEs(1)			Credit Derivatives(2)			Total
	(in millions)
Public Finance:
U.S. public finance	$	23		$	—		$	—		$	23
Non-U.S. public finance	—			—			—			—
Public Finance	23			—			—			23
Structured Finance:
U.S. RMBS:
First lien:
Prime first lien	—			—			(3		)	(3		)
Alt-A first lien	19			(12		)	1			8
Option ARM	(16		)	1			—			(15		)
Subprime	(8		)	(2		)	3			(7		)
Total first lien	(5		)	(13		)	1			(17		)
Second lien:
Closed-end second lien	(1		)	2			4			5
HELOCs	(56		)	58			—			2
Total second lien	(57		)	60			4			7
Total U.S. RMBS	(62		)	47			5			(10		)
Triple-X life insurance transactions	13			—			—			13
TruPS	(1		)	—			(18		)	(19		)
Other structured finance	4			—			2			6
Structured Finance	(46		)	47			(11		)	(10		)
Subtotal	$	(23	)	$	47		$	(11	)	13
Other										(1		)
Total										$	12

_________________

(1) Refer to Note 9, Consolidated Variable Interest Entities.

(2) Refer to Note 8, Financial Guaranty Contracts Accounted for as Credit Derivatives.

Liquidation Rates and Key Assumptions in Base Case Expected Loss Estimates First Lien RMBS

First Lien Liquidation Rates



	March 31, 2015	December 31, 2014
Current Loans Modified in the Previous 12 Months
Alt A and Prime	25%	25%
Option ARM	25	25
Subprime	25	25
Current Loans Delinquent in the Previous 12 Months
Alt A and Prime	25	25
Option ARM	25	25
Subprime	25	25
30 – 59 Days Delinquent
Alt A and Prime	35	35
Option ARM	40	40
Subprime	35	35
60 – 89 Days Delinquent
Alt A and Prime	50	50
Option ARM	55	55
Subprime	40	40
90+ Days Delinquent
Alt A and Prime	60	60
Option ARM	65	65
Subprime	55	55
Bankruptcy
Alt A and Prime	45	45
Option ARM	50	50
Subprime	40	40
Foreclosure
Alt A and Prime	75	75
Option ARM	80	80
Subprime	70	70
Real Estate Owned
All	100	100

Key Assumptions in Base Case Expected Loss Estimates

First Lien RMBS(1)



	As of March 31, 2015					As of December 31, 2014
	Range				Weighted Average	Range				Weighted Average
Alt-A First Lien
Plateau CDR	2.6	%	–	13.1%	7.4%	2.0	%	–	13.4%	7.3%
Intermediate CDR	0.5	%	–	2.6%	1.5%	0.4	%	–	2.7%	1.5%
Period until intermediate CDR	48 months					48 months
Final CDR	0.1	%	–	0.7%	0.3%	0.1	%	–	0.7%	0.3%
Initial loss severity:
2005 and prior	60.0%					60.0%
2006	70.0%					70.0%
2007	65.0%					65.0%
Initial conditional prepayment rate ("CPR")	2.7	%	–	22.4%	8.1%	1.7	%	–	21.0%	7.7%
Final CPR(2)	15.0	%	–	22.4%	15.2%	15%
Option ARM
Plateau CDR	4.5	%	–	12.9%	9.9%	4.3	%	–	14.2%	10.6%
Intermediate CDR	0.9	%	–	2.6%	2.0%	0.9	%	–	2.8%	2.1%
Period until intermediate CDR	48 months					48 months
Final CDR	0.2	%	–	0.6%	0.5%	0.2	%	–	0.7%	0.5%
Initial loss severity:
2005 and prior	60.0%					60.0%
2006	70.0%					70.0%
2007	65.0%					65.0%
Initial CPR	1.8	%	–	12.7%	4.9%	1.1	%	–	11.8%	4.9%
Final CPR(2)	15%					15%
Subprime
Plateau CDR	4.8	%	–	14.4%	10.2%	4.9	%	–	15.0%	10.6%
Intermediate CDR	1.0	%	–	2.9%	2.0%	1.0	%	–	3.0%	2.1%
Period until intermediate CDR	48 months					48 months
Final CDR	0.2	%	–	0.7%	0.4%	0.2	%	–	0.7%	0.4%
Initial loss severity:
2005 and prior	75.0%					75.0%
2006	90.0%					90.0%
2007	90.0%					90.0%
Initial CPR	0.0	%	–	9.7%	4.7%	0.0	%	–	10.5%	6.1%
Final CPR(2)	15%					15%

____________________

(1) Represents variables for most heavily weighted scenario (the “base case”).


(2)	For transactions where the initial CPR is higher than the final CPR, the initial CPR is held constant and the final CPR is not used.

Key Assumptions in Base Case Expected Loss Estimates Second Lien RMBS

Key Assumptions in Base Case Expected Loss Estimates

Second Lien RMBS(1)



HELOC key assumptions	As of March 31, 2015					As of December 31, 2014
	Range				Weighted Average	Range				Weighted Average
Plateau CDR	2.3	%	–	7.5%	4.4%	2.8	%	–	6.8%	4.1%
Final CDR trended down to	0.5	%	–	3.2%	1.2%	0.5	%	–	3.2%	1.2%
Period until final CDR	34 months					34 months
Initial CPR	6.9	%	–	23.2%	10.2%	6.9	%	–	21.8%	11.0%
Final CPR(2)	10.0	%	–	23.2%	15.2%	15.0	%	–	21.8%	15.5%
Loss severity	90.0	%	–	98.0%	90.4%	90.0	%	–	98.0%	90.4%



Closed-end second lien key assumptions	As of March 31, 2015					As of December 31, 2014
	Range				Weighted Average	Range				Weighted Average
Plateau CDR	4.7	%	–	12.4%	6.9%	5.5	%	–	12.5%	7.2%
Final CDR trended down to	3.5	%	–	9.1%	4.9%	3.5	%	–	9.1%	4.9%
Period until final CDR	34 months					34 months
Initial CPR	3.4	%	–	11.8%	7.6%	2.8	%	–	13.9%	9.9%
Final CPR(2)	15%					15%
Loss severity	98%					98%

____________________


(1)	Represents variables for most heavily weighted scenario (the “base case”).


(2)	For transactions where the initial CPR is higher than the final CPR, the initial CPR is held constant and the final CPR is not used.

Components of Development and Accretion Amounts of Estimated Recoveries

The following table provides a breakdown of the development and accretion amount in the roll forward of estimated recoveries associated with claims for breaches of R&W.

Components of R&W Development



	First Quarter
	2015			2014
	(in millions)
Estimated increase (decrease) in defaults that will result in additional (lower) breaches(1)	$	(52	)	$	0
Inclusion or removal of deals with breaches of R&W during period	0			—
Change in recovery assumptions	—			10
Settlements and anticipated settlements	—			35
Accretion of discount on balance	1			3
Total	$	(51	)	$	48

____________________


(1)	The negative R&W development is offset by higher anticipated cash flows in the covered transactions that were related to a third party settlement.