Expected Loss to be Paid (Tables)

3 Months Ended

Mar. 31, 2016

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

The following tables present a roll forward of the present value of net expected loss to be paid for all contracts, whether accounted for as insurance, credit derivatives or financial guaranty ("FG") VIEs, by sector, after the benefit for expected recoveries for breaches of representations and warranties ("R&W") and other expected recoveries. The Company used weighted average risk-free rates for U.S. dollar denominated obligations that ranged from 0.0% to 2.88% as of March 31, 2016 and 0.0% to 3.25% as of December 31, 2015.

Net Expected Loss to be Paid

After Net Expected Recoveries for Breaches of R&W

Roll Forward



	First Quarter
	2016			2015
	(in millions)
Net expected loss to be paid, beginning of period	$	1,391		$	1,169
Economic loss development due to:
Accretion of discount	9			7
Changes in discount rates	63			7
Changes in timing and assumptions	(13		)	(17		)
Total economic loss development	59			(3		)
Paid losses	(113		)	(12		)
Net expected loss to be paid, end of period	$	1,337		$	1,154

Net Expected Loss to be Paid

After Net Expected Recoveries for Breaches of R&W

Roll Forward by Sector

First Quarter 2016



	Net Expected Loss to be Paid (Recovered) as of December 31, 2015 (2)			Economic Loss Development			(Paid) Recovered Losses (1)			Net Expected Loss to be Paid (Recovered) as of March 31, 2016 (2)
	(in millions)
Public Finance:
U.S. public finance	$	771		$	98		$	(5	)	$	864
Non-U.S. public finance	38			1			—			39
Public Finance	809			99			(5		)	903
Structured Finance:
U.S. RMBS:
First lien:
Prime first lien	(2		)	0			1			(1		)
Alt-A first lien	127			(16		)	(75		)	36
Option ARM	(28		)	(21		)	2			(47		)
Subprime	251			1			(12		)	240
Total first lien	348			(36		)	(84		)	228
Second lien	61			5			(1		)	65
Total U.S. RMBS	409			(31		)	(85		)	293
Triple-X life insurance transactions	99			4			(1		)	102
Student loans	54			(14		)	(8		)	32
Other structured finance	20			1			(14		)	7
Structured Finance	582			(40		)	(108		)	434
Total	$	1,391		$	59		$	(113	)	$	1,337

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			Economic Loss Development			(Paid) Recovered Losses (1)			Net Expected Loss to be Paid (Recovered) as of March 31, 2015
	(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	(11		)	6			6			1
Total U.S. RMBS	584			4			(18		)	570
Triple-X life insurance transactions	161			5			(1		)	165
Student loans	68			(6		)	—			62
Other structured finance	8			(12		)	9			5
Structured Finance	821			(9		)	(10		)	802
Total	$	1,169		$	(3	)	$	(12	)	$	1,154

____________________


(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 $2 million and $4 million in loss adjustment expenses ("LAE") for First Quarter 2016 and 2015, respectively.


(2)	Includes expected LAE to be paid of $9 million as of March 31, 2016 and $12 million as of December 31, 2015.

Schedule Of Net Expected Losses To Be Paid For Future Benefits, Net Representations And Warranties

Future Net R&W Benefit Receivable (Payable)(1)



	As of March 31, 2016			As of December 31, 2015
	(in millions)
U.S. RMBS:
First lien	$	(30	)	$	0
Second lien	77			79
Total	$	47		$	79

____________________

(1)

The Company’s agreements with providers of breaches of R&W generally provide for reimbursement to the Company as claim payments are made and, to the extent the Company later receives reimbursements of such claims from excess spread or other sources, for the Company to provide reimbursement to the R&W providers. See the section “Breaches of Representations and Warranties” for information about the R&W agreements and eligible assets held in trust with respect to such agreements. When the Company projects receiving more reimbursements in the future than it projects to pay in claims, the Company will have a net R&W payable.

Net Expected Loss to be Paid By Accounting Model

The following tables present the present value of net expected loss to be paid for all contracts by accounting model, by sector and after the benefit for expected recoveries for breaches of R&W.

Net Expected Loss to be Paid (Recovered)

By Accounting Model

As of March 31, 2016



	Financial Guaranty Insurance			FG VIEs(1) and Other		Credit Derivatives(2)			Total
	(in millions)
Public Finance:
U.S. public finance	$	864		$	—	$	0		$	864
Non-U.S. public finance	39			—		—			39
Public Finance	903			—		0			903
Structured Finance:
U.S. RMBS:
First lien:
Prime first lien	2			—		(3		)	(1		)
Alt-A first lien	19			18		(1		)	36
Option ARM	(44		)	—		(3		)	(47		)
Subprime	148			55		37			240
Total first lien	125			73		30			228
Second lien	19			43		3			65
Total U.S. RMBS	144			116		33			293
Triple-X life insurance transactions	91			—		11			102
Student loans	32			—		—			32
Other structured finance	40			2		(35		)	7
Structured Finance	307			118		9			434
Total	$	1,210		$	118	$	9		$	1,337

Net Expected Loss to be Paid (Recovered)

By Accounting Model

As of December 31, 2015



	Financial Guaranty Insurance			FG VIEs(1) and Other		Credit Derivatives(2)			Total
	(in millions)
Public Finance:
U.S. public finance	$	771		$	—	$	0		$	771
Non-U.S. public finance	38			—		—			38
Public Finance	809			—		0			809
Structured Finance:
U.S. RMBS:
First lien:
Prime first lien	2			—		(4		)	(2		)
Alt-A first lien	110			17		0			127
Option ARM	(27		)	—		(1		)	(28		)
Subprime	153			59		39			251
Total first lien	238			76		34			348
Second lien	13			44		4			61
Total U.S. RMBS	251			120		38			409
Triple-X life insurance transactions	88			—		11			99
Student loans	54			—		—			54
Other structured finance	37			16		(33		)	20
Structured Finance	430			136		16			582
Total	$	1,239		$	136	$	16		$	1,391

___________________

(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

The following tables present the net economic loss development for all contracts by accounting model, by sector and after the benefit for expected recoveries for breaches of R&W.

Net Economic Loss Development (Benefit)

By Accounting Model

First Quarter 2016



	Financial Guaranty Insurance			FG VIEs(1) and Other		Credit Derivatives(2)			Total
	(in millions)
Public Finance:
U.S. public finance	$	98		$	—	$	0		$	98
Non-U.S. public finance	1			—		0			1
Public Finance	99			—		0			99
Structured Finance:
U.S. RMBS:
First lien:
Prime first lien	0			—		0			0
Alt-A first lien	(17		)	1		0			(16		)
Option ARM	(19		)	—		(2		)	(21		)
Subprime	3			0		(2		)	1
Total first lien	(33		)	1		(4		)	(36		)
Second lien	2			3		0			5
Total U.S. RMBS	(31		)	4		(4		)	(31		)
Triple-X life insurance transactions	3			—		1			4
Student loans	(14		)	—		—			(14		)
Other structured finance	4			0		(3		)	1
Structured Finance	(38		)	4		(6		)	(40		)
Total	$	61		$	4	$	(6	)	$	59

Net Economic Loss Development (Benefit)

By Accounting Model

First Quarter 2015



	Financial Guaranty Insurance			FG VIEs(1) and Other			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	—			4			(6		)	(2		)
Second lien	8			(1		)	(1		)	6
Total U.S. RMBS	8			3			(7		)	4
Triple-X life insurance transactions	4			—			1			5
Student loans	(6		)	—			—			(6		)
Other structured finance	0			(1		)	(11		)	(12		)
Structured Finance	6			2			(17		)	(9		)
Total	$	12		$	2		$	(17	)	$	(3	)

_________________

(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

Key Assumptions in Base Case Expected Loss Estimates

First Lien RMBS(1)



	As of March 31, 2016					As of December 31, 2015
	Range				Weighted Average	Range				Weighted Average
Alt-A First Lien
Plateau CDR	0.9	%	-	27.8%	6.4%	1.7	%	–	26.4%	6.4%
Intermediate CDR	0.2	%	-	5.6%	1.3%	0.3	%	–	5.3%	1.3%
Period until intermediate CDR	48 months					48 months
Final CDR	0.0	%	-	1.4%	0.3%	0.1	%	–	1.3%	0.3%
Initial loss severity:
2005 and prior	60.0%					60.0%
2006	80.0%					70.0%
2007	65.0%					65.0%
Initial conditional prepayment rate ("CPR")	2.7	%	-	31.6%	11.8%	2.7	%	–	32.5%	11.5%
Final CPR(2)	15%					15%
Option ARM
Plateau CDR	3.4	%	-	10.6%	7.8%	3.5	%	–	10.3%	7.8%
Intermediate CDR	0.7	%	-	2.1%	1.6%	0.7	%	–	2.1%	1.6%
Period until intermediate CDR	48 months					48 months
Final CDR	0.2	%	-	0.5%	0.4%	0.2	%	–	0.5%	0.4%
Initial loss severity:
2005 and prior	60.0%					60.0%
2006	70.0%					70.0%
2007	65.0%					65.0%
Initial CPR	2.0	%	-	13.7%	5.5%	1.5	%	–	10.9%	5.1%
Final CPR(2)	15%					15%
Subprime
Plateau CDR	4.2	%	-	14.4%	9.4%	4.7	%	–	13.2%	9.5%
Intermediate CDR	0.8	%	-	2.9%	1.9%	0.9	%	–	2.6%	1.9%
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	80.0%					75.0%
2006	90.0%					90.0%
2007	90.0%					90.0%
Initial CPR	0.3	%	-	9.2%	4.2%	0.0	%	–	10.1%	3.6%
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.

First Lien Liquidation Rates



	March 31, 2016	December 31, 2015
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	45	45
60 – 89 Days Delinquent
Alt A and Prime	45	45
Option ARM	50	50
Subprime	55	55
90+ Days Delinquent
Alt A and Prime	55	55
Option ARM	60	60
Subprime	60	60
Bankruptcy
Alt A and Prime	45	45
Option ARM	50	50
Subprime	40	40
Foreclosure
Alt A and Prime	65	65
Option ARM	70	70
Subprime	70	70
Real Estate Owned
All	100	100

Key Assumptions in Base Case Expected Loss Estimates Second Lien RMBS

Key Assumptions in Base Case Expected Loss Estimates

HELOCs (1)



	As of March 31, 2016					As of December 31, 2015
	Range				Weighted Average	Range				Weighted Average
Plateau CDR	5.3	%	–	26.1%	11.9%	4.9	%	–	23.5%	10.3%
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	11.0	%	–	14.9%	11.1%	10.9%
Final CPR(2)	10.0	%	–	15.0%	13.3%	10.0	%	–	15.0%	13.3%
Loss severity	98.0%					98.0%

____________________


(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.