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Financial Guaranty Insurance (Tables)
 3 Months Ended
Mar. 31, 2016
Insurance [Abstract]  
Net Earned Premiums
Net Earned Premiums
 
 
First Quarter
 
2016
 
2015
 
(in millions)
Scheduled net earned premiums
$
91

 
$
96

Acceleration of net earned premiums (1)
89

 
41

Accretion of discount on net premiums receivable
3

 
4

Financial guaranty insurance net earned premiums
183

 
141

Other
0

 
1

 Net earned premiums (2)
$
183

 
$
142

 ___________________
(1)
Reflects the unscheduled refunding or termination of the insurance on an insured obligation as well as changes in scheduled earnings due to changes in the expected lives of the insured obligations. 

(2)
Excludes $5 million and $5 million for First Quarter 2016 and 2015, respectively, related to consolidated FG VIEs.
Components of Unearned Premium Reserve
Components of Unearned Premium Reserve
 
 
As of March 31, 2016
 
As of December 31, 2015
 
Gross
 
Ceded
 
Net(1)
 
Gross
 
Ceded
 
Net(1)
 
(in millions)
Deferred premium revenue
3,829

 
241

 
3,588

 
4,008

 
238

 
3,770

Contra-paid (2)
(19
)
 
(5
)
 
(14
)
 
(12
)
 
(6
)
 
(6
)
Unearned premium reserve
$
3,810

 
$
236

 
$
3,574

 
$
3,996

 
$
232

 
$
3,764

 ____________________
(1)
Excludes $105 million and $110 million of deferred premium revenue, and $29 million and $30 million of contra-paid related to FG VIEs as of March 31, 2016 and December 31, 2015, respectively.

(2)
See "Financial Guaranty Insurance Losses– Insurance Contracts' Loss Information" below for an explanation of "contra-paid".
Gross Premium Receivable, Net of Commissions on Assumed Business Roll Forward
Gross Premium Receivable,
Net of Commissions on Assumed Business
Roll Forward
 
 
First Quarter
 
2016
 
2015
 
(in millions)
Beginning of period, December 31
$
693

 
$
729

Gross premium written, net of commissions on assumed business
41

 
36

Gross premiums received, net of commissions on assumed business
(49
)
 
(36
)
Adjustments:
 
 
 
Changes in the expected term
(22
)
 
(6
)
Accretion of discount, net of commissions on assumed business
0

 
5

Foreign exchange translation
(1
)
 
(25
)
Consolidation/deconsolidation of FG VIEs
0

 
(4
)
End of period, March 31 (1)
$
662

 
$
699

____________________
(1)
Excludes $16 million and $22 million as of March 31, 2016 and March 31, 2015, respectively, related to consolidated FG VIEs. Excludes $1 million related to non-financial guaranty line of business as of March 31, 2015.

Expected Collections of
Financial Guaranty Insurance Gross Premiums Receivable,
Net of Commissions on Assumed Business
(Undiscounted)
 
 
As of March 31, 2016
 
(in millions)
2016 (April 1 – June 30)
$
31

2016 (July 1 – September 30)
18

2016 (October 1 – December 31)
17

2017
66

2018
58

2019
55

2020
55

2021-2025
222

2026-2030
147

2031-2035
103

After 2035
82

Total(1)
$
854

 ____________________
(1)
Excludes expected cash collections on FG VIEs of $20 million.
Schedule of Net Earned Premiums
Scheduled Financial Guaranty Insurance Net Earned Premiums

 
As of March 31, 2016
 
(in millions)
2016 (April 1 – June 30)
$
92

2016 (July 1 – September 30)
89

2016 (October 1 – December 31)
85

2017
313

2018
290

2019
264

2020
245

2021-2025
955

2026-2030
610

2031-2035
363

After 2035
282

Net deferred premium revenue(1)
3,588

Future accretion
179

Total future net earned premiums
$
3,767

 ____________________
(1)
Excludes scheduled net earned premiums on consolidated FG VIEs of $105 million.
Selected Information for Policies Paid in Installments
Selected Information for Financial Guaranty Insurance
Policies Paid in Installments

 
As of
March 31, 2016
 
As of
December 31, 2015
 
(dollars in millions)
Premiums receivable, net of commission payable
$
662

 
$
693

Gross deferred premium revenue
1,156

 
1,240

Weighted-average risk-free rate used to discount premiums
3.1
%
 
3.1
%
Weighted-average period of premiums receivable (in years)
9.4

 
9.4
Loss and LAE Reserve and Salvage and Subrogation Recoverable Net of Reinsurance Insurance Contracts
Loss and LAE Reserve and Salvage and Subrogation Recoverable
Net of Reinsurance
Insurance Contracts 

 
As of March 31, 2016
 
As of December 31, 2015
 
Loss and
LAE
Reserve, net
 
Salvage and
Subrogation
Recoverable, net 
 
Net Reserve (Recoverable)
 
Loss and
LAE
Reserve, net
 
Salvage and
Subrogation
Recoverable, net 
 
Net Reserve (Recoverable)
 
(in millions)
Public Finance:
 
 
 
 
 
 
 
 
 
 
 
U.S. public finance
$
695

 
$
7

 
$
688

 
$
604

 
$
7

 
$
597

Non-U.S. public finance
27

 
—

 
27

 
25

 
—

 
25

Public Finance
722

 
7

 
715

 
629

 
7

 
622

Structured Finance:
 
 
 
 
 
 
 
 
 
 
 
U.S. RMBS:
 

 
 

 
 

 
 

 
 

 
 

First lien:
 

 
 

 
 

 
 

 
 

 
 

Prime first lien
2

 
—

 
2

 
2

 
—

 
2

Alt-A first lien
35

 
73

 
(38
)
 
46

 
—

 
46

Option ARM
10

 
51

 
(41
)
 
13

 
42

 
(29
)
Subprime
161

 
21

 
140

 
169

 
21

 
148

First lien
208

 
145

 
63

 
230

 
63

 
167

Second lien
34

 
49

 
(15
)
 
32

 
53

 
(21
)
Total U.S. RMBS
242

 
194

 
48

 
262

 
116

 
146

Triple-X life insurance transactions
85

 
—

 
85

 
82

 
—

 
82

Student loans
30

 
—

 
30

 
51

 
—

 
51

Other structured finance
32

 
—

 
32

 
48

 
—

 
48

Structured Finance
389

 
194

 
195

 
443

 
116

 
327

Subtotal
1,111

 
201

 
910

 
1,072

 
123

 
949

Other recoverables
—

 
3

 
(3
)
 
—

 
3

 
(3
)
Subtotal
1,111

 
204

 
907

 
1,072

 
126

 
946

Effect of consolidating FG VIEs
(71
)
 
—

 
(71
)
 
(74
)
 
0

 
(74
)
Total (1)
$
1,040

 
$
204

 
$
836

 
$
998

 
$
126

 
$
872

____________________
(1)
See “Components of Net Reserves (Salvage)” table for loss and LAE reserve and salvage and subrogation recoverable components.
Components of Net Reserves (Salvage) Insurance Contracts
Components of Net Reserves (Salvage)
 
 
As of
March 31, 2016
 
As of
December 31, 2015
 
(in millions)
Loss and LAE reserve
$
1,112

 
$
1,067

Reinsurance recoverable on unpaid losses
(72
)
 
(69
)
Loss and LAE reserve, net
1,040

 
998

Salvage and subrogation recoverable
(206
)
 
(126
)
Salvage and subrogation payable(1)
5

 
3

Other recoverables
(3
)
 
(3
)
Salvage and subrogation recoverable, net and other recoverable
(204
)
 
(126
)
Net reserves (salvage)
$
836

 
$
872

____________________
(1)
Recorded as a component of reinsurance balances payable.
Reconciliation of Net Expected Loss to be Paid and Net Expected Loss to be Expensed Financial Guaranty Insurance Contracts
Reconciliation of Net Expected Loss to be Paid and
Net Expected Loss to be Expensed
Financial Guaranty Insurance Contracts
 
 
As of
March 31, 2016
 
(in millions)
Net expected loss to be paid - financial guaranty insurance (1)
$
1,210

Contra-paid, net
14

Salvage and subrogation recoverable, net of reinsurance
201

Loss and LAE reserve - financial guaranty insurance contracts, net of reinsurance
(1,038
)
Other recoveries
2

Net expected loss to be expensed (present value) (2)
$
389

____________________
(1)
See "Net Expected Loss to be Paid (Recovered) by Accounting Model" table in Note 5, Expected Loss to be Paid.

(2)
Excludes $74 million as of March 31, 2016, related to consolidated FG VIEs.
Net Expected Loss to be Expensed Insurance Contracts
Net Expected Loss to be Expensed
Financial Guaranty Insurance Contracts 

 
As of
March 31, 2016
 
(in millions)
2016 (April 1 – June 30)
$
11

2016 (July 1 – September 30)
10

2016 (October 1 – December 31)
9

Subtotal 2016
30

2017
34

2018
33

2019
30

2020
27

2021-2025
100

2026-2030
70

2031-2035
45

After 2035
20

Net expected loss to be expensed
389

Future accretion
156

Total expected future loss and LAE
$
545

 
Loss and LAE Reported on the Consolidated Statements of Operations
Loss and LAE
Reported on the
Consolidated Statements of Operations
  
 
First Quarter
 
2016

2015
 
(in millions)
Public Finance:
 
 
 
U.S. public finance
$
97

 
$
13

Non-U.S. public finance
0

 
5

Public finance
97

 
18

Structured Finance:
 
 
 
U.S. RMBS:
 
 
 
First lien:
 
 
 
Prime first lien
0

 
0

Alt-A first lien
8

 
(2
)
Option ARM
(14
)
 
(1
)
Subprime
4

 
0

First lien
(2
)
 
(3
)
Second lien
13

 
10

Total U.S. RMBS
11

 
7

Triple-X life insurance transactions
3

 
6

Student loans
(14
)
 
(6
)
Other structured finance
0

 
(2
)
Structured finance
0

 
5

Loss and LAE on insurance contracts before FG VIE consolidation
97

 
23

Effect of consolidating FG VIEs
(7
)
 
(5
)
Loss and LAE
$
90

 
$
18
BIG Net Par Outstanding and Number of Risks
The following table provides information on financial guaranty insurance contracts categorized as BIG.
 
Financial Guaranty Insurance
BIG Transaction Loss Summary
As of March 31, 2016
 
 
BIG  Categories
 
BIG 1
 
BIG 2
 
BIG 3
 
Total
BIG, Net
 
Effect of
Consolidating
FG VIEs
 
Total
 
Gross
 
Ceded
 
Gross
 
Ceded
 
Gross
 
Ceded
 
 
 
 
(dollars in millions)
Number of risks(1)
202

 
(43
)
 
86

 
(14
)
 
129

 
(45
)
 
417

 
—

 
417

Remaining weighted-average contract period (in years)
10.1

 
7.4

 
13.1

 
10.4

 
7.2

 
5.4

 
10.6

 
—

 
10.6

Outstanding exposure:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Principal
$
7,084

 
$
(499
)
 
$
4,461

 
$
(446
)
 
$
3,145

 
$
(207
)
 
$
13,538

 
$
—

 
$
13,538

Interest
3,764

 
(214
)
 
3,058

 
(233
)
 
962

 
(44
)
 
7,293

 
—

 
7,293

Total(2)
$
10,848

 
$
(713
)
 
$
7,519

 
$
(679
)
 
$
4,107

 
$
(251
)
 
$
20,831

 
$
—

 
$
20,831

Expected cash outflows (inflows)
$
337

 
$
(28
)
 
$
1,418

 
$
(77
)
 
$
1,372

 
$
(58
)
 
$
2,964

 
$
(345
)
 
$
2,619

Potential recoveries
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Undiscounted R&W
97

 
(2
)
 
(42
)
 
1

 
(88
)
 
5

 
(29
)
 
6

 
(23
)
Other(3)
(590
)
 
16

 
(250
)
 
10

 
(631
)
 
25

 
(1,420
)
 
190

 
(1,230
)
Total potential recoveries
(493
)
 
14

 
(292
)
 
11

 
(719
)
 
30

 
(1,449
)
 
196

 
(1,253
)
Subtotal
(156
)
 
(14
)
 
1,126

 
(66
)
 
653

 
(28
)
 
1,515

 
(149
)
 
1,366

Discount
153

 
(3
)
 
(288
)
 
14

 
29

 
(94
)
 
(189
)
 
33

 
(156
)
Present value of expected cash flows
$
(3
)
 
$
(17
)
 
$
838

 
$
(52
)
 
$
682

 
$
(122
)
 
$
1,326

 
$
(116
)
 
$
1,210

Deferred premium revenue
$
280

 
$
(10
)
 
$
156

 
$
(7
)
 
$
380

 
$
(33
)
 
$
766

 
$
(96
)
 
$
670

Reserves (salvage)
$
(96
)
 
$
(12
)
 
$
717

 
$
(47
)
 
$
352

 
$
(8
)
 
$
906

 
$
(71
)
 
$
835

 
Financial Guaranty Insurance
BIG Transaction Loss Summary
As of December 31, 2015
 
 
BIG Categories
 
BIG 1
 
BIG 2
 
BIG 3
 
Total
BIG, Net
 
Effect of
Consolidating
FG VIEs
 
Total
 
Gross
 
Ceded
 
Gross
 
Ceded
 
Gross
 
Ceded
 
 
(dollars in millions)
Number of risks(1)
202

 
(46
)
 
85

 
(13
)
 
132

 
(44
)
 
419

 
—

 
419

Remaining weighted-average contract period (in years)
10.0

 
8.7

 
13.8

 
9.5

 
7.7

 
5.9

 
10.7

 
—

 
10.7

Outstanding exposure:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Principal
$
7,751

 
$
(732
)
 
$
3,895

 
$
(240
)
 
$
3,087

 
$
(187
)
 
$
13,574

 
$
—

 
$
13,574

Interest
4,109

 
(354
)
 
2,805

 
(110
)
 
1,011

 
(42
)
 
7,419

 
—

 
7,419

Total(2)
$
11,860

 
$
(1,086
)
 
$
6,700

 
$
(350
)
 
$
4,098

 
$
(229
)
 
$
20,993

 
$
—

 
$
20,993

Expected cash outflows (inflows)
$
386

 
$
(42
)
 
$
1,158

 
$
(60
)
 
$
1,464

 
$
(53
)
 
$
2,853

 
$
(343
)
 
$
2,510

Potential recoveries
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Undiscounted R&W
69

 
(2
)
 
(49
)
 
1

 
(85
)
 
5

 
(61
)
 
7

 
(54
)
Other(3)
(441
)
 
14

 
(118
)
 
7

 
(587
)
 
19

 
(1,106
)
 
175

 
(931
)
Total potential recoveries
(372
)
 
12

 
(167
)
 
8

 
(672
)
 
24

 
(1,167
)
 
182

 
(985
)
Subtotal
14

 
(30
)
 
991

 
(52
)
 
792

 
(29
)
 
1,686

 
(161
)
 
1,525

Discount
91

 
3

 
(286
)
 
12

 
(58
)
 
(89
)
 
(327
)
 
41

 
(286
)
Present value of expected cash flows
$
105

 
$
(27
)
 
$
705

 
$
(40
)
 
$
734

 
$
(118
)
 
$
1,359

 
$
(120
)
 
$
1,239

Deferred premium revenue
$
371

 
$
(37
)
 
$
150

 
$
(4
)
 
$
386

 
$
(32
)
 
$
834

 
$
(100
)
 
$
734

Reserves (salvage)
$
2

 
$
(19
)
 
$
591

 
$
(38
)
 
$
404

 
$
(9
)
 
$
931

 
$
(74
)
 
$
857

____________________
(1)
A risk represents the aggregate of the financial guaranty policies that share the same revenue source for purposes of making Debt Service payments. The ceded number of risks represents the number of risks for which the Company ceded a portion of its exposure.

(2)
Includes BIG amounts related to FG VIEs.

(3)
Includes excess spread.