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Financial Guaranty Insurance (Tables)
 6 Months Ended
Jun. 30, 2016
Insurance [Abstract]  
Net Earned Premiums
Net Earned Premiums
 
 
Second Quarter
 
Six Months
 
2016
 
2015
 
2016
 
2015
 
(in millions)
Scheduled net earned premiums
$
93

 
$
118

 
$
184

 
$
214

Acceleration of net earned premiums (1)
117

 
96

 
206

 
137

Accretion of discount on net premiums receivable
4

 
5

 
7

 
9

Financial guaranty insurance net earned premiums
214

 
219

 
397

 
360

Other
—

 
0

 
0

 
1

 Net earned premiums (2)
$
214

 
$
219

 
$
397

 
$
361

 ___________________
(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 $3 million and $5 million for Second Quarter 2016 and 2015, respectively, and $8 million and $10 million for Six Months 2016 and 2015, respectively, related to consolidated FG VIEs.
Components of Unearned Premium Reserve
Components of Unearned Premium Reserve
 
 
As of June 30, 2016
 
As of December 31, 2015
 
Gross
 
Ceded
 
Net(1)
 
Gross
 
Ceded
 
Net(1)
 
(in millions)
Deferred premium revenue
3,641

 
230

 
3,411

 
4,008

 
238

 
3,770

Contra-paid (2)
(24
)
 
(2
)
 
(22
)
 
(12
)
 
(6
)
 
(6
)
Unearned premium reserve
$
3,617

 
$
228

 
$
3,389

 
$
3,996

 
$
232

 
$
3,764

 ____________________
(1)
Excludes $98 million and $110 million of deferred premium revenue, and $30 million and $30 million of contra-paid related to FG VIEs as of June 30, 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
 
 
Six Months
 
2016
 
2015
 
(in millions)
Beginning of period, December 31
$
693

 
$
729

Premiums receivable acquired in Radian Asset Acquisition on April 1, 2015
—

 
2

Gross written premiums, net of commissions on assumed business
83

 
61

Gross premiums received, net of commissions on assumed business
(107
)
 
(79
)
Adjustments:
 
 
 
Changes in the expected term
(27
)
 
(9
)
Accretion of discount, net of commissions on assumed business
3

 
10

Foreign exchange translation
(22
)
 
(8
)
Consolidation/deconsolidation of FG VIEs
0

 
(4
)
End of period, June 30 (1)
$
623

 
$
702

____________________
(1)
Excludes $11 million and $23 million as of June 30, 2016 and June 30, 2015, respectively, related to consolidated FG VIEs. Excludes $1 million related to non-financial guaranty line of business as of June 30, 2015.

Expected Collections of
Financial Guaranty Insurance Gross Premiums Receivable,
Net of Commissions on Assumed Business
(Undiscounted)
 
 
As of June 30, 2016
 
(in millions)
2016 (July 1 – September 30)
$
21

2016 (October 1 – December 31)
21

2017
66

2018
59

2019
54

2020
53

2021-2025
212

2026-2030
139

2031-2035
97

After 2035
79

Total(1)
$
801

 ____________________
(1)
Excludes expected cash collections on FG VIEs of $14 million.
Schedule of Net Earned Premiums
Scheduled Financial Guaranty Insurance Net Earned Premiums

 
As of June 30, 2016
 
(in millions)
2016 (July 1 – September 30)
$
89

2016 (October 1 – December 31)
85

2017
313

2018
287

2019
258

2020
236

2021-2025
922

2026-2030
588

2031-2035
350

After 2035
283

Net deferred premium revenue(1)
3,411

Future accretion
166

Total future net earned premiums
$
3,577

 ____________________
(1)
Excludes scheduled net earned premiums on consolidated FG VIEs of $98 million.
Selected Information for Policies Paid in Installments
Selected Information for Financial Guaranty Insurance
Policies Paid in Installments

 
As of
June 30, 2016
 
As of
December 31, 2015
 
(dollars in millions)
Premiums receivable, net of commission payable
$
623

 
$
693

Gross deferred premium revenue
1,086

 
1,240

Weighted-average risk-free rate used to discount premiums
3.1
%
 
3.1
%
Weighted-average period of premiums receivable (in years)
9.2

 
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 June 30, 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
$
807

 
$
14

 
$
793

 
$
604

 
$
7

 
$
597

Non-U.S. public finance
24

 
—

 
24

 
25

 
—

 
25

Public Finance
831

 
14

 
817

 
629

 
7

 
622

Structured Finance:
 
 
 
 
 
 
 
 
 
 
 
U.S. RMBS:
 

 
 

 
 

 
 

 
 

 
 

First lien:
 

 
 

 
 

 
 

 
 

 
 

Prime first lien
3

 
—

 
3

 
2

 
—

 
2

Alt-A first lien
40

 
184

 
(144
)
 
46

 
—

 
46

Option ARM
9

 
58

 
(49
)
 
13

 
42

 
(29
)
Subprime
147

 
14

 
133

 
169

 
21

 
148

First lien
199

 
256

 
(57
)
 
230

 
63

 
167

Second lien
84

 
45

 
39

 
32

 
53

 
(21
)
Total U.S. RMBS
283

 
301

 
(18
)
 
262

 
116

 
146

Triple-X life insurance transactions
83

 
—

 
83

 
82

 
—

 
82

Student loans
30

 
—

 
30

 
51

 
—

 
51

Other structured finance
30

 
1

 
29

 
48

 
—

 
48

Structured Finance
426

 
302

 
124

 
443

 
116

 
327

Subtotal
1,257

 
316

 
941

 
1,072

 
123

 
949

Other recoverables
—

 
3

 
(3
)
 
—

 
3

 
(3
)
Subtotal
1,257

 
319

 
938

 
1,072

 
126

 
946

Effect of consolidating FG VIEs
(71
)
 
—

 
(71
)
 
(74
)
 
0

 
(74
)
Total (1)
$
1,186

 
$
319

 
$
867

 
$
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
June 30, 2016
 
As of
December 31, 2015
 
(in millions)
Loss and LAE reserve
$
1,268

 
$
1,067

Reinsurance recoverable on unpaid losses
(82
)
 
(69
)
Loss and LAE reserve, net
1,186

 
998

Salvage and subrogation recoverable
(323
)
 
(126
)
Salvage and subrogation payable(1)
7

 
3

Other recoverables
(3
)
 
(3
)
Salvage and subrogation recoverable, net and other recoverable
(319
)
 
(126
)
Net reserves (salvage)
$
867

 
$
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
June 30, 2016
 
(in millions)
Net expected loss to be paid - financial guaranty insurance (1)
$
1,208

Contra-paid, net
22

Salvage and subrogation recoverable, net of reinsurance
316

Loss and LAE reserve - financial guaranty insurance contracts, net of reinsurance
(1,185
)
Other recoveries
3

Net expected loss to be expensed (present value) (2)
$
364

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

(2)
Excludes $72 million as of June 30, 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
June 30, 2016
 
(in millions)
2016 (July 1 – September 30)
$
9

2016 (October 1 – December 31)
8

Subtotal 2016
17

2017
30

2018
28

2019
29

2020
27

2021-2025
103

2026-2030
71

2031-2035
40

After 2035
19

Net expected loss to be expensed
364

Future accretion
199

Total expected future loss and LAE
$
563

 
Loss and LAE Reported on the Consolidated Statements of Operations
Loss and LAE
Reported on the
Consolidated Statements of Operations
  
 
Second Quarter
 
Six Months
 
2016
 
2015
 
2016

2015
 
(in millions)
Public Finance:
 
 
 
 
 
 
 
U.S. public finance
$
116

 
$
196

 
$
213

 
$
209

Non-U.S. public finance
(1
)
 
1

 
(1
)
 
6

Public finance
115

 
197

 
212

 
215

Structured Finance:
 
 
 
 
 
 
 
U.S. RMBS:
 
 
 
 
 
 
 
First lien:
 
 
 
 
 
 
 
Prime first lien
(1
)
 
(1
)
 
(1
)
 
(1
)
Alt-A first lien
3

 
(9
)
 
11

 
(11
)
Option ARM
(7
)
 
0

 
(21
)
 
(1
)
Subprime
(11
)
 
1

 
(7
)
 
1

First lien
(16
)
 
(9
)
 
(18
)
 
(12
)
Second lien
4

 
0

 
17

 
10

Total U.S. RMBS
(12
)
 
(9
)
 
(1
)
 
(2
)
Triple-X life insurance transactions
(1
)
 
1

 
2

 
7

Student loans
0

 
1

 
(14
)
 
(5
)
Other structured finance
(3
)
 
0

 
(3
)
 
(2
)
Structured finance
(16
)
 
(7
)
 
(16
)
 
(2
)
Loss and LAE on insurance contracts before FG VIE consolidation
99

 
190

 
196

 
213

Effect of consolidating FG VIEs
3

 
(2
)
 
(4
)
 
(7
)
Loss and LAE
$
102

 
$
188

 
$
192

 
$
206
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 June 30, 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)
198

 
(42
)
 
76

 
(12
)
 
131

 
(46
)
 
405

 
—

 
405

Remaining weighted-average contract period (in years)
9.8

 
7.4

 
12.7

 
10.0

 
6.6

 
5.1

 
10.1

 
—

 
10.1

Outstanding exposure:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Principal
$
7,012

 
$
(466
)
 
$
4,571

 
$
(452
)
 
$
3,276

 
$
(237
)
 
$
13,704

 
$
—

 
$
13,704

Interest
3,618

 
(200
)
 
2,991

 
(228
)
 
937

 
(50
)
 
7,068

 
—

 
7,068

Total(2)
$
10,630

 
$
(666
)
 
$
7,562

 
$
(680
)
 
$
4,213

 
$
(287
)
 
$
20,772

 
$
—

 
$
20,772

Expected cash outflows (inflows)
$
331

 
$
(27
)
 
$
1,466

 
$
(82
)
 
$
1,228

 
$
(57
)
 
$
2,859

 
$
(330
)
 
$
2,529

Potential recoveries
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Undiscounted R&W
122

 
(3
)
 
(2
)
 
—

 
(33
)
 
1

 
85

 
—

 
85

Other(3)
(667
)
 
16

 
(298
)
 
11

 
(499
)
 
30

 
(1,407
)
 
200

 
(1,207
)
Total potential recoveries
(545
)
 
13

 
(300
)
 
11

 
(532
)
 
31

 
(1,322
)
 
200

 
(1,122
)
Subtotal
(214
)
 
(14
)
 
1,166

 
(71
)
 
696

 
(26
)
 
1,537

 
(130
)
 
1,407

Discount
133

 
(3
)
 
(232
)
 
12

 
(29
)
 
(97
)
 
(216
)
 
17

 
(199
)
Present value of expected cash flows
$
(81
)
 
$
(17
)
 
$
934

 
$
(59
)
 
$
667

 
$
(123
)
 
$
1,321

 
$
(113
)
 
$
1,208

Deferred premium revenue
$
256

 
$
(8
)
 
$
152

 
$
(7
)
 
$
347

 
$
(32
)
 
$
708

 
$
(94
)
 
$
614

Reserves (salvage)
$
(177
)
 
$
(11
)
 
$
811

 
$
(53
)
 
$
378

 
$
(11
)
 
$
937

 
$
(71
)
 
$
866


 
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.