Expected Loss to be Paid (Tables)

9 Months Ended

Sep. 30, 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 2.42% as of September 30, 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



	Third Quarter						Nine Months
	2016			2015			2016			2015
	(in millions)
Net expected loss to be paid, beginning of period	$	1,326		$	1,510		$	1,391		$	1,169
Net expected loss to be paid on CIFG portfolio as of July 1, 2016	22			—			22			—
Net expected loss to be paid on Radian Asset portfolio as of April 1, 2015	—			—			—			190
Economic loss development due to:
Accretion of discount	5			10			20			24
Changes in discount rates	(29		)	11			79			(29		)
Changes in timing and assumptions	(20		)	(24		)	(62		)	191
Total economic loss development	(44		)	(3		)	37			186
Paid losses	(214		)	(200		)	(360		)	(238		)
Net expected loss to be paid, end of period	$	1,090		$	1,307		$	1,090		$	1,307

Net Expected Loss to be Paid

After Net Expected Recoveries for Breaches of R&W

Roll Forward by Sector

Third Quarter 2016



	Net Expected Loss to be Paid (Recovered) as of June 30, 2016			Net Expected Loss to be Paid (Recovered) on CIFG as of July 1, 2016			Economic Loss Development			(Paid) Recovered Losses (1)			Net Expected Loss to be Paid (Recovered) as of September 30, 2016 (2)
	(in millions)
Public Finance:
U.S. public finance	$	963		$	40		$	9		$	(196	)	$	816
Non-U.S. public finance	37			2			(1		)	—			38
Public Finance	1,000			42			8			(196		)	854
Structured Finance:
U.S. RMBS:
First lien:
Prime first lien	3			—			0			0			3
Alt-A first lien	(96		)	0			3			5			(88		)
Option ARM	(56		)	—			(3		)	3			(56		)
Subprime	227			—			(17		)	(12		)	198
Total first lien	78			0			(17		)	(4		)	57
Second lien	114			(22		)	(10		)	9			91
Total U.S. RMBS	192			(22		)	(27		)	5			148
Triple-X life insurance transactions	100			—			(23		)	(23		)	54
Student loans	31			—			0			0			31
Other structured finance	3			2			(2		)	0			3
Structured Finance	326			(20		)	(52		)	(18		)	236
Total	$	1,326		$	22		$	(44	)	$	(214	)	$	1,090

Net Expected Loss to be Paid

After Net Expected Recoveries for Breaches of R&W

Roll Forward by Sector

Third Quarter 2015



	Net Expected Loss to be Paid (Recovered) as of June 30, 2015			Economic Loss Development			(Paid) Recovered Losses (1)			Net Expected Loss to be Paid (Recovered) as of September 30, 2015
	(in millions)
Public Finance:
U.S. public finance	$	613		$	92		$	(18	)	$	687
Non-U.S public finance	44			(1		)	—			43
Public Finance	657			91			(18		)	730
Structured Finance:
U.S. RMBS:
First lien:
Prime first lien	1			0			(1		)	0
Alt-A first lien	265			(111		)	(108		)	46
Option ARM	(18		)	(4		)	6			(16		)
Subprime	273			26			(20		)	279
Total first lien	521			(89		)	(123		)	309
Second lien	3			13			10			26
Total U.S. RMBS	524			(76		)	(113		)	335
Triple-X life insurance transactions	165			1			(68		)	98
Student loans	58			(2		)	—			56
Other structured finance	106			(17		)	(1		)	88
Structured Finance	853			(94		)	(182		)	577
Total	$	1,510		$	(3	)	$	(200	)	$	1,307

Net Expected Loss to be Paid

After Net Expected Recoveries for Breaches of R&W

Roll Forward by Sector

Nine Months 2016



	Net Expected Loss to be Paid (Recovered) as of December 31, 2015 (2)			Net Expected Loss to be Paid (Recovered) on CIFG as of July 1, 2016			Economic Loss Development			(Paid) Recovered Losses (1)			Net Expected Loss to be Paid (Recovered) as of September 30, 2016 (2)
	(in millions)
Public Finance:
U.S. public finance	$	771		$	40		$	218		$	(213	)	$	816
Non-U.S. public finance	38			2			(2		)	—			38
Public Finance	809			42			216			(213		)	854
Structured Finance:
U.S. RMBS:
First lien:
Prime first lien	(2		)	—			0			5			3
Alt-A first lien	127			0			(51		)	(164		)	(88		)
Option ARM	(28		)	—			(34		)	6			(56		)
Subprime	251			—			(42		)	(11		)	198
Total first lien	348			0			(127		)	(164		)	57
Second lien	61			(22		)	(12		)	64			91
Total U.S. RMBS	409			(22		)	(139		)	(100		)	148
Triple-X life insurance transactions	99			—			(21		)	(24		)	54
Student loans	54			—			(15		)	(8		)	31
Other structured finance	20			2			(4		)	(15		)	3
Structured Finance	582			(20		)	(179		)	(147		)	236
Total	$	1,391		$	22		$	37		$	(360	)	$	1,090

Net Expected Loss to be Paid

After Net Expected Recoveries for Breaches of R&W

Roll Forward by Sector

Nine Months 2015



	Net Expected Loss to be Paid (Recovered) as of December 31, 2014			Net Expected Loss to be Paid (Recovered) on Radian Asset portfolio as of April 1, 2015			Economic Loss Development			(Paid) Recovered Losses (1)			Net Expected Loss to be Paid (Recovered) as of September 30, 2015
	(in millions)
Public Finance:
U.S. public finance	$	303		$	81		$	327		$	(24	)	$	687
Non-U.S. public finance	45			4			(6		)	—			43
Public Finance	348			85			321			(24		)	730
Structured Finance:
U.S. RMBS:
First lien:
Prime first lien	4			—			(1		)	(3		)	0
Alt-A first lien	304			7			(132		)	(133		)	46
Option ARM	(16		)	0			(3		)	3			(16		)
Subprime	303			(4		)	19			(39		)	279
Total first lien	595			3			(117		)	(172		)	309
Second lien	(11		)	1			13			23			26
Total U.S. RMBS	584			4			(104		)	(149		)	335
Triple-X life insurance transactions	161			—			8			(71		)	98
Student loans	68			—			(7		)	(5		)	56
Other structured finance	8			101			(32		)	11			88
Structured Finance	821			105			(135		)	(214		)	577
Total	$	1,169		$	190		$	186		$	(238	)	$	1,307

____________________

(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 $3 million and $7 million in LAE for Third Quarter 2016 and 2015, respectively, and $12 million and $16 million in LAE for Nine Months 2016 and 2015, respectively.


(2)	Includes expected LAE to be paid of $12 million as of September 30, 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 Recoverable (Payable)(1)



	As of September 30, 2016			As of December 31, 2015
	(in millions)
U.S. RMBS:
First lien	$	(87	)	$	0
Second lien	50			79
Total	$	(37	)	$	79

____________________

(1)

The Company’s agreements with R&W providers generally provide that, as the Company makes claim payments, the R&W providers reimburse it for those claims; if the Company later receives reimbursement through the transaction (for example, from excess spread), the Company repays 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 paying in claims on transactions covered by R&W settlement agreements, 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 September 30, 2016



	Financial Guaranty Insurance			FG VIEs(1) and Other		Credit Derivatives(2)			Total
	(in millions)
Public Finance:
U.S. public finance	$	816		$	—	$	0		$	816
Non-U.S. public finance	38			—		—			38
Public Finance	854			—		0			854
Structured Finance:
U.S. RMBS:
First lien:
Prime first lien	3			—		—			3
Alt-A first lien	(110		)	20		2			(88		)
Option ARM	(52		)	—		(4		)	(56		)
Subprime	119			45		34			198
Total first lien	(40		)	65		32			57
Second lien	54			42		(5		)	91
Total U.S. RMBS	14			107		27			148
Triple-X life insurance transactions	43			—		11			54
Student loans	31			—		—			31
Other structured finance	35			1		(33		)	3
Structured Finance	123			108		5			236
Total	$	977		$	108	$	5		$	1,090

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

Third Quarter 2016



	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	(1		)	—			—			(1		)
Public Finance	8			—			—			8
Structured Finance:
U.S. RMBS:
First lien:
Prime first lien	0			—			—			0
Alt-A first lien	4			(1		)	0			3
Option ARM	(3		)	—			0			(3		)
Subprime	(17		)	0			0			(17		)
Total first lien	(16		)	(1		)	0			(17		)
Second lien	(1		)	(1		)	(8		)	(10		)
Total U.S. RMBS	(17		)	(2		)	(8		)	(27		)
Triple-X life insurance transactions	(23		)	—			0			(23		)
Student loans	0			—			—			0
Other structured finance	(3		)	(1		)	2			(2		)
Structured Finance	(43		)	(3		)	(6		)	(52		)
Total	$	(35	)	$	(3	)	$	(6	)	$	(44	)

Net Economic Loss Development (Benefit)

By Accounting Model

Third Quarter 2015



	Financial Guaranty Insurance			FG VIEs(1) and Other		Credit Derivatives(2)			Total
	(in millions)
Public Finance:
U.S. public finance	$	91		$	—	$	1		$	92
Non-U.S. public finance	(1		)	—		0			(1		)
Public Finance	90			—		1			91
Structured Finance:
U.S. RMBS:
First lien:
Prime first lien	0			—		0			0
Alt-A first lien	(44		)	0		(67		)	(111		)
Option ARM	(2		)	—		(2		)	(4		)
Subprime	16			7		3			26
Total first lien	(30		)	7		(66		)	(89		)
Second lien	11			2		0			13
Total U.S. RMBS	(19		)	9		(66		)	(76		)
Triple-X life insurance transactions	(1		)	—		2			1
Student loans	(2		)	—		—			(2		)
Other structured finance	(1		)	0		(16		)	(17		)
Structured Finance	(23		)	9		(80		)	(94		)
Total	$	67		$	9	$	(79	)	$	(3	)

Net Economic Loss Development (Benefit)

By Accounting Model

Nine Months 2016



	Financial Guaranty Insurance			FG VIEs(1) and Other			Credit Derivatives(2)			Total
	(in millions)
Public Finance:
U.S. public finance	$	218		$	—		$	—		$	218
Non-U.S. public finance	(2		)	—			—			(2		)
Public Finance	216			—			—			216
Structured Finance:
U.S. RMBS:
First lien:
Prime first lien	0			0			0			0
Alt-A first lien	(52		)	2			(1		)	(51		)
Option ARM	(31		)	0			(3		)	(34		)
Subprime	(31		)	(2		)	(9		)	(42		)
Total first lien	(114		)	0			(13		)	(127		)
Second lien	0			(4		)	(8		)	(12		)
Total U.S. RMBS	(114		)	(4		)	(21		)	(139		)
Triple-X life insurance transactions	(21		)	0			0			(21		)
Student loans	(15		)	—			—			(15		)
Other structured finance	0			(2		)	(2		)	(4		)
Structured Finance	(150		)	(6		)	(23		)	(179		)
Total	$	66		$	(6	)	$	(23	)	$	37

Net Economic Loss Development (Benefit)

By Accounting Model

Nine Months 2015



	Financial Guaranty Insurance			FG VIEs(1) and Other			Credit Derivatives(2)			Total
	(in millions)
Public Finance:
U.S. public finance	$	332		$	—		$	(5	)	$	327
Non-U.S. public finance	(6		)	—			0			(6		)
Public Finance	326			—			(5		)	321
Structured Finance:
U.S. RMBS:
First lien:
Prime first lien	0			—			(1		)	(1		)
Alt-A first lien	(54		)	(1		)	(77		)	(132		)
Option ARM	(5		)	—			2			(3		)
Subprime	12			10			(3		)	19
Total first lien	(47		)	9			(79		)	(117		)
Second lien	12			1			0			13
Total U.S. RMBS	(35		)	10			(79		)	(104		)
Triple-X life insurance transactions	4			—			4			8
Student loans	(7		)	—			—			(7		)
Other structured finance	(2		)	0			(30		)	(32		)
Structured Finance	(40		)	10			(105		)	(135		)
Total	$	286		$	10		$	(110	)	$	186

_________________

(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



	September 30, 2016	June 30, 2016	December 31, 2015
Current Loans Modified in the Previous 12 Months
Alt A and Prime	25%	25%	25%
Option ARM	25	25	25
Subprime	25	25	25
Current Loans Delinquent in the Previous 12 Months
Alt A and Prime	25	25	25
Option ARM	25	25	25
Subprime	25	25	25
30 – 59 Days Delinquent
Alt A and Prime	35	35	35
Option ARM	40	40	40
Subprime	45	45	45
60 – 89 Days Delinquent
Alt A and Prime	45	45	45
Option ARM	50	50	50
Subprime	50	50	55
90+ Days Delinquent
Alt A and Prime	55	55	55
Option ARM	60	60	60
Subprime	55	55	60
Bankruptcy
Alt A and Prime	45	45	45
Option ARM	50	50	50
Subprime	40	40	40
Foreclosure
Alt A and Prime	65	65	65
Option ARM	70	70	70
Subprime	65	65	70
Real Estate Owned
All	100	100	100

Key Assumptions in Base Case Expected Loss Estimates

First Lien RMBS(1)



	As of September 30, 2016					As of June 30, 2016					As of December 31, 2015
	Range				Weighted Average	Range				Weighted Average	Range				Weighted Average
Alt-A First Lien
Plateau CDR	0.1	%	-	20.8%	6.0%	0.9	%	-	27.0%	6.1%	1.7	%	–	26.4%	6.4%
Intermediate CDR	0.0	%	-	4.2%	1.2%	0.2	%	-	5.4%	1.2%	0.3	%	–	5.3%	1.3%
Period until intermediate CDR	48 months					48 months					48 months
Final CDR	0.0	%	-	1.0%	0.3%	0.0	%	-	1.3%	0.3%	0.1	%	–	1.3%	0.3%
Initial loss severity:
2005 and prior	60.0%					60.0%					60.0%
2006	80.0%					80.0%					70.0%
2007	70.0%					70.0%					65.0%
Initial conditional prepayment rate ("CPR")	1.8	%	-	26.6%	10.7%	3.5	%	-	29.3%	11.0%	2.7	%	–	32.5%	11.5%
Final CPR(2)	15%					15%					15%
Option ARM
Plateau CDR	3.4	%	-	9.1%	7.1%	3.2	%	-	10.1%	7.4%	3.5	%	–	10.3%	7.8%
Intermediate CDR	0.7	%	-	1.8%	1.4%	0.6	%	-	2.0%	1.5%	0.7	%	–	2.1%	1.6%
Period until intermediate CDR	48 months					48 months					48 months
Final CDR	0.2	%	-	0.5%	0.3%	0.2	%	-	0.5%	0.3%	0.2	%	–	0.5%	0.4%
Initial loss severity:
2005 and prior	60.0%					60.0%					60.0%
2006	70.0%					70.0%					70.0%
2007	75.0%					75.0%					65.0%
Initial CPR	1.7	%	-	14.4%	6.8%	2.0	%	-	13.2%	5.7%	1.5	%	–	10.9%	5.1%
Final CPR(2)	15%					15%					15%
Subprime
Plateau CDR	4.5	%	-	12.8%	8.2%	4.4	%	-	12.7%	8.5%	4.7	%	–	13.2%	9.5%
Intermediate CDR	0.9	%	-	2.6%	1.6%	0.9	%	-	2.5%	1.7%	0.9	%	–	2.6%	1.9%
Period until intermediate CDR	48 months					48 months					48 months
Final CDR	0.2	%	-	0.6%	0.4%	0.2	%	-	0.6%	0.4%	0.2	%	–	0.7%	0.4%
Initial loss severity:
2005 and prior	80.0%					80.0%					75.0%
2006	90.0%					90.0%					90.0%
2007	90.0%					90.0%					90.0%
Initial CPR	0.4	%	-	12.1%	5.2%	0.6	%	-	11.3%	4.9%	0.0	%	–	10.1%	3.6%
Final CPR(2)	15%					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

HELOCs (1)



	As of September 30, 2016					As of June 30, 2016					As of December 31, 2015
	Range				Weighted Average	Range				Weighted Average	Range				Weighted Average
Plateau CDR	5.1	%	–	20.6%	13.0%	2.5	%	–	26.3%	12.6%	4.9	%	–	23.5%	10.3%
Final CDR trended down to	0.5	%	–	3.2%	1.2%	0.5	%	–	3.2%	1.2%	0.5	%	–	3.2%	1.2%
Period until final CDR	34 months					34 months					34 months
Initial CPR	11.5	%	–	17.7%	12.9%	11.0	%	–	15.4%	11.1%	10.9%
Final CPR(2)	15.0	%	–	17.7%	15.3%	10.0	%	–	15.4%	13.3%	10.0	%	–	15.0%	13.3%
Loss severity	98.0%					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.