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Financial Guaranty Insurance (Tables)
 9 Months Ended
Sep. 30, 2016
Insurance [Abstract]  
Net Earned Premiums
Net Earned Premiums
 
 
Third Quarter
 
Nine Months
 
2016
 
2015
 
2016
 
2015
 
(in millions)
Scheduled net earned premiums
$
101

 
$
104

 
$
285

 
$
318

Accelerations
 
 
 
 
 
 
 
Refundings
105

 
77

 
267

 
213

Terminations
21

 
28

 
65

 
29

Total Accelerations
126

 
105

 
332

 
242

Accretion of discount on net premiums receivable
4

 
4

 
11

 
13

Financial guaranty insurance net earned premiums
231

 
213

 
628

 
573

Other
—

 
0

 
0

 
1

 Net earned premiums (1)
$
231

 
$
213

 
$
628

 
$
574

 ___________________
(1)
Excludes $4 million and $6 million for Third Quarter 2016 and 2015, respectively, and $12 million and $16 million for Nine Months 2016 and 2015, respectively, related to consolidated FG VIEs.
Components of Unearned Premium Reserve
Components of Unearned Premium Reserve
 
 
As of September 30, 2016
 
As of December 31, 2015
 
Gross
 
Ceded
 
Net(1)
 
Gross
 
Ceded
 
Net(1)
 
(in millions)
Deferred premium revenue
3,710

 
217

 
3,493

 
4,008

 
238

 
3,770

Contra-paid (2)
(42
)
 
(4
)
 
(38
)
 
(12
)
 
(6
)
 
(6
)
Unearned premium reserve
$
3,668

 
$
213

 
$
3,455

 
$
3,996

 
$
232

 
$
3,764

 ____________________
(1)
Excludes $93 million and $110 million of deferred premium revenue, and $28 million and $30 million of contra-paid related to FG VIEs as of September 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
 
 
Nine Months
 
2016
 
2015
 
(in millions)
Beginning of period, December 31
$
693

 
$
729

Premiums receivable from acquisitions (see Note 2)
18

 
2

Gross written premiums on new business, net of commissions on assumed business
111

 
103

Gross premiums received, net of commissions on assumed business
(155
)
 
(140
)
Adjustments:
 
 
 
Changes in the expected term
(39
)
 
(11
)
Accretion of discount, net of commissions on assumed business
5

 
15

Foreign exchange translation
(25
)
 
(18
)
Consolidation/deconsolidation of FG VIEs
0

 
(4
)
End of period, September 30 (1)
$
608

 
$
676

____________________
(1)
Excludes $11 million and $23 million as of September 30, 2016 and September 30, 2015, respectively, related to consolidated FG VIEs.

Expected Collections of
Financial Guaranty Insurance Gross Premiums Receivable,
Net of Commissions on Assumed Business
(Undiscounted)
 
 
As of September 30, 2016
 
(in millions)
2016 (October 1 – December 31)
$
25

2017
70

2018
60

2019
54

2020
52

2021-2025
207

2026-2030
135

2031-2035
95

After 2035
75

Total(1)
$
773

 ____________________
(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 September 30, 2016
 
(in millions)
2016 (October 1 – December 31)
$
96

2017
344

2018
309

2019
274

2020
249

2021-2025
959

2026-2030
608

2031-2035
366

After 2035
288

Net deferred premium revenue(1)
3,493

Future accretion
154

Total future net earned premiums
$
3,647

 ____________________
(1)
Excludes scheduled net earned premiums on consolidated FG VIEs of $93 million.
Selected Information for Policies Paid in Installments
Selected Information for Financial Guaranty Insurance
Policies Paid in Installments

 
As of
September 30, 2016
 
As of
December 31, 2015
 
(dollars in millions)
Premiums receivable, net of commission payable
$
608

 
$
693

Gross deferred premium revenue
1,080

 
1,240

Weighted-average risk-free rate used to discount premiums
3.1
%
 
3.1
%
Weighted-average period of premiums receivable (in years)
9.1

 
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 September 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
$
674

 
$
117

 
$
557

 
$
604

 
$
7

 
$
597

Non-U.S. public finance
24

 
—

 
24

 
25

 
—

 
25

Public Finance
698

 
117

 
581

 
629

 
7

 
622

Structured Finance:
 
 
 
 
 
 
 
 
 
 
 
U.S. RMBS:
 

 
 

 
 

 
 

 
 

 
 

First lien:
 

 
 

 
 

 
 

 
 

 
 

Prime first lien
2

 
—

 
2

 
2

 
—

 
2

Alt-A first lien
38

 
174

 
(136
)
 
46

 
—

 
46

Option ARM
8

 
56

 
(48
)
 
13

 
42

 
(29
)
Subprime
147

 
24

 
123

 
169

 
21

 
148

First lien
195

 
254

 
(59
)
 
230

 
63

 
167

Second lien
84

 
61

 
23

 
32

 
53

 
(21
)
Total U.S. RMBS
279

 
315

 
(36
)
 
262

 
116

 
146

Triple-X life insurance transactions
36

 
—

 
36

 
82

 
—

 
82

Student loans
30

 
—

 
30

 
51

 
—

 
51

Other structured finance
27

 
—

 
27

 
48

 
—

 
48

Structured Finance
372

 
315

 
57

 
443

 
116

 
327

Subtotal
1,070

 
432

 
638

 
1,072

 
123

 
949

Other recoverables
—

 
5

 
(5
)
 
—

 
3

 
(3
)
Subtotal
1,070

 
437

 
633

 
1,072

 
126

 
946

Effect of consolidating FG VIEs
(66
)
 
—

 
(66
)
 
(74
)
 
0

 
(74
)
Total (1)
$
1,004

 
$
437

 
$
567

 
$
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
September 30, 2016
 
As of
December 31, 2015
 
(in millions)
Loss and LAE reserve
$
1,091

 
$
1,067

Reinsurance recoverable on unpaid losses
(87
)
 
(69
)
Loss and LAE reserve, net
1,004

 
998

Salvage and subrogation recoverable
(455
)
 
(126
)
Salvage and subrogation payable(1)
23

 
3

Other recoverables
(5
)
 
(3
)
Salvage and subrogation recoverable, net and other recoverable
(437
)
 
(126
)
Net reserves (salvage)
$
567

 
$
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
September 30, 2016
 
(in millions)
Net expected loss to be paid - financial guaranty insurance (1)
$
977

Contra-paid, net
38

Salvage and subrogation recoverable, net of reinsurance
432

Loss and LAE reserve - financial guaranty insurance contracts, net of reinsurance
(1,003
)
Other recoveries
5

Net expected loss to be expensed (present value) (2)
$
449

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

(2)
Excludes $70 million as of September 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
September 30, 2016
 
(in millions)
2016 (October 1 – December 31)
$
8

Subtotal 2016
8

2017
37

2018
37

2019
33

2020
31

2021-2025
129

2026-2030
95

2031-2035
56

After 2035
23

Net expected loss to be expensed
449

Future accretion
242

Total expected future loss and LAE
$
691

 
Loss and LAE Reported on the Consolidated Statements of Operations
Loss and LAE
Reported on the
Consolidated Statements of Operations
  
 
Third Quarter
 
Nine Months
 
2016
 
2015
 
2016

2015
 
(in millions)
Public Finance:
 
 
 
 
 
 
 
U.S. public finance
$
20

 
$
89

 
$
233

 
$
298

Non-U.S. public finance
—

 
(2
)
 
(1
)
 
4

Public finance
20

 
87

 
232

 
302

Structured Finance:
 
 
 
 
 
 
 
U.S. RMBS:
 
 
 
 
 
 
 
First lien:
 
 
 
 
 
 
 
Prime first lien
1

 
0

 
0

 
(1
)
Alt-A first lien
(1
)
 
(15
)
 
10

 
(26
)
Option ARM
1

 
(4
)
 
(20
)
 
(5
)
Subprime
(6
)
 
31

 
(13
)
 
32

First lien
(5
)
 
12

 
(23
)
 
0

Second lien
3

 
19

 
20

 
29

Total U.S. RMBS
(2
)
 
31

 
(3
)
 
29

Triple-X life insurance transactions
(24
)
 
7

 
(22
)
 
14

Student loans
0

 
(2
)
 
(14
)
 
(7
)
Other structured finance
(3
)
 
(1
)
 
(6
)
 
(3
)
Structured finance
(29
)
 
35

 
(45
)
 
33

Loss and LAE on insurance contracts before FG VIE consolidation
(9
)
 
122

 
187

 
335

Effect of consolidating FG VIEs
0

 
(10
)
 
(4
)
 
(17
)
Loss and LAE
$
(9
)
 
$
112

 
$
183

 
$
318
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 September 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)
182

 
(39
)
 
76

 
(10
)
 
144

 
(48
)
 
402

 
—

 
402

Remaining weighted-average contract period (in years)
9.1

 
7.4

 
13.5

 
10.8

 
8.1

 
6.0

 
10.2

 
—

 
10.2

Outstanding exposure:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Principal
$
4,813

 
$
(343
)
 
$
4,277

 
$
(416
)
 
$
4,834

 
$
(331
)
 
$
12,834

 
$
—

 
$
12,834

Interest
2,326

 
(154
)
 
2,973

 
(224
)
 
1,929

 
(91
)
 
6,759

 
—

 
6,759

Total(2)
$
7,139

 
$
(497
)
 
$
7,250

 
$
(640
)
 
$
6,763

 
$
(422
)
 
$
19,593

 
$
—

 
$
19,593

Expected cash outflows (inflows)
$
210

 
$
(21
)
 
$
1,302

 
$
(86
)
 
$
1,286

 
$
(60
)
 
$
2,631

 
$
(326
)
 
$
2,305

Potential recoveries
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Undiscounted R&W
138

 
(3
)
 
(2
)
 
—

 
(52
)
 
1

 
82

 
—

 
82

Other(3)
(668
)
 
29

 
(125
)
 
3

 
(648
)
 
41

 
(1,368
)
 
200

 
(1,168
)
Total potential recoveries
(530
)
 
26

 
(127
)
 
3

 
(700
)
 
42

 
(1,286
)
 
200

 
(1,086
)
Subtotal
(320
)
 
5

 
1,175

 
(83
)
 
586

 
(18
)
 
1,345

 
(126
)
 
1,219

Discount
54

 
(3
)
 
(249
)
 
14

 
19

 
(96
)
 
(261
)
 
19

 
(242
)
Present value of expected cash flows
$
(266
)
 
$
2

 
$
926

 
$
(69
)
 
$
605

 
$
(114
)
 
$
1,084

 
$
(107
)
 
$
977

Deferred premium revenue
$
172

 
$
(5
)
 
$
256

 
$
(6
)
 
$
496

 
$
(32
)
 
$
881

 
$
(90
)
 
$
791

Reserves (salvage)
$
(325
)
 
$
5

 
$
749

 
$
(64
)
 
$
272

 
$
(5
)
 
$
632

 
$
(66
)
 
$
566


 
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)
(372
)
 
12

 
(167
)
 
8

 
(672
)
 
24

 
(1,167
)
 
182

 
(985
)
Total potential recoveries
(303
)
 
10

 
(216
)
 
9

 
(757
)
 
29

 
(1,228
)
 
189

 
(1,039
)
Subtotal
83

 
(32
)
 
942

 
(51
)
 
707

 
(24
)
 
1,625

 
(154
)
 
1,471

Discount
22

 
5

 
(237
)
 
11

 
27

 
(94
)
 
(266
)
 
34

 
(232
)
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.