Expected Loss to be Paid (Tables)

9 Months Ended

Sep. 30, 2017

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 expected recoveries/ (payables) for breaches of representations and warranties (R&W) and other expected recoveries. The Company used risk-free rates for U.S. dollar denominated obligations that ranged from 0.0% to 2.94% with a weighted average of 2.27% as of September 30, 2017 and 0.0% to 3.23% with a weighted average of 2.73% as of December 31, 2016.

Net Expected Loss to be Paid

Roll Forward



	Third Quarter						Nine Months
	2017			2016			2017			2016
	(in millions)
Net expected loss to be paid, beginning of period	$	1,297		$	1,326		$	1,198		$	1,391
Net expected loss to be paid on the MBIA UK portfolio as of January 10, 2017	—			—			21			—
Net expected loss to be paid on the CIFG portfolio as of July 1, 2016	—			22			—			22
Economic loss development (benefit) due to:
Accretion of discount	8			5			24			20
Changes in discount rates	(6		)	(29		)	28			79
Changes in timing and assumptions	202			(20		)	246			(62		)
Total economic loss development (benefit)	204			(44		)	298			37
Net (paid) recovered losses	(209		)	(214		)	(225		)	(360		)
Net expected loss to be paid, end of period	$	1,292		$	1,090		$	1,292		$	1,090

Net Expected Loss to be Paid

Roll Forward by Sector

Third Quarter 2017



	Net Expected Loss to be Paid (Recovered) as of June 30, 2017			Economic Loss Development / (Benefit)			(Paid) Recovered Losses (1)			Net Expected Loss to be Paid (Recovered) as of September 30, 2017 (2)
	(in millions)
Public finance:
U.S. public finance	$	1,044		$	229		$	(227	)	$	1,046
Non-U.S. public finance	42			0			5			47
Public finance	1,086			229			(222		)	1,093
Structured finance:
U.S. RMBS	182			(19		)	13			176
Triple-X life insurance transactions	(4		)	(1		)	(2		)	(7		)
Other structured finance	33			(5		)	2			30
Structured finance	211			(25		)	13			199
Total	$	1,297		$	204		$	(209	)	$	1,292

Net Expected Loss to be Paid

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 / (Benefit)			(Paid) Recovered Losses (1)			Net Expected Loss to be Paid (Recovered) as of September 30, 2016
	(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	192		(22		)	(27		)	5			148
Triple-X life insurance transactions	100		—			(23		)	(23		)	54
Other structured finance	34		2			(2		)	0			34
Structured finance	326		(20		)	(52		)	(18		)	236
Total	$	1,326	$	22		$	(44	)	$	(214	)	$	1,090

Net Expected Loss to be Paid

Roll Forward by Sector

Nine Months 2017



	Net Expected Loss to be Paid (Recovered) as of December 31, 2016 (2)		Net Expected Loss to be Paid on MBIA UK as of January 10, 2017		Economic Loss Development / (Benefit)			(Paid) Recovered Losses (1)			Net Expected Loss to be Paid (Recovered) as of September 30, 2017 (2)
	(in millions)
Public finance:
U.S. public finance	$	871	$	—	$	431		$	(256	)	$	1,046
Non-U.S. public finance	33		13		(4		)	5			47
Public finance	904		13		427			(251		)	1,093
Structured finance:
U.S. RMBS	206		—		(70		)	40			176
Triple-X life insurance transactions	54		—		(56		)	(5		)	(7		)
Other structured finance	34		8		(3		)	(9		)	30
Structured finance	294		8		(129		)	26			199
Total	$	1,198	$	21	$	298		$	(225	)	$	1,292

Net Expected Loss to be Paid

Roll Forward by Sector

Nine Months 2016



	Net Expected Loss to be Paid (Recovered) as of December 31, 2015		Net Expected Loss to be Paid (Recovered) on CIFG as of July 1, 2016			Economic Loss Development / (Benefit)			(Paid) Recovered Losses (1)			Net Expected Loss to be Paid (Recovered) as of September 30, 2016
	(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	409		(22		)	(139		)	(100		)	148
Triple-X life insurance transactions	99		—			(21		)	(24		)	54
Other structured finance	74		2			(19		)	(23		)	34
Structured finance	582		(20		)	(179		)	(147		)	236
Total	$	1,391	$	22		$	37		$	(360	)	$	1,090

____________________

(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 $7 million and $3 million in LAE for Third Quarter 2017 and 2016, respectively and $16 million and $12 million in LAE for Nine Months 2017 and 2016, respectively.


(2)	Includes expected LAE to be paid of $23 million as of September 30, 2017 and $12 million as of December 31, 2016.

Schedule Of Net Expected Losses To Be Paid (Recovered) And Net Economic Development (Benefit) Loss

The following table presents the present value of net expected loss to be paid and the net economic loss development for all contracts by accounting model.

Net Expected Loss to be Paid (Recovered) and

Net Economic Loss Development (Benefit)

By Accounting Model



	Net Expected Loss to be Paid (Recovered)					Net Economic Loss Development (Benefit)
	As of September 30, 2017			As of December 31, 2016		Third Quarter 2017			Third Quarter 2016			Nine Months 2017			Nine Months 2016
	(in millions)
Financial guaranty insurance	$	1,205		$	1,083	$	207		$	(35	)	$	328		$	66
FG VIEs (1) and other	93			105		(2		)	(3		)	(6		)	(6		)
Credit derivatives (2)	(6		)	10		(1		)	(6		)	(24		)	(23		)
Total	$	1,292		$	1,198	$	204		$	(44	)	$	298		$	37

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(1) Refer to Note 9, Consolidated Variable Interest Entities.

(2) Refer to Note 8, Contracts Accounted for as Credit Derivatives.

Net Expected Loss to be Paid By Accounting Model

The following table presents the present value of net expected loss to be paid and the net economic loss development for all contracts by accounting model.

Net Expected Loss to be Paid (Recovered) and

Net Economic Loss Development (Benefit)

By Accounting Model



	Net Expected Loss to be Paid (Recovered)					Net Economic Loss Development (Benefit)
	As of September 30, 2017			As of December 31, 2016		Third Quarter 2017			Third Quarter 2016			Nine Months 2017			Nine Months 2016
	(in millions)
Financial guaranty insurance	$	1,205		$	1,083	$	207		$	(35	)	$	328		$	66
FG VIEs (1) and other	93			105		(2		)	(3		)	(6		)	(6		)
Credit derivatives (2)	(6		)	10		(1		)	(6		)	(24		)	(23		)
Total	$	1,292		$	1,198	$	204		$	(44	)	$	298		$	37

___________________

(1) Refer to Note 9, Consolidated Variable Interest Entities.

(2) Refer to Note 8, 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 September 30, 2017					As of June 30, 2017						As of December 31, 2016
	Range				Weighted Average	Range				Weighted Average		Range				Weighted Average
Alt A and Prime
Plateau CDR	1.0	%	-	11.0%	5.1%	1.1	%	-	10.3%	5.1	%	1.0	%	–	13.5%	5.7%
Final CDR	0.0	%	-	0.5%	0.3%	0.1	%	-	0.5%	0.3	%	0.0	%	–	0.7%	0.3%
Initial loss severity:
2005 and prior	60%					60%						60%
2006	80%					80%						80%
2007+	70%					70%						70%
Option ARM
Plateau CDR	2.4	%	-	6.6%	5.3%	3.7	%	-	6.7%	5.4	%	3.2	%	–	7.0%	5.6%
Final CDR	0.1	%	-	0.3%	0.3%	0.2	%	-	0.3%	0.3	%	0.2	%	–	0.3%	0.3%
Initial loss severity:
2005 and prior	60%					60%						60%
2006	70%					70%						70%
2007+	75%					75%						75%
Subprime
Plateau CDR	3.6	%	-	13.1%	7.9%	3.8	%	-	13.1%	7.8	%	2.8	%	–	14.1%	8.1%
Final CDR	0.2	%	-	0.7%	0.4%	0.2	%	-	0.7%	0.4	%	0.1	%	–	0.7%	0.4%
Initial loss severity:
2005 and prior	80%					80%						80%
2006	90%					90%						90%
2007+	95%					95%						90%

____________________

(1) Represents variables for the base case.

First Lien Liquidation Rates



	September 30, 2017	June 30, 2017	December 31, 2016
Delinquent/Modified in the Previous 12 Months
Alt A and Prime	20%	20%	25%
Option ARM	20	20	25
Subprime	20	20	25
30 – 59 Days Delinquent
Alt A and Prime	30	30	35
Option ARM	35	35	35
Subprime	40	40	40
60 – 89 Days Delinquent
Alt A and Prime	40	40	45
Option ARM	45	45	50
Subprime	50	45	50
90+ Days Delinquent
Alt A and Prime	50	50	55
Option ARM	55	55	55
Subprime	55	55	55
Bankruptcy
Alt A and Prime	45	45	45
Option ARM	50	50	50
Subprime	40	40	40
Foreclosure
Alt A and Prime	65	60	65
Option ARM	65	65	65
Subprime	65	65	65
Real Estate Owned
All	100	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 September 30, 2017					As of June 30, 2017						As of December 31, 2016
	Range				Weighted Average	Range				Weighted Average		Range				Weighted Average
Plateau CDR	5.2	%	-	22.0%	11.3%	3.2	%	-	22.6%	13.3	%	3.5	%	-	24.8%	13.6%
Final CDR trended down to	2.5	%	-	3.2%	2.5%	0.5	%	-	3.2%	1.3	%	0.5	%	-	3.2%	1.3%
Liquidation rates:
Delinquent/Modified in the Previous 12 Months	20%					20%						25%
30 – 59 Days Delinquent	45					45						50
60 – 89 Days Delinquent	60					65						65
90+ Days Delinquent	75					80						80
Bankruptcy	55					55						55
Foreclosure	70					75						75
Real Estate Owned	100					100						100
Loss severity	98%					98%						98%

____________________


(1)	Represents variables for the base case.