Expected Loss to be Paid (Tables)

6 Months Ended

Jun. 30, 2018

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 net expected loss to be paid for all contracts. The Company used risk-free rates for U.S. dollar denominated obligations that ranged from 0.0% to 3.03% with a weighted average of 2.85% as of June 30, 2018 and 0.00% to 2.78% with a weighted average of 2.38% as of December 31, 2017. Expected losses to be paid for transactions denominated in currencies other than the U.S. dollar represented approximately 2.9% and 3.7% of the total as of June 30, 2018 and December 31, 2017, respectively.

Net Expected Loss to be Paid

Roll Forward



	Second Quarter					Six Months
	2018			2017		2018			2017
	(in millions)
Net expected loss to be paid, beginning of period	$	1,298		$	1,244	$	1,303		$	1,198
Net expected loss to be paid on the SGI portfolio as of June 1, 2018 (see Note 2)	131			—		131			—
Net expected loss to be paid on the MBIA UK portfolio as of January 10, 2017	—			—		—			21
Economic loss development (benefit) due to:
Accretion of discount	9			8		17			16
Changes in discount rates	0			23		(6		)	34
Changes in timing and assumptions	10			16		(16		)	44
Total economic loss development (benefit)	19			47		(5		)	94
Net (paid) recovered losses	(16		)	6		3			(16		)
Net expected loss to be paid, end of period	$	1,432		$	1,297	$	1,432		$	1,297

Net Expected Loss to be Paid

Roll Forward by Sector

Second Quarter 2018



	Net Expected Loss to be Paid (Recovered) as of March 31, 2018		Net Expected Loss to be Paid on SGI Portfolio as of June 1, 2018		Economic Loss Development / (Benefit)			(Paid) Recovered Losses (1)			Net Expected Loss to be Paid (Recovered) as of June 30, 2018 (2)
	(in millions)
Public finance:
U.S. public finance	$	1,007	$	0	$	56		$	(22	)	$	1,041
Non-U.S. public finance	43		1		(3		)	0			41
Public finance	1,050		1		53			(22		)	1,082
Structured finance:
U.S. RMBS	219		130		(28		)	5			326
Other structured finance	29		—		(6		)	1			24
Structured finance	248		130		(34		)	6			350
Total	$	1,298	$	131	$	19		$	(16	)	$	1,432

Net Expected Loss to be Paid

Roll Forward by Sector

Second Quarter 2017



	Net Expected Loss to be Paid (Recovered) as of March 31, 2017		Economic Loss Development / (Benefit)			(Paid) Recovered Losses (1)			Net Expected Loss to be Paid (Recovered) as of June 30, 2017
	(in millions)
Public finance:
U.S. public finance	$	970	$	78		$	(4	)	$	1,044
Non-U.S. public finance	41		1			0			42
Public finance	1,011		79			(4		)	1,086
Structured finance:
U.S. RMBS	197		(29		)	14			182
Other structured finance	36		(3		)	(4		)	29
Structured finance	233		(32		)	10			211
Total	$	1,244	$	47		$	6		$	1,297

Net Expected Loss to be Paid

Roll Forward by Sector

Six Months 2018



	Net Expected Loss to be Paid (Recovered) as of December 31, 2017 (2)		Net Expected Loss to be Paid on SGI Portfolio as of June 1, 2018		Economic Loss Development / (Benefit)			(Paid) Recovered Losses (1)			Net Expected Loss to be Paid (Recovered) as of June 30, 2018 (2)
	(in millions)
Public finance:
U.S. public finance	$	1,157	$	0	$	17		$	(133	)	$	1,041
Non-U.S. public finance	46		1		(6		)	0			41
Public finance	1,203		1		11			(133		)	1,082
Structured finance:
U.S. RMBS	73		130		(12		)	135			326
Other structured finance	27		—		(4		)	1			24
Structured finance	100		130		(16		)	136			350
Total	$	1,303	$	131	$	(5	)	$	3		$	1,432

Net Expected Loss to be Paid

Roll Forward by Sector

Six Months 2017



	Net Expected Loss to be Paid (Recovered) as of December 31, 2016		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 June 30, 2017
	(in millions)
Public finance:
U.S. public finance	$	871	$	—	$	202		$	(29	)	$	1,044
Non-U.S. public finance	33		13		(4		)	0			42
Public finance	904		13		198			(29		)	1,086
Structured finance:
U.S. RMBS	206		—		(51		)	27			182
Other structured finance	88		8		(53		)	(14		)	29
Structured finance	294		8		(104		)	13			211
Total	$	1,198	$	21	$	94		$	(16	)	$	1,297

____________________

(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 $6 million and $7 million in loss adjustment expenses (LAE) for Second Quarter 2018 and 2017, respectively, and $11 million and $9 million in LAE for Six Months 2018 and 2017, respectively.


(2)	Includes expected LAE to be paid of $17 million as of June 30, 2018 and $23 million as of December 31, 2017.

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 June 30, 2018			As of December 31, 2017			Second Quarter 2018			Second Quarter 2017			Six Months 2018			Six Months 2017
	(in millions)
Financial guaranty insurance	$	1,350		$	1,226		$	23		$	55		$	(10	)	$	121
FG VIEs (1) and other	87			91			(6		)	0			(4		)	(4		)
Credit derivatives (2)	(5		)	(14		)	2			(8		)	9			(23		)
Total	$	1,432		$	1,303		$	19		$	47		$	(5	)	$	94

___________________

(1) See Note 9, Consolidated Variable Interest Entities.

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

The following table presents the net economic loss development (benefit).

Net Economic Loss Development (Benefit)



	Second Quarter						Six Months
	2018			2017			2018			2017
	(in millions)
First lien U.S. RMBS	$	(7	)	$	(14	)	$	17		$	(23	)
Second lien U.S. RMBS	(21		)	(15		)	(29		)	(28		)

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 June 30, 2018			As of December 31, 2017			Second Quarter 2018			Second Quarter 2017			Six Months 2018			Six Months 2017
	(in millions)
Financial guaranty insurance	$	1,350		$	1,226		$	23		$	55		$	(10	)	$	121
FG VIEs (1) and other	87			91			(6		)	0			(4		)	(4		)
Credit derivatives (2)	(5		)	(14		)	2			(8		)	9			(23		)
Total	$	1,432		$	1,303		$	19		$	47		$	(5	)	$	94

___________________

(1) See Note 9, Consolidated Variable Interest Entities.

(2) See 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



	As of June 30, 2018					As of March 31, 2018					As of December 31, 2017
	Range				Weighted Average	Range				Weighted Average	Range				Weighted Average
Alt-A First Lien
Plateau CDR	0.7	%	-	12.2%	4.7%	1.4	%	-	9.2%	4.7%	1.3	%	–	9.8%	5.2%
Final CDR	0.0	%	-	0.6%	0.2%	0.1	%	-	0.5%	0.2%	0.1	%	–	0.5%	0.3%
Initial loss severity:
2005 and prior	60%					60%					60%
2006	80%					80%					80%
2007+	70%					70%					70%
Option ARM
Plateau CDR	2.1	%	-	8.5%	5.9%	1.4	%	-	7.8%	5.8%	2.5	%	–	7.0%	5.9%
Final CDR	0.1	%	-	0.4%	0.3%	0.1	%	-	0.4%	0.3%	0.1	%	–	0.3%	0.3%
Initial loss severity:
2005 and prior	60%					60%					60%
2006	70%					70%					70%
2007+	75%					75%					75%
Subprime
Plateau CDR	3.2	%	-	18.4%	6.9%	4.2	%	-	11.8%	7.7%	3.5	%	–	13.1%	7.8%
Final CDR	0.2	%	-	0.9%	0.3%	0.2	%	-	0.6%	0.4%	0.2	%	–	0.7%	0.4%
Initial loss severity:
2005 and prior	80%					80%					80%
2006	85%					85%					90%
2007+	95%					95%					95%

First Lien Liquidation Rates



	June 30, 2018	March 31, 2018	December 31, 2017
Delinquent/Modified in the Previous 12 Months
Alt A and Prime	20%	20%	20%
Option ARM	20	20	20
Subprime	20	20	20
30 – 59 Days Delinquent
Alt A and Prime	30	30	30
Option ARM	35	35	35
Subprime	40	45	40
60 – 89 Days Delinquent
Alt A and Prime	35	40	40
Option ARM	45	45	50
Subprime	50	50	50
90+ Days Delinquent
Alt A and Prime	40	45	55
Option ARM	55	55	60
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	55	55	65
Option ARM	65	65	70
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



	As of June 30, 2018					As of March 31, 2018					As of December 31, 2017
	Range				Weighted Average	Range				Weighted Average	Range				Weighted Average
Plateau CDR	4.8	%	-	28.5%	11.1%	2.5	%	-	18.4%	10.6%	2.7	%	-	19.9%	11.4%
Final CDR trended down to	2.5	%	-	3.2%	2.5%	2.5	%	-	3.2%	2.5%	2.5	%	-	3.2%	2.5%
Liquidation rates:
Delinquent/Modified in the Previous 12 Months	20%					20%					20%
30 – 59 Days Delinquent	40					40					45
60 – 89 Days Delinquent	55					60					60
90+ Days Delinquent	75					75					75
Bankruptcy	55					55					55
Foreclosure	65					65					70
Real Estate Owned	100					100					100
Loss severity	98%					98%					98%