Expected Loss to be Paid (Tables)

9 Months Ended

Sep. 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 3.20% with a weighted average of 3.03% as of September 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 3.2% and 3.7% of the total as of September 30, 2018 and December 31, 2017, respectively.

Net Expected Loss to be Paid

Roll Forward



	Third Quarter						Nine Months
	2018			2017			2018			2017
	(in millions)
Net expected loss to be paid, beginning of period	$	1,432		$	1,297		$	1,303		$	1,198
Net expected loss to be paid on the SGI portfolio as of June 1, 2018 (see Note 2)	—			—			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	10			8			27			24
Changes in discount rates	(9		)	(6		)	(15		)	28
Changes in timing and assumptions	(1		)	202			(17		)	246
Total economic loss development (benefit)	0			204			(5		)	298
Net (paid) recovered losses	(241		)	(209		)	(238		)	(225		)
Net expected loss to be paid, end of period	$	1,191		$	1,292		$	1,191		$	1,292

Net Expected Loss to be Paid

Roll Forward by Sector

Third Quarter 2018



	Net Expected Loss to be Paid (Recovered) as of June 30, 2018		Economic Loss Development / (Benefit)			(Paid) Recovered Losses (1)			Net Expected Loss to be Paid (Recovered) as of September 30, 2018 (2)
	(in millions)
Public finance:
U.S. public finance	$	1,041	$	42		$	(251	)	$	832
Non-U.S. public finance	41		(3		)	—			38
Public finance	1,082		39			(251		)	870
Structured finance:
U.S. RMBS	326		(40		)	17			303
Other structured finance	24		1			(7		)	18
Structured finance	350		(39		)	10			321
Total	$	1,432	$	0		$	(241	)	$	1,191

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
	(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
Other structured finance	29		(6		)	0			23
Structured finance	211		(25		)	13			199
Total	$	1,297	$	204		$	(209	)	$	1,292

Net Expected Loss to be Paid

Roll Forward by Sector

Nine 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 September 30, 2018 (2)
	(in millions)
Public finance:
U.S. public finance	$	1,157	$	0	$	59		$	(384	)	$	832
Non-U.S. public finance	46		1		(9		)	0			38
Public finance	1,203		1		50			(384		)	870
Structured finance:
U.S. RMBS	73		130		(52		)	152			303
Other structured finance	27		—		(3		)	(6		)	18
Structured finance	100		130		(55		)	146			321
Total	$	1,303	$	131	$	(5	)	$	(238	)	$	1,191

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		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
	(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
Other structured finance	88		8		(59		)	(14		)	23
Structured finance	294		8		(129		)	26			199
Total	$	1,198	$	21	$	298		$	(225	)	$	1,292

____________________

(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 Third Quarter 2018 and 2017, respectively, and $17 million and $16 million in LAE for Nine Months 2018 and 2017, respectively.


(2)	Includes expected LAE to be paid of $15 million as of September 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 U.S. RMBS net economic loss development (benefit).

Net Economic Loss Development (Benefit)

U.S. RMBS



	Third Quarter						Nine Months
	2018			2017			2018			2017
	(in millions)
First lien U.S. RMBS	$	(13	)	$	1		$	4		$	(22	)
Second lien U.S. RMBS	(27		)	(20		)	(56		)	(48		)

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, 2018			As of December 31, 2017			Third Quarter 2018			Third Quarter 2017			Nine Months 2018			Nine Months 2017
	(in millions)
Financial guaranty insurance	$	1,112		$	1,226		$	1		$	207		$	(9	)	$	328
FG VIEs (1) and other	83			91			(3		)	(2		)	(7		)	(6		)
Credit derivatives (2)	(4		)	(14		)	2			(1		)	11			(24		)
Total	$	1,191		$	1,303		$	0		$	204		$	(5	)	$	298

___________________

(1) See Note 9, Variable Interest Entities.

(2) See 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, 2018			As of December 31, 2017			Third Quarter 2018			Third Quarter 2017			Nine Months 2018			Nine Months 2017
	(in millions)
Financial guaranty insurance	$	1,112		$	1,226		$	1		$	207		$	(9	)	$	328
FG VIEs (1) and other	83			91			(3		)	(2		)	(7		)	(6		)
Credit derivatives (2)	(4		)	(14		)	2			(1		)	11			(24		)
Total	$	1,191		$	1,303		$	0		$	204		$	(5	)	$	298

___________________

(1) See Note 9, 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 September 30, 2018					As of June 30, 2018					As of December 31, 2017
	Range				Weighted Average	Range				Weighted Average	Range				Weighted Average
Alt-A First Lien
Plateau CDR	0.9	%	-	11.2%	4.6%	0.7	%	-	12.2%	4.7%	1.3	%	-	9.8%	5.2%
Final CDR	0.0	%	-	0.6%	0.2%	0.0	%	-	0.6%	0.2%	0.1	%	-	0.5%	0.3%
Initial loss severity:
2005 and prior	60%					60%					60%
2006	70%					80%					80%
2007+	70%					70%					70%
Option ARM
Plateau CDR	2.1	%	-	8.7%	5.8%	2.1	%	-	8.5%	5.9%	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	60%					70%					70%
2007+	70%					75%					75%
Subprime
Plateau CDR	2.3	%	-	18.6%	6.7%	3.2	%	-	18.4%	6.9%	3.5	%	-	13.1%	7.8%
Final CDR	0.1	%	-	0.9%	0.3%	0.2	%	-	0.9%	0.3%	0.2	%	-	0.7%	0.4%
Initial loss severity:
2005 and prior	80%					80%					80%
2006	75%					85%					90%
2007+	95%					95%					95%

First Lien Liquidation Rates



	September 30, 2018	June 30, 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	40	40
60 – 89 Days Delinquent
Alt-A and Prime	35	35	40
Option ARM	45	45	50
Subprime	50	50	50
90+ Days Delinquent
Alt-A and Prime	40	40	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 September 30, 2018					As of June 30, 2018					As of December 31, 2017
	Range				Weighted Average	Range				Weighted Average	Range				Weighted Average
Plateau CDR	2.9	%	-	31.7%	11.5%	4.8	%	-	28.5%	11.1%	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					55					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%