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Contracts Accounted for as Insurance (Tables)
 9 Months Ended
Sep. 30, 2019
Insurance [Abstract]  
Net Earned Premiums
Net Earned Premiums
 
 
Third Quarter
 
Nine Months
 
2019
 
2018
 
2019
 
2018
 
(in millions)
Financial guaranty:
 
 
 
 
 
 
 
Scheduled net earned premiums
$
81

 
$
95

 
$
253

 
$
275

Accelerations from refundings and terminations
37

 
40

 
83

 
131

Accretion of discount on net premiums receivable
4

 
6

 
13

 
14

Financial guaranty insurance net earned premiums
122

 
141

 
349

 
420

Non-financial guaranty net earned premiums
1

 
1

 
4

 
3

  Net earned premiums (1)
$
123

 
$
142

 
$
353

 
$
423

 ___________________
(1)
Excludes $2 million and $3 million for Third Quarter 2019 and 2018, respectively, and $16 million and $9 million for Nine Months 2019 and 2018, respectively, related to consolidated FG VIEs.
Gross Premium Receivable, Net of Commissions on Assumed Business Roll Forward
Expected Collections of
Financial Guaranty Insurance Gross Premiums Receivable,
Net of Commissions on Assumed Business
(Undiscounted)

 
As of
September 30, 2019
 
(in millions)
2019 (October 1 - December 31)
$
29

2020
102

2021
77

2022
78

2023
65

2024-2028
275

2029-2033
182

2034-2038
97

After 2038
104

Total (1)
$
1,009

 ____________________
(1)
Excludes expected cash collections on consolidated FG VIEs of $9 million.
Gross Premium Receivable,
Net of Commissions on Assumed Business
Roll Forward 

 
Nine Months
 
2019
 
2018
 
(in millions)
Beginning of year
$
904

 
$
915

Less: Non-financial guaranty insurance premium receivable
1

 
1

Financial guaranty insurance premiums receivable
903

 
914

Gross written premiums on new business, net of commissions (1)
164

 
508

Gross premiums received, net of commissions
(198
)
 
(477
)
Adjustments:
 
 
 
Changes in the expected term
(10
)
 
(2
)
Accretion of discount, net of commissions on assumed business
8

 
5

Foreign exchange translation and remeasurement (2)
(24
)
 
(23
)
Cancellation of assumed reinsurance
—

 
(10
)
Financial guaranty insurance premium receivable (3)
843

 
915

Non-financial guaranty insurance premium receivable
1

 
1

September 30,
$
844


$
916

____________________
(1)
For transactions where one of the Company's financial guaranty contracts is replaced by another of the Company's insurance subsidiary's contracts, gross written premium in this table represents only the incremental amount in excess of the original gross written premiums. Nine Months 2018 included $330 million of gross written premiums assumed from SGI on June 1, 2018, when the Company closed a reinsurance transaction with SGI (SGI Transaction). See Note 11, Reinsurance.

(2)
Includes foreign exchange loss on remeasurement recorded in the condensed consolidated statements of operations of $24 million in Nine Months 2019 and $21 million in Nine Months 2018. The remaining foreign exchange translation in Nine Months 2018 was recorded in other comprehensive income (OCI) prior to the combination of the European subsidiaries.

(3)
Excludes $7 million and $9 million as of September 30, 2019 and September 30, 2018, respectively, related to consolidated FG VIEs.

Schedule of Net Earned Premiums
Scheduled Financial Guaranty Insurance Net Earned Premiums

 
As of
September 30, 2019
 
(in millions)
2019 (October 1 - December 31)
$
79

2020
301

2021
275

2022
252

2023
231

2024-2028
908

2029-2033
620

2034-2038
356

After 2038
319

Net deferred premium revenue (1)
3,341

Future accretion
165

Total future net earned premiums
$
3,506

 ____________________
(1)
Excludes net earned premiums on consolidated FG VIEs of $48 million.
Selected Information for Policies Paid in Installments
Selected Information for Financial Guaranty Insurance
Policies with Premiums Paid in Installments

 
As of
September 30, 2019
 
As of
December 31, 2018
 
(dollars in millions)
Premiums receivable, net of commission payable
$
843

 
$
903

Gross deferred premium revenue
1,237

 
1,313

Weighted-average risk-free rate used to discount premiums
2.2
%
 
2.3
%
Weighted-average period of premiums receivable (in years)
9.1

 
9.1
Loss and LAE Reserve and Salvage and Subrogation Recoverable Net of Reinsurance Insurance Contracts
Net Reserve (Salvage) 

 
As of
September 30, 2019
 
As of
December 31, 2018
 
(in millions)
Public finance:
 
 
 
U.S. public finance
$
326

 
$
612

Non-U.S. public finance
5

 
14

Public finance
331

 
626

Structured finance:
 
 
 
U.S. RMBS (1)
(97
)
 
21

Other structured finance
38

 
30

Structured finance
(59
)
 
51

Subtotal
272

 
677

Other payable (recoverable)
—

 
(3
)
Total
$
272

 
$
674

____________________
(1)
Excludes net reserves of $36 million and $47 million as of September 30, 2019 and December 31, 2018, respectively, related to consolidated FG VIEs.
 
Components of Net Reserves (Salvage) Insurance Contracts
Components of Net Reserves (Salvage)
 
 
As of
September 30, 2019
 
As of
December 31, 2018
 
(in millions)
Loss and LAE reserve
$
1,007

 
$
1,177

Reinsurance recoverable on unpaid losses (1)
(36
)
 
(34
)
Loss and LAE reserve, net
971

 
1,143

Salvage and subrogation recoverable
(725
)
 
(490
)
Salvage and subrogation reinsurance payable (2)
26

 
24

Other payable (recoverable) (1)
—

 
(3
)
Salvage and subrogation recoverable, net, and other recoverable
(699
)
 
(469
)
Net reserves (salvage)
$
272

 
$
674

____________________
(1)
Recorded as a component of other assets in the condensed consolidated balance sheets.

(2)
Recorded as a component of other liabilities in the condensed consolidated balance sheets.
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, 2019
 
(in millions)
Net expected loss to be paid - financial guaranty insurance
$
661

Contra-paid, net
58

Salvage and subrogation recoverable, net, and other recoverable
699

Loss and LAE reserve - financial guaranty insurance contracts, net of reinsurance
(970
)
Net expected loss to be expensed (present value) (1)
$
448

____________________
(1)    Excludes $34 million as of September 30, 2019, 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, 2019
 
(in millions)
2019 (October 1 - December 31)
$
9

2020
37

2021
36

2022
35

2023
31

2024-2028
147

2029-2033
99

2034-2038
45

After 2038
9

Net expected loss to be expensed
448

Future accretion
30

Total expected future loss and LAE
$
478

 
Loss and LAE Reported on the Consolidated Statements of Operations
Loss and LAE
Reported on the
Condensed Consolidated Statements of Operations
  
 
Loss (Benefit)
 
Third Quarter
 
Nine Months
 
2019
 
2018
 
2019
 
2018
 
(in millions)
Public finance:
 
 
 
 
 
 
 
U.S. public finance
$
64

 
$
42

 
$
228

 
$
76

Non-U.S. public finance
1

 
(3
)
 
(7
)
 
(5
)
Public finance
65

 
39

 
221

 
71

Structured finance:
 
 
 
 
 
 
 
U.S. RMBS (1)
(35
)
 
(21
)
 
(150
)
 
(17
)
Other structured finance
—

 
(1
)
 
4

 
(11
)
Structured finance
(35
)
 
(22
)
 
(146
)
 
(28
)
Loss and LAE
$
30

 
$
17

 
$
75

 
$
43


____________________
(1)
Excludes a benefit of $3 million and $3 million for Third Quarter 2019 and 2018, respectively, and a benefit of $18 million and a loss of $0 million for Nine Months 2019 and 2018 respectively, related to consolidated FG VIEs.
BIG Net Par Outstanding and Number of Risks
The following tables provide information on financial guaranty insurance contracts categorized as BIG.
 
Financial Guaranty Insurance
BIG Transaction Loss Summary
As of September 30, 2019
 
 
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)
119

 
(6
)
 
26

 
—

 
134

 
(7
)
 
279

 
—

 
279

Remaining weighted-average contract period (in years)
8.2

 
5.4

 
17.1

 
—

 
9.9

 
8.5

 
9.9

 
—

 
9.9

Outstanding exposure:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Principal
$
2,596

 
$
(53
)
 
$
547

 
$
—

 
$
5,463

 
$
(170
)
 
$
8,383

 
$
—

 
$
8,383

Interest
1,192

 
(16
)
 
478

 
—

 
2,638

 
(72
)
 
4,220

 
—

 
4,220

Total (2)
$
3,788

 
$
(69
)
 
$
1,025

 
$
—

 
$
8,101

 
$
(242
)
 
$
12,603

 
$
—

 
$
12,603

Expected cash outflows (inflows)
$
110

 
$
(3
)
 
$
124

 
$
—

 
$
3,550

 
$
(118
)
 
$
3,663

 
$
(267
)
 
$
3,396

Potential recoveries (3)
(567
)
 
21

 
(51
)
 
—

 
(2,393
)
 
95

 
(2,895
)
 
190

 
(2,705
)
Subtotal
(457
)
 
18

 
73

 
—

 
1,157

 
(23
)
 
768

 
(77
)
 
691

Discount
69

 
(4
)
 
(13
)
 
—

 
(92
)
 
(6
)
 
(46
)
 
16

 
(30
)
Present value of expected cash flows
$
(388
)
 
$
14

 
$
60

 
$
—

 
$
1,065

 
$
(29
)
 
$
722

 
$
(61
)
 
$
661

Deferred premium revenue
$
147

 
$
(1
)
 
$
25

 
$
—

 
$
505

 
$
(5
)
 
$
671

 
$
(49
)
 
$
622

Reserves (salvage)
$
(418
)
 
$
15

 
$
41

 
$
—

 
$
694

 
$
(25
)
 
$
307

 
$
(36
)
 
$
271

 
Financial Guaranty Insurance
BIG Transaction Loss Summary
As of December 31, 2018
 
 
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)
128

 
(8
)
 
39

 
(1
)
 
145

 
(7
)
 
312

 
—

 
312

Remaining weighted-average contract period (in years)
7.9

 
6.5

 
13.2

 
2.1

 
10.1

 
9.1

 
9.8

 
—

 
9.8

Outstanding exposure:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Principal
$
3,052

 
$
(71
)
 
$
938

 
$
(6
)
 
$
6,249

 
$
(159
)
 
$
10,003

 
$
—

 
$
10,003

Interest
1,319

 
(29
)
 
592

 
(1
)
 
3,140

 
(72
)
 
4,949

 
—

 
4,949

Total (2)
$
4,371

 
$
(100
)
 
$
1,530

 
$
(7
)
 
$
9,389

 
$
(231
)
 
$
14,952

 
$
—

 
$
14,952

Expected cash outflows (inflows)
$
98

 
$
(5
)
 
$
264

 
$
(1
)
 
$
4,029

 
$
(80
)
 
$
4,305

 
$
(290
)
 
$
4,015

Potential recoveries (3)
(465
)
 
23

 
(81
)
 
—

 
(2,542
)
 
55

 
(3,010
)
 
192

 
(2,818
)
Subtotal
(367
)
 
18

 
183

 
(1
)
 
1,487

 
(25
)
 
1,295

 
(98
)
 
1,197

Discount
83

 
(5
)
 
(53
)
 
—

 
(134
)
 
(2
)
 
(111
)
 
23

 
(88
)
Present value of expected cash flows
$
(284
)
 
$
13

 
$
130

 
$
(1
)
 
$
1,353

 
$
(27
)
 
$
1,184

 
$
(75
)
 
$
1,109

Deferred premium revenue
$
125

 
$
(4
)
 
$
151

 
$
—

 
$
518

 
$
(2
)
 
$
788

 
$
(64
)
 
$
724

Reserves (salvage)
$
(311
)
 
$
15

 
$
48

 
$
(1
)
 
$
993

 
$
(24
)
 
$
720

 
$
(47
)
 
$
673

____________________
(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 amounts related to FG VIEs.

(3)
Represents expected inflows for future payments by obligors pursuant to restructuring agreements, settlement or litigation judgments, excess spread on any underlying collateral and other estimated recoveries. Potential recoveries also include recoveries on certain investment grade credits, related mainly to exposures that were previously BIG and for which claims have been paid in the past.