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Contracts Accounted for as Insurance (Tables)

12 Months Ended

Dec. 31, 2021


	Year Ended December 31,
	2021		2020		2019
	(in millions)
Financial guaranty:
Scheduled net earned premiums	$	322	$	334	$	331
Accelerations from refundings and terminations	59		129		122
Accretion of discount on net premiums receivable	30		20		17
Financial guaranty insurance net earned premiums	411		483		470
Specialty net earned premiums	3		2		6
Net earned premiums	$	414	$	485	$	476

Gross Premium Receivable, Net of Commissions on Assumed Business Roll Forward

Gross Premium Receivable, Net of Commissions Payable on Assumed Business

Roll Forward


	Year Ended December 31,
	2021		2020		2019
	(in millions)
Beginning of year	$	1,372	$	1,286	$	904
Less: Specialty insurance premium receivable	1		2		1
Financial guaranty insurance premiums receivable	1,371		1,284		903
Gross written premiums on new business, net of commissions	369		462		689
Gross premiums received, net of commissions	(383)		(426)		(318)
Adjustments:
Changes in the expected term	6		(10)		(21)
Accretion of discount, net of commissions on assumed business	26		18		10
Foreign exchange gain (loss) on remeasurement	(22)		43		21
Expected recovery of premiums previously written off	4		—		—
Financial guaranty insurance premium receivable	1,371		1,371		1,284
Specialty insurance premium receivable	1		1		2
December 31,	$	1,372	$	1,372	$	1,286

Expected Future Premium Collections and Earnings


	As of December 31, 2021
	Future Premiums to be Collected (1)		Future Net Premiums to be Earned (2)
	(in millions)
2022 (January 1 - March 31)	$	47	$	78
2022 (April 1 - June 30)	39		78
2022 (July 1 - September 30)	28		77
2022 (October 1 - December 31)	33		75
Subtotal 2022	147		308
2023	107		287
2024	99		265
2025	88		241
2026	83		223
2027-2031	354		920
2032-2036	249		628
2037-2041	165		361
After 2041	347		495
Total	$	1,639	3,728
Future accretion			268
Total future net earned premiums			$	3,996

____________________

(1) Net of assumed commissions payable.

(2) Net of reinsurance.

Selected Information for Policies Paid in Installments

Selected Information for Financial Guaranty Insurance Policies with Premiums Paid in Installments


	As of December 31,
	2021		2020
	(dollars in millions)
Premiums receivable, net of commissions payable	$	1,371	$	1,371
Deferred premium revenue	$	1,663	$	1,664
Weighted-average risk-free rate used to discount premiums	1.6%		1.6%
Weighted-average period of premiums receivable (in years)	12.7		12.8

Rollforward of Deferred Acquisition Costs

Roll Forward of Deferred Acquisition Costs


	Year Ended December 31,
	2021		2020		2019
	(in millions)
Beginning of year	$	119	$	111	$	105
Costs deferred during the period	26		24		23
Costs amortized during the period	(14)		(16)		(17)
December 31,	$	131	$	119	$	111

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

The following tables provide information on net reserve (salvage), which includes loss and LAE reserves and salvage and subrogation recoverable, both net of reinsurance.

Net Reserve (Salvage) by Sector


	As of December 31,
Sector	2021		2020
	(in millions)
Public finance:
U.S. public finance	$	60	$	129
Non-U.S. public finance	1		11
Public finance	61		140
Structured finance:
U.S. RMBS	(24)		(52)
Other structured finance	42		34
Structured finance	18		(18)
Total	$	79	$	122

Components of Net Reserves (Salvage) Insurance Contracts

Components of Net Reserve (Salvage)


	As of December 31,
	2021		2020
	(in millions)
Loss and LAE reserve	$	869	$	1,088
Reinsurance recoverable on unpaid losses (1)	(5)		(8)
Loss and LAE reserve, net	864		1,080
Salvage and subrogation recoverable	(801)		(991)
Salvage and subrogation reinsurance payable (2)	16		33
Salvage and subrogation recoverable, net	(785)		(958)
Net reserve (salvage)	$	79	$	122

____________________

(1) Reported in “other assets” on the consolidated balance sheets.

(2) Reported in “other liabilities” on the consolidated balance sheets.

Reconciliation of Net Expected Loss to be Paid and Net Expected Loss to be Expensed Financial Guaranty Insurance Contracts

The table below provides a reconciliation of net expected loss to be paid (recovered) for financial guaranty insurance contracts to net expected loss to be expensed. Expected loss to be paid (recovered) for financial guaranty insurance contracts differs from expected loss to be expensed due to: (i) the contra-paid, which represents the claim payments made and recoveries received that have not yet been recognized in the statements of operations; (ii) salvage and subrogation recoverable for transactions that are in a net recovery position where the Company has not yet received recoveries on claims previously paid (and therefore recognized in income but not yet received); and (iii) loss reserves that have already been established (and therefore expensed but not yet paid).

Reconciliation of Net Expected Loss to be Paid (Recovered) to Net Expected Loss to be Expensed

Financial Guaranty Insurance Contracts


	As of December 31, 2021
	(in millions)
Net expected loss to be paid (recovered) - financial guaranty insurance	$	359
Contra-paid, net	40
Salvage and subrogation recoverable, net	785
Loss and LAE reserve - financial guaranty insurance contracts, net of reinsurance	(859)
Net expected loss to be expensed (present value)	$	325

Net Expected Loss to be Expensed Insurance Contracts

The following table provides a schedule of the expected timing of net expected losses to be expensed. The amount and timing of actual loss and LAE may differ from the estimates shown below due to factors such as accelerations, commutations, changes in expected lives and updates to loss estimates. This table excludes amounts related to FG VIEs, which are eliminated in consolidation.

Net Expected Loss to be Expensed

Financial Guaranty Insurance Contracts


	As of December 31, 2021
	(in millions)
2022 (January 1 - March 31)	$	7
2022 (April 1 - June 30)	7
2022 (July 1 - September 30)	7
2022 (October 1 - December 31)	7
Subtotal 2022	28
2023	27
2024	27
2025	26
2026	26
2027-2031	111
2032-2036	66
2037-2041	11
After 2041	3
Net expected loss to be expensed	325
Future accretion	129
Total expected future loss and LAE	$	454

Loss and LAE Reported on the Consolidated Statements of Operations

The following table presents the loss and LAE (benefit) reported in the consolidated statements of operations by sector for insurance contracts. Amounts presented are net of reinsurance.

Loss and LAE (Benefit) by Sector


	Year Ended December 31,
Sector	2021		2020		2019
	(in millions)
Public finance:
U.S. public finance	$	(146)	$	225	$	247
Non-U.S. public finance	(9)		5		(7)
Public finance	(155)		230		240
Structured finance:
U.S. RMBS	(69)		(34)		(154)
Other structured finance	4		7		7
Structured finance	(65)		(27)		(147)
Loss and LAE (benefit)	$	(220)	$	203	$	93

BIG Net Par Outstanding and Number of Risks

Financial Guaranty Portfolio

BIG Net Par Outstanding and Number of Risks

As of December 31, 2021


	Net Par Outstanding						Number of Risks (2)
Description	Financial Guaranty Insurance (1)		Credit Derivative		Total		Financial Guaranty Insurance (1)	Credit Derivative	Total
	(dollars in millions)
BIG:
Category 1	$	2,429	$	14	$	2,443	117	2	119
Category 2	177		4		181		16	1	17
Category 3	4,687		45		4,732		129	8	137
Total BIG	$	7,293	$	63	$	7,356	262	11	273

Financial Guaranty Portfolio

BIG Net Par Outstanding and Number of Risks

As of December 31, 2020


	Net Par Outstanding						Number of Risks (2)
Description	Financial Guaranty Insurance (1)		Credit Derivative		Total		Financial Guaranty Insurance(1)	Credit Derivative	Total
	(dollars in millions)
BIG:
Category 1	$	2,781	$	70	$	2,851	125	6	131
Category 2	130		4		134		19	1	20
Category 3	4,944		46		4,990		126	7	133
Total BIG	$	7,855	$	120	$	7,975	270	14	284

_____________________

(1) Includes FG VIEs.

(2) A risk represents the aggregate of the financial guaranty policies that share the same revenue source for purposes of making debt service payments.

The following tables provide information on financial guaranty insurance contracts categorized as BIG.

Financial Guaranty Insurance

BIG Transaction Loss Summary

As of December 31, 2021


	Gross								Net Total BIG
	BIG 1		BIG 2		BIG 3		Total BIG
	(dollars in millions)
Number of risks (1)	117		16		129		262		262
Remaining weighted-average period (in years)	7.6		8.9		8.9		8.5		8.5

Outstanding exposure:
Par	$	2,437	$	177	$	4,745	$	7,359	$	7,293
Interest	1,000		36		1,942		2,978		2,962
Total (2)	$	3,437	$	213	$	6,687	$	10,337	$	10,255

Expected cash outflows (inflows)	$	111	$	40	$	4,820	$	4,971	$	4,918
Potential recoveries (3)	(656)		(10)		(3,829)		(4,495)		(4,430)
Subtotal	(545)		30		991		476		488
Discount	19		(3)		(145)		(129)		(129)
Expected losses to be paid (recovered)	$	(526)	$	27	$	846	$	347	$	359

Deferred premium revenue	$	85	$	2	$	350	$	437	$	435
Reserves (salvage)	$	(549)	$	25	$	584	$	60	$	74

Financial Guaranty Insurance

BIG Transaction Loss Summary

As of December 31, 2020


	Gross								Net Total BIG
	BIG 1		BIG 2		BIG 3		Total BIG
	(dollars in millions)
Number of risks (1)	125		19		126		270		270
Remaining weighted-average period (in years)	7.5		9.2		9.4		8.7		8.7

Outstanding exposure:
Par	$	2,791	$	130	$	5,009	$	7,930	$	7,855
Interest	1,092		36		2,175		3,303		3,285
Total (2)	$	3,883	$	166	$	7,184	$	11,233	$	11,140

Expected cash outflows (inflows)	$	172	$	29	$	4,441	$	4,642	$	4,591
Potential recoveries (3)	(697)		(3)		(3,385)		(4,085)		(4,011)
Subtotal	(525)		26		1,056		557		580
Discount	22		(3)		(122)		(103)		(104)
Expected losses to be paid (recovered)	$	(503)	$	23	$	934	$	454	$	476

Deferred premium revenue	$	116	$	1	$	394	$	511	$	508
Reserves (salvage)	$	(538)	$	21	$	619	$	102	$	127

__________________

(1) A risk represents the aggregate of the financial guaranty policies that share the same revenue source for purposes of making debt service payments.

(2)Includes amounts related to FG VIEs.

(3)Represents expected inflows for future payments by obligors pursuant to restructuring agreements, settlements 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.

Effects of Reinsurance on Statement of Operations

The following table presents the components of premiums and losses reported in the consolidated statements of operations attributable to the Assumed and Ceded Businesses (both financial guaranty and specialty).

Effect of Reinsurance on Premiums Written, Premiums Earned and Loss and LAE (Benefit)


	Year Ended December 31,
	2021		2020		2019
	(in millions)
Premiums Written:
Direct	$	355	$	453	$	663
Assumed	22		1		14
Ceded (1)	—		13		10
Net	$	377	$	467	$	687

Premiums Earned:
Direct	$	385	$	448	$	429
Assumed	32		41		54
Ceded	(3)		(4)		(7)
Net	$	414	$	485	$	476

Loss and LAE (benefit):
Direct (2)	$	(203)	$	182	$	101
Assumed	5		24		2
Ceded	(22)		(3)		(10)
Net	$	(220)	$	203	$	93

____________________

(1) Positive ceded premiums written were due to commutations and changes in expected debt service schedules.

(2) See Note 5, Expected Loss to be Paid (Recovered), for additional information on the economic loss development (benefit).