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Contracts Accounted for as Insurance (Tables)

6 Months Ended

Jun. 30, 2022


	Second Quarter				Six Months
	2022		2021		2022		2021
	(in millions)
Financial guaranty insurance:
Scheduled net earned premiums	70		80		$	149	$	161
Accelerations from refundings and terminations (1)	5		15		133		31
Accretion of discount on net premiums receivable	6		6		12		11
Financial guaranty insurance net earned premiums	81		101		294		203
Specialty net earned premiums	1		1		2		2
Net earned premiums	$	82	$	102	$	296	$	205

____________________

(1) Six months 2022 accelerations include $104 million related to the March Puerto Rico Resolutions. See Note 3, Outstanding Exposure for additional information.

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

Gross Premium Receivable,

Net of Commissions Payable on Assumed Business

Roll Forward


	Six Months
	2022		2021
	(in millions)
Beginning of year	$	1,372	$	1,372
Less: Specialty insurance premium receivable	1		1
Financial guaranty insurance premiums receivable	1,371		1,371
Gross written premiums on new business, net of commissions	137		165
Gross premiums received, net of commissions	(180)		(184)
Adjustments:
Changes in the expected term and debt service assumptions	(4)		5
Accretion of discount, net of commissions on assumed business	12		10
Foreign exchange gain (loss) on remeasurement	(102)		5
Financial guaranty insurance premium receivable	1,234		1,372
Specialty insurance premium receivable	1		1
June 30,	$	1,235	$	1,373

Financial Guaranty Insurance

Expected Future Premium Collections and Earnings


	As of June 30, 2022
	Future Premiums to be Collected (1)		Future Net Premiums to be Earned (2)
	(in millions)
2022 (July 1 - September 30)	$	39	$	72
2022 (October 1 - December 31)	36		71
Subtotal 2022	75		143
2023	89		272
2024	87		255
2025	84		237
2026	81		221
2027-2031	342		914
2032-2036	242		637
2037-2041	160		381
After 2041	320		519
Total	$	1,481	3,579
Future accretion			247
Total future net earned premiums			$	3,826

____________________

(1) Net of 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
	June 30, 2022		December 31, 2021
	(dollars in millions)
Premiums receivable, net of commissions payable	$	1,234	$	1,371
Deferred premium revenue	1,613		1,663
Weighted-average risk-free rate used to discount premiums	1.6%		1.6%
Weighted-average period of premiums receivable (in years)	12.7		12.7

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
Sector	June 30, 2022		December 31, 2021
	(in millions)
Public finance:
U.S. public finance	$	154	$	60
Non-U.S. public finance	1		1
Public finance	155		61
Structured finance:
U.S. RMBS	16		(24)
Other structured finance	41		42
Structured finance	57		18
Total	$	212	$	79

Components of Net Reserves (Salvage) Insurance Contracts

Components of Net Reserve (Salvage)


	As of
	June 30, 2022		December 31, 2021
	(in millions)
Loss and LAE reserve	$	716	$	869
Reinsurance recoverable on unpaid losses (1)	(3)		(5)
Loss and LAE reserve, net	713		864
Salvage and subrogation recoverable	(502)		(801)
Salvage and subrogation reinsurance payable (2)	1		16
Salvage and subrogation recoverable, net	(501)		(785)
Net reserve (salvage)	$	212	$	79

____________________

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

(2) Reported in “other liabilities” on the condensed 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 June 30, 2022
	(in millions)
Net expected loss to be paid (recovered) - financial guaranty insurance	$	400
Contra-paid, net	19
Salvage and subrogation recoverable	501
Loss and LAE reserve - financial guaranty insurance contracts, net of reinsurance	(708)
Net expected loss to be expensed (present value)	$	212

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 June 30, 2022
	(in millions)
2022 (July 1 - September 30)	$	4
2022 (October 1 - December 31)	5
Subtotal 2022	9
2023	18
2024	17
2025	16
2026	19
2027-2031	72
2032-2036	48
2037-2041	10
After 2041	3
Net expected loss to be expensed	212
Future accretion	216
Total expected future loss and LAE	$	428

Loss and LAE Reported on the Consolidated Statements of Operations

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

Loss and LAE (Benefit) by Sector


	Second Quarter				Six Months
Sector	2022		2021		2022		2021
	(in millions)
Public finance:
U.S. public finance	11		4		$	66	$	30
Non-U.S. public finance	—		(1)		—		(9)
Public finance	11		3		66		21
Structured finance:
U.S. RMBS	(22)		(18)		$	(19)	$	(6)
Other structured finance	—		(1)		(1)		(1)
Structured finance	(22)		(19)		(20)		(7)
Loss and LAE (Benefit)	$	(11)	$	(16)	$	46	$	14

BIG Net Par Outstanding and Number of Risks

Financial Guaranty Portfolio

BIG Net Par Outstanding and Number of Risks

As of June 30, 2022


	Net Par Outstanding						Number of Risks (2)
Description	Financial Guaranty Insurance (1)		Credit Derivatives		Total		Financial Guaranty Insurance (1)	Credit Derivatives	Total
	(dollars in millions)
BIG:
Category 1	$	1,814	$	7	$	1,821	107	1	108
Category 2	234		10		244		20	2	22
Category 3	3,279		42		3,321		123	8	131
Total BIG	$	5,327	$	59	$	5,386	250	11	261

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 Derivatives		Total		Financial Guaranty Insurance (1)	Credit Derivatives	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

_____________________

(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 June 30, 2022


	Gross								Net Total BIG
	BIG 1		BIG 2		BIG 3		Total BIG
	(dollars in millions)
Number of risks (1)	107		20		123		250		250
Remaining weighted-average period (in years)	8.0		7.8		8.2		8.1		8.1

Outstanding exposure:
Par	$	1,822	$	234	$	3,298	$	5,354	$	5,327
Interest	752		60		1,227		2,039		2,035
Total (2)	$	2,574	$	294	$	4,525	$	7,393	$	7,362

Expected cash outflows (inflows)	$	64	$	68	$	3,396	$	3,528	$	3,515
Potential recoveries (3)	(381)		(38)		(2,492)		(2,911)		(2,899)
Subtotal	(317)		30		904		617		616
Discount	30		(6)		(240)		(216)		(216)
Expected losses to be paid (recovered)	$	(287)	$	24	$	664	$	401	$	400

Deferred premium revenue	$	60	$	12	$	226	$	298	$	296
Reserves (salvage)	$	(303)	$	19	$	491	$	207	$	207

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

____________________

(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 from future payments by obligors pursuant to restructuring agreements, settlements, 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.