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Contracts Accounted for as Insurance (Tables)

3 Months Ended

Mar. 31, 2023


	First Quarter
	2023		2022
	(in millions)
Financial guaranty insurance:
Scheduled net earned premiums	$	69	$	79
Accelerations from refundings and terminations (1)	4		128
Accretion of discount on net premiums receivable	7		6
Financial guaranty insurance net earned premiums	80		213
Specialty net earned premiums	1		1
Net earned premiums	$	81	$	214

____________________

(1) First quarter 2022 accelerations included $104 million related to PRCCDA, PRIFA and GO/PBA exposures. 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


	First Quarter
	2023		2022
	(in millions)
Beginning of year	$	1,298	$	1,372
Less: Specialty insurance premium receivable	1		1
Financial guaranty insurance premiums receivable	1,297		1,371
Gross written premiums on new business, net of commissions	79		61
Gross premiums received, net of commissions	(64)		(83)
Adjustments:
Changes in the expected term and debt service assumptions	6		8
Accretion of discount, net of commissions on assumed business	7		6
Foreign exchange gain (loss) on remeasurement	20		(29)
Financial guaranty insurance premium receivable (1)	1,345		1,334
Specialty insurance premium receivable	1		1
March 31,	$	1,346	$	1,335

Financial Guaranty Insurance

Expected Future Premium Collections and Earnings


	As of March 31, 2023
	Future Gross Premiums to be Collected (1)		Future Net Premiums to be Earned (2)
	(in millions)
2023 (April 1 - June 30)	$	32	$	70
2023 (July 1 - September 30)	38		70
2023 (October 1 - December 31)	19		69
Subtotal 2023	89		209
2024	111		267
2025	96		251
2026	94		235
2027	91		221
2028-2032	379		925
2033-2037	252		618
2038-2042	175		377
After 2042	364		528
Total	$	1,651	3,631
Future accretion			307
Total future net earned premiums			$	3,938

____________________

(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
	March 31, 2023		December 31, 2022
	(dollars in millions)
Premiums receivable, net of commissions payable	$	1,345	$	1,297
Deferred premium revenue	1,699		1,663
Weighted-average risk-free rate used to discount premiums	1.8%		1.8%
Weighted-average period of premiums receivable (in years)	12.6		12.9

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	March 31, 2023		December 31, 2022
	(in millions)
Public finance:
U.S. public finance	$	52	$	71
Non-U.S. public finance	1		1
Public finance	53		72
Structured finance:
U.S. RMBS	(62)		(77)
Other structured finance	41		42
Structured finance	(21)		(35)
Total	$	32	$	37

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 March 31, 2023
	(in millions)
Net expected loss to be paid (recovered) - financial guaranty insurance	$	202
Contra-paid, net	22
Salvage and subrogation recoverable, net	257
Loss and LAE reserve - financial guaranty insurance contracts, net of reinsurance	(286)
Net expected loss to be expensed (present value)	$	195

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 March 31, 2023
	(in millions)
2023 (April 1 - June 30)	$	3
2023 (July 1 - September 30)	3
2023 (October 1 - December 31)	3
Subtotal 2023	9
2024	12
2025	12
2026	17
2027	15
2028-2032	61
2033-2037	49
2038-2042	8
After 2042	12
Net expected loss to be expensed	195
Future accretion	66
Total expected future loss and LAE	$	261

Loss and LAE Reported on the Consolidated Statements of Operations

The following table presents the loss and LAE (benefit) 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


	First Quarter
Sector	2023		2022
	(in millions)
Public finance:
U.S. public finance	$	(4)	$	55
Non-U.S. public finance	—		—
Public finance	(4)		55
Structured finance:
U.S. RMBS	$	6	$	3
Other structured finance	2		(1)
Structured finance	8		2
Loss and LAE (benefit)	$	4	$	57

BIG Net Par Outstanding and Number of Risks

Financial Guaranty Portfolio

BIG Net Par Outstanding and Number of Risks

As of March 31, 2023


	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	$	3,370	$	6	$	3,376	117	1	118
Category 2	170		10		180		15	2	17
Category 3	2,286		40		2,326		109	8	117
Total BIG	$	5,826	$	56	$	5,882	241	11	252

Financial Guaranty Portfolio

BIG Net Par Outstanding and Number of Risks

As of December 31, 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	$	3,357	$	6	$	3,363	122	1	123
Category 2	171		10		181		14	2	16
Category 3	2,307		41		2,348		111	10	121
Total BIG	$	5,835	$	57	$	5,892	247	13	260

_____________________

(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 table shows the scheduled amortization of the insured general obligation bonds of Puerto Rico and various obligations of its related authorities and public corporations. The Company guarantees payment of interest and principal when those amounts are scheduled to be paid and cannot be required to pay on an accelerated basis, although in certain circumstances it may elect to do so. In the event that obligors default on their obligations, the Company would only be required to pay the shortfall between the debt service due in any given period and the amount paid by the obligors.

Amortization Schedule of Puerto Rico

Net Par Outstanding and Net Debt Service Outstanding

As of March 31, 2023


	Scheduled Net Par Amortization		Scheduled Net Debt Service Amortization
	(in millions)
2023 (April 1 - June 30)	$	—	$	3
2023 (July 1 - September 30)	124		154
2023 (October 1 - December 31)	—		3
Subtotal 2023	124		160
2024	110		170
2025	94		148
2026	149		200
2027	124		168
2028-2032	378		528
2033-2037	240		311
2038-2041	132		150
Total	$	1,351	$	1,835

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

Financial Guaranty Insurance

BIG Transaction Loss Summary

As of March 31, 2023


	Gross								Net Total BIG
	BIG 1		BIG 2		BIG 3		Total BIG
	(dollars in millions)
Number of risks (1)	117		15		109		241		241
Remaining weighted-average period (in years)	11.2		8.5		7.4		9.7		9.7

Outstanding exposure:
Par	$	3,376	$	170	$	2,296	$	5,842	$	5,826
Interest	2,172		77		872		3,121		3,117
Total (2)	$	5,548	$	247	$	3,168	$	8,963	$	8,943

Expected cash outflows (inflows)	$	263	$	122	$	1,704	$	2,089	$	2,077
Potential recoveries (3)	(412)		(79)		(1,330)		(1,821)		(1,809)
Subtotal	(149)		43		374		268		268
Discount	40		(12)		(94)		(66)		(66)
Expected losses to be paid (recovered)	$	(109)	$	31	$	280	$	202	$	202

Deferred premium revenue	$	165	$	15	$	155	$	335	$	335
Reserves (salvage)	$	(158)	$	23	$	164	$	29	$	29

Financial Guaranty Insurance

BIG Transaction Loss Summary

As of December 31, 2022


	Gross								Net Total BIG
	BIG 1		BIG 2		BIG 3		Total BIG
	(dollars in millions)
Number of risks (1)	122		14		111		247		247
Remaining weighted-average period (in years)	11.3		8.7		7.6		9.8		9.8

Outstanding exposure:
Par	$	3,363	$	171	$	2,318	$	5,852	$	5,835
Interest	2,177		77		894		3,148		3,144
Total (2)	$	5,540	$	248	$	3,212	$	9,000	$	8,979

Expected cash outflows (inflows)	$	128	$	121	$	1,771	$	2,020	$	2,008
Potential recoveries (3)	(294)		(79)		(1,364)		(1,737)		(1,725)
Subtotal	(166)		42		407		283		283
Discount	35		(13)		(104)		(82)		(82)
Expected losses to be paid (recovered)	$	(131)	$	29	$	303	$	201	$	201

Deferred premium revenue	$	170	$	15	$	160	$	345	$	345
Reserves (salvage)	$	(174)	$	21	$	186	$	33	$	33

____________________

(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.