Expected Loss to be Paid (Recovered) (Tables)

6 Months Ended

Jun. 30, 2023

Expected Losses [Abstract]

Net Expected Loss to be Paid 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				Second Quarter				Six Months
Accounting Model	June 30, 2023		December 31, 2022		2023		2022		2023		2022
	(in millions)
Insurance (see Note 5)	$	262	$	205	$	62	$	(26)	$	68	$	(70)
FG VIEs (see Note 8) (1)	295		314		(14)		(6)		(9)		(10)
Credit derivatives (see Note 6)	3		3		1		—		1		4
Total	$	560	$	522	$	49	$	(32)	$	60	$	(76)

____________________

(1)    The expected loss to be paid for FG VIEs primarily relates to trusts established as part of the 2022 Puerto Rico Resolutions (Puerto Rico Trusts) that were consolidated.

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 (recovered) for all contracts, which are accounted for under one of the following accounting models: insurance, derivative and FG VIE. The Company used risk-free rates for U.S. dollar denominated obligations that ranged from 3.73% to 5.37% with a weighted average of 4.34% as of June 30, 2023 and 3.82% to 4.69% with a weighted average of 4.08% as of December 31, 2022. Expected losses to be paid for U.S. dollar denominated transactions represented approximately 98.3% and 98.5% of the total as of June 30, 2023 and December 31, 2022, respectively.

Net Expected Loss to be Paid (Recovered)

Roll Forward

	Second Quarter				Six Months
	2023		2022		2023		2022
	(in millions)
Net expected loss to be paid (recovered), beginning of period	$	517	$	432	$	522	$	411
Economic loss development (benefit) due to:
Accretion of discount	4		3		9		5
Changes in discount rates	(6)		(42)		4		(89)
Changes in timing and assumptions	51		7		47		8
Total economic loss development (benefit)	49		(32)		60		(76)
Net (paid) recovered losses (1)	(6)		42		(22)		107
Net expected loss to be paid (recovered), end of period	$	560	$	442	$	560	$	442

____________________

(1)     Net (paid) recovered losses in 2022 include the net amounts received pursuant to the portion of the 2022 Puerto Rico Resolutions related to PRCCDA, PRIFA and GO/PBA exposures, as described in Note 3, Outstanding Exposure.

Net Expected Loss to be Paid (Recovered)

Roll Forward by Sector

	Second Quarter 2023
Sector	Net Expected Loss to be Paid (Recovered) as of March 31, 2023		Economic Loss Development (Benefit)		Net (Paid) Recovered Losses (1)		Net Expected Loss to be Paid (Recovered) as of June 30, 2023
	(in millions)
Public finance:
U.S. public finance	$	380	$	57	$	(4)	$	433
Non-U.S. public finance	13		(3)		—		10
Public finance	393		54		(4)		443
Structured finance:
U.S. RMBS	82		(9)		—		73
Other structured finance	42		4		(2)		44
Structured finance	124		(5)		(2)		117
Total	$	517	$	49	$	(6)	$	560

	Second Quarter 2022
Sector	Net Expected Loss to be Paid (Recovered) as of March 31, 2022		Economic Loss Development (Benefit)		Net (Paid) Recovered Losses (1)		Net Expected Loss to be Paid (Recovered) as of June 30, 2022
	(in millions)
Public finance:
U.S. public finance	$	181	$	8	$	21	$	210
Non-U.S. public finance	10		(2)		(1)		7
Public finance	191		6		20		217
Structured finance:
U.S. RMBS	195		(39)		23		179
Other structured finance	46		1		(1)		46
Structured finance	241		(38)		22		225
Total	$	432	$	(32)	$	42	$	442

	Six Months 2023
Sector	Net Expected Loss to be Paid (Recovered) as of December 31, 2022		Economic Loss Development (Benefit)		Net (Paid) Recovered Losses (1)		Net Expected Loss to be Paid (Recovered) as of June 30, 2023
	(in millions)
Public finance:
U.S. public finance	$	403	$	58	$	(28)	$	433
Non-U.S. public finance	9		1		—		10
Public finance	412		59		(28)		443
Structured finance:
U.S. RMBS	66		(4)		11		73
Other structured finance	44		5		(5)		44
Structured finance	110		1		6		117
Total	$	522	$	60	$	(22)	$	560

	Six Months 2022
Sector	Net Expected Loss to be Paid (Recovered) as of December 31, 2021		Economic Loss Development (Benefit)		Net (Paid) Recovered Losses (1)		Net Expected Loss to be Paid (Recovered) as of June 30, 2022
	(in millions)
Public finance:
U.S. public finance	$	197	$	(40)	$	53	$	210
Non-U.S. public finance	12		(4)		(1)		7
Public finance	209		(44)		52		217
Structured finance:
U.S. RMBS	150		(32)		61		179
Other structured finance	52		—		(6)		46
Structured finance	202		(32)		55		225
Total	$	411	$	(76)	$	107	$	442

____________________

(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 as reinsurance recoverable on paid losses in “other assets”.

Schedule Of Net Expected Losses To Be Paid (Recovered) And Net Economic Development (Benefit) Loss

The assumptions that the Company uses to project RMBS losses are shown in the sections below.

Net Economic Loss Development (Benefit)

U.S. RMBS

	Second Quarter				Six Months
	2023		2022		2023		2022
	(in millions)
First lien U.S. RMBS	$	—	$	(14)	$	—	$	4
Second lien U.S. RMBS	(9)		(25)		(4)		(36)

Liquidation Rates and Key Assumptions in Base Case Expected Loss Estimates First Lien RMBS

The following table shows liquidation assumptions for various non-performing and re-performing categories.

First Lien U.S. RMBS Liquidation Rates

	As of
	June 30, 2023	December 31, 2022
Current but recently delinquent
Alt-A and Prime	20%	20%
Option ARM	20%	20%
Subprime	20%	20%
30 – 59 Days Delinquent
Alt-A and Prime	35%	35%
Option ARM	35%	35%
Subprime	30%	30%
60 – 89 Days Delinquent
Alt-A and Prime	40%	40%
Option ARM	45%	45%
Subprime	40%	40%
90+ Days Delinquent
Alt-A and Prime	55%	55%
Option ARM	60%	60%
Subprime	45%	45%
Bankruptcy
Alt-A and Prime	45%	45%
Option ARM	50%	50%
Subprime	40%	40%
Foreclosure
Alt-A and Prime	60%	60%
Option ARM	65%	65%
Subprime	55%	55%
Real Estate Owned
All	100%	100%

The following table shows the range as well as the average, weighted by outstanding net insured par, for key assumptions used in the calculation of expected loss to be paid (recovered) for individual transactions for vintage 2004 - 2008 first lien U.S. RMBS.

Key Assumptions in Base Scenario Expected Loss Estimates

First Lien U.S. RMBS

	As of June 30, 2023					As of December 31, 2022
	Range				Weighted Average	Range				Weighted Average
Alt-A and Prime:
Plateau CDR	0.7	%	-	10.3%	3.9%	1.6	%	-	11.5%	5.1%
Final CDR	0.0	%	-	0.5%	0.2%	0.1	%	-	0.6%	0.3%
Initial loss severity:
2005 and prior	50%					50%
2006	50%					50%
2007+	50%					50%
Option ARM:
Plateau CDR	0.0	%	-	9.6%	3.4%	2.0	%	-	7.7%	4.3%
Final CDR	0.0	%	-	0.5%	0.2%	0.1	%	-	0.4%	0.2%
Initial loss severity:
2005 and prior	50%					50%
2006	50%					50%
2007+	50%					50%
Subprime:
Plateau CDR	1.6	%	-	9.0%	4.9%	2.7	%	-	9.7%	5.6%
Final CDR	0.1	%	-	0.4%	0.2%	0.1	%	-	0.5%	0.3%
Initial loss severity:
2005 and prior	50%					50%
2006	50%					50%
2007+	50%					50%

Key Assumptions in Base Case Expected Loss Estimates Second Lien RMBS

The following table shows the range as well as the average, weighted by net par outstanding, for key assumptions used in the calculation of expected loss to be paid (recovered) for individual transactions for vintage 2004 - 2008 HELOCs.

Key Assumptions in Base Scenario Expected Loss Estimates

HELOCs

	As of June 30, 2023					As of December 31, 2022
	Range				Weighted Average	Range				Weighted Average
Plateau CDR	0.9	%	-	5.8%	3.0%	0.4	%	-	8.4%	3.5%
Final CDR trended down to	0.0	%	-	0.3%	0.1%	0.0	%	-	0.4%	0.2%
Liquidation rates:
Current but recently delinquent	20%					20%
30 – 59 Days Delinquent	30					30
60 – 89 Days Delinquent	40					40
90+ Days Delinquent	60					60
Bankruptcy	55					55
Foreclosure	55					55
Real Estate Owned	100					100
Loss severity on future defaults	98%					98%
Projected future recoveries on previously charged-off loans	30%					30%