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Contracts Accounted for as Insurance (Tables)

12 Months Ended

Dec. 31, 2023


	Year Ended December 31,
	2023		2022		2021
	(in millions)
Financial guaranty insurance:
Scheduled net earned premiums	$	285	$	287	$	322
Accelerations from refundings and terminations (1)	29		179		59
Accretion of discount on net premiums receivable	26		24		30
Financial guaranty insurance net earned premiums	340		490		411
Specialty net earned premiums	4		4		3
Net earned premiums	$	344	$	494	$	414

____________________

(1) 2022 accelerations include $133 million related to 2022 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


	Year Ended December 31,
	2023		2022		2021
	(in millions)
Beginning of year	$	1,298	$	1,372	$	1,372
Less: Specialty insurance premium receivable	1		1		1
Financial guaranty insurance premiums receivable	1,297		1,371		1,371
Gross written premiums on new business, net of commissions	353		356		369
Gross premiums received, net of commissions	(261)		(345)		(383)
Adjustments:
Changes in the expected term and debt service assumptions	1		2		6
Accretion of discount, net of commissions on assumed business	26		24		26
Foreign exchange gain (loss) on remeasurement	51		(111)		(22)
Expected recovery of premiums previously written off	—		—		4
Financial guaranty insurance premium receivable	1,467		1,297		1,371
Specialty insurance premium receivable	1		1		1
December 31,	$	1,468	$	1,298	$	1,372

Financial Guaranty Insurance

Expected Future Premium Collections and Earnings


	As of December 31, 2023
	Future Premiums to be Collected (1)		Future Net Premiums to be Earned (2)
	(in millions)
2024 (January 1 - March 31)	$	58	$	72
2024 (April 1 - June 30)	39		71
2024 (July 1 - September 30)	32		70
2024 (October 1 - December 31)	34		69
Subtotal 2024	163		282
2025	110		264
2026	106		247
2027	102		234
2028	95		220
2029-2033	402		909
2034-2038	275		602
2039-2043	199		375
After 2043	387		513
Total	$	1,839	3,646
Future accretion			370
Total future net earned premiums			$	4,016

____________________

(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,
	2023		2022
	(dollars in millions)
Premiums receivable, net of commissions payable	$	1,467	$	1,297
Deferred premium revenue	$	1,768	$	1,663
Weighted average risk-free rate used to discount premiums	2.1%		1.8%
Weighted average period of premiums receivable (in years)	12.5		12.9

Rollforward of Deferred Acquisition Costs

Roll Forward of Deferred Acquisition Costs


	Year Ended December 31,
	2023		2022		2021
	(in millions)
Beginning of year	$	147	$	131	$	119
Costs deferred during the period	27		30		26
Costs amortized during the period	(13)		(14)		(14)
December 31,	$	161	$	147	$	131

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	2023		2022
	(in millions)
Public finance:
U.S. public finance	$	119	$	71
Non-U.S. public finance	1		1
Public finance	120		72
Structured finance:
U.S. RMBS	(87)		(77)
Other structured finance	42		42
Structured finance	(45)		(35)
Total	$	75	$	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 December 31, 2023
	(in millions)
Net expected loss to be paid (recovered) - financial guaranty insurance	$	260
Contra-paid, net	22
Salvage and subrogation recoverable, net	297
Loss and LAE reserve - financial guaranty insurance contracts, net of reinsurance	(369)
Net expected loss to be expensed (present value)	$	210

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, 2023
	(in millions)
2024 (January 1 - March 31)	$	3
2024 (April 1 - June 30)	3
2024 (July 1 - September 30)	3
2024 (October 1 - December 31)	3
Subtotal 2024	12
2025	12
2026	16
2027	16
2028	15
2029-2033	69
2034-2038	48
2039-2043	11
After 2043	11
Net expected loss to be expensed (present value)	210
Future accretion	19
Total expected future loss and LAE	$	229

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.

Loss and LAE (Benefit) by Sector


	Year Ended December 31,
Sector	2023		2022		2021
	(in millions)
Public finance:
U.S. public finance	$	192	$	125	$	(146)
Non-U.S. public finance	—		—		(9)
Public finance	192		125		(155)
Structured finance:
U.S. RMBS	(34)		(112)		(69)
Other structured finance	4		3		4
Structured finance	(30)		(109)		(65)
Loss and LAE (benefit)	$	162	$	16	$	(220)

BIG Net Par Outstanding and Number of Risks

Financial Guaranty Portfolio

BIG Net Par Outstanding and Number of Risks

As of December 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 1	$	2,394	$	16	$	2,410	95	2	97
BIG 2	979		10		989		13	2	15
BIG 3	2,010		28		2,038		109	7	116
Total BIG	$	5,383	$	54	$	5,437	217	11	228

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 1	$	3,357	$	6	$	3,363	122	1	123
BIG 2	171		10		181		14	2	16
BIG 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 December 31, 2023


	Scheduled Net Par Amortization		Scheduled Net Debt Service Amortization
	(in millions)
2024 (January 1 - March 31)	$	—	$	24
2024 (April 1 - June 30)	—		3
2024 (July 1 - September 30)	110		134
2024 (October 1 - December 31)	—		3
Subtotal 2024	110		164
2025	84		132
2026	140		185
2027	120		158
2028	81		114
2029-2033	233		353
2034-2038	220		274
2039-2041	117		128
Total	$	1,105	$	1,508

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

Financial Guaranty Insurance

BIG Transaction Loss Summary

As of December 31, 2023


	Gross								Net Total BIG
	BIG 1		BIG 2		BIG 3		Total BIG
	(dollars in millions)
Number of risks (1)	95		13		109		217		217
Remaining weighted average period (in years)	9.6		15.9		7.5		9.9		10.0

Outstanding exposure:
Par	$	2,400	$	979	$	2,019	$	5,398	$	5,383
Interest	1,126		896		818		2,840		2,836
Total (2)	$	3,526	$	1,875	$	2,837	$	8,238	$	8,219

Expected cash outflows (inflows)	$	176	$	187	$	1,585	$	1,948	$	1,938
Potential recoveries (3)	(376)		(78)		(1,214)		(1,668)		(1,659)
Subtotal	(200)		109		371		280		279
Discount	56		(22)		(53)		(19)		(19)
Expected losses to be paid (recovered)	$	(144)	$	87	$	318	$	261	$	260

Deferred premium revenue	$	100	$	63	$	142	$	305	$	305
Reserves (salvage)	$	(181)	$	45	$	209	$	73	$	72

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.

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).

Components of Premiums Written, Premiums Earned and Loss and LAE (Benefit)


	Year Ended December 31,
	2023		2022		2021
	(in millions)
Premiums Written:
Direct	$	307	$	377	$	355
Assumed (1)	50		(17)		22
Ceded	(16)		—		—
Net	$	341	$	360	$	377

Premiums Earned:
Direct	$	319	$	469	$	385
Assumed	28		28		32
Ceded	(3)		(3)		(3)
Net	$	344	$	494	$	414

Loss and LAE (benefit):
Direct (2)	$	157	$	32	$	(203)
Assumed	8		(17)		5
Ceded	(3)		1		(22)
Net	$	162	$	16	$	(220)

____________________

(1) Negative assumed premiums written were due to terminations and changes in expected debt service schedules.

(2) See Note 4, Expected Loss to be Paid (Recovered), for additional information on the economic loss development (benefit).