| Financial Guaranty Insurance Premiums |
Financial Guaranty Insurance Premiums
The portfolio of outstanding exposures discussed in Note 3, Outstanding Exposure, includes financial guaranty contracts that meet the definition of insurance contracts as well as those that meet the definition of a derivative under GAAP. Amounts presented in this note relate only to financial guaranty insurance contracts. See Note 8, Financial Guaranty Contracts Accounted for as Credit Derivatives, for a discussion of credit derivative revenues.
Net Earned Premiums | | | | | | | | | | | | | | | | | | Second Quarter | | Six Months | | 2013 | | 2012 | | 2013 | | 2012 | | (in millions) | Scheduled net earned premiums | $ | 113 |
| | $ | 145 |
| | $ | 241 |
| | $ | 297 |
| Acceleration of premium earnings | 46 |
| | 68 |
| | 159 |
| | 105 |
| Accretion of discount on net premiums receivable | 3 |
| | 6 |
| | 10 |
| | 11 |
| Total financial guaranty insurance | 162 |
| | 219 |
| | 410 |
| | 413 |
| Other | 1 |
| | 0 |
| | 1 |
| | 0 |
| Total net earned premiums(1) | $ | 163 |
| | $ | 219 |
| | $ | 411 |
| | $ | 413 |
|
___________________ | | (1) | Excludes $15 million and $16 million for Second Quarter 2013 and 2012, respectively, and $33 million and $33 million for the Six Months 2013 and 2012, respectively, related to consolidated FG VIEs. |
Components of Unearned Premium Reserve | | | | | | | | | | | | | | | | | | | | | | | | | | As of June 30, 2013 | | As of December 31, 2012 | | Gross | | Ceded | | Net(1) | | Gross | | Ceded | | Net(1) | | (in millions) | Deferred premium revenue: | | | | | | | | | | | | Financial guaranty | $ | 4,941 |
| | $ | 533 |
| | $ | 4,408 |
| | $ | 5,349 |
| | $ | 586 |
| | $ | 4,763 |
| Other | 6 |
| | — |
| | 6 |
| | 7 |
| | — |
| | 7 |
| Total deferred premium revenue | $ | 4,947 |
| | $ | 533 |
| | $ | 4,414 |
| | $ | 5,356 |
| | $ | 586 |
| | $ | 4,770 |
| Contra-paid | (135 | ) | | (23 | ) | | (112 | ) | | (149 | ) | | (25 | ) | | (124 | ) | Total | $ | 4,812 |
| | $ | 510 |
| | $ | 4,302 |
| | $ | 5,207 |
| | $ | 561 |
| | $ | 4,646 |
|
____________________ | | (1) | Excludes $210 million and $262 million of deferred premium revenue, and $58 million and $98 million of contra-paid related to FG VIEs as of June 30, 2013 and December 31, 2012, respectively. |
Gross Premium Receivable, Net of Ceding Commissions Roll Forward | | | | | | | | | | Six Months | | 2013 | | 2012 | | (in millions) | Balance beginning of period | $ | 1,005 |
| | $ | 1,003 |
| Premium written, net of ceding commissions | 32 |
| | 103 |
| Premium payments received, net of ceding commissions | (109 | ) | | (167 | ) | Adjustments: | | | | Changes in the expected term of financial guaranty insurance contracts | 1 |
| | 19 |
| Accretion of discount, net of ceding commissions | 13 |
| | 13 |
| Foreign exchange translation | (27 | ) | | (1 | ) | Consolidation of FG VIEs | — |
| | (5 | ) | Other adjustments | — |
| | (1 | ) | Balance, end of period (1) | $ | 915 |
| | $ | 964 |
|
____________________ | | (1) | Excludes $20 million and $32 million as of June 30, 2013 and June 30, 2012, respectively, related to consolidated FG VIEs. |
Gains or losses due to foreign exchange rate changes relate to installment premium receivables denominated in currencies other than the U.S. dollar. Approximately 46%, 47% and 49% of installment premiums at June 30, 2013, December 31, 2012 and June 30, 2012, respectively, are denominated in currencies other than the U.S. dollar, primarily Euro and British Pound Sterling. The timing and cumulative amount of actual collections may differ from expected collections in the tables below due to factors such as foreign exchange rate fluctuations, counterparty collectability issues, accelerations, commutations and changes in expected lives. Expected Collections of Gross Premiums Receivable, Net of Ceding Commissions (Undiscounted)
| | | | | | June 30, 2013 | | (in millions) | 2013 (July 1 – September 30) | $ | 39 |
| 2013 (October 1 – December 31) | 34 |
| 2014 | 104 |
| 2015 | 91 |
| 2016 | 85 |
| 2017 | 78 |
| 2018-2022 | 307 |
| 2023-2027 | 190 |
| 2028-2032 | 129 |
| After 2032 | 147 |
| Total(1) | $ | 1,204 |
|
____________________ | | (1) | Excludes expected cash collections on FG VIEs of $25 million. |
Scheduled Net Earned Premiums Financial Guaranty Insurance Contracts | | | | | | As of June 30, 2013 | | (in millions) | 2013 (July 1 - September 30) | $ | 119 |
| 2013 (October 1–December 31) | 113 |
| Subtotal 2013 | 232 |
| 2014 | 427 |
| 2015 | 374 |
| 2016 | 338 |
| 2017 | 302 |
| 2018 - 2022 | 1,161 |
| 2023 - 2027 | 731 |
| 2028 - 2032 | 436 |
| After 2032 | 407 |
| Total present value basis(1) | 4,408 |
| Discount | 247 |
| Total future value | $ | 4,655 |
|
____________________ | | (1) | Excludes scheduled net earned premiums on consolidated FG VIEs of $210 million. |
Selected Information for Policies Paid in Installments
| | | | | | | | | | As of
June 30, 2013 | | As of
December 31, 2012 | | (dollars in millions) | Premiums receivable, net of ceding commission payable | $ | 915 |
| | $ | 1,005 |
| Gross deferred premium revenue | 1,725 |
| | 1,908 |
| Weighted-average risk-free rate used to discount premiums | 3.4 | % | | 3.5 | % | Weighted-average period of premiums receivable (in years) | 9.4 |
| | 9.6 |
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