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Expected Loss to be Paid (Recovered) (Tables)

12 Months Ended

Dec. 31, 2022

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 December 31,					Year Ended December 31,
Accounting Model	2022			2021		2022		2021		2020
	(in millions)
Insurance (see Note 5)	$	205		$	364	$	(112)	$	(281)	$	142
FG VIEs (see Note 8)	314		(1)	42		(17)		(20)		1
Credit derivatives (see Note 6)	3			5		4		14		2
Total	$	522		$	411	$	(125)	$	(287)	$	145

____________________

(1) The increase in 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 as a result of the 2022 Puerto Rico Resolutions. Prior to the 2022 Puerto Rico Resolutions, all Puerto Rico Exposures were accounted for as insurance.

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 3.82% to 4.69% with a weighted average of 4.08% as of December 31, 2022 and 0.00% to 1.98% with a weighted average of 1.02% as of December 31, 2021. Expected losses to be paid for U.S. dollar denominated transactions represented approximately 98.5% and 97.2% of the total as of December 31, 2022 and December 31, 2021, respectively.

Net Expected Loss to be Paid (Recovered)

Roll Forward


	Year Ended December 31,
	2022		2021		2020
	(in millions)
Net expected loss to be paid (recovered), beginning of period	$	411	$	529	$	737
Economic loss development (benefit) due to:
Accretion of discount	16		7		9
Changes in discount rates	(115)		(33)		13
Changes in timing and assumptions	(26)		(261)		123
Total economic loss development (benefit)	(125)		(287)		145
Net (paid) recovered losses (1)	236		169		(353)
Net expected loss to be paid (recovered), end of period	$	522	$	411	$	529

____________________

(1) Net (paid) recovered losses in 2022 include the net amounts received pursuant to the Puerto Rico Resolutions, as described in Note 3, Outstanding Exposure.

Net Expected Loss to be Paid (Recovered)

Roll Forward by Sector


	Year Ended December 31, 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 December 31, 2022
	(in millions)
Public finance:
U.S. public finance	$	197	$	19	$	187	$	403
Non-U.S. public finance	12		(2)		(1)		9
Public finance	209		17		186		412
Structured finance:
U.S. RMBS	150		(143)		59		66
Other structured finance	52		1		(9)		44
Structured finance	202		(142)		50		110
Total	$	411	$	(125)	$	236	$	522


	Year Ended December 31, 2021
Sector	Net Expected Loss to be Paid (Recovered) as of December 31, 2020		Economic Loss Development (Benefit)		Net (Paid) Recovered Losses (1)		Net Expected Loss to be Paid (Recovered) as of December 31, 2021
	(in millions)
Public finance:
U.S. public finance	$	305	$	(182)	$	74	$	197
Non-U.S. public finance	36		(22)		(2)		12
Public finance	341		(204)		72		209
Structured finance:
U.S. RMBS	148		(100)		102		150
Other structured finance	40		17		(5)		52
Structured finance	188		(83)		97		202
Total	$	529	$	(287)	$	169	$	411


	Year Ended December 31, 2020
Sector	Net Expected Loss to be Paid (Recovered) as of December 31, 2019		Economic Loss Development (Benefit)		Net (Paid) Recovered Losses (1)		Net Expected Loss to be Paid (Recovered) as of December 31, 2020
	(in millions)
Public finance:
U.S. public finance	$	531	$	190	$	(416)	$	305
Non-U.S. public finance	23		13		—		36
Public finance	554		203		(416)		341
Structured finance:
U.S. RMBS	146		(71)		73		148
Other structured finance	37		13		(10)		40
Structured finance	183		(58)		63		188
Total	$	737	$	145	$	(353)	$	529

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(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”.

The tables above include: (a) net LAE paid of $33 million, $36 million and $25 million for the years ended

December 31, 2022, 2021 and 2020, respectively; and (b) net expected LAE to be paid of $11 million as of December 31, 2022 and $26 million as of December 31, 2021.

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

Net Economic Loss Development (Benefit)

U.S. RMBS


	Year Ended December 31,
	2022		2021		2020
	(in millions)
First lien U.S. RMBS	$	(36)	$	—	$	(45)
Second lien U.S. RMBS	(107)		(100)		(26)

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

First Lien U.S. RMBS Liquidation Rates


	As of December 31,
	2022	2021
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%

Key Assumptions in Base Scenario Expected Loss Estimates

First Lien U.S. RMBS


	As of December 31, 2022					As of December 31, 2021
	Range				Weighted Average	Range				Weighted Average
Alt-A and Prime:
Plateau CDR	1.6	%	–	11.5%	5.1%	0.9	%	–	11.6%	5.9%
Final CDR	0.1	%	–	0.6%	0.3%	0.0	%	–	0.6%	0.3%
Initial loss severity:
2005 and prior	50%					60%
2006	50%					60%
2007+	50%					60%
Option ARM:
Plateau CDR	2.0	%	–	7.7%	4.3%	1.8	%	–	11.9%	5.6%
Final CDR	0.1	%	–	0.4%	0.2%	0.1	%	–	0.6%	0.3%
Initial loss severity:
2005 and prior	50%					60%
2006	50%					60%
2007+	50%					60%
Subprime:
Plateau CDR	2.7	%	–	9.7%	5.6%	2.9	%	–	10.0%	6.0%
Final CDR	0.1	%	–	0.5%	0.3%	0.1	%	–	0.5%	0.3%
Initial loss severity:
2005 and prior	50%					60%
2006	50%					60%
2007+	50%					60%

Key Assumptions in Base Case Expected Loss Estimates Second Lien RMBS

Key Assumptions in Base Scenario Expected Loss Estimates

HELOCs


	As of December 31, 2022					As of December 31, 2021
	Range				Weighted Average	Range				Weighted Average
Plateau CDR	0.4	%	–	8.4%	3.5%	6.5	%	–	39.6%	16.4%
Final CDR trended down to	0.0	%	–	0.4%	0.2%	1.0%
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%