The portfolio of outstanding exposures discussed in Note 3, Outstanding Exposure, and Note 4, Expected Loss to be Paid (Recovered), includes contracts that are accounted for as insurance contracts, derivatives and consolidated FG VIEs. Amounts presented in this note relate only to contracts accounted for as insurance, unless otherwise specified. See Note 6, Contracts Accounted for as Credit Derivatives, for amounts related to CDS and Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles, for amounts related to consolidated FG VIEs.

Premiums receivable represent the present value of contractual or expected future premium collections, discounted using risk-free rates. Unearned premium reserve represents deferred premium revenue less claim payments made (net of recoveries received) that have not yet been recognized in the statement of operations (i.e., contra-paid). The following discussion relates to the deferred premium revenue component of the unearned premium reserve, while the contra-paid is discussed below under “Losses and Recoveries.”

•For premiums received upfront on financial guaranty insurance contracts that were originally underwritten by the Company, deferred premium revenue is equal to the amount of cash received. Upfront premiums typically relate to public finance transactions.

•For premiums received in installments on financial guaranty insurance contracts that were originally underwritten by the Company, deferred premium revenue is calculated as the present value (discounted at risk free rates) of either: (i) contractual premiums due; or (ii) in cases where the underlying collateral is composed of homogeneous pools of assets, the expected premiums to be collected over the life of the contract. To be considered a homogeneous pool of assets, prepayments must be contractually allowable, the amount of prepayments must be probable, and the timing and amount of prepayments must be reasonably estimable. Installment premiums typically relate to structured finance (e.g., securitized debt) and infrastructure transactions, where the insurance premium rate is determined at the inception of the contract, but the insured par is subject to prepayment throughout the life of the transaction.

•For financial guaranty insurance contracts acquired in a business combination, deferred premium revenue is equal to the fair value of the Company’s stand-ready obligation portion of the insurance contract, at the date of acquisition, based on what a hypothetical similarly rated financial guaranty insurer would have charged for the contract at that date (not the discounted future cash flows under the insurance contract). The amount of deferred premium revenue may differ significantly from cash collections primarily due to fair value adjustments recorded in connection with a business combination.

When the Company adjusts prepayment assumptions for expected premium collections for obligations backed by homogeneous pools of contractually prepayable assets, an adjustment is recorded to the deferred premium revenue, with a corresponding adjustment to premiums receivable. Premiums receivable are discounted at the risk-free rate at inception and such discount rate is updated only when changes to prepayment assumptions are made that change the expected date of final maturity. Accretion of the discount on premiums receivable is reported in “net earned premiums”.

The Company recognizes deferred premium revenue as earned premium over the contractual period or expected period of the contract in proportion to the amount of insurance protection provided. As premium revenue is recognized, a corresponding decrease to the deferred premium revenue is recorded. The amount of insurance protection provided is a function of the insured par amount outstanding. Accordingly, the proportionate share of premium revenue recognized in a given reporting period is a constant rate calculated based on the relationship between the insured par amounts outstanding in the reporting period compared with the sum of each of the insured par amounts outstanding for all periods. When an insured financial obligation is retired before its maturity, the financial guaranty insurance contract is extinguished, and any nonrefundable deferred premium revenue related to that contract is accelerated and recognized as premium revenue. Any

For assumed reinsurance contracts, net earned premiums reported in the consolidated statements of operations are calculated based upon data received from ceding companies; however, some ceding companies report premium data between 30 and 90 days after the end of the reporting period. The Company estimates net earned premiums for the lag period. Differences between such estimates and actual amounts are recorded in the period in which the actual amounts are determined. When installment premiums are related to assumed reinsurance contracts, the Company assesses the credit quality and available liquidity of the ceding companies and the impact of any potential regulatory constraints to determine the collectability of such amounts.


	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

____________________


	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

Approximately 70% and 74% of gross premiums receivable, net of commissions payable at December 31, 2023 and December 31, 2022, respectively, are denominated in currencies other than the U.S. dollar, primarily the pound sterling and euro.

The timing and cumulative amount of actual collections and net earned premiums may differ from those of expected collections and of expected net earned premiums in the table below due to factors such as foreign exchange rate fluctuations, counterparty collectability issues, accelerations, commutations, restructurings, changes in the consumer price indices, changes in expected lives and new business.


	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


	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

Deferred acquisition costs (DAC) reported on the consolidated balance sheet represent the unamortized portion of (i) policy acquisition costs that are directly related and essential to the successful acquisition of an insurance contract and (ii) ceding commission income and expense. Deferred policy acquisition costs include the cost of underwriting personnel attributable to successful underwriting efforts. The Company conducts an annual time study, which requires the use of judgement, to estimate the amount of costs to be deferred.

DAC is generally amortized in proportion to net earned premiums. Amortization of deferred policy acquisition costs includes the accretion of discount on ceding commission receivable and payable. When an insured obligation is retired early, the remaining related DAC is expensed at that time.

Costs incurred for soliciting potential customers, market research, training, administration, unsuccessful acquisition efforts, and product development as well as overhead costs are charged to expense as incurred.


	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 reported on the balance sheet relates only to direct and assumed reinsurance contracts that are accounted for as insurance, substantially all of which are financial guaranty insurance contracts. The portion of any contract’s reserve that is ceded to a reinsurer is reported as reinsurance recoverable on unpaid losses and reported in other assets. Any loss and LAE reserves related to FG VIEs are eliminated upon consolidation. Any expected losses to be paid (recovered) on credit derivatives are reflected in the fair value of credit derivatives.

Under financial guaranty insurance accounting, the sum of unearned premium reserve and loss and LAE reserve represents the Company’s stand‑ready obligation. A loss and LAE reserve for a financial guaranty insurance contract is recorded only to the extent, and for the amount, that expected loss to be paid plus contra-paid (total losses) exceed the deferred premium revenue, on a contract-by-contract basis. As a result, the Company has expected loss to be paid that has not yet been expensed. Such amounts will be recognized in future periods as deferred premium revenue amortizes into income.

When a claim or LAE payment is made on a contract, the Company first reduces any recorded loss and LAE reserve. To the extent there is insufficient loss and LAE reserve on a contract, then such claim payment is recorded as contra-paid, which reduces the unearned premium reserve. The contra-paid is recognized in “loss and loss adjustment expenses (benefit)” in the consolidated statement of operations when and for the amount that total losses exceed the remaining deferred premium revenue on the insurance contract. “Loss and loss adjustment expenses (benefit)” in the consolidated statement of operations is presented net of cessions to reinsurers.

Expected losses to be paid are reduced when a claim payment (or estimated future claim payment) entitles the Company to cash flows associated with salvage and subrogation rights from the underlying collateral of, or other recoveries relating to an insured exposure. Such reduction in expected loss to be paid can result in one of the following: (i) a reduction in the corresponding loss and LAE reserve with a benefit to the consolidated statement of operations; (ii) no effect on the consolidated balance sheet or statements of operations, if total loss is not in excess of deferred premium revenue; or (iii) the recording of a salvage asset with a benefit to the consolidated statements of operations if the transaction is in a net recovery position at the reporting date. The ceded component of salvage and subrogation recoverable is reported in “other liabilities.”

Expected loss to be expensed represents past or expected future financial guaranty insurance net claim payments that have not yet been expensed. Such amounts will be expensed in future periods as deferred premium revenue amortizes into income. Expected loss to be expensed is the Company’s projection of incurred losses that will be recognized in future periods, excluding accretion of discount.

Loss and LAE reserve and salvage and subrogation recoverable are discounted at risk-free rates for U.S. dollar denominated financial guaranty insurance obligations that ranged from 3.79% to 5.40% with a weighted average of 4.17% as of December 31, 2023, and 3.82% to 4.69% with a weighted average of 4.15% as of December 31, 2022.


	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

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).


	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

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.


	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


	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)


	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


	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

(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.

The Company cedes portions of its gross insured financial guaranty exposure (Ceded Financial Guaranty Business) to third-party insurers. This Ceded Financial Guaranty Business represents $401 million, or approximately 0.1%, of the Company’s total gross insured debt service of $398.0 billion, as of December 31, 2023. The Company also cedes $482 million of its $3.8 billion in gross insured specialty business exposure.

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).


	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)