Insurance Premiums

12 Months Ended

Dec. 31, 2011

Insurance Premiums [Abstract]

Insurance Premiums

Note 5: Insurance Premiums

The Company recognizes and measures premiums related to financial guarantee (non-derivative) insurance and reinsurance contracts in accordance with the accounting principles for financial guarantee insurance contracts.

As of December 31, 2011 and 2010, the Company reported premiums receivable of $1.4 billion and $1.6 billion, respectively, primarily related to installment policies for which premiums will be collected over the estimated term of the contracts. Premiums receivable for an installment policy is initially measured at the present value of premiums expected to be collected over the expected period or contract period of the policy using a risk-free discount rate. Premiums receivable for policies that use the expected period of risk due to expected prepayments are adjusted in subsequent measurement periods when prepayment assumptions change using the risk-free discount rate as of the remeasurement date. As of December 31, 2011 and 2010, the weighted average risk-free rate used to discount future installment premiums was 2.8% and 3.1%, respectively, and the weighted average expected collection term of the premiums receivable was 9.13 years and 9.16 years, respectively.

The Company evaluates whether any premiums receivable are uncollectible at each balance sheet date. If the Company determines that premiums are uncollectible, it records a write-off of such amounts in current earnings. The majority of the Company's premiums receivable consists of the present values of future installment premiums that are not yet billed or due primarily from structured finance transactions. Given that premiums due to MBIA typically have priority over most other payment obligations of structured finance transactions, the Company determined that the amount of uncollectible premiums as of December 31, 2011 and 2010 was insignificant.

As of December 31, 2011 and 2010, the Company reported reinsurance premiums payable of $64 million and $71 million, respectively, which represents the portion of the Company's premiums receivable that is due to reinsurers. The reinsurance premiums payable is accreted and paid to reinsurers as premiums due to MBIA are accreted and collected.

The following tables present a roll forward of the Company's premiums receivable for the years ended December 31, 2011 and 2010:

In millions						Adjustments
Premiums Receivable as of December 31, 2010	Premium Payments Received			Premiums from New Business Written		Changes in Expected Term of Policies			Accretion of Premiums Receivable Discount		Other (1)		Premiums Receivable as of December 31, 2011		Reinsurance Premiums Payable as of December 31, 2011
$                      1,589	$	(212	)	$	—	$	(76	)	$	40	$	19	$	1,360	$	64

(1)—Primarily consists of unrealized gains (losses) due to foreign currency exchange rates.

In millions									Adjustments
Premiums Receivable as of December 31, 2009	Accounting Transition Adjustment(1)			Premium Payments Received			Premiums from New Business Written		Changes in Expected Term of Policies			Accretion of Premiums Receivable Discount		Other(2)			Premiums Receivable as of December 31, 2010		Reinsurance Premiums Payable as of December 31, 2010
$                      2,021	$	(150	)	$	(253	)	$	12	$	(42	)	$	48	$	(47	)	$	1,589	$	71

(1)—Reflects the adoption of the accounting principles for the consolidation of VIEs.

(2)—Primarily consists of unrealized gains (losses) due to foreign currency exchange rates.

The following table presents the undiscounted future amount of premiums expected to be collected and the period in which those collections are expected to occur:

In millions	Expected Collection of Premiums
Three months ended:
March 31, 2012	$	38
June 30, 2012		57
September 30, 2012		34
December 31, 2012		43
Twelve months ended:
December 31, 2013		146
December 31, 2014		129
December 31, 2015		120
December 31, 2016		111
Five years ended:
December 31, 2021		419
December 31, 2026		283
December 31, 2031 and thereafter		351
Total	$	1,731

The following table presents the unearned premium revenue balance and future expected premium earnings as of and for the periods presented:

			Expected Future Premium Earnings
In millions	Unearned Premium Revenue		Upfront		Installments		Accretion		Total Expected Future Premium Earnings
December 31, 2011	$	3,515
Three months ended:
March 31, 2012		3,420	$	55	$	40	$	9	$	104
June 30, 2012		3,328		54		38		9		101
September 30, 2012		3,240		53		35		9		97
December 31, 2012		3,156		51		33		8		92
Twelve months ended:
December 31, 2013		2,835		195		126		32		353
December 31, 2014		2,543		180		112		30		322
December 31, 2015		2,275		165		103		28		296
December 31, 2016		2,030		150		95		26		271
Five years ended:
December 31, 2021		1,099		581		350		99		1,030
December 31, 2026		533		346		220		61		627
December 31, 2031 and thereafter		—		296		237		63		596
Total			$	2,126	$	1,389	$	374	$	3,889