Insurance Premiums

12 Months Ended

Dec. 31, 2015

Text Block [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 31,2015 and 2014, premiums receivable was $792 million and $875 million, 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. Premiums receivable also includes the current amount of premiums due from installment policies insuring consolidated VIEs when the premiums are payable by third-parties on behalf of the consolidated VIEs.

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 31,2015 and 2014 was insignificant.

As of December 31,2015 and 2014, the risk-free rate used to discount future installment premiums was 2.7% and 2.8%, respectively, and the weighted average expected collection term of the premiums receivable was9.08 years and 9.18 years, respectively. As of December 31,2015 and 2014, reinsurance premiums payable was $38million and $56 million, respectively, and is included in “Other liabilities” in the Company’s consolidated balance sheets. 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 endedDecember 31,2015 and 2014:

In millions

Adjustments

Premiums

Premiums

Changes in

Accretion of

Premiums

Receivable as of

Premium

from New

Expected

Premiums

Receivable as of

December 31,

Payments

Business

Term of

Receivable

December 31,

2014

Received

Written

Policies

Discount

Other (1)

2015

$

875

$

(98)

$

5

$

(16)

$

21

$

5

$

792

__________

(1) - Includes premiums from third-parties on behalf of consolidated VIEs, offset by net unrealized losses due to changes in foreign currency exchange rates.

In millions

Adjustments

Premiums

Premiums

Changes in

Accretion of

Premiums

Receivable as of

Premium

from New

Expected

Premiums

Receivable as of

December 31,

Payments

Business

Term of

Receivable

December 31,

2013

Received

Written

Policies

Discount

Other (1)

2014

$

1,051

$

(120)

$

6

$

(50)

$

26

$

(38)

$

875

__________

(1) - Primarily consists of net unrealized 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:

	Expected
	Collection of
In millions	Premiums
Three months ending:
March 31, 2016	$	17
June 30, 2016		28
September 30, 2016		18
December 31, 2016		21
Twelve months ending:
December 31, 2017		75
December 31, 2018		68
December 31, 2019		64
December 31, 2020		61
Five years ending:
December 31, 2025		250
December 31, 2030		175
December 31, 2035 and thereafter		175
Total	$	952

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

									Total
									Expected
	Unearned		Expected Future						Future
	Premium			Premium Earnings					Premium
In millions	Revenue		Upfront		Installments		Accretion		Earnings
December 31, 2015	$	1,591
Three months ending:
March 31, 2016		1,549	$	22	$	20	$	5	$	47
June 30, 2016		1,507		22		20		5		47
September 30, 2016		1,467		21		19		5		45
December 31, 2016		1,428		20		19		5		44
Twelve months ending:
December 31, 2017		1,284		77		67		18		162
December 31, 2018		1,151		70		63		16		149
December 31, 2019		1,028		64		59		15		138
December 31, 2020		914		58		56		14		128
Five years ending:
December 31, 2025		481		217		216		53		486
December 31, 2030		224		123		134		30		287
December 31, 2035 and thereafter		-		108		116		30		254
Total			$	802	$	789	$	196	$	1,787