Insurance Premiums

12 Months Ended

Dec. 31, 2017

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 31,2017 and 2016, premiums receivable was $369 million and $409 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 31,2017 and 2016 was insignificant.

As of December 31,2017 and 2016, the risk-free rate used to discount future installment premiums was 2.8%, and the weighted average expected collection term of the premiums receivable was9.45 years and 10.07 years, respectively. As of December 31,2017 and 2016, reinsurance premiums payable was $25millionand $26 million, respectively, and is included in “Other liabilities” in the Company’s consolidated balance sheets. In addition, as of December 31, 2016, $6 million was included in “Liabilities held for sale” in the Company’s consolidated balance sheet. 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 31,2017 and 2016.

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,

2016

Received

Written

Policies

Discount (1)

Other (2)

2017

$

409

$

(50)

$

3

$

(15)

$

10

$

12

$

369

__________

(1) - Recorded within premiums earned on MBIA's consolidated statement of operations.

(2) - Primarily consists of realized gains 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,

2015

Received

Written

Policies

Discount (1)

Other (2)

2016

$

792

$

(115)

$

10

$

(5)

$

19

$

(292)

$

409

__________

(1) - Recorded within premiums earned on MBIA's consolidated statement of operations.

(2) - Primarily consists of premiums receivable of $267 million reported within "Assets held for sale" on MBIA's consolidated balance sheet.

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, 2018	$	5
June 30, 2018		15
September 30, 2018		7
December 31, 2018		14
Twelve months ending:
December 31, 2019		38
December 31, 2020		35
December 31, 2021		32
December 31, 2022		28
Five years ending:
December 31, 2027		120
December 31, 2032		71
December 31, 2037 and thereafter		81
Total	$	446

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, 2017	$	752
Three months ending:
March 31, 2018		729	$	12	$	11	$	2	$	25
June 30, 2018		707		12		10		2		24
September 30, 2018		686		11		10		2		23
December 31, 2018		665		11		10		2		23
Twelve months ending:
December 31, 2019		587		41		37		9		87
December 31, 2020		516		37		34		8		79
December 31, 2021		452		33		31		7		71
December 31, 2022		395		30		27		7		64
Five years ending:
December 31, 2027		195		105		95		25		225
December 31, 2032		94		54		47		14		115
December 31, 2037 and thereafter		-		40		54		13		107
Total			$	386	$	366	$	91	$	843