Insurance Premiums

12 Months Ended

Dec. 31, 2018

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 31,2018 and 2017, premiums receivable were $296 million and $369 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 31,2018 and 2017 was insignificant.

As of December 31,2018 and 2017, the weighted average risk-free rates used to discount future installment premiums were3% and 2.8%, respectively, and the weighted average expected collection term of the premiums receivable was9.59 years and 9.45 years, respectively. As of December 31,2018 and 2017, reinsurance premiums payable was $20millionand $25 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 31,2018 and 2017.

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,

2017

Received

Written

Policies

Discount (1)

Other (2)

2018

$

369

$

(74)

$

-

$

2

$

9

$

(10)

$

296

__________

(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,

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.

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, 2019	$	4
June 30, 2019		12
September 30, 2019		6
December 31, 2019		12
Twelve months ending:
December 31, 2020		32
December 31, 2021		30
December 31, 2022		26
December 31, 2023		23
Five years ending:
December 31, 2028		86
December 31, 2033		54
December 31, 2038 and thereafter		72
Total	$	357

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, 2018	$	587
Three months ending:
March 31, 2019		569	$	9	$	9	$	2	$	20
June 30, 2019		552		9		8		2		19
September 30, 2019		535		9		8		2		19
December 31, 2019		518		9		8		2		19
Twelve months ending:
December 31, 2020		456		32		30		7		69
December 31, 2021		401		28		27		6		61
December 31, 2022		352		25		24		6		55
December 31, 2023		309		22		21		5		48
Five years ending:
December 31, 2028		158		81		70		20		171
December 31, 2033		79		42		37		12		91
December 31, 2038 and thereafter		-		33		46		11		90
Total			$	299	$	288	$	75	$	662