Insurance Premiums

12 Months Ended

Dec. 31, 2019

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, 2019 and 2018, premiums receivable were $249 million and $296 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 generally are more senior over most other payment obligations of insured transactions, the Company wrote off an insignificant amount of premiums it deemed uncollectible as of December 31, 2019 and 2018.

As of December 31, 2019 and 2018, the weighted average risk-free rates used to discount future installment premiums were 2.8% and 3%, respectively, and the weighted average expected collection term of the premiums receivable was

8.86 years and

9.59 years

respectively. As of December 31, 2019 and 2018, reinsurance premiums payable was $17 million and $20 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 ended December 31, 2019 and 2018.


In millions					Adjustments
Premiums Receivable as of December 31, 2018	Premium Payments Received		Premiums from New Business Written		Changes in Expected Term of Policies		Accretion of Premiums Receivable Discount (1)		Other (2)		Premiums Receivable as of December 31, 2019
$ 296	$	(43)	$	—	$	(4)	$	7	$	(7)	$	249

(1)—Recorded within premiums earned on MBIA’s consolidated statement of operations.

(2)—Primarily relates to the write off of uncollectible premiums and to a lesser extent realized gains due to changes in foreign currency exchange rates.


In millions					Adjustments
Premiums Receivable as of December 31, 2017	Premium Payments Received		Premiums from New Business Written		Changes in Expected Term of Policies		Accretion of Premiums Receivable Discount (1)		Other (2)		Premiums Receivable as of December 31, 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.

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, 2020	$	3
June 30, 2020		10
September 30, 2020		6
December 31, 2020		11

Twelve months ending:
December 31, 2021		28
December 31, 2022		24
December 31, 2023		23
December 31, 2024		21

Five years ending:
December 31, 2029		75
December 31, 2034		50
December 31, 2039 and thereafter		63

Total	$	314

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




	Unearned		Expected Future						Total Expected
	Premium		Premium Earnings						Future Premium
In millions	Revenue		Upfront		Installments		Accretion		Earnings
December 31, 2019	$	482

Three months ending:
March 31, 2020		466	$	8	$	8	$	2	$	18
June 30, 2020		451		8		7		2		17
September 30, 2020		437		7		7		2		16
December 31, 2020		423		7		7		2		16

Twelve months ending:
December 31, 2021		370		26		27		6		59
December 31, 2022		323		23		24		6		53
December 31, 2023		282		20		21		5		46
December 31, 2024		245		18		19		5		42

Five years ending:
December 31, 2029		122		63		60		17		140
December 31, 2034		59		29		34		11		74
December 31, 2039 and thereafter		—		20		39		7		66

Total			$	229	$	253	$	65	$	547