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Contracts Accounted for as Financial Guaranty Insurance | 3 Months Ended
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Mar. 31, 2026
Insurance [Abstract] |
Contracts Accounted for as Financial Guaranty Insurance | Contracts Accounted for as Financial Guaranty Insurance The portfolio of outstanding exposures discussed in Note 4. Outstanding Exposure, and Note 5. Expected Loss to be Paid (Recovered), includes contracts that are accounted for as FG insurance contracts, credit derivatives and consolidated FG VIEs. Amounts presented in this note relate only to contracts accounted for as FG insurance, unless otherwise specified. See Note 8. Derivatives, for amounts related to CDS, and Note 10. Variable Interest Entities, for amounts related to consolidated FG VIEs. Premiums Net Earned Premiums
|  |  | First Quarter
|  |  |  |  | 2026 |  | 2025
|  |  |  |  | (in millions)
FG insurance: |  |  |  |  |  |  |
Scheduled net earned premiums |  |  |  |  | $ | 76 |  |  | $ | 76 |
Accelerations from refundings, terminations and modifications (1) |  |  |  |  | (6) |  |  | 5 |
Accretion of discount on net premiums receivable |  |  |  |  | 10 |  |  | 9 |
FG insurance net earned premiums |  |  |  |  | 80 |  |  | 90 |
Specialty net earned premiums |  |  |  |  | 2 |  |  | 1 |
Net earned premiums |  |  |  |  | $ | 82 |  |  | $ | 91 |
____________________ (1) Negative net earned premiums for first quarter 2026 resulted from significant modifications to FG insurance contracts. Gross Premium Receivable, Net of Commissions Payable on Assumed Business and Allowance for Credit Losses Roll Forward
| First Quarter
| 2026 |  | 2025
| (in millions)
Beginning of year | $ | 1,572 |  |  | $ | 1,551 |
Less: Specialty insurance premium receivable | 2 |  |  | 1 |
FG insurance premiums receivable | 1,570 |  |  | 1,550 |
New business and supplemental premiums, net of commissions | 72 |  |  | 39 |
Gross premiums received, net of commissions | (74) |  |  | (58) |
Adjustments: |  |  |
Changes in the expected term and debt service assumptions | (4) |  |  | (5) |
Accretion of discount, net of commissions on assumed business | 2 |  |  | 8 |
Foreign exchange gain (loss) on remeasurement | (25) |  |  | 33 |
FG insurance premium receivable | 1,541 |  |  | 1,567 |
Specialty insurance premium receivable | 2 |  |  | 1 |
March 31, | $ | 1,543 |  |  | $ | 1,568 |
Approximately 67% and 68% of gross premiums receivable, net of commissions payable, as of March 31, 2026 and December 31, 2025, respectively, are denominated in currencies other than the U.S. dollar, primarily the pound sterling and euro. The timing and cumulative amount of actual collections and net earned premiums may differ from those of expected collections and of expected net earned premiums in the table below due to factors such as foreign exchange rate fluctuations, counterparty collectability issues, accelerations, commutations, restructurings, changes in the consumer price indices, changes in expected lives, new business and changes in ratings of the insured obligations and/or the Company’s FG insurance subsidiaries. FG Insurance Expected Future Premium Collections and Earnings
| As of March 31, 2026
|  |  | Future Net Premiums to be Earned (2)
| Future Premiums to be Collected (1) |  | Earnings of Deferred Premium Revenue |  | Accretion of Discount |  | Total
| (in millions)
2026 (April 1 - June 30) | $ | 82 |  |  | $ | 81 |  |  | $ | 10 |  |  | $ | 91 |
2026 (July 1 - September 30) | 52 |  |  | 79 |  |  | 10 |  |  | 89 |
2026 (October 1 - December 31) | 31 |  |  | 77 |  |  | 10 |  |  | 87 |
Subtotal 2026 | 165 |  |  | 237 |  |  | 30 |  |  | 267 |
2027 | 139 |  |  | 289 |  |  | 37 |  |  | 326 |
2028 | 129 |  |  | 270 |  |  | 34 |  |  | 304 |
2029 | 115 |  |  | 250 |  |  | 32 |  |  | 282 |
2030 | 102 |  |  | 232 |  |  | 30 |  |  | 262 |
2031-2035 | 417 |  |  | 902 |  |  | 128 |  |  | 1,030 |
2036-2040 | 331 |  |  | 584 |  |  | 92 |  |  | 676 |
2041-2045 | 250 |  |  | 387 |  |  | 60 |  |  | 447 |
2046-2050 | 187 |  |  | 248 |  |  | 33 |  |  | 281 |
2051-2055 | 106 |  |  | 120 |  |  | 14 |  |  | 134 |
After 2055 | 101 |  |  | 86 |  |  | 10 |  |  | 96 |
Total | $ | 2,042 |  |  | $ | 3,605 |  |  | $ | 500 |  |  | $ | 4,105 |
____________________ (1) Net of assumed commissions payable. (2) Net of reinsurance. Selected Information for FG Insurance Policies with Premiums Paid in Installments
| As of
| March 31, 2026 |  | December 31, 2025
| (dollars in millions)
Premiums receivable, net of commissions payable | $ | 1,541 |  | $ | 1,570
Deferred premium revenue | $ | 1,825 |  | $ | 1,831
Weighted-average risk-free rate used to discount premiums | 2.8% |  | 2.7%
Weighted-average period of premiums receivable (in years) | 11.7 |  | 11.7
FG Insurance Contracts’ Losses Reported in the Condensed Consolidated Financial Statements Loss and LAE reserve and salvage and subrogation recoverable are discounted at risk-free rates for FG insurance obligations that ranged from 1.93% to 5.68% with a weighted average of 4.17% as of March 31, 2026 and 1.93% to 5.35% with a weighted average of 3.93% as of December 31, 2025. The following table provides information on net reserve (salvage), which includes loss and LAE reserve and salvage and subrogation recoverable, both net of reinsurance. Net Reserve (Salvage) by Sector
|  | As of
Sector |  | March 31, 2026 |  | December 31, 2025
|  | (in millions)
Public finance: |  |  |  |
U.S. public finance |  | $ | (64) |  |  | $ | (66) |
Non-U.S. public finance |  | 24 |  |  | 18 |
Public finance |  | (40) |  |  | (48) |
Structured finance: |  |  |  |
U.S. RMBS |  | (143) |  |  | (150) |
Other structured finance |  | 59 |  |  | 59 |
Structured finance |  | (84) |  |  | (91) |
Total |  | $ | (124) |  |  | $ | (139) |
The table below provides a reconciliation of net expected loss to be paid (recovered) for FG insurance contracts to net expected loss to be expensed. Expected loss to be paid (recovered) for FG insurance contracts differs from expected loss to be expensed due to: (i) the contra-paid, which represents the claim payments made and recoveries received that have not yet been recognized in the statements of operations; (ii) salvage and subrogation recoverable for transactions that are in a net recovery position where the Company has not yet received recoveries on claims previously paid (and therefore recognized in income but not yet received); and (iii) loss reserves that have already been established (and therefore expensed but not yet paid). Reconciliation of Net Expected Loss to be Paid (Recovered) to Net Expected Loss to be Expensed FG Insurance Contracts
| As of March 31, 2026
| (in millions)
Net expected loss to be paid (recovered) - FG insurance | $ | 129 |
Contra-paid, net | 22 |
Salvage and subrogation recoverable, net | 433 |
Loss and LAE reserve - FG insurance contracts, net of reinsurance | (309) |
Net expected loss to be expensed (present value) | $ | 275 |
The following table provides a schedule of the expected timing of financial guaranty net expected losses to be expensed. The amount and timing of actual loss and LAE may differ from the estimates shown below due to factors such as accelerations, commutations, changes in expected lives, changes in foreign exchange rates and updates to loss estimates. This table excludes amounts related to FG VIEs, which are eliminated in consolidation. Net Expected Loss to be Expensed FG Insurance Contracts
| As of March 31, 2026
| (in millions)
2026 (April 1 - June 30) | $ | 4 |
2026 (July 1 - September 30) | 3 |
2026 (October 1 - December 31) | 3 |
Subtotal 2026 | 10 |
2027 | 18 |
2028 | 18 |
2029 | 18 |
2030 | 16 |
2031-2035 | 68 |
2036-2040 | 42 |
2041-2045 | 34 |
2046-2050 | 32 |
2051-2055 | 16 |
After 2055 | 3 |
Net expected loss to be expensed (present value) | 275 |
Future expected accretion | 19 |
Total expected future loss and LAE | $ | 294 |
The following table presents the loss and LAE (benefit) reported in the condensed consolidated statements of operations by sector for FG insurance contracts. Loss and LAE (Benefit) by Sector
|  |  |  | First Quarter
Sector |  |  |  |  |  | 2026 |  | 2025
|  |  |  |  | (in millions)
Public finance: |  |  |  |  |  |  |  |
U.S. public finance |  |  |  |  |  | $ | 12 |  |  | $ | 36 |
Non-U.S. public finance |  |  |  |  |  | 7 |  |  | 6 |
Public finance |  |  |  |  |  | 19 |  |  | 42 |
Structured finance: |  |  |  |  |  |  |  |
U.S. RMBS |  |  |  |  |  | (1) |  |  | — |
Other structured finance |  |  |  |  |  | (1) |  |  | (2) |
Structured finance |  |  |  |  |  | (2) |  |  | (2) |
Loss and LAE (benefit) |  |  |  |  |  | $ | 17 |  |  | $ | 40 |
The following tables provide information on FG insurance contracts categorized as BIG. FG Insurance BIG Transaction Loss Summary As of March 31, 2026
| Gross |  | Net Total BIG
| BIG 1 |  | BIG 2 |  | BIG 3 |  | Total BIG |
| (dollars in billions)
Number of risks (1) | 86 |  |  | 14 |  |  | 92 |  |  | 192 |  |  | 192 |
Remaining weighted-average period (in years) | 14.0 |  | 23.8 |  | 5.2 |  | 18.5 |  | 18.6
Outstanding exposure: |  |  |  |  |  |  |  |  |
Par | $ | 3.61 |  |  | $ | 3.82 |  |  | $ | 1.19 |  |  | $ | 8.62 |  |  | $ | 8.61 |
Interest | 2.46 |  |  | 4.73 |  |  | 0.29 |  |  | 7.48 |  |  | 7.48 |
Total (2) | $ | 6.07 |  |  | $ | 8.55 |  |  | $ | 1.48 |  |  | $ | 16.10 |  |  | $ | 16.09 |
| Gross |  | Net Total BIG
| BIG 1 |  | BIG 2 |  | BIG 3 |  | Total BIG |
| (in millions)
Expected cash outflows (inflows) | $ | 915 |  |  | $ | 1,127 |  |  | $ | 1,219 |  |  | $ | 3,261 |  |  | $ | 3,253 |
Potential recoveries (3) | (1,192) |  |  | (835) |  |  | (1,088) |  |  | (3,115) |  |  | (3,105) |
Subtotal | (277) |  |  | 292 |  |  | 131 |  |  | 146 |  |  | 148 |
Discount | 85 |  |  | (101) |  |  | (3) |  |  | (19) |  |  | (19) |
Expected losses to be paid (recovered) | $ | (192) |  |  | $ | 191 |  |  | $ | 128 |  |  | $ | 127 |  |  | $ | 129 |
Deferred premium revenue | $ | 161 |  |  | $ | 160 |  |  | $ | 99 |  |  | $ | 420 |  |  | $ | 420 |
Reserves (salvage) | $ | (251) |  |  | $ | 77 |  |  | $ | 48 |  |  | $ | (126) |  |  | $ | (124) |
FG Insurance BIG Transaction Loss Summary As of December 31, 2025
| Gross |  | Net Total BIG
| BIG 1 |  | BIG 2 |  | BIG 3 |  | Total BIG |
| (dollars in billions)
Number of risks (1) | 87 |  |  | 13 |  |  | 95 |  |  | 195 |  |  | 195 |
Remaining weighted-average period (in years) | 14.0 |  | 24.1 |  | 5.4 |  | 18.7 |  | 18.7
Outstanding exposure: |  |  |  |  |  |  |  |  |
Par | $ | 3.73 |  |  | $ | 3.81 |  |  | $ | 1.21 |  |  | $ | 8.75 |  |  | $ | 8.73 |
Interest | 2.52 |  |  | 4.84 |  |  | 0.32 |  |  | 7.68 |  |  | 7.68 |
Total (2) | $ | 6.25 |  |  | $ | 8.65 |  |  | $ | 1.53 |  |  | $ | 16.43 |  |  | $ | 16.41 |
| Gross |  | Net Total BIG
| BIG 1 |  | BIG 2 |  | BIG 3 |  | Total BIG |
| (in millions)
Expected cash outflows (inflows) | $ | 172 |  |  | $ | 1,141 |  |  | $ | 1,242 |  |  | $ | 2,555 |  |  | $ | 2,547 |
Potential recoveries (3) | (445) |  |  | (877) |  |  | (1,110) |  |  | (2,432) |  |  | (2,422) |
Subtotal | (273) |  |  | 264 |  |  | 132 |  |  | 123 |  |  | 125 |
Discount | 47 |  |  | (77) |  |  | (8) |  |  | (38) |  |  | (38) |
Expected losses to be paid (recovered) | $ | (226) |  |  | $ | 187 |  |  | $ | 124 |  |  | $ | 85 |  |  | $ | 87 |
Deferred premium revenue | $ | 164 |  |  | $ | 162 |  |  | $ | 103 |  |  | $ | 429 |  |  | $ | 429 |
Reserves (salvage) | $ | (255) |  |  | $ | 71 |  |  | $ | 43 |  |  | $ | (141) |  |  | $ | (140) |
____________________ (1)A risk represents the aggregate of the financial guaranty policies that share the same revenue source for purposes of making debt service payments. (2)Includes amounts related to FG VIEs. (3)Represents expected inflows from future payments by obligors pursuant to restructuring agreements, settlements, excess spread on any underlying collateral and other estimated recoveries. Potential recoveries also include recoveries on certain investment grade credits, related mainly to exposures that were previously BIG and for which claims have been paid in the past.

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