Annual report pursuant to Section 13 and 15(d)

Vacation Ownership Contract Receivables

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Vacation Ownership Contract Receivables
 12 Months Ended
Dec. 31, 2022
Vacation Ownership Contract Receivables [Abstract]  
Vacation Ownership Contract Receivables Vacation Ownership Contract Receivables
The Company generates VOCRs by extending financing to the purchasers of its VOIs. Vacation ownership contract receivables, net consisted of the following (in millions):
As of December 31,
2022 2021
Vacation ownership contract receivables:
Securitized (a)
$ 2,164  $ 2,061 
Non-securitized (b)
747  758 
Vacation ownership contract receivables, gross 2,911  2,819 
Less: allowance for loan losses 541  510 
Vacation ownership contract receivables, net $ 2,370  $ 2,309 
(a)Excludes $17 million of accrued interest on VOCRs as of both December 31, 2022 and 2021, which are included in Trade receivables, net on the Consolidated Balance Sheets.
(b)Excludes $7 million and $5 million of accrued interest on VOCRs as of December 31, 2022 and 2021, which are included in Trade receivables, net on the Consolidated Balance Sheets.

Principal payments due on the Company’s VOCRs during each of the five years subsequent to December 31, 2022, and thereafter are as follows (in millions):
Securitized Non -
Securitized		 Total
2023 $ 208  $ 80  $ 288 
2024 222  81  303 
2025 234  89  323 
2026 244  94  338 
2027 237  97  334 
Thereafter 1,019  306  1,325 
$ 2,164  $ 747  $ 2,911 

During 2022, 2021, and 2020, the Company’s securitized VOCRs generated interest income of $292 million, $304 million, and $391 million. Such interest income is included within Consumer financing revenue on the Consolidated Statements of Income/(Loss).

During 2022, 2021, and 2020, the Company had net VOCR originations of $1.14 billion, $780 million, and $481 million and received principal collections of $771 million, $815 million, and $718 million. The weighted average interest rate on outstanding VOCRs was 14.6%, 14.5%, and 14.4% during 2022, 2021, and 2020.

The activity in the allowance for loan losses on VOCRs was as follows (in millions):
  Amount
Allowance for loan losses as of December 31, 2019 $ 747 
Provision for loan losses, net 415 
Contract receivables write-offs, net (469)
Allowance for loan losses as of December 31, 2020 693 
Provision for loan losses, net 129 
Contract receivables write-offs, net (312)
Allowance for loan losses as of December 31, 2021 510 
Provision for loan losses, net 302 
Contract receivables write-offs, net (271)
Allowance for loan losses as of December 31, 2022 $ 541 

Due to the economic downturn resulting from COVID-19 during the first quarter of 2020, the Company evaluated the potential impact of COVID-19 on its owners’ ability to repay their contract receivables and as a result of current and projected unemployment rates at that time, the Company recorded a COVID-19 related allowance for loan losses. The Company based its COVID-19 loan loss estimate upon historical data on the relationship between unemployment rates and net new defaults observed during the most recent recession in 2008. This allowance consisted of a $225 million COVID-19 related provision, which was reflected as a reduction to Vacation ownership interest sales, and $55 million of estimated recoveries, which were reflected as a reduction to Cost of vacation ownership interests on the Consolidated Statements of Income/(Loss). Since the first quarter of 2020, the Company has performed quarterly evaluations of the impact of COVID-19 on its owners’ ability to repay contract receivables and, as a result of improvements in net new defaults and lower than expected unemployment rates, reduced this allowance. The total impact of COVID-19 on owners’ ability to repay contract receivables for the year ended December 31, 2020, is reflected as a $205 million reduction to Vacation ownership interest sales and a $48 million reduction to Cost of vacation ownership interests on the Consolidated Statements of Income/(Loss). During 2021 the Company released a portion of its COVID-19 related allowance which is reflected as a $91 million increase to Vacation ownership interest sales and a $33 million increase to Cost of vacation ownership interests on the Consolidated Statements of Income/(Loss). After considering write-offs and the allowance for remaining likely defaults associated with loans that were granted payment deferrals, the Company has not had a COVID-19 related allowance since December 31, 2021.
The Company recorded net provisions for loan losses of $302 million and $129 million as a reduction of net revenues during the years ended December 31, 2022 and 2021, inclusive of the aforementioned COVID-19 related adjustments.

Credit Quality for Financed Receivables and the Allowance for Credit Losses
The basis of the differentiation within the identified class of financed VOI contract receivables is the consumer’s Fair Isaac Corporation (“FICO”) score. A FICO score is a branded version of a consumer credit score widely used within the U.S. by the largest banks and lending institutions. FICO scores range from 300 to 850 and are calculated based on information obtained from one or more of the three major U.S. credit reporting agencies that compile and report on a consumer’s credit history. The Company updates its records for all active VOI contract receivables with a balance due on a rolling monthly basis to ensure that all VOI contract receivables are scored at least every six months. The Company groups all VOI contract receivables into five different categories: FICO scores ranging from 700 to 850, from 600 to 699, below 600, no score (primarily comprised of consumers for whom a score is not readily available, including consumers declining access to FICO scores and non-U.S. residents), and Asia Pacific (comprised of receivables in the Company’s Vacation Ownership Asia Pacific business for which scores are not available).

The following table details an aging analysis of financing receivables using the most recently updated FICO scores, based on the policy described above (in millions):
As of December 31, 2022
700+ 600-699 <600 No Score Asia Pacific Total
Current $ 1,674  $ 700  $ 93  $ 142  $ 143  $ 2,752 
31 - 60 days 24  32  11  5  1  73 
61 - 90 days 16  20  7  2  —  45 
91 - 120 days 12  17  10  2  —  41 
Total (a)
$ 1,726  $ 769  $ 121  $ 151  $ 144  $ 2,911 
As of December 31, 2021
700+ 600-699 <600 No Score Asia Pacific Total
Current $ 1,630  $ 734  $ 98  $ 72  $ 169  $ 2,703 
31 - 60 days 17  24  10  3  1  55 
61 - 90 days 9  12  7  1  —  29 
91 - 120 days 9  12  9  1  1  32 
Total (a)
$ 1,665  $ 782  $ 124  $ 77  $ 171  $ 2,819 
(a)Includes contracts under temporary deferment (up to 180 days) of $7 million as of December 31, 2021. There were no contracts under temporary deferment as of December 31, 2022.

The Company ceases to accrue interest on VOI contract receivables once the contract has remained delinquent for greater than 90 days and reverses all of the associated accrued interest recognized to date against interest income included within Consumer financing revenue on the Consolidated Statements of Income/(Loss). At greater than 120 days, the VOI contract receivable is written off to the allowance for loan losses. In accordance with its policy, the Company assesses the allowance for loan losses using a static pool methodology and thus does not assess individual loans for impairment.
The following table details the year of origination of financing receivables using the most recently updated FICO scores, based on the policy described above (in millions):
As of December 31, 2022
700+ 600-699 <600 No Score Asia Pacific Total
2022 $ 745  $ 291  $ 19  $ 87  $ 52  $ 1,194 
2021 275  149  30  8  19  481 
2020 134  60  12  5  15  226 
2019 198  97  23  16  21  355 
2018 162  74  16  13  14  279 
Prior 212  98  21  22  23  376 
Total $ 1,726  $ 769  $ 121  $ 151  $ 144  $ 2,911 
As of December 31, 2021
700+ 600-699 <600 No Score Asia Pacific Total
2021 $ 534  $ 221  $ 11  $ 11  $ 38  $ 815 
2020 224  105  17  6  38  390 
2019 324  168  37  19  33  581 
2018 234  117  25  14  24  414 
2017 157  76  15  11  14  273 
Prior 192  95  19  16  24  346 
Total $ 1,665  $ 782  $ 124  $ 77  $ 171  $ 2,819