XML 48 R37.htm IDEA: XBRL DOCUMENT v3.8.0.1
Investments and Cash (Tables)
 9 Months Ended
Sep. 30, 2017
Investments, Debt and Equity Securities [Abstract]  
Net Investment Income
Net Investment Income
 
 
Third Quarter
 
Nine Months
 
2017
 
2016
 
2017
 
2016
 
(in millions)
Income from fixed-maturity securities managed by third parties
$
74

 
$
75

 
$
224

 
$
231

Income from internally managed securities:
 
 
 
 
 
 
 
Fixed maturities (1)
27

 
19

 
100

 
58

Other
1

 
2

 
5

 
8

Gross investment income
102

 
96

 
329

 
297

Investment expenses
(3
)
 
(2
)
 
(7
)
 
(6
)
Net investment income
$
99

 
$
94

 
$
322

 
$
291


____________________
(1)    Nine Months 2017 includes accretion on Zohar II Notes.
Net Realized Investment Gains (Losses)
Net Realized Investment Gains (Losses)
 
 
Third Quarter
 
Nine Months
 
2017
 
2016
 
2017
 
2016
 
(in millions)
Gross realized gains on available-for-sale securities (1)
$
23

 
$
4

 
$
92

 
$
24

Gross realized losses on available-for-sale securities
(3
)
 
(1
)
 
(9
)
 
(3
)
Net realized gains (losses) on other invested assets
0

 
0

 
0

 
0

Other-than-temporary impairment
(13
)
 
(5
)
 
(29
)
 
(26
)
Net realized investment gains (losses)
$
7

 
$
(2
)
 
$
54

 
$
(5
)

____________________
(1)
Nine Months 2017 includes a gain on Zohar II Notes used as consideration for the MBIA UK Acquisition. Please refer to Note 2, Acquisitions.
Roll Forward of Credit Losses in the Investment Portfolio
The following table presents the roll-forward of the credit losses of fixed-maturity securities for which the Company has recognized an other-than-temporary-impairment and where the portion of the fair value adjustment related to other factors was recognized in OCI.
 
Roll Forward of Credit Losses
in the Investment Portfolio

 
Third Quarter
 
Nine Months
 
2017
 
2016
 
2017
 
2016
 
(in millions)
Balance, beginning of period
$
145

 
$
108

 
$
134

 
$
108

Additions for credit losses on securities for which an other-than-temporary-impairment was not previously recognized
3

 
1

 
6

 
3

Reductions for securities sold and other settlements
0

 
—

 
(4
)
 
(4
)
Additions for credit losses on securities for which an other-than-temporary-impairment was previously recognized
5

 
1

 
17

 
3

Balance, end of period
$
153

 
$
110

 
$
153

 
$
110
Fixed Maturity Securities and Short Term Investments by Security Type
Fixed-Maturity Securities and Short-Term Investments
by Security Type 
As of September 30, 2017

Investment Category
 
Percent
of
Total(1)
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
 
AOCI(2)
Gain
(Loss) on
Securities
with
Other-Than-Temporary Impairment
 
Weighted
Average
Credit
Rating
 (3)
 
 
(dollars in millions)
Fixed-maturity securities:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
Obligations of state and political subdivisions
 
49
%
 
$
5,445

 
$
277

 
$
(17
)
 
$
5,705

 
$
21

 
 AA-
U.S. government and agencies
 
2

 
256

 
14

 
0

 
270

 
0

 
 AA+
Corporate securities
 
18

 
1,932

 
62

 
(18
)
 
1,976

 
(6
)
 
 A+
Mortgage-backed securities(4):
 
0

 
 
 
 
 
 

 
 
 
 

 
 
RMBS
 
8

 
866

 
27

 
(12
)
 
881

 
2

 
 BBB+
CMBS
 
5

 
551

 
15

 
(4
)
 
562

 
—

 
 AAA
Asset-backed securities
 
6

 
682

 
170

 
0

 
852

 
143

 
 B
Foreign government securities
 
3

 
313

 
6

 
(19
)
 
300

 
—

 
 AA
Total fixed-maturity securities
 
91

 
10,045

 
571

 
(70
)
 
10,546

 
160

 
 A+
Short-term investments
 
9

 
948

 
1

 
0

 
949

 
—

 
 AAA
Total investment portfolio
 
100
%
 
$
10,993

 
$
572

 
$
(70
)
 
$
11,495

 
$
160

 
 A+


Fixed-Maturity Securities and Short-Term Investments
by Security Type 
As of December 31, 2016 

Investment Category
 
Percent
of
Total(1)
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
 
AOCI
Gain
(Loss) on
Securities
with
Other-Than-Temporary Impairment
 
Weighted
Average
Credit
Rating
 (3)
 
 
(dollars in millions)
Fixed-maturity securities:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
Obligations of state and political subdivisions
 
50
%
 
$
5,269

 
$
202

 
$
(39
)
 
$
5,432

 
$
13

 
AA
U.S. government and agencies
 
4

 
424

 
17

 
(1
)
 
440

 
—

 
AA+
Corporate securities
 
15

 
1,612

 
32

 
(31
)
 
1,613

 
(8
)
 
A-
Mortgage-backed securities(4):
 
 

 
 

 
 

 
 

 
 

 
 

 
 
RMBS
 
9

 
998

 
27

 
(38
)
 
987

 
(21
)
 
A-
CMBS
 
5

 
575

 
13

 
(5
)
 
583

 
—

 
AAA
Asset-backed securities
 
8

 
835

 
110

 
0

 
945

 
33

 
B
Foreign government securities
 
3

 
261

 
4

 
(32
)
 
233

 
—

 
AA
Total fixed-maturity securities
 
94

 
9,974

 
405

 
(146
)
 
10,233

 
17

 
A+
Short-term investments
 
6

 
590

 
0

 
0

 
590

 
—

 
AAA
Total investment portfolio
 
100
%
 
$
10,564

 
$
405

 
$
(146
)
 
$
10,823

 
$
17

 
A+
____________________
(1)
Based on amortized cost.
 
(2)
Accumulated OCI (AOCI). See also Note 17, Shareholders' Equity for additional information as applicable.

(3)
Ratings in the tables above represent the lower of the Moody’s and S&P Global Ratings, a division of Standard & Poor's Financial Services LLC (S&P) classifications except for bonds purchased for loss mitigation or risk management strategies, which use internal ratings classifications. The Company’s portfolio consists primarily of high-quality, liquid instruments.
 
(4)
Government-agency obligations were approximately 39% of mortgage backed securities as of September 30, 2017 and 42% as of December 31, 2016 based on fair value.

Fixed Maturity Securities Gross Unrealized Loss by Length of Time
The following tables summarize, for all fixed-maturity securities in an unrealized loss position, the aggregate fair value and gross unrealized loss by length of time the amounts have continuously been in an unrealized loss position.
 
Fixed-Maturity Securities
Gross Unrealized Loss by Length of Time
As of September 30, 2017
 
 
Less than 12 months
 
12 months or more
 
Total
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
 
(dollars in millions)
Obligations of state and political subdivisions
$
445

 
$
(10
)
 
$
253

 
$
(7
)
 
$
698

 
$
(17
)
U.S. government and agencies
114

 
0

 
4

 
0

 
118

 
0

Corporate securities
136

 
(1
)
 
252

 
(17
)
 
388

 
(18
)
Mortgage-backed securities:
 
 
 
 
 
 
 

 


 


RMBS
107

 
(1
)
 
170

 
(11
)
 
277

 
(12
)
CMBS
50

 
0

 
76

 
(4
)
 
126

 
(4
)
Asset-backed securities
66

 
0

 
3

 
0

 
69

 
0

Foreign government securities
35

 
(1
)
 
147

 
(18
)
 
182

 
(19
)
Total
$
953

 
$
(13
)
 
$
905

 
$
(57
)
 
$
1,858

 
$
(70
)
Number of securities (1)
 

 
292

 
 

 
230

 
 

 
513

Number of securities with other-than-temporary impairment
 

 
9

 
 

 
14

 
 

 
23

 
Fixed-Maturity Securities
Gross Unrealized Loss by Length of Time
As of December 31, 2016

 
Less than 12 months
 
12 months or more
 
Total
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
 
(dollars in millions)
Obligations of state and political subdivisions
$
1,110

 
$
(38
)
 
$
6

 
$
(1
)
 
$
1,116

 
$
(39
)
U.S. government and agencies
87

 
(1
)
 
—

 
—

 
87

 
(1
)
Corporate securities
492

 
(11
)
 
118

 
(20
)
 
610

 
(31
)
Mortgage-backed securities:
 

 
 

 
 

 
 

 


 


RMBS
391

 
(23
)
 
94

 
(15
)
 
485

 
(38
)
CMBS
165

 
(5
)
 
—

 
—

 
165

 
(5
)
Asset-backed securities
36

 
0

 
0

 
0

 
36

 
0

Foreign government securities
44

 
(5
)
 
114

 
(27
)
 
158

 
(32
)
Total
$
2,325

 
$
(83
)
 
$
332

 
$
(63
)
 
$
2,657

 
$
(146
)
Number of securities (1)
 

 
622

 
 

 
60

 
 

 
676

Number of securities with other-than-temporary impairment
 

 
8

 
 

 
9

 
 

 
17


___________________
(1)
The number of securities does not add across because lots consisting of the same securities have been purchased at different times and appear in both categories above (i.e., less than 12 months and 12 months or more). If a security appears in both categories, it is counted only once in the total column.

Distribution of Fixed Maturity Securities by Contractual Maturity
The amortized cost and estimated fair value of available-for-sale fixed maturity securities by contractual maturity as of September 30, 2017 are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
 
Distribution of Fixed-Maturity Securities
by Contractual Maturity
As of September 30, 2017
 
 
Amortized
Cost
 
Estimated
Fair Value
 
(in millions)
Due within one year
$
249

 
$
250

Due after one year through five years
1,518

 
1,552

Due after five years through 10 years
2,280

 
2,365

Due after 10 years
4,581

 
4,936

Mortgage-backed securities:
 

 
 

RMBS
866

 
881

CMBS
551

 
562

Total
$
10,045

 
$
10,546
Internally Managed Investment Portfolio
Internally Managed Portfolio
Carrying Value

 
As of
September 30, 2017
 
As of
December 31, 2016
 
(in millions)
Assets purchased for loss mitigation and other risk management purposes:
 
 
 
Fixed-maturity securities, at fair value
$
1,220

 
$
1,492

Other invested assets
20

 
107

Other
76

 
55

Total
$
1,316

 
$
1,654
Cash and Restricted Cash
The following table provides a reconciliation of the cash reported on the consolidated balance sheets and the cash and restricted cash reported in the statements of cash flows.

Cash and Restricted Cash

 
As of
September 30, 2017
 
As of
December 31, 2016
 
As of
September 30, 2016
 
As of
December 31, 2015
 
(in millions)
Cash
$
72

 
$
118

 
$
98

 
$
166

Restricted cash (1)
0

 
9

 
1

 
0

Total cash and restricted cash
$
72

 
$
127

 
$
99

 
$
166

____________________
(1)
Amounts relate to cash held in trust accounts and are reported in other assets in consolidated balance sheets. Please refer to Note 13, Reinsurance and Other Monoline Exposures, for more information.