XML 47 R36.htm IDEA: XBRL DOCUMENT v3.8.0.1
Investments and Cash (Tables)
 3 Months Ended
Mar. 31, 2018
Investments, Debt and Equity Securities [Abstract]  
Net Investment Income
Net Investment Income
 
 
First Quarter
 
2018
 
2017
 
(in millions)
Income from fixed-maturity securities managed by third parties
$
75

 
$
75

Income from internally managed securities (1)
28

 
49

Gross investment income
103

 
124

Investment expenses
(2
)
 
(2
)
Net investment income
$
101

 
$
122


____________________
(1)    First Quarter 2017 includes accretion on Zohar II Notes.
Net Realized Investment Gains (Losses)
Net Realized Investment Gains (Losses)
 
 
First Quarter
 
2018
 
2017
 
(in millions)
Gross realized gains on available-for-sale securities (1)
$
9

 
$
43

Gross realized losses on available-for-sale securities
(5
)
 
(2
)
Net realized gains (losses) on other invested assets
(1
)
 
0

Other-than-temporary impairment (OTTI)
(8
)
 
(9
)
Net realized investment gains (losses)
$
(5
)
 
$
32


____________________
(1)
First Quarter 2017 includes a gain on Zohar II Notes used as consideration for the MBIA UK Acquisition. See 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 OTTI 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

 
First Quarter
 
2018
 
2017
 
(in millions)
Balance, beginning of period
$
162

 
$
134

Additions for credit losses on securities for which an OTTI was previously recognized
7

 
8

Balance, end of period
$
169

 
$
142
Fixed Maturity Securities and Short Term Investments by Security Type
Fixed-Maturity Securities and Short-Term Investments
by Security Type 
As of March 31, 2018

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

 
 

 
 

 
 

 
 

 
 

 
 
Obligations of state and political subdivisions
 
50
%
 
$
5,323

 
$
178

 
$
(27
)
 
$
5,474

 
$
26

 
 AA-
U.S. government and agencies
 
2

 
265

 
11

 
(1
)
 
275

 
—

 
 AA+
Corporate securities
 
18

 
1,911

 
45

 
(32
)
 
1,924

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

 
 
 
 
 
 

 
 
 
 

 
 
RMBS
 
8

 
857

 
20

 
(28
)
 
849

 
(8
)
 
 A-
CMBS
 
5

 
561

 
5

 
(7
)
 
559

 
—

 
 AAA
Asset-backed securities
 
7

 
721

 
169

 
(1
)
 
889

 
137

 
 B
Non-U.S. government securities
 
3

 
331

 
9

 
(13
)
 
327

 
—

 
 AA
Total fixed-maturity securities
 
93

 
9,969

 
437

 
(109
)
 
10,297

 
149

 
A+
Short-term investments
 
7

 
751

 
0

 
0

 
751

 
—

 
AAA
Total investment portfolio
 
100
%
 
$
10,720

 
$
437

 
$
(109
)
 
$
11,048

 
$
149

 
A+


Fixed-Maturity Securities and Short-Term Investments
by Security Type 
As of December 31, 2017 

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

 
 

 
 

 
 

 
 

 
 

 
 
Obligations of state and political subdivisions
 
51
%
 
$
5,504

 
$
267

 
$
(11
)
 
$
5,760

 
$
23

 
AA
U.S. government and agencies
 
2

 
272

 
14

 
(1
)
 
285

 
—

 
AA+
Corporate securities
 
18

 
1,973

 
63

 
(18
)
 
2,018

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

 
 

 
 

 
 

 
 

 
 

 
 
RMBS
 
8

 
852

 
26

 
(17
)
 
861

 
(1
)
 
BBB+
CMBS
 
5

 
540

 
12

 
(3
)
 
549

 
—

 
AAA
Asset-backed securities
 
7

 
730

 
166

 
0

 
896

 
136

 
B
Non-U.S. government securities
 
3

 
316

 
6

 
(17
)
 
305

 
0

 
AA
Total fixed-maturity securities
 
94

 
10,187

 
554

 
(67
)
 
10,674

 
152

 
A+
Short-term investments
 
6

 
627

 
0

 
0

 
627

 
—

 
AAA
Total investment portfolio
 
100
%
 
$
10,814

 
$
554

 
$
(67
)
 
$
11,301

 
$
152

 
A+
____________________
(1)
Based on amortized cost.
 
(2)
See Note 17, Shareholders' Equity.

(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)
U.S. government-agency obligations were approximately 42% of mortgage backed securities as of March 31, 2018 and 39% as of December 31, 2017 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 March 31, 2018
 
 
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
$
988

 
$
(15
)
 
$
260

 
$
(12
)
 
$
1,248

 
$
(27
)
U.S. government and agencies
62

 
0

 
17

 
(1
)
 
79

 
(1
)
Corporate securities
692

 
(14
)
 
226

 
(18
)
 
918

 
(32
)
Mortgage-backed securities:
 
 
 
 
 
 
 

 


 


RMBS
350

 
(11
)
 
203

 
(17
)
 
553

 
(28
)
CMBS
222

 
(3
)
 
78

 
(4
)
 
300

 
(7
)
Asset-backed securities
55

 
(1
)
 
3

 
0

 
58

 
(1
)
Non-U.S. government securities
21

 
0

 
119

 
(13
)
 
140

 
(13
)
Total
$
2,390

 
$
(44
)
 
$
906

 
$
(65
)
 
$
3,296

 
$
(109
)
Number of securities (1)
 

 
716

 
 

 
244

 
 

 
944

Number of securities with OTTI (1)
 

 
20

 
 

 
16

 
 

 
35

 

Fixed-Maturity Securities
Gross Unrealized Loss by Length of Time
As of December 31, 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
$
166

 
$
(4
)
 
$
281

 
$
(7
)
 
$
447

 
$
(11
)
U.S. government and agencies
151

 
0

 
18

 
(1
)
 
169

 
(1
)
Corporate securities
201

 
(1
)
 
240

 
(17
)
 
441

 
(18
)
Mortgage-backed securities:
 

 
 

 
 

 
 

 


 


RMBS
191

 
(5
)
 
213

 
(12
)
 
404

 
(17
)
CMBS
29

 
0

 
80

 
(3
)
 
109

 
(3
)
Asset-backed securities
48

 
0

 
3

 
0

 
51

 
0

Non-U.S. government securities
20

 
0

 
140

 
(17
)
 
160

 
(17
)
Total
$
806

 
$
(10
)
 
$
975

 
$
(57
)
 
$
1,781

 
$
(67
)
Number of securities (1)
 

 
244

 
 

 
264

 
 

 
499

Number of securities with OTTI (1)
 

 
17

 
 

 
15

 
 

 
31


___________________
(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 March 31, 2018 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 March 31, 2018
 
 
Amortized
Cost
 
Estimated
Fair Value
 
(in millions)
Due within one year
$
274

 
$
272

Due after one year through five years
1,438

 
1,467

Due after five years through 10 years
2,345

 
2,378

Due after 10 years
4,494

 
4,772

Mortgage-backed securities:
 

 
 

RMBS
857

 
849

CMBS
561

 
559

Total
$
9,969

 
$
10,297
Internally Managed Investment Portfolio
Internally Managed Portfolio
Carrying Value

 
As of
March 31, 2018
 
As of
December 31, 2017
 
(in millions)
Assets purchased for loss mitigation and other risk management purposes:
 
 
 
Fixed-maturity securities, at fair value
$
1,199

 
$
1,231

Other invested assets
18

 
20

Alternative investments
80

 
69

Other
5

 
5

Total
$
1,302

 
$
1,325
Cash and Restricted Cash
The following table provides a reconciliation of the cash reported on the condensed consolidated balance sheets and the cash and restricted cash reported in the statements of cash flows.

Cash and Restricted Cash

 
As of
March 31, 2018
 
As of
December 31, 2017
 
As of
March 31, 2017
 
As of
December 31, 2016
 
(in millions)
Cash
$
114

 
$
144

 
$
147

 
$
118

Restricted cash (1)
3

 
0

 
1

 
9

Total cash and restricted cash
$
117

 
$
144

 
$
148

 
$
127

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