Investments (Tables)
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6 Months Ended |
Jun. 30, 2024 |
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| Investments, Debt and Equity Securities [Abstract] |
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| Marketable Securities |
Investment Portfolio Carrying Value | | | | | | | | | | | | | As of | | June 30, 2024 | | December 31, 2023 | | | (in millions) | | Fixed-maturity securities, available-for-sale (1): | | | | | Externally managed | $ | 5,298 | | | $ | 5,372 | | | Loss Mitigation Securities | 465 | | | 459 | | | Other | 243 | | | 476 | | | Fixed-maturity securities, trading - Puerto Rico, CVIs (2) | 221 | | | 318 | | Short-term investments | 1,717 | | | 1,661 | | | Other invested assets: | | | | Equity method investments: | | | | Sound Point | 413 | | | 429 | | | Alternative investments (3) | 462 | | | 394 | | | Other | 7 | | | 6 | | | Total (4) | $ | 8,826 | | | $ | 9,115 | |
____________________ (1) 9.4% and 9.2% of fixed-maturity securities, available for sale, were rated BIG or not rated as of June 30, 2024 and December 31, 2023, respectively. BIG rated securities consisted primarily of Loss Mitigation Securities. (2) These securities are not rated. (3) Excludes certain investments in funds that are consolidated and accounted for as CIVs. See Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles. (4) The aggregate carrying value of the Company’s investments in Sound Point and Sound Point managed funds was $641 million and $631 million as of June 30, 2024 and December 31, 2023, respectively.
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| Fixed Maturity Securities and Short Term Investments by Security Type |
Available-for-Sale Fixed-Maturity Securities by Security Type As of June 30, 2024 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Security Type | | Percent
of
Total (1) | | Amortized
Cost | | Allowance for Credit Losses | | Gross
Unrealized
Gains | | Gross
Unrealized
Losses | | Estimated
Fair
Value | | | | (dollars in millions) | | Obligations of state and political subdivisions | | 35 | % | | $ | 2,239 | | | $ | (14) | | | $ | 25 | | | $ | (105) | | | $ | 2,145 | | | U.S. government and agencies | | 1 | | | 77 | | | — | | | 1 | | | (6) | | | 72 | | Corporate securities (2) | | 37 | | | 2,358 | | | (6) | | | 8 | | | (214) | | | 2,146 | | Mortgage-backed securities (3): | | | | | | | | | | | | | | RMBS | | 9 | | | 565 | | | (21) | | | 2 | | | (69) | | | 477 | | | Commercial mortgage-backed securities (CMBS) | | 3 | | | 204 | | | — | | | — | | | (6) | | | 198 | | | Asset-backed securities: | | | | | | | | | | | | | | CLOs | | 6 | | | 412 | | | — | | | 1 | | | (2) | | | 411 | | | Other | | 8 | | | 538 | | | (28) | | | 1 | | | (24) | | | 487 | | | Non-U.S. government securities | | 1 | | | 85 | | | — | | | — | | | (15) | | | 70 | | | Total available-for-sale fixed-maturity securities | | 100 | % | | $ | 6,478 | | | $ | (69) | | | $ | 38 | | | $ | (441) | | | $ | 6,006 | |
Available-for-Sale Fixed-Maturity Securities by Security Type As of December 31, 2023 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Security Type | | Percent
of
Total (1) | | Amortized
Cost | | Allowance for Credit Losses | | Gross
Unrealized
Gains | | Gross
Unrealized
Losses | | Estimated
Fair
Value | | | | (dollars in millions) | | Obligations of state and political subdivisions | | 41 | % | | $ | 2,733 | | | $ | (13) | | | $ | 33 | | | $ | (92) | | | $ | 2,661 | | | U.S. government and agencies | | 1 | | | 65 | | | — | | | 1 | | | (6) | | | 60 | | Corporate securities (2) | | 34 | | | 2,327 | | | (6) | | | 17 | | | (197) | | | 2,141 | | Mortgage-backed securities (3): | | | | | | | | | | | | | | RMBS | | 6 | | | 428 | | | (21) | | | 3 | | | (68) | | | 342 | | | CMBS | | 2 | | | 157 | | | — | | | — | | | (6) | | | 151 | | | Asset-backed securities: | | | | | | | | | | | | | | CLOs | | 7 | | | 456 | | | — | | | 1 | | | (7) | | | 450 | | | Other | | 7 | | | 465 | | | (37) | | | — | | | (26) | | | 402 | | | Non-U.S. government securities | | 2 | | | 115 | | | — | | | — | | | (15) | | | 100 | | | Total available-for-sale fixed-maturity securities | | 100 | % | | $ | 6,746 | | | $ | (77) | | | $ | 55 | | | $ | (417) | | | $ | 6,307 | |
____________________ (1)Based on amortized cost. (2)Includes securities issued by taxable universities and hospitals. (3)U.S. government-agency obligations were approximately 61% and 42% of mortgage-backed securities as of June 30, 2024 and December 31, 2023, respectively, based on fair value.
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| Fixed-Maturity Securities Gross Unrealized Loss by Length of Time |
Gross Unrealized Loss by Length of Time for Available-for-Sale Fixed-Maturity Securities for Which a Credit Loss was Not Recorded As of June 30, 2024 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Less than 12 months | | 12 months or more | | Total | | | Fair
Value | | Gross Unrealized
Loss | | Fair
Value | | Gross Unrealized
Loss | | Fair
Value | | Gross Unrealized
Loss | | | (dollars in millions) | | Obligations of state and political subdivisions | $ | 572 | | | $ | (4) | | | $ | 1,231 | | | $ | (100) | | | $ | 1,803 | | | $ | (104) | | | U.S. government and agencies | 28 | | | — | | | 33 | | | (6) | | | 61 | | | (6) | | | Corporate securities | 332 | | | (3) | | | 1,316 | | | (170) | | | 1,648 | | | (173) | | | Mortgage-backed securities: | | | | | | | | | | | | | RMBS | 147 | | | (1) | | | 141 | | | (12) | | | 288 | | | (13) | | | CMBS | 28 | | | — | | | 116 | | | (6) | | | 144 | | | (6) | | | Asset-backed securities: | | | | | | | | | | | | | CLOs | 32 | | | — | | | 178 | | | (1) | | | 210 | | | (1) | | | Other | 66 | | | (1) | | | 23 | | | (1) | | | 89 | | | (2) | | | Non-U.S. government securities | — | | | — | | | 66 | | | (15) | | | 66 | | | (15) | | | Total | $ | 1,205 | | | $ | (9) | | | $ | 3,104 | | | $ | (311) | | | $ | 4,309 | | | $ | (320) | | | Number of securities (1) | | | 395 | | | | | 1,291 | | | | | 1,668 | |
Gross Unrealized Loss by Length of Time for Available-for-Sale Fixed-Maturity Securities for Which a Credit Loss was Not Recorded As of December 31, 2023 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Less than 12 months | | 12 months or more | | Total | | | Fair
Value | | Gross Unrealized
Loss | | Fair
Value | | Gross Unrealized
Loss | | Fair
Value | | Gross Unrealized
Loss | | | (dollars in millions) | | Obligations of state and political subdivisions | $ | 641 | | | $ | (4) | | | $ | 931 | | | $ | (87) | | | $ | 1,572 | | | $ | (91) | | | U.S. government and agencies | — | | | — | | | 33 | | | (6) | | | 33 | | | (6) | | | Corporate securities | 72 | | | (1) | | | 1,426 | | | (152) | | | 1,498 | | | (153) | | | Mortgage-backed securities: | | | | | | | | | | | | | RMBS | 27 | | | (1) | | | 124 | | | (8) | | | 151 | | | (9) | | | CMBS | 3 | | | — | | | 148 | | | (6) | | | 151 | | | (6) | | | Asset-backed securities: | | | | | | | | | | | | | CLOs | 22 | | | (1) | | | 379 | | | (6) | | | 401 | | | (7) | | | Other | 1 | | | — | | | 26 | | | (1) | | | 27 | | | (1) | | | Non-U.S. government securities | — | | | — | | | 95 | | | (15) | | | 95 | | | (15) | | | Total | $ | 766 | | | $ | (7) | | | $ | 3,162 | | | $ | (281) | | | $ | 3,928 | | | $ | (288) | | | Number of securities (1) | | | 274 | | | | | 1,266 | | | | | 1,525 | |
___________________ (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.
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| Investments Classified by Contractual Maturity Date |
The amortized cost and estimated fair value of available-for-sale fixed-maturity securities by contractual maturity as of June 30, 2024 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 Available-for-Sale Fixed-Maturity Securities by Contractual Maturity As of June 30, 2024 | | | | | | | | | | | | | | Amortized
Cost | | Estimated
Fair Value | | | (in millions) | | Due within one year | $ | 248 | | | $ | 243 | | | Due after one year through five years | 1,347 | | | 1,281 | | | Due after five years through 10 years | 1,656 | | | 1,573 | | | Due after 10 years | 2,458 | | | 2,234 | | | Mortgage-backed securities: | | | | | RMBS | 565 | | | 477 | | | CMBS | 204 | | | 198 | | | Total | $ | 6,478 | | | $ | 6,006 | |
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| Net Investment Income |
Income from Investments | | | | | | | | | | | | | | | | | | | | | | | | | | Second Quarter | | Six Months | | | 2024 | | 2023 | | 2024 | | 2023 | | (in millions) | | Investment income: | | | | | | | | | Fixed-maturity securities, available-for-sale: | | | | | | | | | Externally managed | $ | 51 | | | $ | 53 | | | $ | 102 | | | $ | 105 | | | Loss Mitigation Securities | 7 | | | 12 | | | 14 | | | 22 | | | Puerto Rico, New Recovery Bonds | — | | | 1 | | | — | | | 4 | | | Other | 2 | | | 4 | | | 6 | | | 7 | | | Short-term investments | 22 | | | 18 | | | 45 | | | 32 | | | Other invested assets | — | | | 2 | | | — | | | 2 | | | Investment income | 82 | | | 90 | | | 167 | | | 172 | | | Investment expenses | (1) | | | (1) | | | (2) | | | (2) | | | Net investment income | $ | 81 | | | $ | 89 | | | $ | 165 | | | $ | 170 | | | | | | | | | | | Fair value gains (losses) on trading securities (1) | $ | 17 | | | $ | 40 | | | $ | 43 | | | $ | 38 | | | | | | | | | | | Equity in earnings (losses) of investees: | | | | | | | | | Sound Point (2) | $ | (3) | | | $ | — | | | $ | 1 | | | $ | — | | | Funds (3) | 5 | | | — | | | 19 | | | — | | | Other | 3 | | | 5 | | | 9 | | | 7 | | | Equity in earnings (losses) of investees | $ | 5 | | | $ | 5 | | | $ | 29 | | | $ | 7 | |
____________________ (1) Fair value gains on trading securities pertaining to securities still held as of June 30, 2024 were $14 million for second quarter 2024 and $31 million for six months 2024, respectively. Fair value gains on trading securities pertaining to securities still held as of June 30, 2023 were $40 million for second quarter 2023 and $38 million for six months 2023, respectively. (2) Beginning in the fourth quarter of 2023, equity in earnings (losses) includes the Company’s share of the earnings of Sound Point, which is reported on a one-quarter lag. (3) Sound Point and AHP funds, and, prior to July 1 2023, AssuredIM funds.
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| Net Realized Investment Gains (Losses) |
The table below presents the components of net realized investment gains (losses). Realized gains and losses on sales of investments are determined using the specific identification method. Net Realized Investment Gains (Losses) | | | | | | | | | | | | | | | | | | | | | | | | | | Second Quarter | | Six Months | | | 2024 | | 2023 | | 2024 | | 2023 | | | (in millions) | | Gross realized gains on sales of available-for-sale securities (1) | $ | 1 | | | $ | 7 | | | $ | 2 | | | $ | 19 | | | Gross realized losses on sales of available-for-sale securities | (4) | | | (6) | | | (7) | | | (15) | | | Net foreign currency gains (losses) | (2) | | | — | | | (2) | | | — | | | Change in the allowance for credit losses and intent to sell (2) | (2) | | | (10) | | | 8 | | | (15) | | | Other net realized gains (losses) | 1 | | | — | | | 1 | | | — | | | Net realized investment gains (losses) | $ | (6) | | | $ | (9) | | | $ | 2 | | | $ | (11) | |
____________________ (1) Gross realized gains and losses in six months 2023 related primarily to sales of New Recovery Bonds received as part of the 2022 Puerto Rico Resolutions. (2) Change in allowance for credit losses for all periods was primarily related to Loss Mitigation Securities.
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| Rollforward of Credit Losses for Available-for-sale Fixed-Maturity Securities |
The following table presents the roll forward of allowance for the credit losses on available-for-sale fixed-maturity securities.
Roll Forward of Allowance for Credit Losses for Available-for-Sale Fixed-Maturity Securities | | | | | | | | | | | | | | | | | | | | | | | | | | Second Quarter | | Six Months | | | 2024 | | 2023 | | 2024 | | 2023 | | | (in millions) | | Balance, beginning of period | $ | 67 | | | $ | 69 | | | $ | 77 | | | $ | 65 | | | Additions (reductions) for securities for which credit losses were previously recognized | 2 | | | 10 | | | (8) | | | 14 | | | Balance, end of period | $ | 69 | | | $ | 79 | | | $ | 69 | | | $ | 79 | |
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