Investments, excluding equity instruments, those elected under the fair value option and those classified as trading, primarily consist of debt instruments classified as AFS.

The following tables present the amortized cost, allowance for credit losses, corresponding gross unrealized gains and losses and fair value for AFS investments in the Company’s consolidated investment portfolio as of December 31, 2023 and 2022:


			December 31, 2023
					Allowance		Gross		Gross
			Amortized		for Credit		Unrealized		Unrealized			Fair
In millions			Cost		Losses		Gains		Losses			Value
AFS Investments
Fixed-maturity investments:
	U.S. Treasury and government agency		$	721	$	-	$	1	$	(18	)	$	704
	State and municipal bonds			128		-		3		(8	)		123
	Foreign governments			19		-		1		(2	)		18
	Corporate obligations			505		-		2		(90	)		417
	Mortgage-backed securities:
		Residential mortgage-backed agency		149		-		-		(14	)		135
		Residential mortgage-backed non-agency		31		-		1		(5	)		27
		Commercial mortgage-backed		13		-		-		-			13
	Asset-backed securities:
		Collateralized debt obligations		96		-		1		(1	)		96
		Other asset-backed		26		-		-		(2	)		24
Total AFS investments			$	1,688	$	-	$	9	$	(140	)	$	1,557


			December 31, 2022
					Allowance		Gross		Gross
			Amortized		for Credit		Unrealized		Unrealized			Fair
In millions			Cost		Losses		Gains		Losses			Value
AFS Investments
Fixed-maturity investments:
	U.S. Treasury and government agency		$	541	$	-	$	5	$	(38	)	$	508
	State and municipal bonds			173		-		2		(11	)		164
	Foreign governments			23		-		-		(3	)		20
	Corporate obligations			862		-		1		(148	)		715
	Mortgage-backed securities:
		Residential mortgage-backed agency		217		-		-		(22	)		195
		Residential mortgage-backed non-agency		96		-		3		(11	)		88
		Commercial mortgage-backed		24		-		-		(1	)		23
	Asset-backed securities:
		Collateralized debt obligations		117		-		-		(5	)		112
		Other asset-backed		110		-		-		(4	)		106
Total AFS investments			$	2,163	$	-	$	11	$	(243	)	$	1,931

The fair value of securities on deposit with various regulatory authorities as of December 31, 2023 and 2022 was $11 million and $10 million, respectively. These deposits are required to comply with state insurance laws.

Investment agreement obligations require the Company to pledge securities as collateral. Securities pledged in connection with investment agreements may not be repledged by the investment agreement counterparty. As of December 31, 2023 and 2022, the fair value of securities pledged as collateral for these investment agreements were $241 million and $251 million, respectively. The Company’s collateral as of December 31, 2023 consisted principally of U.S. Treasury and government agency and corporate obligations, and was primarily held with major U.S. banks.

The following tables present the non-credit related gross unrealized losses related to AFS investments as of December 31, 2023 and 2022:


			December 31, 2023
			Less than 12 Months					12 Months or Longer					Total
			Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
In millions			Value		Losses			Value		Losses			Value		Losses
AFS Investments
Fixed-maturity investments:
	U.S. Treasury and government agency		$	11	$	-		$	143	$	(18	)	$	154	$	(18	)
	State and municipal bonds			23		(1	)		57		(7	)		80		(8	)
	Foreign governments			-		-			6		(2	)		6		(2	)
	Corporate obligations			17		-			337		(90	)		354		(90	)
	Mortgage-backed securities:
		Residential mortgage-backed agency		-		-			118		(14	)		118		(14	)
		Residential mortgage-backed non-agency		3		-			21		(5	)		24		(5	)
		Commercial mortgage-backed		4		-			3		-			7		-
	Asset-backed securities:
		Collateralized debt obligations		-		-			89		(1	)		89		(1	)
		Other asset-backed		-		-			22		(2	)		22		(2	)
Total AFS investments			$	58	$	(1	)	$	796	$	(139	)	$	854	$	(140	)

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 8: Investments (continued)


			December 31, 2022
			Less than 12 Months					12 Months or Longer					Total
			Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
In millions			Value		Losses			Value		Losses			Value		Losses
AFS Investments
Fixed-maturity investments:
	U.S. Treasury and government agency		$	266	$	(34	)	$	29	$	(4	)	$	295	$	(38	)
	State and municipal bonds			92		(10	)		1		(1	)		93		(11	)
	Foreign governments			9		(3	)		-		-			9		(3	)
	Corporate obligations			508		(106	)		141		(42	)		649		(148	)
	Mortgage-backed securities:
		Residential mortgage-backed agency		112		(9	)		65		(13	)		177		(22	)
		Residential mortgage-backed non-agency		65		(10	)		2		(1	)		67		(11	)
		Commercial mortgage-backed		18		(1	)		1		-			19		(1	)
	Asset-backed securities:
		Collateralized debt obligations		51		(1	)		60		(4	)		111		(5	)
		Other asset-backed		44		(3	)		24		(1	)		68		(4	)
Total AFS investments			$	1,165	$	(177	)	$	323	$	(66	)	$	1,488	$	(243	)

Gross unrealized losses on AFS investments decreased as of December 31, 2023 compared with December 31, 2022 primarily due to the reversal of unrealized losses into earnings driven by sales of investments and, to a lesser extent, also due to lower interest rates and tighter credit spreads.

With the weighting applied on the fair value of each security relative to the total fair value, the weighted average contractual maturity of securities in an unrealized loss position as of December 31, 2023 and 2022 was 14 years. As of December 31, 2023 and 2022, there were 450 and 210 securities, respectively, that were in an unrealized loss position for a continuous twelve- month period or longer, of which, fair values of 365 and 190 securities, respectively, were below book value by more than 5%.

As of December 31, 2023, the Company concluded that it does not have the intent to sell securities in an unrealized loss position and it is more likely than not, that it would not have to sell these securities before recovery of their cost basis. In making this conclusion, the Company examined the cash flow projections for its investment portfolios, the potential sources and uses of cash in its businesses, and the cash resources available to its business other than sales of securities. It also considered the existence of any risk management or other plans as of December 31, 2023 that would require the sale of impaired securities. Impaired securities that the Company intends to sell before the expected recovery of such securities' fair values have been written down to fair value. For the years ended December 31, 2023 and 2022, impairment loss due to intent to sell securities in an unrealized position was $8 million and $21, respectively, and reported in "Other net realized gains (losses)" on the Company's consolidated results of operations.

In calculating credit-related losses, the Company uses cash flow modeling based on the type of security. The Company’s cash flow analysis considers all sources of cash that support the payment of amounts owed by an issuer of a security. For AFS investments, this includes the credit enhancement taking into the consideration of cash expected to be provided by financial guarantors, including MBIA Corp. and National, resulting from an actual or potential insurance policy claim. In general, any change in the amount and/or timing of cash flows received or expected to be received, whether or not such cash flows are contractually defined, is reflected in the Company’s cash flow analysis for purposes of assessing a credit loss on an impaired security.

Each quarter, an internal committee, comprising staff that is independent of the Company’s evaluation process for determining credit losses of securities, reviews and approves the valuation of investments. Among other responsibilities, this committee ensures that the Company’s process for identifying and calculating allowance for credit losses, including the use of models and assumptions, is reasonable and complies with the Company’s internal policy.

AFS ABS investments are evaluated for credit loss using historical collateral performance, deal waterfall and structural protections, credit ratings, and forward looking projections of collateral performance based on business and economic conditions specific to each collateral type and risk. The underlying collateral is evaluated to identify any specific performance concerns, and stress scenarios are considered in forecasting ultimate returns of principal. Based on this evaluation, if a principal default is projected for a security, estimated future cash flows are discounted at the security’s effective interest rate used to recognize interest income on the security. For CDO investments, the Company uses the same tools as its RMBS investments discussed below, aggregating the bond level cash flows to the CDO investment level. If the present value of cash flows is less than the Company’s amortized cost for the security, the difference is recorded as a credit loss.

AFS RMBS investments are evaluated for credit losses using several quantitative tools. Loan level data is obtained and analyzed in a model that produces prepayment, default, and severity vectors. The model uses macro inputs, including housing price assumptions and interest rates. The vector outputs are used as inputs to a third-party cash flow model, which considers deal waterfall dynamics and structural features, to generate cash flows for an RMBS investment. The expected cash flows of the security are then discounted at the interest rate used to recognize interest income of the security to arrive at a present value amount. If the present value of the cash flows is less than the Company’s amortized cost for the investment, the difference is recorded as a credit loss.

For AFS corporate obligation investments, credit losses are evaluated using credit analysis techniques. The Company’s analysis includes a detailed review of a number of quantitative and qualitative factors impacting the value of an individual security. These factors include the interest rate of the security (fixed or floating), the security’s current market spread, any collateral supporting the security, the security’s position in the issuer’s capital structure, and credit rating upgrades or downgrades. Additionally, these factors include an assessment of various issuer-related credit metrics including market capitalization, earnings, cash flow, capitalization, interest coverage, leverage, liquidity and management. The Company’s analysis is augmented by comparing market prices for similar securities of other issuers in the same sector, as well as any recent corporate or government actions that may impact the ultimate return of principal. If the Company determines that a principal default is projected, a recovery analysis is performed using the above data. If the Company’s estimated recovery value for the security is less than its amortized cost, the difference is recorded as a credit loss.

Determination of Credit Losses on Guaranteed by the Company on Other Third-Party Guarantors

The Company does not recognize credit losses on securities insured by MBIA Corp. and National since those securities, whether or not owned by the Company, are evaluated for impairments in accordance with its loss reserving policy. Refer to "Note 2: Significant Accounting Policies" included herein for information about the Company's loss reserving policy and "Note 6: Loss and Loss Adjustment Expense Reserves" for information about loss reserves.

The following table presents the rollforward of allowance for credit losses on AFS investments for the year ended December 31, 2022. The additions to the allowance for credit losses for year ended December 31, 2022 were related to concerns on an issuer’s credit deterioration as a result of the Ukraine and Russia conflict. Such allowance for credit losses was reversed in the same year due to the Company's intent to sell these securities. The Company did not establish an allowance for credit losses for AFS securities during 2023.


	Years Ended December 31, 2022
	Balance		Additions		Additions		Reductions		Reductions-		Change in						Balance
	as of		not		arising		from		Intent		Allowance						as of
	December 31,		previously		from PCD		Securities		to sell		Previously		Write				December 31,
In millions	2021		recorded		Assets		Sold		or MLTN		Recorded		Offs		Recoveries		2022
AFS Investments
Fixed-maturity investments:
Corporate obligations	$	-	$	3	$	-	$	-	$	3	$	-	$	-	$	-	$	-
Total Allowance on AFS investments	$	-	$	3	$	-	$	-	$	3	$	-	$	-	$	-	$	-

Gross realized gains and losses from sales of AFS investments are recorded within “Net realized investment gains (losses)”on the Company’s consolidated statements of operations. The proceeds and the gross realized gains and losses from sales of fixed-maturity securities held as AFS for the years ended December 31, 2023, 2022 and 2021 are as follows:

Equity and trading investments are included within “Investments carried at fair value” on the Company’s consolidated balance sheets. Unrealized gains and losses recognized on equity and trading investments held as of the end of each period for the years ended December 31, 2023, 2022 and 2021 are as follows: