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Investments
 3 Months Ended
Mar. 31, 2013
Investments

Note 7: Investments

Investments, excluding those elected under the fair value option, include debt and equity securities classified as either AFS or HTM. Other invested assets designated as AFS are primarily comprised of money market funds.

The following tables present the amortized cost, fair value, corresponding gross unrealized gains and losses and other-than-temporary impairments (“OTTI”) for AFS and HTM investments in the Company’s consolidated investment portfolio as of March 31, 2013 and December 31, 2012:

 

                                                      
     March 31, 2013  
            Gross      Gross             Other-Than-  
     Amortized      Unrealized      Unrealized      Fair      Temporary  

In millions

    Cost      Gains      Losses      Value      Impairments(1)  

AFS Investments

               

Fixed-maturity investments:

               

U.S. Treasury and government agency

    $ 678        $ 37        $ (1)       $ 714        $ -   

State and municipal bonds

      1,457          76          (8)         1,525          -   

Foreign governments

      198          12          -         210          -   

Corporate obligations

      994          45          (20)         1,019          4    

Mortgage-backed securities:

               

Residential mortgage-backed agency

      888          16          (3)         901          -   

Residential mortgage-backed non-agency

      78          11          (7)         82          2    

Commercial mortgage-backed

      31          1          (1)         31          -   

Asset-backed securities:

               

Collateralized debt obligations

      158          1          (65)         94          (21)   

Other asset-backed

      141          3          (11)         133          -   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total fixed-maturity investments

      4,623          202          (116)         4,709          (15)   

Money market securities

      688          -         -         688          -   

Perpetual debt and equity securities

      12          1          -         13          -   

Assets of consolidated VIEs:

               

State and municipal bonds

      33          4          -         37          -   

Corporate obligations

      175          10          (6)         179          -   

Mortgage-backed securities:

               

Residential mortgage-backed non-agency

      86          -         (7)         79          -   

Asset-backed securities:

               

Collateralized debt obligations

      94          -         (6)         88          -   

Other asset-backed

      20          -         -         20          -   

Money market securities

      220          -         -         220          -   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total AFS investments

    $ 5,951        $ 217        $ (135)       $ 6,033        $ (15)   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

HTM Investments

               

Assets of consolidated VIEs:

               

Corporate obligations

    $ 2,826        $ 26        $ (93)       $ 2,759        $ -   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total HTM investments

    $ 2,826        $ 26        $ (93)       $ 2,759        $ -   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

(1) - Represents unrealized gains or losses on other than temporarily impaired securities recognized in AOCI, which includes the non-credit component of impairments, as well as all subsequent changes in fair value of such impaired securities reported in AOCI.

 

                                                      
     December 31, 2012  
            Gross      Gross             Other-Than-  
     Amortized      Unrealized      Unrealized      Fair      Temporary  

In millions

    Cost      Gains      Losses      Value      Impairments(1)  

AFS Investments

               

Fixed-maturity investments:

               

U.S. Treasury and government agency

    $ 819        $ 40        $ (1)       $ 858        $ -   

State and municipal bonds

      1,446          97          (12)         1,531          -   

Foreign governments

      183          13          -         196          -   

Corporate obligations

      1,058          54          (20)         1,092          5    

Mortgage-backed securities:

               

Residential mortgage-backed agency

      939          19          (1)         957          -   

Residential mortgage-backed non-agency

      86          11          (8)         89          -   

Commercial mortgage-backed

      46          -         (4)         42          -   

Asset-backed securities:

               

Collateralized debt obligations

      161          1          (71)         91          (25)   

Other asset-backed

      145          3          (11)         137          -   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total fixed-maturity investments

      4,883          238          (128)         4,993          (20)   

Money market securities

      580          -         -         580          -   

Perpetual debt and equity securities

      22          1          -         23          -   

Assets of consolidated VIEs:

               

State and municipal bonds

      38          3          -         41          -   

Corporate obligations

      177          9          (6)         180          -   

Mortgage-backed securities:

               

Residential mortgage-backed non-agency

      92          -         (10)         82          -   

Asset-backed securities:

               

Collateralized debt obligations

      97          -         (8)         89          -   

Other asset-backed

      23          -         -         23          -   

Money market securities

      210          -         -         210          -   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total AFS investments

    $ 6,122        $ 251        $ (152)       $ 6,221        $ (20)   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

HTM Investments

               

Assets of consolidated VIEs:

               

Corporate obligations

    $ 2,829        $ 2        $ (157)       $ 2,674        $ -   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total HTM investments

    $ 2,829        $ 2        $ (157)       $ 2,674        $ -   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

(1) - Represents unrealized gains or losses on other than temporarily impaired securities recognized in AOCI, which includes the non-credit component of impairments, as well as all subsequent changes in fair value of such impaired securities reported in AOCI.

 

The following table presents the distribution by contractual maturity of AFS and HTM fixed-maturity securities at amortized cost and fair value as of March 31, 2013. Contractual maturity may differ from expected maturity as borrowers may have the right to call or prepay obligations.

 

                                                                 
     AFS Securities      HTM Securities  
                   Consolidated VIEs      Consolidated VIEs  
     Amortized             Amortized             Amortized         

In millions

    Cost      Fair Value      Cost      Fair Value      Cost      Fair Value  

Due in one year or less

    $ 274        $ 275        $ 17        $ 18        $ -        $ -    

Due after one year through five years

      898          921          107          116          -          -    

Due after five years through ten years

      794          831          -          -          -          -    

Due after ten years through fifteen years

      370          398          84          82          -          -    

Due after fifteen years

      991          1,043          -          -          2,826          2,759    

Mortgage-backed and asset-backed

      1,296          1,241          200          187          -          -    
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total fixed-maturity investments

    $ 4,623        $ 4,709        $ 408        $ 403        $ 2,826        $ 2,759    
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Deposited and Pledged Securities

The fair value of securities on deposit with various regulatory authorities was $11 million and $10 million as of March 31, 2013 and December 31, 2012, respectively. These deposits are required to comply with state insurance laws.

The Company enters into securities borrowing and lending contracts in connection with MBIA’s collateralized investment agreement activities. Such contracts are only transacted with high-quality dealer firms. It is the Company’s policy to take possession of securities borrowed under these contracts. The Company minimizes credit risk from counterparties that might be unable to fulfill their contractual obligations by monitoring customer credit exposure and collateral values and requiring additional collateral to be deposited with the Company when deemed necessary.

Substantially all of the obligations under investment agreements require the Company to pledge securities as collateral. Securities pledged in connection with investment agreement activities may not be repledged by the investment agreement counterparty. As of March 31, 2013 and December 31, 2012, the fair value of securities pledged as collateral for these investment agreements approximated $804 million and $820 million, respectively. The Company’s collateral as of March 31, 2013 consisted principally of RMBS, U.S. Treasury and government agency bonds and state and municipal bonds, and was primarily held with major U.S. banks. Additionally, the Company pledged cash and money market securities as collateral under investment agreements in the amount of $122 million and $144 million as of March 31, 2013 and December 31, 2012, respectively.

 

Impaired Investments

The following tables present the gross unrealized losses related to AFS and HTM investments as of March 31, 2013 and December 31, 2012:

 

                                                                 
     March 31, 2013  
     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

    $ 70        $ (1)       $ -        $ -        $ 70        $ (1)   

State and municipal bonds

      196          (2)         85          (6)         281          (8)   

Foreign governments

      32          -          -          -          32          -    

Corporate obligations

      267          (5)         54          (15)         321          (20)   

Mortgage-backed securities:

                  

Residential mortgage-backed agency

      403          (3)         36          -          439          (3)   

Residential mortgage-backed non-agency

      2          -          27          (7)         29          (7)   

Commercial mortgage-backed

      3          -          1          (1)         4          (1)   

Asset-backed securities:

                  

Collateralized debt obligations

      4          -          74          (65)         78          (65)   

Other asset-backed

      3          -          63          (11)         66          (11)   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total fixed-maturity investments

      980          (11)         340          (105)         1,320          (116)   

Perpetual debt and equity securities

      1          -          -          -          1          -    

Assets of consolidated VIEs:

                  

Corporate obligations

      10          -          21          (6)         31          (6)   

Mortgage-backed securities:

                  

Residential mortgage-backed non-agency

      3          -          76          (7)         79          (7)   

Asset-backed securities:

                  

Collateralized debt obligations

      -          -          83          (6)         83          (6)   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total AFS investments

    $ 994        $ (11)       $ 520        $ (124)       $ 1,514        $ (135)   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

HTM Investments

                  

Assets of consolidated VIEs:

                  

Corporate obligations

    $ 311        $ (4)       $ 1,336        $ (89)       $ 1,647        $ (93)   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total HTM investments

    $ 311        $ (4)       $ 1,336        $ (89)       $ 1,647        $ (93)   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

                                                                 
     December 31, 2012  
     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

    $ 234        $ (1)       $ -        $ -        $ 234        $ (1)   

State and municipal bonds

      69          -          87          (12)         156          (12)   

Foreign governments

      11          -          1          -          12          -    

Corporate obligations

      202          (2)         57          (18)         259          (20)   

Mortgage-backed securities:

                  

Residential mortgage-backed agency

      173          (1)         38          -          211          (1)   

Residential mortgage-backed non-agency

      4          -          28          (8)         32          (8)   

Commercial mortgage-backed

      3          -          27          (4)         30          (4)   

Asset-backed securities:

                  

Collateralized debt obligations

      1          -          80          (71)         81          (71)   

Other asset-backed

      4          -          65          (11)         69          (11)   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total fixed-maturity investments

      701          (4)         383          (124)         1,084          (128)   

Perpetual debt and equity securities

      1          -          1          -          2          -    

Assets of consolidated VIEs:

                  

Corporate obligations

      -          -          31          (6)         31          (6)   

Mortgage-backed securities:

                  

Residential mortgage-backed non-agency

      -          -          82          (10)         82          (10)   

Asset-backed securities:

                  

Collateralized debt obligations

      -          -          85          (8)         85          (8)   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total AFS investments

    $ 702        $ (4)       $ 582        $ (148)       $ 1,284        $ (152)   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

HTM Investments

                  

Assets of consolidated VIEs:

                  

Corporate obligations

    $ 297        $ (19)       $ 1,287        $ (138)       $ 1,584        $ (157)   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total HTM investments

    $ 297        $ (19)       $ 1,287        $ (138)       $ 1,584        $ (157)   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Gross unrealized losses on AFS and HTM securities decreased as of March 31, 2013 compared with December 31, 2012 primarily due to market price appreciation.

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 March 31, 2013 and December 31, 2012 was 24 and 23 years, respectively. As of March 31, 2013 and December 31, 2012, there were 124 and 153 securities, respectively, that were in an unrealized loss position for a continuous twelve-month period or longer, of which the fair values of 68 and 89 securities, respectively, were below book value by more than 5%.

The following table presents the distribution of securities by percentage of fair value below book value by more than 5%:

 

                                
     Number of      Book Value      Fair Value  

Percentage of Fair Value Below Book Value

    Securities      (in millions)      (in millions)  

> 5% to 15%

      18        $ 741        $ 641    

> 15% to 25%

      15          136          110    

> 25% to 50%

      15          56          40    

> 50%

      20          80          17    
  

 

 

     

 

 

     

 

 

  

Total

      68        $ 1,013        $ 808    
  

 

 

     

 

 

     

 

 

  

 

The following table presents the fair values and gross unrealized losses by credit rating category of ABS, MBS and corporate obligations included in the Company’s consolidated AFS investment portfolio as of March 31, 2013 for which fair value was less than amortized cost. The credit ratings are based on ratings from Moody’s as of March 31, 2013 or an alternate ratings source, such as S&P, when a security is not rated by Moody’s. For investments that are insured by various third-party guarantee insurers, the credit rating reflects the higher of the insurer’s rating or the underlying bond’s rating.

 

                                                                                                                                                         

In millions

    Aaa      Aa      A      Baa      Below
Investment Grade		      Not Rated      Total  
     Fair      Unrealized      Fair      Unrealized      Fair      Unrealized      Fair      Unrealized      Fair      Unrealized      Fair      Unrealized      Fair      Unrealized  

Asset Type

    Value      Loss      Value      Loss      Value      Loss      Value      Loss      Value      Loss      Value      Loss      Value      Loss  

ABS

    $ 25        $ (1)       $ 64        $ (5)       $ 3        $ -        $ 1        $ -        $ 134        $ (76)       $ -        $ -        $ 227        $ (82)   

MBS

      439          (4)         4          -          78          (7)         2          -          13          (2)         15          (5)         551          (18)   

Corporate obligations

      5          -          72          (1)         196          (11)         65          (13)         14          (1)         -          -          352          (26)   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 469        $ (5)       $ 140        $ (6)       $ 277        $ (18)       $ 68        $ (13)       $ 161        $ (79)       $ 15        $ (5)       $ 1,130        $ (126)   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

The total ABS, MBS and corporate obligations reported in the preceding table include those which are guaranteed by financial guarantors. In addition, the following table presents information on ABS, MBS and corporate obligations guaranteed by the Company and third-party financial guarantors.

 

                                           
               Insured Securities Rated Below
Investment Grade without the
Effect of Guarantee		  
     Average Credit Rating with the    Average Credit Rating without the    (in millions)         

Asset Type

   

Effect of Guarantee

   

Effect of Guarantee

    Fair Value      Percentage  

ABS

    Below investment grade    Below investment grade    $ 100          64 %   

MBS

    A    Below investment grade      83          95 %   

Corporate obligations

    Baa    Baa      -         - %   

Refer to the table in the “Determination of Credit Loss Guaranteed by the Company and Other Third-Party Guarantors” section within the OTTI section of this note for information on the insured securities included in the table above.

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 March 31, 2013 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.

Other-Than-Temporary Impairments

Evaluating AFS Securities for OTTI

The Company has an ongoing review process for all securities in its investment portfolio, including a quarterly assessment of OTTI. This evaluation includes both qualitative and quantitative considerations. In assessing whether a decline in value is related to a credit loss, the Company considers several factors, including but not limited to (i) the magnitude and duration of declines in fair value; (ii) the reasons for the declines in fair value, such as general credit spread movements in each asset-backed sector, transaction-specific changes in credit spreads, credit rating downgrades, modeled defaults, and principal and interest payment priorities within each investment structure; and (iii) any guarantees associated with a security such as those provided by financial guarantee insurance companies, including MBIA Corp. and National.

In calculating credit-related losses, the Company utilizes cash flow modeling based on the type of security. The Company’s cash flow analysis considers all sources of cash, including credit enhancement, that support the payment of amounts owed by an issuer of a security. This includes the consideration of cash expected to be provided by financial guarantors, including MBIA Corp., 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 an OTTI loss on an impaired security.

 

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

Determination of Credit Loss on ABS, MBS and Corporate Obligations

Investments with unrealized losses that met the above criteria were tested for OTTI and principally related to ABS, MBS and corporate obligations.

ABS investments are evaluated for OTTI 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 interest rate used to recognize interest income on the security. For CDO investments, the Company utilizes the same tools as for 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 an OTTI loss.

RMBS investments are evaluated for OTTI using several quantitative tools. Loan level data are obtained and analyzed in a model that produces prepayment, default, and severity vectors. The model utilizes 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 an OTTI loss.

Corporate obligation investments are evaluated for OTTI 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, management and a third-party quantitative default probability model. 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, after considering these factors, 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 an OTTI loss.

 

For the three months ended March 31, 2012, the credit losses recognized in earnings were related to RMBS and CDOs. The following table presents a summary of the significant inputs considered in determining the measurement of the credit losses on securities in which a portion of the impairment is included in AOCI:

 

          
     Three Months Ended
March 31,		  

Asset-backed Securities

    2012  

Expected size of losses(1):

   

Range(2)

      12.13% to 100.00%    

Weighted average(3)

      90.60%    

Current subordination levels(4):

   

Range(2)

      0.00% to 0.00%    

Weighted average(3)

      0.00%    

Prepayment speed (annual constant prepayment rate)(5):

   

Range(2)

      0.00% to 22.68%    

Weighted average(3)

      10.21%    

 

(1) - Represents future expected credit losses on impaired assets expressed as a percentage of total outstanding balance.

 

(2) - Represents the range of inputs/assumptions based upon the individual securities within each category.

 

(3) - Calculated by weighting the relevant input/assumption for each individual security by the outstanding notional of the security.

 

(4) - Represents current level of credit protection (subordination) for the securities, expressed as a percentage of the balance of the collateral group backing the bond.

 

(5) - Values represent high and low points of lifetime vectors of constant prepayment rates.

Determination of Credit Loss Guaranteed by the Company and Other Third-Party Guarantors

The Company does not record OTTI related to credit concerns about issuers of securities insured by MBIA Corp. and National since investors in these securities, including MBIA, are guaranteed payment of principal and interest when due by MBIA. Securities insured by the Company, whether or not owned by the Company, are evaluated for impairment as part of its insurance surveillance process and, therefore, losses on securities insured by the Company are recorded in accordance with its loss reserving policy. Refer to “Note 2: Significant Accounting Policies” in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 for information about the Company’s loss reserving policy and “Note 5: Loss and Loss Adjustment Expense Reserves” for information about loss reserves.

In considering cash expected to be provided from other third-party financial guarantors, the Company assesses the financial guarantor’s ability to make claim payments under a variety of scenarios that test the guarantor’s ultimate claims paying ability. The weighted average outcome of these scenarios, combined with the cash flows provided by the insured security, are used to determine the recoverability of the Company’s amortized cost.

 

The following table provides information about securities held by the Company as of March 31, 2013 that were in an unrealized loss position and insured by a financial guarantor, along with the amount of insurance loss reserves corresponding to the par amount owned by the Company:

 

                                

In millions

    Fair Value      Unrealized
Loss		      Insurance Loss
Reserve (2)		  

Asset-backed:

         

MBIA(1)

    $ 146        $ (58)        $ 16    

Other

      9          (5)          -   
  

 

 

     

 

 

     

 

 

  

Total asset-backed

      155          (63)          16    

Mortgage-backed:

         

MBIA(1)

      6          -         -    

Other

      82          (7)          -    
  

 

 

     

 

 

     

 

 

  

Total mortgage-backed

      88          (7)          -    

Corporate obligations:

         

Other

      11          (10)          -    
  

 

 

     

 

 

     

 

 

  

Total corporate obligations

      11          (10)          -    

Other:

         

MBIA(1)

      68          (6)          -    

Other

      7          -          -    
  

 

 

     

 

 

     

 

 

  

Total other

      75          (6)          -    
  

 

 

     

 

 

     

 

 

  

Total

    $ 329        $ (86)        $ 16    
  

 

 

     

 

 

     

 

 

  

 

(1) - Includes investments insured by MBIA Corp. and National.

 

(2) - Insurance loss reserve estimates are based on the proportion of par value owned to the total amount of par value insured.

Credit Loss Rollforward

The portion of certain OTTI losses on fixed-maturity securities that does not represent credit losses is recognized in AOCI. For these impairments, the net amount recognized in earnings represents the difference between the amortized cost of the security and the net present value of its projected future discounted cash flows prior to impairment. Any remaining difference between the fair value and amortized cost is recognized in AOCI. The following table presents the amount of credit loss impairments recognized in earnings on fixed-maturity securities held by MBIA as of the dates indicated, for which a portion of the OTTI losses was recognized in AOCI, and the corresponding changes in such amounts.

 

                     

In millions

    Three Months Ended March 31,  

Credit Losses Recognized in Earnings Related to

Other-Than-Temporary Impairments

    2013      2012  

Beginning balance

    $ 197        $ 341    

Additions for credit loss impairments recognized in the current period on securities previously impaired

      -          2    

Reductions for credit loss impairments previously recognized on securities sold during the period

      (2)          (7)    

Reductions for credit loss impairments previously recognized on securities impaired to fair value during the period(1)

      -          (59)    
  

 

 

     

 

 

  

Ending balance

    $ 195        $ 277    
  

 

 

     

 

 

  

 

(1) - Represents circumstances where the Company determined in the current period that it intends to sell the security or it is more likely than not that it will be required to sell the security before recovery of the security’s amortized cost.

Sales of Available-For-Sale Investments

Gross realized gains and losses are recorded in “Net gains (losses) on financial instruments at fair value and foreign exchange” in the Company’s consolidated statements of operations. The proceeds and gross realized gains and losses from sales of AFS investments for the three months ended March 31, 2013 and 2012 are as follows:

 

                     
     Three Months Ended March 31,  

In millions

    2013      2012  

Proceeds from sales

    $ 878        $ 2,052    

Gross realized gains

    $ 36        $ 31    

Gross realized losses

    $ (3)       $ (79)