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Investments and Cash (Tables)
 12 Months Ended
Dec. 31, 2016
Investments, Debt and Equity Securities [Abstract]  
Net Investment Income
Net Investment Income  

 
Year Ended December 31,
 
2016
 
2015
 
2014
 
(in millions)
Income from fixed-maturity securities managed by third parties
$
306


$
335


$
324

Income from internally managed securities:
 
 
 
 
 
Fixed maturities
103


61


74

Other
7

 
37

 
14

Other
1

 
0

 
0

Gross investment income
417


433


412

Investment expenses
(9
)

(10
)

(9
)
Net investment income
$
408

 
$
423

 
$
403
Net Realized Investment Gains (Losses)
Net Realized Investment Gains (Losses)
 
 
Year Ended December 31,
 
2016
 
2015
 
2014
 
(in millions)
Gross realized gains on available-for-sale securities
$
28

 
$
44

 
$
14

Gross realized losses on available-for-sale securities
(8
)
 
(15
)
 
(5
)
Net realized gains (losses) on other invested assets
2

 
(8
)
 
6

Other-than-temporary impairment
(51
)
 
(47
)
 
(75
)
Net realized investment gains (losses)
$
(29
)
 
$
(26
)
 
$
(60
)
Roll Forward of Credit Losses in the Investment Portfolio
Roll Forward of Credit Losses
in the Investment Portfolio

 
Year Ended December 31,
 
2016
 
2015
 
2014
 
(in millions)
Balance, beginning of period
$
108

 
$
124

 
$
80

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

 
3

 
64

Eliminations of securities issued by FG VIEs
—

 
—

 
(15
)
Reductions for securities sold and other settlement during the period
(4
)
 
(28
)
 
(12
)
Additions for credit losses on securities for which an other-than-temporary-impairment was previously recognized
27

 
9

 
7

Balance, end of period
$
134

 
$
108

 
$
124
Fixed Maturity Securities and Short Term Investments by Security Type
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(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
 
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+

Fixed-Maturity Securities and Short-Term Investments
by Security Type 
As of December 31, 2015

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
 
52
%
 
$
5,528

 
$
323

 
$
(10
)
 
$
5,841

 
$
5

 
AA
U.S. government and agencies
 
3

 
377

 
23

 
0

 
400

 
—

 
AA+
Corporate securities
 
14

 
1,505

 
38

 
(23
)
 
1,520

 
(13
)
 
A-
Mortgage-backed securities(4):
 
 

 
 

 
 

 
 

 
 

 
 

 
 
RMBS
 
11

 
1,238

 
29

 
(22
)
 
1,245

 
(7
)
 
A
CMBS
 
5

 
506

 
9

 
(2
)
 
513

 
—

 
AAA
Asset-backed securities
 
8

 
831

 
4

 
(10
)
 
825

 
(6
)
 
B+
Foreign government securities
 
3

 
290

 
4

 
(11
)
 
283

 
—

 
AA+
Total fixed-maturity securities
 
96

 
10,275

 
430

 
(78
)
 
10,627

 
(21
)
 
A+
Short-term investments
 
4

 
396

 
0

 
0

 
396

 
—

 
AA-
Total investment portfolio
 
100
%
 
$
10,671

 
$
430

 
$
(78
)
 
$
11,023

 
$
(21
)
 
A+
____________________
(1)
Based on amortized cost.
 
(2)
Accumulated OCI. See also Note 20, Other Comprehensive Income.
 
(3)
Ratings in the tables above represent the lower of the Moody’s and 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 42% of mortgage backed securities as of December 31, 2016 and 54% as of December 31, 2015 based on fair value.
Fair Value of Available-for-Sale Municipal Bond Portfolio by State
Fair Value of Available-for-Sale Portfolio of
Obligations of State and Political Subdivisions
As of December 31, 2016 (1)
 
State
 
State
General
Obligation
 
Local
General
Obligation
 
Revenue Bonds
 
Fair
Value
 
Amortized
Cost
 
Average
Credit
Rating
 
 
(in millions)
Fixed-maturity securities:
 
 
 
 
 
 
 
 
 
 
 
 
New York
 
$
13

 
$
38

 
$
570

 
$
621

 
$
604

 
AA
California
 
73

 
62

 
391

 
526

 
497

 
A+
Texas
 
16

 
186

 
316

 
518

 
503

 
AA
Washington
 
81

 
68

 
201

 
350

 
348

 
AA
Florida
 
16

 
11

 
247

 
274

 
266

 
AA-
Massachusetts
 
74

 
—

 
149

 
223

 
215

 
AA
Illinois
 
18

 
65

 
127

 
210

 
205

 
A+
Arizona
 
—

 
3

 
122

 
125

 
122

 
AA
Georgia
 
—

 
9

 
104

 
113

 
109

 
A+
Pennsylvania
 
38

 
17

 
58

 
113

 
111

 
A+
All others
 
153

 
155

 
1,085

 
1,393

 
1,364

 
AA-
Total
 
$
482

 
$
614

 
$
3,370

 
$
4,466

 
$
4,344

 
AA-

Fair Value of Available-for-Sale Portfolio of
Obligations of State and Political Subdivisions
As of December 31, 2015 (1)

State
 
State
General
Obligation
 
Local
General
Obligation
 
Revenue Bonds
 
Fair
Value
 
Amortized
Cost
 
Average
Credit
Rating
 
 
(in millions)
Fixed-maturity securities:
 
 
 
 
 
 
 
 
 
 
 
 
New York
 
$
13

 
$
59

 
$
571

 
$
643

 
$
610

 
AA
Texas
 
28

 
224

 
325

 
577

 
542

 
AA
California
 
78

 
66

 
411

 
555

 
521

 
A+
Washington
 
59

 
79

 
200

 
338

 
323

 
AA
Florida
 
17

 
—

 
268

 
285

 
266

 
AA-
Illinois
 
47

 
69

 
128

 
244

 
234

 
A
Massachusetts
 
75

 
—

 
148

 
223

 
207

 
AA
Arizona
 
—

 
10

 
181

 
191

 
181

 
AA
Pennsylvania
 
48

 
26

 
47

 
121

 
115

 
A
Ohio
 
17

 
14

 
83

 
114

 
106

 
AA
All others
 
156

 
168

 
1,148

 
1,472

 
1,396

 
AA-
Subtotal
 
538

 
715

 
3,510

 
4,763

 
4,501

 
AA-
Short-term investments (2)
 
—

 
—

 
60

 
60

 
60

 
CC
Total
 
$
538

 
$
715

 
$
3,570

 
$
4,823

 
$
4,561

 
AA-
____________________
(1)
Excludes $966 million and $1,078 million as of December 31, 2016 and 2015, respectively, of pre-refunded bonds, at fair value. The credit ratings are based on the underlying ratings and do not include any benefit from bond insurance.

(2)    Matured in the first quarter of 2016.
Revenue Sources
Revenue Bonds
Sources of Funds
 
 
 
As of December 31, 2016
 
As of December 31, 2015
Type
 
Fair
Value
 
Amortized
Cost
 
Fair
Value
 
Amortized
Cost
 
 
(in millions)
Fixed-maturity securities:
 
 
 
 
 
 
 
 
Transportation
 
$
860

 
$
824

 
$
867

 
$
815

Tax backed
 
617

 
601

 
610

 
576

Water and sewer
 
545

 
531

 
612

 
576

Higher education
 
513

 
499

 
518

 
487

Municipal utilities
 
365

 
360

 
414

 
393

Healthcare
 
310

 
298

 
344

 
321

All others
 
160

 
158

 
145

 
141

Subtotal
 
3,370

 
3,271

 
3,510

 
3,309

Short-term investments (1)
 
—

 
—

 
60

 
60

Total
 
$
3,370

 
$
3,271

 
$
3,570

 
$
3,369


____________________
(1)    Matured in the first quarter of 2016.
Fixed Maturity Securities Gross Unrealized Loss by Length of Time
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

 
Fixed-Maturity Securities
Gross Unrealized Loss by Length of Time
As of December 31, 2015

 
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
$
316

 
$
(10
)
 
$
7

 
$
0

 
$
323

 
$
(10
)
U.S. government and agencies
77

 
0

 
—

 
—

 
77

 
0

Corporate securities
381

 
(8
)
 
95

 
(15
)
 
476

 
(23
)
Mortgage-backed securities:
 

 
 

 
 

 
 

 
 
 
 
RMBS
438

 
(8
)
 
90

 
(14
)
 
528

 
(22
)
CMBS
140

 
(2
)
 
2

 
0

 
142

 
(2
)
Asset-backed securities
517

 
(10
)
 
—

 
—

 
517

 
(10
)
Foreign government securities
97

 
(4
)
 
82

 
(7
)
 
179

 
(11
)
Total
$
1,966

 
$
(42
)
 
$
276

 
$
(36
)
 
$
2,242

 
$
(78
)
Number of securities(1)
 

 
335

 
 

 
71

 
 

 
396

Number of securities with other-than-temporary impairment
 

 
9

 
 

 
4

 
 

 
13

___________________
(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
Distribution of Fixed-Maturity Securities
by Contractual Maturity
As of December 31, 2016
 
 
Amortized
Cost
 
Estimated
Fair Value
 
(in millions)
Due within one year
$
482

 
$
550

Due after one year through five years
1,725

 
1,727

Due after five years through 10 years
2,112

 
2,155

Due after 10 years
4,082

 
4,231

Mortgage-backed securities:
 

 
 

RMBS
998

 
987

CMBS
575

 
583

Total
$
9,974

 
$
10,233
Internally Managed Investment Portfolio
Internally Managed Portfolio
Carrying Value

 
As of December 31,
 
2016
 
2015
 
(in millions)
Assets purchased for loss mitigation and other risk management purposes:
 
 
 
   Fixed-maturity securities, at fair value
$
1,492

 
$
1,266

   Other invested assets
107

 
114

Other
55

 
55

Total
$
1,654

 
$
1,435