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Investments and Cash (Tables)
 12 Months Ended
Dec. 31, 2018
Investments, Debt and Equity Securities [Abstract]  
Net Investment Income
Net Investment Income  

 
Year Ended December 31,
 
2018
 
2017
 
2016
 
(in millions)
Income from fixed-maturity securities managed by third parties
$
297


$
298


$
306

Income from internally managed securities (1)
110

 
129

 
111

Gross investment income
407

 
427

 
417

Investment expenses
(9
)

(9
)

(9
)
Net investment income
$
398

 
$
418

 
$
408


____________________
(1)
Year ended December 31, 2017 included accretion on Zohar II Notes used as consideration for the MBIA UK Acquisition. See Note 2, Assumption of Insured Portfolio and Business Combinations.
Net Realized Investment Gains (Losses)
Net Realized Investment Gains (Losses)
 
 
Year Ended December 31,
 
2018
 
2017
 
2016
 
(in millions)
Gross realized gains on available-for-sale securities (1)
$
20

 
$
95

 
$
28

Gross realized losses on available-for-sale securities
(12
)
 
(12
)
 
(8
)
Net realized gains (losses) on other invested assets
(1
)
 
—

 
2

OTTI:
 
 
 
 
 
Total OTTI
(35
)
 
(33
)
 
(47
)
Less: portion of OTTI recognized in OCI
4

 
10

 
4

Net OTTI recognized in net income (loss) (2)
(39
)
 
(43
)
 
(51
)
Net realized investment gains (losses)
$
(32
)
 
$
40

 
$
(29
)

____________________
(1)
Year ended December 31, 2017 included a gain on Zohar II Notes used as consideration for the MBIA UK Acquisition. See Note 2, Assumption of Insured Portfolio and Business Combinations.

(2)
Net OTTI recognized in net income (loss) was primarily a result of a decline in expected cash flows on loss mitigation securities.
Roll Forward of Credit Losses in the Investment Portfolio
Roll Forward of Credit Losses
in the Investment Portfolio

 
Year Ended December 31,
 
2018
 
2017
 
2016
 
(in millions)
Balance, beginning of period
$
162

 
$
134

 
$
108

Additions for credit losses on securities for which an OTTI was not previously recognized
—

 
13

 
3

Reductions for securities sold and other settlements
—

 
(4
)
 
(4
)
Additions for credit losses on securities for which an OTTI was previously recognized
23

 
19

 
27

Balance, end of period
$
185

 
$
162

 
$
134
Marketable Securities
Investment Portfolio
Carrying Value

 
As of December 31,
 
2018
 
2017
 
(in millions)
Fixed-maturity securities (1):
 
 
 
Externally managed
$
8,909

 
$
9,443

Internally managed
1,180

 
1,231

Short-term investments
729

 
627

Other invested assets:
 
 
 
Internally managed
 
 
 
Alternative investments
39

 
69

Other
16

 
25

Total
$
10,873

 
$
11,395

____________________
(1)
10.8% and 10.5% of fixed-maturity securities are rated BIG as of December 31, 2018 and December 31, 2017, respectively.
Fixed Maturity Securities and Short Term Investments by Security Type
Fixed-Maturity Securities and Short-Term Investments
by Security Type 
As of December 31, 2018

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

 
 

 
 

 
 

 
 

 
 

 
 
Obligations of state and political subdivisions
 
45
%
 
$
4,761

 
$
168

 
$
(18
)
 
$
4,911

 
$
40

 
AA-
U.S. government and agencies
 
2

 
167

 
9

 
(1
)
 
175

 
—

 
AA+
Corporate securities
 
20

 
2,175

 
13

 
(52
)
 
2,136

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

 
 
 
 
 
 

 
 
 
 

 

RMBS
 
9

 
999

 
17

 
(34
)
 
982

 
(15
)
 
A-
CMBS
 
5

 
542

 
4

 
(7
)
 
539

 
—

 
AAA
Asset-backed securities
 
9

 
942

 
131

 
(5
)
 
1,068

 
97

 
BB
Non-U.S. government securities
 
3

 
298

 
2

 
(22
)
 
278

 
—

 
AA
Total fixed-maturity securities
 
93

 
9,884

 
344

 
(139
)
 
10,089

 
118

 
A+
Short-term investments
 
7

 
729

 
—

 
—

 
729

 
—

 
AAA
Total investment portfolio
 
100
%
 
$
10,613

 
$
344

 
$
(139
)
 
$
10,818

 
$
118

 
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 (2)
 
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

 
—

 
896

 
136

 
B
Non-U.S. government securities
 
3

 
316

 
6

 
(17
)
 
305

 
—

 
AA
Total fixed-maturity securities
 
94

 
10,187

 
554

 
(67
)
 
10,674

 
152

 
A+
Short-term investments
 
6

 
627

 
—

 
—

 
627

 
—

 
AAA
Total investment portfolio
 
100
%
 
$
10,814

 
$
554

 
$
(67
)
 
$
11,301

 
$
152

 
A+
____________________
(1)
Based on amortized cost.
 
(2)
See 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 primarily consists of high-quality, liquid instruments.
 
(4)
U.S. government-agency obligations were approximately 48% of mortgage backed securities as of December 31, 2018 and 39% as of December 31, 2017 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, 2018 (1)
 
State
 
State
General
Obligation
 
Local
General
Obligation
 
Revenue Bonds
 
Fair
Value
 
Amortized
Cost
 
Average
Credit
Rating
 
 
(in millions)
New York
 
$
5

 
$
49

 
$
492

 
$
546

 
$
536

 
AA
Texas
 
19

 
170

 
344

 
533

 
520

 
AA
California
 
63

 
77

 
378

 
518

 
482

 
A
Washington
 
80

 
81

 
193

 
354

 
349

 
AA
Florida
 
8

 
13

 
220

 
241

 
236

 
A+
Massachusetts
 
75

 
—

 
144

 
219

 
211

 
AA
Illinois
 
16

 
55

 
127

 
198

 
192

 
A
Pennsylvania
 
35

 
5

 
98

 
138

 
136

 
A+
District of Columbia
 
41

 
—

 
92

 
133

 
131

 
AA
Georgia
 
10

 
10

 
94

 
114

 
110

 
AA-
All others
 
96

 
210

 
1,103

 
1,409

 
1,369

 
AA-
Total
 
$
448

 
$
670

 
$
3,285

 
$
4,403

 
$
4,272

 
AA-


Fair Value of Available-for-Sale Portfolio of
Obligations of State and Political Subdivisions
As of December 31, 2017 (1)

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

 
$
44

 
$
568

 
$
625

 
$
598

 
AA
California
 
76

 
83

 
421

 
580

 
527

 
A
Texas
 
17

 
212

 
321

 
550

 
528

 
AA
Washington
 
93

 
87

 
214

 
394

 
381

 
AA
Florida
 
5

 
17

 
244

 
266

 
254

 
AA-
Massachusetts
 
70

 
—

 
151

 
221

 
208

 
AA
Illinois
 
18

 
51

 
131

 
200

 
189

 
A
Ohio
 
16

 
22

 
102

 
140

 
136

 
AA
Pennsylvania
 
33

 
21

 
76

 
130

 
125

 
A+
District of Columbia
 
43

 
—

 
85

 
128

 
123

 
AA
All others
 
138

 
263

 
1,233

 
1,634

 
1,577

 
AA-
Total
 
$
522

 
$
800

 
$
3,546

 
$
4,868

 
$
4,646

 
AA-
____________________
(1)
Excludes $508 million and $892 million as of December 31, 2018 and 2017, 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.
Revenue Sources
Revenue Bonds
Sources of Funds
 
 
 
As of December 31, 2018
 
As of December 31, 2017
Type
 
Fair
Value
 
Amortized
Cost
 
Fair
Value
 
Amortized
Cost
 
 
(in millions)
Transportation
 
$
967

 
$
925

 
$
955

 
$
889

Water and sewer
 
580

 
566

 
670

 
641

Higher education
 
557

 
543

 
515

 
492

Tax backed
 
471

 
458

 
600

 
570

Municipal utilities
 
287

 
267

 
324

 
315

Healthcare
 
278

 
270

 
308

 
293

All others
 
145

 
143

 
174

 
169

Total
 
$
3,285

 
$
3,172

 
$
3,546

 
$
3,369
Fixed Maturity Securities Gross Unrealized Loss by Length of Time
Fixed-Maturity Securities
Gross Unrealized Loss by Length of Time
As of December 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
$
195

 
$
(4
)
 
$
658

 
$
(14
)
 
$
853

 
$
(18
)
U.S. government and agencies
11

 
—

 
24

 
(1
)
 
35

 
(1
)
Corporate securities
836

 
(19
)
 
522

 
(33
)
 
1,358

 
(52
)
Mortgage-backed securities:
 
 
 
 
 
 
 

 


 


RMBS
85

 
(2
)
 
447

 
(32
)
 
532

 
(34
)
CMBS
111

 
(1
)
 
164

 
(6
)
 
275

 
(7
)
Asset-backed securities
322

 
(4
)
 
38

 
(1
)
 
360

 
(5
)
Non-U.S. government securities
83

 
(4
)
 
99

 
(18
)
 
182

 
(22
)
Total
$
1,643

 
$
(34
)
 
$
1,952

 
$
(105
)
 
$
3,595

 
$
(139
)
Number of securities (1)
 

 
417

 
 

 
608

 
 

 
997

Number of securities with OTTI (1)
 

 
22

 
 

 
22

 
 

 
42

 
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

 
—

 
18

 
(1
)
 
169

 
(1
)
Corporate securities
201

 
(1
)
 
240

 
(17
)
 
441

 
(18
)
Mortgage-backed securities:
 

 
 

 
 

 
 

 
 
 
 
RMBS
191

 
(5
)
 
213

 
(12
)
 
404

 
(17
)
CMBS
29

 
—

 
80

 
(3
)
 
109

 
(3
)
Asset-backed securities
48

 
—

 
3

 
—

 
51

 
—

Non-U.S. government securities
20

 
—

 
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
Distribution of Fixed-Maturity Securities
by Contractual Maturity
As of December 31, 2018
 
 
Amortized
Cost
 
Estimated
Fair Value
 
(in millions)
Due within one year
$
206

 
$
203

Due after one year through five years
1,507

 
1,497

Due after five years through 10 years
2,387

 
2,393

Due after 10 years
4,243

 
4,475

Mortgage-backed securities:
 

 
 

RMBS
999

 
982

CMBS
542

 
539

Total
$
9,884

 
$
10,089
Restrictions on Cash and Cash Equivalents
Cash and Restricted Cash

 
As of December 31,
 
2018
 
2017
 
(in millions)
Cash
$
104

 
$
144

Restricted cash
—

 
—

Total cash and restricted cash
$
104

 
$
144