XML 49 R34.htm IDEA: XBRL DOCUMENT v3.19.1
Investments and Cash (Tables)
 3 Months Ended
Mar. 31, 2019
Investments, Debt and Equity Securities [Abstract]  
Net Investment Income Net Investment Income
 
 
First Quarter
 
2019
 
2018
 
(in millions)
Income from fixed-maturity securities managed by third parties
$
72

 
$
75

Income from internally managed securities
28

 
27

Gross investment income
100

 
102

Investment expenses
(2
)
 
(2
)
Net investment income
$
98

 
$
100
Net Realized Investment Gains (Losses) Net Realized Investment Gains (Losses)
 
 
First Quarter
 
2019
 
2018
 
(in millions)
Gross realized gains on available-for-sale securities
$
6

 
$
9

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

 
(1
)
Other-than-temporary impairment (OTTI):
 
 
 
Total OTTI
(13
)
 
(11
)
Less: portion of OTTI recognized in OCI
3

 
(3
)
Net OTTI recognized in net income (loss) (1)
(16
)
 
(8
)
Net realized investment gains (losses)
$
(12
)
 
$
(5
)

____________________
(1)
Net OTTI recognized in net income was primarily a result of a decline in expected cash flows on loss mitigation and other risk management securities.

Roll Forward of Credit Losses in the Investment Portfolio The following table presents the roll-forward of the credit losses on fixed-maturity securities for which the Company has recognized an OTTI and for which unrealized loss was recognized in OCI.
 
Roll Forward of Credit Losses
in the Investment Portfolio

 
First Quarter
 
2019
 
2018
 
(in millions)
Balance, beginning of period
$
185

 
$
162

Additions for credit losses on securities for which an OTTI was previously recognized
12

 
7

Balance, end of period
$
197

 
$
169
Fixed Maturity Securities and Short Term Investments by Security Type Fixed-Maturity Securities and Short-Term Investments
by Security Type 
As of March 31, 2019

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

 
 

 
 

 
 

 
 

 
 

 
 
Obligations of state and political subdivisions
 
45
%
 
$
4,597

 
$
249

 
$
(3
)
 
$
4,843

 
$
46

 
AA-
U.S. government and agencies
 
1

 
157

 
9

 
—

 
166

 
—

 
AA+
Corporate securities
 
21

 
2,125

 
46

 
(17
)
 
2,154

 
—

 
A
Mortgage-backed securities (4):
 
0

 
 
 
 
 
 

 
 
 
 

 
 
RMBS
 
9

 
960

 
23

 
(24
)
 
959

 
(11
)
 
A-
CMBS
 
5

 
532

 
10

 
(3
)
 
539

 
—

 
AAA
Asset-backed securities
 
9

 
957

 
122

 
(3
)
 
1,076

 
88

 
BB
Non-U.S. government securities
 
3

 
262

 
5

 
(15
)
 
252

 
—

 
AA
Total fixed-maturity securities
 
93

 
9,590

 
464

 
(65
)
 
9,989

 
123

 
A+
Short-term investments
 
7

 
727

 
—

 
—

 
727

 
—

 
AAA
Total investment portfolio
 
100
%
 
$
10,317

 
$
464

 
$
(65
)
 
$
10,716

 
$
123

 
A+

Fixed-Maturity Securities and Short-Term Investments
by Security Type 
As of December 31, 2018 

Security Type
 
Percent
of
Total (1)
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
 
AOCI
Gain
(Loss) on
Securities
with
OTTI
 
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+
____________________
(1)
Based on amortized cost.
 
(2)
Accumulated OCI (AOCI). See Note 15, Shareholders' Equity.

(3)
Ratings 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 46% of mortgage backed securities as of March 31, 2019 and 48% as of December 31, 2018 based on fair value.

Fixed Maturity Securities Gross Unrealized Loss by Length of Time The following tables summarize, for all fixed-maturity securities in an unrealized loss position, the aggregate fair value and gross unrealized loss by length of time the amounts have continuously been in an unrealized loss position.

Fixed-Maturity Securities
Gross Unrealized Loss by Length of Time
As of March 31, 2019
 
 
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
$
17

 
$
—

 
$
152

 
$
(3
)
 
$
169

 
$
(3
)
U.S. government and agencies
20

 
—

 
24

 
—

 
44

 
—

Corporate securities
101

 
(1
)
 
381

 
(16
)
 
482

 
(17
)
Mortgage-backed securities:
 
 
 
 
 
 
 

 


 


RMBS
37

 
(1
)
 
371

 
(23
)
 
408

 
(24
)
CMBS
1

 
—

 
86

 
(3
)
 
87

 
(3
)
Asset-backed securities
308

 
(3
)
 
18

 
—

 
326

 
(3
)
Non-U.S. government securities
46

 
(1
)
 
86

 
(14
)
 
132

 
(15
)
Total
$
530

 
$
(6
)
 
$
1,118

 
$
(59
)
 
$
1,648

 
$
(65
)
Number of securities (1)
 

 
128

 
 

 
333

 
 

 
456

Number of securities with OTTI (1)
 

 
5

 
 

 
24

 
 

 
28

 

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


___________________
(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 The amortized cost and estimated fair value of available-for-sale fixed maturity securities by contractual maturity as of March 31, 2019 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 Fixed-Maturity Securities
by Contractual Maturity
As of March 31, 2019
 
 
Amortized
Cost
 
Estimated
Fair Value
 
(in millions)
Due within one year
$
217

 
$
213

Due after one year through five years
1,500

 
1,524

Due after five years through 10 years
2,249

 
2,316

Due after 10 years
4,132

 
4,438

Mortgage-backed securities:
 

 
 

RMBS
960

 
959

CMBS
532

 
539

Total
$
9,590

 
$
9,989