XML 45 R32.htm IDEA: XBRL DOCUMENT v3.19.2
Fair Value Measurement (Tables)
 6 Months Ended
Jun. 30, 2019
Fair Value Disclosures [Abstract]  
Fair Value Hierarchy of Financial Instruments Carried at Fair Value
Amounts recorded at fair value in the Company’s financial statements are presented in the tables below.
 
Fair Value Hierarchy of Financial Instruments Carried at Fair Value
As of June 30, 2019
 
 
 
 
Fair Value Hierarchy
 
Fair Value
 
Level 1
 
Level 2
 
Level 3
 
(in millions)
Assets:
 

 
 

 
 

 
 

Investment portfolio, available-for-sale:
 

 
 

 
 

 
 

Fixed-maturity securities
 

 
 

 
 

 
 

Obligations of state and political subdivisions
$
4,683

 
$
—

 
$
4,578

 
$
105

U.S. government and agencies
165

 
—

 
165

 
—

Corporate securities
2,267

 
—

 
2,219

 
48

Mortgage-backed securities:
 

 
 
 
 
 
 
RMBS
938

 
—

 
613

 
325

Commercial mortgage-backed securities (CMBS)
495

 
—

 
495

 
—

Asset-backed securities
779

 
—

 
105

 
674

Non-U.S. government securities
247

 
—

 
247

 
—

Total fixed-maturity securities
9,574


—

 
8,422

 
1,152

Short-term investments
1,159

 
893

 
266

 
—

Other invested assets (1)
6

 
—

 
—

 
6

FG VIEs’ assets, at fair value
526

 
—

 
—

 
526

Other assets
166

 
32

 
42

 
92

Total assets carried at fair value
$
11,431

 
$
925

 
$
8,730

 
$
1,776

Liabilities:
 

 
 
 
 
 
 
Credit derivative liabilities
$
224

 
$
—

 
$
—

 
$
224

FG VIEs’ liabilities with recourse, at fair value
446

 
—

 
—

 
446

FG VIEs’ liabilities without recourse, at fair value
105

 
—

 
—

 
105

Total liabilities carried at fair value
$
775

 
$
—

 
$
—

 
$
775

 
Fair Value Hierarchy of Financial Instruments Carried at Fair Value
As of December 31, 2018
 
 
 
 
Fair Value Hierarchy
 
Fair Value
 
Level 1
 
Level 2
 
Level 3
 
(in millions)
Assets:
 

 
 

 
 

 
 

Investment portfolio, available-for-sale:
 

 
 

 
 

 
 

Fixed-maturity securities
 

 
 

 
 

 
 

Obligations of state and political subdivisions
$
4,911

 
$
—

 
$
4,812

 
$
99

U.S. government and agencies
175

 
—

 
175

 
—

Corporate securities
2,136

 
—

 
2,080

 
56

Mortgage-backed securities:
 

 
 

 
 

 
 

RMBS
982

 
—

 
673

 
309

CMBS
539

 
—

 
539

 
—

Asset-backed securities
1,068

 
—

 
121

 
947

Non-U.S. government securities
278

 
—

 
278

 
—

Total fixed-maturity securities
10,089

 
—

 
8,678

 
1,411

Short-term investments
729

 
429

 
300

 
—

Other invested assets (1)
7

 
—

 
—

 
7

FG VIEs’ assets, at fair value
569

 
—

 
—

 
569

Other assets
139

 
25

 
38

 
76

Total assets carried at fair value
$
11,533

 
$
454

 
$
9,016

 
$
2,063

Liabilities:
 

 
 

 
 

 
 

Credit derivative liabilities
$
209

 
$
—

 
$
—

 
$
209

FG VIEs’ liabilities with recourse, at fair value
517

 
—

 
—

 
517

FG VIEs’ liabilities without recourse, at fair value
102

 
—

 
—

 
102

Total liabilities carried at fair value
$
828

 
$
—

 
$
—

 
$
828

____________________
(1)
Includes Level 3 mortgage loans that are recorded at fair value on a non-recurring basis.
Fair Value Assets Measured on Recurring Basis
The tables below present a roll forward of the Company’s Level 3 financial instruments carried at fair value on a recurring basis during Second Quarter 2019 and 2018 and Six Months 2019 and 2018.


Fair Value Level 3 Rollforward
Recurring Basis
Second Quarter 2019


 
Fixed-Maturity Securities
 
 
 
 
 
 
 
FG VIEs’ Liabilities, at Fair Value
 
 
Obligations
of State and
Political
Subdivisions
 
Corporate Securities
 
RMBS
 
Asset-
Backed
Securities
 
FG VIEs’
Assets at
Fair
Value
 
Other
(6)
 
Credit
Derivative
Asset
(Liability),
net (4)
 
With
Recourse
 
Without
Recourse
 
 
(in millions)
Fair value as of
March 31, 2019
$
104

 
$
48

 
$
318

 
$
958

 
$
560

 
$
68

 
$
(228
)
 
$
(505
)
 
$
(104
)
 
Total pretax realized and unrealized gains/(losses) recorded in:
 
 
 
 
 
 
 
 

 
 
 
 

 
 

 
 

 
 

Net income (loss)
1

(1
)
1

(1
)
5

(1
)
30

(1
)
47

(2
)
19

(3
)
(8
)
(5
)
(20
)
(2
)
(3
)
(2
)
Other comprehensive income (loss)
—

 
(1
)
 
15

 
(85
)
 
—

 
—

 
—

 
5

 
—

 

Purchases
—

 
—

 
—

 
8

 
—

 
—

 
—

 
—

 
—

 

Settlements
—

 
—

 
(13
)
 
(238
)
 
(75
)
 
—

 
20

 
69

 
1

 

FG VIE deconsolidation
—

 
—

 
—

 
—

 
(6
)
 
—

 
—

 
5

 
1

 
Transfers into Level 3
—

 
—

 
—

 
1

 
—

 
—

 
—

 
—

 
—

 
Fair value as of
June 30, 2019
$
105

 
$
48

 
$
325

 
$
674

 
$
526

 
$
87

 
$
(216
)
 
$
(446
)
 
$
(105
)
 
Change in unrealized gains/(losses) included in earnings related to financial instruments held as of June 30, 2019
 
 
 
 
 
 
 
 
$
52

(2
)
$
19

(3
)
$
(7
)
(5
)
$
(20
)
(2
)
$
(12
)
(2
)
Change in unrealized
gains/(losses) included
in OCI related to
financial instruments
held as of June 30, 2019
$
—

 
$
(1
)
 
$
15

 
$
8

 
 
 
$
—

 
 
 
$
5

 
 
 





















Fair Value Level 3 Rollforward
Recurring Basis
Second Quarter 2018

 
Fixed-Maturity Securities
 
 
 
 
 
 
 
FG VIEs’ Liabilities, at Fair Value
 
 
Obligations
of State and
Political
Subdivisions
 
Corporate Securities
 
RMBS
 
Asset-
Backed
Securities
 
FG VIEs’
Assets at
Fair
Value
 
Other
(6)
 
Credit
Derivative
Asset
(Liability),
net (4)
 
With
Recourse
 
Without
Recourse
 
 
(in millions)
Fair value as of
March 31, 2018
$
83

 
$
62

 
$
314

 
$
809

 
$
651

 
$
62



$
(236
)
 
$
(598
)
 
$
(110
)
 
Total pretax realized and unrealized gains/(losses) recorded in:
 
 
 
 
 
 
 
 

 
 
 
 

 
 

 
 

 
 

Net income (loss)
1

(1
)
1

(1
)
6

(1
)
14

(1
)
3

(2
)
(1
)
(3
)
48

(5
)
(4
)
(2
)
1

(2
)
Other comprehensive income (loss)
8

 
—

 
(3
)
 
6

 
—

 
—

 
—

 
4

 
—

 

Purchases
—

 
—

 
9

 
91

 
—

 
—

 
—

 
—

 
—

 

Issuances
—

 
—

 
—

 
—

 
—

 
—

 
(68
)
(7
)
—

 
—

 
Settlements
—

 
—

 
(15
)
 
(23
)
 
(27
)
 
—

 
(1
)
 
27

 
1

 

Fair value as of
June 30, 2018
$
92

 
$
63

 
$
311

 
$
897

 
$
627

 
$
61

 
$
(257
)
 
$
(571
)
 
$
(108
)
 
Change in unrealized gains/(losses) related to financial instruments held as of June 30, 2018
$
8

 
$
—

 
$
(2
)
 
$
6

 
$
6

(2
)
$
(1
)
(3
)
$
46

(5
)
$
2

(2
)
$
1

(2
)

Fair Value Level 3 Rollforward
Recurring Basis
Six Months 2019

 
Fixed-Maturity Securities
 
 
 
 
 
 
 
FG VIEs’ Liabilities, at Fair Value
 
 
Obligations
of State and
Political
Subdivisions
 
Corporate Securities
 
RMBS
 
Asset-
Backed
Securities
 
FG VIEs’
Assets at
Fair
Value
 
Other
(6)
 
Credit
Derivative
Asset
(Liability),
net (4)
 
With
Recourse
 
Without
Recourse
 
 
(in millions)
Fair value as of
December 31, 2018
$
99

 
$
56

 
$
309

 
$
947

 
$
569

 
$
77

 
$
(207
)
 
$
(517
)
 
$
(102
)
 
Total pretax realized and unrealized gains/(losses) recorded in:
 
 
 
 
 
 
 
 

 
 
 
 

 
 

 
 

 
 

Net income (loss)
2

(1
)
(10
)
(1
)
11

(1
)
44

(1
)
64

(2
)
10

(3
)
(30
)
(5
)
(31
)
(2
)
(7
)
(2
)
Other comprehensive income (loss)
5

 
2

 
20

 
(94
)
 

—

 
—

 

—

 

5

 

—

 

Purchases
—

 
—

 
11

 
18

 

—

 
—

 

—

 

—

 

—

 

Settlements
(1
)
 
—

 
(26
)
 
(242
)
 
(101
)
 
—

 

21

 

92

 

3

 

FG VIE deconsolidation
—

 
—

 
—

 
—

 
(6
)
 
—

 
—

 
5

 
1

 
Transfers into Level 3
—

 
—

 
—

 
1

 
—

 
—

 
—

 
—

 
—

 
Fair value as of
June 30, 2019
$
105

 
$
48

 
$
325

 
$
674

 
$
526

 
$
87

 
$
(216
)
 
$
(446
)
 
$
(105
)
 
Change in unrealized gains/(losses) included in earnings related to financial instruments held as of June 30, 2019
 
 
 
 
 
 
 
 
$
72

(2
)
$
10

(3
)
$
(28
)
(5
)
$
(31
)
(2
)
$
(15
)
(2
)
Change in unrealized
gains/(losses) included
in OCI related to
financial instruments
held as of June 30, 2019
$
5

 
$
2

 
$
20

 
$
11

 
 
 
$
—

 
 
 
$
5

 
 
 
Fair Value Level 3 Rollforward
Recurring Basis
Six Months 2018

 
Fixed-Maturity Securities
 
 
 
 
 
 
 
FG VIEs’ Liabilities, at Fair Value
 
 
Obligations
of State and
Political
Subdivisions
 
Corporate Securities
 
RMBS
 
Asset-
Backed
Securities
 
FG VIEs’
Assets at
Fair
Value
 
Other
(6)
 
Credit
Derivative
Asset
(Liability),
net (4)
 

With
Recourse
 

Without
Recourse
 
 
(in millions)
Fair value as of
December 31, 2017
$
76

 
$
67

 
$
334

 
$
787

 
$
700

 
$
64

 
$
(269
)
 
$
(627
)
 
$
(130
)
 
Total pretax realized and unrealized gains/(losses) recorded in:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Net income (loss)
2

(1
)
(4
)
(1
)
13

(1
)
29

(1
)
4

(2
)
(2
)
(3
)
82

(5
)
(4
)
(2
)
2

(2
)
Other comprehensive income (loss)
11

 
—

 
(10
)
 
9

 
—

 
—

 

—

 

2

 

—

 

Purchases
4

 
—

 
9

 
100

 
—

 
—

 

—

 

—

 

—

 

Issuances
—

 
—

 
—

 
—

 
—

 
—

 
(68
)
(7
)
—

 
—

 
Settlements
(1
)
 
—

 
(35
)
 
(28
)
 
(60
)
 
(1
)
 

(2
)
 

57

 

4

 

FG VIE deconsolidations
—

 
—

 
—

 
—

 
(17
)
 
—

 
—

 
1

 
16

 
Fair value as of
June 30, 2018
$
92

 
$
63

 
$
311

 
$
897

 
$
627

 
$
61

 
$
(257
)
 
$
(571
)
 
$
(108
)
 
Change in unrealized gains/(losses) related to financial instruments held as of June 30, 2018
$
11

 
$
—

 
$
(8
)
 
$
10

 
$
10

(2
)
$
(2
)
(3
)
$
73

(5
)
$
(1
)
(2
)
$
1

(2
)
 ____________________
(1)
Included in net realized investment gains (losses) and net investment income.

(2)
Included in fair value gains (losses) on FG VIEs.

(3)
Recorded in net investment income and other income.

(4)
Represents the net position of credit derivatives. Credit derivative assets (recorded in other assets) and credit derivative liabilities (presented as a separate line item) are shown as either assets or liabilities in the condensed consolidated balance sheet based on net exposure by counterparty.

(5)
Reported in net change in fair value of credit derivatives.

(6)
Includes CCS and other invested assets.

(7)
Relates to SGI Transaction. See Note 11, Reinsurance.
Fair Value, Liabilities Measured on Recurring Basis
The tables below present a roll forward of the Company’s Level 3 financial instruments carried at fair value on a recurring basis during Second Quarter 2019 and 2018 and Six Months 2019 and 2018.


Fair Value Level 3 Rollforward
Recurring Basis
Second Quarter 2019


 
Fixed-Maturity Securities
 
 
 
 
 
 
 
FG VIEs’ Liabilities, at Fair Value
 
 
Obligations
of State and
Political
Subdivisions
 
Corporate Securities
 
RMBS
 
Asset-
Backed
Securities
 
FG VIEs’
Assets at
Fair
Value
 
Other
(6)
 
Credit
Derivative
Asset
(Liability),
net (4)
 
With
Recourse
 
Without
Recourse
 
 
(in millions)
Fair value as of
March 31, 2019
$
104

 
$
48

 
$
318

 
$
958

 
$
560

 
$
68

 
$
(228
)
 
$
(505
)
 
$
(104
)
 
Total pretax realized and unrealized gains/(losses) recorded in:
 
 
 
 
 
 
 
 

 
 
 
 

 
 

 
 

 
 

Net income (loss)
1

(1
)
1

(1
)
5

(1
)
30

(1
)
47

(2
)
19

(3
)
(8
)
(5
)
(20
)
(2
)
(3
)
(2
)
Other comprehensive income (loss)
—

 
(1
)
 
15

 
(85
)
 
—

 
—

 
—

 
5

 
—

 

Purchases
—

 
—

 
—

 
8

 
—

 
—

 
—

 
—

 
—

 

Settlements
—

 
—

 
(13
)
 
(238
)
 
(75
)
 
—

 
20

 
69

 
1

 

FG VIE deconsolidation
—

 
—

 
—

 
—

 
(6
)
 
—

 
—

 
5

 
1

 
Transfers into Level 3
—

 
—

 
—

 
1

 
—

 
—

 
—

 
—

 
—

 
Fair value as of
June 30, 2019
$
105

 
$
48

 
$
325

 
$
674

 
$
526

 
$
87

 
$
(216
)
 
$
(446
)
 
$
(105
)
 
Change in unrealized gains/(losses) included in earnings related to financial instruments held as of June 30, 2019
 
 
 
 
 
 
 
 
$
52

(2
)
$
19

(3
)
$
(7
)
(5
)
$
(20
)
(2
)
$
(12
)
(2
)
Change in unrealized
gains/(losses) included
in OCI related to
financial instruments
held as of June 30, 2019
$
—

 
$
(1
)
 
$
15

 
$
8

 
 
 
$
—

 
 
 
$
5

 
 
 





















Fair Value Level 3 Rollforward
Recurring Basis
Second Quarter 2018

 
Fixed-Maturity Securities
 
 
 
 
 
 
 
FG VIEs’ Liabilities, at Fair Value
 
 
Obligations
of State and
Political
Subdivisions
 
Corporate Securities
 
RMBS
 
Asset-
Backed
Securities
 
FG VIEs’
Assets at
Fair
Value
 
Other
(6)
 
Credit
Derivative
Asset
(Liability),
net (4)
 
With
Recourse
 
Without
Recourse
 
 
(in millions)
Fair value as of
March 31, 2018
$
83

 
$
62

 
$
314

 
$
809

 
$
651

 
$
62



$
(236
)
 
$
(598
)
 
$
(110
)
 
Total pretax realized and unrealized gains/(losses) recorded in:
 
 
 
 
 
 
 
 

 
 
 
 

 
 

 
 

 
 

Net income (loss)
1

(1
)
1

(1
)
6

(1
)
14

(1
)
3

(2
)
(1
)
(3
)
48

(5
)
(4
)
(2
)
1

(2
)
Other comprehensive income (loss)
8

 
—

 
(3
)
 
6

 
—

 
—

 
—

 
4

 
—

 

Purchases
—

 
—

 
9

 
91

 
—

 
—

 
—

 
—

 
—

 

Issuances
—

 
—

 
—

 
—

 
—

 
—

 
(68
)
(7
)
—

 
—

 
Settlements
—

 
—

 
(15
)
 
(23
)
 
(27
)
 
—

 
(1
)
 
27

 
1

 

Fair value as of
June 30, 2018
$
92

 
$
63

 
$
311

 
$
897

 
$
627

 
$
61

 
$
(257
)
 
$
(571
)
 
$
(108
)
 
Change in unrealized gains/(losses) related to financial instruments held as of June 30, 2018
$
8

 
$
—

 
$
(2
)
 
$
6

 
$
6

(2
)
$
(1
)
(3
)
$
46

(5
)
$
2

(2
)
$
1

(2
)

Fair Value Level 3 Rollforward
Recurring Basis
Six Months 2019

 
Fixed-Maturity Securities
 
 
 
 
 
 
 
FG VIEs’ Liabilities, at Fair Value
 
 
Obligations
of State and
Political
Subdivisions
 
Corporate Securities
 
RMBS
 
Asset-
Backed
Securities
 
FG VIEs’
Assets at
Fair
Value
 
Other
(6)
 
Credit
Derivative
Asset
(Liability),
net (4)
 
With
Recourse
 
Without
Recourse
 
 
(in millions)
Fair value as of
December 31, 2018
$
99

 
$
56

 
$
309

 
$
947

 
$
569

 
$
77

 
$
(207
)
 
$
(517
)
 
$
(102
)
 
Total pretax realized and unrealized gains/(losses) recorded in:
 
 
 
 
 
 
 
 

 
 
 
 

 
 

 
 

 
 

Net income (loss)
2

(1
)
(10
)
(1
)
11

(1
)
44

(1
)
64

(2
)
10

(3
)
(30
)
(5
)
(31
)
(2
)
(7
)
(2
)
Other comprehensive income (loss)
5

 
2

 
20

 
(94
)
 

—

 
—

 

—

 

5

 

—

 

Purchases
—

 
—

 
11

 
18

 

—

 
—

 

—

 

—

 

—

 

Settlements
(1
)
 
—

 
(26
)
 
(242
)
 
(101
)
 
—

 

21

 

92

 

3

 

FG VIE deconsolidation
—

 
—

 
—

 
—

 
(6
)
 
—

 
—

 
5

 
1

 
Transfers into Level 3
—

 
—

 
—

 
1

 
—

 
—

 
—

 
—

 
—

 
Fair value as of
June 30, 2019
$
105

 
$
48

 
$
325

 
$
674

 
$
526

 
$
87

 
$
(216
)
 
$
(446
)
 
$
(105
)
 
Change in unrealized gains/(losses) included in earnings related to financial instruments held as of June 30, 2019
 
 
 
 
 
 
 
 
$
72

(2
)
$
10

(3
)
$
(28
)
(5
)
$
(31
)
(2
)
$
(15
)
(2
)
Change in unrealized
gains/(losses) included
in OCI related to
financial instruments
held as of June 30, 2019
$
5

 
$
2

 
$
20

 
$
11

 
 
 
$
—

 
 
 
$
5

 
 
 
Fair Value Level 3 Rollforward
Recurring Basis
Six Months 2018

 
Fixed-Maturity Securities
 
 
 
 
 
 
 
FG VIEs’ Liabilities, at Fair Value
 
 
Obligations
of State and
Political
Subdivisions
 
Corporate Securities
 
RMBS
 
Asset-
Backed
Securities
 
FG VIEs’
Assets at
Fair
Value
 
Other
(6)
 
Credit
Derivative
Asset
(Liability),
net (4)
 

With
Recourse
 

Without
Recourse
 
 
(in millions)
Fair value as of
December 31, 2017
$
76

 
$
67

 
$
334

 
$
787

 
$
700

 
$
64

 
$
(269
)
 
$
(627
)
 
$
(130
)
 
Total pretax realized and unrealized gains/(losses) recorded in:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Net income (loss)
2

(1
)
(4
)
(1
)
13

(1
)
29

(1
)
4

(2
)
(2
)
(3
)
82

(5
)
(4
)
(2
)
2

(2
)
Other comprehensive income (loss)
11

 
—

 
(10
)
 
9

 
—

 
—

 

—

 

2

 

—

 

Purchases
4

 
—

 
9

 
100

 
—

 
—

 

—

 

—

 

—

 

Issuances
—

 
—

 
—

 
—

 
—

 
—

 
(68
)
(7
)
—

 
—

 
Settlements
(1
)
 
—

 
(35
)
 
(28
)
 
(60
)
 
(1
)
 

(2
)
 

57

 

4

 

FG VIE deconsolidations
—

 
—

 
—

 
—

 
(17
)
 
—

 
—

 
1

 
16

 
Fair value as of
June 30, 2018
$
92

 
$
63

 
$
311

 
$
897

 
$
627

 
$
61

 
$
(257
)
 
$
(571
)
 
$
(108
)
 
Change in unrealized gains/(losses) related to financial instruments held as of June 30, 2018
$
11

 
$
—

 
$
(8
)
 
$
10

 
$
10

(2
)
$
(2
)
(3
)
$
73

(5
)
$
(1
)
(2
)
$
1

(2
)
 ____________________
(1)
Included in net realized investment gains (losses) and net investment income.

(2)
Included in fair value gains (losses) on FG VIEs.

(3)
Recorded in net investment income and other income.

(4)
Represents the net position of credit derivatives. Credit derivative assets (recorded in other assets) and credit derivative liabilities (presented as a separate line item) are shown as either assets or liabilities in the condensed consolidated balance sheet based on net exposure by counterparty.

(5)
Reported in net change in fair value of credit derivatives.

(6)
Includes CCS and other invested assets.

(7)
Relates to SGI Transaction. See Note 11, Reinsurance.
Schedule of Quantitative Information About Level 3 Liabilities, Fair Value Measurements
Quantitative Information About Level 3 Fair Value Inputs
At June 30, 2019

Financial Instrument Description (1)
 
Fair Value at
June 30, 2019
(in millions)
 
Significant Unobservable Inputs
 
Range
 
Weighted Average as a Percentage of Current Par Outstanding
Assets (liabilities) (2):
 
 

 
 
 
 
 
 
Fixed-maturity securities:
 
 

 
 
 
 
 
 
 
 
Obligations of state and political subdivisions
 
$
105

 
Yield
 
4.5
%
-
33.0%
 
7.1%
 
 
 
 
 
 
 
 
 
 
 
Corporate securities
 
48

 
Yield
 
30.9%
 
 
 
 
 
 
 
 
 
 
 
 
 
RMBS
 
325

 
CPR
 
1.5
%
-
18.2%
 
5.9%
 
 
CDR
 
1.5
%
-
6.9%
 
4.9%
 
 
Loss severity
 
40.0
%
-
125.0%
 
85.5%
 
 
Yield
 
3.8
%
-
6.2%
 
4.5%
Asset-backed securities:
 
 
 
 
 
 
 
 
 
 
Life insurance transactions
 
337

 
Yield
 
5.6%
 
 
 
 
 
 
 
 
 
 
 
 
 
Collateralized loan obligations (CLOs) /Trust preferred securities (TruPS)
 
280

 
Yield
 
2.8
%
-
5.1%
 
3.8%
 
 
 
 
 
 
 
 
 
 
 
Others
 
57

 
Yield
 
10.4%
 
 
 
 
 
 
 
 
 
 
 
 
 
FG VIEs’ assets, at fair value
 
526

 
CPR
 
0.9
%
-
18.3%
 
8.9%
 
 
CDR
 
1.3
%
-
24.2%
 
4.6%
 
 
Loss severity
 
60.0
%
-
100.0%
 
78.4%
 
 
Yield
 
3.6
%
-
8.5%
 
5.3%
 
 
 
 
 
 
 
 
 
 
 
Other assets
 
84

 
Implied Yield
 
6.7
%
-
7.3%
 
7.0%
 
 
Term (years)
 
10 years
 
 
 
 
 

 
 
 
 
 
 
 
 
Credit derivative liabilities, net
 
(216
)
 
Year 1 loss estimates
 
0.0
%
-
80.0%
 
1.8%
 
 
Hedge cost (in basis points (bps))
 
7.0

-
42.0
 
15.0
 
 
Bank profit (in bps)
 
38.0

-
215.0
 
88.0
 
 
Internal floor (in bps)
 
30.0
 
 
 
 
Internal credit rating
 
AAA

-
CCC
 
A+
 
 
 
 
 
 
 
 
 
 
 
FG VIEs’ liabilities, at fair value
 
(551
)
 
CPR
 
0.9
%
-
18.3%
 
8.9%
 
 
CDR
 
1.3
%
-
24.2%
 
4.6%
 
 
Loss severity
 
60.0
%
-
100.0%
 
78.4%
 
 
Yield
 
3.5
%
-
8.5%
 
4.3%
___________________
(1)
Discounted cash flow is used as the primary valuation technique for all financial instruments listed in this table.

(2)
Excludes several investments recorded in other invested assets with fair value of $6 million.
Quantitative Information About Level 3 Fair Value Inputs
At December 31, 2018

Financial Instrument Description (1)
 
Fair Value at
December 31, 2018
(in millions)
 
Significant Unobservable Inputs
 
Range
 
Weighted Average as a Percentage of Current Par Outstanding
Assets (liabilities) (2):
 
 

 
 
 
 
 
 
 
 
Fixed-maturity securities:
 
 

 
 
 
 
 
 
 
 
Obligations of state and political subdivisions
 
$
99

 
Yield
 
4.5
%
-
32.7%
 
12.0%
 
 
 
 
 
 
 
 
 
 
 
Corporate securities
 
56

 
Yield
 
29.5%
 
 
 
 
 
 
 
 
 
 
 
 
 
RMBS
 
309

 
CPR
 
3.4
%
-
19.4%
 
6.2%
 
 
CDR
 
1.5
%
-
6.9%
 
5.2%
 
 
Loss severity
 
40.0
%
-
125.0%
 
82.7%
 
 
Yield
 
5.3
%
-
8.1%
 
6.3%
Asset-backed securities:
 
 
 
 
 
 
 
 
 
 
Life insurance transactions
 
620

 
Yield
 
6.5
%
-
7.1%
 
6.8%
 
 
 
 
 
 
 
 
 
 
 
CLOs/TruPS
 
274

 
Yield
 
3.8
%
-
4.7%
 
4.3%
 
 
 
 
 
 
 
 
 
 
 
Others
 
53

 
Yield
 
11.5%
 
 
 
 
 
 
 
 
 
 
 
 
 
FG VIEs’ assets, at fair value
 
569

 
CPR
 
0.9
%
-
18.1%
 
9.3%
 
 
CDR
 
1.3
%
-
23.7%
 
5.1%
 
 
Loss severity
 
60.0
%
-
100.0%
 
79.8%
 
 
Yield
 
5.0
%
-
10.2%
 
7.1%
 
 
 
 
 
 
 
 
 
 
 
Other assets
 
74

 
Implied Yield
 
6.6
%
-
7.2%
 
6.9%
 
 
Term (years)
 
10 years
 
 
 
 
 

 
 
 
 
 
 
 
 
Credit derivative liabilities, net
 
(207
)
 
Year 1 loss estimates
 
0.0
%
-
66.0%
 
2.2%
 
 
Hedge cost (in bps)
 
5.5

-
82.5
 
23.3
 
 
Bank profit (in bps)
 
7.2

-
509.9
 
77.3
 
 
Internal floor (in bps)
 
8.8

-
30.0
 
19.0
 
 
Internal credit rating
 
AAA

-
CCC
 
AA-
 
 
 
 
 
 
 
 
 
 
 
FG VIEs’ liabilities, at fair value
 
(619
)
 
CPR
 
0.9
%
-
18.1%
 
9.3%
 
 
CDR
 
1.3
%
-
23.7%
 
5.1%
 
 
Loss severity
 
60.0
%
-
100.0%
 
79.8%
 
 
Yield
 
5.0
%
-
10.2%
 
5.6%

____________________
(1)
Discounted cash flow is used as the primary valuation technique for all financial instruments listed in this table.

(2)
Excludes several investments recorded in other invested assets with fair value of $7 million
Fair Value of Financial Instruments

Fair Value of Financial Instruments Not Carried at Fair Value
 
 
As of
June 30, 2019
 
As of
December 31, 2018
 
Carrying
Amount
 
Estimated
Fair Value
 
Carrying
Amount
 
Estimated
Fair Value
 
(in millions)
Assets (liabilities):
 

 
 

 
 

 
 

Other invested assets
$
1

 
$
2

 
$
1

 
$
2

Other assets (1)
91

 
91

 
130

 
130

Financial guaranty insurance contracts (2)
(2,995
)
 
(5,870
)
 
(3,240
)
 
(5,932
)
Long-term debt
(1,233
)
 
(1,545
)
 
(1,233
)
 
(1,496
)
Other liabilities (1)
(22
)
 
(22
)
 
(12
)
 
(12
)
____________________
(1)
The Company's other assets and other liabilities consist predominantly of accrued interest, receivables for securities sold and payables for securities purchased, for which the carrying value approximates fair value.

(2)
Carrying amount includes the assets and liabilities related to financial guaranty insurance contract premiums, losses, and salvage and subrogation and other recoverables net of reinsurance.