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Investments and Cash (Tables)
 6 Months Ended
Jun. 30, 2019
Investments, Debt and Equity Securities [Abstract]  
Net Investment Income
Net Investment Income
 
 
Second Quarter
 
Six Months
 
2019
 
2018
 
2019
 
2018
 
(in millions)
Income from fixed-maturity securities managed by third parties
$
69

 
$
74

 
$
141

 
$
149

Income from internally managed securities
43

 
27

 
71

 
54

Gross investment income
112

 
101

 
212

 
203

Investment expenses
(2
)
 
(3
)
 
(4
)
 
(5
)
Net investment income
$
110

 
$
98

 
$
208

 
$
198
Net Realized Investment Gains (Losses)
Net Realized Investment Gains (Losses)
 
 
Second Quarter
 
Six Months
 
2019
 
2018
 
2019
 
2018
 
(in millions)
Gross realized gains on available-for-sale securities
$
13

 
$
2

 
$
19

 
$
11

Gross realized losses on available-for-sale securities
(1
)
 
(1
)
 
(3
)
 
(6
)
Net realized gains (losses) on other invested assets
—

 
—

 
—

 
(1
)
Other-than-temporary impairment (OTTI):
 
 
 
 
 
 
 
Total OTTI
(4
)
 
(4
)
 
(17
)
 
(15
)
Less: portion of OTTI recognized in OCI
—

 
(1
)
 
3

 
(4
)
Net OTTI recognized in net income (loss) (1)
(4
)
 
(3
)
 
(20
)
 
(11
)
Net realized investment gains (losses)
$
8

 
$
(2
)
 
$
(4
)
 
$
(7
)

____________________
(1)
Net OTTI recognized in net income was mainly attributable to change in foreign exchange rates in Second Quarter 2019. OTTI for all other periods presented was primarily attributable to securities purchased for loss mitigation and other risk management purposes.
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

 
Second Quarter
 
Six Months
 
2019
 
2018
 
2019
 
2018
 
(in millions)
Balance, beginning of period
$
197

 
$
169

 
$
185

 
$
162

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

 
1

 
12

 
8

Reductions for securities sold and other settlements
(6
)
 
—

 
(6
)
 
—

Balance, end of period
$
191

 
$
170

 
$
191

 
$
170
Fixed Maturity Securities and Short Term Investments by Security Type
Fixed-Maturity Securities and Short-Term Investments
by Security Type 
As of June 30, 2019

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

 
 

 
 

 
 

 
 

 
 

 
 
Obligations of state and political subdivisions
 
42
%
 
$
4,370

 
$
313

 
$
—

 
$
4,683

 
$
46

 
AA-
U.S. government and agencies
 
1

 
154

 
11

 
—

 
165

 
—

 
AA+
Corporate securities
 
22

 
2,212

 
71

 
(16
)
 
2,267

 
(1
)
 
A
Mortgage-backed securities (4):
 
0

 
 
 
 
 
 

 
 
 
 

 
 
RMBS
 
9

 
914

 
37

 
(13
)
 
938

 
4

 
A-
CMBS
 
5

 
478

 
18

 
(1
)
 
495

 
—

 
AAA
Asset-backed securities
 
7

 
746

 
36

 
(3
)
 
779

 
14

 
BBB-
Non-U.S. government securities
 
3

 
263

 
2

 
(18
)
 
247

 
—

 
AA
Total fixed-maturity securities
 
89

 
9,137

 
488

 
(51
)
 
9,574

 
63

 
A+
Short-term investments
 
11

 
1,159

 
—

 
—

 
1,159

 
—

 
AAA
Total investment portfolio
 
100
%
 
$
10,296

 
$
488

 
$
(51
)
 
$
10,733

 
$
63

 
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
Pre-tax
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).

(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 45% of mortgage backed securities as of June 30, 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 June 30, 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
$
7

 
$
—

 
$
17

 
$
—

 
$
24

 
$
—

U.S. government and agencies
10

 
—

 
21

 
—

 
31

 
—

Corporate securities
229

 
(2
)
 
204

 
(14
)
 
433

 
(16
)
Mortgage-backed securities:
 
 
 
 
 
 
 

 


 


RMBS
7

 
—

 
283

 
(13
)
 
290

 
(13
)
CMBS
—

 
—

 
51

 
(1
)
 
51

 
(1
)
Asset-backed securities
226

 
(2
)
 
76

 
(1
)
 
302

 
(3
)
Non-U.S. government securities
45

 
(1
)
 
113

 
(17
)
 
158

 
(18
)
Total
$
524

 
$
(5
)
 
$
765

 
$
(46
)
 
$
1,289

 
$
(51
)
Number of securities (1)
 

 
112

 
 

 
186

 
 

 
291

Number of securities with OTTI
 

 
6

 
 

 
11

 
 

 
17

 

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 June 30, 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 June 30, 2019
 
 
Amortized
Cost
 
Estimated
Fair Value
 
(in millions)
Due within one year
$
223

 
$
216

Due after one year through five years
1,637

 
1,665

Due after five years through 10 years
2,101

 
2,196

Due after 10 years
3,784

 
4,064

Mortgage-backed securities:
 

 
 

RMBS
914

 
938

CMBS
478

 
495

Total
$
9,137

 
$
9,574
Restrictions on Cash and Cash Equivalents
The following table provides a reconciliation of the cash reported on the condensed consolidated balance sheets and the cash and restricted cash reported in the statements of cash flows.

Cash and Restricted Cash

 
As of
June 30, 2019
 
As of
December 31, 2018
 
(in millions)
Cash
$
190

 
$
104

Restricted cash
4

 
—

Total cash and restricted cash
$
194

 
$
104