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Investments and Cash (Tables)
 12 Months Ended
Dec. 31, 2019
Investments, Debt and Equity Securities [Abstract]  
Net Investment Income
Net Investment Income

 
Year Ended December 31,
 
2019
 
2018
 
2017
 
(in millions)
Income from securities managed by third parties
$
273


$
297


$
298

Income from internally managed securities (1)
114

 
107

 
128

Gross investment income
387

 
404

 
426

Investment expenses
(9
)

(9
)

(9
)
Net investment income
$
378

 
$
395

 
$
417


____________________
(1)
Year ended December 31, 2017 included accretion on Zohar II Notes used as consideration for the MBIA UK Acquisition. See Note 2, Business Combinations and Assumption of Insured Portfolio
Net Realized Investment Gains (Losses)
Net Realized Investment Gains (Losses)
 
 
Year Ended December 31,
 
2019
 
2018
 
2017
 
(in millions)
Gross realized gains on available-for-sale securities (1)
$
63

 
$
20

 
$
95

Gross realized losses on available-for-sale securities
(5
)
 
(12
)
 
(12
)
Net realized gains (losses) on other invested assets
(1
)
 
(1
)
 
—

OTTI:
 
 
 
 
 
Total OTTI
(29
)
 
(35
)
 
(33
)
Less: portion of OTTI recognized in OCI
6

 
4

 
10

Net OTTI recognized in net income (loss) (2)
(35
)
 
(39
)
 
(43
)
Net realized investment gains (losses) (3)
$
22

 
$
(32
)
 
$
40


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

(2)
Net OTTI recognized in net income for 2019, 2018 and 2017 was attributable to securities purchased for loss mitigation and other risk management purposes and change in foreign exchange rates.

(3)
Includes foreign currency gains (losses) of $(15) million, $1 million and $18 million for 2019, 2018 and 2017, respectively.
Roll Forward of Credit Losses in the Investment Portfolio
Roll Forward of Credit Losses
in the Investment Portfolio

 
Year Ended December 31,
 
2019
 
2018
 
2017
 
(in millions)
Balance, beginning of period
$
185

 
$
162

 
$
134

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

 
—

 
13

Reductions for securities sold and other settlements
(15
)
 
—

 
(4
)
Additions for credit losses on securities for which an OTTI was previously recognized
16

 
23

 
19

Balance, end of period
$
186

 
$
185

 
$
162
Marketable Securities
Investment Portfolio
Carrying Value

 
As of December 31,
 
2019
 
2018
 
(in millions)
Fixed-maturity securities (1):
 
 
 
Externally managed
$
7,978

 
$
8,909

Internally managed
876

 
1,180

Short-term investments
1,268

 
729

Other invested assets-internally managed
 
 
 
Equity method investments
111

 
47

Other
7

 
8

Total
$
10,240

 
$
10,873

____________________
(1)
8.6% and 10.8% of fixed-maturity securities are rated BIG as of December 31, 2019 and December 31, 2018, 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, 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
%
 
$
4,036

 
$
305

 
$
(1
)
 
$
4,340

 
$
40

 
AA-
U.S. government and agencies
 
1

 
137

 
10

 
—

 
147

 
—

 
AA+
Corporate securities
 
23

 
2,137

 
103

 
(19
)
 
2,221

 
(8
)
 
A
Mortgage-backed securities(4):
 
—

 
 
 
 
 
 

 
 
 
 

 
 
RMBS
 
8

 
745

 
37

 
(7
)
 
775

 
8

 
A-
CMBS
 
4

 
402

 
17

 
—

 
419

 
—

 
AAA
Asset-backed securities
 
7

 
684

 
38

 
(2
)
 
720

 
16

 
BB+
Non-U.S. government securities
 
2

 
230

 
7

 
(5
)
 
232

 
3

 
AA
Total fixed-maturity securities
 
87

 
8,371

 
517

 
(34
)
 
8,854

 
59

 
A+
Short-term investments
 
13

 
1,268

 
—

 
—

 
1,268

 
—

 
AAA
Total investment portfolio
 
100
%
 
$
9,639

 
$
517

 
$
(34
)
 
$
10,122

 
$
59

 
AA-

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 42% of mortgage backed securities as of December 31, 2019 and 48% as of December 31, 2018, 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, 2019 (1)
 
State
 
State
General
Obligation
 
Local
General
Obligation
 
Revenue Bonds
 
Total Fair
Value
 
Amortized
Cost
 
Average
Credit
Rating
 
 
(in millions)
California
 
68

 
70

 
380

 
$
518

 
457

 
A
New York
 
$
6

 
$
46

 
$
408

 
$
460

 
$
431

 
AA
Texas
 
23

 
122

 
287

 
432

 
404

 
AA
Washington
 
52

 
69

 
181

 
302

 
284

 
AA
Florida
 
8

 
3

 
233

 
244

 
229

 
A+
Illinois
 
18

 
53

 
125

 
196

 
182

 
A
Massachusetts
 
71

 
—

 
115

 
186

 
171

 
AA
Pennsylvania
 
38

 
4

 
95

 
137

 
128

 
A+
Georgia
 
11

 
10

 
92

 
113

 
104

 
AA-
District of Columbia
 
30

 
—

 
69

 
99

 
94

 
AA
All others
 
71

 
172

 
915

 
1,158

 
1,080

 
AA-
Total
 
$
396

 
$
549

 
$
2,900

 
$
3,845

 
$
3,564

 
AA-


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
 
Total 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-
____________________
(1)
Excludes $495 million and $508 million as of December 31, 2019 and 2018, 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, 2019
 
As of December 31, 2018
Type
 
Fair
Value
 
Amortized
Cost
 
Fair
Value
 
Amortized
Cost
 
 
(in millions)
Transportation
 
$
916

 
$
835

 
$
967

 
$
925

Higher education
 
488

 
456

 
557

 
543

Water and sewer
 
453

 
422

 
580

 
566

Tax backed
 
426

 
397

 
471

 
458

Healthcare
 
236

 
220

 
278

 
270

Municipal utilities
 
234

 
212

 
287

 
267

All others
 
147

 
137

 
145

 
143

Total
 
$
2,900

 
$
2,679

 
$
3,285

 
$
3,172
Fixed Maturity Securities Gross Unrealized Loss by Length of Time
Fixed-Maturity Securities
Gross Unrealized Loss by Length of Time
As of December 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
$
45

 
$
(1
)
 
$
—

 
$
—

 
$
45

 
$
(1
)
U.S. government and agencies
5

 
—

 
5

 
—

 
10

 
—

Corporate securities
61

 
—

 
119

 
(19
)
 
180

 
(19
)
Mortgage-backed securities:
 
 
 
 
 
 
 

 


 


RMBS
10

 
—

 
75

 
(7
)
 
85

 
(7
)
CMBS
—

 
—

 
4

 
—

 
4

 
—

Asset-backed securities
24

 
—

 
183

 
(2
)
 
207

 
(2
)
Non-U.S. government securities
—

 
—

 
56

 
(5
)
 
56

 
(5
)
Total
$
145

 
$
(1
)
 
$
442

 
$
(33
)
 
$
587

 
$
(34
)
Number of securities
 

 
57

 
 

 
119

 
 

 
176

Number of securities with OTTI
 

 
1

 
 

 
7

 
 

 
8

 
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
Distribution of Fixed-Maturity Securities
by Contractual Maturity
As of December 31, 2019
 
 
Amortized
Cost
 
Estimated
Fair Value
 
(in millions)
Due within one year
$
326

 
$
334

Due after one year through five years
1,538

 
1,591

Due after five years through 10 years
2,022

 
2,128

Due after 10 years
3,338

 
3,607

Mortgage-backed securities:
 

 
 

RMBS
745

 
775

CMBS
402

 
419

Total
$
8,371

 
$
8,854