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Investments and Cash (Tables)
 6 Months Ended
Jun. 30, 2020
Investments, Debt and Equity Securities [Abstract]  
Marketable Securities
Investment Portfolio
Carrying Value

 
As of
June 30, 2020
 
As of
December 31, 2019
 
(in millions)
Fixed-maturity securities (1):
 
 
 
Externally managed
$
7,503

 
$
7,978

Internally managed:
 
 
 
Assured Investment Management
354

 
—

Loss mitigation and other securities
773

 
876

Short-term investments
821

 
1,268

Other invested assets
 
 
 
Equity method investments
107

 
111

Other
15

 
7

Total
$
9,573

 
$
10,240

____________________
(1)
7.7% and 8.6% of fixed-maturity securities are rated BIG as of June 30, 2020 and December 31, 2019, respectively.
Fixed Maturity Securities and Short Term Investments by Security Type
 
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
$
35

 
$
(1
)
 
$
—

 
$
—

 
$
35

 
$
(1
)
Corporate securities
341

 
(8
)
 
61

 
(12
)
 
402

 
(20
)
Mortgage-backed securities:
 
 
 
 
 
 
 

 
 
 
 
RMBS
30

 
(2
)
 
1

 
—

 
31

 
(2
)
CMBS
—

 
—

 
1

 
—

 
1

 
—

Asset-backed securities
468

 
(10
)
 
118

 
(3
)
 
586

 
(13
)
Non-U.S. government securities
74

 
(1
)
 
40

 
(8
)
 
114

 
(9
)
Total
$
948

 
$
(22
)
 
$
221

 
$
(23
)
 
$
1,169

 
$
(45
)
Number of securities (1)
 

 
196

 
 

 
65

 
 

 
244

 

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

___________________
(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.

Fixed-Maturity Securities and Short-Term Investments
by Security Type 
As of June 30, 2020

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

 
 

 
 
 
 

 
 

 
 

 
 

 
 
Obligations of state and political subdivisions
 
42
%
 
$
3,789

 
$
(11
)
 
$
336

 
$
(1
)
 
$
4,113

 
$
(1
)
 
AA-
U.S. government and agencies
 
2

 
160

 
—

 
14

 
—

 
174

 
—

 
AA+
Corporate securities
 
26

 
2,327

 
(38
)
 
138

 
(38
)
 
2,389

 
(18
)
 
A
Mortgage-backed securities (4):
 
0

 
 
 
 
 
 
 
 

 


 
 

 
 
RMBS
 
7

 
649

 
(20
)
 
37

 
(31
)
 
635

 
(29
)
 
A-
CMBS
 
4

 
384

 
—

 
27

 
—

 
411

 
—

 
AAA
Asset-backed securities
 
8

 
780

 
(6
)
 
12

 
(18
)
 
768

 
(4
)
 
BBB-
Non-U.S. government securities
 
2

 
148

 
—

 
1

 
(9
)
 
140

 
—

 
AA
Total fixed-maturity securities
 
91

 
8,237

 
(75
)
 
565

 
(97
)
 
8,630

 
(52
)
 
A+
Short-term investments
 
9

 
821

 
—

 
1

 
(1
)
 
821

 
—

 
AAA
Total
 
100
%
 
$
9,058

 
$
(75
)
 
$
566

 
$
(98
)
 
$
9,451

 
$
(52
)
 
A+
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
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
 
100
%
 
$
9,639

 
$
517

 
$
(34
)
 
$
10,122

 
$
59

 
AA-
____________________
(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 39% of mortgage backed securities as of June 30, 2020 and 42% as of December 31, 2019 based on fair value.



Net Investment Income
Net Investment Income
 
 
Second Quarter
 
Six Months
 
2020
 
2019
 
2020
 
2019
 
(in millions)
Interest income:
 
 
 
 
 
 
 
Externally managed
$
62

 
$
69

 
$
124

 
$
141

Internally managed
18

 
43

 
38

 
71

Interest income
80

 
112

 
162

 
212

Investment expenses
(2
)
 
(2
)
 
(4
)
 
(4
)
Net investment income
$
78

 
$
110

 
$
158

 
$
208
Net Realized Investment Gains (Losses)
Net Realized Investment Gains (Losses)
 
 
Second Quarter
 
Six Months
 
2020
 
2019
 
2020
 
2019
 
(in millions)
Gross realized gains on available-for-sale securities
$
16

 
$
13

 
$
23

 
$
19

Gross realized losses on available-for-sale securities
(8
)
 
(1
)
 
(9
)
 
(3
)
Credit impairments (1)
(4
)
 
(4
)
 
(15
)
 
(20
)
Net realized investment gains (losses) (2)
$
4

 
$
8

 
$
(1
)
 
$
(4
)

____________________
(1)
Credit impairment in Second Quarter 2020 and Six Months 2020 was related primarily to an increase in the allowance for credit loss on loss mitigation securities. Shut-downs due to COVID-19 pandemic restrictions contributed to the increase in the allowance for credit losses in Six Months 2020. Credit impairment in Second Quarter 2019 was primarily attributable to foreign exchange losses while Six Months 2019 was primarily attributable to loss mitigation securities and foreign exchange losses.

(2)
Includes foreign currency losses of $2 million for Second Quarter 2020, $3 million for Second Quarter 2019 and $5 million for Six Months 2019, and foreign currency gains of $1 million for Six Months 2020.
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 allowance for credit losses in 2020 or an OTTI and for which unrealized loss was recognized in OCI for 2019.

Roll Forward of Credit Losses
for Fixed-Maturity Securities

 
Second Quarter
 
Six Months
 
2020
 
2019
 
2020
 
2019
 
(in millions)
Balance, beginning of period
$
73

 
$
197

 
$
—

 
$
185

Effect of adoption of accounting guidance on credit losses on January 1, 2020
—

 
—

 
62

 
—

Additions for credit losses on securities for which credit impairments were not previously recognized
—

 
—

 
1

 
—

Reductions for securities sold and other settlements
(1
)
 
(6
)
 
(1
)
 
(6
)
Additions (reductions) for credit losses on securities for which credit impairments were previously recognized
3

 
—

 
13

 
12

Balance, end of period
$
75

 
$
191

 
$
75

 
$
191