Investments

3 Months Ended

Mar. 31, 2020

Investments, Debt and Equity Securities [Abstract]

Investments

Investments

Beginning January 1, 2020, unrealized losses are evaluated to determine whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, adverse conditions specifically related to the security and changes to the rating of the security by a rating agency, among other factors, including the correlation between changes in the price of certain comparable benchmark indices and the security. If credit losses exist, an allowance for credit losses is recorded for the credit losses limited by the amount that the fair value is less than the amortized cost. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income. Such reviews are inherently uncertain and the value of the investment may not fully recover or may decline in future periods resulting in additional losses.

The cost basis of fixed maturity securities available for sale includes an adjustment for amortized premium or accreted discount since the date of purchase. The fair values of our available for sale securities at March 31, 2020 and December 31, 2019 are as follows:

	March 31, 2020
		Cost		Unrealized		Unrealized		Allowance for		Fair
		Basis		Gains		Losses		Credit Loss		Value
	(In millions)
Fixed maturity securities available for sale:
U.S. government and agencies		$	265	$	13	$	—	$	—	$	278
State and political subdivisions		90		2		—		—		92
Corporate debt securities		1,547		42		(11)		(11)		1,567
Mortgage-backed/asset-backed securities		60		3		—		—		63
Foreign government bonds		63		—		(6)		—		57
Total		$	2,025	$	60	$	(17)	$	(11)	$	2,057

	December 31, 2019
		Cost		Unrealized		Unrealized		Fair
		Basis		Gains		Losses		Value
	(In millions)
Fixed maturity securities available for sale:
U.S. government and agencies		$	282	$	7	$	(1)	$	288
State and political subdivisions		90		3		—		93
Corporate debt securities		1,536		54		(3)		1,587
Mortgage-backed/asset-backed securities		60		2		—		62
Foreign government bonds		61		1		(2)		60
Total		$	2,029	$	67	$	(6)	$	2,090

The following table presents certain information regarding contractual maturities of our fixed maturity securities at March 31, 2020:

	March 31, 2020
	Amortized		% of		Fair		% of
Maturity	Cost		Total		Value		Total
	(Dollars in millions)
One year or less	$	319	16	%	$	315	15	%
After one year through five years	1,104		54		1,112		55
After five years through ten years	421		21		442		21
After ten years	121		6		125		6
Mortgage-backed/asset-backed securities	60		3		63		3
Total	$	2,025	100	%	$	2,057	100	%

Expected maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Because of the potential for prepayment on mortgage-backed and asset-backed securities, they are not categorized by contractual maturity.

Net unrealized losses on investment securities for which the allowance for credit losses has not been recorded and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2020 were as follows:

March 31, 2020
	Less than 12 Months				12 Months or Longer				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
Corporate debt securities	$	404	$	(9)	$	45	$	(2)	$	449	$	(11)
Foreign government bonds	36		(2)		20		(4)		56		(6)
Total temporarily impaired securities	$	440	$	(11)	$	65	$	(6)	$	505	$	(17)

Unrealized losses on corporate bonds have not been recognized into income because the issuers bonds are of high credit quality (rated AA or higher), management does not intend to and it is likely that management will not be required to sell the securities prior to their anticipated recovery and the decline in fair value is largely due to changes in interest rates and other market conditions. The issuers continue to make timely principal and interest payment on the bonds. The fair value is expected to recover as the bonds approach maturity.

Net unrealized losses on investment securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2019, were as follows:

December 31, 2019
	Less than 12 Months				12 Months or Longer				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
U.S. government and agencies	$	62	$	(1)	$	—	$	—	$	62	$	(1)
Corporate debt securities	98		(2)		51		(1)		149		(3)
Foreign government bonds	—		—		33		(2)		33		(2)
Total temporarily impaired securities	$	160	$	(3)	$	84	$	(3)	$	244	$	(6)

During the three months ended March 31, 2020, we recorded impairment charges of $11 million related to our corporate debt securities. We recorded no impairments relating to our investments during the three months ended March 31, 2019.

It is possible that future events may lead us to recognize impairment losses related to our investment portfolio and that unanticipated future events may lead us to dispose of certain investment holdings and recognize the effects of any market movements in our condensed consolidated financial statements.

The following tables present realized gains and losses on investments and other assets and proceeds from the sale or maturity of investments and other assets for the three-month periods ended March 31, 2020 and 2019, respectively:

	Three months ended March 31, 2020
	Gross Realized Gains		Gross Realized Losses		Allowance for Credit Losses		Net Realized Gains (Losses)		Gross Proceeds from Sale/Maturity
	(In millions)
Sales and maturities of fixed maturity securities available for sale	$	12	$	(1)	$	—	$	11	$	177
Sales and maturities of preferred securities	—		—		—		—		83
Sales of equity securities	—		—		—		—		—
Valuation of fixed maturity securities available for sale					(11)		(11)		—
Valuation of equity securities					—		(205)		—
Valuation of preferred securities					—		(42)		—
Valuation of other long term investments					—		(63)		—
Other realized gains and losses, net					—		(10)		9
Total					$	(11)	$	(320)	$	269

	Three months ended March 31, 2019
	Gross Realized Gains		Gross Realized Losses		Net Realized Gains (Losses)		Gross Proceeds from Sale/Maturity
	(In millions)
Sales and maturities of fixed maturity securities available for sale	$	1	$	(1)	$	—	$	235
Sales and maturities of preferred securities	—		—		—		24
Sales of equity securities	4		—		4		41
Valuation of equity securities					126		—
Valuation of preferred securities					11		—
Valuation of other long term investments					5		—
Impairment of lease assets					(4)		—
Total					$	142	$	300

Investment with Related Party

Included in equity securities as of March 31, 2020 and December 31, 2019 are 5,706,134 shares of Cannae common stock (NYSE: CNNE) which were purchased during the fourth quarter of 2017 in connection with the split-off of our former portfolio company investments to Cannae. The fair value of our related party investment based on quoted market prices is $191 million and $212 million as of March 31, 2020 and December 31, 2019, respectively.