Debt Securities

9 Months Ended

Sep. 30, 2022

Note 3 – Debt Securities

Investments in debt securities, classified as available-for-sale, are as follows:


	Amortized		Gross unrealized					Estimated
(in millions)	cost		Gains		Losses			fair value
September 30, 2022
U.S. Treasury bonds	$	196	$	—	$	(10	)	$	186
Municipal bonds		1,664		—		(221	)		1,443
Foreign government bonds		224		—		(17	)		207
Governmental agency bonds		256		—		(19	)		237
Governmental agency mortgage-backed securities		5,355		1		(714	)		4,642
U.S. corporate debt securities		1,115		—		(124	)		991
Foreign corporate debt securities		504		—		(57	)		447
	$	9,314	$	1	$	(1,162	)	$	8,153
December 31, 2021
U.S. Treasury bonds	$	123	$	1	$	(1	)	$	123
Municipal bonds		1,607		59		(17	)		1,649
Foreign government bonds		228		2		(3	)		227
Governmental agency bonds		175		3		(1	)		177
Governmental agency mortgage-backed securities		5,620		34		(47	)		5,607
U.S. corporate debt securities		1,071		19		(9	)		1,081
Foreign corporate debt securities		493		9		(4	)		498
	$	9,317	$	127	$	(82	)	$	9,362

Sales of debt securities resulted in realized losses of $50 million and $62 million and proceeds of $606 million and $1.1 billion for the three and nine months ended September 30, 2022, respectively, and realized gains of $4 million for the nine months ended September 30, 2022. Sales of debt securities resulted in realized gains of $7 million and $25 million and proceeds of

$189 million and $869 million for the three and nine months ended September 30, 2021, respectively, and realized losses of $7 million for the nine months ended September 30, 2021.

Investments in debt securities in an unrealized loss position, based on length of time in such position, are as follows:


	Less than 12 months					12 months or longer					Total
(in millions)	Estimated fair value		Unrealized losses			Estimated fair value		Unrealized losses			Estimated fair value		Unrealized losses
September 30, 2022
U.S. Treasury bonds	$	156	$	(7	)	$	30	$	(3	)	$	186	$	(10	)
Municipal bonds		1,085		(129	)		345		(92	)		1,430		(221	)
Foreign government bonds		159		(9	)		44		(8	)		203		(17	)
Governmental agency bonds		139		(15	)		22		(4	)		161		(19	)
Governmental agency mortgage-backed securities		2,924		(370	)		1,608		(344	)		4,532		(714	)
U.S. corporate debt securities		739		(81	)		247		(43	)		986		(124	)
Foreign corporate debt securities		340		(39	)		106		(18	)		446		(57	)
	$	5,542	$	(650	)	$	2,402	$	(512	)	$	7,944	$	(1,162	)
December 31, 2021
U.S. Treasury bonds	$	76	$	(1	)	$	—	$	—		$	76	$	(1	)
Municipal bonds		684		(17	)		—		—			684		(17	)
Foreign government bonds		103		(1	)		33		(2	)		136		(3	)
Governmental agency bonds		73		(1	)		—		—			73		(1	)
Governmental agency mortgage-backed securities		4,036		(47	)		—		—			4,036		(47	)
U.S. corporate debt securities		533		(9	)		—		—			533		(9	)
Foreign corporate debt securities		234		(4	)		—		—			234		(4	)
	$	5,739	$	(80	)	$	33	$	(2	)	$	5,772	$	(82	)

Based on the Company’s review of its debt securities in an unrealized loss position for which an allowance for credit losses has not been recorded, it determined that the losses were due to non-credit factors. As such, the Company does not consider these securities to be credit impaired at September 30, 2022. As of September 30, 2022, the Company did not intend to sell any debt securities in an unrealized loss position and it is not more likely than not that the Company will be required to sell any debt securities before recovery of their amortized cost basis.

In determining credit losses on its debt securities in an unrealized loss position, the Company considers certain factors which may include, among others, severity of the unrealized loss, security type, industry sector, credit rating, profitability and stock performance.

Investments in debt securities at September 30, 2022, by contractual maturities, are as follows:


(in millions)	Due in one year or less		Due after one through five years		Due after five through ten years		Due after ten years		Total
U.S. Treasury bonds
Amortized cost	$	117	$	56	$	10	$	13	$	196
Estimated fair value	$	117	$	50	$	8	$	11	$	186
Municipal bonds
Amortized cost		21		229		805		609		1,664
Estimated fair value		21		214		699		509		1,443
Foreign government bonds
Amortized cost		28		111		73		12		224
Estimated fair value		28		108		63		8		207
Governmental agency bonds
Amortized cost		1		189		7		59		256
Estimated fair value		1		182		6		48		237
U.S. corporate debt securities
Amortized cost		60		694		275		86		1,115
Estimated fair value		60		627		240		64		991
Foreign corporate debt securities
Amortized cost		36		306		111		51		504
Estimated fair value		35		278		95		39		447
Total debt securities (excluding mortgage-backed securities)
Amortized cost	$	263	$	1,585	$	1,281	$	830	$	3,959
Estimated fair value	$	262	$	1,459	$	1,111	$	679	$	3,511
Total mortgage-backed securities
Amortized cost										5,355
Estimated fair value										4,642
Total debt securities
Amortized cost									$	9,314
Estimated fair value									$	8,153

Mortgage-backed securities, which include contractual terms to maturity, are not categorized by contractual maturity as borrowers may have the right to call or prepay obligations with, or without, call or prepayment penalties.

The composition of the debt securities portfolio at September 30, 2022, by credit rating, is as follows:


	A- or higher					BBB+ to BBB-					Non-Investment Grade					Total
(dollars in millions)	Estimated fair value		Percentage			Estimated fair value		Percentage			Estimated fair value		Percentage			Estimated fair value
U.S. Treasury bonds	$	186		100.0	%	$	—		—	%	$	—		—	%	$	186
Municipal bonds		1,404		97.3			39		2.7			—		—			1,443
Foreign government bonds		204		98.5			1		0.5			2		1.0			207
Governmental agency bonds		237		100.0			—		—			—		—			237
Governmental agency mortgage- backed securities		4,642		100.0			—		—			—		—			4,642
U.S. corporate debt securities		442		44.6			375		37.8			174		17.6			991
Foreign corporate debt securities		187		41.8			223		49.9			37		8.3			447
	$	7,302		89.6	%	$	638		7.8	%	$	213		2.6	%	$	8,153

Included in debt securities at September 30, 2022, were bank loans totaling $151 million, of which $147 million were non-investment grade; high yield corporate debt securities totaling $57 million, all of which were non-investment grade; and emerging market debt securities totaling $64 million, of which $9 million were non-investment grade.

The composition of the debt securities portfolio in an unrealized loss position at September 30, 2022, by credit rating, is as follows:


	A- or higher					BBB+ to BBB-					Non-Investment Grade					Total
(dollars in millions)	Estimated fair value		Percentage			Estimated fair value		Percentage			Estimated fair value		Percentage			Estimated fair value
U.S. Treasury bonds	$	186		100.0	%	$	—		—	%	$	—		—	%	$	186
Municipal bonds		1,392		97.3			38		2.7			—		—			1,430
Foreign government bonds		199		98.0			1		0.5			3		1.5			203
Governmental agency bonds		161		100.0			—		—			—		—			161
Governmental agency mortgage- backed securities		4,532		100.0			—		—			—		—			4,532
U.S. corporate debt securities		442		44.8			375		38.1			169		17.1			986
Foreign corporate debt securities		187		41.9			223		50.0			36		8.1			446
	$	7,099		89.4	%	$	637		8.0	%	$	208		2.6	%	$	7,944

Debt securities in an unrealized loss position at September 30, 2022, included bank loans totaling $146 million, of which $142 million were non-investment grade; high yield corporate debt securities totaling $57 million, all of which were non-investment grade; and emerging market debt securities totaling $64 million, of which $9 million were non-investment grade.

The credit ratings in the above tables reflect published ratings obtained from globally recognized securities rating agencies. If a security was rated differently among the rating agencies, the lowest rating was selected. Governmental agency mortgage-backed securities are not rated by any of the ratings agencies; however, these securities have been included in the above table in the “A- or higher” rating category because the payments of principal and interest are guaranteed by the governmental agency that issued the security.