Debt Securities

3 Months Ended

Mar. 31, 2022

Available For Sale Securities [Abstract]

Debt Securities

Note 3 – Debt Securities

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

(in millions)	Amortized cost		Gross unrealized					Estimated fair value
			Gains		Losses
March 31, 2022
U.S. Treasury bonds	$	94	$	—	$	(6	)	$	88
Municipal bonds		1,596		12		(87	)		1,521
Foreign government bonds		235		—		(12	)		223
Governmental agency bonds		153		—		(6	)		147
Governmental agency mortgage-backed securities		5,668		11		(298	)		5,381
U.S. corporate debt securities		1,141		4		(49	)		1,096
Foreign corporate debt securities		501		2		(22	)		481
	$	9,388	$	29	$	(480	)	$	8,937
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 gains of $3 million and $5 million and proceeds of $296 million and $191 million for the three months ended March 31, 2022 and 2021, respectively, and realized losses of $4 million for the three months ended March 31, 2022.  Realized losses from the sales of debt securities were not material for the three months ended March 31, 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
March 31, 2022
U.S. Treasury bonds	$	76	$	(5	)	$	11	$	(1	)	$	87	$	(6	)
Municipal bonds		961		(78	)		63		(9	)		1,024		(87	)
Foreign government bonds		174		(7	)		39		(5	)		213		(12	)
Governmental agency bonds		97		(5	)		4		(1	)		101		(6	)
Governmental agency mortgage-backed securities		4,071		(248	)		469		(50	)		4,540		(298	)
U.S. corporate debt securities		818		(46	)		33		(3	)		851		(49	)
Foreign corporate debt securities		375		(20	)		19		(2	)		394		(22	)
	$	6,572	$	(409	)	$	638	$	(71	)	$	7,210	$	(480	)
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 March 31, 2022.

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

Investments in debt securities at March 31, 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	$	2	$	58	$	25	$	9	$	94
Estimated fair value	$	2	$	55	$	23	$	8	$	88
Municipal bonds
Amortized cost		23		114		817		642		1,596
Estimated fair value		23		113		777		608		1,521
Foreign government bonds
Amortized cost		36		111		76		12		235
Estimated fair value		36		108		68		11		223
Governmental agency bonds
Amortized cost		10		75		7		61		153
Estimated fair value		11		72		7		57		147
U.S. corporate debt securities
Amortized cost		46		628		372		95		1,141
Estimated fair value		46		609		352		89		1,096
Foreign corporate debt securities
Amortized cost		24		286		135		56		501
Estimated fair value		24		277		127		53		481
Total debt securities excluding mortgage-backed securities
Amortized cost	$	141	$	1,272	$	1,432	$	875	$	3,720
Estimated fair value	$	142	$	1,234	$	1,354	$	826	$	3,556
Total mortgage-backed securities
Amortized cost										5,668
Estimated fair value										5,381
Total debt securities
Amortized cost									$	9,388
Estimated fair value									$	8,937

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 March 31, 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
Debt securities:
U.S. Treasury bonds	$	88		100.0	$	—		—	$	—		—	$	88
Municipal bonds		1,473		96.8		47		3.1		1		0.1		1,521
Foreign government bonds		211		94.7		9		4.0		3		1.3		223
Governmental agency bonds		147		100.0		—		—		—		—		147
Governmental agency mortgage-backed securities		5,381		100.0		—		—		—		—		5,381
U.S. corporate debt securities		455		41.5		448		40.9		193		17.6		1,096
Foreign corporate debt securities		194		40.3		244		50.8		43		8.9		481
	$	7,949		88.9	$	748		8.4	$	240		2.7	$	8,937

Included in debt securities at March 31, 2022, were bank loans totaling $162 million, of which $157 million were non-investment grade; high yield corporate debt securities totaling $70 million, all of which were non-investment grade; and emerging market debt securities totaling $80 million, of which $12 million were non-investment grade.

The composition of the debt securities portfolio in an unrealized loss position at March 31, 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
Debt securities:
U.S. Treasury bonds	$	87		100.0	$	—		—	$	—		—	$	87
Municipal bonds		988		96.5		35		3.4		1		0.1		1,024
Foreign government bonds		204		95.8		7		3.3		2		0.9		213
Governmental agency bonds		101		100.0		—		—		—		—		101
Governmental agency mortgage-backed securities		4,540		100.0		—		—		—		—		4,540
U.S. corporate debt securities		344		40.4		334		39.3		173		20.3		851
Foreign corporate debt securities		172		43.6		182		46.2		40		10.2		394
	$	6,436		89.3	$	558		7.7	$	216		3.0	$	7,210

Debt securities in an unrealized loss position at March 31, 2022, included bank loans totaling $142 million, of which $138 million were non-investment grade; high yield corporate debt securities totaling $67 million, all of which were non-investment grade; and emerging market debt securities totaling $61 million, of which $10 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.