XML 21 R10.htm IDEA: XBRL DOCUMENT v3.5.0.2
INVESTMENT SECURITIES
 6 Months Ended
Jun. 30, 2016
Investments, Debt and Equity Securities [Abstract]  
INVESTMENT SECURITIES
INVESTMENT SECURITIES
Investment securities classified as current and long-term were as follows at June 30, 2016 and December 31, 2015, respectively:
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
(in millions)
June 30, 2016
 
 
 
 
 
 
 
U.S. Treasury and other U.S. government
corporations and agencies:
 
 
 
 
 
 
 
U.S. Treasury and agency obligations
$
543

 
$
2

 
$
—

 
$
545

Mortgage-backed securities
1,710

 
31

 
—

 
1,741

Tax-exempt municipal securities
2,991

 
115

 
(1
)
 
3,105

Mortgage-backed securities:
 
 
 
 
 
 
 
Residential
11

 
—

 
(1
)
 
10

Commercial
766

 
13

 
(28
)
 
751

Asset-backed securities
189

 
1

 
—

 
190

Corporate debt securities
2,879

 
260

 
(13
)
 
3,126

Total debt securities
$
9,089

 
$
422

 
$
(43
)
 
$
9,468

 
 
 
 
 
 
 
 
December 31, 2015
 
 
 
 
 
 
 
U.S. Treasury and other U.S. government
corporations and agencies:
 
 
 
 
 
 
 
U.S. Treasury and agency obligations
$
331

 
$
2

 
$
(1
)
 
$
332

Mortgage-backed securities
1,902

 
12

 
(23
)
 
1,891

Tax-exempt municipal securities
2,611

 
61

 
(4
)
 
2,668

Mortgage-backed securities:
 
 
 
 
 
 
 
Residential
13

 
—

 
—

 
13

Commercial
1,024

 
2

 
(41
)
 
985

Asset-backed securities
264

 
1

 
(2
)
 
263

Corporate debt securities
2,873

 
140

 
(55
)
 
2,958

Total debt securities
$
9,018

 
$
218

 
$
(126
)
 
$
9,110


Gross unrealized losses and fair values aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position were as follows at June 30, 2016 and December 31, 2015, respectively:
 
Less than 12 months
 
12 months or more
 
Total
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
(in millions)
June 30, 2016
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and other U.S.
government corporations
and agencies:
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and agency
obligations
$
3

 
$
—

 
$
—

 
$
—

 
$
3

 
$
—

Mortgage-backed
securities
2

 
—

 
4

 
—

 
6

 
—

Tax-exempt municipal
securities
219

 
—

 
24

 
(1
)
 
243

 
(1
)
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
Residential
2

 
—

 
3

 
(1
)
 
5

 
(1
)
Commercial
115

 
(2
)
 
273

 
(26
)
 
388

 
(28
)
Asset-backed securities
26

 
—

 
70

 
—

 
96

 
—

Corporate debt securities
68

 
(3
)
 
131

 
(10
)
 
199

 
(13
)
Total debt securities
$
435

 
$
(5
)
 
$
505

 
$
(38
)
 
$
940

 
$
(43
)
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and other U.S.
government corporations
and agencies:
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and agency
obligations
$
195

 
$
(1
)
 
$
14

 
$
—

 
$
209

 
$
(1
)
Mortgage-backed
securities
1,484

 
(20
)
 
86

 
(3
)
 
1,570

 
(23
)
Tax-exempt municipal
securities
843

 
(3
)
 
52

 
(1
)
 
895

 
(4
)
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
Residential
2

 
—

 
4

 
—

 
6

 
—

Commercial
626

 
(13
)
 
265

 
(28
)
 
891

 
(41
)
Asset-backed securities
258

 
(2
)
 
—

 
—

 
258

 
(2
)
Corporate debt securities
918

 
(45
)
 
63

 
(10
)
 
981

 
(55
)
Total debt securities
$
4,326

 
$
(84
)
 
$
484

 
$
(42
)
 
$
4,810

 
$
(126
)

Approximately 98% of our debt securities were investment-grade quality, with a weighted average credit rating of AA by S&P at June 30, 2016. Most of the debt securities that were below investment-grade were rated BB, the higher end of the below investment-grade rating scale. At June 30, 2016, 6% of our tax-exempt municipal securities were pre-refunded, generally with U.S. government and agency securities. Tax-exempt municipal securities that were not pre-refunded were diversified among general obligation bonds of U.S. states and local municipalities as well as special revenue bonds. General obligation bonds, which are backed by the taxing power and full faith of the issuer, accounted for 47% of the tax-exempt municipals that were not pre-refunded in the portfolio. Special revenue bonds, issued by a municipality to finance a specific public works project such as utilities, water and sewer, transportation, or education, and supported by the revenues of that project, accounted for the remaining 53% of these municipals. Our general obligation bonds are diversified across the United States with no individual state exceeding 10%. In addition, 4.6% of our tax-exempt securities were insured by bond insurers and had an equivalent weighted average S&P credit rating of AA exclusive of the bond insurers’ guarantee. Our investment policy limits investments in a single issuer and requires diversification among various asset types.
Residential mortgage-backed securities comprised approximately 99% of our agency mortgage-backed securities at June 30, 2016 and 98% at December 31, 2015.

The recoverability of our non-agency commercial mortgage-backed securities is supported by factors such as seniority, underlying collateral characteristics and credit enhancements. At June 30, 2016, these commercial mortgage-backed securities primarily were composed of senior tranches having higher credit support than junior tranches. The weighted average credit rating of all commercial mortgage-backed securities was AA+ at June 30, 2016.
The percentage of corporate securities associated with the financial services industry was 24% at June 30, 2016 and 25% at December 31, 2015.
Our unrealized losses from all securities were generated from approximately 190 positions out of a total of approximately 2,070 positions at June 30, 2016. All issuers of securities we own that were trading at an unrealized loss at June 30, 2016 remain current on all contractual payments. After taking into account these and other factors previously described, we believe these unrealized losses primarily were caused by an increase in market interest rates in the current markets since the time the securities were purchased. At June 30, 2016, we did not intend to sell the securities with an unrealized loss position in accumulated other comprehensive income, and it is not likely that we will be required to sell these securities before recovery of their amortized cost basis. As a result, we believe that the securities with an unrealized loss were not other-than-temporarily impaired at June 30, 2016.
The detail of realized gains (losses) related to investment securities and included within investment income was as follows for the three and six months ended June 30, 2016 and 2015:
 
Three months ended
June 30,
 
Six months ended
June 30,
 
2016
 
2015
 
2016
 
2015
 
(in millions)
Gross realized gains
$
20

 
$
30

 
$
51

 
$
47

Gross realized losses
(1
)
 
(2
)
 
(12
)
 
(10
)
Net realized capital gains
$
19

 
$
28


$
39


$
37


There were no material other-than-temporary impairments for the three and six months ended June 30, 2016 or 2015.
The contractual maturities of debt securities available for sale at June 30, 2016, regardless of their balance sheet classification, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
 
Amortized
Cost
 
Fair
Value
 
(in millions)
Due within one year
$
396

 
$
395

Due after one year through five years
2,119

 
2,176

Due after five years through ten years
1,451

 
1,513

Due after ten years
2,447

 
2,692

Mortgage and asset-backed securities
2,676

 
2,692

Total debt securities
$
9,089

 
$
9,468