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Investments (Tables)

3 Months Ended

Mar. 31, 2022

Investments, Debt and Equity Securities [Abstract]

Marketable Securities

Investment Portfolio

Carrying Value

			As of
			March 31, 2022						December 31, 2021
			(in millions)
Fixed-maturity securities, available-for-sale (1):
Externally managed			$	6,316					$	6,843
Loss mitigation securities and other			789						818
AssuredIM managed			537						541
Fixed-maturity securities - Puerto Rico (2)			514						—
Fixed-maturity securities - Puerto Rico, trading (3)			174						—
Short-term investments (4)			585						1,225
Other invested assets:
Equity method investments			145						169
Other			7						12
Total			$	9,067					$	9,608

____________________

(1)    7.3% and 7.5% of fixed-maturity securities were rated BIG as of March 31, 2022 and December 31, 2021, respectively, consisting primarily of loss mitigation securities. 7.2% and 0.9% were not rated, as of March 31, 2022 and December 31, 2021, respectively.

(2)    Represents new recovery bonds received in connection with the consummation of the March Puerto Rico Resolutions. These securities are not rated.

(3)    Represents CVIs received in connection with the consummation of the March Puerto Rico Resolutions. These securities are not rated.

(4)     Weighted average credit rating of AAA as of both March 31, 2022 and December 31, 2021, based on the lower of the Moody’s and S&P Global Ratings, a division of Standard & Poor's Financial Services LLC (S&P) classifications.

Fixed Maturity Securities and Short Term Investments by Security Type

Available-for-Sale Fixed-Maturity Securities by Security Type 

As of March 31, 2022

Security Type						Percent of Total (1)						Amortized Cost						Allowance for Credit Losses						Gross Unrealized Gains						Gross Unrealized Losses						Estimated Fair Value						AOCI (5) Pre-tax Gain (Loss) on Securities with Credit Loss						Weighted Average Credit Rating (2)
						(dollars in millions)
Obligations of state and political subdivisions						47		%				$	3,893					$	(13)					$	115					$	(54)					$	3,941					$	(3)					A
U.S. government and agencies						2						122						—						5						(5)						122						—						AA+
Corporate securities (3)						30						2,469						(5)						26						(102)						2,388						(44)						A
Mortgage-backed securities (4):
RMBS						5						437						(18)						10						(29)						400						(28)						BBB+
Commercial mortgage-backed securities (CMBS)						4						321						—						2						(1)						322						—						AAA
Asset-backed securities:
CLOs						5						440						—						—						(3)						437						—						A+
Other						5						422						(11)						22						(3)						430						(2)						CCC+
Non-U.S. government securities						2						123						—						—						(7)						116						(1)						AA-
Total available-for-sale fixed-maturity securities						100		%				$	8,227					$	(47)					$	180					$	(204)					$	8,156					$	(78)					A-

Available-for-Sale Fixed-Maturity Securities by Security Type 

As of December 31, 2021 

Security Type						Percent of Total (1)						Amortized Cost						Allowance for Credit Losses						Gross Unrealized Gains						Gross Unrealized Losses						Estimated Fair Value						AOCI Pre-tax Gain (Loss) on Securities with Credit Loss						Weighted Average Credit Rating (2)
						(dollars in millions)
Obligations of state and political subdivisions						43		%				$	3,386					$	(12)					$	290					$	(4)					$	3,660					$	—					AA-
U.S. government and agencies						2						123						—						7						(2)						128						—						AA+
Corporate securities (3)						32						2,516						(1)						111						(21)						2,605						(4)						A
Mortgage-backed securities (4):
RMBS						6						454						(17)						24						(24)						437						(24)						BBB+
CMBS						4						332						—						14						—						346						—						AAA
Asset-backed securities:
CLOs						6						457						—						1						—						458						—						AA-
Other						5						420						(12)						26						(2)						432						(2)						CCC+
Non-U.S. government securities						2						134						—						5						(3)						136						—						AA-
Total available-for-sale fixed-maturity securities						100		%				$	7,822					$	(42)					$	478					$	(56)					$	8,202					$	(30)					A+

____________________

(1)Based on amortized cost.

(2)Ratings represent the lower of the Moody’s and S&P classifications, except for loss mitigation and certain other securities, which use internal ratings classifications. The Company’s portfolio primarily consists of high-quality, liquid instruments. New recovery bonds received in connection with the consummation of the March Puerto Rico Resolutions are not rated.

(3)Includes securities issued by taxable universities and hospitals.

(4)U.S. government-agency obligations were approximately 30% of mortgage-backed securities as of March 31, 2022 and 31% as of December 31, 2021 based on fair value.

(5)Accumulated other comprehensive income (AOCI).

Fixed-Maturity Securities Gross Unrealized Loss by Length of Time

Gross Unrealized Loss by Length of Time

for Available-for-Sale Fixed-Maturity Securities for Which a Credit Loss was Not Recorded

As of March 31, 2022  

			Less than 12 months												12 months or more												Total
			Fair Value						Gross Unrealized Loss						Fair Value						Gross Unrealized Loss						Fair Value						Gross Unrealized Loss
			(dollars in millions)
Obligations of state and political subdivisions			$	849					$	(47)					$	28					$	(4)					$	877					$	(51)
U.S. government and agencies			26						(1)						32						(4)						58						(5)
Corporate securities			825						(50)						49						(8)						874						(58)
Mortgage-backed securities:
RMBS			74						(1)						—						—						74						(1)
CMBS			100						(1)						—						—						100						(1)
Asset-backed securities:
CLOs			327						(3)						54						—						381						(3)
Other			17						(1)						—						—						17						(1)
Non-U.S. government securities			82						(4)						12						(2)						94						(6)
Total			$	2,300					$	(108)					$	175					$	(18)					$	2,475					$	(126)
Number of securities (1)									740												81												814

Gross Unrealized Loss by Length of Time

for Available-for-Sale Fixed-Maturity Securities for Which a Credit Loss was Not Recorded

As of December 31, 2021

			Less than 12 months												12 months or more												Total
			Fair Value						Gross Unrealized Loss						Fair Value						Gross Unrealized Loss						Fair Value						Gross Unrealized Loss
			(dollars in millions)
Obligations of state and political subdivisions			$	117					$	(3)					$	10					$	(1)					$	127					$	(4)
U.S. government and agencies			26						—						32						(2)						58						(2)
Corporate securities			407						(12)						70						(5)						477						(17)
Mortgage-backed securities:
RMBS			4						—						—						—						4						—
Asset-backed securities:
CLOs			226						—						—						—						226						—
Non-U.S. government securities			24						(2)						8						(1)						32						(3)
Total			$	804					$	(17)					$	120					$	(9)					$	924					$	(26)
Number of securities (1)									355												60												410

___________________

(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.

Investments Classified by Contractual Maturity Date

The amortized cost and estimated fair value of available-for-sale fixed-maturity securities by contractual maturity as of March 31, 2022 are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

Distribution of Available-for-Sale Fixed-Maturity Securities by Contractual Maturity

As of March 31, 2022

			Amortized Cost						Estimated Fair Value
			(in millions)
Due within one year			$	202					$	203
Due after one year through five years			1,956						1,948
Due after five years through 10 years			1,869						1,853
Due after 10 years			3,442						3,430
Mortgage-backed securities:
RMBS			437						400
CMBS			321						322
Total			$	8,227					$	8,156

Net Investment Income

Income from Investment Portfolio

			First Quarter
			2022						2021
			(in millions)
Investment income:
Externally managed			$	48					$	51
Loss mitigation securities and other			11						16
Managed by AssuredIM (1)			4						4
Investment income			63						71
Investment expenses			(1)						(1)
Net investment income			$	62					$	70
Unrealized gain (loss) on trading securities (2)			$	(4)					$	—
Equity in earnings (losses) of investees (3)			$	(11)					$	9

____________________

(1)    Represents interest income on a portfolio of CLOs and municipal bonds managed by AssuredIM under an IMA.

(2)    Reported in “other income (loss)”. First Quarter 2022 amount relates to securities still held as of March 31, 2022.

(3)     First Quarter 2022 includes $3 million related to fair value gains on investments where the fair value option was elected utilizing the net asset value (NAV), as a practical expedient. In addition, the Company received $5 million in dividends related to the same investment. Fair value losses in First Quarter 2021 were de minimis.

Net Realized Investment Gains (Losses)

The table below presents the components of net realized investment gains (losses). Realized gains and losses on sales of investments are determined using the specific identification method.

Net Realized Investment Gains (Losses)

			First Quarter
			2022						2021
			(in millions)
Gross realized gains on sales available-for-sale securities			$	—					$	1
Gross realized losses on sales available-for-sale securities			(2)						(2)
Net foreign currency gains (losses)			—						1
Change in credit impairment and intent to sell			(5)						(4)
Other net realized gains (losses) (1)			10						1
Net realized investment gains (losses)			$	3					$	(3)

____________________

(1)    Net realized gains in First Quarter 2022 related primarily to the sale of one of the Company’s alternative investments.

Roll Forward of Credit Losses in the Investment Portfolio

The following table presents the roll forward of the credit losses on available-for-sale fixed-maturity securities for which the Company has recognized an allowance for credit losses in 2022 and 2021.

Roll Forward of Credit Losses for Available-for-Sale Fixed-Maturity Securities

						First Quarter
						2022						2021
						(in millions)
Balance, beginning of period						$	42					$	78
Additions for securities for which credit impairments were not previously recognized						4						1
Additions (reductions) for credit losses on securities for which credit impairments were previously recognized						1						2
Balance, end of period						$	47					$	81

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