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Investments (Tables)

3 Months Ended

Mar. 31, 2023

Investments, Debt and Equity Securities [Abstract]

Marketable Securities

Investment Portfolio

Carrying Value

			As of
			March 31, 2023						December 31, 2022
			(in millions)
Fixed-maturity securities, available-for-sale (1):
Externally managed			$	5,498					$	5,519
Loss Mitigation Securities and other			696						705
AssuredIM managed			539						537
Puerto Rico, New Recovery Bonds (2)			136						358
Fixed-maturity securities, trading - Puerto Rico, CVIs (2)			300						303
Short-term investments (3)			1,273						810
Other invested assets:
Equity method investments			122						123
Other			18						10
Total			$	8,582					$	8,365

____________________

(1)    7.5% and 7.4% of fixed-maturity securities were rated BIG as of March 31, 2023 and December 31, 2022, respectively, consisting primarily of Loss Mitigation Securities. 2.9% and 5.9% were not rated, as of March 31, 2023 and December 31, 2022, respectively.

(2)    These securities are not rated.

(3)     Weighted average credit rating of AAA as of both March 31, 2023 and December 31, 2022, based on the lower of the Moody’s Investors Service, Inc. (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, 2023

Security Type						Percent of Total (1)						Amortized Cost						Allowance for Credit Losses						Gross Unrealized Gains						Gross Unrealized Losses						Estimated Fair Value						Weighted Average Credit Rating (2)
						(dollars in millions)
Obligations of state and political subdivisions						43		%				$	3,161					$	(14)					$	46					$	(96)					$	3,097					A+
U.S. government and agencies						1						94						—						1						(7)						88						AA+
Corporate securities (3)						33						2,408						(6)						5						(254)						2,153						A
Mortgage-backed securities (4):
RMBS						6						429						(20)						3						(62)						350						BBB+
Commercial mortgage-backed securities (CMBS)						3						267						—						—						(9)						258						AAA
Asset-backed securities:
CLOs						6						453						—						—						(20)						433						A+
Other						6						426						(29)						20						(28)						389						CCC+
Non-U.S. government securities						2						121						—						—						(20)						101						AA-
Total available-for-sale fixed-maturity securities						100		%				$	7,359					$	(69)					$	75					$	(496)					$	6,869					A

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

As of December 31, 2022 

Security Type						Percent of Total (1)						Amortized Cost						Allowance for Credit Losses						Gross Unrealized Gains						Gross Unrealized Losses						Estimated Fair Value						Weighted Average Credit Rating (2)
						(dollars in millions)
Obligations of state and political subdivisions						45		%				$	3,509					$	(14)					$	37					$	(138)					$	3,394					A
U.S. government and agencies						2						118						—						1						(8)						111						AA+
Corporate securities (3)						31						2,387						(6)						2						(299)						2,084						A
Mortgage-backed securities (4):
RMBS						5						418						(19)						3						(62)						340						BBB
CMBS						4						282						—						—						(11)						271						AAA
Asset-backed securities:
CLOs						6						449						—						—						(21)						428						A+
Other						5						423						(26)						22						(26)						393						CCC+
Non-U.S. government securities						2						121						—						—						(23)						98						AA-
Total available-for-sale fixed-maturity securities						100		%				$	7,707					$	(65)					$	65					$	(588)					$	7,119					A

____________________

(1)Based on amortized cost.

(2)Ratings represent the lower of the Moody’s and S&P classifications, except for Loss Mitigation Securities 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 2022 Puerto Rico Resolutions are not rated.

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

(4)U.S. government-agency obligations were approximately 32% and 30% of mortgage-backed securities as of March 31, 2023 and December 31, 2022, respectively, based on fair value.

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, 2023  

			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			$	667					$	(10)					$	614					$	(84)					$	1,281					$	(94)
U.S. government and agencies			1						—						56						(7)						57						(7)
Corporate securities			627						(14)						1,150						(191)						1,777						(205)
Mortgage-backed securities:
RMBS			117						(5)						51						(4)						168						(9)
CMBS			114						(2)						143						(7)						257						(9)
Asset-backed securities:
CLOs			42						(1)						377						(19)						419						(20)
Other			12						—						15						(1)						27						(1)
Non-U.S. government securities			4						—						93						(20)						97						(20)
Total			$	1,584					$	(32)					$	2,499					$	(333)					$	4,083					$	(365)
Number of securities (1)									602												1,006												1,568

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, 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			$	1,763					$	(79)					$	163					$	(56)					$	1,926					$	(135)
U.S. government and agencies			32						—						52						(8)						84						(8)
Corporate securities			1,276						(95)						519						(147)						1,795						(242)
Mortgage-backed securities:
RMBS			147						(9)						3						(1)						150						(10)
CMBS			270						(11)						—						—						270						(11)
Asset-backed securities:
CLOs			171						(7)						250						(14)						421						(21)
Other			27						(2)						—						—						27						(2)
Non-U.S. government securities			65						(10)						30						(13)						95						(23)
Total			$	3,751					$	(213)					$	1,017					$	(239)					$	4,768					$	(452)
Number of securities (1)									1,340												466												1,776

___________________

(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, 2023 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, 2023

			Amortized Cost						Estimated Fair Value
			(in millions)
Due within one year			$	289					$	283
Due after one year through five years			1,636						1,531
Due after five years through 10 years			1,720						1,636
Due after 10 years			3,018						2,811
Mortgage-backed securities:
RMBS			429						350
CMBS			267						258
Total			$	7,359					$	6,869

New Recovery Bonds in FG VIEs’ Assets

Distribution by Contractual Maturity

As of March 31, 2023

			Amortized Cost						Estimated Fair Value
			(in millions)
Due within one year			$	1					$	1
Due after one year through five years			6						6
Due after five years through 10 years			42						43
Due after 10 years			155						161
Total			$	204					$	211

Net Investment Income

Income from Investments

			First Quarter
			2023						2022
			(in millions)
Investment income:
Externally managed			$	48					$	48
Loss Mitigation Securities and other			26						11
Managed by AssuredIM (1)			8						4
Investment income			82						63
Investment expenses			(1)						(1)
Net investment income			$	81					$	62
Fair value gains (losses) on trading securities (2)			$	(2)					$	(4)
Equity in earnings (losses) of investees (3)			$	2					$	(11)

____________________

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

(2)    Fair value losses on trading securities pertaining to securities still held as of March 31, 2023 were $2 million for first quarter 2023. Fair value losses on trading securities pertaining to securities still held as of March 31, 2022 were $4 million for first quarter 2022.

(3)     Fair value gains (losses) on investments where the fair value option (FVO) was elected utilizing the NAV as a practical expedient were $1 million in first quarter 2023 and $3 million in first quarter 2022.

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
			2023						2022
			(in millions)
Gross realized gains on sales of available-for-sale securities (1)			$	12					$	—
Gross realized losses on sales of available-for-sale securities (2)			(9)						(2)
Change in allowance for credit losses and intent to sell			(5)						(5)
Other net realized gains (losses) (3)			—						10
Net realized investment gains (losses)			$	(2)					$	3

____________________

(1)    First quarter 2023 related primarily to sales of New Recovery Bonds received as part of the 2022 Puerto Rico Resolutions.

(2)    First quarter 2023 related primarily to sales in externally managed portfolio and New Recovery Bonds received as part of the 2022 Puerto Rico Resolutions.

(3)    First quarter 2022 net realized gains related primarily to the sale of one of the Company’s alternative investments.

Rollforward of Credit Losses for Available-for-sale Fixed-Maturity Securities

The following table presents the roll forward of allowance for the credit losses on available-for-sale fixed-maturity securities.

Roll Forward of Allowance for

Credit Losses for Available-for-Sale Fixed-Maturity Securities

			First Quarter
			2023						2022
			(in millions)
Balance, beginning of period			$	65					$	42
Additions for securities for which credit losses were not previously recognized			—						4
Additions (reductions) for securities for which credit losses were previously recognized			4						1
Balance, end of period			$	69					$	47

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