XML 59 R15.htm IDEA: XBRL DOCUMENT
v3.19.3

Investments | 9 Months Ended
--- | ---
Sep. 30, 2019
Text Block [Abstract] |
Investments | Note 7: Investments Investments, excluding those elected under the fair value option, include debt and equity securities classified as either AFS or held-to-maturity (“HTM”). The following tables present the amortized cost, fair value, corresponding gross unrealized gains and losses and OTTI for AFS and HTM investments in the Company’s consolidated investment portfolio as of September 30, 2019 and December 31, 2018:
|  | September 30, 2019 |
In millions |  | Amortized Cost |  |  | Gross Unrealized Gains |  |  | Gross Unrealized Losses |  |  | Fair Value |  |  | Other-Than- Temporary Impairments (1)
AFS Investments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed-maturity investments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury and government agency |  | $ | 807 |  |  | $ | 59 |  |  | $ | (1 | ) |  | $ | 865 |  |  | $ | - |
State and municipal bonds |  |  | 205 |  |  |  | 24 |  |  |  | - |  |  |  | 229 |  |  |  | - |
Foreign governments |  |  | 8 |  |  |  | - |  |  |  | - |  |  |  | 8 |  |  |  | - |
Corporate obligations |  |  | 1,239 |  |  |  | 58 |  |  |  | (34 | ) |  |  | 1,263 |  |  |  | (33 | )
Mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage-backed agency |  |  | 297 |  |  |  | 4 |  |  |  | (1 | ) |  |  | 300 |  |  |  | - |
Residential mortgage-backed non-agency |  |  | 25 |  |  |  | 1 |  |  |  | (5 | ) |  |  | 21 |  |  |  | - |
Commercial mortgage-backed |  |  | 23 |  |  |  | 1 |  |  |  | - |  |  |  | 24 |  |  |  | - |
Asset-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Collateralized debt obligations |  |  | 129 |  |  |  | - |  |  |  | (2 | ) |  |  | 127 |  |  |  | - |
Other asset-backed |  |  | 275 |  |  |  | 1 |  |  |  | - |  |  |  | 276 |  |  |  | - |
Total AFS investments |  | $ | 3,008 |  |  | $ | 148 |  |  | $ | (43 | ) |  | $ | 3,113 |  |  | $ | (33 | )
HTM Investments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Assets of consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate obligations |  | $ | 890 |  |  | $ | 87 |  |  | $ | - |  |  | $ | 977 |  |  | $ | - |
Total HTM investments |  | $ | 890 |  |  | $ | 87 |  |  | $ | - |  |  | $ | 977 |  |  | $ | - |
(1) - | Represents unrealized gains or losses on OTTI securities recognized in AOCI, which includes the non-credit component of impairments, as well as all subsequent changes in fair value of such impaired securities reported in AOCI.
|  | December 31, 2018 |
In millions |  | Amortized Cost |  |  | Gross Unrealized Gains |  |  | Gross Unrealized Losses |  |  | Fair Value |  |  | Other-Than- Temporary Impairments (1)
AFS Investments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed-maturity investments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury and government agency |  | $ | 1,093 |  |  | $ | 26 |  |  | $ | (10 | ) |  | $ | 1,109 |  |  | $ | - |
State and municipal bonds |  |  | 641 |  |  |  | 97 |  |  |  | (11 | ) |  |  | 727 |  |  |  | 42 |
Foreign governments |  |  | 9 |  |  |  | - |  |  |  | - |  |  |  | 9 |  |  |  | - |
Corporate obligations |  |  | 1,473 |  |  |  | 6 |  |  |  | (131 | ) |  |  | 1,348 |  |  |  | (68 | )
Mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage-backed agency |  |  | 218 |  |  |  | 1 |  |  |  | (5 | ) |  |  | 214 |  |  |  | - |
Residential mortgage-backed non-agency |  |  | 30 |  |  |  | 1 |  |  |  | (4 | ) |  |  | 27 |  |  |  | - |
Commercial mortgage-backed |  |  | 53 |  |  |  | - |  |  |  | (2 | ) |  |  | 51 |  |  |  | - |
Asset-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Collateralized debt obligations |  |  | 122 |  |  |  | - |  |  |  | (3 | ) |  |  | 119 |  |  |  | - |
Other asset-backed |  |  | 178 |  |  |  | - |  |  |  | (1 | ) |  |  | 177 |  |  |  | - |
Total AFS investments |  | $ | 3,817 |  |  | $ | 131 |  |  | $ | (167 | ) |  | $ | 3,781 |  |  | $ | (26 | )
HTM Investments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Assets of consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate obligations |  | $ | 890 |  |  | $ | 35 |  |  | $ | - |  |  | $ | 925 |  |  | $ | - |
Total HTM investments |  | $ | 890 |  |  | $ | 35 |  |  | $ | - |  |  | $ | 925 |  |  | $ | - |
(1) - | Represents unrealized gains or losses on OTTI securities recognized in AOCI, which includes the non-credit component of impairments, as well as all subsequent changes in fair value of such impaired securities reported in AOCI.
The following table presents the distribution by contractual maturity of AFS and HTM fixed-maturity securities at amortized cost and fair value as of September 30, 2019. Contractual maturity may differ from expected maturity as borrowers may have the right to call or prepay obligations.
|  | AFS Securities |  |  | HTM Securities |
|  |  |  |  |  |  |  | Consolidated VIEs |
In millions |  | Amortized Cost |  |  | Fair Value |  |  | Amortized Cost |  |  | Fair Value |
Due in one year or less |  | $ | 598 |  |  | $ | 599 |  |  | $ | - |  |  | $ | - |
Due after one year through five years |  |  | 496 |  |  |  | 503 |  |  |  | - |  |  |  | - |
Due after five years through ten years |  |  | 436 |  |  |  | 423 |  |  |  | - |  |  |  | - |
Due after ten years |  |  | 729 |  |  |  | 840 |  |  |  | 890 |  |  |  | 977 |
Mortgage-backed and asset-backed |  |  | 749 |  |  |  | 748 |  |  |  | - |  |  |  | - |
Total fixed-maturity investments |  | $ | 3,008 |  |  | $ | 3,113 |  |  | $ | 890 |  |  | $ | 977 |
Deposited and Pledged Securities The fair value of securities on deposit with various regulatory authorities as of September 30, 2019 and December 31, 2018 was $11 million. These deposits are required to comply with state insurance laws. Pursuant to the Company’s tax sharing agreement, securities held by MBIA Inc. in the Tax Escrow Account are included as “Investments pledged as collateral, at fair value” on the Company’s consolidated balance sheets. Investment agreement obligations require the Company to pledge securities as collateral. Securities pledged in connection with investment agreements may not be repledged by the investment agreement counterparty. As of September 30, 2019 and December 31, 2018, the fair value of securities pledged as collateral for these investment agreements approximated $317 million and $314 million, respectively. The Company’s collateral as of September 30, 2019 consisted principally of U.S. Treasury and government agency and corporate obligations, and was primarily held with major U.S. banks. Additionally, the Company pledged cash as collateral under investment agreements in the amount of $6 million as of September 30, 2019. Refer to “Note 8: Derivative Instruments” for information about securities posted to derivative counterparties. Impaired Investments The following tables present the gross unrealized losses related to AFS and HTM investments as of September 30, 2019 and December 31, 2018:
|  | September 30, 2019 |
|  | Less than 12 Months |  |  | 12 Months or Longer |  |  | Total |
|  | Fair |  |  | Unrealized |  |  | Fair |  |  | Unrealized |  |  | Fair |  |  | Unrealized |
In millions |  | Value |  |  | Losses |  |  | Value |  |  | Losses |  |  | Value |  |  | Losses |
AFS Investments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed-maturity investments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury and government agency |  | $ | 102 |  |  | $ | - |  |  | $ | 84 |  |  | $ | (1 | ) |  | $ | 186 |  |  | $ | (1 | )
State and municipal bonds |  |  | 5 |  |  |  | - |  |  |  | 26 |  |  |  | - |  |  |  | 31 |  |  |  | - |
Foreign governments |  |  | 5 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 5 |  |  |  | - |
Corporate obligations |  |  | 182 |  |  |  | (1 | ) |  |  | 55 |  |  |  | (33 | ) |  |  | 237 |  |  |  | (34 | )
Mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage-backed agency |  |  | 35 |  |  |  | (1 | ) |  |  | 32 |  |  |  | - |  |  |  | 67 |  |  |  | (1 | )
Residential mortgage-backed non-agency |  |  | - |  |  |  | - |  |  |  | 11 |  |  |  | (5 | ) |  |  | 11 |  |  |  | (5 | )
Commercial mortgage-backed |  |  | 6 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 6 |  |  |  | - |
Asset-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Collateralized debt obligations |  |  | 43 |  |  |  | - |  |  |  | 68 |  |  |  | (2 | ) |  |  | 111 |  |  |  | (2 | )
Other asset-backed |  |  | 16 |  |  |  | - |  |  |  | 9 |  |  |  | - |  |  |  | 25 |  |  |  | - |
Total AFS investments |  | $ | 394 |  |  | $ | (2 | ) |  | $ | 285 |  |  | $ | (41 | ) |  | $ | 679 |  |  | $ | (43 | )
|  | December 31, 2018
|  | Less than 12 Months |  |  | 12 Months or Longer |  |  | Total
|  | Fair |  | Unrealized |  | Fair |  | Unrealized |  | Fair |  | Unrealized
In millions |  | Value |  | Losses |  | Value |  | Losses |  | Value |  | Losses
AFS Investments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed-maturity investments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury and government agency |  | $ | 231 |  |  | $ | (1 | ) |  | $ | 278 |  |  | $ | (9 | ) |  | $ | 509 |  |  | $ | (10)
State and municipal bonds |  |  | 60 |  |  |  | (1 | ) |  |  | 135 |  |  |  | (10 | ) |  |  | 195 |  |  |  | (11)
Foreign governments |  |  | 5 |  |  |  | - |  |  |  | 2 |  |  |  | - |  |  |  | 7 |  |  |  | -
Corporate obligations |  |  | 900 |  |  |  | (41 | ) |  |  | 335 |  |  |  | (90 | ) |  |  | 1,235 |  |  |  | (131)
Mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage-backed agency |  |  | 29 |  |  |  | (1 | ) |  |  | 118 |  |  |  | (4 | ) |  |  | 147 |  |  |  | (5)
Residential mortgage-backed non-agency |  |  | 2 |  |  |  | - |  |  |  | 13 |  |  |  | (4 | ) |  |  | 15 |  |  |  | (4)
Commercial mortgage-backed |  |  | 24 |  |  |  | - |  |  |  | 21 |  |  |  | (2 | ) |  |  | 45 |  |  |  | (2)
Asset-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Collateralized debt obligations |  |  | 98 |  |  |  | (3 | ) |  |  | 7 |  |  |  | - |  |  |  | 105 |  |  |  | (3)
Other asset-backed |  |  | 127 |  |  |  | - |  |  |  | 35 |  |  |  | (1 | ) |  |  | 162 |  |  |  | (1)
Total AFS investments |  | $ | 1,476 |  |  | $ | (47 | ) |  | $ | 944 |  |  | $ | (120 | ) |  | $ | 2,420 |  |  | $ | (167)
Gross unrealized losses on AFS investments decreased as of September 30, 2019 compared with December 31, 2018 primarily due to lower interest rates and tightening credit spreads. With the weighting applied on the fair value of each security relative to the total fair value, the weighted average contractual maturity of securities in an unrealized loss position as of September 30, 2019 and December 31, 2018 was 7 and 11 years, respectively. As of September 30, 2019 and December 31, 2018, there were 68 and 182 securities, respectively, that were in an unrealized loss position for a continuous twelve-month period or longer, of which, fair values of 15 and 64 securities, respectively, were below book value by more than 5%. The following table presents the distribution of securities in an unrealized loss position for a continuous twelve-month period or longer where fair value was below book value by more than 5% as of September 30, 2019:
|  | AFS Securities |
Percentage of Fair Value Below Book Value |  | Number of Securities |  |  | Book Value (in millions) |  |  | Fair Value (in millions) |
> 5% to 15% |  |  | 9 |  |  | $ | 19 |  |  | $ | 19 |
> 15% to 25% |  |  | 1 |  |  |  | 1 |  |  |  | - |
> 25% to 50% |  |  | 2 |  |  |  | 14 |  |  |  | 10 |
> 50% |  |  | 3 |  |  |  | 63 |  |  |  | 30 |
Total |  |  | 15 |  |  | $ | 97 |  |  | $ | 59 |
The Company concluded that it does not have the intent to sell securities in an unrealized loss position and it is more likely than not, that it would not have to sell these securities before recovery of their cost basis. In making this conclusion, the Company examined the cash flow projections for its investment portfolios, the potential sources and uses of cash in its businesses, and the cash resources available to its business other than sales of securities. It also considered the existence of any risk management or other plans as of September 30, 2019 that would require the sale of impaired securities. Impaired securities that the Company intends to sell before the expected recovery of such securities’ fair values have been written down to fair value. Other-Than-Temporary Impairments The Company’s fixed-maturity securities for which fair value is less than amortized cost are reviewed quarterly in order to determine whether a credit loss exists. The portion of certain OTTI losses on fixed-maturity securities that does not represent credit losses is recognized in AOCI. Refer to “Note 8: Investments” in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 for a discussion of the Company’s policy for OTTI and its determination of credit loss. The following table presents the amount of credit loss impairments recognized in earnings on fixed-maturity securities held by MBIA as of the dates indicated, for which a portion of the OTTI losses was recognized in AOCI, and the corresponding changes in such amounts. The additional credit loss impairments for the nine months ended September 30, 2019 and the three and nine months ended September 30, 2018 were primarily related to an impaired security for which a loss was recognized as the difference between the amortized cost and net present value of projected cash flows. This OTTI resulted from liquidity concerns and other adverse financial conditions of the issuer.
In millions |  | Three Months Ended September 30, |  |  | Nine Months Ended September 30,
Credit Losses Recognized in Earnings Related to Other-Than- Temporary Impairments |  | 2019 |  |  | 2018 |  |  | 2019 |  |  | 2018
Beginning balance |  | $ | 74 |  |  | $ | 34 |  |  | $ | 37 |  |  | $ | 32
Additions for credit loss impairments recognized in the current period on securities previously impaired |  |  | - |  |  |  | 1 |  |  |  | 37 |  |  |  | 3
Ending balance |  | $ | 74 |  |  | $ | 35 |  |  | $ | 74 |  |  | $ | 35
The Company does not recognize OTTI on securities insured by MBIA Corp. and National since those securities, whether or not owned by the Company, are evaluated for impairments in accordance with its loss reserving policy. The following table provides information about securities held by the Company as of September 30, 2019 that were in an unrealized loss position and insured by a financial guarantor, along with the amount of insurance loss reserves corresponding to the par amount owned by the Company:
In millions |  | Fair Value |  | Unrealized Loss |  | Insurance Loss Reserve (2)
Mortgage-backed: |  |  |  |  |  |  |  |  |  |
MBIA (1) |  | $ | 11 |  |  | $ | (5) |  | $ | 19
| (1) - | Includes investments insured by MBIA Corp. and National.
| (2) - | Insurance loss reserve estimates are based on the proportion of par value owned to the total amount of par value insured.
Sales of Available-for-Sale Investments Gross realized gains and losses are recorded within “Net gains (losses) on financial instruments at fair value and foreign exchange” on the Company’s consolidated statements of operations. The proceeds and the gross realized gains and losses from sales of fixed-maturity securities held as AFS for the three and nine months ended September 30, 2019 and 2018 are as follows:
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
In millions |  | 2019 |  | 2018 |  | 2019 |  | 2018
Proceeds from sales |  | $ | 508 |  |  | $ | 583 |  |  | $ | 1,875 |  |  | $ | 1,647 |
Gross realized gains |  | $ | 79 |  |  | $ | 1 |  |  | $ | 100 |  |  | $ | 4 |
Gross realized losses |  | $ | - |  |  | $ | (2 | ) |  | $ | (3 | ) |  | $ | (15 | )
Equity Investments Unrealized gains and losses recognized on equity investments held as of the end of each period for the three and nine months ended September 30, 2019 and 2018 are as follows:
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
In millions |  | 2019 |  | 2018 |  | 2019 |  | 2018
Net gains (losses) recognized during the period on equity securities |  | $ | 2 |  |  | $ | 3 |  |  | $ | 9 |  |  | $ | 3 |
Less: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net gains (losses) recognized during the period on equity securities sold during the period |  |  | - |  |  |  | - |  |  |  | 1 |  |  |  | 1 |
Unrealized gains (losses) recognized during the period on equity securities still held at the reporting date |  | $ | 2 |  |  | $ | 3 |  |  | $ | 8 |  |  | $ | 2 |

X
- Definition Tabular disclosure of marketable securities. This may consist of investments in certain debt and equity securities, short-term investments and other assets. + References No definition available. + Details
Name: | us-gaap_MarketableSecuritiesTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_TextBlockAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration