Bermuda
|
001-32141
|
98-0429991
|
(State or other jurisdiction
of incorporation or organization) |
(Commission File Number)
|
(I.R.S. Employer
Identification No.) |
☐
|
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
|
☐
|
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
|
☐
|
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
|
☐
|
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
|
Title of each class:
|
Trading Symbol(s)
|
Name of exchange on which registered
|
|
Common Shares
|
$0.01 per share
|
AGO
|
New York Stock Exchange
|
|
Assured Guaranty Ltd.
|
|
|
|
|
|
|
|
|
By:
|
/s/ ROBERT A. BAILENSON
|
|
|
Name: Robert A. Bailenson
Title: Chief Financial Officer |
|
Page(s)
|
|
As of
December 31, 2019 |
|
As of
December 31, 2018 |
||||
Assets
|
|
|
|
||||
Investment portfolio:
|
|
|
|
||||
Fixed-maturity securities, available-for-sale, at fair value (amortized cost of $2,388 and $2,743)
|
$
|
2,566
|
|
|
$
|
2,907
|
|
Short-term investments, at fair value
|
88
|
|
|
126
|
|
||
Equity method investments
|
391
|
|
|
234
|
|
||
Other invested assets, at fair value
|
1
|
|
|
2
|
|
||
Total investment portfolio
|
3,046
|
|
|
3,269
|
|
||
Loan receivable from parent
|
88
|
|
|
—
|
|
||
Cash
|
48
|
|
|
31
|
|
||
Premiums receivable, net of commissions payable
|
255
|
|
|
199
|
|
||
Ceded unearned premium reserve
|
219
|
|
|
221
|
|
||
Reinsurance recoverable on unpaid losses
|
125
|
|
|
171
|
|
||
Salvage and subrogation recoverable
|
306
|
|
|
214
|
|
||
Financial guaranty variable interest entities’ assets, at fair value
|
49
|
|
|
101
|
|
||
Other assets (includes $63 and $64 measured at fair value)
|
211
|
|
|
252
|
|
||
Total assets
|
$
|
4,347
|
|
|
$
|
4,458
|
|
Liabilities and shareholder’s equity
|
|
|
|
||||
Unearned premium reserve
|
$
|
903
|
|
|
$
|
982
|
|
Loss and loss adjustment expense reserve
|
414
|
|
|
386
|
|
||
Reinsurance balances payable, net
|
128
|
|
|
86
|
|
||
Note payable to affiliate
|
300
|
|
|
300
|
|
||
Credit derivative liabilities, at fair value
|
190
|
|
|
182
|
|
||
Financial guaranty variable interest entities’ liabilities with recourse, at fair value
|
47
|
|
|
108
|
|
||
Financial guaranty variable interest entities’ liabilities without recourse, at fair value
|
1
|
|
|
1
|
|
||
Other liabilities
|
87
|
|
|
84
|
|
||
Total liabilities
|
2,070
|
|
|
2,129
|
|
||
Commitments and contingencies (see Note 16)
|
|
|
|
||||
Preferred stock ($1,000 par value, 200,004 shares authorized; none issued and outstanding)
|
—
|
|
|
—
|
|
||
Common stock (2019: 493,339 shares authorized, 14,173 shares issued and outstanding, with par value of $1,058.38; 2018: 495,559 shares authorized, 16,393 shares issued and outstanding, with par value of $915.05)
|
15
|
|
|
15
|
|
||
Additional paid-in capital
|
742
|
|
|
842
|
|
||
Retained earnings
|
1,364
|
|
|
1,333
|
|
||
Accumulated other comprehensive income, net of tax of $27 and $24
|
156
|
|
|
139
|
|
||
Total shareholder’s equity
|
2,277
|
|
|
2,329
|
|
||
Total liabilities and shareholder’s equity
|
$
|
4,347
|
|
|
$
|
4,458
|
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Revenues
|
|
|
|
|
|
||||||
Net earned premiums
|
$
|
125
|
|
|
$
|
152
|
|
|
$
|
231
|
|
Net investment income
|
135
|
|
|
128
|
|
|
136
|
|
|||
Net realized investment gains (losses)
|
8
|
|
|
(5
|
)
|
|
39
|
|
|||
Net change in fair value of credit derivatives
|
(7
|
)
|
|
95
|
|
|
71
|
|
|||
Bargain purchase gain and settlement of pre-existing relationships, net
|
—
|
|
|
—
|
|
|
58
|
|
|||
Other income (loss)
|
12
|
|
|
13
|
|
|
21
|
|
|||
Total revenues
|
273
|
|
|
383
|
|
|
556
|
|
|||
Expenses
|
|
|
|
|
|
||||||
Loss and loss adjustment expenses
|
44
|
|
|
38
|
|
|
54
|
|
|||
Interest expense on note payable to affiliate
|
11
|
|
|
11
|
|
|
11
|
|
|||
Employee compensation and benefit expenses
|
37
|
|
|
36
|
|
|
38
|
|
|||
Other expenses
|
27
|
|
|
24
|
|
|
34
|
|
|||
Total expenses
|
119
|
|
|
109
|
|
|
137
|
|
|||
Income (loss) before income taxes and equity in net earnings of investees
|
154
|
|
|
274
|
|
|
419
|
|
|||
Equity in net earnings of investees
|
1
|
|
|
(2
|
)
|
|
(1
|
)
|
|||
Income (loss) before income taxes
|
155
|
|
|
272
|
|
|
418
|
|
|||
Provision (benefit) for income taxes
|
|
|
|
|
|
||||||
Current
|
(9
|
)
|
|
99
|
|
|
(198
|
)
|
|||
Deferred
|
28
|
|
|
(11
|
)
|
|
328
|
|
|||
Total provision (benefit) for income taxes
|
19
|
|
|
88
|
|
|
130
|
|
|||
Equity in after-tax net earnings of affiliates
|
18
|
|
|
24
|
|
|
32
|
|
|||
Net income (loss)
|
$
|
154
|
|
|
$
|
208
|
|
|
$
|
320
|
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Net income (loss)
|
$
|
154
|
|
|
$
|
208
|
|
|
$
|
320
|
|
Change in net unrealized gains (losses) on:
|
|
|
|
|
|
||||||
Investments with no other-than-temporary impairment, net of tax provision (benefit) of $18, $(15) and $8
|
72
|
|
|
(60
|
)
|
|
15
|
|
|||
Investments with other-than-temporary impairment, net of tax provision (benefit) of $(15), $(1), and $23
|
(56
|
)
|
|
(5
|
)
|
|
43
|
|
|||
Change in net unrealized gains (losses) on investments
|
16
|
|
|
(65
|
)
|
|
58
|
|
|||
Change in net unrealized gains (losses) on financial guaranty variable interest entities' liabilities with recourse, net of tax
|
1
|
|
|
1
|
|
|
—
|
|
|||
Change in cumulative translation adjustment, net of tax provision (benefit) of $-, $- and $3
|
—
|
|
|
—
|
|
|
20
|
|
|||
Other comprehensive income (loss)
|
17
|
|
|
(64
|
)
|
|
78
|
|
|||
Comprehensive income (loss)
|
$
|
171
|
|
|
$
|
144
|
|
|
$
|
398
|
|
|
Assured Guaranty Corp. Common Shares Outstanding
|
|
|
Common
Stock |
|
Additional
Paid-in Capital |
|
Retained
Earnings |
|
Accumulated Other Comprehensive Income
|
|
Total
Shareholder’s Equity |
|||||||||||
Balance at December 31, 2016
|
20,834
|
|
|
|
$
|
15
|
|
|
$
|
1,041
|
|
|
$
|
1,283
|
|
|
$
|
65
|
|
|
$
|
2,404
|
|
Net income
|
—
|
|
|
|
—
|
|
|
—
|
|
|
320
|
|
|
—
|
|
|
320
|
|
|||||
Net impact of sale of the European Subsidiaries to affiliate (see Note 1)
|
—
|
|
|
|
—
|
|
|
—
|
|
|
(203
|
)
|
|
37
|
|
|
(166
|
)
|
|||||
Dividends - cash
|
—
|
|
|
|
—
|
|
|
—
|
|
|
(107
|
)
|
|
—
|
|
|
(107
|
)
|
|||||
Dividends - transfer of benefit/health/retirement plans to AG US Services (see Note 15)
|
—
|
|
|
|
—
|
|
|
—
|
|
|
(12
|
)
|
|
—
|
|
|
(12
|
)
|
|||||
Effect of 2017 Tax Act
|
—
|
|
|
|
—
|
|
|
—
|
|
|
(28
|
)
|
|
28
|
|
|
—
|
|
|||||
Other comprehensive income
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
78
|
|
|
78
|
|
|||||
Other
|
—
|
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|||||
Balance at December 31, 2017
|
20,834
|
|
|
|
15
|
|
|
1,042
|
|
|
1,253
|
|
|
208
|
|
|
2,518
|
|
|||||
Net income
|
—
|
|
|
|
—
|
|
|
—
|
|
|
208
|
|
|
—
|
|
|
208
|
|
|||||
Dividends
|
—
|
|
|
|
—
|
|
|
—
|
|
|
(133
|
)
|
|
—
|
|
|
(133
|
)
|
|||||
Common stock repurchases
(see Note 14)
|
(4,441
|
)
|
|
|
—
|
|
|
(200
|
)
|
|
—
|
|
|
—
|
|
|
(200
|
)
|
|||||
Other comprehensive loss
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(64
|
)
|
|
(64
|
)
|
|||||
Effect of adoption of ASU 2016-01 (see Note 18)
|
—
|
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
(5
|
)
|
|
—
|
|
|||||
Balance at December 31, 2018
|
16,393
|
|
|
|
15
|
|
|
842
|
|
|
1,333
|
|
|
139
|
|
|
2,329
|
|
|||||
Net income
|
—
|
|
|
|
—
|
|
|
—
|
|
|
154
|
|
|
—
|
|
|
154
|
|
|||||
Dividends
|
—
|
|
|
|
—
|
|
|
—
|
|
|
(123
|
)
|
|
—
|
|
|
(123
|
)
|
|||||
Common stock repurchases
(see Note 14)
|
(2,220
|
)
|
|
|
—
|
|
|
(100
|
)
|
|
—
|
|
|
—
|
|
|
(100
|
)
|
|||||
Other comprehensive income
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
17
|
|
|
17
|
|
|||||
Balance at December 31, 2019
|
14,173
|
|
|
|
$
|
15
|
|
|
$
|
742
|
|
|
$
|
1,364
|
|
|
$
|
156
|
|
|
$
|
2,277
|
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Operating Activities:
|
|
|
|
|
|
||||||
Net Income
|
$
|
154
|
|
|
$
|
208
|
|
|
$
|
320
|
|
Adjustments to reconcile net income to net cash flows provided by operating activities:
|
|
|
|
|
|
||||||
Net amortization of premium (discount) on investments
|
(39
|
)
|
|
(37
|
)
|
|
(40
|
)
|
|||
Provision (benefit) for deferred income taxes
|
28
|
|
|
(11
|
)
|
|
328
|
|
|||
Net realized investment losses (gains)
|
(8
|
)
|
|
5
|
|
|
(39
|
)
|
|||
Bargain purchase gain and settlement of pre-existing relationships, net
|
—
|
|
|
—
|
|
|
(58
|
)
|
|||
Equity in net earnings of investees
|
(19
|
)
|
|
(24
|
)
|
|
(32
|
)
|
|||
Change in premiums receivable, net of premiums payable and commissions
|
(29
|
)
|
|
(21
|
)
|
|
14
|
|
|||
Change in ceded unearned premium reserve
|
2
|
|
|
2
|
|
|
88
|
|
|||
Change in unearned premium reserve
|
(79
|
)
|
|
91
|
|
|
(328
|
)
|
|||
Change in loss and loss adjustment expense reserve, net
|
(6
|
)
|
|
42
|
|
|
(60
|
)
|
|||
Change in current income tax
|
(5
|
)
|
|
169
|
|
|
(198
|
)
|
|||
Change in credit derivative assets and liabilities, net
|
(1
|
)
|
|
(30
|
)
|
|
(62
|
)
|
|||
Dividends received from investee (see Note 12)
|
31
|
|
|
11
|
|
|
42
|
|
|||
Other
|
14
|
|
|
21
|
|
|
(7
|
)
|
|||
Net cash flows provided by (used in) operating activities
|
43
|
|
|
426
|
|
|
(32
|
)
|
|||
Investing activities
|
|
|
|
|
|
||||||
Fixed-maturity securities:
|
|
|
|
|
|
||||||
Purchases
|
(285
|
)
|
|
(596
|
)
|
|
(1,002
|
)
|
|||
Sales
|
404
|
|
|
393
|
|
|
561
|
|
|||
Maturities and paydowns
|
286
|
|
|
164
|
|
|
192
|
|
|||
Short-term investments with original maturities of over three months:
|
|
|
|
|
|
||||||
Purchases
|
(11
|
)
|
|
(6
|
)
|
|
(121
|
)
|
|||
Sales
|
—
|
|
|
—
|
|
|
42
|
|
|||
Maturities and paydowns
|
12
|
|
|
2
|
|
|
44
|
|
|||
Net sales (purchases) of short-term investments with original maturities of less than three months
|
38
|
|
|
(65
|
)
|
|
16
|
|
|||
Net proceeds from paydowns on financial guaranty variable interest entities’ assets
|
67
|
|
|
24
|
|
|
28
|
|
|||
Acquisitions, net of cash acquired (see Note 2)
|
—
|
|
|
—
|
|
|
95
|
|
|||
Proceeds from return of capital (see Note 12)
|
10
|
|
|
—
|
|
|
70
|
|
|||
Sale of the European Subsidiaries to affiliates, net of cash sold (see Note 1)
|
—
|
|
|
—
|
|
|
127
|
|
|||
Proceeds from maturity of other invested asset
|
—
|
|
|
—
|
|
|
85
|
|
|||
Investment in AG Asset Strategies LLC
|
(175
|
)
|
|
—
|
|
|
—
|
|
|||
Loan made to parent
|
(88
|
)
|
|
—
|
|
|
—
|
|
|||
Other
|
4
|
|
|
—
|
|
|
4
|
|
|||
Net cash flows provided by (used in) investing activities
|
$
|
262
|
|
|
$
|
(84
|
)
|
|
$
|
141
|
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Financing activities
|
|
|
|
|
|
||||||
Dividends paid
|
$
|
(123
|
)
|
|
$
|
(133
|
)
|
|
$
|
(107
|
)
|
Net paydowns of financial guaranty variable interest entities’ liabilities
|
(65
|
)
|
|
(24
|
)
|
|
(30
|
)
|
|||
Repurchases of common stock
|
(100
|
)
|
|
(200
|
)
|
|
—
|
|
|||
Net cash flows provided by (used in) financing activities
|
(288
|
)
|
|
(357
|
)
|
|
(137
|
)
|
|||
Effect of foreign exchange rate changes
|
—
|
|
|
—
|
|
|
4
|
|
|||
Increase (decrease) in cash and restricted cash
|
17
|
|
|
(15
|
)
|
|
(24
|
)
|
|||
Cash and restricted cash at beginning of period
|
31
|
|
|
46
|
|
|
70
|
|
|||
Cash and restricted cash at end of period
|
$
|
48
|
|
|
$
|
31
|
|
|
$
|
46
|
|
|
|
|
|
|
|
||||||
Supplemental cash flow information
|
|
|
|
|
|
||||||
Cash paid (received) during the period for:
|
|
|
|
|
|
||||||
Income taxes
|
$
|
(1
|
)
|
|
$
|
(70
|
)
|
|
$
|
—
|
|
Interest on note payable to affiliate
|
11
|
|
|
11
|
|
|
11
|
|
|||
|
|
|
|
|
|
||||||
Supplemental disclosure of non-cash investing activities:
|
|
|
|
|
|
||||||
Purchases of fixed-maturity investments
|
$
|
(6
|
)
|
|
$
|
(4
|
)
|
|
$
|
—
|
|
|
|
|
|
|
|
||||||
|
As of December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Reconciliation of cash and restricted cash to the consolidated balance sheets:
|
|
|
|
|
|
||||||
Cash
|
$
|
48
|
|
|
$
|
31
|
|
|
$
|
46
|
|
Restricted cash (included in other assets)
|
—
|
|
|
—
|
|
|
—
|
|
|||
Cash and restricted cash at the end of period
|
$
|
48
|
|
|
$
|
31
|
|
|
$
|
46
|
|
1.
|
Business and Basis of Presentation
|
•
|
39.3% of Municipal Assurance Holdings Inc. (MAC Holdings), incorporated in Delaware. AGC's affiliate, Assured Guaranty Municipal Corp. (AGM), owns the remaining 60.7% of MAC Holdings. MAC Holdings owns 100% of Municipal Assurance Corp. (MAC), a New York domiciled insurance company.
|
•
|
35% of AG Asset Strategies (AGAS) directly. MAC owns 10% of AGAS, and AGM owns 55% directly.
|
|
(in millions)
|
||
Consideration received
|
$
|
411
|
|
|
|
||
Carrying value of European Subsidiaries
|
651
|
|
|
Deferred tax liabilities transferred
|
(55
|
)
|
|
Net carrying value transferred
|
596
|
|
|
|
|
||
Impact before other related adjustments
|
(185
|
)
|
|
Elimination of the financial guarantee on Orkney Bonds
|
20
|
|
|
Other
|
(1
|
)
|
|
Net shareholder's equity impact
|
$
|
(166
|
)
|
Business Combinations
|
Note 2
|
Expected loss to be paid (insurance, credit derivatives and FG VIE contracts)
|
Note 5
|
Contracts accounted for as insurance (premium revenue recognition, loss and loss adjustment expense and policy acquisition cost)
|
Note 6 and 7
|
Fair value measurement
|
Note 8
|
Investments and cash
|
Note 9 and 12
|
Credit derivatives
|
Note 10
|
Variable interest entities
|
Note 11
|
Income taxes
|
Note 13
|
Share repurchases
|
Note 18
|
Commitments and contingencies
|
Note 16
|
Note payable to affiliate and credit facilities
|
Note 17
|
2.
|
Assumption of Insured Portfolio and Business Combinations
|
|
|
Assumed
|
||
|
|
(in millions)
|
||
Cash
|
|
$
|
344
|
|
|
|
|
||
Premiums receivable, net of commissions
|
|
$
|
55
|
|
Unearned premium reserve
|
|
(331
|
)
|
|
Credit derivative liability, net
|
|
(68
|
)
|
|
Net assets (liabilities) acquired, excluding cash
|
|
$
|
(344
|
)
|
|
Fair Value of Net Assets Acquired, before Settlement of Pre-existing Relationships
|
|
Net effect of Settlement of Pre-existing Relationships
|
|
Net Effect of
MBIA UK Acquisition
|
||||||
|
(in millions)
|
||||||||||
Purchase price (1)
|
$
|
334
|
|
|
$
|
—
|
|
|
$
|
334
|
|
|
|
|
|
|
|
||||||
Identifiable assets acquired:
|
|
|
|
|
|
||||||
Investments
|
459
|
|
|
—
|
|
|
459
|
|
|||
Cash
|
72
|
|
|
—
|
|
|
72
|
|
|||
Premiums receivable, net of commissions payable
|
274
|
|
|
(3
|
)
|
|
271
|
|
|||
Other assets
|
16
|
|
|
(6
|
)
|
|
10
|
|
|||
Total assets
|
821
|
|
|
(9
|
)
|
|
812
|
|
|||
|
|
|
|
|
|
|
|||||
Liabilities assumed:
|
|
|
|
|
|
||||||
Unearned premium reserves
|
389
|
|
|
(6
|
)
|
|
383
|
|
|||
Current tax payable
|
25
|
|
|
—
|
|
|
25
|
|
|||
Other liabilities
|
4
|
|
|
(4
|
)
|
|
—
|
|
|||
Total liabilities
|
418
|
|
|
(10
|
)
|
|
408
|
|
|||
Net assets of MBIA UK
|
403
|
|
|
1
|
|
|
404
|
|
|||
Cash acquired from MBIA Holdings
|
23
|
|
|
—
|
|
|
23
|
|
|||
Deferred tax liability
|
(36
|
)
|
|
—
|
|
|
(36
|
)
|
|||
Net asset effect of MBIA UK Acquisition
|
390
|
|
|
1
|
|
|
391
|
|
|||
Bargain purchase gain and settlement of pre-existing relationships resulting from MBIA UK Acquisition, after-tax
|
56
|
|
|
1
|
|
|
57
|
|
|||
Deferred tax
|
—
|
|
|
1
|
|
|
1
|
|
|||
Bargain purchase gain and settlement of pre-existing relationships resulting from MBIA UK Acquisition, pre-tax
|
$
|
56
|
|
|
$
|
2
|
|
|
$
|
58
|
|
(1)
|
The purchase price of $334 million was allocated as follows: (1) $329 million for the purchase of net assets of $385 million, and (2) the settlement of pre-existing relationships between MBIA UK and Assured Guaranty at a fair value of $5 million.
|
3.
|
Ratings
|
|
S&P Global Ratings, a division of Standard & Poor’s Financial Services LLC
|
|
Kroll Bond Rating Agency
|
|
Moody’s Investors Service, Inc.
|
AGC
|
AA(stable) (11/7/19)
|
|
AA (stable) (11/22/19)
|
|
(1)
|
MAC
|
AA(stable) (11/7/19)
|
|
AA+ (stable) (3/4/20)
|
|
—
|
(1)
|
AGC requested that Moody’s Investors Services, Inc. (Moody’s) withdraw its financial strength ratings of AGC in January 2017, but Moody's denied that request. Moody’s continues to rate AGC A3 (stable).
|
4.
|
Outstanding Exposure
|
•
|
BIG Category 1: Below-investment-grade transactions showing sufficient deterioration to make future losses possible, but for which none are currently expected.
|
•
|
BIG Category 2: Below-investment-grade transactions for which future losses are expected but for which no claims (other than liquidity claims which are claims that the Company expects to be reimbursed within one year) have yet been paid.
|
•
|
BIG Category 3: Below-investment-grade transactions for which future losses are expected and on which claims (other than liquidity claims) have been paid.
|
•
|
for insured obligations that are not supported by homogeneous pools of assets (which category includes most of the Company's public finance transactions), as the total estimated contractual future principal and interest due through maturity, regardless of whether the obligations may be called and regardless of whether, in the case of obligations where principal payments are due when an underlying asset makes a principal payment, the Company believes the obligations will be repaid prior to contractual maturity;
|
•
|
for insured obligations that are supported by homogeneous pools of assets that are contractually permitted to prepay principal (which category includes, for example, residential mortgage-backed securities (RMBS) and CLOs), as total estimated expected future principal and interest due on insured obligations through their respective expected terms, which includes the Company's expectations as to whether the obligations may be called and, in the case of obligations where principal payments are due when an underlying asset makes a principal payment, when the Company expects principal payments to be made prior to contractual maturity.
|
|
Gross Debt Service
Outstanding
|
|
Net Debt Service
Outstanding
|
||||||||||||
|
As of
December 31, 2019 |
|
As of
December 31, 2018 |
|
As of
December 31, 2019 |
|
As of
December 31, 2018 |
||||||||
|
(in millions)
|
||||||||||||||
Public finance
|
$
|
47,656
|
|
|
$
|
63,368
|
|
|
$
|
30,093
|
|
|
$
|
35,575
|
|
Structured finance
|
7,031
|
|
6,978
|
|
|
4,613
|
|
5,044
|
|
||||||
Total financial guaranty
|
$
|
54,687
|
|
|
$
|
70,346
|
|
|
$
|
34,706
|
|
|
$
|
40,619
|
|
|
|
Public Finance
U.S. |
|
Public Finance
Non-U.S. |
|
Structured Finance
U.S. |
|
Structured Finance
Non-U.S. |
|
Total
|
|||||||||||||||||||||||||
Rating Category
|
|
Net Par
Outstanding |
|
%
|
|
Net Par
Outstanding |
|
%
|
|
Net Par
Outstanding |
|
%
|
|
Net Par
Outstanding |
|
%
|
|
Net Par
Outstanding
|
|
%
|
|||||||||||||||
|
|
(dollars in millions)
|
|||||||||||||||||||||||||||||||||
AAA
|
|
$
|
20
|
|
|
0.1
|
%
|
|
$
|
804
|
|
|
16.8
|
%
|
|
$
|
535
|
|
|
14.3
|
%
|
|
$
|
78
|
|
|
22.1
|
%
|
|
$
|
1,437
|
|
|
6.4
|
%
|
AA
|
|
2,807
|
|
|
20.5
|
|
|
195
|
|
|
4.1
|
|
|
1,537
|
|
|
41.0
|
|
|
11
|
|
|
3.1
|
|
|
4,550
|
|
|
20.1
|
|
|||||
A
|
|
4,477
|
|
|
32.6
|
|
|
815
|
|
|
17.0
|
|
|
619
|
|
|
16.5
|
|
|
133
|
|
|
37.7
|
|
|
6,044
|
|
|
26.7
|
|
|||||
BBB
|
|
4,719
|
|
|
34.4
|
|
|
2,851
|
|
|
59.6
|
|
|
523
|
|
|
13.9
|
|
|
131
|
|
|
37.1
|
|
|
8,224
|
|
|
36.4
|
|
|||||
BIG
|
|
1,698
|
|
|
12.4
|
|
|
121
|
|
|
2.5
|
|
|
538
|
|
|
14.3
|
|
|
—
|
|
|
—
|
|
|
2,357
|
|
|
10.4
|
|
|||||
Total net par outstanding
|
|
$
|
13,721
|
|
|
100.0
|
%
|
|
$
|
4,786
|
|
|
100.0
|
%
|
|
$
|
3,752
|
|
|
100.0
|
%
|
|
$
|
353
|
|
|
100.0
|
%
|
|
$
|
22,612
|
|
|
100.0
|
%
|
|
|
Public Finance
U.S. |
|
Public Finance
Non-U.S. |
|
Structured Finance
U.S. |
|
Structured Finance
Non-U.S. |
|
Total
|
|||||||||||||||||||||||||
Rating Category
|
|
Net Par
Outstanding |
|
%
|
|
Net Par
Outstanding |
|
%
|
|
Net Par
Outstanding |
|
%
|
|
Net Par
Outstanding |
|
%
|
|
Net Par
Outstanding
|
|
%
|
|||||||||||||||
|
|
(dollars in millions)
|
|||||||||||||||||||||||||||||||||
AAA
|
|
$
|
19
|
|
|
0.1
|
%
|
|
$
|
778
|
|
|
15.9
|
%
|
|
$
|
639
|
|
|
15.7
|
%
|
|
$
|
136
|
|
|
23.8
|
%
|
|
$
|
1,572
|
|
|
5.7
|
%
|
AA
|
|
3,092
|
|
|
17.3
|
|
|
187
|
|
|
3.8
|
|
|
1,438
|
|
|
35.5
|
|
|
41
|
|
|
7.2
|
|
|
4,758
|
|
|
17.4
|
|
|||||
A
|
|
7,883
|
|
|
44.1
|
|
|
916
|
|
|
18.6
|
|
|
726
|
|
|
17.9
|
|
|
142
|
|
|
24.8
|
|
|
9,667
|
|
|
35.3
|
|
|||||
BBB
|
|
5,044
|
|
|
28.2
|
|
|
2,887
|
|
|
58.9
|
|
|
519
|
|
|
12.8
|
|
|
253
|
|
|
44.2
|
|
|
8,703
|
|
|
31.7
|
|
|||||
BIG
|
|
1,839
|
|
|
10.3
|
|
|
137
|
|
|
2.8
|
|
|
736
|
|
|
18.1
|
|
|
—
|
|
|
—
|
|
|
2,712
|
|
|
9.9
|
|
|||||
Total net par outstanding
|
|
$
|
17,877
|
|
|
100.0
|
%
|
|
$
|
4,905
|
|
|
100.0
|
%
|
|
$
|
4,058
|
|
|
100.0
|
%
|
|
$
|
572
|
|
|
100.0
|
%
|
|
$
|
27,412
|
|
|
100.0
|
%
|
|
Gross Par Outstanding
|
|
Net Par Outstanding
|
||||||||||||
Sector (1)
|
As of
December 31, 2019 |
|
As of
December 31, 2018 |
|
As of
December 31, 2019 |
|
As of
December 31, 2018 |
||||||||
|
(in millions)
|
||||||||||||||
Public finance:
|
|
|
|
|
|
|
|
||||||||
U.S.:
|
|
|
|
|
|
|
|
||||||||
Tax backed
|
$
|
4,109
|
|
|
$
|
7,046
|
|
|
$
|
3,059
|
|
|
$
|
4,168
|
|
Transportation
|
3,270
|
|
|
3,285
|
|
|
2,393
|
|
|
2,255
|
|
||||
General obligation
|
5,622
|
|
|
11,478
|
|
|
2,336
|
|
|
3,777
|
|
||||
Infrastructure finance
|
2,367
|
|
|
2,429
|
|
|
1,994
|
|
|
2,051
|
|
||||
Municipal utilities
|
2,896
|
|
|
4,630
|
|
|
1,443
|
|
|
1,905
|
|
||||
Healthcare
|
890
|
|
|
1,869
|
|
|
662
|
|
|
1,371
|
|
||||
Investor-owned utilities
|
437
|
|
|
624
|
|
|
344
|
|
|
492
|
|
||||
Higher education
|
691
|
|
|
1,335
|
|
|
334
|
|
|
585
|
|
||||
Renewable energy
|
181
|
|
|
187
|
|
|
130
|
|
|
134
|
|
||||
Housing revenue
|
137
|
|
|
180
|
|
|
109
|
|
|
145
|
|
||||
Other public finance
|
1,271
|
|
|
1,508
|
|
|
917
|
|
|
994
|
|
||||
Total public finance—U.S.
|
21,871
|
|
|
34,571
|
|
|
13,721
|
|
|
17,877
|
|
||||
Non-U.S.:
|
|
|
|
|
|
|
|
||||||||
Regulated utilities
|
3,462
|
|
|
3,850
|
|
|
1,918
|
|
|
2,203
|
|
||||
Infrastructure finance
|
2,022
|
|
|
1,745
|
|
|
1,622
|
|
|
1,462
|
|
||||
Pooled infrastructure
|
1,416
|
|
|
1,373
|
|
|
708
|
|
|
687
|
|
||||
Sovereign and sub-sovereign
|
283
|
|
|
292
|
|
|
283
|
|
|
292
|
|
||||
Renewable energy
|
341
|
|
|
346
|
|
|
255
|
|
|
261
|
|
||||
Total public finance—non-U.S.
|
7,524
|
|
|
7,606
|
|
|
4,786
|
|
|
4,905
|
|
||||
Total public finance
|
29,395
|
|
|
42,177
|
|
|
18,507
|
|
|
22,782
|
|
||||
Structured finance:
|
|
|
|
|
|
|
|
||||||||
U.S.:
|
|
|
|
|
|
|
|
||||||||
RMBS
|
1,368
|
|
|
1,662
|
|
|
1,158
|
|
|
1,399
|
|
||||
Pooled corporate obligations
|
1,350
|
|
|
1,189
|
|
|
1,081
|
|
|
1,015
|
|
||||
Insurance securitization
|
2,095
|
|
|
1,585
|
|
|
563
|
|
|
510
|
|
||||
Consumer receivables
|
650
|
|
|
866
|
|
|
534
|
|
|
720
|
|
||||
Other structured finance
|
561
|
|
|
548
|
|
|
416
|
|
|
414
|
|
||||
Total structured finance—U.S.
|
6,024
|
|
|
5,850
|
|
|
3,752
|
|
|
4,058
|
|
||||
Non-U.S.:
|
|
|
|
|
|
|
|
||||||||
RMBS
|
214
|
|
|
221
|
|
|
210
|
|
|
215
|
|
||||
Pooled corporate obligations
|
3
|
|
|
47
|
|
|
3
|
|
|
47
|
|
||||
Other structured finance
|
183
|
|
|
384
|
|
|
140
|
|
|
310
|
|
||||
Total structured finance—non-U.S.
|
400
|
|
|
652
|
|
|
353
|
|
|
572
|
|
||||
Total structured finance
|
6,424
|
|
|
6,502
|
|
|
4,105
|
|
|
4,630
|
|
||||
Total par outstanding
|
$
|
35,819
|
|
|
$
|
48,679
|
|
|
$
|
22,612
|
|
|
$
|
27,412
|
|
|
Public
Finance
|
|
Structured
Finance
|
|
Total
|
||||||
|
(in millions)
|
||||||||||
0 to 5 years
|
$
|
4,341
|
|
|
$
|
2,135
|
|
|
$
|
6,476
|
|
5 to 10 years
|
3,774
|
|
|
690
|
|
|
4,464
|
|
|||
10 to 15 years
|
3,343
|
|
|
612
|
|
|
3,955
|
|
|||
15 to 20 years
|
3,416
|
|
|
397
|
|
|
3,813
|
|
|||
20 years and above
|
3,633
|
|
|
271
|
|
|
3,904
|
|
|||
Total net par outstanding
|
$
|
18,507
|
|
|
$
|
4,105
|
|
|
$
|
22,612
|
|
|
BIG Net Par Outstanding
|
|
Net Par
|
||||||||||||||||
|
BIG 1
|
|
BIG 2
|
|
BIG 3
|
|
Total BIG
|
|
Outstanding
|
||||||||||
|
|
|
|
|
(in millions)
|
|
|
|
|
||||||||||
Public finance:
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. public finance
|
$
|
200
|
|
|
$
|
294
|
|
|
$
|
1,204
|
|
|
$
|
1,698
|
|
|
$
|
13,721
|
|
Non-U.S. public finance
|
121
|
|
|
—
|
|
|
—
|
|
|
121
|
|
|
4,786
|
|
|||||
Public finance
|
321
|
|
|
294
|
|
|
1,204
|
|
|
1,819
|
|
|
18,507
|
|
|||||
Structured finance:
|
|
|
|
|
|
|
|
|
|
||||||||||
RMBS
|
83
|
|
|
26
|
|
|
411
|
|
|
520
|
|
|
1,158
|
|
|||||
Other structured finance
|
4
|
|
|
2
|
|
|
12
|
|
|
18
|
|
|
2,947
|
|
|||||
Structured finance
|
87
|
|
|
28
|
|
|
423
|
|
|
538
|
|
|
4,105
|
|
|||||
Total
|
$
|
408
|
|
|
$
|
322
|
|
|
$
|
1,627
|
|
|
$
|
2,357
|
|
|
$
|
22,612
|
|
|
BIG Net Par Outstanding
|
|
Net Par
|
||||||||||||||||
|
BIG 1
|
|
BIG 2
|
|
BIG 3
|
|
Total BIG
|
|
Outstanding
|
||||||||||
|
|
|
|
|
(in millions)
|
|
|
|
|
||||||||||
Public finance:
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. public finance
|
$
|
252
|
|
|
$
|
305
|
|
|
$
|
1,282
|
|
|
$
|
1,839
|
|
|
$
|
17,877
|
|
Non-U.S. public finance
|
89
|
|
|
48
|
|
|
—
|
|
|
137
|
|
|
4,905
|
|
|||||
Public finance
|
341
|
|
|
353
|
|
|
1,282
|
|
|
1,976
|
|
|
22,782
|
|
|||||
Structured finance:
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. RMBS
|
83
|
|
|
163
|
|
|
478
|
|
|
724
|
|
|
1,399
|
|
|||||
Other structured finance
|
2
|
|
|
8
|
|
|
2
|
|
|
12
|
|
|
3,231
|
|
|||||
Structured finance
|
85
|
|
|
171
|
|
|
480
|
|
|
736
|
|
|
4,630
|
|
|||||
Total
|
$
|
426
|
|
|
$
|
524
|
|
|
$
|
1,762
|
|
|
$
|
2,712
|
|
|
$
|
27,412
|
|
|
|
Net Par Outstanding
|
|
Number of Risks (2)
|
|||||||||||||||||
Description
|
|
Financial
Guaranty
Insurance (1)
|
|
Credit
Derivative
|
|
Total
|
|
Financial
Guaranty
Insurance (1)
|
|
Credit
Derivative
|
|
Total
|
|||||||||
|
|
(dollars in millions)
|
|||||||||||||||||||
BIG:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Category 1
|
|
$
|
350
|
|
|
$
|
58
|
|
|
$
|
408
|
|
|
74
|
|
|
6
|
|
|
80
|
|
Category 2
|
|
319
|
|
|
3
|
|
|
322
|
|
|
18
|
|
|
1
|
|
|
19
|
|
|||
Category 3
|
|
1,578
|
|
|
49
|
|
|
1,627
|
|
|
105
|
|
|
7
|
|
|
112
|
|
|||
Total BIG
|
|
$
|
2,247
|
|
|
$
|
110
|
|
|
$
|
2,357
|
|
|
197
|
|
|
14
|
|
|
211
|
|
|
|
Net Par Outstanding
|
|
Number of Risks (2)
|
|||||||||||||||||
Description
|
|
Financial
Guaranty
Insurance (1)
|
|
Credit
Derivative
|
|
Total
|
|
Financial
Guaranty
Insurance (1)
|
|
Credit
Derivative
|
|
Total
|
|||||||||
|
|
(dollars in millions)
|
|||||||||||||||||||
BIG:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Category 1
|
|
$
|
360
|
|
|
$
|
66
|
|
|
$
|
426
|
|
|
78
|
|
|
6
|
|
|
84
|
|
Category 2
|
|
520
|
|
|
4
|
|
|
524
|
|
|
33
|
|
|
1
|
|
|
34
|
|
|||
Category 3
|
|
1,699
|
|
|
63
|
|
|
1,762
|
|
|
115
|
|
|
8
|
|
|
123
|
|
|||
Total BIG
|
|
$
|
2,579
|
|
|
$
|
133
|
|
|
$
|
2,712
|
|
|
226
|
|
|
15
|
|
|
241
|
|
(1)
|
Includes VIEs.
|
(2)
|
A risk represents the aggregate of the financial guaranty policies that share the same revenue source for purposes of making debt service payments.
|
|
Number
of Risks
|
|
Net Par Outstanding
|
|
Percent of Total Net Par Outstanding
|
||||
|
(dollars in millions)
|
||||||||
U.S.:
|
|
|
|
|
|
||||
U.S. Public finance:
|
|
|
|
|
|
||||
California
|
275
|
|
|
$
|
3,356
|
|
|
14.8
|
%
|
Puerto Rico
|
17
|
|
|
1,518
|
|
|
6.7
|
%
|
|
Texas
|
219
|
|
|
1,119
|
|
|
5.0
|
%
|
|
New Jersey
|
56
|
|
|
1,118
|
|
|
4.9
|
%
|
|
New York
|
165
|
|
|
848
|
|
|
3.8
|
%
|
|
Illinois
|
147
|
|
|
694
|
|
|
3.1
|
%
|
|
District of Columbia
|
5
|
|
|
620
|
|
|
2.7
|
%
|
|
Florida
|
76
|
|
|
527
|
|
|
2.3
|
%
|
|
Virginia
|
12
|
|
|
463
|
|
|
2.0
|
%
|
|
Georgia
|
29
|
|
|
294
|
|
|
1.3
|
%
|
|
Other
|
699
|
|
|
3,164
|
|
|
14.0
|
%
|
|
Total U.S. public finance
|
1,700
|
|
|
13,721
|
|
|
60.6
|
%
|
|
U.S. Structured finance (multiple states)
|
367
|
|
|
3,752
|
|
|
16.6
|
%
|
|
Total U.S.
|
2,067
|
|
|
17,473
|
|
|
77.2
|
%
|
|
Non-U.S.:
|
|
|
|
|
|
||||
United Kingdom
|
80
|
|
|
3,309
|
|
|
14.6
|
%
|
|
Australia
|
7
|
|
|
559
|
|
|
2.5
|
%
|
|
New Zealand
|
2
|
|
|
219
|
|
|
1.0
|
%
|
|
Chile
|
4
|
|
|
176
|
|
|
0.8
|
%
|
|
Mexico
|
2
|
|
|
176
|
|
|
0.8
|
%
|
|
Other
|
39
|
|
|
700
|
|
|
3.1
|
%
|
|
Total non-U.S.
|
134
|
|
|
5,139
|
|
|
22.8
|
%
|
|
Total
|
2,201
|
|
|
$
|
22,612
|
|
|
100.0
|
%
|
•
|
Constitutionally Guaranteed. The Company includes in this category public debt benefiting from Article VI of the Constitution of the Commonwealth, which expressly provides that interest and principal payments on the public debt are to be paid before other disbursements are made.
|
•
|
Public Corporations – Certain Revenues Potentially Subject to Clawback. The Company includes in this category the debt of public corporations for which applicable law permits the Commonwealth to claw back, subject to certain conditions and for the payment of public debt, at least a portion of the revenues supporting the bonds the Company insures. As a constitutional condition to clawback, available Commonwealth revenues for any fiscal year must be insufficient to pay Commonwealth debt service before the payment of any appropriations for that year. The Company believes that this condition has not been satisfied to date, and accordingly that the Commonwealth has not to date been entitled to claw back revenues supporting debt insured by the Company.
|
•
|
Other Public Corporations. The Company includes in this category the debt of public corporations that are supported by revenues it does not believe are subject to clawback.
|
General Obligation Bonds
|
|
The Company's Net Par Outstanding as of December 31, 2019
|
|
The Company's Total Net Principal Claims Paid as of December 31, 2019
|
|
The Company's Total Net Interest Claims Paid as of December 31, 2019
|
|
Base Recovery as a % of Pre-Petition Claims
|
|||||||
|
|
(in millions)
|
|
(percent)
|
|||||||||||
Vintage GO
|
|
$
|
268
|
|
|
$
|
211
|
|
|
$
|
65
|
|
|
74.9
|
%
|
2011 GO (Series D, E and PIB)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
73.8
|
|
|||
2011 GO (Series C)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
70.4
|
|
|||
2012 GO
|
|
—
|
|
|
—
|
|
|
—
|
|
|
69.9
|
|
|||
2014 GO
|
|
—
|
|
|
—
|
|
|
—
|
|
|
65.4
|
|
PBA Bonds
|
|
The Company's Net Par Outstanding as of December 31, 2019
|
|
The Company's Total Net Principal Claims Paid as of December 31, 2019
|
|
The Company's Total Net Interest Claims Paid as of December 31, 2019
|
|
Base Recovery as a % of Pre-Petition Claims
|
|||||||
|
|
(in millions)
|
|
(percent)
|
|||||||||||
Vintage PBA
|
|
$
|
140
|
|
|
$
|
32
|
|
|
$
|
16
|
|
|
77.6
|
%
|
2011 PBA
|
|
—
|
|
|
—
|
|
|
—
|
|
|
76.8
|
|
|||
2012 PBA
|
|
—
|
|
|
—
|
|
|
—
|
|
|
72.2
|
|
|
Gross Par Outstanding
|
|
Gross Debt Service Outstanding
|
||||||||||||
|
December 31, 2019
|
|
December 31, 2018
|
|
December 31, 2019
|
|
December 31, 2018
|
||||||||
|
(in millions)
|
||||||||||||||
Exposure to Puerto Rico
|
$
|
1,854
|
|
|
$
|
1,939
|
|
|
$
|
3,110
|
|
|
$
|
3,295
|
|
|
As of
December 31, 2019 |
|
As of
December 31, 2018 |
||||
|
(in millions)
|
||||||
Commonwealth Constitutionally Guaranteed
|
|
|
|
||||
Commonwealth of Puerto Rico - General Obligation Bonds (1)
|
$
|
268
|
|
|
$
|
301
|
|
PBA
|
140
|
|
|
142
|
|
||
Public Corporations - Certain Revenues Potentially Subject to Clawback
|
|
|
|
||||
PRHTA (Transportation revenue) (1)
|
480
|
|
|
495
|
|
||
PRHTA (Highways revenue) (1)
|
74
|
|
|
84
|
|
||
PRCCDA
|
152
|
|
|
152
|
|
||
PRIFA
|
15
|
|
|
15
|
|
||
Other Public Corporations
|
|
|
|
||||
PREPA (1)
|
71
|
|
|
72
|
|
||
PRASA
|
284
|
|
|
284
|
|
||
MFA
|
33
|
|
|
40
|
|
||
U of PR
|
1
|
|
|
1
|
|
||
Total net exposure to Puerto Rico
|
$
|
1,518
|
|
|
$
|
1,586
|
|
(1)
|
As of the date of this filing, the Oversight Board has certified a filing under Title III of PROMESA for these exposures.
|
|
Scheduled Net Par Amortization
|
|
Scheduled Net Debt Service Amortization
|
||||
|
(in millions)
|
||||||
2020 (January 1 - March 31)
|
$
|
—
|
|
|
$
|
38
|
|
2020 (April 1 - June 30)
|
—
|
|
|
—
|
|
||
2020 (July 1 - September 30)
|
118
|
|
|
156
|
|
||
2020 (October 1 - December 31)
|
—
|
|
|
—
|
|
||
Subtotal 2020
|
118
|
|
|
194
|
|
||
2021
|
54
|
|
|
125
|
|
||
2022
|
35
|
|
|
104
|
|
||
2023
|
40
|
|
|
107
|
|
||
2024
|
17
|
|
|
82
|
|
||
2025-2029
|
393
|
|
|
672
|
|
||
2030-2034
|
309
|
|
|
509
|
|
||
2035-2039
|
302
|
|
|
400
|
|
||
2040-2044
|
66
|
|
|
122
|
|
||
2045-2047
|
184
|
|
|
204
|
|
||
Total
|
$
|
1,518
|
|
|
$
|
2,519
|
|
5.
|
Expected Loss to be Paid
|
|
Year Ended December 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(in millions)
|
||||||
Net expected loss to be paid, beginning of period
|
$
|
354
|
|
|
$
|
224
|
|
Net expected loss to be paid on the SGI portfolio as of June 1, 2018 (see Note 2)
|
—
|
|
|
131
|
|
||
Economic loss development (benefit) due to:
|
|
|
|
||||
Accretion of discount
|
8
|
|
|
9
|
|
||
Changes in discount rates
|
(1
|
)
|
|
4
|
|
||
Changes in timing and assumptions
|
6
|
|
|
4
|
|
||
Total economic loss development (benefit)
|
13
|
|
|
17
|
|
||
Net (paid) recovered losses
|
(55
|
)
|
|
(18
|
)
|
||
Net expected loss to be paid, end of period
|
$
|
312
|
|
|
$
|
354
|
|
|
Year Ended December 31, 2019
|
||||||||||||||
|
Net Expected
Loss to be Paid (Recovered) as of December 31, 2018 |
|
Economic
Loss
Development /(Benefit)
|
|
(Paid)
Recovered
Losses(1)
|
|
Net Expected
Loss to be Paid (Recovered) as of December 31, 2019 |
||||||||
|
(in millions)
|
||||||||||||||
Public finance:
|
|
|
|
|
|
|
|
||||||||
U.S. public finance
|
$
|
314
|
|
|
$
|
75
|
|
|
$
|
(142
|
)
|
|
$
|
247
|
|
Non-U.S. public finance
|
4
|
|
|
(2
|
)
|
|
—
|
|
|
2
|
|
||||
Public finance
|
318
|
|
|
73
|
|
|
(142
|
)
|
|
249
|
|
||||
Structured finance:
|
|
|
|
|
|
|
|
||||||||
U.S. RMBS
|
123
|
|
|
(60
|
)
|
|
28
|
|
|
91
|
|
||||
Other structured finance
|
(87
|
)
|
|
—
|
|
|
59
|
|
|
(28
|
)
|
||||
Structured finance
|
36
|
|
|
(60
|
)
|
|
87
|
|
|
63
|
|
||||
Total
|
$
|
354
|
|
|
$
|
13
|
|
|
$
|
(55
|
)
|
|
$
|
312
|
|
|
Year Ended December 31, 2018
|
||||||||||||||||||
|
Net Expected
Loss to be Paid (Recovered) as of December 31, 2017 |
|
Net Expected Loss to be Paid on SGI portfolio as of June 1, 2018
|
|
Economic
Loss
Development/(Benefit)
|
|
(Paid)
Recovered
Losses(1)
|
|
Net Expected
Loss to be Paid (Recovered) as of December 31, 2018 |
||||||||||
|
(in millions)
|
||||||||||||||||||
Public finance:
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. public finance
|
$
|
444
|
|
|
$
|
—
|
|
|
$
|
20
|
|
|
$
|
(150
|
)
|
|
$
|
314
|
|
Non-U.S. public finance
|
5
|
|
|
1
|
|
|
(2
|
)
|
|
—
|
|
|
4
|
|
|||||
Public finance
|
449
|
|
|
1
|
|
|
18
|
|
|
(150
|
)
|
|
318
|
|
|||||
Structured finance:
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. RMBS
|
(111
|
)
|
|
130
|
|
|
(24
|
)
|
|
128
|
|
|
123
|
|
|||||
Other structured finance
|
(114
|
)
|
|
—
|
|
|
23
|
|
|
4
|
|
|
(87
|
)
|
|||||
Structured finance
|
(225
|
)
|
|
130
|
|
|
(1
|
)
|
|
132
|
|
|
36
|
|
|||||
Total
|
$
|
224
|
|
|
$
|
131
|
|
|
$
|
17
|
|
|
$
|
(18
|
)
|
|
$
|
354
|
|
(1)
|
Net of ceded paid losses, whether or not such amounts have been settled with reinsurers. Ceded paid losses are typically settled 45 days after the end of the reporting period. Such amounts are recorded as reinsurance recoverable on paid losses in other assets.
|
|
Net Expected Loss to be Paid (Recovered)
|
|
Net Economic Loss Development (Benefit)
|
||||||||||||
|
As of December 31,
|
|
Year Ended December 31,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
(in millions)
|
||||||||||||||
Insurance
|
$
|
315
|
|
|
$
|
349
|
|
|
$
|
10
|
|
|
$
|
9
|
|
Financial guaranty VIEs (FG VIEs)
(See Note 11)
|
2
|
|
|
7
|
|
|
(5
|
)
|
|
(6
|
)
|
||||
Credit derivatives (See Note 10)
|
(5
|
)
|
|
(2
|
)
|
|
8
|
|
|
14
|
|
||||
Total
|
$
|
312
|
|
|
$
|
354
|
|
|
$
|
13
|
|
|
$
|
17
|
|
|
Year Ended December 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(in millions)
|
||||||
First lien U.S. RMBS
|
$
|
(14
|
)
|
|
$
|
(2
|
)
|
Second lien U.S. RMBS
|
(46
|
)
|
|
(22
|
)
|
|
As of December 31,
|
||||
|
2019
|
|
2018
|
|
2017
|
Delinquent/Modified in the Previous 12 Months
|
|
|
|
|
|
Alt-A and Prime
|
20%
|
|
20%
|
|
20%
|
Option ARM
|
20
|
|
20
|
|
20
|
Subprime
|
20
|
|
20
|
|
20
|
30 – 59 Days Delinquent
|
|
|
|
|
|
Alt-A and Prime
|
30
|
|
30
|
|
30
|
Option ARM
|
35
|
|
35
|
|
35
|
Subprime
|
35
|
|
40
|
|
40
|
60 – 89 Days Delinquent
|
|
|
|
|
|
Alt-A and Prime
|
40
|
|
40
|
|
40
|
Option ARM
|
45
|
|
45
|
|
50
|
Subprime
|
45
|
|
45
|
|
50
|
90+ Days Delinquent
|
|
|
|
|
|
Alt-A and Prime
|
55
|
|
50
|
|
55
|
Option ARM
|
55
|
|
55
|
|
60
|
Subprime
|
50
|
|
50
|
|
55
|
Bankruptcy
|
|
|
|
|
|
Alt-A and Prime
|
45
|
|
45
|
|
45
|
Option ARM
|
50
|
|
50
|
|
50
|
Subprime
|
40
|
|
40
|
|
40
|
Foreclosure
|
|
|
|
|
|
Alt-A and Prime
|
65
|
|
60
|
|
65
|
Option ARM
|
65
|
|
65
|
|
70
|
Subprime
|
60
|
|
60
|
|
65
|
Real Estate Owned
|
|
|
|
|
|
All
|
100
|
|
100
|
|
100
|
|
As of
December 31, 2019 |
|
As of
December 31, 2018 |
|
As of
December 31, 2017 |
||||||
|
Range
|
|
Weighted Average
|
|
Range
|
|
Weighted Average
|
|
Range
|
|
Weighted Average
|
Alt-A First Lien
|
|
|
|
|
|
|
|
|
|
|
|
Plateau CDR
|
0.3% - 5.9%
|
|
3.7%
|
|
1.2% - 10.3%
|
|
3.9%
|
|
1.3% - 9.7%
|
|
4.9%
|
Final CDR
|
0.0% - 0.3%
|
|
0.2%
|
|
0.1% - 0.5%
|
|
0.2%
|
|
0.1% - 0.5%
|
|
0.2%
|
Initial loss severity:
|
|
|
|
|
|
|
|
|
|
|
|
2005 and prior
|
60%
|
|
|
|
60%
|
|
|
|
60%
|
|
|
2006
|
70%
|
|
|
|
70%
|
|
|
|
80%
|
|
|
2007+
|
70%
|
|
|
|
70%
|
|
|
|
70%
|
|
|
Option ARM
|
|
|
|
|
|
|
|
|
|
|
|
Plateau CDR
|
1.8% - 6.3%
|
|
5.4%
|
|
1.8% - 6.8%
|
|
5.2%
|
|
2.5% - 6.9%
|
|
5.8%
|
Final CDR
|
0.1% - 0.3%
|
|
0.3%
|
|
0.1% - 0.3%
|
|
0.3%
|
|
0.1% - 0.3%
|
|
0.3%
|
Initial loss severity:
|
|
|
|
|
|
|
|
|
|
|
|
2005 and prior
|
60%
|
|
|
|
60%
|
|
|
|
60%
|
|
|
2006
|
60%
|
|
|
|
60%
|
|
|
|
70%
|
|
|
2007+
|
70%
|
|
|
|
70%
|
|
|
|
75%
|
|
|
Subprime
|
|
|
|
|
|
|
|
|
|
|
|
Plateau CDR
|
3.7% - 11.8%
|
|
5.9%
|
|
3.2% - 11.5%
|
|
6.3%
|
|
3.5% - 13.1%
|
|
7.9%
|
Final CDR
|
0.2% - 0.6%
|
|
0.3%
|
|
0.2% - 0.6%
|
|
0.3%
|
|
0.2% - 0.7%
|
|
0.4%
|
Initial loss severity:
|
|
|
|
|
|
|
|
|
|
|
|
2005 and prior
|
75%
|
|
|
|
80%
|
|
|
|
80%
|
|
|
2006
|
75%
|
|
|
|
75%
|
|
|
|
90%
|
|
|
2007+
|
75%
|
|
|
|
95%
|
|
|
|
95%
|
|
|
|
As of
December 31, 2019 |
|
As of
December 31, 2018 |
|
As of
December 31, 2017 |
||||||
|
Range
|
|
Weighted Average
|
|
Range
|
|
Weighted Average
|
|
Range
|
|
Weighted Average
|
Plateau CDR
|
6.0% - 19.9%
|
|
11.6%
|
|
7.2% - 26.8%
|
|
12.8%
|
|
8.5% - 13.3%
|
|
11.4%
|
Final CDR trended down to
|
2.5%
|
|
|
|
2.5%
|
|
|
|
2.5%
|
|
|
Liquidation rates:
|
|
|
|
|
|
|
|
|
|
|
|
Delinquent/Modified in the Previous 12 Months
|
20%
|
|
|
|
20%
|
|
|
|
20%
|
|
|
30 – 59 Days Delinquent
|
30
|
|
|
|
35
|
|
|
|
45
|
|
|
60 – 89 Days Delinquent
|
45
|
|
|
|
50
|
|
|
|
60
|
|
|
90+ Days Delinquent
|
65
|
|
|
|
70
|
|
|
|
75
|
|
|
Bankruptcy
|
55
|
|
|
|
55
|
|
|
|
55
|
|
|
Foreclosure
|
55
|
|
|
|
65
|
|
|
|
70
|
|
|
Real Estate Owned
|
100
|
|
|
|
100
|
|
|
|
100
|
|
|
Loss severity (1)
|
98%
|
|
|
|
98%
|
|
|
|
98%
|
|
|
6.
|
Contracts Accounted for as Insurance
|
•
|
For premiums received upfront on financial guaranty insurance contracts that were originally underwritten by the Company, deferred premium revenue is equal to the amount of cash received. Upfront premiums typically relate to public finance transactions.
|
•
|
For premiums received in installments on financial guaranty insurance contracts that were originally underwritten by the Company, deferred premium revenue is the present value (discounted at risk free rates) of either (1) contractual premiums due or (2) in cases where the underlying collateral is composed of homogeneous pools of assets, the expected premiums to be collected over the life of the contract. To be considered a homogeneous pool of assets, prepayments must be contractually allowable, the amount of prepayments must be probable, and the timing and amount of prepayments must be reasonably estimable. Installment premiums typically relate to structured finance and infrastructure transactions, where the insurance premium rate is determined at the inception of the contract but the insured par is subject to prepayment throughout the life of the transaction.
|
•
|
For financial guaranty insurance contracts acquired in a business combination, deferred premium revenue is equal to the fair value of the Company's stand-ready obligation portion of the insurance contract at the date of acquisition based on what a hypothetical similarly rated financial guaranty insurer would have charged for the contract at that date and not the actual cash flows under the insurance contract. The amount of deferred premium revenue may differ significantly from cash collections primarily due to fair value adjustments recorded in connection with a business combination.
|
•
|
For premiums received in a reinsurance transaction, the cash received is allocated to individual policies in the assumed portfolio and recorded as unearned premium reserve.
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Scheduled net earned premiums
|
$
|
89
|
|
|
$
|
99
|
|
|
$
|
122
|
|
Accelerations from refundings and terminations
|
33
|
|
|
50
|
|
|
104
|
|
|||
Accretion of discount on net premiums receivable
|
3
|
|
|
3
|
|
|
5
|
|
|||
Net earned premiums (1)
|
$
|
125
|
|
|
$
|
152
|
|
|
$
|
231
|
|
(1)
|
Excludes $1 million, $1 million and $1 million for the years ended December 31, 2019, 2018 and 2017, respectively, related to consolidated FG VIEs.
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Beginning of year
|
$
|
199
|
|
|
$
|
172
|
|
|
$
|
213
|
|
Premiums receivable from acquisitions (see Note 2)
|
—
|
|
|
—
|
|
|
271
|
|
|||
Gross written premiums on new business, net of commissions on assumed business (1)
|
125
|
|
|
338
|
|
|
2
|
|
|||
Gross premiums received, net of commissions
|
(51
|
)
|
|
(309
|
)
|
|
(39
|
)
|
|||
Adjustments:
|
|
|
|
|
|
||||||
Changes in the expected term
|
(18
|
)
|
|
(3
|
)
|
|
(7
|
)
|
|||
Accretion of discount, net of commissions on assumed business
|
(2
|
)
|
|
4
|
|
|
4
|
|
|||
Foreign exchange translation and remeasurement
|
2
|
|
|
(2
|
)
|
|
16
|
|
|||
Cancellation of assumed reinsurance
|
—
|
|
|
(1
|
)
|
|
—
|
|
|||
Premiums receivable of the European Subsidiaries sold (see Note 1)
|
—
|
|
|
—
|
|
|
(288
|
)
|
|||
December 31, (2)
|
$
|
255
|
|
|
$
|
199
|
|
|
$
|
172
|
|
(1)
|
The year ended December 31, 2018 included $331 million of gross written premiums assumed from SGI on June 1, 2018, when the Company closed the SGI Transaction. See Note 2, Assumption of Insured Portfolio and Business Combinations.
|
(2)
|
Excludes $4 million, $5 million and $6 million as of December 31, 2019, 2018 and 2017, respectively, related to consolidated FG VIEs.
|
|
As of
December 31, 2019 |
||
|
(in millions)
|
||
2020 (January 1 - March 31)
|
$
|
16
|
|
2020 (April 1 - June 30)
|
8
|
|
|
2020 (July 1 - September 30)
|
5
|
|
|
2020 (October 1 - December 31)
|
5
|
|
|
2021
|
21
|
|
|
2022
|
20
|
|
|
2023
|
19
|
|
|
2024
|
21
|
|
|
2025-2029
|
75
|
|
|
2030-2034
|
55
|
|
|
2035-2039
|
29
|
|
|
After 2039
|
31
|
|
|
Total (1)
|
$
|
305
|
|
(1)
|
Excludes expected cash collections on consolidated FG VIEs of $5 million.
|
|
As of
December 31, 2019 |
||
|
(in millions)
|
||
2020 (January 1 - March 31)
|
$
|
20
|
|
2020 (April 1 - June 30)
|
20
|
|
|
2020 (July 1 - September 30)
|
19
|
|
|
2020 (October 1 - December 31)
|
19
|
|
|
Subtotal 2020
|
78
|
|
|
2021
|
69
|
|
|
2022
|
62
|
|
|
2023
|
56
|
|
|
2024
|
51
|
|
|
2025-2029
|
200
|
|
|
2030-2034
|
130
|
|
|
2035-2039
|
55
|
|
|
After 2039
|
37
|
|
|
Net deferred premium revenue (1)
|
738
|
|
|
Future accretion
|
29
|
|
|
Total future net earned premiums
|
$
|
767
|
|
(1)
|
Excludes net earned premiums on consolidated FG VIEs of $4 million.
|
|
As of
December 31, 2019 |
|
As of
December 31, 2018 |
||||
|
(dollars in millions)
|
||||||
Premiums receivable, net of commission payable
|
$
|
255
|
|
|
$
|
199
|
|
Gross deferred premium revenue
|
426
|
|
|
375
|
|
||
Weighted-average risk-free rate used to discount premiums
|
2.1
|
%
|
|
2.6
|
%
|
||
Weighted-average period of premiums receivable (in years)
|
9.4
|
|
|
7.2
|
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Beginning of year
|
$
|
(8
|
)
|
|
$
|
3
|
|
|
$
|
(8
|
)
|
DAC adjustments from acquisitions and sales (see Notes 1 and 2)
|
—
|
|
|
—
|
|
|
9
|
|
|||
Deferrals
|
(14
|
)
|
|
(15
|
)
|
|
1
|
|
|||
Amortization (2)
|
—
|
|
|
4
|
|
|
1
|
|
|||
December 31,
|
$
|
(22
|
)
|
|
$
|
(8
|
)
|
|
$
|
3
|
|
(1)
|
The balances are included in other liabilities in the consolidated balance sheets.
|
(2)
|
Included in other expenses in the consolidated statements of operations.
|
•
|
a reduction in the corresponding loss and LAE reserve with a benefit to the income statement,
|
•
|
no entry recorded, if “total loss” is not in excess of deferred premium revenue, or
|
•
|
the recording of a salvage asset with a benefit to the income statement if the transaction is in a net recovery position at the reporting date.
|
|
As of
December 31, 2019 |
|
As of
December 31, 2018 |
||||
|
(in millions)
|
||||||
Public finance:
|
|
|
|
||||
U.S. public finance
|
$
|
65
|
|
|
$
|
121
|
|
Non-U.S. public finance
|
—
|
|
|
—
|
|
||
Public finance
|
65
|
|
|
121
|
|
||
Structured finance:
|
|
|
|
||||
U.S. RMBS (1)
|
(23
|
)
|
|
(17
|
)
|
||
Other structured finance
|
(21
|
)
|
|
(79
|
)
|
||
Structured finance
|
(44
|
)
|
|
(96
|
)
|
||
Subtotal
|
21
|
|
|
25
|
|
||
Other payable (recoverable)
|
—
|
|
|
(3
|
)
|
||
Total
|
$
|
21
|
|
|
$
|
22
|
|
(1)
|
Excludes net recoveries of $2 million and net reserves $3 million as of December 31, 2019 and December 31, 2018, respectively, related to consolidated FG VIEs.
|
|
As of
December 31, 2019 |
|
As of
December 31, 2018 |
||||
|
(in millions)
|
||||||
Loss and LAE reserve
|
$
|
414
|
|
|
$
|
386
|
|
Reinsurance recoverable on unpaid losses
|
(125
|
)
|
|
(171
|
)
|
||
Loss and LAE reserve, net
|
289
|
|
|
215
|
|
||
Salvage and subrogation recoverable
|
(306
|
)
|
|
(214
|
)
|
||
Salvage and subrogation reinsurance payable (1)
|
38
|
|
|
24
|
|
||
Other payable (recoverable) (2)
|
—
|
|
|
(3
|
)
|
||
Salvage and subrogation recoverable, net and other recoverable
|
(268
|
)
|
|
(193
|
)
|
||
Net reserves (salvage)
|
$
|
21
|
|
|
$
|
22
|
|
|
As of
December 31, 2019 |
||
|
(in millions)
|
||
Net expected loss to be paid - financial guaranty insurance
|
$
|
315
|
|
Contra-paid, net
|
53
|
|
|
Salvage and subrogation recoverable, net and other recoverable
|
268
|
|
|
Loss and LAE reserve - financial guaranty insurance contracts, net of reinsurance
|
(289
|
)
|
|
Net expected loss to be expensed (present value) (1)
|
$
|
347
|
|
|
As of
December 31, 2019 |
||
|
(in millions)
|
||
2020 (January 1 - March 31)
|
$
|
7
|
|
2020 (April 1 - June 30)
|
8
|
|
|
2020 (July 1 - September 30)
|
7
|
|
|
2020 (October 1 - December 31)
|
7
|
|
|
Subtotal 2020
|
29
|
|
|
2021
|
28
|
|
|
2022
|
27
|
|
|
2023
|
26
|
|
|
2024
|
27
|
|
|
2025-2029
|
110
|
|
|
2030-2034
|
72
|
|
|
2035-2039
|
24
|
|
|
After 2039
|
4
|
|
|
Net expected loss to be expensed
|
347
|
|
|
Future accretion
|
88
|
|
|
Total expected future loss and LAE
|
$
|
435
|
|
|
Loss (Benefit)
|
||||||||||
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Public finance:
|
|
|
|
|
|
||||||
U.S. public finance
|
$
|
87
|
|
|
$
|
39
|
|
|
$
|
152
|
|
Non-U.S. public finance
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|||
Public finance
|
87
|
|
|
38
|
|
|
151
|
|
|||
Structured finance:
|
|
|
|
|
|
||||||
U.S. RMBS (1)
|
(35
|
)
|
|
(7
|
)
|
|
(114
|
)
|
|||
Other structured finance
|
(8
|
)
|
|
7
|
|
|
17
|
|
|||
Structured finance
|
(43
|
)
|
|
—
|
|
|
(97
|
)
|
|||
Loss and LAE
|
$
|
44
|
|
|
$
|
38
|
|
|
$
|
54
|
|
(1)
|
Excludes a benefit of $5 million, $5 million and $1 million for the years ended December 31, 2019, 2018 and 2017, respectively, related to consolidated FG VIEs.
|
|
|
BIG Categories
|
||||||||||||||||||||||||||||||||||
|
|
BIG 1
|
|
BIG 2
|
|
BIG 3
|
|
Total BIG, Net
|
|
Effect of
Consolidating FG VIEs |
|
Total
|
||||||||||||||||||||||||
|
|
Gross
|
|
Ceded
|
|
Gross
|
|
Ceded
|
|
Gross
|
|
Ceded
|
|
|
|
|||||||||||||||||||||
|
|
(dollars in millions)
|
||||||||||||||||||||||||||||||||||
Number of risks (1)
|
|
74
|
|
|
(16
|
)
|
|
18
|
|
|
(5
|
)
|
|
105
|
|
|
(26
|
)
|
|
197
|
|
|
—
|
|
|
197
|
|
|||||||||
Remaining weighted-average contract period (in years)
|
|
6.9
|
|
|
7.9
|
|
|
19.6
|
|
|
20.0
|
|
|
11.0
|
|
|
12.9
|
|
|
11.3
|
|
|
—
|
|
|
11.3
|
|
|||||||||
Outstanding exposure:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Par
|
|
$
|
449
|
|
|
$
|
(99
|
)
|
|
$
|
411
|
|
|
$
|
(92
|
)
|
|
$
|
1,859
|
|
|
$
|
(281
|
)
|
|
$
|
2,247
|
|
|
—
|
|
|
$
|
2,247
|
|
|
Interest
|
|
177
|
|
|
(51
|
)
|
|
419
|
|
|
(97
|
)
|
|
956
|
|
|
(172
|
)
|
|
1,232
|
|
|
—
|
|
|
1,232
|
|
|||||||||
Total (2)
|
|
$
|
626
|
|
|
$
|
(150
|
)
|
|
$
|
830
|
|
|
$
|
(189
|
)
|
|
$
|
2,815
|
|
|
$
|
(453
|
)
|
|
$
|
3,479
|
|
|
$
|
—
|
|
|
$
|
3,479
|
|
Expected cash outflows (inflows)
|
|
$
|
36
|
|
|
$
|
(2
|
)
|
|
$
|
57
|
|
|
$
|
(12
|
)
|
|
$
|
1,792
|
|
|
$
|
(246
|
)
|
|
$
|
1,625
|
|
|
$
|
(36
|
)
|
|
$
|
1,589
|
|
Potential recoveries (3)
|
|
(259
|
)
|
|
31
|
|
|
(2
|
)
|
|
—
|
|
|
(1,085
|
)
|
|
97
|
|
|
(1,218
|
)
|
|
32
|
|
|
(1,186
|
)
|
|||||||||
Subtotal
|
|
(223
|
)
|
|
29
|
|
|
55
|
|
|
(12
|
)
|
|
707
|
|
|
(149
|
)
|
|
407
|
|
|
(4
|
)
|
|
403
|
|
|||||||||
Discount
|
|
18
|
|
|
(3
|
)
|
|
(15
|
)
|
|
3
|
|
|
(129
|
)
|
|
36
|
|
|
(90
|
)
|
|
2
|
|
|
(88
|
)
|
|||||||||
Present value of
expected cash flows |
|
$
|
(205
|
)
|
|
$
|
26
|
|
|
$
|
40
|
|
|
$
|
(9
|
)
|
|
$
|
578
|
|
|
$
|
(113
|
)
|
|
$
|
317
|
|
|
$
|
(2
|
)
|
|
$
|
315
|
|
Deferred premium revenue
|
|
$
|
28
|
|
|
$
|
(1
|
)
|
|
$
|
22
|
|
|
$
|
(4
|
)
|
|
$
|
374
|
|
|
$
|
(6
|
)
|
|
$
|
413
|
|
|
$
|
(4
|
)
|
|
$
|
409
|
|
Reserves (salvage)
|
|
$
|
(216
|
)
|
|
$
|
25
|
|
|
$
|
23
|
|
|
$
|
(5
|
)
|
|
$
|
299
|
|
|
$
|
(107
|
)
|
|
$
|
19
|
|
|
$
|
2
|
|
|
$
|
21
|
|
|
|
BIG Categories
|
||||||||||||||||||||||||||||||||||
|
|
BIG 1
|
|
BIG 2
|
|
BIG 3
|
|
Total BIG, Net
|
|
Effect of
Consolidating FG VIEs |
|
Total
|
||||||||||||||||||||||||
|
|
Gross
|
|
Ceded
|
|
Gross
|
|
Ceded
|
|
Gross
|
|
Ceded
|
|
|
|
|||||||||||||||||||||
|
|
(dollars in millions)
|
||||||||||||||||||||||||||||||||||
Number of risks (1)
|
|
78
|
|
|
(18
|
)
|
|
33
|
|
|
(9
|
)
|
|
115
|
|
|
(29
|
)
|
|
226
|
|
|
—
|
|
|
226
|
|
|||||||||
Remaining weighted-average contract period (in years)
|
|
7.2
|
|
|
6.7
|
|
|
16.7
|
|
|
19.9
|
|
|
10.4
|
|
|
11.5
|
|
|
11.0
|
|
|
—
|
|
|
11.0
|
|
|||||||||
Outstanding exposure:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Par
|
|
$
|
501
|
|
|
$
|
(141
|
)
|
|
$
|
619
|
|
|
$
|
(99
|
)
|
|
$
|
2,046
|
|
|
$
|
(347
|
)
|
|
$
|
2,579
|
|
|
—
|
|
|
$
|
2,579
|
|
|
Interest
|
|
203
|
|
|
(58
|
)
|
|
474
|
|
|
(99
|
)
|
|
1,001
|
|
|
(185
|
)
|
|
1,336
|
|
|
—
|
|
|
1,336
|
|
|||||||||
Total (2)
|
|
$
|
704
|
|
|
$
|
(199
|
)
|
|
$
|
1,093
|
|
|
$
|
(198
|
)
|
|
$
|
3,047
|
|
|
$
|
(532
|
)
|
|
$
|
3,915
|
|
|
$
|
—
|
|
|
$
|
3,915
|
|
Expected cash outflows (inflows)
|
|
$
|
15
|
|
|
$
|
(2
|
)
|
|
$
|
199
|
|
|
$
|
(21
|
)
|
|
$
|
1,674
|
|
|
$
|
(317
|
)
|
|
$
|
1,548
|
|
|
$
|
(42
|
)
|
|
$
|
1,506
|
|
Potential recoveries (3)
|
|
(220
|
)
|
|
26
|
|
|
(52
|
)
|
|
7
|
|
|
(993
|
)
|
|
87
|
|
|
(1,145
|
)
|
|
32
|
|
|
(1,113
|
)
|
|||||||||
Subtotal
|
|
(205
|
)
|
|
24
|
|
|
147
|
|
|
(14
|
)
|
|
681
|
|
|
(230
|
)
|
|
403
|
|
|
(10
|
)
|
|
393
|
|
|||||||||
Discount
|
|
46
|
|
|
(6
|
)
|
|
(44
|
)
|
|
4
|
|
|
(109
|
)
|
|
61
|
|
|
(48
|
)
|
|
3
|
|
|
(45
|
)
|
|||||||||
Present value of
expected cash flows |
|
$
|
(159
|
)
|
|
$
|
18
|
|
|
$
|
103
|
|
|
$
|
(10
|
)
|
|
$
|
572
|
|
|
$
|
(169
|
)
|
|
$
|
355
|
|
|
$
|
(7
|
)
|
|
$
|
348
|
|
Deferred premium revenue
|
|
$
|
28
|
|
|
$
|
(1
|
)
|
|
$
|
96
|
|
|
$
|
(4
|
)
|
|
$
|
377
|
|
|
$
|
(12
|
)
|
|
$
|
484
|
|
|
$
|
(4
|
)
|
|
$
|
480
|
|
Reserves (salvage)
|
|
$
|
(171
|
)
|
|
$
|
20
|
|
|
$
|
30
|
|
|
$
|
(6
|
)
|
|
$
|
312
|
|
|
$
|
(161
|
)
|
|
$
|
24
|
|
|
$
|
(3
|
)
|
|
$
|
21
|
|
(1)
|
A risk represents the aggregate of the financial guaranty policies that share the same revenue source for purposes of making debt service payments. The ceded number of risks represents the number of risks for which the Company ceded a portion of its exposure.
|
(2)
|
Includes amounts related to FG VIEs.
|
(3)
|
Represents expected inflows for future payments by obligors pursuant to restructuring agreements, settlements or litigation judgments, excess spread on any underlying collateral and other estimated recoveries. Potential recoveries also include recoveries on certain investment grade credits, related mainly to exposures that were previously BIG and for which claims have been paid in the past.
|
7.
|
Reinsurance
|
•
|
if the Company fails to meet certain financial and regulatory criteria;
|
•
|
if the Company fails to maintain a specified minimum financial strength rating; or
|
•
|
upon certain changes of control of the Company.
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Premiums Written:
|
|
|
|
|
|
||||||
Direct
|
$
|
104
|
|
|
$
|
6
|
|
|
$
|
(4
|
)
|
Assumed (1)
|
1
|
|
|
330
|
|
|
(2
|
)
|
|||
Ceded (2)
|
(53
|
)
|
|
(67
|
)
|
|
4
|
|
|||
Net
|
$
|
52
|
|
|
$
|
269
|
|
|
$
|
(2
|
)
|
Premiums Earned:
|
|
|
|
|
|
||||||
Direct
|
$
|
119
|
|
|
$
|
156
|
|
|
$
|
285
|
|
Assumed
|
59
|
|
|
66
|
|
|
30
|
|
|||
Ceded
|
(53
|
)
|
|
(70
|
)
|
|
(84
|
)
|
|||
Net
|
$
|
125
|
|
|
$
|
152
|
|
|
$
|
231
|
|
Loss and LAE:
|
|
|
|
|
|
||||||
Direct
|
$
|
53
|
|
|
$
|
16
|
|
|
$
|
(21
|
)
|
Assumed
|
14
|
|
|
16
|
|
|
5
|
|
|||
Ceded
|
(23
|
)
|
|
6
|
|
|
70
|
|
|||
Net
|
$
|
44
|
|
|
$
|
38
|
|
|
$
|
54
|
|
(1)
|
Negative assumed premiums written were due to changes in expected debt service schedules. Includes business assumed from SGI pursuant to the SGI Transaction.
|
(2)
|
Positive ceded premiums written in 2017 were due to commutations and changes in expected debt service schedules.
|
|
As of December 31, 2019
|
|
As of December 31, 2018
|
||||||||||||
|
Affiliated Reinsurers
|
|
Non-Affiliated Reinsurers
|
|
Affiliated Reinsurers
|
|
Non-Affiliated Reinsurers
|
||||||||
|
(in millions)
|
||||||||||||||
Ceded premium payable, net of commissions
|
$
|
89
|
|
|
$
|
—
|
|
|
$
|
62
|
|
|
$
|
—
|
|
Ceded expected loss to be recovered (paid)
|
98
|
|
|
—
|
|
|
4
|
|
|
—
|
|
||||
Ceded unearned premium reserve
|
216
|
|
|
3
|
|
|
218
|
|
|
3
|
|
||||
Ceded par outstanding (2)
|
13,108
|
|
|
99
|
|
|
21,168
|
|
|
99
|
|
(1)
|
There was no collateral posted by third party reinsurers as of December 31, 2019 and December 31, 2018. The total collateral posted by affiliated reinsurers was $186 million and $310 million as of December 31, 2019 and December 31, 2018, respectively.
|
(2)
|
Of the total par ceded to unrated or BIG rated reinsurers, none is rated BIG as of either December 31, 2019 nor December 31, 2018. Of the total ceded par to affiliates, $492 million and $610 million is rated BIG as of December 31, 2019 and December 31, 2018, respectively.
|
8.
|
Fair Value Measurement
|
•
|
Actual collateral specific credit spreads (if up-to-date and reliable market-based spreads are available).
|
•
|
Transactions priced or closed during a specific quarter within a specific asset class and specific rating.
|
•
|
Credit spreads interpolated based upon market indices adjusted to reflect the non-standard terms of the Company's CDS contracts.
|
•
|
Credit spreads extrapolated based upon transactions of similar asset classes, similar ratings, and similar time to maturity.
|
•
|
The model takes into account the transaction structure and the key drivers of market value.
|
•
|
The model maximizes the use of market-driven inputs whenever they are available.
|
•
|
The model is a consistent approach to valuing positions.
|
•
|
There is no exit market or any actual exit transactions; therefore, the Company’s exit market is a hypothetical one based on the Company’s entry market.
|
•
|
There is a very limited market in which to validate the reasonableness of the fair values developed by the Company’s model.
|
•
|
The markets for the inputs to the model are highly illiquid, which impacts their reliability.
|
•
|
Due to the non-standard terms under which the Company enters into derivative contracts, the fair value of its credit derivatives may not reflect the same prices observed in an actively traded market of credit derivatives that do not contain terms and conditions similar to those observed in the financial guaranty market.
|
|
|
|
Fair Value Hierarchy
|
||||||||||||
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
|
(in millions)
|
||||||||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Investment portfolio, available-for-sale:
|
|
|
|
|
|
|
|
||||||||
Fixed-maturity securities
|
|
|
|
|
|
|
|
||||||||
Obligations of state and political subdivisions
|
$
|
1,641
|
|
|
$
|
—
|
|
|
$
|
1,569
|
|
|
$
|
72
|
|
U.S. government and agencies
|
53
|
|
|
—
|
|
|
53
|
|
|
—
|
|
||||
Corporate securities
|
341
|
|
|
—
|
|
|
341
|
|
|
—
|
|
||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
||||||||
RMBS
|
57
|
|
|
—
|
|
|
43
|
|
|
14
|
|
||||
Commercial mortgage-backed securities (CMBS)
|
40
|
|
|
—
|
|
|
40
|
|
|
—
|
|
||||
Asset-backed securities
|
434
|
|
|
—
|
|
|
23
|
|
|
411
|
|
||||
Total fixed-maturity securities
|
2,566
|
|
|
—
|
|
|
2,069
|
|
|
497
|
|
||||
Short-term investments
|
88
|
|
|
83
|
|
|
5
|
|
|
—
|
|
||||
Other invested assets
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||
FG VIEs’ assets, at fair value
|
49
|
|
|
—
|
|
|
—
|
|
|
49
|
|
||||
Other assets (1)
|
63
|
|
|
—
|
|
|
—
|
|
|
63
|
|
||||
Total assets carried at fair value
|
$
|
2,767
|
|
|
$
|
83
|
|
|
$
|
2,074
|
|
|
$
|
610
|
|
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Credit derivative liabilities
|
$
|
190
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
190
|
|
FG VIEs’ liabilities with recourse, at fair value
|
47
|
|
|
—
|
|
|
—
|
|
|
47
|
|
||||
FG VIEs’ liabilities without recourse, at fair value
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||
Total liabilities carried at fair value
|
$
|
238
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
238
|
|
|
|
|
Fair Value Hierarchy
|
||||||||||||
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
|
(in millions)
|
||||||||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Investment portfolio, available-for-sale:
|
|
|
|
|
|
|
|
||||||||
Fixed-maturity securities
|
|
|
|
|
|
|
|
||||||||
Obligations of state and political subdivisions
|
$
|
1,710
|
|
|
$
|
—
|
|
|
$
|
1,649
|
|
|
$
|
61
|
|
U.S. government and agencies
|
52
|
|
|
—
|
|
|
52
|
|
|
—
|
|
||||
Corporate securities
|
288
|
|
|
—
|
|
|
288
|
|
|
—
|
|
||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
||||||||
RMBS
|
105
|
|
|
—
|
|
|
88
|
|
|
17
|
|
||||
CMBS
|
42
|
|
|
—
|
|
|
42
|
|
|
—
|
|
||||
Asset-backed securities
|
710
|
|
|
—
|
|
|
62
|
|
|
648
|
|
||||
Total fixed-maturity securities
|
2,907
|
|
|
—
|
|
|
2,181
|
|
|
726
|
|
||||
Short-term investments
|
126
|
|
|
106
|
|
|
20
|
|
|
—
|
|
||||
Other invested assets
|
2
|
|
|
—
|
|
|
—
|
|
|
2
|
|
||||
FG VIEs’ assets, at fair value
|
101
|
|
|
—
|
|
|
—
|
|
|
101
|
|
||||
Other assets (1)
|
64
|
|
|
—
|
|
|
—
|
|
|
64
|
|
||||
Total assets carried at fair value
|
$
|
3,200
|
|
|
$
|
106
|
|
|
$
|
2,201
|
|
|
$
|
893
|
|
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Credit derivative liabilities
|
$
|
182
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
182
|
|
FG VIEs’ liabilities with recourse, at fair value
|
108
|
|
|
—
|
|
|
—
|
|
|
108
|
|
||||
FG VIEs’ liabilities without recourse, at fair value
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||
Total liabilities carried at fair value
|
$
|
291
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
291
|
|
|
Fixed-Maturity Securities
|
|
|
|
|
|
|
|
FG VIEs’ Liabilities, at
Fair Value
|
|
||||||||||||||||||||||
|
Obligations
of State and Political Subdivisions |
|
RMBS
|
|
Asset-
Backed Securities |
|
FG VIEs’ Assets at
Fair Value
|
|
Other
(6) |
|
Credit
Derivative Asset (Liability), net (4) |
|
With Recourse
|
|
Without
Recourse |
|
||||||||||||||||
|
(in millions)
|
|
||||||||||||||||||||||||||||||
Fair value as of
December 31, 2018 |
$
|
61
|
|
|
$
|
17
|
|
|
$
|
648
|
|
|
$
|
101
|
|
|
$
|
40
|
|
|
$
|
(156
|
)
|
|
$
|
(108
|
)
|
|
$
|
(1
|
)
|
|
Total pretax realized and unrealized gains/(losses) recorded in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Net income (loss)
|
4
|
|
(1)
|
(1
|
)
|
(1)
|
53
|
|
(1)
|
15
|
|
(2)
|
(11
|
)
|
(3)
|
(7
|
)
|
(5)
|
(5
|
)
|
(2)
|
(1
|
)
|
(2)
|
||||||||
Other comprehensive income (loss)
|
3
|
|
|
1
|
|
|
(82
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
||||||||
Purchases
|
6
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
||||||||
Settlements
|
(2
|
)
|
|
(3
|
)
|
|
(214
|
)
|
|
(67
|
)
|
|
—
|
|
|
8
|
|
|
64
|
|
|
1
|
|
|
||||||||
Fair value as of
December 31, 2019 |
$
|
72
|
|
|
$
|
14
|
|
|
$
|
411
|
|
|
$
|
49
|
|
|
$
|
29
|
|
|
$
|
(155
|
)
|
|
$
|
(47
|
)
|
|
$
|
(1
|
)
|
|
Change in unrealized gains/(losses) included in earnings related to financial instruments held as of
December 31, 2019 |
|
|
|
|
|
|
$
|
15
|
|
(2)
|
$
|
(11
|
)
|
(3)
|
$
|
—
|
|
(5)
|
$
|
(5
|
)
|
(2)
|
$
|
(1
|
)
|
(2)
|
||||||
Change in unrealized gains/(losses) included in OCI related to financial instruments held as of
December 31, 2019 |
$
|
3
|
|
|
$
|
1
|
|
|
$
|
13
|
|
|
|
|
|
|
|
|
$
|
2
|
|
|
|
|
|
Fixed-Maturity Securities
|
|
|
|
|
|
|
|
FG VIEs’ Liabilities, at
Fair Value
|
|
||||||||||||||||||||||
|
Obligations
of State and Political Subdivisions |
|
RMBS
|
|
Asset-
Backed Securities |
|
FG VIEs’
Assets at Fair Value |
|
Other
(6) |
|
Credit
Derivative Asset (Liability), net (4) |
|
With Recourse
|
|
Without
Recourse |
|
||||||||||||||||
|
(in millions)
|
|
||||||||||||||||||||||||||||||
Fair value as of
December 31, 2017 |
$
|
55
|
|
|
$
|
28
|
|
|
$
|
614
|
|
|
$
|
122
|
|
|
$
|
34
|
|
|
$
|
(186
|
)
|
|
$
|
(131
|
)
|
|
$
|
(2
|
)
|
|
Total pretax realized and unrealized gains/(losses) recorded in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Net income (loss)
|
2
|
|
(1)
|
—
|
|
(1)
|
51
|
|
(1)
|
3
|
|
(2)
|
7
|
|
(3)
|
95
|
|
(5)
|
(2
|
)
|
(2)
|
1
|
|
(2)
|
||||||||
Other comprehensive income (loss)
|
1
|
|
|
—
|
|
|
(33
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
||||||||
Purchases
|
4
|
|
|
—
|
|
|
35
|
|
|
—
|
|
|
—
|
|
|
3
|
|
(7)
|
—
|
|
|
—
|
|
|
||||||||
Issuances
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(68
|
)
|
(7)
|
—
|
|
|
—
|
|
|
||||||||
Settlements
|
(1
|
)
|
|
(11
|
)
|
|
(19
|
)
|
|
(24
|
)
|
|
(1
|
)
|
|
—
|
|
|
24
|
|
|
—
|
|
|
||||||||
Fair value as of
December 31, 2018 |
$
|
61
|
|
|
$
|
17
|
|
|
$
|
648
|
|
|
$
|
101
|
|
|
$
|
40
|
|
|
$
|
(156
|
)
|
|
$
|
(108
|
)
|
|
$
|
(1
|
)
|
|
Change in unrealized gains/(losses) included in earnings related to financial instruments held as of December 31, 2018
|
|
|
|
|
|
|
$
|
5
|
|
(2)
|
$
|
7
|
|
(3)
|
$
|
90
|
|
(5)
|
$
|
(2
|
)
|
(2)
|
$
|
1
|
|
(2)
|
||||||
Change in unrealized gains/(losses) included in OCI related to financial instruments held as of
December 31, 2018 |
$
|
2
|
|
|
$
|
—
|
|
|
$
|
(31
|
)
|
|
|
|
$
|
—
|
|
|
|
|
$
|
1
|
|
|
|
|
(1)
|
Included in net realized investment gains (losses) and net investment income.
|
(2)
|
Included in other income.
|
(3)
|
Recorded in net investment income and other income.
|
(4)
|
Represents the net position of credit derivatives. Credit derivative assets (recorded in other assets) and credit derivative liabilities (presented as a separate line item) are shown as either assets or liabilities in the consolidated balance sheet based on net exposure by counterparty.
|
(5)
|
Reported in net change in fair value of credit derivatives.
|
(6)
|
Includes CCS and other invested assets.
|
Financial Instrument Description (1)
|
|
Fair Value at
December 31, 2019 (in millions) |
|
Significant Unobservable Inputs
|
|
Range
|
|
Weighted Average as a Percentage of Current Par Outstanding
|
|||||
Assets (liabilities) (2):
|
|
|
|
|
|
|
|
|
|
|
|||
Fixed-maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|||
Obligations of state and political subdivisions
|
|
$
|
72
|
|
|
Yield
|
|
6.0
|
%
|
-
|
31.1%
|
|
8.4%
|
|
|
|
|
|
|
|
|
|
|
|
|||
RMBS
|
|
14
|
|
|
CPR
|
|
3.8
|
%
|
-
|
15.0%
|
|
9.9%
|
|
|
|
CDR
|
|
1.5
|
%
|
-
|
6.6%
|
|
4.9%
|
||||
|
|
Loss severity
|
|
40.0
|
%
|
-
|
125.0%
|
|
85.5%
|
||||
|
|
Yield
|
|
4.0
|
%
|
-
|
6.1%
|
|
5.6%
|
||||
Asset-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|||
Life insurance transaction
|
|
319
|
|
|
Yield
|
|
5.8%
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
CLOs/TruPS
|
|
41
|
|
|
Yield
|
|
2.5
|
%
|
-
|
4.1%
|
|
2.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Others
|
|
51
|
|
|
Yield
|
|
2.3
|
%
|
-
|
9.4%
|
|
9.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
FG VIEs’ assets, at fair value
|
|
49
|
|
|
CPR
|
|
3.8
|
%
|
-
|
11.5%
|
|
9.4%
|
|
|
|
CDR
|
|
6.1
|
%
|
-
|
7.4%
|
|
6.8%
|
||||
|
|
Loss severity
|
|
70.0
|
%
|
-
|
100.0%
|
|
92.8%
|
||||
|
|
Yield
|
|
4.1
|
%
|
-
|
5.9%
|
|
5.1%
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
Other assets
|
|
28
|
|
|
Implied Yield
|
|
5.8%
|
|
|
||||
|
|
Term (years)
|
|
10 years
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|||
Credit derivative liabilities, net
|
|
(155
|
)
|
|
Year 1 loss estimates
|
|
0.0
|
%
|
-
|
46.0%
|
|
1.5%
|
|
|
|
Hedge cost (in basis points (bps))
|
|
5.0
|
-
|
31.0
|
|
11.0
|
|||||
|
|
Bank profit (in bps)
|
|
51.0
|
-
|
212.0
|
|
82.0
|
|||||
|
|
Internal floor (in bps)
|
|
30.0
|
|
|
|||||||
|
|
Internal credit rating
|
|
AAA
|
|
-
|
CCC
|
|
AA-
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
FG VIEs’ liabilities, at fair value
|
|
(48
|
)
|
|
CPR
|
|
3.8
|
%
|
-
|
11.5%
|
|
9.4%
|
|
|
|
CDR
|
|
6.1
|
%
|
-
|
7.4%
|
|
6.8%
|
||||
|
|
Loss severity
|
|
70.0
|
%
|
-
|
100.0%
|
|
92.8%
|
||||
|
|
Yield
|
|
3.1
|
%
|
-
|
5.9%
|
|
3.7%
|
(1)
|
Discounted cash flow is used as the primary valuation technique for all financial instruments listed in this table.
|
(2)
|
Excludes an investment recorded in other invested assets with fair value of $1 million.
|
Financial Instrument Description (1)
|
|
Fair Value at
December 31, 2018 (in millions) |
|
Significant Unobservable Inputs
|
|
Range
|
|
Weighted Average as a Percentage of Current Par Outstanding
|
|||||
Assets (liabilities) (2):
|
|
|
|
|
|
|
|
|
|
|
|||
Fixed-maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|||
Obligations of state and political subdivisions
|
|
$
|
61
|
|
|
Yield
|
|
6.2
|
%
|
-
|
32.7%
|
|
8.9%
|
|
|
|
|
|
|
|
|
|
|
|
|||
RMBS
|
|
17
|
|
|
CPR
|
|
3.8
|
%
|
-
|
19.4%
|
|
11.2%
|
|
|
|
CDR
|
|
1.5
|
%
|
-
|
6.9%
|
|
4.7%
|
||||
|
|
Loss severity
|
|
40.0
|
%
|
-
|
125.0%
|
|
84.2%
|
||||
|
|
Yield
|
|
5.8
|
%
|
-
|
8.1%
|
|
7.5%
|
||||
Asset-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|||
Life insurance transactions
|
|
561
|
|
|
Yield
|
|
6.5
|
%
|
-
|
7.1%
|
|
6.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
CLO/TruPS
|
|
34
|
|
|
Yield
|
|
3.8
|
%
|
-
|
4.7%
|
|
4.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Other
|
|
53
|
|
|
Yield
|
|
11.5%
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
FG VIEs’ assets, at fair value
|
|
101
|
|
|
CPR
|
|
2.5
|
%
|
-
|
16.8%
|
|
11.7%
|
|
|
|
CDR
|
|
2.2
|
%
|
-
|
7.7%
|
|
5.1%
|
||||
|
|
Loss severity
|
|
75.0
|
%
|
-
|
100.0%
|
|
92.4%
|
||||
|
|
Yield
|
|
6.0
|
%
|
-
|
8.4%
|
|
7.1%
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
Other assets
|
|
38
|
|
|
Implied Yield
|
|
7.2%
|
|
|
||||
|
|
Term (years)
|
|
10 years
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|||
Credit derivative liabilities, net
|
|
(156
|
)
|
|
Year 1 loss estimates
|
|
0.0
|
%
|
-
|
66.0%
|
|
2.8%
|
|
|
|
Hedge cost (in bps)
|
|
5.5
|
-
|
82.5
|
|
24.5
|
|||||
|
|
Bank profit (in bps)
|
|
7.2
|
-
|
509.9
|
|
86.5
|
|||||
|
|
Internal floor (in bps)
|
|
8.8
|
-
|
30.0
|
|
17.8
|
|||||
|
|
Internal credit rating
|
|
AAA
|
|
-
|
CCC
|
|
AA-
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
FG VIEs’ liabilities, at fair value
|
|
(109
|
)
|
|
CPR
|
|
2.5
|
%
|
-
|
16.8%
|
|
11.7%
|
|
|
|
CDR
|
|
2.2
|
%
|
-
|
7.7%
|
|
5.1%
|
||||
|
|
Loss severity
|
|
75.0
|
%
|
-
|
100.0%
|
|
92.4%
|
||||
|
|
Yield
|
|
5.2
|
%
|
-
|
7.6%
|
|
5.3%
|
(1)
|
Discounted cash flow is used as the primary valuation technique for all financial instruments listed in this table.
|
(2)
|
Excludes an investment recorded in other invested assets with fair value of $2 million.
|
|
As of December 31, 2019
|
|
As of December 31, 2018
|
||||||||||||
|
Carrying
Amount |
|
Estimated
Fair Value |
|
Carrying
Amount |
|
Estimated
Fair Value |
||||||||
|
(in millions)
|
||||||||||||||
Assets (liabilities):
|
|
|
|
|
|
|
|
||||||||
Loan receivable from parent
|
$
|
88
|
|
|
$
|
95
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Other assets (1)
|
25
|
|
|
25
|
|
|
24
|
|
|
24
|
|
||||
Financial guaranty insurance contracts (2)
|
(539
|
)
|
|
(1,201
|
)
|
|
(649
|
)
|
|
(1,340
|
)
|
||||
Note payable to affiliate
|
(300
|
)
|
|
(326
|
)
|
|
(300
|
)
|
|
(289
|
)
|
||||
Other liabilities (1)
|
(2
|
)
|
|
(2
|
)
|
|
(2
|
)
|
|
(2
|
)
|
(1)
|
The Company's other assets and other liabilities consist predominantly of: accrued interest, receivables for securities sold and payables for securities purchased, for which the carrying value approximates fair value.
|
(2)
|
Carrying amount includes the assets and liabilities related to financial guaranty insurance contract premiums, losses, and salvage and subrogation and other recoverables net of reinsurance.
|
9.
|
Investments and Cash
|
•
|
a decline in the market value of a security by 20% or more below amortized cost for a continuous period of at least six months;
|
•
|
a decline in the market value of a security for a continuous period of 12 months;
|
•
|
recent credit downgrades of the applicable security or the issuer by rating agencies;
|
•
|
the financial condition of the applicable issuer;
|
•
|
whether loss of investment principal is anticipated;
|
•
|
the impact of foreign exchange rates; and
|
•
|
whether scheduled interest payments are past due.
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Income from securities managed by third parties
|
$
|
70
|
|
|
$
|
66
|
|
|
$
|
68
|
|
Income from internally managed securities (1)
|
66
|
|
|
64
|
|
|
70
|
|
|||
Interest income on loan receivable from parent
|
1
|
|
|
—
|
|
|
—
|
|
|||
Gross investment income
|
137
|
|
|
130
|
|
|
138
|
|
|||
Investment expenses
|
(2
|
)
|
|
(2
|
)
|
|
(2
|
)
|
|||
Net investment income
|
$
|
135
|
|
|
$
|
128
|
|
|
$
|
136
|
|
(1)
|
Year ended December 31, 2017 included accretion on Zohar II Notes used as consideration for the MBIA UK Acquisition. See Note 2, Assumption of Insured Portfolio and Business Combinations.
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Gross realized gains on available-for-sale securities (1)
|
$
|
10
|
|
|
$
|
1
|
|
|
$
|
50
|
|
Gross realized losses on available-for-sale securities
|
(1
|
)
|
|
(3
|
)
|
|
(5
|
)
|
|||
OTTI
|
|
|
|
|
|
||||||
Total OTTI
|
(1
|
)
|
|
(5
|
)
|
|
(4
|
)
|
|||
Less: portion of OTTI recognized in OCI
|
—
|
|
|
(2
|
)
|
|
2
|
|
|||
Net OTTI recognized in net income (loss) (2)
|
(1
|
)
|
|
(3
|
)
|
|
(6
|
)
|
|||
Net realized investment gains (losses) (3)
|
$
|
8
|
|
|
$
|
(5
|
)
|
|
$
|
39
|
|
(1)
|
Year ended December 31, 2017 included a gain on Zohar II Notes used as consideration for the MBIA UK Acquisition. See Note 2, Assumption of Insured Portfolio and Business Combinations.
|
(2)
|
Net OTTI recognized in net income for all years was attributable primarily to a decline in expected cash flows on loss mitigation securities.
|
(3)
|
Includes foreign currency gains of $4 million in 2017. There were no foreign currency gains (losses) in 2019 and 2018.
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Balance, beginning of period
|
$
|
13
|
|
|
$
|
11
|
|
|
$
|
8
|
|
Reductions for securities sold and other settlements
|
(11
|
)
|
|
—
|
|
|
(1
|
)
|
|||
Additions for credit losses on securities for which an OTTI was previously recognized
|
—
|
|
|
2
|
|
|
4
|
|
|||
Balance, end of period
|
$
|
2
|
|
|
$
|
13
|
|
|
$
|
11
|
|
|
As of December 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(in millions)
|
||||||
Fixed-maturity securities (1):
|
|
|
|
||||
Externally managed
|
$
|
2,101
|
|
|
$
|
2,182
|
|
Internally managed
|
465
|
|
|
725
|
|
||
Short-term investments
|
88
|
|
|
126
|
|
||
Equity method investments-internally managed:
|
|
|
|
||||
MAC Holdings
|
208
|
|
|
226
|
|
||
AGAS
|
175
|
|
|
—
|
|
||
Other
|
8
|
|
|
8
|
|
||
Other invested assets-internally managed
|
1
|
|
|
2
|
|
||
Total
|
$
|
3,046
|
|
|
$
|
3,269
|
|
(1)
|
15.6% and 22.0% of fixed-maturity securities are rated BIG as of December 31, 2019 and December 31, 2018, respectively.
|
Security Type
|
|
Percent
of Total (1) |
|
Amortized
Cost |
|
Gross
Unrealized Gains |
|
Gross
Unrealized Losses |
|
Estimated
Fair Value |
|
AOCI Pre-Tax
Gain (Loss) on Securities with OTTI |
|
Weighted
Average Credit Rating (2) |
|||||||||||
|
|
(dollars in millions)
|
|||||||||||||||||||||||
Fixed-maturity securities:
|
|
|
|||||||||||||||||||||||
Obligations of state and political subdivisions
|
|
61
|
%
|
|
$
|
1,518
|
|
|
$
|
124
|
|
|
$
|
(1
|
)
|
|
$
|
1,641
|
|
|
$
|
30
|
|
|
AA-
|
U.S. government and
agencies |
|
2
|
|
|
52
|
|
|
1
|
|
|
—
|
|
|
53
|
|
|
—
|
|
|
AA+
|
|||||
Corporate securities
|
|
13
|
|
|
326
|
|
|
15
|
|
|
—
|
|
|
341
|
|
|
—
|
|
|
A-
|
|||||
Mortgage-backed securities (3):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
RMBS
|
|
2
|
|
|
55
|
|
|
3
|
|
|
(1
|
)
|
|
57
|
|
|
—
|
|
|
A
|
|||||
CMBS
|
|
2
|
|
|
38
|
|
|
2
|
|
|
—
|
|
|
40
|
|
|
—
|
|
|
AAA
|
|||||
Asset-backed securities
|
|
16
|
|
|
399
|
|
|
36
|
|
|
(1
|
)
|
|
434
|
|
|
(1
|
)
|
|
B-
|
|||||
Total fixed-maturity securities
|
|
96
|
|
|
2,388
|
|
|
181
|
|
|
(3
|
)
|
|
2,566
|
|
|
29
|
|
|
A
|
|||||
Short-term investments
|
|
4
|
|
|
88
|
|
|
—
|
|
|
—
|
|
|
88
|
|
|
—
|
|
|
AAA
|
|||||
Total investment portfolio
|
|
100
|
%
|
|
$
|
2,476
|
|
|
$
|
181
|
|
|
$
|
(3
|
)
|
|
$
|
2,654
|
|
|
$
|
29
|
|
|
A
|
Security Type
|
|
Percent
of Total (1) |
|
Amortized
Cost |
|
Gross
Unrealized Gains |
|
Gross
Unrealized Losses |
|
Estimated
Fair Value |
|
AOCI Pre-tax
Gain (Loss) on Securities with OTTI |
|
Weighted
Average Credit Rating (2) |
|||||||||||
|
|
(dollars in millions)
|
|||||||||||||||||||||||
Fixed-maturity securities:
|
|
|
|||||||||||||||||||||||
Obligations of state and political subdivisions
|
|
58
|
%
|
|
$
|
1,659
|
|
|
$
|
61
|
|
|
$
|
(10
|
)
|
|
$
|
1,710
|
|
|
$
|
27
|
|
|
AA-
|
U.S. government and
agencies |
|
2
|
|
|
51
|
|
|
2
|
|
|
(1
|
)
|
|
52
|
|
|
—
|
|
|
AA+
|
|||||
Corporate securities
|
|
10
|
|
|
292
|
|
|
1
|
|
|
(5
|
)
|
|
288
|
|
|
—
|
|
|
A
|
|||||
Mortgage-backed securities (3):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
RMBS
|
|
4
|
|
|
105
|
|
|
2
|
|
|
(2
|
)
|
|
105
|
|
|
(1
|
)
|
|
A+
|
|||||
CMBS
|
|
1
|
|
|
43
|
|
|
—
|
|
|
(1
|
)
|
|
42
|
|
|
—
|
|
|
AAA
|
|||||
Asset-backed securities
|
|
21
|
|
|
593
|
|
|
119
|
|
|
(2
|
)
|
|
710
|
|
|
74
|
|
|
CCC+
|
|||||
Total fixed-maturity securities
|
|
96
|
|
|
2,743
|
|
|
185
|
|
|
(21
|
)
|
|
2,907
|
|
|
100
|
|
|
A-
|
|||||
Short-term investments
|
|
4
|
|
|
126
|
|
|
—
|
|
|
—
|
|
|
126
|
|
|
—
|
|
|
AAA
|
|||||
Total investment portfolio
|
|
100
|
%
|
|
$
|
2,869
|
|
|
$
|
185
|
|
|
$
|
(21
|
)
|
|
$
|
3,033
|
|
|
$
|
100
|
|
|
A-
|
(1)
|
Based on amortized cost.
|
(2)
|
Ratings represent the lower of the Moody’s and S&P classifications except for bonds purchased for loss mitigation or risk management strategies, which use internal ratings classifications. The Company’s portfolio primarily consists of high-quality, liquid instruments.
|
(3)
|
U.S. government-agency obligations were approximately 50% of mortgage backed securities as of December 31, 2019 and 59% as of December 31, 2018 based on fair value.
|
State
|
|
State
General Obligation |
|
Local
General Obligation |
|
Revenue Bonds
|
|
Fair
Value |
|
Amortized
Cost |
|
Average
Credit Rating |
||||||||||
|
|
(in millions)
|
||||||||||||||||||||
California
|
|
$
|
49
|
|
|
$
|
21
|
|
|
$
|
196
|
|
|
$
|
266
|
|
|
$
|
224
|
|
|
BBB+
|
New York
|
|
4
|
|
|
13
|
|
|
170
|
|
|
187
|
|
|
175
|
|
|
AA
|
|||||
Texas
|
|
12
|
|
|
51
|
|
|
94
|
|
|
157
|
|
|
147
|
|
|
AA
|
|||||
Washington
|
|
28
|
|
|
39
|
|
|
55
|
|
|
122
|
|
|
115
|
|
|
AA
|
|||||
Florida
|
|
—
|
|
|
3
|
|
|
65
|
|
|
68
|
|
|
63
|
|
|
A-
|
|||||
Massachusetts
|
|
31
|
|
|
—
|
|
|
26
|
|
|
57
|
|
|
53
|
|
|
AA
|
|||||
Colorado
|
|
—
|
|
|
22
|
|
|
27
|
|
|
49
|
|
|
46
|
|
|
AA
|
|||||
District of Columbia
|
|
26
|
|
|
—
|
|
|
20
|
|
|
46
|
|
|
43
|
|
|
AA
|
|||||
Arizona
|
|
—
|
|
|
1
|
|
|
42
|
|
|
43
|
|
|
40
|
|
|
AA
|
|||||
Illinois
|
|
10
|
|
|
6
|
|
|
23
|
|
|
39
|
|
|
37
|
|
|
A-
|
|||||
All others
|
|
48
|
|
|
60
|
|
|
334
|
|
|
442
|
|
|
416
|
|
|
AA-
|
|||||
Total
|
|
$
|
208
|
|
|
$
|
216
|
|
|
$
|
1,052
|
|
|
$
|
1,476
|
|
|
$
|
1,359
|
|
|
AA-
|
State
|
|
State
General Obligation |
|
Local
General Obligation |
|
Revenue Bonds
|
|
Fair
Value |
|
Amortized
Cost |
|
Average
Credit Rating |
||||||||||
|
|
(in millions)
|
||||||||||||||||||||
California
|
|
$
|
42
|
|
|
$
|
17
|
|
|
$
|
187
|
|
|
$
|
246
|
|
|
$
|
219
|
|
|
BBB+
|
New York
|
|
—
|
|
|
11
|
|
|
192
|
|
|
203
|
|
|
200
|
|
|
AA
|
|||||
Texas
|
|
9
|
|
|
63
|
|
|
105
|
|
|
177
|
|
|
173
|
|
|
AA
|
|||||
Washington
|
|
50
|
|
|
41
|
|
|
53
|
|
|
144
|
|
|
143
|
|
|
AA
|
|||||
Massachusetts
|
|
29
|
|
|
—
|
|
|
40
|
|
|
69
|
|
|
68
|
|
|
AA
|
|||||
Arizona
|
|
—
|
|
|
5
|
|
|
54
|
|
|
59
|
|
|
57
|
|
|
AA
|
|||||
Florida
|
|
—
|
|
|
2
|
|
|
55
|
|
|
57
|
|
|
57
|
|
|
A
|
|||||
Colorado
|
|
—
|
|
|
23
|
|
|
29
|
|
|
52
|
|
|
51
|
|
|
AA
|
|||||
District of Columbia
|
|
24
|
|
|
—
|
|
|
19
|
|
|
43
|
|
|
43
|
|
|
AA
|
|||||
Illinois
|
|
9
|
|
|
6
|
|
|
24
|
|
|
39
|
|
|
39
|
|
|
A
|
|||||
All others
|
|
42
|
|
|
72
|
|
|
361
|
|
|
475
|
|
|
467
|
|
|
AA-
|
|||||
Total
|
|
$
|
205
|
|
|
$
|
240
|
|
|
$
|
1,119
|
|
|
$
|
1,564
|
|
|
$
|
1,517
|
|
|
AA-
|
(1)
|
Excludes $165 million and $146 million as of December 31, 2019 and 2018, respectively, of pre-refunded bonds, at fair value. The credit ratings are based on the underlying ratings and do not include any benefit from bond insurance.
|
|
|
As of December 31, 2019
|
|
As of December 31, 2018
|
||||||||||||
Type
|
|
Fair
Value
|
|
Amortized
Cost |
|
Fair
Value
|
|
Amortized
Cost |
||||||||
|
|
(in millions)
|
||||||||||||||
Transportation
|
|
$
|
382
|
|
|
$
|
335
|
|
|
$
|
364
|
|
|
$
|
335
|
|
Tax backed
|
|
154
|
|
|
145
|
|
|
176
|
|
|
174
|
|
||||
Higher education
|
|
145
|
|
|
137
|
|
|
167
|
|
|
164
|
|
||||
Water and sewer
|
|
139
|
|
|
131
|
|
|
186
|
|
|
183
|
|
||||
Healthcare
|
|
90
|
|
|
83
|
|
|
91
|
|
|
89
|
|
||||
Municipal utilities
|
|
59
|
|
|
54
|
|
|
66
|
|
|
63
|
|
||||
All others
|
|
83
|
|
|
75
|
|
|
69
|
|
|
67
|
|
||||
Total
|
|
$
|
1,052
|
|
|
$
|
960
|
|
|
$
|
1,119
|
|
|
$
|
1,075
|
|
|
Less than 12 months
|
|
12 months or more
|
|
Total
|
||||||||||||||||||
|
Fair
Value |
|
Unrealized
Loss |
|
Fair
Value |
|
Unrealized
Loss |
|
Fair
Value |
|
Unrealized
Loss |
||||||||||||
|
(dollars in millions)
|
||||||||||||||||||||||
Obligations of state and political subdivisions
|
$
|
23
|
|
|
$
|
(1
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
23
|
|
|
$
|
(1
|
)
|
U.S. government and agencies
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Corporate securities
|
23
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
28
|
|
|
—
|
|
||||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
RMBS
|
2
|
|
|
—
|
|
|
12
|
|
|
(1
|
)
|
|
14
|
|
|
(1
|
)
|
||||||
CMBS
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
3
|
|
|
—
|
|
||||||
Asset-backed securities
|
5
|
|
|
—
|
|
|
57
|
|
|
(1
|
)
|
|
62
|
|
|
(1
|
)
|
||||||
Total
|
$
|
53
|
|
|
$
|
(1
|
)
|
|
$
|
77
|
|
|
$
|
(2
|
)
|
|
$
|
130
|
|
|
$
|
(3
|
)
|
Number of securities
|
|
|
26
|
|
|
|
|
35
|
|
|
|
|
61
|
|
|||||||||
Number of securities with OTTI
|
|
|
—
|
|
|
|
|
3
|
|
|
|
|
3
|
|
|
Less than 12 months
|
|
12 months or more
|
|
Total
|
||||||||||||||||||
|
Fair
Value |
|
Unrealized
Loss |
|
Fair
Value |
|
Unrealized
Loss |
|
Fair
Value |
|
Unrealized
Loss |
||||||||||||
|
(dollars in millions)
|
||||||||||||||||||||||
Obligations of state and political subdivisions
|
$
|
99
|
|
|
$
|
(3
|
)
|
|
$
|
333
|
|
|
$
|
(7
|
)
|
|
$
|
432
|
|
|
$
|
(10
|
)
|
U.S. government and agencies
|
—
|
|
|
—
|
|
|
17
|
|
|
(1
|
)
|
|
17
|
|
|
(1
|
)
|
||||||
Corporate securities
|
124
|
|
|
(2
|
)
|
|
96
|
|
|
(3
|
)
|
|
220
|
|
|
(5
|
)
|
||||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
RMBS
|
18
|
|
|
—
|
|
|
32
|
|
|
(2
|
)
|
|
50
|
|
|
(2
|
)
|
||||||
CMBS
|
15
|
|
|
—
|
|
|
19
|
|
|
(1
|
)
|
|
34
|
|
|
(1
|
)
|
||||||
Asset-backed securities
|
76
|
|
|
(2
|
)
|
|
16
|
|
|
—
|
|
|
92
|
|
|
(2
|
)
|
||||||
Total
|
$
|
332
|
|
|
$
|
(7
|
)
|
|
$
|
513
|
|
|
$
|
(14
|
)
|
|
$
|
845
|
|
|
$
|
(21
|
)
|
Number of securities (1)
|
|
|
123
|
|
|
|
|
208
|
|
|
|
|
328
|
|
|||||||||
Number of securities with OTTI
|
|
|
13
|
|
|
|
|
4
|
|
|
|
|
17
|
|
(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.
|
|
Amortized
Cost |
|
Estimated
Fair Value |
||||
|
(in millions)
|
||||||
Due within one year
|
$
|
43
|
|
|
$
|
44
|
|
Due after one year through five years
|
266
|
|
|
273
|
|
||
Due after five years through 10 years
|
623
|
|
|
660
|
|
||
Due after 10 years
|
1,363
|
|
|
1,492
|
|
||
Mortgage-backed securities:
|
|
|
|
||||
RMBS
|
55
|
|
|
57
|
|
||
CMBS
|
38
|
|
|
40
|
|
||
Total
|
$
|
2,388
|
|
|
$
|
2,566
|
|
|
|
As of December 31, 2019
|
|
As of December 31, 2018 (2)
|
||||||||||||
|
|
Net Par
Outstanding |
|
Net Fair Value
Asset (Liability)
|
|
Net Par
Outstanding |
|
Net Fair Value
Asset (Liability) |
||||||||
|
|
(in millions)
|
||||||||||||||
U.S. public finance
|
|
$
|
1,120
|
|
|
$
|
(79
|
)
|
|
$
|
1,092
|
|
|
$
|
(63
|
)
|
Non-U.S. public finance
|
|
1,507
|
|
|
(22
|
)
|
|
1,732
|
|
|
(30
|
)
|
||||
U.S. structured finance
|
|
1,035
|
|
|
(49
|
)
|
|
1,233
|
|
|
(57
|
)
|
||||
Non-U.S. structured finance
|
|
133
|
|
|
(5
|
)
|
|
129
|
|
|
(6
|
)
|
||||
Total
|
|
$
|
3,795
|
|
|
$
|
(155
|
)
|
|
$
|
4,186
|
|
|
$
|
(156
|
)
|
(2)
|
Prior year presentation has been conformed to the current year's presentation.
|
|
|
As of December 31, 2019
|
|
As of December 31, 2018
|
||||||||||
Ratings
|
|
Net Par
Outstanding |
|
% of Total
|
|
Net Par
Outstanding |
|
% of Total
|
||||||
|
|
(dollars in millions)
|
||||||||||||
AAA
|
|
$
|
961
|
|
|
25.3
|
%
|
|
$
|
1,041
|
|
|
24.9
|
%
|
AA
|
|
1,492
|
|
|
39.3
|
%
|
|
1,628
|
|
|
38.9
|
%
|
||
A
|
|
525
|
|
|
13.8
|
%
|
|
608
|
|
|
14.5
|
%
|
||
BBB
|
|
707
|
|
|
18.7
|
%
|
|
776
|
|
|
18.5
|
%
|
||
BIG (1)
|
|
110
|
|
|
2.9
|
%
|
|
133
|
|
|
3.2
|
%
|
||
Credit derivative net par outstanding
|
|
$
|
3,795
|
|
|
100.0
|
%
|
|
$
|
4,186
|
|
|
100.0
|
%
|
(1)
|
All BIG credit derivatives are U.S. RMBS transactions.
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Realized gains on credit derivatives
|
$
|
5
|
|
|
$
|
5
|
|
|
$
|
7
|
|
Net credit derivative losses (paid and payable) recovered and recoverable and other settlements
|
(12
|
)
|
|
(4
|
)
|
|
(1
|
)
|
|||
Realized gains (losses) and other settlements
|
(7
|
)
|
|
1
|
|
|
6
|
|
|||
Net unrealized gains (losses)
|
—
|
|
|
94
|
|
|
65
|
|
|||
Net change in fair value of credit derivatives
|
$
|
(7
|
)
|
|
$
|
95
|
|
|
$
|
71
|
|
|
As of
December 31, 2019 |
|
As of
December 31, 2018 |
|
As of
December 31, 2017 |
Five-year CDS spread
|
41
|
|
110
|
|
163
|
One-year CDS spread
|
9
|
|
22
|
|
70
|
|
As of
December 31, 2019 |
|
As of
December 31, 2018 |
||||
|
(in millions)
|
||||||
Fair value of credit derivatives before effect of AGC credit spread
|
$
|
(218
|
)
|
|
$
|
(319
|
)
|
Plus: Effect of AGC credit spread
|
63
|
|
|
163
|
|
||
Net fair value of credit derivatives
|
$
|
(155
|
)
|
|
$
|
(156
|
)
|
|
As of
December 31, 2019 |
|
As of
December 31, 2018 |
||||
|
(in millions)
|
||||||
Excess of unpaid principal over fair value of:
|
|
|
|
||||
FG VIEs’ assets
|
$
|
29
|
|
|
$
|
43
|
|
FG VIEs’ liabilities with recourse
|
4
|
|
|
8
|
|
||
FG VIEs’ liabilities without recourse
|
1
|
|
|
1
|
|
||
Unpaid principal balance for FG VIEs’ assets that were 90 days or more past due
|
7
|
|
|
12
|
|
||
Unpaid principal for FG VIEs’ liabilities with recourse (1)
|
51
|
|
|
115
|
|
(1)
|
FG VIEs’ liabilities with recourse will mature at various dates ranging from 2023 to 2038.
|
|
As of December 31, 2019
|
|
As of December 31, 2018
|
||||||||||||
|
Assets
|
|
Liabilities
|
|
Assets
|
|
Liabilities
|
||||||||
|
(in millions)
|
||||||||||||||
With recourse:
|
|
|
|
|
|
|
|
||||||||
U.S. RMBS first lien
|
$
|
18
|
|
|
$
|
17
|
|
|
$
|
20
|
|
|
$
|
18
|
|
U.S. RMBS second lien
|
30
|
|
|
30
|
|
|
28
|
|
|
36
|
|
||||
Manufactured housing
|
—
|
|
|
—
|
|
|
52
|
|
|
54
|
|
||||
Total with recourse
|
48
|
|
|
47
|
|
|
100
|
|
|
108
|
|
||||
Without recourse
|
1
|
|
|
1
|
|
|
1
|
|
|
1
|
|
||||
Total
|
$
|
49
|
|
|
$
|
48
|
|
|
$
|
101
|
|
|
$
|
109
|
|
|
As of
December 31, 2019 |
|
As of
December 31, 2018 |
||||
|
(in millions)
|
||||||
Assets
|
|
|
|
||||
Fixed maturity securities and short-term investments
|
$
|
(7
|
)
|
|
$
|
(6
|
)
|
Premiums receivable, net of commissions payable
|
(4
|
)
|
|
(5
|
)
|
||
Salvage and subrogation recoverable
|
(5
|
)
|
|
—
|
|
||
Deferred tax assets, net
|
2
|
|
|
2
|
|
||
FG VIEs’ assets, at fair value
|
49
|
|
|
101
|
|
||
Total assets
|
$
|
35
|
|
|
$
|
92
|
|
Liabilities and shareholder’s equity
|
|
|
|
||||
Unearned premium reserve
|
$
|
(4
|
)
|
|
$
|
(6
|
)
|
Loss and LAE reserve
|
(3
|
)
|
|
(3
|
)
|
||
FG VIEs’ liabilities with recourse, at fair value
|
47
|
|
|
108
|
|
||
FG VIEs’ liabilities without recourse, at fair value
|
1
|
|
|
1
|
|
||
Total liabilities
|
41
|
|
|
100
|
|
||
|
|
|
|
||||
Retained earnings
|
(1
|
)
|
|
(4
|
)
|
||
Accumulated other comprehensive income
|
(5
|
)
|
|
(4
|
)
|
||
Total shareholder’s equity
|
(6
|
)
|
|
(8
|
)
|
||
Total liabilities and shareholder’s equity
|
$
|
35
|
|
|
$
|
92
|
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Net earned premiums
|
$
|
(1
|
)
|
|
$
|
(1
|
)
|
|
$
|
(1
|
)
|
Net investment income
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|||
Fair value gains (losses) on FG VIEs (1)
|
10
|
|
|
4
|
|
|
6
|
|
|||
Loss and LAE
|
(5
|
)
|
|
(5
|
)
|
|
(1
|
)
|
|||
Effect on income before tax
|
4
|
|
|
(3
|
)
|
|
3
|
|
|||
Less: Tax provision (benefit)
|
1
|
|
|
(1
|
)
|
|
2
|
|
|||
Effect on net income (loss)
|
$
|
3
|
|
|
$
|
(2
|
)
|
|
$
|
1
|
|
(1)
|
See consolidated statements of comprehensive income and Note 18, Shareholder's Equity, for information on changes in fair value of the FG VIEs’ liabilities with recourse that are attributable to changes in the Company's own credit risk.
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
|
|
||||||||
Effect on cash flows from operating activities
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
3
|
|
Effect on cash flows from investing activities
|
65
|
|
|
22
|
|
|
27
|
|
|||
Effect on cash flows from financing activities
|
(65
|
)
|
|
(24
|
)
|
|
(30
|
)
|
|||
Total effect on cash flows
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
As of
December 31, 2019 |
|
As of
December 31, 2018 |
||||
|
(in millions)
|
||||||
Total assets
|
|
|
|
||||
MAC Holdings
|
$
|
680
|
|
|
$
|
765
|
|
AGAS
|
499
|
|
|
—
|
|
||
Total liabilities
|
|
|
|
||||
MAC Holdings
|
150
|
|
|
190
|
|
||
AGAS
|
—
|
|
|
—
|
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Total revenues
|
|
|
|
|
|
||||||
MAC Holdings
|
$
|
74
|
|
|
$
|
84
|
|
|
$
|
121
|
|
AGAS
|
1
|
|
|
—
|
|
|
—
|
|
|||
Net income (loss)
|
|
|
|
|
|
||||||
MAC Holdings
|
48
|
|
|
61
|
|
|
82
|
|
|||
AGAS
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Dividends paid by MAC Holdings to AGC
|
$
|
31
|
|
|
$
|
11
|
|
|
$
|
42
|
|
Return of capital from MAC Holdings to AGC
|
10
|
|
|
—
|
|
|
70
|
|
|||
Investment in AGAS
|
(175
|
)
|
|
—
|
|
|
—
|
|
13.
|
Income Taxes
|
|
As of December 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(in millions)
|
||||||
Deferred tax assets (liabilities)
|
$
|
65
|
|
|
$
|
96
|
|
Current tax assets (liabilities)
|
2
|
|
|
(3
|
)
|
(1)
|
Included in other assets or other liabilities on the consolidated balance sheets.
|
|
As of December 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(in millions)
|
||||||
Deferred tax assets:
|
|
|
|
||||
Net operating loss
|
$
|
102
|
|
|
$
|
103
|
|
Unearned premium reserves, net
|
69
|
|
|
71
|
|
||
Foreign tax credit
|
13
|
|
|
13
|
|
||
Other
|
13
|
|
|
17
|
|
||
Total deferred income tax assets
|
197
|
|
|
204
|
|
||
Deferred tax liabilities:
|
|
|
|
||||
Loss and LAE reserve
|
61
|
|
|
33
|
|
||
Unrealized appreciation on investments
|
28
|
|
|
25
|
|
||
Market discount
|
4
|
|
|
17
|
|
||
Other
|
26
|
|
|
20
|
|
||
Total deferred income tax liabilities
|
119
|
|
|
95
|
|
||
Less: Valuation allowance
|
13
|
|
|
13
|
|
||
Net deferred income tax asset
|
$
|
65
|
|
|
$
|
96
|
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Expected tax provision (benefit)
|
$
|
32
|
|
|
$
|
57
|
|
|
$
|
146
|
|
Tax-exempt interest
|
(7
|
)
|
|
(7
|
)
|
|
(14
|
)
|
|||
Bargain purchase gain
|
—
|
|
|
—
|
|
|
(20
|
)
|
|||
Change in liability for uncertain tax positions
|
(2
|
)
|
|
(2
|
)
|
|
(22
|
)
|
|||
Taxes on reinsurance
|
(2
|
)
|
|
1
|
|
|
(1
|
)
|
|||
Effect of adjustments to the provisional amount as a result of the Tax Act
|
—
|
|
|
39
|
|
|
42
|
|
|||
Other
|
(2
|
)
|
|
—
|
|
|
(1
|
)
|
|||
Total provision (benefit) for income taxes
|
$
|
19
|
|
|
$
|
88
|
|
|
$
|
130
|
|
Effective tax rate
|
12.4
|
%
|
|
32.4
|
%
|
|
31.2
|
%
|
|
Year Ended December 31,
|
||||||
|
2018
|
|
2017
|
||||
|
(in millions)
|
||||||
Foreign tax credit realized
|
$
|
—
|
|
|
$
|
(6
|
)
|
Net impact of repatriation
|
—
|
|
|
(6
|
)
|
||
Write down of deferred tax asset due to tax rate change
|
39
|
|
|
48
|
|
||
Net impact of Tax Act
|
$
|
39
|
|
|
$
|
42
|
|
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Beginning of year
|
$
|
4
|
|
|
$
|
6
|
|
|
$
|
25
|
|
Effect of provision to tax return filing adjustments
|
—
|
|
|
—
|
|
|
2
|
|
|||
Increase in unrecognized tax positions as a result of position taken during the current period
|
—
|
|
|
—
|
|
|
1
|
|
|||
Decrease in unrecognized tax positions as a result of settlement of positions taken during the prior period
|
—
|
|
|
—
|
|
|
(22
|
)
|
|||
Reductions to unrecognized tax benefits as a result of the applicable statute of limitations
|
(2
|
)
|
|
(2
|
)
|
|
—
|
|
|||
Balance as of December 31,
|
$
|
2
|
|
|
$
|
4
|
|
|
$
|
6
|
|
14.
|
Insurance Company Regulatory Requirements
|
|
Policyholders' Surplus
|
|
Net Income (Loss)
|
||||||||||||||||
|
As of December 31,
|
|
Year Ended December 31,
|
||||||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2017
|
||||||||||
|
(in millions)
|
||||||||||||||||||
AGC (1)
|
$
|
1,775
|
|
|
$
|
1,793
|
|
|
$
|
226
|
|
|
$
|
(5
|
)
|
|
$
|
219
|
|
(1)
|
As of December 31, 2019 and 2018, policyholders' surplus is net of contingency reserves of $546 million and $550 million, respectively.
|
•
|
Upfront premiums are earned upon expiration of risk rather than earned over the expected period of coverage. Premium earnings are accelerated when transactions are economically defeased, rather than legally defeased.
|
•
|
Acquisition costs are charged to expense as incurred rather than over the period that related premiums are earned.
|
•
|
A contingency reserve is computed based on statutory requirements, whereas no such reserve is required under GAAP.
|
•
|
Certain assets designated as “non-admitted assets” are charged directly to statutory surplus, rather than reflected as assets under GAAP.
|
•
|
Investments in subsidiaries are carried on the balance sheet on the equity basis, to the extent admissible, rather than consolidated with the parent.
|
•
|
Admitted deferred tax assets are subject to an adjusted surplus threshold and subject to a limitation calculated in accordance with Statutory Accounting Principles, or SAP. Under GAAP there is no non-admitted asset determination, rather a valuation allowance is recorded to reduce the deferred tax asset to an amount that is more likely than not to be realized.
|
•
|
Insured credit derivatives are accounted for as insurance contracts rather than as derivative contracts measured at fair value.
|
•
|
Bonds are generally carried at amortized cost rather than fair value.
|
•
|
Insured obligations of VIEs, where the Company is deemed the primary beneficiary, are accounted for as insurance contracts. Under GAAP, such VIEs and refinancing vehicles are consolidated and any transactions with the Company are eliminated.
|
•
|
Surplus notes are recognized as surplus and each payment of principal and interest is recorded only upon approval of the insurance regulator rather than as liabilities with periodic accrual of interest.
|
•
|
Acquisitions are accounted for as either statutory purchases or statutory mergers, rather than under the purchase method under GAAP.
|
•
|
Losses are discounted at tax equivalent yields, and recorded when the loss is deemed probable and without consideration of the deferred premium revenue. Under GAAP, expected losses are discounted at the risk free rate at the end of each reporting period and are recorded only to the extent they exceed deferred premium revenue.
|
•
|
The present value of installment premiums and commissions are not recorded on the balance sheet as they are under GAAP.
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Dividends paid by AGC to AGUS
|
$
|
123
|
|
|
$
|
133
|
|
|
$
|
107
|
|
Repurchase of common stock by AGC from AGUS (1)
|
100
|
|
|
200
|
|
|
—
|
|
(1)
|
Represents repurchase of 2,220 and 4,441 of AGC's shares in 2019 and 2018, respectively. Pursuant to an amendment to AGC's Charter, the par value of AGC's remaining shares of common stock issued and outstanding was increased in order to maintain AGC's total common stock at or above $15 million as is required under the laws of the various jurisdictions for the Company to be licensed as a financial guaranty insurer. See Note 18, Shareholder's Equity, for the accounting policy for share repurchases.
|
15.
|
Related Party Transactions
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Affiliated companies:
|
|
|
|
|
|
||||||
AG Services
|
$
|
47
|
|
|
$
|
43
|
|
|
$
|
44
|
|
AGL
|
1
|
|
|
2
|
|
|
2
|
|
|||
Other
|
—
|
|
|
—
|
|
|
2
|
|
|||
Total
|
$
|
48
|
|
|
$
|
45
|
|
|
$
|
48
|
|
|
As of December 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(in millions)
|
||||||
Affiliated companies:
|
|
|
|
||||
AG Services
|
$
|
(19
|
)
|
|
$
|
(19
|
)
|
AGL
|
(1
|
)
|
|
(1
|
)
|
||
AGM
|
1
|
|
|
3
|
|
||
MAC
|
1
|
|
|
—
|
|
||
Total
|
$
|
(18
|
)
|
|
$
|
(17
|
)
|
|
As of December 31,
|
||||||||||||||||||||||
|
2019
|
|
2018
|
||||||||||||||||||||
|
AGM and
AGE UK
|
|
AGRe
|
|
MAC
|
|
AGM and
AGE UK
|
|
AGRe
|
|
MAC
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Premiums receivable, net of commissions payable
|
$
|
21
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
29
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Ceded unearned premium reserve
|
—
|
|
|
184
|
|
|
32
|
|
|
—
|
|
|
165
|
|
|
53
|
|
||||||
Reinsurance recoverable on unpaid losses
|
—
|
|
|
124
|
|
|
—
|
|
|
—
|
|
|
171
|
|
|
—
|
|
||||||
Salvage and subrogation recoverable
|
47
|
|
|
—
|
|
|
—
|
|
|
35
|
|
|
—
|
|
|
—
|
|
||||||
Assumed funds held (1)
|
12
|
|
|
—
|
|
|
—
|
|
|
15
|
|
|
—
|
|
|
—
|
|
||||||
Net credit derivative assets (1)
|
—
|
|
|
28
|
|
|
—
|
|
|
—
|
|
|
26
|
|
|
—
|
|
||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Unearned premium reserve
|
93
|
|
|
—
|
|
|
—
|
|
|
121
|
|
|
—
|
|
|
—
|
|
||||||
Loss and loss adjustment expense reserve
|
40
|
|
|
—
|
|
|
—
|
|
|
27
|
|
|
—
|
|
|
—
|
|
||||||
Reinsurance balances payable, net
|
—
|
|
|
128
|
|
|
—
|
|
|
—
|
|
|
86
|
|
|
—
|
|
||||||
Ceded funds held (2)
|
—
|
|
|
15
|
|
|
—
|
|
|
—
|
|
|
15
|
|
|
—
|
|
||||||
Deferred ceding commissions (2)
|
(11
|
)
|
|
53
|
|
|
—
|
|
|
(15
|
)
|
|
48
|
|
|
—
|
|
||||||
Other information:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Assumed par outstanding
|
3,151
|
|
|
—
|
|
|
—
|
|
|
3,216
|
|
|
—
|
|
|
—
|
|
||||||
Ceded par outstanding
|
—
|
|
|
9,838
|
|
|
3,270
|
|
|
—
|
|
|
12,815
|
|
|
8,353
|
|
(1)
|
Included in other assets on the consolidated balance sheets.
|
(2)
|
Included in other liabilities on the consolidated balance sheets.
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Revenues:
|
|
|
|
|
|
||||||
Net earned premiums
|
|
|
|
|
|
||||||
AG Re
|
$
|
(31
|
)
|
|
$
|
(41
|
)
|
|
$
|
(43
|
)
|
AGM and AGE UK
|
16
|
|
|
28
|
|
|
27
|
|
|||
MAC
|
(21
|
)
|
|
(28
|
)
|
|
(39
|
)
|
|||
Net change in fair value of credit derivatives
|
|
|
|
|
|
||||||
AG Re
|
2
|
|
|
11
|
|
|
(12
|
)
|
|||
AGFP
|
2
|
|
|
3
|
|
|
3
|
|
|||
Other income
|
|
|
|
|
|
||||||
AG Re
|
—
|
|
|
1
|
|
|
—
|
|
|||
AGM and AGE UK
|
1
|
|
|
(1
|
)
|
|
1
|
|
|||
Expenses:
|
|
|
|
|
|
||||||
Loss and LAE (recoveries)
|
|
|
|
|
|
||||||
AG Re
|
(23
|
)
|
|
4
|
|
|
71
|
|
|||
AGM and AGE UK
|
13
|
|
|
13
|
|
|
9
|
|
|||
MAC
|
—
|
|
|
1
|
|
|
(1
|
)
|
|||
Other expenses
|
|
|
|
|
|
||||||
AG Re
|
(9
|
)
|
|
(12
|
)
|
|
(12
|
)
|
|||
AGM and AGE UK
|
—
|
|
|
1
|
|
|
1
|
|
16.
|
Commitments and Contingencies
|
17.
|
Note Payable to Affiliate and Credit Facilities
|
|
Net Unrealized
Gains (Losses) on
Investments with no OTTI
|
|
Net Unrealized
Gains (Losses) on
Investments with OTTI
|
|
Net Unrealized Gains (Losses) on FG VIEs’ Liabilities with Recourse due to ISCR
|
|
Total AOCI
|
||||||||
|
(in millions)
|
||||||||||||||
Balance, December 31, 2018
|
$
|
64
|
|
|
$
|
79
|
|
|
$
|
(4
|
)
|
|
$
|
139
|
|
Other comprehensive income (loss) before reclassifications
|
80
|
|
|
(46
|
)
|
|
(1
|
)
|
|
33
|
|
||||
Less: Amounts reclassified from AOCI to:
|
|
|
|
|
|
|
|
|
|||||||
Net realized investment gains (losses)
|
9
|
|
|
(1
|
)
|
|
—
|
|
|
8
|
|
||||
Net investment income
|
2
|
|
|
13
|
|
|
—
|
|
|
15
|
|
||||
Fair value gains (losses) on FG VIEs
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
(2
|
)
|
||||
Tax (provision) benefit
|
(3
|
)
|
|
(2
|
)
|
|
—
|
|
|
(5
|
)
|
||||
Total amount reclassified from AOCI, net of tax
|
8
|
|
|
10
|
|
|
(2
|
)
|
|
16
|
|
||||
Net current period other comprehensive income (loss)
|
72
|
|
|
(56
|
)
|
|
1
|
|
|
17
|
|
||||
Balance, December 31, 2019
|
$
|
136
|
|
|
$
|
23
|
|
|
$
|
(3
|
)
|
|
$
|
156
|
|
|
Net Unrealized
Gains (Losses) on Investments with no OTTI |
|
Net Unrealized
Gains (Losses) on Investments with OTTI |
|
Cumulative
Translation
Adjustment
|
|
Total Accumulated
Other
Comprehensive
Income
|
||||||||
|
(in millions)
|
||||||||||||||
Balance, December 31, 2017
|
$
|
124
|
|
|
$
|
84
|
|
|
$
|
—
|
|
|
$
|
208
|
|
Effect of adoption of ASU 2016-01 (1)
|
—
|
|
|
—
|
|
|
(5
|
)
|
|
(5
|
)
|
||||
Other comprehensive income (loss) before reclassifications
|
(61
|
)
|
|
(8
|
)
|
|
—
|
|
|
(69
|
)
|
||||
Less: Amounts reclassified from AOCI to:
|
|
|
|
|
|
|
|
|
|||||||
Net realized investment gains (losses)
|
(1
|
)
|
|
(4
|
)
|
|
—
|
|
|
(5
|
)
|
||||
Fair value gains (losses) on FG VIEs
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
(2
|
)
|
||||
Tax (provision) benefit
|
—
|
|
|
1
|
|
|
1
|
|
|
2
|
|
||||
Total amount reclassified from AOCI, net of tax
|
(1
|
)
|
|
(3
|
)
|
|
(1
|
)
|
|
(5
|
)
|
||||
Net current period other comprehensive income (loss)
|
(60
|
)
|
|
(5
|
)
|
|
1
|
|
|
(64
|
)
|
||||
Balance, December 31, 2018
|
$
|
64
|
|
|
$
|
79
|
|
|
$
|
(4
|
)
|
|
$
|
139
|
|
(1)
|
On January 1, 2018, the Company adopted ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10) - Recognition and Measurement of Financial Assets and Financial Liabilities, resulting in a cumulative-effect reclassification of a $5 million loss, net of tax, from retained earnings to AOCI.
|
|
Net Unrealized
Gains (Losses) on Investments with no OTTI |
|
Net Unrealized
Gains (Losses) on Investments with OTTI |
|
Cumulative
Translation
Adjustment
|
|
Total Accumulated
Other
Comprehensive
Income
|
||||||||
|
(in millions)
|
||||||||||||||
Balance, December 31, 2016
|
$
|
76
|
|
|
$
|
26
|
|
|
$
|
(37
|
)
|
|
$
|
65
|
|
Reclassification of stranded tax effects (2)
|
13
|
|
|
15
|
|
|
—
|
|
|
28
|
|
||||
Other comprehensive income (loss) before reclassifications
|
61
|
|
|
39
|
|
|
11
|
|
|
111
|
|
||||
Less: Amounts reclassified from AOCI to:
|
|
|
|
|
|
|
|
|
|||||||
Net realized investment gains (losses)
|
45
|
|
|
(6
|
)
|
|
—
|
|
|
39
|
|
||||
Net investment income
|
26
|
|
|
—
|
|
|
—
|
|
|
26
|
|
||||
Other income (loss)
|
—
|
|
|
—
|
|
|
(14
|
)
|
|
(14
|
)
|
||||
Tax (provision) benefit
|
(25
|
)
|
|
2
|
|
|
5
|
|
|
(18
|
)
|
||||
Total amount reclassified from AOCI, net of tax
|
46
|
|
|
(4
|
)
|
|
(9
|
)
|
|
33
|
|
||||
Net current period other comprehensive income (loss)
|
15
|
|
|
43
|
|
|
20
|
|
|
78
|
|
||||
Sale of the European Subsidiaries to affiliate
(see Note 1)
|
20
|
|
|
—
|
|
|
17
|
|
|
37
|
|
||||
Balance, December 31, 2017
|
$
|
124
|
|
|
$
|
84
|
|
|
$
|
—
|
|
|
$
|
208
|
|
(2)
|
Represents a reclassification from AOCI to retained earnings as a result of adopting ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Comprehensive Income.
|