Quarterly report pursuant to Section 13 or 15(d)

Short-term and Long-term Investments, Restricted Deposits

v3.19.1
Short-term and Long-term Investments, Restricted Deposits
3 Months Ended
Mar. 31, 2019
Investments, Debt and Equity Securities [Abstract]  
Short-term and Long-term Investments, Restricted Deposits
Short-term and Long-term Investments, Restricted Deposits

Short-term and long-term investments and restricted deposits by investment type consist of the following ($ in millions):
 
March 31, 2019
 
December 31, 2018
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized Losses
 
Fair
Value
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized Losses
 
Fair
Value
U.S. Treasury securities and obligations of U.S. government corporations and agencies
$
251

 
$
1

 
$
(1
)
 
$
251

 
$
362

 
$
1

 
$
(2
)
 
$
361

Corporate securities
3,318

 
40

 
(16
)
 
3,342

 
3,190

 
8

 
(52
)
 
3,146

Restricted certificates of deposit
474

 

 

 
474

 
433

 

 

 
433

Restricted cash equivalents
6

 

 

 
6

 
8

 

 

 
8

Municipal securities
2,260

 
33

 
(3
)
 
2,290

 
2,196

 
9

 
(18
)
 
2,187

Asset-backed securities
728

 
3

 
(3
)
 
728

 
686

 
1

 
(4
)
 
683

Residential mortgage-backed securities
457

 
4

 
(6
)
 
455

 
452

 
1

 
(9
)
 
444

Commercial mortgage-backed securities
378

 
4

 
(2
)
 
380

 
366

 
1

 
(6
)
 
361

Private equity investments
402

 

 

 
402

 
387

 

 

 
387

Life insurance contracts
137

 

 

 
137

 
128

 

 

 
128

Total
$
8,411

 
$
85

 
$
(31
)
 
$
8,465

 
$
8,208

 
$
21

 
$
(91
)
 
$
8,138



The Company’s investments are debt securities classified as available-for-sale with the exception of life insurance contracts and certain private equity investments. The Company’s investment policies are designed to provide liquidity, preserve capital and maximize total return on invested assets with the focus on high credit quality securities. The Company limits the size of investment in any single issuer other than U.S. treasury securities and obligations of U.S. government corporations and agencies. As of March 31, 2019, 97% of the Company’s investments in rated securities carry an investment grade rating by nationally recognized statistical rating organizations. At March 31, 2019, the Company held certificates of deposit, life insurance contracts and private equity investments that did not carry a credit rating.

The Company's residential mortgage-backed securities are primarily issued by the Federal National Mortgage Association, Government National Mortgage Association or Federal Home Loan Mortgage Corporation, which carry implicit or explicit guarantees of the U.S. government. The Company's commercial mortgage-backed securities are primarily senior tranches with a weighted average rating of AA+ and a weighted average duration of 3.8 years at March 31, 2019.

The fair value of available-for-sale debt securities with gross unrealized losses by investment type and length of time that individual securities have been in a continuous unrealized loss position were as follows ($ in millions):
 
March 31, 2019
 
December 31, 2018
 
Less Than 12 Months
 
12 Months or More
 
Less Than 12 Months
 
12 Months or More
 
Unrealized Losses
 
Fair
Value
 
Unrealized Losses
 
Fair
Value
 
Unrealized Losses
 
Fair
Value
 
Unrealized Losses
 
Fair
Value
U.S. Treasury securities and obligations of U.S. government corporations and agencies
$

 
$
1

 
$
(1
)
 
$
172

 
$

 
$
59

 
$
(2
)
 
$
202

Corporate securities
(4
)
 
392

 
(12
)
 
1,010

 
(27
)
 
1,389

 
(25
)
 
871

Municipal securities

 
74

 
(3
)
 
496

 
(4
)
 
591

 
(14
)
 
806

Asset-backed securities
(2
)
 
221

 
(1
)
 
196

 
(2
)
 
318

 
(2
)
 
168

Residential mortgage-backed securities

 
12

 
(6
)
 
241

 
(1
)
 
61

 
(8
)
 
233

Commercial mortgage-backed securities

 
72

 
(2
)
 
129

 
(2
)
 
137

 
(4
)
 
140

Total
$
(6
)
 
$
772

 
$
(25
)
 
$
2,244

 
$
(36
)
 
$
2,555

 
$
(55
)
 
$
2,420



As of March 31, 2019, the gross unrealized losses were generated from 1,966 positions out of a total of 4,339 positions. The change in fair value of fixed income securities is primarily a result of movement in interest rates subsequent to the purchase of the security.

For each security in an unrealized loss position, the Company assesses whether it intends to sell the security or if it is more likely than not the Company will be required to sell the security before recovery of the amortized cost basis for reasons such as liquidity, contractual or regulatory purposes. If the security meets this criterion, the decline in fair value is other-than-temporary and is recorded in earnings. The Company does not intend to sell these securities prior to maturity and it is not likely that the Company will be required to sell these securities prior to maturity; therefore, there is no indication of other-than-temporary impairment for these securities.

The contractual maturities of short-term and long-term investments and restricted deposits are as follows ($ in millions):
 
March 31, 2019
 
December 31, 2018
 
Investments
 
Restricted Deposits
 
Investments
 
Restricted Deposits
 
Amortized
Cost
 
Fair
Value
 
Amortized
Cost
 
Fair
Value
 
Amortized
Cost
 
Fair
Value
 
Amortized
Cost
 
Fair
Value
One year or less
$
610

 
$
609

 
$
515

 
$
515

 
$
647

 
$
646

 
$
205

 
$
205

One year through five years
3,112

 
3,130

 
67

 
67

 
3,026

 
2,998

 
351

 
350

Five years through ten years
2,477

 
2,512

 

 

 
2,387

 
2,362

 

 

Greater than ten years
67

 
69

 

 

 
88

 
89

 

 

Asset-backed securities
1,563

 
1,563

 

 

 
1,504

 
1,488

 

 

Total
$
7,829

 
$
7,883

 
$
582

 
$
582

 
$
7,652

 
$
7,583

 
$
556

 
$
555


 
Actual maturities may differ from contractual maturities due to call or prepayment options. Private equity investments and life insurance contracts are included in the five years through ten years category. Residential mortgage-backed securities and commercial mortgage-backed securities are included in the asset-backed securities category. The Company has an option to redeem at amortized cost substantially all of the securities included in the greater than ten years category listed above.

The Company continuously monitors investments for other-than-temporary impairment. Certain investments have experienced a decline in fair value due to changes in credit quality, market interest rates and/or general economic conditions. The Company recognizes an impairment loss for private equity investments when evidence demonstrates that it is other-than-temporarily impaired. Evidence of a loss in value that is other-than-temporary may include the absence of an ability to recover the carrying amount of the investment or the inability of the investee to sustain a level of earnings that would justify the carrying amount of the investment.