(4) Investments

(a) Net Investment Income

Sources of net investment income were as follows for the years ended December 31:


(Amounts in millions)	2015			2014			2013
Fixed maturity securities—taxable	$	2,558		$	2,598		$	2,603
Fixed maturity securities—non-taxable		12			12			9
Commercial mortgage loans		337			333			335
Restricted commercial mortgage loans related to securitization entities ⁽¹⁾		14			14			23
Equity securities		15			14			17
Other invested assets ⁽²⁾		135			105			108
Restricted other invested assets related to securitization entities ⁽¹⁾		5			5			4
Policy loans		137			129			129
Cash, cash equivalents and short-term investments		13			24			19

Gross investment income before expenses and fees		3,226			3,234			3,247
Expenses and fees		(88	)		(92	)		(92	)

Net investment income	$	3,138		$	3,142		$	3,155

⁽¹⁾	See note 17 for additional information related to consolidated securitization entities.

⁽²⁾	Included in other invested assets was $9 million, $8 million and $13 million of net investment income related to trading securities for the years ended December 31, 2015, 2014 and 2013, respectively.

(b) Net Investment Gains (Losses)

The following table sets forth net investment gains (losses) for the years ended December 31:


(Amounts in millions)	2015			2014			2013
Available-for-sale securities:
Realized gains	$	102		$	72		$	149
Realized losses		(82	)		(46	)		(184	)

Net realized gains (losses) on available-for-sale securities		20			26			(35	)

Impairments:
Total other-than-temporary impairments		(28	)		(9	)		(16	)
Portion of other-than-temporary impairments included in other comprehensive income (loss)		1			—			(9	)

Net other-than-temporary impairments		(27	)		(9	)		(25	)

Trading securities		(7	)		39			(23	)
Commercial mortgage loans		7			11			4
Net gains (losses) related to securitization entities ⁽¹⁾		5			16			69
Derivative instruments ⁽²⁾		(76	)		(103	)		(49	)
Contingent consideration adjustment		2			(2	)		—
Other		1			—			(5	)

Net investment gains (losses)	$	(75	)	$	(22	)	$	(64	)

⁽¹⁾	See note 17 for additional information related to consolidated securitization entities.

⁽²⁾	See note 5 for additional information on the impact of derivative instruments included in net investment gains (losses).

We generally intend to hold securities in unrealized loss positions until they recover. However, from time to time, our intent on an individual security may change, based upon market or other unforeseen developments. In such instances, we sell securities in the ordinary course of managing our portfolio to meet diversification, credit quality, yield and liquidity requirements. If a loss is recognized from a sale subsequent to a balance sheet date due to these unexpected developments, the loss is recognized in the period in which we determined that we have the intent to sell the securities or it is more likely than not that we will be required to sell the securities prior to recovery. The aggregate fair value of securities sold at a loss during the years ended December 31, 2015, 2014 and 2013 was $1,827 million, $857 million and $1,743 million, respectively, which was approximately 96%, 95% and 91%, respectively, of book value.

The following represents the activity for credit losses recognized in net income (loss) on debt securities where an other-than-temporary impairment was identified and a portion of other-than-temporary impairments was included in OCI as of and for the years ended December 31:


(Amounts in millions)	2015			2014			2013
Beginning balance	$	83		$	101		$	387
Additions:
Other-than-temporary impairments not previously recognized		—			1			4
Increases related to other-than-temporary impairments previously recognized		—			1			11
Reductions:
Securities sold, paid down or disposed		(19	)		(20	)		(301	)

Ending balance	$	64		$	83		$	101

(c) Unrealized Investment Gains and Losses

Net unrealized gains and losses on available-for-sale investment securities reflected as a separate component of accumulated other comprehensive income (loss) were as follows as of December 31:


(Amounts in millions)	2015			2014			2013
Net unrealized gains (losses) on investment securities:
Fixed maturity securities	$	3,140		$	5,560		$	2,346
Equity securities		(10	)		32			23
Other invested assets		—			(2	)		(4	)

Subtotal		3,130			5,590			2,365
Adjustments to DAC, PVFP, sales inducements and benefit reserves		(1,070	)		(1,656	)		(869	)
Income taxes, net		(711	)		(1,372	)		(517	)

Net unrealized investment gains (losses)		1,349			2,562			979
Less: net unrealized investment gains (losses) attributable to noncontrolling interests		95			109			53

Net unrealized investment gains (losses) attributable to Genworth Financial, Inc.	$	1,254		$	2,453		$	926

The change in net unrealized gains (losses) on available-for-sale investment securities reported in accumulated other comprehensive income (loss) was as follows as of and for the years ended December 31:


(Amounts in millions)	2015			2014			2013
Beginning balance	$	2,453		$	926		$	2,638
Unrealized gains (losses) arising during the period:
Unrealized gains (losses) on investment securities		(2,467	)		3,244			(3,780	)
Adjustment to DAC		177			(172	)		248
Adjustment to PVFP		89			(66	)		95
Adjustment to sales inducements		30			(15	)		40
Adjustment to benefit reserves		290			(534	)		673
Provision for income taxes		663			(862	)		952

Change in unrealized gains (losses) on investment securities		(1,218	)		1,595			(1,772	)
Reclassification adjustments to net investment (gains) losses, net of taxes of $(2), $7 and $(12)		5			(12	)		21

Change in net unrealized investment gains (losses)		(1,213	)		1,583			(1,751	)
Less: change in net unrealized investment gains (losses) attributable to noncontrolling interests		(14	)		56			(39	)

Ending balance	$	1,254		$	2,453		$	926

(d) Fixed Maturity and Equity Securities

As of December 31, 2015, the amortized cost or cost, gross unrealized gains (losses) and fair value of our fixed maturity and equity securities classified as available-for-sale were as follows:


	Amortized cost or cost		Gross unrealized gains				Gross unrealized losses					Fair value
(Amounts in millions)	Amortized cost or cost		Not other-than- temporarily impaired		Other-than- temporarily impaired		Not other-than- temporarily impaired			Other-than- temporarily impaired		Fair value
Fixed maturity securities:
U.S. government, agencies and government-sponsored enterprises	$	5,487	$	732	$	—	$	(16	)	$	—	$	6,203
State and political subdivisions		2,287		181		—		(30	)		—		2,438
Non-U.S. government		1,910		110		—		(5	)		—		2,015
U.S. corporate:
Utilities		3,355		364		—		(26	)		—		3,693
Energy		2,560		103		—		(162	)		—		2,501
Finance and insurance		5,268		392		15		(43	)		—		5,632
Consumer—non-cyclical		3,755		371		—		(30	)		—		4,096
Technology and communications		2,108		123		—		(38	)		—		2,193
Industrial		1,164		53		—		(44	)		—		1,173
Capital goods		1,774		188		—		(12	)		—		1,950
Consumer—cyclical		1,602		95		—		(22	)		—		1,675
Transportation		1,023		75		—		(12	)		—		1,086
Other		385		22		—		(5	)		—		402

Total U.S. corporate		22,994		1,786		15		(394	)		—		24,401

Non-U.S. corporate:
Utilities		815		37		—		(9	)		—		843
Energy		1,700		64		—		(78	)		—		1,686
Finance and insurance		2,327		152		2		(8	)		—		2,473
Consumer—non-cyclical		746		24		—		(18	)		—		752
Technology and communications		978		36		—		(26	)		—		988
Industrial		1,063		19		—		(96	)		—		986
Capital goods		602		19		—		(17	)		—		604
Consumer—cyclical		522		8		—		(4	)		—		526
Transportation		559		52		—		(6	)		—		605
Other		2,574		187		—		(25	)		—		2,736

Total non-U.S. corporate		11,886		598		2		(287	)		—		12,199

Residential mortgage-backed		4,777		330		11		(17	)		—		5,101
Commercial mortgage-backed		2,492		84		3		(20	)		—		2,559
Other asset-backed		3,328		11		1		(59	)		—		3,281

Total fixed maturity securities		55,161		3,832		32		(828	)		—		58,197
Equity securities		325		8		—		(23	)		—		310

Total available-for-sale securities	$	55,486	$	3,840	$	32	$	(851	)	$	—	$	58,507

As of December 31, 2014, the amortized cost or cost, gross unrealized gains (losses) and fair value of our fixed maturity and equity securities classified as available-for-sale were as follows:


	Amortized cost or cost		Gross unrealized gains				Gross unrealized losses						Fair value
(Amounts in millions)	Amortized cost or cost		Not other-than- temporarily impaired		Other-than- temporarily impaired		Not other-than- temporarily impaired			Other-than- temporarily impaired			Fair value
Fixed maturity securities:
U.S. government, agencies and government-sponsored enterprises	$	5,006	$	995	$	—	$	(1	)	$	—		$	6,000
State and political subdivisions		2,013		236		—		(27	)		—			2,222
Non-U.S. government		1,761		143		—		(2	)		—			1,902
U.S. corporate:
Utilities		3,292		577		—		(5	)		—			3,864
Energy		2,498		265		—		(21	)		—			2,742
Finance and insurance		5,102		537		20		(13	)		—			5,646
Consumer—non-cyclical		3,483		538		—		(8	)		—			4,013
Technology and communications		2,112		217		—		(4	)		—			2,325
Industrial		1,195		100		—		(8	)		—			1,287
Capital goods		1,748		263		—		(5	)		—			2,006
Consumer—cyclical		1,750		158		—		(8	)		—			1,900
Transportation		929		114		—		(4	)		—			1,039
Other		370		31		—		—			—			401

Total U.S. corporate		22,479		2,800		20		(76	)		—			25,223

Non-U.S. corporate:
Utilities		857		48		—		(2	)		—			903
Energy		1,911		163		—		(38	)		—			2,036
Finance and insurance		2,757		203		—		(3	)		—			2,957
Consumer—non-cyclical		764		41		—		(9	)		—			796
Technology and communications		986		71		—		(4	)		—			1,053
Industrial		1,166		65		—		(18	)		—			1,213
Capital goods		592		31		—		(5	)		—			618
Consumer—cyclical		520		14		—		—			—			534
Transportation		521		70		—		(1	)		—			590
Other		3,153		257		—		(15	)		—			3,395

Total non-U.S. corporate		13,227		963		—		(95	)		—			14,095

Residential mortgage-backed		4,871		362		13		(17	)		(1	)		5,228
Commercial mortgage-backed		2,564		143		4		(9	)		—			2,702
Other asset-backed		3,735		23		1		(54	)		—			3,705

Total fixed maturity securities		55,656		5,665		38		(281	)		(1	)		61,077
Equity securities		250		32		—		(7	)		—			275

Total available-for-sale securities	$	55,906	$	5,697	$	38	$	(288	)	$	(1	)	$	61,352

The following table presents the gross unrealized losses and fair values of our investment securities, aggregated by investment type and length of time that individual investment securities have been in a continuous unrealized loss position, as of December 31, 2015:


	Less than 12 months							12 months or more							Total
(Dollar amounts in millions)	Fair value		Gross unrealized losses			Number of securities		Fair value		Gross unrealized losses			Number of securities		Fair value		Gross unrealized losses			Number of securities
Description of Securities
Fixed maturity securities:
U.S. government, agencies and government-sponsored enterprises	$	883	$	(16	)		32	$	—	$	—			—	$	883	$	(16	)		32
State and political subdivisions		464		(15	)		81		163		(15	)		17		627		(30	)		98
Non-U.S. government		366		(5	)		49		—		—			—		366		(5	)		49
U.S. corporate		5,836		(332	)		817		466		(62	)		83		6,302		(394	)		900
Non-U.S. corporate		3,016		(170	)		400		486		(117	)		87		3,502		(287	)		487
Residential mortgage-backed		756		(10	)		88		103		(7	)		38		859		(17	)		126
Commercial mortgage-backed		780		(19	)		116		39		(1	)		13		819		(20	)		129
Other asset-backed		1,944		(22	)		349		336		(37	)		55		2,280		(59	)		404

Subtotal, fixed maturity securities		14,045		(589	)		1,932		1,593		(239	)		293		15,638		(828	)		2,225
Equity securities		153		(23	)		64		—		—			—		153		(23	)		64

Total for securities in an unrealized loss position	$	14,198	$	(612	)		1,996	$	1,593	$	(239	)		293	$	15,791	$	(851	)		2,289

% Below cost—fixed maturity securities:
<20% Below cost	$	13,726	$	(472	)		1,877	$	1,259	$	(78	)		238	$	14,985	$	(550	)		2,115
20%-50% Below cost		319		(116	)		54		316		(139	)		50		635		(255	)		104
>50% Below cost		—		(1	)		1		18		(22	)		5		18		(23	)		6

Total fixed maturity securities		14,045		(589	)		1,932		1,593		(239	)		293		15,638		(828	)		2,225

% Below cost—equity securities:
<20% Below cost		133		(18	)		56		—		—			—		133		(18	)		56
20%-50% Below cost		20		(5	)		8		—		—			—		20		(5	)		8

Total equity securities		153		(23	)		64		—		—			—		153		(23	)		64

Total for securities in an unrealized loss position	$	14,198	$	(612	)		1,996	$	1,593	$	(239	)		293	$	15,791	$	(851	)		2,289

Investment grade	$	13,342	$	(524	)		1,834	$	1,245	$	(135	)		225	$	14,587	$	(659	)		2,059
Below investment grade		856		(88	)		162		348		(104	)		68		1,204		(192	)		230

Total for securities in an unrealized loss position	$	14,198	$	(612	)		1,996	$	1,593	$	(239	)		293	$	15,791	$	(851	)		2,289

The following table presents the gross unrealized losses and fair values of our corporate securities, aggregated by investment type and length of time that individual investment securities have been in a continuous unrealized loss position, based on industry, as of December 31, 2015:


	Less than 12 months							12 months or more							Total
(Dollar amounts in millions)	Fair value		Gross unrealized losses			Number of securities		Fair value		Gross unrealized losses			Number of securities		Fair value		Gross unrealized losses			Number of securities
Description of Securities
U.S. corporate:
Utilities	$	485	$	(25	)		74	$	14	$	(1	)		7	$	499	$	(26	)		81
Energy		1,162		(134	)		163		131		(28	)		22		1,293		(162	)		185
Finance and insurance		1,142		(35	)		160		94		(8	)		15		1,236		(43	)		175
Consumer—non-cyclical		836		(26	)		107		51		(4	)		10		887		(30	)		117
Technology and communications		658		(36	)		95		23		(2	)		5		681		(38	)		100
Industrial		476		(33	)		64		44		(11	)		9		520		(44	)		73
Capital goods		293		(10	)		48		26		(2	)		4		319		(12	)		52
Consumer—cyclical		427		(18	)		60		63		(4	)		10		490		(22	)		70
Transportation		273		(10	)		38		20		(2	)		1		293		(12	)		39
Other		84		(5	)		8		—		—			—		84		(5	)		8

Subtotal, U.S. corporate securities		5,836		(332	)		817		466		(62	)		83		6,302		(394	)		900

Non-U.S. corporate:
Utilities		130		(6	)		20		32		(3	)		6		162		(9	)		26
Energy		589		(48	)		71		127		(30	)		20		716		(78	)		91
Finance and insurance		478		(7	)		77		30		(1	)		8		508		(8	)		85
Consumer—non-cyclical		261		(14	)		27		37		(4	)		4		298		(18	)		31
Technology and communications		324		(15	)		37		33		(11	)		9		357		(26	)		46
Industrial		495		(54	)		67		110		(42	)		18		605		(96	)		85
Capital goods		154		(8	)		22		41		(9	)		9		195		(17	)		31
Consumer—cyclical		155		(4	)		20		—		—			—		155		(4	)		20
Transportation		147		(6	)		17		—		—			—		147		(6	)		17
Other		283		(8	)		42		76		(17	)		13		359		(25	)		55

Subtotal, non-U.S. corporate securities		3,016		(170	)		400		486		(117	)		87		3,502		(287	)		487

Total for corporate securities in an unrealized loss position	$	8,852	$	(502	)		1,217	$	952	$	(179	)		170	$	9,804	$	(681	)		1,387

As indicated in the tables above, the majority of the securities in a continuous unrealized loss position for less than 12 months were investment grade and less than 20% below cost. These unrealized losses were primarily attributable to the increase in interest rates, mostly concentrated in our corporate securities. For securities that have been in a continuous unrealized loss position for less than 12 months, the average fair value percentage below cost was approximately 4% as of December 31, 2015.

Fixed Maturity Securities In A Continuous Unrealized Loss Position For 12 Months Or More

Of the $78 million of unrealized losses on fixed maturity securities in a continuous unrealized loss for 12 months or more that were less than 20% below cost, the weighted-average rating was “BBB+” and approximately 75% of the unrealized losses were related to investment grade securities as of December 31, 2015. These unrealized losses were predominantly attributable to corporate securities and state and political subdivision securities including fixed rate securities purchased in a lower rate environment and variable rate securities purchased in a higher rate and lower spread environment. The average fair value percentage below cost for these securities was approximately 6% as of December 31, 2015. See below for additional discussion related to fixed maturity securities that have been in a continuous unrealized loss position for 12 months or more with a fair value that was more than 20% below cost.

The following tables present the concentration of gross unrealized losses and fair values of fixed maturity securities that were more than 20% below cost and in a continuous unrealized loss position for 12 months or more by asset class as of December 31, 2015:


	Investment Grade
	20% to 50%										Greater than 50%
(Dollar amounts in millions)	Fair value		Gross unrealized losses			% of total gross unrealized losses			Number of securities		Fair value		Gross unrealized losses		% of total gross unrealized losses			Number of securities
Fixed maturity securities:
State and political subdivisions	$	9	$	(3	)		—	%		1	$	—	$	—		—	%		—
U.S. corporate:
Energy		23		(8	)		1			4		—		—		—			—
Industrial		18		(9	)		1			3		—		—		—			—

Total U.S. corporate		41		(17	)		2			7		—		—		—			—

Non-U.S. corporate:
Utilities		8		(2	)		—			1		—		—		—			—
Energy		21		(8	)		1			2		—		—		—			—
Industrial		29		(14	)		2			4		—		—		—			—
Capital goods		6		(5	)		1			2		—		—		—			—
Other		5		(2	)		—			1		—		—		—			—

Total non-U.S. corporate		69		(31	)		4			10		—		—		—			—

Structured securities:
Other asset-backed		66		(25	)		3			4		—		—		—			—

Total structured securities		66		(25	)		3			4		—		—		—			—

Total	$	185	$	(76	)		9	%		22	$	—	$	—		—	%		—


	Below Investment Grade
	20% to 50%										Greater than 50%
(Dollar amounts in millions)	Fair value		Gross unrealized losses			% of total gross unrealized losses			Number of securities		Fair value		Gross unrealized losses			% of total gross unrealized losses			Number of securities
Fixed maturity securities:
U.S. corporate:
Energy	$	21	$	(9	)		1	%		6	$	—	$	—			—	%		—
Finance and insurance		7		(3	)		1			1		—		—			—			—
Technology and communications		5		(2	)		—			1		—		—			—			—
Industrial		4		(1	)		—			1		—		—			—			—

Total U.S. corporate		37		(15	)		2			9		—		—			—			—

Non-U.S. corporate:
Energy		44		(20	)		2			8		—		—			—			—
Technology and communications		5		(4	)		1			2		4		(5	)		1			1
Industrial		10		(6	)		1			2		14		(17	)		2			4
Capital goods		3		(2	)		1			1		—		—			—			—
Other		24		(10	)		—			5		—		—			—			—

Total non-U.S. corporate		86		(42	)		5			18		18		(22	)		3			5

Structured securities:
Other asset-backed		8		(6	)		1			1		—		—			—			—

Total structured securities		8		(6	)		1			1		—		—			—			—

Total	$	131	$	(63	)		8	%		28	$	18	$	(22	)		3	%		5

For all securities in an unrealized loss position, we expect to recover the amortized cost based on our estimate of the amount and timing of cash flows to be collected. We do not intend to sell nor do we expect that we will be required to sell these securities prior to recovering our amortized cost. See below for further discussion of gross unrealized losses by asset class.

Non-U.S. corporate

As indicated above, $95 million of gross unrealized losses were related to non-U.S. corporate fixed maturity securities that have been in an unrealized loss position for more than 12 months and were more than 20% below cost. Of the total unrealized losses for non-U.S. corporate fixed maturity securities, $37 million, or 39%, related to the industrial sector and $28 million, or 29%, related to the energy sector. Reduced overseas demand for metals, particularly copper and oil, has led to a decline in commodities pricing, adversely impacting the fair value of these securities.

We expect that our investments in non-U.S. corporate securities will continue to perform in accordance with our expectations about the amount and timing of estimated cash flows. Although we do not anticipate such events, it is reasonably possible that issuers of our investments in non-U.S. corporate securities may perform worse than current expectations. Such events may lead us to recognize write-downs within our portfolio of non-U.S. corporate securities in the future.

While we considered the length of time each security had been in an unrealized loss position, the extent of the unrealized loss position and any significant declines in fair value subsequent to the balance sheet date in our evaluation of impairment for each of these individual securities, the primary factor in our evaluation of impairment is the expected performance for each of these securities. Our evaluation of expected performance is based on the historical performance of the associated securitization trust as well as the historical performance of the underlying collateral. Our examination of the historical performance of the securitization trust included consideration of the following factors for each class of securities issued by the trust: i) the payment history, including failure to make scheduled payments; ii) current payment status; iii) current and historical outstanding balances; iv) current levels of subordination and losses incurred to date; and v) characteristics of the underlying collateral. Our examination of the historical performance of the underlying collateral included: i) historical default rates, delinquency rates, voluntary and involuntary prepayments and severity of losses, including recent trends in this information; ii) current payment status; iii) loan to collateral value ratios, as applicable; iv) vintage; and v) other underlying characteristics such as current financial condition.

We used our assessment of the historical performance of both the securitization trust and the underlying collateral for each security, along with third-party sources, when available, to develop our best estimate of cash flows expected to be collected. These estimates reflect projections for future delinquencies, prepayments, defaults and losses for the assets that collateralize the securitization trust and are used to determine the expected cash flows for our security, based on the payment structure of the trust. Our projection of expected cash flows is primarily based on the expected performance of the underlying assets that collateralize the securitization trust and is not directly impacted by the rating of our security. While we consider the rating of the security as an indicator of the financial condition of the issuer, this factor does not have a significant impact on our expected cash flows for each security. In limited circumstances, our expected cash flows include expected payments from reliable financial guarantors where we believe the financial guarantor will have sufficient assets to pay claims under the financial guarantee when the cash flows from the securitization trust are not sufficient to make scheduled payments. We then discount the expected cash flows using the effective yield of each security to determine the present value of expected cash flows.

Based on this evaluation, the present value of expected cash flows was greater than or equal to the amortized cost for each security. Accordingly, we determined that the unrealized losses on each of our structured securities represented temporary impairments as of December 31, 2015.

Despite the considerable analysis and rigor employed on our structured securities, it is reasonably possible that the underlying collateral of these investments will perform worse than current market expectations. Such events may lead to adverse changes in cash flows on our holdings of structured securities and future write-downs within our portfolio of structured securities.


	Less than 12 months							12 months or more							Total
(Dollar amounts in millions)	Fair value		Gross unrealized losses			Number of securities		Fair value		Gross unrealized losses ⁽¹⁾			Number of securities		Fair value		Gross unrealized losses ⁽¹⁾			Number of securities
Description of Securities
Fixed maturity securities:
U.S. government, agencies and government-sponsored enterprises	$	—	$	—			—	$	75	$	(1	)		10	$	75	$	(1	)		10
State and political subdivision		9		—			7		267		(27	)		45		276		(27	)		52
Non-U.S. government		64		(1	)		15		22		(1	)		4		86		(2	)		19
U.S. corporate		1,639		(33	)		231		1,201		(43	)		174		2,840		(76	)		405
Non-U.S. corporate		1,456		(67	)		199		504		(28	)		67		1,960		(95	)		266
Residential mortgage-backed		180		(1	)		24		249		(17	)		87		429		(18	)		111
Commercial mortgage-backed		163		—			21		362		(9	)		49		525		(9	)		70
Other asset-backed		1,551		(12	)		215		487		(42	)		55		2,038		(54	)		270

Subtotal, fixed maturity securities		5,062		(114	)		712		3,167		(168	)		491		8,229		(282	)		1,203
Equity securities		30		(3	)		46		48		(4	)		6		78		(7	)		52

Total for securities in an unrealized loss position	$	5,092	$	(117	)		758	$	3,215	$	(172	)		497	$	8,307	$	(289	)		1,255

% Below cost—fixed maturity securities:
<20% Below cost	$	5,025	$	(103	)		708	$	3,036	$	(114	)		470	$	8,061	$	(217	)		1,178
20%-50% Below cost		37		(11	)		4		131		(53	)		15		168		(64	)		19
>50% Below cost		—		—			—		—		(1	)		6		—		(1	)		6

Total fixed maturity securities		5,062		(114	)		712		3,167		(168	)		491		8,229		(282	)		1,203

% Below cost—equity securities:
<20% Below cost		26		(2	)		40		48		(4	)		6		74		(6	)		46
20%-50% Below cost		4		(1	)		6		—		—			—		4		(1	)		6

Total equity securities		30		(3	)		46		48		(4	)		6		78		(7	)		52

Total for securities in an unrealized loss position	$	5,092	$	(117	)		758	$	3,215	$	(172	)		497	$	8,307	$	(289	)		1,255

Investment grade	$	4,501	$	(75	)		631	$	2,918	$	(145	)		424	$	7,419	$	(220	)		1,055
Below investment grade ⁽²⁾		591		(42	)		127		297		(27	)		73		888		(69	)		200

Total for securities in an unrealized loss position	$	5,092	$	(117	)		758	$	3,215	$	(172	)		497	$	8,307	$	(289	)		1,255

⁽¹⁾	Amounts included $1 million of unrealized losses on other-than-temporarily impaired securities.

⁽²⁾	Amounts that have been in a continuous unrealized loss position for 12 months or more included $1 million of unrealized losses on other-than-temporarily impaired securities.


	Less than 12 months							12 months or more							Total
(Dollar amounts in millions)	Fair value		Gross unrealized losses			Number of securities		Fair value		Gross unrealized losses			Number of securities		Fair value		Gross unrealized losses			Number of securities
Description of Securities
U.S. corporate:
Utilities	$	55	$	—			10	$	164	$	(5	)		23	$	219	$	(5	)		33
Energy		404		(16	)		56		96		(5	)		15		500		(21	)		71
Finance and insurance		399		(3	)		56		257		(10	)		35		656		(13	)		91
Consumer—non-cyclical		160		(3	)		20		182		(5	)		32		342		(8	)		52
Technology and communications		181		(3	)		27		97		(1	)		15		278		(4	)		42
Industrial		151		(4	)		21		80		(4	)		11		231		(8	)		32
Capital goods		85		—			13		122		(5	)		18		207		(5	)		31
Consumer—cyclical		132		(2	)		17		139		(6	)		18		271		(8	)		35
Transportation		52		(2	)		9		57		(2	)		6		109		(4	)		15
Other		20		—			2		7		—			1		27		—			3

Subtotal, U.S. corporate securities		1,639		(33	)		231		1,201		(43	)		174		2,840		(76	)		405

Non-U.S. corporate:
Utilities		79		—			13		43		(2	)		5		122		(2	)		18
Energy		442		(33	)		57		58		(5	)		13		500		(38	)		70
Finance and insurance		237		(2	)		32		29		(1	)		6		266		(3	)		38
Consumer—non-cyclical		134		(6	)		10		83		(3	)		9		217		(9	)		19
Technology and communications		77		(2	)		13		81		(2	)		8		158		(4	)		21
Industrial		214		(9	)		30		116		(9	)		15		330		(18	)		45
Capital goods		63		(2	)		7		38		(3	)		4		101		(5	)		11
Consumer—cyclical		8		—			1		—		—			—		8		—			1
Transportation		30		—			6		14		(1	)		1		44		(1	)		7
Other		172		(13	)		30		42		(2	)		6		214		(15	)		36

Subtotal, non-U.S. corporate securities		1,456		(67	)		199		504		(28	)		67		1,960		(95	)		266

Total for corporate securities in an unrealized loss position	$	3,095	$	(100	)		430	$	1,705	$	(71	)		241	$	4,800	$	(171	)		671

The scheduled maturity distribution of fixed maturity securities as of December 31, 2015 is set forth below. Actual maturities may differ from contractual maturities because issuers of securities may have the right to call or prepay obligations with or without call or prepayment penalties.


(Amounts in millions)	Amortized cost or cost		Fair value
Due one year or less	$	1,729	$	1,744
Due after one year through five years		9,814		10,192
Due after five years through ten years		11,772		11,917
Due after ten years		21,249		23,403

Subtotal		44,564		47,256
Residential mortgage-backed		4,777		5,101
Commercial mortgage-backed		2,492		2,559
Other asset-backed		3,328		3,281

Total	$	55,161	$	58,197

As of December 31, 2015, $7,730 million of our investments (excluding mortgage-backed and asset-backed securities) were subject to certain call provisions.

As of December 31, 2015, securities issued by finance and insurance, consumer—non-cyclical , utilities and energy industry groups represented approximately 22%, 13%, 12% and 11%, respectively, of our domestic and foreign corporate fixed maturity securities portfolio. No other industry group comprised more than 10% of our investment portfolio.

As of December 31, 2015, we did not hold any fixed maturity securities in any single issuer, other than securities issued or guaranteed by the U.S. government, which exceeded 10% of stockholders’ equity.

As of December 31, 2015 and 2014, $44 million and $49 million, respectively, of securities were on deposit with various state or foreign government insurance departments in order to comply with relevant insurance regulations.

(e) Commercial Mortgage Loans

Our mortgage loans are collateralized by commercial properties, including multi-family residential buildings. The carrying value of commercial mortgage loans is stated at original cost net of principal payments, amortization and allowance for loan losses.

We diversify our commercial mortgage loans by both property type and geographic region. The following tables set forth the distribution across property type and geographic region for commercial mortgage loans as of December 31:


	2015						2014
(Amounts in millions)	Carrying value			% of total			Carrying value			% of total
Property type:
Retail	$	2,355			38	%	$	2,150			35	%
Industrial		1,562			25			1,597			26
Office		1,516			24			1,643			27
Apartments		465			8			494			8
Mixed use/other		289			5			239			4

Subtotal		6,187			100	%		6,123			100	%

Unamortized balance of loan origination fees and costs		(2	)					(1	)
Allowance for losses		(15	)					(22	)

Total	$	6,170					$	6,100


	2015						2014
(Amounts in millions)	Carrying value			% of total			Carrying value			% of total
Geographic region:
Pacific	$	1,581			26	%	$	1,636			27	%
South Atlantic		1,574			25			1,673			27
Middle Atlantic		890			14			826			14
Mountain		585			10			536			9
West North Central		416			7			382			6
East North Central		386			6			397			7
West South Central		294			5			268			4
New England		268			4			264			4
East South Central		193			3			141			2

Subtotal		6,187			100	%		6,123			100	%

Unamortized balance of loan origination fees and costs		(2	)					(1	)
Allowance for losses		(15	)					(22	)

Total	$	6,170					$	6,100

The following tables set forth the aging of past due commercial mortgage loans by property type as of December 31:


	2015
(Amounts in millions)	31 - 60 days past due			61 - 90 days past due			Greater than 90 days past due			Total past due			Current			Total
Property type:
Retail	$	—		$	—		$	—		$	—		$	2,355		$	2,355
Industrial		—			—			—			—			1,562			1,562
Office		6			—			5			11			1,505			1,516
Apartments		—			—			—			—			465			465
Mixed use/other		—			—			—			—			289			289

Total recorded investment	$	6		$	—		$	5		$	11		$	6,176		$	6,187

% of total commercial mortgage loans		—	%		—	%		—	%		—	%		100	%		100	%


	2014
(Amounts in millions)	31 - 60 days past due			61 - 90 days past due			Greater than 90 days past due			Total past due			Current			Total
Property type:
Retail	$	—		$	—		$	—		$	—		$	2,150		$	2,150
Industrial		—			—			2			2			1,595			1,597
Office		—			—			6			6			1,637			1,643
Apartments		—			—			—			—			494			494
Mixed use/other		—			—			—			—			239			239

Total recorded investment	$	—		$	—		$	8		$	8		$	6,115		$	6,123

% of total commercial mortgage loans		—	%		—	%		—	%		—	%		100	%		100	%

As of December 31, 2015 and 2014, we had no commercial mortgage loans that were past due for more than 90 days and still accruing interest. We also did not have any commercial mortgage loans that were past due for less than 90 days on non-accrual status as of December 31, 2015 and 2014.

We evaluate the impairment of commercial mortgage loans on an individual loan basis. As of December 31, 2015 and 2014, our commercial mortgage loans greater than 90 days past due included loans with appraised values in excess of the recorded investment and the current recorded investment of these loans was expected to be recoverable.

During the years ended December 31, 2015 and 2014, we modified or extended 21 and 28 commercial mortgage loans, respectively, with a total carrying value of $110 million and $254 million, respectively. All of these modifications or extensions were based on current market interest rates, did not result in any forgiveness in the outstanding principal amount owed by the borrower and were not considered troubled debt restructurings.

The following table sets forth the allowance for credit losses and recorded investment in commercial mortgage loans as of or for the years ended December 31:


(Amounts in millions)	2015			2014			2013
Allowance for credit losses:
Beginning balance	$	22		$	33		$	42
Charge-offs		(4	)		(1	)		(2	)
Recoveries		—			—			—
Provision		(3	)		(10	)		(7	)

Ending balance	$	15		$	22		$	33

Ending allowance for individually impaired loans	$	—		$	—		$	—

Ending allowance for loans not individually impaired that were evaluated collectively for impairment	$	15		$	22		$	33

Recorded investment:
Ending balance	$	6,187		$	6,123		$	5,932

Ending balance of individually impaired loans	$	19		$	15		$	2

Ending balance of loans not individually impaired that were evaluated collectively for impairment	$	6,168		$	6,108		$	5,930

As of December 31, 2015, we had an individually impaired commercial mortgage loan included within the office property type with a recorded investment of $5 million, an unpaid principal balance of $6 million and charge-offs of $1 million. As of December 31, 2014, we had an individually impaired commercial mortgage loan included within the industrial property type with a recorded investment of $15 million, an unpaid principal balance of $16 million and charge-offs of $1 million. As of December 31, 2015, this loan had a recorded investment of $14 million, an unpaid principal balance of $15 million and interest income of $1 million.

In evaluating the credit quality of commercial mortgage loans, we assess the performance of the underlying loans using both quantitative and qualitative criteria. Certain risks associated with commercial mortgage loans can be evaluated by reviewing both the loan-to-value and debt service coverage ratio to understand both the probability of the borrower not being able to make the necessary loan payments as well as the ability to sell the underlying property for an amount that would enable us to recover our unpaid principal balance in the event of default by the borrower. The average loan-to-value ratio is based on our most recent estimate of the fair value for the underlying property which is evaluated at least annually and updated more frequently if necessary to better indicate risk associated with the loan. A lower loan-to-value indicates that our loan value is more likely to be recovered in the event of default by the borrower if the property was sold. The debt service coverage ratio is based on “normalized” annual net operating income of the property compared to the payments required under the terms of the loan. Normalization allows for the removal of annual one-time events such as capital expenditures, prepaid or late real estate tax payments or non-recurring third-party fees (such as legal, consulting or contract fees). This ratio is evaluated at least annually and updated more frequently if necessary to better indicate risk associated with the loan. A higher debt service coverage ratio indicates the borrower is less likely to default on the loan. The debt service coverage ratio should not be used without considering other factors associated with the borrower, such as the borrower’s liquidity or access to other resources that may result in our expectation that the borrower will continue to make the future scheduled payments.

The following tables set forth the loan-to-value of commercial mortgage loans by property type as of December 31:


	2015
(Amounts in millions)	0%-50%			51%-60%			61%-75%			76%-100%			Greater than 100% ⁽¹⁾			Total
Property type:
Retail	$	846		$	465		$	924		$	106		$	14		$	2,355
Industrial		515			478			499			65			5			1,562
Office		493			341			580			83			19			1,516
Apartments		196			66			182			21			—			465
Mixed use/other		49			55			185			—			—			289

Total recorded investment	$	2,099		$	1,405		$	2,370		$	275		$	38		$	6,187

% of total		34	%		23	%		38	%		4	%		1	%		100	%

Weighted-average debt service coverage ratio		2.13			1.82			1.57			1.12			0.55			1.79

⁽¹⁾	Included $38 million of loans in good standing, where borrowers continued to make timely payments, with a total weighted-average loan-to-value of 123%.


	2014
(Amounts in millions)	0%-50%			51%-60%			61%-75%			76%-100%			Greater than 100% ⁽¹⁾			Total
Property type:
Retail	$	671		$	419		$	967		$	75		$	18		$	2,150
Industrial		451			285			778			60			23			1,597
Office		383			278			782			164			36			1,643
Apartments		211			76			199			8			—			494
Mixed use/other		45			43			145			6			—			239

Total recorded investment	$	1,761		$	1,101		$	2,871		$	313		$	77		$	6,123

% of total		29	%		18	%		47	%		5	%		1	%		100	%

Weighted-average debt service coverage ratio		2.27			1.75			1.61			1.02			0.72			1.78

⁽¹⁾	Included $15 million of impaired loans, $6 million of loans past due and not individually impaired and $56 million of loans in good standing, where borrowers continued to make timely payments, with a total weighted-average loan-to-value of 120%.

The following tables set forth the debt service coverage ratio for fixed rate commercial mortgage loans by property type as of December 31:


	2015
(Amounts in millions)	Less than 1.00			1.00-1.25			1.26-1.50			1.51-2.00			Greater than 2.00			Total
Property type:
Retail	$	70		$	232		$	466		$	1,017		$	570		$	2,355
Industrial		94			181			208			672			407			1,562
Office		85			114			265			699			346			1,509
Apartments		6			41			74			199			145			465
Mixed use/other		—			58			141			60			30			289

Total recorded investment	$	255		$	626		$	1,154		$	2,647		$	1,498		$	6,180

% of total		4	%		10	%		19	%		43	%		24	%		100	%

Weighted-average loan-to-value		74	%		64	%		58	%		58	%		43	%		56	%


	2014
(Amounts in millions)	Less than 1.00			1.00-1.25			1.26-1.50			1.51-2.00			Greater than 2.00			Total
Property type:
Retail	$	80		$	253		$	524		$	870		$	423		$	2,150
Industrial		158			142			246			706			343			1,595
Office		119			101			247			780			389			1,636
Apartments		1			48			88			186			171			494
Mixed use/other		6			1			61			135			36			239

Total recorded investment	$	364		$	545		$	1,166		$	2,677		$	1,362		$	6,114

% of total		6	%		9	%		19	%		44	%		22	%		100	%

Weighted-average loan-to-value		77	%		64	%		64	%		59	%		45	%		59	%

As of December 31, 2015 and 2014, we had floating rate commercial mortgage loans of $7 million and $9 million, respectively.

(f) Restricted Commercial Mortgage Loans Related To Securitization Entities

We have a consolidated securitization entity that holds commercial mortgage loans that are recorded as restricted commercial mortgage loans related to securitization entities. See note 17 for additional information related to consolidated securitization entities.

(g) Restricted Other Invested Assets Related To Securitization Entities

We have consolidated securitization entities that hold certain investments that are recorded as restricted other invested assets related to securitization entities. The consolidated securitization entities hold certain investments as trading securities whereby the changes in fair value are recorded in current period income (loss). The trading securities comprise asset-backed securities, including residual interest in certain policy loan securitization entities and highly rated bonds that are primarily backed by credit card receivables. See note 17 for additional information related to consolidated securitization entities.