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Investments
 12 Months Ended
Dec. 31, 2016
Investments Schedule [Abstract]  
Investments
2. Investments

Available-for-sale Securities—The following table represents the cost or amortized cost, gross unrealized gains and losses, fair value and OTTI in AOCI of our AFS investments by asset type. Our AFS investment portfolio includes direct investments in affiliates of Apollo where Apollo can exercise significant influence over the affiliates. These investments are presented as investments in related parties on the consolidated balance sheets, and are separately disclosed below.
 
December 31, 2016
(In millions)
Cost or Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
 
OTTI
in AOCI
Fixed maturity securities
 
 
 
 
 
 
 
 
 
U.S. government and agencies
$
59

 
$
1

 
$
—

 
$
60

 
$
—

U.S. state, municipal and political subdivisions
1,024

 
117

 
(1
)
 
1,140

 
—

Foreign governments
2,098

 
143

 
(6
)
 
2,235

 
—

Corporate
29,433

 
901

 
(314
)
 
30,020

 
2

CLO
4,950

 
14

 
(142
)
 
4,822

 
—

ABS
2,980

 
25

 
(69
)
 
2,936

 
—

CMBS
1,835

 
38

 
(26
)
 
1,847

 
—

RMBS
8,731

 
313

 
(71
)
 
8,973

 
15

Total fixed maturity securities
51,110

 
1,552

 
(629
)
 
52,033

 
17

Equity securities
319

 
35

 
(1
)
 
353

 
—

Total AFS securities
51,429

 
1,587

 
(630
)
 
52,386

 
17

Fixed maturity securities – related party
 
 
 
 
 
 
 
 
 
CLO
284

 
1

 
(6
)
 
279

 
—

ABS
57

 
—

 
(1
)
 
56

 
—

Total fixed maturity securities – related party
341

 
1

 
(7
)
 
335

 
—

Equity securities – related party
20

 
—

 
—

 
20

 
—

Total AFS securities – related party
361

 
1

 
(7
)
 
355

 
—

Total AFS securities including related party
$
51,790

 
$
1,588

 
$
(637
)
 
$
52,741

 
$
17


 
December 31, 2015
(In millions)
Cost or Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
 
OTTI
in AOCI
Fixed maturity securities
 
 
 
 
 
 
 
 
 
U.S. government and agencies
$
44

 
$
1

 
$
—

 
$
45

 
$
—

U.S. state, municipal and political subdivisions
1,075

 
100

 
(10
)
 
1,165

 
7

Foreign governments
2,467

 
17

 
(20
)
 
2,464

 
—

Corporate
26,979

 
523

 
(566
)
 
26,936

 
2

CLO
4,943

 
4

 
(392
)
 
4,555

 
—

ABS
2,944

 
33

 
(59
)
 
2,918

 
—

CMBS
1,725

 
33

 
(20
)
 
1,738

 
—

RMBS
8,050

 
128

 
(183
)
 
7,995

 
6

Total fixed maturity securities
48,227

 
839

 
(1,250
)
 
47,816

 
15

Equity securities
367

 
40

 
—

 
407

 
—

Total AFS securities
48,594

 
879

 
(1,250
)
 
48,223

 
15

Fixed maturity securities – related party
 
 
 
 
 
 
 
 
 
CLO
271

 
—

 
(23
)
 
248

 
—

ABS
61

 
—

 
(1
)
 
60

 
—

Total AFS securities – related party
332

 
—

 
(24
)
 
308

 
—

Total AFS securities including related party
$
48,926

 
$
879

 
$
(1,274
)
 
$
48,531

 
$
15



The amortized cost and fair value of fixed maturity AFS securities, including related party, are shown by contractual maturity below:    
 
December 31, 2016
(In millions)
Amortized Cost
 
Fair Value
Due in one year or less
$
831

 
$
835

Due after one year through five years
6,958

 
7,092

Due after five years through ten years
11,299

 
11,520

Due after ten years
13,526

 
14,008

CLO, ABS, CMBS and RMBS
18,496

 
18,578

Total AFS fixed maturity securities
51,110

 
52,033

Fixed maturity securities – related party, CLO and ABS
341

 
335

Total AFS fixed maturity securities including related party
$
51,451

 
$
52,368



Actual maturities can differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

Unrealized Losses on AFS Securities—The following summarizes the fair value and gross unrealized losses for AFS securities, including related party, aggregated by class of security and length of time the fair value has remained below cost or amortized cost:
 
December 31, 2016
 
Less than 12 months
 
12 months or greater
 
Total
(In millions)
Fair Value
 
Gross
Unrealized
Losses
 
Fair Value
 
Gross
Unrealized
Losses
 
Fair Value
 
Gross
Unrealized
Losses
Fixed maturity securities
 
 
 
 
 
 
 
 
 
 
 
U.S. government and agencies
$
1

 
$
—

 
$
—

 
$
—

 
$
1

 
$
—

U.S. state, municipal and political subdivisions
85

 
(1
)
 
2

 
—

 
87

 
(1
)
Foreign governments
137

 
(5
)
 
9

 
(1
)
 
146

 
(6
)
Corporate
6,136

 
(228
)
 
1,113

 
(86
)
 
7,249

 
(314
)
CLO
388

 
(2
)
 
3,102

 
(140
)
 
3,490

 
(142
)
ABS
865

 
(17
)
 
767

 
(52
)
 
1,632

 
(69
)
CMBS
576

 
(18
)
 
183

 
(8
)
 
759

 
(26
)
RMBS
1,143

 
(19
)
 
1,727

 
(52
)
 
2,870

 
(71
)
Total fixed maturity securities
9,331

 
(290
)
 
6,903

 
(339
)
 
16,234

 
(629
)
Equity securities
179

 
(1
)
 
—

 
—

 
179

 
(1
)
Total AFS securities
9,510

 
(291
)
 
6,903

 
(339
)
 
16,413

 
(630
)
Fixed maturity securities – related party
 
 
 
 
 
 
 
 
 
 
 
CLO
68

 
—

 
100

 
(6
)
 
168

 
(6
)
ABS
—

 
—

 
56

 
(1
)
 
56

 
(1
)
Total fixed maturity securities – related party
68

 
—

 
156

 
(7
)
 
224

 
(7
)
Equity securities – related party
14

 
—

 
—

 
—

 
14

 
—

Total AFS securities – related party
82

 
—

 
156

 
(7
)
 
238

 
(7
)
Total AFS securities including related party
$
9,592

 
$
(291
)
 
$
7,059

 
$
(346
)
 
$
16,651

 
$
(637
)

 
December 31, 2015
 
Less than 12 months
 
12 months or greater
 
Total
(In millions)
Fair Value
 
Gross
Unrealized
Losses
 
Fair Value
 
Gross Unrealized Losses
 
Fair Value
 
Gross Unrealized Losses
Fixed maturity securities
 
 
 
 
 
 
 
 
 
 
 
U.S. government and agencies
$
4

 
$
—

 
$
2

 
$
—

 
$
6

 
$
—

U.S. state, municipal and political subdivisions
63

 
(9
)
 
8

 
(1
)
 
71

 
(10
)
Foreign governments
711

 
(20
)
 
—

 
—

 
711

 
(20
)
Corporate
7,810

 
(450
)
 
554

 
(116
)
 
8,364

 
(566
)
CLO
2,934

 
(169
)
 
1,555

 
(223
)
 
4,489

 
(392
)
ABS
1,484

 
(37
)
 
371

 
(22
)
 
1,855

 
(59
)
CMBS
577

 
(11
)
 
119

 
(9
)
 
696

 
(20
)
RMBS
4,672

 
(128
)
 
995

 
(55
)
 
5,667

 
(183
)
Total AFS securities
18,255

 
(824
)
 
3,604

 
(426
)
 
21,859

 
(1,250
)
Fixed maturity securities – related party
 
 
 
 
 
 
 
 
 
 
 
CLO
139

 
(14
)
 
72

 
(9
)
 
211

 
(23
)
ABS
60

 
(1
)
 
—

 
—

 
60

 
(1
)
Total AFS securities – related party
199

 
(15
)
 
72

 
(9
)
 
271

 
(24
)
Total AFS securities including related party
$
18,454

 
$
(839
)
 
$
3,676

 
$
(435
)
 
$
22,130

 
$
(1,274
)


As of December 31, 2016, we held 2,117 AFS securities that were in an unrealized loss position. Of this total, 899 were in an unrealized loss position longer than 12 months. As of December 31, 2016, we held 14 related party AFS securities that were in an unrealized loss position. Of this total, 10 were in an unrealized loss position longer than 12 months. The unrealized losses on AFS securities can primarily be attributed to changes in market interest rates since acquisition. We did not recognize the unrealized losses in income as we intend to hold these securities and it is not more likely than not we will be required to sell a security before the recovery of its amortized cost.

Other-Than-Temporary Impairments—For the year ended December 31, 2016, we incurred $30 million of net OTTI, of which $5 million related to intent-to-sell impairments. These securities were impaired to fair value as of the impairment date. The remainder of net OTTI of $25 million related to credit impairments, of which $14 million related to credit loss impairments that we impaired to fair value and did not bifurcate a portion of the impairment in AOCI. The credit loss impairments not bifurcated in AOCI are excluded from the rollforward below.

The following table represents a rollforward of the cumulative amounts recognized on the consolidated statements of income for OTTI related to pre-tax credit loss impairments on AFS fixed maturity securities, for which a portion of the securities' total OTTI was recognized in AOCI:
 
Years ended December 31,
(In millions)
2016
 
2015
 
2014
Beginning balance
$
22

 
$
8

 
$
3

Initial impairments – credit loss OTTI recognized on securities not previously impaired
8

 
19

 
3

Additional impairments – credit loss OTTI recognized on securities previously impaired
3

 
1

 
2

Reduction in impairments from securities sold
(9
)
 
(2
)
 
—

Reduction for credit loss that no longer has a portion of the OTTI loss recognized in AOCI
(8
)
 
(4
)
 
—

Ending balance
$
16

 
$
22

 
$
8



Net Investment Income—Net investment income by asset type consists of the following:
 
Years ended December 31,
(In millions)
2016

2015

2014
AFS securities
 
 
 
 
 
Fixed maturity securities
$
2,293

 
$
2,051

 
$
1,868

Equity securities
9

 
7

 
6

Trading securities
238

 
196

 
136

Mortgage loans, net of allowances
355

 
320

 
347

Investment funds
180

 
109

 
177

Funds withheld at interest
82

 
54

 
46

Other
62

 
44

 
24

Investment revenue
3,219

 
2,781

 
2,604

Investment expenses
(303
)
 
(273
)
 
(271
)
Net investment income
$
2,916

 
$
2,508

 
$
2,333



Investment Related Gains (Losses)—Investment related gains (losses) by asset type consist of the following:
 
Years ended December 31,
(In millions)
2016

2015

2014
AFS fixed maturity securities
 
 
 
 
 
Gross realized gain on investment activity
$
138

 
$
150

 
$
203

Gross realized loss on investment activity
(54
)
 
(86
)
 
(22
)
Net realized investment gains on fixed maturity securities
84


64

 
181

Net realized investment gains (losses) on trading securities
(33
)
 
(228
)
 
242

Derivative gains (losses)
596

 
(277
)
 
792

Other gains (losses)
5

 
11

 
(5
)
Investment related gains (losses)
$
652

 
$
(430
)
 
$
1,210



Proceeds from sales of AFS securities were $4,662 million, $6,899 million and $6,391 million for the years ended December 31, 2016, 2015 and 2014, respectively.

Included in net realized investment gains (losses) on trading securities are gains of $38 million, losses of $133 million and gains of $258 million resulting from the change in unrealized gains or losses for the underlying securities we still held as of December 31, 2016, 2015 and 2014, respectively. Also included in net realized investment gains (losses) on trading securities are related party losses of $10 million, losses of $10 million and gains of $13 million resulting from the change in unrealized gains or losses for the underlying securities we still held as of December 31, 2016, 2015 and 2014, respectively.

PCI Investments—The following table summarizes our PCI investments:
 
December 31,
 
2016
 
2015
 
2016
(In millions)
Fixed maturity securities
 
Mortgage loans3
Contractually required payments1
$
7,761

 
$
7,291

 
$
424

Less: Cash flows expected to be collected2
(5,285
)
 
(4,986
)
 
(286
)
Non-accretable difference
$
2,476

 
$
2,305

 
$
138

 
 
 
 
 
 
Cash flows expected to be collected
$
5,285

 
$
4,986

 
$
286

Less: Amortized cost
(3,898
)
 
(3,673
)
 
(220
)
Accretable difference
$
1,387

 
$
1,313

 
$
66

 
 
 
 
 
 
Fair value
$
4,029

 
$
3,647

 
$
221

 
 
 
 
 
 
1 Includes principal and accrued interest.
2 Represents the acquisition date undiscounted principal and interest cash flows expected.
3 As of December 31, 2015, we did not hold any investments in PCI mortgage loans.

During the respective year, we acquired PCI investments with the following amounts at the time of purchase:
 
December 31,
 
2016
 
2015
 
2016
(In millions)
Fixed maturity securities
 
Mortgage loans1
Contractually required principal and interest
$
1,631

 
$
1,999

 
$
425

Expected cash flows
1,027

 
1,277

 
287

Estimated fair value
761

 
937

 
221

 
 
 
 
 
 
1 As of December 31, 2015, we did not hold any investments in PCI mortgage loans.

The following tables summarize the activity for the accretable yield on PCI investments:
 
2016
 
2015
 
2016
(In millions)
Fixed maturity securities
 
Mortgage loans1
Beginning balance at January 1
$
1,313

 
$
1,330

 
$
—

Purchases of PCI investments, net of sales
231

 
243

 
66

Accretion
(112
)
 
(113
)
 
(1
)
Changes in expected cash flows
(45
)
 
(147
)
 
1

Ending balance at December 31
$
1,387

 
$
1,313

 
$
66

 
 
 
 
 
 
1 During the year ended December 31, 2015, we did not hold any investments in PCI mortgage loans.


Mortgage Loans—Mortgage loans, net of allowances, consist of the following:
 
December 31,
(In millions)
2016
 
2015
Commercial mortgage loans
$
5,058

 
$
5,178

Commercial mortgage loans under development
74

 
222

Total commercial mortgage loans
5,132

 
5,400

Residential mortgage loans
338

 
100

Mortgage loans, net of allowances
$
5,470

 
$
5,500



We primarily make commercial mortgage loans on income producing properties including hotels, industrial properties and retail and office buildings. We diversify the commercial mortgage loan portfolio by geographic region and property type to reduce concentration risk. We evaluate mortgage loans based on relevant current information to confirm if properties are performing at a consistent and acceptable level to secure the related debt.

The distribution of commercial mortgage loans, including those under development, net of valuation allowances, by property type and geographic region, is as follows:
 
December 31,
 
2016
 
2015
(In millions, except for percentages)
Net Carrying Value
 
Percentage of Total
 
Net Carrying Value
 
Percentage of Total
Property type
 
 
 
 
 
 
 
Hotels
$
1,025

 
20.0
%
 
$
877

 
16.2
%
Retail
1,135

 
22.1
%
 
1,230

 
22.8
%
Office building
1,217

 
23.7
%
 
1,274

 
23.6
%
Industrial
742

 
14.5
%
 
821

 
15.2
%
Apartment
616

 
12.0
%
 
907

 
16.8
%
Other commercial
397

 
7.7
%
 
291

 
5.4
%
Total commercial mortgage loans
$
5,132

 
100.0
%
 
$
5,400

 
100.0
%
 
 
 
 
 
 
 
 
U.S. Region
 
 
 
 
 
 
 
East North Central
$
450

 
8.8
%
 
$
443

 
8.2
%
East South Central
158

 
3.1
%
 
129

 
2.4
%
Middle Atlantic
628

 
12.2
%
 
804

 
14.9
%
Mountain
543

 
10.6
%
 
583

 
10.8
%
New England
194

 
3.8
%
 
181

 
3.3
%
Pacific
833

 
16.2
%
 
838

 
15.5
%
South Atlantic
1,284

 
25.0
%
 
1,231

 
22.8
%
West North Central
306

 
6.0
%
 
291

 
5.4
%
West South Central
662

 
12.9
%
 
792

 
14.7
%
Total U.S. Region
5,058

 
98.6
%
 
5,292

 
98.0
%
International Region
74

 
1.4
%
 
108

 
2.0
%
Total commercial mortgage loans
$
5,132

 
100.0
%
 
$
5,400

 
100.0
%


Our residential mortgage loan portfolio includes first lien residential mortgage loans, collateralized by properties located in the U.S. As of December 31, 2016, California, Florida and New York represented 38.9%, 9.1% and 5.1%, respectively, of the portfolio. The remaining 46.9% represented all other states, with each individual state comprising less than 5% of the portfolio. As of December 31, 2015, California, Texas and Washington represented 64.8%, 10.1% and 5.6%, respectively, of the portfolio, and the remaining 19.5% represented all other states, with each individual state comprising less than 5% of the portfolio.

Mortgage Loan Valuation Allowance—The assessment of mortgage loan impairments and valuation allowances is substantially the same for residential and commercial mortgage loans. The valuation allowance was $2 million as of December 31, 2016 and 2015. We did not record any material impairments or significant activity in the valuation allowance during the years ended December 31, 2016, 2015 or 2014.

Residential mortgage loans – The primary credit quality indicator of residential mortgage loans is loan performance. Nonperforming residential mortgage loans are 90 days or more past due and/or are in non-accrual status. All of our residential mortgage loans were performing as of December 31, 2016 and 2015.

Commercial mortgage loans – The following provides the aging of our commercial mortgage loan portfolio, including those under development, net of valuation allowances:
    
 
December 31,
(In millions)
2016
 
2015
Current (less than 30 days past due)
$
5,111

 
$
5,360

30 to 60 days past due
—

 
1

Over 90 days past due
21

 
39

Total commercial mortgage loans
$
5,132

 
$
5,400



Loan-to-value and debt service coverage ratios are measures we use to assess the risk and quality of commercial mortgage loans other than those under development. Loans under development are not evaluated using these ratios as they are generally not yet income-producing and the value of the underlying property significantly fluctuates based on the progress of construction. Therefore, the risk and quality of loans under development are evaluated based on the aging and geographical distribution of such loans as shown above.

The loan-to-value ratio is expressed as a percentage of the amount of the loan relative to the value of the underlying property. A loan-to-value ratio in excess of 100% indicates the unpaid loan amount exceeds the underlying collateral. The following represents the loan-to-value ratio of the commercial mortgage loan portfolio, excluding those under development, net of valuation allowances:
    
 
December 31,
(In millions)
2016
 
2015
Less than 50%
$
1,787

 
$
2,087

50% to 60%
1,337

 
1,024

61% to 70%
1,401

 
1,299

71% to 100%
492

 
697

Greater than 100%
41

 
71

Commercial mortgage loans
$
5,058

 
$
5,178



The debt service coverage ratio, based upon the most recent financial statements, is expressed as a percentage of a property's net income to its debt service payments. A debt service ratio of less than 1.0 indicates a property's operations do not generate enough income to cover debt payments. The following represents the debt service coverage ratio of the commercial mortgage loan portfolio, excluding those under development, net of valuation allowances:
    
 
December 31,
(In millions)
2016
 
2015
Greater than 1.20x
$
4,378

 
$
4,455

1.00x – 1.20x
353

 
471

Less than 1.00x
327

 
252

Commercial mortgage loans
$
5,058

 
$
5,178



Real Estate—Depreciation expense on invested real estate was $9 million and $2 million during the years ended December 31, 2016 and 2015, respectively. Accumulated depreciation was $11 million and $2 million as of December 31, 2016 and 2015, respectively.

Investment Funds—Our investment fund portfolio consists of funds that employ various strategies and include investments in mortgage and real estate, credit, private equity, natural resources and hedge funds. Investment funds meet the definition of variable interest entities and are discussed further in Note 4 – Variable Interest Entities.