| Investments |
2. Investments
AFS Securities—Our AFS investment portfolio includes bonds, collateralized loan obligations (CLO), asset-backed securities (ABS), commercial mortgage-backed securities (CMBS), residential mortgage-backed securities (RMBS) and redeemable preferred stock. Our AFS investment portfolio includes related party investments that are primarily comprised of investments over which Apollo can exercise significant influence. These investments are presented as investments in related parties on the condensed consolidated balance sheets, and are separately disclosed below.
The following table represents the amortized cost, allowance for credit losses, gross unrealized gains and losses and fair value of our AFS investments by asset type: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | March 31, 2021 | | (In millions) | Amortized Cost | | Allowance for Credit Losses | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Value | | AFS securities | | | | | | | | | | | US government and agencies | $ | 375 | | | $ | — | | | $ | 1 | | | $ | (25) | | | $ | 351 | | US state, municipal and political subdivisions | 898 | | | — | | | 115 | | | (7) | | | 1,006 | | | Foreign governments | 373 | | | — | | | 18 | | | (9) | | | 382 | | | Corporate | 55,922 | | | (8) | | | 3,750 | | | (816) | | | 58,848 | | | CLO | 11,299 | | | — | | | 94 | | | (121) | | | 11,272 | | | ABS | 4,761 | | | (11) | | | 152 | | | (70) | | | 4,832 | | | CMBS | 2,218 | | | (14) | | | 66 | | | (64) | | | 2,206 | | | RMBS | 6,344 | | | (78) | | | 383 | | | (22) | | | 6,627 | | | Total AFS securities | 82,190 | | | (111) | | | 4,579 | | | (1,134) | | | 85,524 | | | AFS securities – related party | | | | | | | | | | | Corporate | 213 | | | — | | | 8 | | | — | | | 221 | | | CLO | 1,864 | | | — | | | 13 | | | (8) | | | 1,869 | | ABS | 4,777 | | | — | | | 78 | | | (40) | | | 4,815 | | Total AFS securities – related party | 6,854 | | | — | | | 99 | | | (48) | | | 6,905 | | Total AFS securities including related party | $ | 89,044 | | | $ | (111) | | | $ | 4,678 | | | $ | (1,182) | | | $ | 92,429 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2020 | | (In millions) | Amortized Cost | | Allowance for Credit Losses | | Gross Unrealized Gains | | Gross Unrealized Losses | |
Fair Value | | AFS securities | | | | | | | | | | | US government and agencies | $ | 349 | | | $ | — | | | $ | 3 | | | $ | (1) | | | $ | 351 | | | US state, municipal and political subdivisions | 864 | | | — | | | 169 | | | — | | | 1,033 | | | Foreign governments | 330 | | | — | | | 38 | | | — | | | 368 | | | Corporate | 51,934 | | | (6) | | | 6,368 | | | (116) | | | 58,180 | | | CLO | 9,631 | | | (1) | | | 145 | | | (206) | | | 9,569 | | | ABS | 4,259 | | | (6) | | | 140 | | | (123) | | | 4,270 | | | CMBS | 2,165 | | | (10) | | | 85 | | | (71) | | | 2,169 | | | RMBS | 6,568 | | | (80) | | | 447 | | | (22) | | | 6,913 | | | Total AFS securities | 76,100 | | | (103) | | | 7,395 | | | (539) | | | 82,853 | | | AFS securities – related party | | | | | | | | | | | Corporate | 213 | | | — | | | 2 | | | — | | | 215 | | | CLO | 1,511 | | | (1) | | | 23 | | | (13) | | | 1,520 | | | ABS | 4,720 | | | — | | | 95 | | | (30) | | | 4,785 | | | Total AFS securities – related party | 6,444 | | | (1) | | | 120 | | | (43) | | | 6,520 | | | Total AFS securities including related party | $ | 82,544 | | | $ | (104) | | | $ | 7,515 | | | $ | (582) | | | $ | 89,373 | |
The amortized cost and fair value of AFS securities, including related party, are shown by contractual maturity below: | | | | | | | | | | | | | March 31, 2021 | | (In millions) | Amortized Cost | | Fair Value | | AFS securities | | | | | Due in one year or less | $ | 985 | | | $ | 1,000 | | | Due after one year through five years | 8,603 | | | 9,060 | | | Due after five years through ten years | 15,913 | | | 16,559 | | | Due after ten years | 32,067 | | | 33,968 | | | CLO, ABS, CMBS and RMBS | 24,622 | | | 24,937 | | | Total AFS securities | 82,190 | | | 85,524 | | | AFS securities – related party | | | | | | | | | Due after one year through five years | 18 | | | 19 | | | Due after five years through ten years | 195 | | | 202 | | | | | | | CLO and ABS | 6,641 | | | 6,684 | | Total AFS securities – related party | 6,854 | | | 6,905 | | | Total AFS securities including related party | $ | 89,044 | | | $ | 92,429 | |
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, for which an allowance for credit losses has not been recorded, aggregated by asset type and length of time the fair value has remained below amortized cost: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | March 31, 2021 | | Less than 12 months | | 12 months or more | | Total | | (In millions) | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses | | AFS securities | | | | | | | | | | | | US government and agencies | $ | 312 | | | $ | (25) | | | $ | — | | | $ | — | | | $ | 312 | | | $ | (25) | | US state, municipal and political subdivisions | 226 | | | (7) | | | 6 | | | — | | | 232 | | | (7) | | | Foreign governments | 211 | | | (9) | | | 1 | | | — | | | 212 | | | (9) | | | Corporate | 15,665 | | | (749) | | | 398 | | | (43) | | | 16,063 | | | (792) | | | CLO | 2,643 | | | (19) | | | 2,873 | | | (89) | | | 5,516 | | | (108) | | | ABS | 752 | | | (21) | | | 524 | | | (40) | | | 1,276 | | | (61) | | CMBS | 588 | | | (23) | | | 245 | | | (22) | | | 833 | | | (45) | | RMBS | 562 | | | (7) | | | 124 | | | (4) | | | 686 | | | (11) | | Total AFS securities | 20,959 | | | (860) | | | 4,171 | | | (198) | | | 25,130 | | | (1,058) | | | AFS securities – related party | | | | | | | | | | | | | | | | | | | | | | | | | CLO | 601 | | | (1) | | | 216 | | | (4) | | | 817 | | | (5) | | ABS | 2,262 | | | (40) | | | 14 | | | — | | | 2,276 | | | (40) | | Total AFS securities – related party | 2,863 | | | (41) | | | 230 | | | (4) | | | 3,093 | | | (45) | | Total AFS securities including related party | $ | 23,822 | | | $ | (901) | | | $ | 4,401 | | | $ | (202) | | | $ | 28,223 | | | $ | (1,103) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2020 | | Less than 12 months | | 12 months or more | | Total | | (In millions) | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses | | AFS securities | | | | | | | | | | | | US government and agencies | $ | 31 | | | $ | (1) | | | $ | — | | | $ | — | | | $ | 31 | | | $ | (1) | | US state, municipal and political subdivisions | 9 | | | — | | | 6 | | | — | | | 15 | | | — | | | Foreign governments | 2 | | | — | | | — | | | — | | | 2 | | | — | | | Corporate | 2,218 | | | (66) | | | 248 | | | (24) | | | 2,466 | | | (90) | | | CLO | 1,649 | | | (33) | | | 3,179 | | | (167) | | | 4,828 | | | (200) | | | ABS | 1,169 | | | (73) | | | 84 | | | (18) | | | 1,253 | | | (91) | | CMBS | 710 | | | (37) | | | 48 | | | (13) | | | 758 | | | (50) | | RMBS | 548 | | | (11) | | | 37 | | | (2) | | | 585 | | | (13) | | | Total AFS securities | 6,336 | | | (221) | | | 3,602 | | | (224) | | | 9,938 | | | (445) | | AFS securities – related party | | | | | | | | | | | | CLO | 336 | | | (3) | | | 232 | | | (10) | | | 568 | | | (13) | | ABS | 1,012 | | | (30) | | | — | | | — | | | 1,012 | | | (30) | | Total AFS securities – related party | 1,348 | | | (33) | | | 232 | | | (10) | | | 1,580 | | | (43) | | Total AFS securities including related party | $ | 7,684 | | | $ | (254) | | | $ | 3,834 | | | $ | (234) | | | $ | 11,518 | | | $ | (488) | |
The following summarizes the number of AFS securities that were in an unrealized loss position, including related party, for which an allowance for credit losses has not been recorded: | | | | | | | | | | | | | March 31, 2021 | | Unrealized loss position | | Unrealized loss position 12 months or more | | AFS securities | 3,556 | | | 480 | | | AFS securities – related party | 56 | | | 8 | |
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.
Allowance for Credit Losses—The following table summarizes the activity in the allowance for credit losses for AFS securities, including Purchase Credit Deteriorated (PCD) securities, by asset type: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Three months ended March 31, 2021 | | | | Additions | | Reductions | | | | | | (In millions) | Beginning balance | | Initial credit losses | | Initial credit losses on PCD securities | | Securities sold during the period | | | | | | | | Additions (reductions) to previously impaired securities | | Ending Balance | | AFS securities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Corporate | $ | 6 | | | $ | 2 | | | $ | — | | | $ | (2) | | | | | | | | | $ | 2 | | | $ | 8 | | | CLO | 1 | | | — | | | — | | | — | | | | | | | | | (1) | | | — | | | ABS | 6 | | | 5 | | | — | | | — | | | | | | | | | — | | | 11 | | CMBS | 10 | | | 2 | | | — | | | — | | | | | | | | | 2 | | | 14 | | RMBS | 80 | | | — | | | 2 | | | (3) | | | | | | | | | (1) | | | 78 | | | Total AFS securities | 103 | | | 9 | | | 2 | | | (5) | | | | | | | | | 2 | | | 111 | | | | | | | | | | | | | | | | | | | | | AFS securities – related party, CLO | 1 | | | — | | | — | | | (1) | | | | | | | | | — | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total AFS securities including related party | $ | 104 | | | $ | 9 | | | $ | 2 | | | $ | (6) | | | | | | | | | $ | 2 | | | $ | 111 | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Three months ended March 31, 2020 | | | | Additions | | Reductions | | | | | | (In millions) | Beginning balance | | Initial credit losses | | Initial credit losses on PCD securities | | Securities sold during the period | | | | | | | | Additions (reductions) to previously impaired securities | | Ending Balance | | AFS securities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Corporate | $ | — | | | $ | 15 | | | $ | — | | | $ | — | | | | | | | | | $ | — | | | $ | 15 | | | | | | | | | | | | | | | | | | | | | ABS | — | | | 5 | | | — | | | — | | | | | | | | | — | | | 5 | | | CMBS | — | | | 4 | | | — | | | — | | | | | | | | | — | | | 4 | | | RMBS | 17 | | | 35 | | | 1 | | | (1) | | | | | | | | | 2 | | | 54 | | | Total AFS securities | $ | 17 | | | $ | 59 | | | $ | 1 | | | $ | (1) | | | | | | | | | $ | 2 | | | $ | 78 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net Investment Income—Net investment income by asset class consists of the following: | | | | | | | | | | | | | | | | | | | Three months ended March 31, | | (In millions) | | | | | 2021 | | 2020 | | AFS securities | | | | | $ | 860 | | | $ | 837 | | | Trading securities | | | | | 63 | | | 48 | | | Equity securities | | | | | 4 | | | 4 | | | Mortgage loans | | | | | 192 | | | 186 | | | Investment funds | | | | | 463 | | | (278) | | | Funds withheld at interest | | | | | 206 | | | 41 | | | Other | | | | | 64 | | | 37 | | | Investment revenue | | | | | 1,852 | | | 875 | | | Investment expenses | | | | | (148) | | | (130) | | | Net investment income | | | | | $ | 1,704 | | | $ | 745 | |
Investment Related Gains (Losses)—Investment related gains (losses) by asset class consists of the following: | | | | | | | | | | | | | | | | | | | Three months ended March 31, | | (In millions) | | | | | 2021 | | 2020 | | AFS securities | | | | | | | | | Gross realized gains on investment activity | | | | | $ | 73 | | | $ | 164 | | | Gross realized losses on investment activity | | | | | (143) | | | (134) | | | Net realized investment gains (losses) on AFS securities | | | | | (70) | | | 30 | | | Net recognized investment losses on trading securities | | | | | (69) | | | (223) | | | Net recognized investment gains (losses) on equity securities | | | | | 17 | | | (50) | | | Derivative losses | | | | | (438) | | | (3,019) | | | Provision for credit losses | | | | | (8) | | | (284) | | | Other gains (losses) | | | | | 80 | | | (26) | | | Investment related gains (losses) | | | | | $ | (488) | | | $ | (3,572) | |
Proceeds from sales of AFS securities were $892 million and $1,807 million for the three months ended March 31, 2021 and 2020, respectively.
The following table summarizes the change in unrealized gains (losses) on trading and equity securities we held as of the respective period end: | | | | | | | | | | | | | | | | | | | Three months ended March 31, | | (In millions) | | | | | 2021 | | 2020 | | Trading securities | | | | | $ | (121) | | | $ | (73) | | | Trading securities – related party | | | | | 58 | | | (109) | | | Equity securities | | | | | 9 | | | (37) | | | Equity securities – related party | | | | | 6 | | | — | |
Purchased Financial Assets with Credit Deterioration—The following table summarizes our PCD investment purchases with the following amounts at the time of purchase: | | | | | | | | | | | | | | | | | | | | | Three months ended March 31, 2021 | | (In millions) | | | | | Fixed maturity securities | | Mortgage loans | | Purchase price | | | | | $ | 6 | | | $ | 335 | | | Allowance for credit losses at acquisition | | | | | 2 | | | 6 | | | Discount (premiums) attributable to other factors | | | | | (2) | | | (26) | | | Par value | | | | | $ | 6 | | | $ | 315 | |
Repurchase Agreements—The following table summarizes the maturities of our repurchase agreements: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | March 31, 2021 | | Remaining Contractual Maturity | | (In millions) | Overnight and continuous | | Less than 30 days | | 30-90 days | | 91 days to 1 year | | Greater than 1 year | | Total | Payables for repurchase agreements1 | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 599 | | | $ | 599 | | | | | | | | | | | | | | 1 Included in payables for collateral on derivatives and securities to repurchase on the condensed consolidated balance sheets. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2020 | | Remaining Contractual Maturity | | (In millions) | Overnight and continuous | | Less than 30 days | | 30-90 days | | 91 days to 1 year | | Greater than 1 year | | Total | Payables for repurchase agreements1 | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 598 | | | $ | 598 | | | | | | | | | | | | | | 1 Included in payables for collateral on derivatives and securities to repurchase on the condensed consolidated balance sheets. |
The following table summarizes the securities pledged as collateral for repurchase agreements: | | | | | | | | | | | | | | | | | | | | | | | | | March 31, 2021 | | December 31, 2020 | | (In millions) | Amortized Cost | | Fair Value | | Amortized Cost | | Fair Value | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | AFS securities – Corporate | $ | 553 | | | $ | 603 | | | $ | 559 | | | $ | 644 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Mortgage Loans, including related party—Mortgage loans, net of allowances, consists of the following: | | | | | | | | | | | | | (In millions) | March 31, 2021 | | December 31, 2020 | | Commercial mortgage loans | $ | 12,385 | | | $ | 11,383 | | | Commercial mortgage loans under development | 283 | | | 232 | | | Total commercial mortgage loans | 12,668 | | | 11,615 | | | Allowance for credit losses on commercial mortgage loans | (172) | | | (167) | | | Commercial mortgage loans, net of allowances | 12,496 | | | 11,448 | | | Residential mortgage loans | 4,967 | | | 4,569 | | | Allowance for credit losses on residential mortgage loans | (78) | | | (79) | | | Residential mortgage loans, net of allowances | 4,889 | | | 4,490 | | | Mortgage loans, net of allowances | $ | 17,385 | | | $ | 15,938 | |
We primarily invest in commercial mortgage loans on income producing properties including office and retail buildings, apartments, hotels and industrial properties. 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 allowances, by property type and geographic region, is as follows: | | | | | | | | | | | | | | | | | | | | | | | | | March 31, 2021 | | December 31, 2020 | | (In millions, except for percentages) | Net Carrying Value | | Percentage of Total | | Net Carrying Value | | Percentage of Total | | Property type | | | | | | | | | Office building | $ | 3,817 | | | 30.5 | % | | $ | 3,589 | | | 31.4 | % | | Retail | 2,100 | | | 16.8 | % | | 2,083 | | | 18.2 | % | | Apartment | 2,770 | | | 22.2 | % | | 2,441 | | | 21.3 | % | | Hotels | 1,334 | | | 10.7 | % | | 1,294 | | | 11.3 | % | | Industrial | 1,801 | | | 14.4 | % | | 1,362 | | | 11.9 | % | | Other commercial | 674 | | | 5.4 | % | | 679 | | | 5.9 | % | | Total commercial mortgage loans | $ | 12,496 | | | 100.0 | % | | $ | 11,448 | | | 100.0 | % | | | | | | | | | | US Region | | | | | | | | | East North Central | $ | 1,224 | | | 9.8 | % | | $ | 1,209 | | | 10.5 | % | | East South Central | 414 | | | 3.3 | % | | 402 | | | 3.5 | % | | Middle Atlantic | 3,227 | | | 25.8 | % | | 3,069 | | | 26.8 | % | | Mountain | 480 | | | 3.9 | % | | 487 | | | 4.2 | % | | New England | 376 | | | 3.0 | % | | 350 | | | 3.1 | % | | Pacific | 2,919 | | | 23.4 | % | | 2,746 | | | 24.0 | % | | South Atlantic | 1,875 | | | 15.0 | % | | 1,773 | | | 15.5 | % | | West North Central | 141 | | | 1.1 | % | | 145 | | | 1.3 | % | | West South Central | 674 | | | 5.4 | % | | 640 | | | 5.6 | % | | Total US Region | 11,330 | | | 90.7 | % | | 10,821 | | | 94.5 | % | | International Region | | | | | | | | | United Kingdom | 724 | | | 5.8 | % | | — | | | — | % | Other International1 | 442 | | | 3.5 | % | | 627 | | | 5.5 | % | | Total International Region | 1,166 | | | 9.3 | % | | 627 | | | 5.5 | % | | Total commercial mortgage loans | $ | 12,496 | | | 100.0 | % | | $ | 11,448 | | | 100.0 | % | | | | | | | | | 1 Represents all other countries, with each individual country comprising less than 5% of the portfolio. |
Our residential mortgage loan portfolio includes first lien residential mortgage loans collateralized by properties in various geographic locations and is summarized by proportion of the portfolio in the following table: | | | | | | | | | | | | | March 31, 2021 | | December 31, 2020 | | US States | | | | | California | 23.3 | % | | 24.8 | % | | Florida | 12.6 | % | | 13.3 | % | | New York | 6.7 | % | | 6.2 | % | Other1 | 43.1 | % | | 41.1 | % | | Total US residential mortgage loan percentage | 85.7 | % | | 85.4 | % | | International | | | | | Ireland | 11.1 | % | | 12.9 | % | Other2 | 3.2 | % | | 1.7 | % | | Total International residential mortgage loan percentage | 14.3 | % | | 14.6 | % | | Total residential mortgage loan percentage | 100.0 | % | | 100.0 | % | | | | | 1 Represents all other states, with each individual state comprising less than 5% of the portfolio. | 2 Represents all other countries, with each individual country comprising less than 5% of the portfolio. |
Loan Valuation Allowance—The allowances for our mortgage loan portfolio and other loans is summarized as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Three months ended March 31, 2021 | | (In millions) | | | | | | | | | Commercial Mortgage | | Residential Mortgage | | Other Investments | | Total | | Beginning balance | | | | | | | | | $ | 167 | | | $ | 79 | | | $ | 7 | | | $ | 253 | | | | | | | | | | | | | | | | | | Provision (reversal) for expected credit losses | | | | | | | | | 5 | | | (7) | | | (5) | | | (7) | | | Initial credit losses on PCD loans | | | | | | | | | — | | | 6 | | | — | | | 6 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Ending balance | | | | | | | | | $ | 172 | | | $ | 78 | | | $ | 2 | | | $ | 252 | |
| | | | | | | | | | | | | | | | | | | | | | | | | Three months ended March 31, 2020 | | (In millions) | Commercial Mortgage | | Residential Mortgage | | Other Investments | | Total | | Beginning balance | $ | 10 | | | $ | 1 | | | $ | — | | | $ | 11 | | | Adoption of accounting standard | 167 | | | 43 | | | 11 | | | 221 | | | Provision for expected credit losses | 166 | | | 37 | | | 1 | | | 204 | | | | | | | | | | | | | | | | | | | | | | | | | | | Ending balance | $ | 343 | | | $ | 81 | | | $ | 12 | | | $ | 436 | |
Commercial mortgage loans – Our allowance model for commercial mortgage loans is based on the characteristics of the loans in our portfolio, historical economic data and loss information, and current and forecasted economic conditions. Key loan characteristics affecting the estimate include, among others: time to maturity, delinquency status, loan-to-value ratios, debt service coverage ratios, etc. Key macroeconomic variables include unemployment rates, rent growth, capitalization rates, and the housing price index. Management reviews and approves forecasted macroeconomic variables, along with the reasonable and supportable forecast period and mean reversion technique. Management also evaluates assumptions from independent third parties and these assumptions have a high degree of subjectivity. The mean reversion technique varies by macroeconomic variable and may vary by geographic location. As of March 31, 2021, our reasonable and supportable forecast period was one year, after which, we revert to the 30-year or greater historical average or the 10-year US Department of the Treasury (Treasury) constant maturity rate over a period of up to eight years.
Residential mortgage loans – Our allowance model for residential mortgage loans is based on the characteristics of the loans in our portfolio, historical economic data and loss information, and current and forecasted economic conditions. Key loan characteristics affecting the estimate include, among others: time to maturity, delinquency status, original credit scores and loan-to-value ratios. Key macroeconomic variables include unemployment rates and the housing price index. Management reviews and approves forecasted macroeconomic variables, along with the reasonable and supportable forecast period and mean reversion technique. Management also evaluates assumptions from independent third parties and these assumptions have a high degree of subjectivity. The mean reversion technique varies by macroeconomic variable and may vary by geographic location. As of March 31, 2021, our reasonable and supportable forecast period was one year, after which, we revert to the 30-year or greater historical average over a period of up to one year and then continue at those averages through the contractual life of the loan.
Other investments – The allowance model for the loans included in other investments and related party other investments derives an estimate based on historical loss data available for similarly rated unsecured corporate debt obligations, while also incorporating management’s expectations around prepayment. See Note 9 – Related Parties for further information on the related party loans.
Credit Quality Indicators
Residential mortgage loans – The underwriting process for our residential mortgage loans includes an evaluation of relevant credit information including past loan performance, credit scores, loan-to-value and other relevant information. Subsequent to purchase or origination, we closely monitor economic conditions and loan performance to manage and evaluate our exposure to credit risk in our residential mortgage loan portfolio. The primary credit quality indicator monitored for residential mortgage loans is loan performance. Nonperforming residential mortgage loans are 90 days or more past due and/or are in non-accrual status. The following represents our residential loan portfolio by origination year and performance status: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | March 31, 2021 | | (In millions) | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | Total | | Current (less than 30 days past due) | $ | 542 | | | $ | 911 | | | $ | 789 | | | $ | 1,594 | | | $ | 458 | | | $ | 121 | | | $ | 4,415 | | | 30 to 59 days past due | 49 | | | 90 | | | 38 | | | 31 | | | 24 | | | 10 | | | 242 | | | 60 to 89 days past due | — | | | 16 | | | 66 | | | 15 | | | 8 | | | 3 | | | 108 | | | 90 days or more past due | — | | | 17 | | | 45 | | | 61 | | | 51 | | | 28 | | | 202 | | | Total residential mortgages | $ | 591 | | | $ | 1,034 | | | $ | 938 | | | $ | 1,701 | | | $ | 541 | | | $ | 162 | | | $ | 4,967 | | | | | | | | | | | | | | | | | December 31, 2020 | | (In millions) | 2020 | | 2019 | | 2018 | | 2017 | | 2016 | | Prior | | Total | | Current (less than 30 days past due) | $ | 955 | | | $ | 942 | | | $ | 1,730 | | | $ | 485 | | | $ | 141 | | | $ | 6 | | | $ | 4,259 | | | 30 to 59 days past due | 68 | | | 16 | | | 34 | | | 26 | | | 8 | | | 1 | | | 153 | | | 60 to 89 days past due | 15 | | | 7 | | | 16 | | | 9 | | | 3 | | | — | | | 50 | | | 90 days or more past due | 3 | | | 26 | | | 22 | | | 43 | | | 12 | | | 1 | | | 107 | | | Total residential mortgages | $ | 1,041 | | | $ | 991 | | | $ | 1,802 | | | $ | 563 | | | $ | 164 | | | $ | 8 | | | $ | 4,569 | | | | | | | | | | | | | | | |
The following represents our residential loan portfolio in non-accrual status: | | | | | | | | | | | | | (In millions) | March 31, 2021 | | December 31, 2020 | | Beginning amortized cost of residential mortgage loans in non-accrual status | $ | 107 | | | $ | 67 | | | Ending amortized cost of residential mortgage loans in non-accrual status | 199 | | | 107 | | | Amortized cost of residential mortgage loans in non-accrual status without a related allowance for credit losses | 38 | | | 13 | |
During the three months ended March 31, 2021 and 2020, we recognized $2 million and $1 million, respectively, of interest income on residential mortgage loans in non-accrual status.
Commercial mortgage loans – The following represents our commercial mortgage loan portfolio by origination year and loan performance status: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | March 31, 2021 | | (In millions) | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | Total | | Current (less than 30 days past due) | $ | 1,043 | | | $ | 1,982 | | | $ | 4,424 | | | $ | 2,653 | | | $ | 985 | | | $ | 1,529 | | | $ | 12,616 | | | 30 to 59 days past due | — | | | — | | | 5 | | | 22 | | | — | | | — | | | 27 | | | | | | | | | | | | | | | | | 90 days or more past due | — | | | — | | | — | | | — | | | 25 | | | — | | | 25 | | | Total commercial mortgages | $ | 1,043 | | | $ | 1,982 | | | $ | 4,429 | | | $ | 2,675 | | | $ | 1,010 | | | $ | 1,529 | | | $ | 12,668 | | | | | | | | | | | | | | | | | December 31, 2020 | | (In millions) | 2020 | | 2019 | | 2018 | | 2017 | | 2016 | | Prior | | Total | | Current (less than 30 days past due) | $ | 1,913 | | | $ | 4,400 | | | $ | 2,617 | | | $ | 987 | | | $ | 130 | | | $ | 1,452 | | | $ | 11,499 | | | 30 to 59 days past due | — | | | 20 | | | 45 | | | 25 | | | — | | | 5 | | | 95 | | | | | | | | | | | | | | | | | 90 days or more past due | — | | | — | | | — | | | — | | | — | | | 21 | | | 21 | | | Total commercial mortgages | $ | 1,913 | | | $ | 4,420 | | | $ | 2,662 | | | $ | 1,012 | | | $ | 130 | | | $ | 1,478 | | | $ | 11,615 | | | | | | | | | | | | | | | |
As of March 31, 2021 and December 31, 2020, we had $25 million and $0 million, respectively, of commercial mortgage loans that were 90 days or more past due and still accruing interest.
The following represents our commercial mortgage loan portfolio in non-accrual status: | | | | | | | | | | | | | (In millions) | March 31, 2021 | | December 31, 2020 | | Beginning amortized cost of commercial mortgage loans in non-accrual status | $ | 38 | | | $ | — | | | Ending amortized cost of commercial mortgage loans in non-accrual status | 37 | | | 38 | | | Amortized cost of commercial mortgage loans in non-accrual status without a related allowance for credit losses | — | | | — | |
During the three months ended March 31, 2021 and 2020, no interest income was recognized on commercial mortgage loans in non-accrual status. 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 the properties underlying these loans 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 value of the underlying collateral. Loan-to-value information is updated annually as part of the re-underwriting process supporting the NAIC risk-based capital rating criteria. The following represents the loan-to-value ratio of the commercial mortgage loan portfolio, excluding those under development, by origination year: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | March 31, 2021 | | (In millions) | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | Total | | Less than 50% | $ | 252 | | | $ | 453 | | | $ | 606 | | | $ | 201 | | | $ | 151 | | | $ | 1,140 | | | $ | 2,803 | | | 50% to 59% | 67 | | | 291 | | | 1,332 | | | 715 | | | 325 | | | 196 | | | 2,926 | | | 60% to 69% | 595 | | | 646 | | | 1,990 | | | 1,282 | | | 440 | | | 138 | | | 5,091 | | | 70% to 79% | 113 | | | 459 | | | 470 | | | 374 | | | 94 | | | 18 | | | 1,528 | | | | | | | | | | | | | | | | | 100% or greater | — | | | — | | | — | | | — | | | — | | | 37 | | | 37 | | | Commercial mortgage loans | $ | 1,027 | | | $ | 1,849 | | | $ | 4,398 | | | $ | 2,572 | | | $ | 1,010 | | | $ | 1,529 | | | $ | 12,385 | | | | | | | | | | | | | | | | | December 31, 2020 | | (In millions) | 2020 | | 2019 | | 2018 | | 2017 | | 2016 | | Prior | | Total | | Less than 50% | $ | 431 | | | $ | 600 | | | $ | 201 | | | $ | 152 | | | $ | 44 | | | $ | 1,153 | | | $ | 2,581 | | | 50% to 59% | 315 | | | 1,320 | | | 765 | | | 300 | | | 40 | | | 147 | | 2,887 | | | 60% to 69% | 583 | | | 1,988 | | | 1,222 | | | 440 | | | 46 | | | 106 | | 4,385 | | | 70% to 79% | 478 | | | 485 | | | 375 | | | 95 | | | — | | | 13 | | 1,446 | | | 80% to 99% | — | | | — | | | — | | | 25 | | | — | | | 21 | | 46 | | | 100% or greater | — | | | — | | | — | | | — | | | — | | | 38 | | 38 | | | Commercial mortgage loans | $ | 1,807 | | | $ | 4,393 | | | $ | 2,563 | | | $ | 1,012 | | | $ | 130 | | | $ | 1,478 | | | $ | 11,383 | |
The debt service coverage ratio is expressed as a percentage of a property’s net operating 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. Debt service coverage ratios are updated as more recent financial statements become available, at least annually or as frequently as quarterly in some cases. The following represents the debt service coverage ratio of the commercial mortgage loan portfolio, excluding those under development, by origination year: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | March 31, 2021 | | (In millions) | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | Total | | Greater than 1.20x | $ | 714 | | | $ | 1,068 | | | $ | 2,814 | | | $ | 2,224 | | | $ | 861 | | | $ | 1,399 | | | $ | 9,080 | | | 1.00x – 1.20x | 313 | | | 524 | | | 1,187 | | | 62 | | | 53 | | | 94 | | | 2,233 | | | Less than 1.00x | — | | | 257 | | | 397 | | | 286 | | | 96 | | | 36 | | | 1,072 | | | Commercial mortgage loans | $ | 1,027 | | | $ | 1,849 | | | $ | 4,398 | | | $ | 2,572 | | | $ | 1,010 | | | $ | 1,529 | | | $ | 12,385 | | | | | | | | | | | | | | | | | December 31, 2020 | | (In millions) | 2020 | | 2019 | | 2018 | | 2017 | | 2016 | | Prior | | Total | | Greater than 1.20x | $ | 1,274 | | | $ | 2,964 | | | $ | 2,440 | | | $ | 846 | | | $ | 129 | | | $ | 1,369 | | | $ | 9,022 | | | 1.00x – 1.20x | 533 | | | 1,122 | | | 36 | | | 70 | | | 1 | | | 101 | | | 1,863 | | | Less than 1.00x | — | | | 307 | | | 87 | | | 96 | | | — | | | 8 | | | 498 | | | Commercial mortgage loans | $ | 1,807 | | | $ | 4,393 | | | $ | 2,563 | | | $ | 1,012 | | | $ | 130 | | | $ | 1,478 | | | $ | 11,383 | |
Investment Funds—Our investment fund portfolio consists of funds that employ various strategies and include investments in real estate, real assets, credit, equity and natural resources. Investment funds can meet the definition of VIEs, which are discussed further in Note 4 – Variable Interest Entities. Our investment funds do not specify timing of distributions on the funds’ underlying assets.
The following summarizes our investment funds, including related party: | | | | | | | | | | | | | | | | | | | | | | | | | March 31, 2021 | | December 31, 2020 | | (In millions, except for percentages) | Carrying value | | Percent of total | | Carrying value | | Percent of total | | Investment funds | | | | | | | | | Real estate | $ | 462 | | | 47.8 | % | | $ | 348 | | | 43.3 | % | | Credit funds | 122 | | | 12.6 | % | | 107 | | | 13.3 | % | | Private equity | 300 | | | 31.1 | % | | 267 | | | 33.3 | % | | Real assets | 82 | | | 8.5 | % | | 81 | | | 10.1 | % | | | | | | | | | | | | | | | | | | Total investment funds | 966 | | | 100.0 | % | | 803 | | | 100.0 | % | Investment funds – related parties | | | | | | | | | Differentiated investments | | | | | | | | | | | | | | | | AmeriHome Mortgage Company, LLC (AmeriHome)1 | 583 | | | 9.9 | % | | 444 | | | 8.4 | % | | Catalina Holdings Ltd. (Catalina) | 344 | | | 5.8 | % | | 334 | | | 6.3 | % | Athora Holding Ltd. (Athora)1 | 689 | | | 11.7 | % | | 709 | | | 13.4 | % | Venerable Holdings, Inc. (Venerable)1 | 316 | | | 5.4 | % | | 123 | | | 2.3 | % | | Other | 308 | | | 5.2 | % | | 279 | | | 5.3 | % | | Total differentiated investments | 2,240 | | | 38.0 | % | | 1,889 | | | 35.7 | % | | Real estate | 942 | | | 16.0 | % | | 828 | | | 15.7 | % | | Credit funds | 398 | | | 6.7 | % | | 375 | | | 7.1 | % | | Private equity | 689 | | | 11.7 | % | | 473 | | | 8.9 | % | | Real assets | 139 | | | 2.3 | % | | 172 | | | 3.3 | % | | Natural resources | 110 | | | 1.9 | % | | 113 | | | 2.1 | % | | Public equities | 100 | | | 1.7 | % | | 110 | | | 2.1 | % | Investment in Apollo1 | 1,281 | | | 21.7 | % | | 1,324 | | | 25.1 | % | | Total investment funds – related parties | 5,899 | | | 100.0 | % | | 5,284 | | | 100.0 | % | Total investment funds including related party | $ | 6,865 | | | | | $ | 6,087 | | | | | | | | | | | | 1 Our AmeriHome investment was held indirectly through A-A Mortgage Opportunities, L.P. (A-A Mortgage). Our Venerable investment is in its parent company, VA Capital Company LLC (VA Capital). See further discussion on these investments and our investments in Apollo and Athora in Note 9 – Related Parties. |
Summarized Ownership of Equity Method Investees—The following is the summarized income statement information of our equity method investees, A-A Mortgage and VA Capital: | | | | | | | | | | | | | Three months ended March 31, | | (In millions) | 2021 | | 2020 | | Net income – VA Capital | $ | 913 | | | $ | 48 | | | Net income – A-A Mortgage | 261 | | | 39 | |
Non-Consolidated Securities and Investment Funds
Fixed maturity securities – We invest in securitization entities as a debt holder or an investor in the residual interest of the securitization vehicle. These entities are deemed VIEs due to insufficient equity within the structure and lack of control by the equity investors over the activities that significantly impact the economics of the entity. In general, we are a debt investor within these entities and, as such, hold a variable interest; however, due to the debt holders’ lack of ability to control the decisions within the trust that significantly impact the entity, and the fact the debt holders are protected from losses due to the subordination of the equity tranche, the debt holders are not deemed the primary beneficiary. Securitization vehicles in which we hold the residual tranche are not consolidated because we do not unilaterally have substantive rights to remove the general partner, or when assessing related party interests, we are not under common control, as defined by GAAP, with the related party, nor are substantially all of the activities conducted on our behalf; therefore, we are not deemed the primary beneficiary. Debt investments and investments in the residual tranche of securitization entities are considered debt instruments and are held at fair value on the balance sheet and classified as AFS or trading.
Investment funds – Investment funds include non-fixed income, alternative investments in the form of limited partnerships or similar legal structures.
Equity securities – We invest in preferred equity securities issued by entities deemed to be VIEs due to insufficient equity within the structure. Our risk of loss associated with our non-consolidated investments depends on the investment. Investment funds, equity securities and trading securities are limited to the carrying value plus unfunded commitments. AFS securities are limited to amortized cost plus unfunded commitments.
The following summarizes the carrying value and maximum loss exposure of these non-consolidated investments: | | | | | | | | | | | | | | | | | | | | | | | | | March 31, 2021 | | December 31, 2020 | | (In millions) | Carrying Value | | Maximum Loss Exposure | | Carrying Value | | Maximum Loss Exposure | | Investment funds | $ | 966 | | | $ | 1,605 | | | $ | 803 | | | $ | 1,265 | | | Investment in related parties – investment funds | 5,899 | | | 8,664 | | | 5,284 | | | 7,989 | | | Investment in fixed maturity securities | 25,324 | | | 25,009 | | | 23,325 | | | 23,027 | | | Investment in related parties – fixed maturity securities | 8,394 | | | 9,738 | | | 7,834 | | | 8,126 | | | Investment in related parties – equity securities | 114 | | | 114 | | | 72 | | | 72 | | | Total non-consolidated investments | $ | 40,697 | | | $ | 45,130 | | | $ | 37,318 | | | $ | 40,479 | |
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