Investments

On January 1, 2018, we adopted ASU 2016-01, which resulted in changes in the fair value of equity securities still held being reported in net income instead of being reported in other comprehensive income. See Note 1, Summary of Significant Accounting Policies, for additional discussion.

The following table provides cost or amortized cost, gross unrealized gains, gross unrealized losses and fair value for our fixed-maturity and equity securities:



(Dollars in millions)	Cost or amortized cost		Gross unrealized				Fair value
At December 31, 2018	Cost or amortized cost		gains		losses		Fair value
Fixed-maturity securities:
Corporate	$	5,712	$	85	$	87	$	5,710
States, municipalities and political subdivisions	4,251		84		31		4,304
Commercial mortgage-backed	287		3		2		288
Government-sponsored enterprises	316		1		7		310
United States government	67		1		1		67
Foreign government	10		—		—		10
Total	$	10,643	$	174	$	128	$	10,689
At December 31, 2017
Fixed-maturity securities:
Corporate	$	5,420	$	246	$	13	$	5,653
States, municipalities and political subdivisions	4,316		155		6		4,465
Commercial mortgage-backed	280		7		1		286
Government-sponsored enterprises	257		1		4		254
United States government	31		—		—		31
Foreign government	10		—		—		10
Subtotal	10,314		409		24		10,699
Equity securities:
Common equities	2,918		3,135		14		6,039
Nonredeemable preferred equities	176		34		—		210
Subtotal	3,094		3,169		14		6,249
Total	$	13,408	$	3,578	$	38	$	16,948

The net unrealized investment gains in our fixed-maturity portfolio at December 31, 2018, are primarily the result of the continued low interest rate environment that increased the fair value of our fixed-maturity portfolio. Our commercial mortgage-backed securities had an average rating of Aa1/AA at December 31, 2018 and 2017. At December 31, 2018, Microsoft Corporation (Nasdaq:MSFT) was our largest single equity holding with a fair value of $255 million, which was 4.4 percent of our publicly traded common equities portfolio and 1.5 percent of the total investment portfolio.

The table below provides fair values and unrealized losses by investment category and by the duration of the securities’ continuous unrealized loss positions:



(Dollars in millions)	Less than 12 months				12 months or more				Total
At December 31, 2018	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
Fixed-maturity securities:
Corporate	$	2,082	$	51	$	501	$	36	$	2,583	$	87
States, municipalities and political subdivisions	823		18		340		13		1,163		31
Commercial mortgage-backed	77		—		64		2		141		2
Government-sponsored enterprises	49		1		211		6		260		7
United States government	—		—		33		1		33		1
Total	$	3,031	$	70	$	1,149	$	58	$	4,180	$	128
At December 31, 2017
Fixed-maturity securities:
Corporate	$	330	$	4	$	252	$	9	$	582	$	13
States, municipalities and political subdivisions	88		1		264		5		352		6
Commercial mortgage-backed	33		—		36		1		69		1
Government-sponsored enterprises	96		1		124		3		220		4
Foreign government	10		—		—		—		10		—
United States government	23		—		6		—		29		—
Subtotal	580		6		682		18		1,262		24
Equity securities:
Common equities	229		14		—		—		229		14
Subtotal	229		14		—		—		229		14
Total	$	809	$	20	$	682	$	18	$	1,491	$	38

Contractual maturity dates for fixed-maturity investments were:



(Dollars in millions)	Amortized cost		Fair value		% of fair value
At December 31, 2018	Amortized cost		Fair value		% of fair value
Maturity dates:
Due in one year or less	$	586	$	592	5.5	%
Due after one year through five years	2,894		2,912		27.3
Due after five years through ten years	3,663		3,653		34.2
Due after ten years	3,500		3,532		33.0
Total	$	10,643	$	10,689	100.0	%

Actual maturities may differ from contractual maturities when there is a right to call or prepay obligations with or without call or prepayment penalties.

At December 31, 2018 and 2017, the company had fixed-maturity investments with a fair value of $112 million and $101 million, respectively, on deposit with various states in compliance with regulatory requirements. In addition, cash and fixed-maturity investments deposited with third parties used as collateral to secure liabilities on behalf of insureds, cedants and other creditors had a fair value of $75 million and $57 million at December 31, 2018 and 2017, respectively. In the normal course of investing activities, the company enters into investments in limited partnerships, including private equity and real estate investments, and asset-backed securities issued by third-parties. The company’s maximum exposure to loss with respect to these investments is limited to the investment carrying values included in the company’s consolidated balance sheets and any unfunded commitments.

The following table provides investment income and investment gains and losses:



(Dollars in millions)	Years ended December 31,
	2018			2017			2016
Investment income:
Interest	$	445		$	445		$	440
Dividends	181			170			161
Other	5			4			3
Total	631			619			604
Less investment expenses	12			10			9
Total	$	619		$	609		$	595

Investment gains and losses, net:
Equity securities:
Investment gains and losses on securities sold, net	$	9		$	—		$	—
Unrealized gains and losses on securities still held, net	(404		)	—			—
Gross realized gains	—			195			152
Gross realized losses	—			(72		)	(53		)
Other-than-temporary impairments	—			(3		)	—
Subtotal	(395		)	120			99
Fixed maturities:
Gross realized gains	12			25			26
Gross realized losses	(2		)	—			(1		)
Other-than-temporary impairments	(5		)	(6		)	(2		)
Subtotal	5			19			23

Other	(12		)	9			2
Total	(402		)	148			124

For the years ended December 31, 2018, 2017 and 2016, there were no credit losses on fixed-maturity securities for which a portion of OTTI has been recognized in other comprehensive income.

During 2018, we other-than-temporarily impaired one security. At December 31, 2018, 400 fixed-maturity investments with a total unrealized loss of $58 million had been in an unrealized loss position for 12 months or more. Of that total, no fixed-maturity investments had fair values below 70 percent of amortized cost.

During 2017, we other-than-temporarily impaired six securities. At December 31, 2017, 249 fixed-maturity investments with a total unrealized loss of $18 million had been in an unrealized loss position for 12 months or more. Of that total, no fixed-maturity investments had fair values below 70 percent of amortized cost. There were no equity security investments in an unrealized loss position for 12 months or more as of December 31, 2017.

During 2016, we other-than-temporarily impaired four securities. At December 31, 2016, 32 fixed-maturity investments with a total unrealized loss of $11 million had been in an unrealized loss position for 12 months or more. Of that total, no fixed-maturity investments had fair values below 70 percent of amortized cost. There were no equity security investments in an unrealized loss position for 12 months or more as of December 31, 2016.