Investments

9 Months Ended

Sep. 30, 2017

Investments [Abstract]

Investments

Investments

The significant components of Net investment income are presented in the following table.

Periods ended September 30	Three Months						Nine Months
(In millions)	2017			2016			2017			2016
Fixed maturity securities	$	455		$	457		$	1,367		$	1,352
Equity securities	1			1			4			8
Limited partnership investments	51			65			157			97
Mortgage loans	9			8			24			30
Short term investments	4			2			10			6
Trading portfolio	3			1			9			7
Other	1			4			2			4
Gross investment income	524			538			1,573			1,504
Investment expense	(15		)	(14		)	(44		)	(43		)
Net investment income	$	509		$	524		$	1,529		$	1,461

Net realized investment gains (losses) are presented in the following table.

Periods ended September 30	Three Months						Nine Months
(In millions)	2017			2016			2017			2016
Net realized investment gains (losses):
Fixed maturity securities:
Gross realized gains	$	34		$	67		$	139		$	152
Gross realized losses	(18		)	(20		)	(47		)	(106		)
Net realized investment gains (losses) on fixed maturity securities	16			47			92			46
Equity securities:
Gross realized gains	—			1			1			5
Gross realized losses	—			(4		)	(1		)	(10		)
Net realized investment gains (losses) on equity securities	—			(3		)	—			(5		)
Derivatives	(1		)	1			(3		)	(12		)
Short term investments and other	(39		)	1			(27		)	(3		)
Net realized investment gains (losses)	$	(24	)	$	46		$	62		$	26

Net realized investment gains (losses) for the three and nine months ended September 30, 2017 included a $42 million loss related to the redemption of the Company's $350 million senior notes due November 2019. Net realized investment gains (losses) for the nine months ended September 30, 2016 included a $8 million loss related to the first quarter 2016 redemption of the Company's $350 million senior notes due August 2016.

The components of Other-than-temporary impairment (OTTI) losses recognized in earnings by asset type are presented in the following table.

Periods ended September 30	Three Months				Nine Months
(In millions)	2017		2016		2017		2016
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	4	$	14	$	8	$	43
Asset-backed:
Residential mortgage-backed	1		—		1		1
Other asset-backed	—		—		—		3
Total asset-backed	1		—		1		4
Total fixed maturity securities available-for-sale	5		14		9		47
Equity securities available-for-sale -- Common stock	—		4		—		9
OTTI losses recognized in earnings	$	5	$	18	$	9	$	56

The following tables present a summary of fixed maturity and equity securities.

September 30, 2017	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Unrealized OTTI Losses (Gains)
(In millions)
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	17,965	$	1,645	$	26	$	19,584	$	—
States, municipalities and political subdivisions	12,462		1,501		7		13,956		(14		)
Asset-backed:
Residential mortgage-backed	4,906		127		28		5,005		(28		)
Commercial mortgage-backed	1,858		55		13		1,900		—
Other asset-backed	1,047		18		4		1,061		—
Total asset-backed	7,811		200		45		7,966		(28		)
U.S. Treasury and obligations of government-sponsored enterprises	115		3		3		115		—
Foreign government	439		10		4		445		—
Redeemable preferred stock	18		2		—		20		—
Total fixed maturity securities available-for-sale	38,810		3,361		85		42,086		$	(42	)
Total fixed maturity securities trading	4						4
Equity securities available-for-sale:
Common stock	16		7		1		22
Preferred stock	102		5		—		107
Total equity securities available-for-sale	118		12		1		129
Total	$	38,932	$	3,373	$	86	$	42,219

December 31, 2016	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Unrealized OTTI Losses (Gains)
(In millions)
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	17,711	$	1,323	$	76	$	18,958	$	(1	)
States, municipalities and political subdivisions	12,060		1,213		33		13,240		(16		)
Asset-backed:
Residential mortgage-backed	5,004		120		51		5,073		(28		)
Commercial mortgage-backed	2,016		48		24		2,040		—
Other asset-backed	1,022		8		5		1,025		—
Total asset-backed	8,042		176		80		8,138		(28		)
U.S. Treasury and obligations of government-sponsored enterprises	83		10		—		93		—
Foreign government	435		13		3		445		—
Redeemable preferred stock	18		1		—		19		—
Total fixed maturity securities available-for-sale	38,349		2,736		192		40,893		$	(45	)
Total fixed maturity securities trading	12						12
Equity securities available-for-sale:
Common stock	13		6		—		19
Preferred stock	93		2		4		91
Total equity securities available-for-sale	106		8		4		110
Total	$	38,467	$	2,744	$	196	$	41,015

The net unrealized gains on investments included in the tables above are recorded as a component of Accumulated other comprehensive income (AOCI). When presented in AOCI, these amounts are net of tax and any required Shadow Adjustments. To the extent that unrealized gains on fixed income securities supporting certain products within the Life & Group Non-Core segment would result in a premium deficiency if realized, a related increase in Insurance reserves is recorded, net of tax, as a reduction of net unrealized gains through Other comprehensive income (loss) (Shadow Adjustments). As of September 30, 2017 and December 31, 2016, the net unrealized gains on investments included in AOCI were correspondingly reduced by Shadow Adjustments of $1,321 million and $1,014 million.

The following tables present the estimated fair value and gross unrealized losses of fixed maturity and equity securities in a gross unrealized loss position by the length of time in which the securities have continuously been in that position.

	Less than 12 Months				12 Months or Longer				Total
September 30, 2017	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
(In millions)
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	1,216	$	21	$	91	$	5	$	1,307	$	26
States, municipalities and political subdivisions	583		6		56		1		639		7
Asset-backed:
Residential mortgage-backed	1,522		25		106		3		1,628		28
Commercial mortgage-backed	378		6		138		7		516		13
Other asset-backed	129		4		10		—		139		4
Total asset-backed	2,029		35		254		10		2,283		45
U.S. Treasury and obligations of government-sponsored enterprises	67		3		6		—		73		3
Foreign government	191		4		5		—		196		4
Total fixed maturity securities available-for-sale	4,086		69		412		16		4,498		85
Equity securities available-for-sale:
Common stock	2		1		—		—		2		1
Preferred stock	16		—		—		—		16		—
Total equity securities available-for-sale	18		1		—		—		18		1
Total	$	4,104	$	70	$	412	$	16	$	4,516	$	86

	Less than 12 Months				12 Months or Longer				Total
December 31, 2016	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
(In millions)
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	2,615	$	61	$	254	$	15	$	2,869	$	76
States, municipalities and political subdivisions	959		32		23		1		982		33
Asset-backed:
Residential mortgage-backed	2,136		44		201		7		2,337		51
Commercial mortgage-backed	756		22		69		2		825		24
Other asset-backed	398		5		24		—		422		5
Total asset-backed	3,290		71		294		9		3,584		80
U.S. Treasury and obligations of government-sponsored enterprises	5		—		—		—		5		—
Foreign government	108		3		—		—		108		3
Total fixed maturity securities available-for-sale	6,977		167		571		25		7,548		192
Equity securities available-for-sale -- Preferred stock	12		—		13		4		25		4
Total	$	6,989	$	167	$	584	$	29	$	7,573	$	196

Based on current facts and circumstances, the Company believes the unrealized losses presented in the September 30, 2017 securities in a gross unrealized loss position table above are not indicative of the ultimate collectibility of the current amortized cost of the securities, but rather are attributable to changes in interest rates, credit spreads and other factors. The Company has no current intent to sell securities with unrealized losses, nor is it more likely than not that it will be required to sell prior to recovery of amortized cost; accordingly, the Company has determined that there are no additional OTTI losses to be recorded as of September 30, 2017.

The following table presents the activity related to the pretax credit loss component reflected in Retained earnings on fixed maturity securities still held as of September 30, 2017 and 2016 for which a portion of an OTTI loss was recognized in Other comprehensive income (loss).

Periods ended September 30	Three Months						Nine Months
(In millions)	2017			2016			2017			2016
Beginning balance of credit losses on fixed maturity securities	$	30		$	41		$	36		$	53
Reductions for securities sold during the period	(2		)	(2		)	(8		)	(14		)
Reductions for securities the Company intends to sell or more likely than not will be required to sell	—			(1		)	—			(1		)
Ending balance of credit losses on fixed maturity securities	$	28		$	38		$	28		$	38

Contractual Maturity

The following table presents available-for-sale fixed maturity securities by contractual maturity.

	September 30, 2017				December 31, 2016
(In millions)	Cost or Amortized Cost		Estimated Fair Value		Cost or Amortized Cost		Estimated Fair Value
Due in one year or less	$	1,374	$	1,404	$	1,779	$	1,828
Due after one year through five years	7,931		8,293		7,566		7,955
Due after five years through ten years	15,853		16,574		15,892		16,332
Due after ten years	13,652		15,815		13,112		14,778
Total	$	38,810	$	42,086	$	38,349	$	40,893

Actual maturities may differ from contractual maturities because certain securities may be called or prepaid. Securities not due at a single date are allocated based on weighted average life.

Derivative Financial Instruments

The Company holds an embedded derivative on a funds withheld liability with a notional value of $170 million and $174 million as of September 30, 2017 and December 31, 2016 and a fair value of $(1) million and $3 million as of September 30, 2017 and December 31, 2016. The embedded derivative on the funds withheld liability is accounted for separately and reported with the funds withheld liability in Other liabilities on the Condensed Consolidated Balance Sheets.

Investment Commitments

As of September 30, 2017, the Company had committed approximately $405 million to future capital calls from various third-party limited partnership investments in exchange for an ownership interest in the related partnerships.

As of September 30, 2017, the Company had mortgage loan commitments of $68 million representing signed loan applications received and accepted.

The Company invests in various privately placed debt securities, including bank loans, as part of its overall investment strategy and has committed to additional future purchases, sales and funding. Purchases and sales of privately placed debt securities are recorded once funded. As of September 30, 2017, the Company had commitments to purchase or fund additional amounts of $205 million and sell $185 million under the terms of such securities.