Investments

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



Periods ended June 30	Three Months						Six Months
(In millions)	2018			2017			2018			2017
Fixed maturity securities	$	444		$	457		$	890		$	912
Equity securities	12			2			22			3
Limited partnership investments	40			16			70			106
Mortgage loans	14			8			25			15
Short term investments	6			3			12			6
Trading portfolio	3			4			5			6
Other	3			—			3			1
Gross investment income	522			490			1,027			1,049
Investment expense	(16		)	(15		)	(31		)	(29		)
Net investment income	$	506		$	475		$	996		$	1,020

During the three and six months ended June 30, 2018, $2 million and $1 million of Net investment income was recognized due to the change in fair value of common stock still held as of June 30, 2018.

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



Periods ended June 30	Three Months						Six Months
(In millions)	2018			2017			2018			2017
Net realized investment gains (losses):
Fixed maturity securities:
Gross realized gains	$	37		$	56		$	106		$	105
Gross realized losses	(33		)	(12		)	(84		)	(29		)
Net realized investment gains (losses) on fixed maturity securities	4			44			22			76
Equity securities	(10		)	—			(25		)	—
Derivatives	4			(3		)	9			(2		)
Short term investments and other	1			9			5			12
Net realized investment gains (losses)	$	(1	)	$	50		$	11		$	86

During the three and six months ended June 30, 2018, $10 million and $25 million of Net realized investment losses were recognized due to the change in fair value of non-redeemable preferred stock still held as of June 30, 2018.

The components of OTTI losses recognized in earnings by asset type are presented in the following table.



Periods ended June 30	Three Months				Six Months
(In millions)	2018		2017		2018		2017
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	—	$	2	$	5	$	4
Asset-backed	—		—		1		—
OTTI losses recognized in earnings	$	—	$	2	$	6	$	4

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



June 30, 2018 ⁽¹⁾	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Unrealized OTTI Losses (Gains)
(In millions)	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Unrealized OTTI Losses (Gains)
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	17,883	$	938	$	203	$	18,618	$	—
States, municipalities and political subdivisions	10,856		1,161		8		12,009		—
Asset-backed:
Residential mortgage-backed	4,961		72		85		4,948		(25		)
Commercial mortgage-backed	2,082		23		33		2,072		—
Other asset-backed	1,557		9		9		1,557		—
Total asset-backed	8,600		104		127		8,577		(25		)
U.S. Treasury and obligations of government-sponsored enterprises	127		3		3		127		—
Foreign government	436		6		5		437		—
Redeemable preferred stock	9		1		—		10		—
Total fixed maturity securities available-for-sale	37,911		2,213		346		39,778		$	(25	)
Total fixed maturity securities trading	17						17
Total fixed maturity securities	$	37,928	$	2,213	$	346	$	39,795



December 31, 2017	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Unrealized OTTI Losses (Gains)
(In millions)	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Unrealized OTTI Losses (Gains)
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	17,210	$	1,625	$	28	$	18,807	$	—
States, municipalities and political subdivisions	12,478		1,551		2		14,027		(11		)
Asset-backed:
Residential mortgage-backed	5,043		109		32		5,120		(27		)
Commercial mortgage-backed	1,840		46		14		1,872		—
Other asset-backed	1,083		16		5		1,094		—
Total asset-backed	7,966		171		51		8,086		(27		)
U.S. Treasury and obligations of government-sponsored enterprises	111		2		4		109		—
Foreign government	437		9		2		444		—
Redeemable preferred stock	10		1		—		11		—
Total fixed maturity securities available-for-sale	38,212		3,359		87		41,484		$	(38	)
Total fixed maturity securities trading	3						3
Equity securities available-for-sale:
Common stock	21		7		1		27
Preferred stock	638		31		1		668
Total equity securities available-for-sale	659		38		2		695
Total fixed maturity and equity securities	$	38,874	$	3,397	$	89	$	42,182


(1)	As of January 1, 2018, the Company adopted ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The change in fair value of equity securities is now recognized through the income statement. See Note A to the Condensed Consolidated Financial Statements for additional information.

The net unrealized gains on investments included in the tables above are recorded as a component of 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 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 June 30, 2018 and December 31, 2017, the net unrealized gains on investments included in AOCI were correspondingly reduced by Shadow Adjustments of $1,186 million and $1,411 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
June 30, 2018 ⁽¹⁾	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
(In millions)	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	6,963	$	192	$	193	$	11	$	7,156	$	203
States, municipalities and political subdivisions	723		8		3		—		726		8
Asset-backed:
Residential mortgage-backed	3,183		68		344		17		3,527		85
Commercial mortgage-backed	913		16		228		17		1,141		33
Other asset-backed	632		6		27		3		659		9
Total asset-backed	4,728		90		599		37		5,327		127
U.S. Treasury and obligations of government-sponsored enterprises	49		1		19		2		68		3
Foreign government	178		3		40		2		218		5
Total	$	12,641	$	294	$	854	$	52	$	13,495	$	346



	Less than 12 Months				12 Months or Longer				Total
December 31, 2017	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
(In millions)	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	1,354	$	21	$	168	$	7	$	1,522	$	28
States, municipalities and political subdivisions	72		1		85		1		157		2
Asset-backed:
Residential mortgage-backed	1,228		5		947		27		2,175		32
Commercial mortgage-backed	403		4		212		10		615		14
Other asset-backed	248		3		18		2		266		5
Total asset-backed	1,879		12		1,177		39		3,056		51
U.S. Treasury and obligations of government-sponsored enterprises	49		2		21		2		70		4
Foreign government	166		2		4		—		170		2
Total fixed maturity securities available-for-sale	3,520		38		1,455		49		4,975		87
Equity securities available-for-sale:
Common stock	7		1		—		—		7		1
Preferred stock	93		1		—		—		93		1
Total equity securities available-for-sale	100		2		—		—		100		2
Total	$	3,620	$	40	$	1,455	$	49	$	5,075	$	89


(1)	As of January 1, 2018, the Company adopted ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The change in fair value of equity securities is now recognized through the income statement. See Note A to the Condensed Consolidated Financial Statements for additional information.

Based on current facts and circumstances, the Company believes the unrealized losses presented in the June 30, 2018 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 June 30, 2018.

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 June 30, 2018 and 2017 and for which a portion of an OTTI loss was recognized in Other comprehensive income (loss).



Periods ended June 30	Three Months						Six Months
(In millions)	2018			2017			2018			2017
Beginning balance of credit losses on fixed maturity securities	$	25		$	32		$	27		$	36
Reductions for securities sold during the period	(4		)	(2		)	(6		)	(6		)
Ending balance of credit losses on fixed maturity securities	$	21		$	30		$	21		$	30

Contractual Maturity

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



	June 30, 2018				December 31, 2017
(In millions)	Cost or Amortized Cost		Estimated Fair Value		Cost or Amortized Cost		Estimated Fair Value
Due in one year or less	$	1,301	$	1,322	$	1,135	$	1,157
Due after one year through five years	8,211		8,421		8,165		8,501
Due after five years through ten years	16,138		16,240		16,060		16,718
Due after ten years	12,261		13,795		12,852		15,108
Total	$	37,911	$	39,778	$	38,212	$	41,484

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 $161 million and $167 million as of June 30, 2018 and December 31, 2017 and a fair value of $4 million and $(3) million as of June 30, 2018 and December 31, 2017. 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 June 30, 2018, the Company had committed approximately $551 million to future capital calls from various third-party limited partnership investments in exchange for an ownership interest in the related partnerships.

As of June 30, 2018, the Company had mortgage loan commitments of $15 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 June 30, 2018, the Company had commitments to purchase or fund additional amounts of $272 million and sell $111 million under the terms of such securities.