Investments

9 Months Ended

Sep. 30, 2019

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)	2019			2018			2019			2018
Fixed maturity securities	$	452		$	449		$	1,362		$	1,339
Equity securities	16			10			62			32
Limited partnership investments	12			23			125			93
Mortgage loans	13			11			37			36
Short term investments	8			6			27			18
Trading portfolio	2			1			6			6
Other	—			1			2			4
Gross investment income	503			501			1,621			1,528
Investment expense	(16		)	(14		)	(48		)	(45		)
Net investment income	$	487		$	487		$	1,573		$	1,483

During the three and nine months ended September 30, 2019, $5 million and $26 million of Net investment income was recognized due to the change in fair value of common stock still held as of September 30, 2019. During the three and nine months ended September 30, 2018, Net investment income was reduced by $2 million due to the change in fair value of common stock still held as of September 30, 2018.

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

Periods ended September 30	Three Months						Nine Months
(In millions)	2019			2018			2019			2018
Net investment gains (losses):
Fixed maturity securities:
Gross gains	$	34		$	42		$	98		$	148
Gross losses	(31		)	(32		)	(104		)	(116		)
Net investment gains (losses) on fixed maturity securities	3			10			(6		)	32
Equity securities	7			2			60			(23		)
Derivatives	(2		)	1			(13		)	10
Short term investments and other	(1		)	1			(21		)	6
Net investment gains (losses)	$	7		$	14		$	20		$	25

During the three and nine months ended September 30, 2019, $7 million and $60 million of Net investment gains were recognized due to the change in fair value of non-redeemable preferred stock still held as of September 30, 2019. During the three and nine months ended September 30, 2018, $2 million of Net investment gains and $23 million of Net investment losses were recognized due to the change in fair value of non-redeemable preferred stock still held as of September 30, 2018. Net investment gains (losses) for the nine months ended September 30, 2019 included a $21 million loss related to the second quarter 2019 redemption of the Company's $500 million senior notes due August 2020.

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)	2019		2018		2019		2018
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	12	$	1	$	24	$	6
Asset-backed	2		2		10		3
OTTI losses recognized in earnings	$	14	$	3	$	34	$	9

The following tables present a summary of fixed maturity securities.

September 30, 2019	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	$	19,806	$	2,263	$	42	$	22,027	$	—
States, municipalities and political subdivisions	9,154		1,641		—		10,795		—
Asset-backed:
Residential mortgage-backed	4,718		157		1		4,874		(23		)
Commercial mortgage-backed	2,066		117		3		2,180		1
Other asset-backed	1,884		46		4		1,926		(3		)
Total asset-backed	8,668		320		8		8,980		(25		)
U.S. Treasury and obligations of government-sponsored enterprises	124		7		—		131		—
Foreign government	491		20		—		511		—
Redeemable preferred stock	10		—		—		10		—
Total fixed maturity securities available-for-sale	38,253		4,251		50		42,454		$	(25	)
Total fixed maturity securities trading	5		—		—		5
Total fixed maturity securities	$	38,258	$	4,251	$	50	$	42,459

December 31, 2018	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	$	18,764	$	791	$	395	$	19,160	$	—
States, municipalities and political subdivisions	9,681		1,076		9		10,748		—
Asset-backed:
Residential mortgage-backed	4,815		68		57		4,826		(20		)
Commercial mortgage-backed	2,200		28		32		2,196		—
Other asset-backed	1,975		11		24		1,962		—
Total asset-backed	8,990		107		113		8,984		(20		)
U.S. Treasury and obligations of government-sponsored enterprises	156		3		—		159		—
Foreign government	480		5		4		481		—
Redeemable preferred stock	10		—		—		10		—
Total fixed maturity securities available-for-sale	38,081		1,982		521		39,542		$	(20	)
Total fixed maturity securities trading	4		—		—		4
Total fixed maturity securities	$	38,085	$	1,982	$	521	$	39,546

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 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, 2019 and December 31, 2018, the net unrealized gains on investments included in AOCI were correspondingly reduced by Shadow Adjustments of $2,237 million and $1,078 million.

The following tables present the estimated fair value and gross unrealized losses of fixed maturity 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, 2019	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	$	890	$	26	$	200	$	16	$	1,090	$	42
States, municipalities and political subdivisions	20		—		2		—		22		—
Asset-backed:
Residential mortgage-backed	150		—		38		1		188		1
Commercial mortgage-backed	83		2		26		1		109		3
Other asset-backed	416		3		6		1		422		4
Total asset-backed	649		5		70		3		719		8
U.S. Treasury and obligations of government-sponsored enterprises	14		—		4		—		18		—
Foreign government	17		—		2		—		19		—
Total	$	1,590	$	31	$	278	$	19	$	1,868	$	50

	Less than 12 Months				12 Months or Longer				Total
December 31, 2018	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	$	8,543	$	340	$	825	$	55	$	9,368	$	395
States, municipalities and political subdivisions	517		8		5		1		522		9
Asset-backed:
Residential mortgage-backed	1,932		23		1,119		34		3,051		57
Commercial mortgage-backed	728		10		397		22		1,125		32
Other asset-backed	834		21		125		3		959		24
Total asset-backed	3,494		54		1,641		59		5,135		113
U.S. Treasury and obligations of government-sponsored enterprises	21		—		19		—		40		—
Foreign government	114		2		124		2		238		4
Total	$	12,689	$	404	$	2,614	$	117	$	15,303	$	521

Based on current facts and circumstances, the Company believes the unrealized losses presented in the September 30, 2019 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, 2019.

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, 2019 and 2018 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)	2019		2018			2019			2018
Beginning balance of credit losses on fixed maturity securities	$	16	$	21		$	18		$	27
Reductions for securities sold during the period	—		(2		)	(2		)	(8		)
Ending balance of credit losses on fixed maturity securities	$	16	$	19		$	16		$	19

Contractual Maturity

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

	September 30, 2019				December 31, 2018
(In millions)	Cost or Amortized Cost		Estimated Fair Value		Cost or Amortized Cost		Estimated Fair Value
Due in one year or less	$	1,071	$	1,091	$	1,350	$	1,359
Due after one year through five years	10,992		11,470		7,979		8,139
Due after five years through ten years	13,694		14,711		16,859		16,870
Due after ten years	12,496		15,182		11,893		13,174
Total	$	38,253	$	42,454	$	38,081	$	39,542

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 $172 million as of September 30, 2019 and December 31, 2018 and a fair value of $(9) million and $4 million as of September 30, 2019 and December 31, 2018. 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 part of its overall investment strategy, the Company invests in various assets which require future purchase, sale or funding commitments. These investments are recorded once funded, and the related commitments may include future capital calls from various third-party limited partnerships, signed and accepted mortgage loan applications, and obligations related to privately placed debt securities.  As of September 30, 2019, the Company had commitments to purchase or fund approximately $865 million and sell approximately $90 million under the terms of these investments.