

Three months ended March 31
(In millions)	2020			2019
Fixed maturity securities	$	438		$	455
Equity securities	(44		)	30
Limited partnership investments	(70		)	76
Mortgage loans	14			12
Short term investments	7			10
Trading portfolio	1			2
Other	—			2
Gross investment income	346			587
Investment expense	(17		)	(16		)
Net investment income	$	329		$	571

During the three months ended March 31, 2020 and 2019, $(45) million and $17 million of Net investment income was recognized due to the change in fair value of common stock still held as of March 31, 2020 and 2019. During the three months ended March 31, 2020 and 2019, $(2) million and less than $1 million of Net investment income was recognized due to the change in fair value of trading securities still held as of March 31, 2020 and 2019.



Three months ended March 31
(In millions)	2020			2019
Net investment gains (losses):
Fixed maturity securities:
Gross gains	$	29		$	36
Gross losses	(104		)	(42		)
Net investment gains (losses) on fixed maturity securities	(75		)	(6		)
Equity securities	(133		)	42
Derivatives	5			(5		)
Mortgage loans	(13		)	—
Short term investments and other	—			—
Net investment gains (losses)	$	(216	)	$	31

During the three months ended March 31, 2020 and 2019, $(133) million of losses and $42 million of gains were recognized in Net investment gains (losses) due to the change in fair value of non-redeemable preferred stock still held as of March 31, 2020 and 2019.

For available-for-sale fixed maturity securities, a credit loss exists if the present value of cash flows expected to be collected is less than the amortized cost basis. The allowance for credit loss related to available-for-sale fixed maturity securities is the difference between present value of cash flows expected to be collected and the amortized cost basis, limited by the amount that the fair value is less than the amortized cost basis. The Company considers all available evidence when determining whether an investment requires a credit loss write-down or allowance to be recorded. Examples of such evidence may include the financial condition and near term prospects of the issuer, whether the issuer is current with interest and principal payments, credit ratings on the security or changes in ratings over time, general market conditions and industry, sector or other specific factors and whether it is likely that the Company will recover its amortized cost through the collection of cash flows. Changes in the allowance are presented as a component of Net investment gains (losses) on the Condensed Consolidated Statements of Operations.

The following table presents the activity related to the allowance on available-for-sale securities with credit impairments and PCD assets for the three months ended March 31, 2020. Accrued interest receivable on available-for-sale fixed maturity securities totaled $390 million and is excluded from the estimate of expected credit losses and the amortized cost basis in the tables included within this Note.



Three months ended March 31
(in millions)	Corporate and other bonds
Allowance for credit losses:
Beginning balance	$	—
Additions to the allowance for credit losses:
Impact of adopting ASC 326	6
For securities for which credit losses were not previously recorded	48
For available-for-sale securities accounted for as PCD assets	1

Reductions to the allowance for credit losses:
Securities sold during the period (realized)	5
Intent to sell or more likely than not will be required to sell the security before recovery of its amortized cost basis	1
Write-offs charged against the allowance	—
Recoveries of amounts previously written off	—

Additional increases or (decreases) to the allowance for credit losses on securities that had an allowance recorded in a previous period	—
Ending balance as of March 31, 2020	$	49

The components of available-for-sale impairment losses recognized in earnings by asset type are presented in the following table. The table includes losses on securities with an intention to sell and changes in the allowance for credit losses on securities since acquisition date.



March 31, 2020	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses⁽¹⁾		Estimated Fair Value
(In millions)	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses⁽¹⁾		Estimated Fair Value
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	20,181	$	1,419	$	817	$	49	$	20,734
States, municipalities and political subdivisions	8,957		1,536		2		—		10,491
Asset-backed:
Residential mortgage-backed	4,198		207		8		—		4,397
Commercial mortgage-backed	2,207		36		153		—		2,090
Other asset-backed	1,868		9		133		—		1,744
Total asset-backed	8,273		252		294		—		8,231
U.S. Treasury and obligations of government-sponsored enterprises	147		8		—		—		155
Foreign government	452		15		4		—		463
Redeemable preferred stock	9		—		—		—		9
Total fixed maturity securities available-for-sale	38,019		3,230		1,117		49		40,083
Total fixed maturity securities trading	15		—		—		—		15
Total fixed maturity securities	$	38,034	$	3,230	$	1,117	$	49	$	40,098

(1) As of January 1, 2020, the Company adopted ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The Unrealized OTTI Losses (Gains) column that tracked subsequent valuation changes on securities for which a credit loss had previously been recorded has been replaced with the Allowance for Credit Losses column.



December 31, 2019	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	$	19,789	$	2,292	$	32	$	22,049	$	—
States, municipalities and political subdivisions	9,093		1,559		—		10,652		—
Asset-backed:
Residential mortgage-backed	4,387		133		1		4,519		(17		)
Commercial mortgage-backed	2,265		86		5		2,346		1
Other asset-backed	1,925		41		4		1,962		(3		)
Total asset-backed	8,577		260		10		8,827		(19		)
U.S. Treasury and obligations of government-sponsored enterprises	146		1		2		145		—
Foreign government	491		14		1		504		—
Redeemable preferred stock	10		—		—		10		—
Total fixed maturity securities available-for-sale	38,106		4,126		45		42,187		$	(19	)
Total fixed maturity securities trading	20		—		—		20
Total fixed maturity securities	$	38,126	$	4,126	$	45	$	42,207

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 March 31, 2020 and December 31, 2019, the net unrealized gains on investments included in AOCI were correspondingly reduced by Shadow Adjustments of $1,700 million and $2,198 million.

The following tables present the estimated fair value and gross unrealized losses of fixed maturity securities in a gross unrealized loss position for which an allowance for credit loss has not been recorded, by the length of time in which the securities have continuously been in that position.



	Less than 12 Months				12 Months or Longer				Total
March 31, 2020	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	$	7,036	$	804	$	44	$	13	$	7,080	$	817
States, municipalities and political subdivisions	82		2		—		—		82		2
Asset-backed:
Residential mortgage-backed	166		7		22		1		188		8
Commercial mortgage-backed	1,185		151		12		2		1,197		153
Other asset-backed	1,510		131		9		2		1,519		133
Total asset-backed	2,861		289		43		5		2,904		294
U.S. Treasury and obligations of government-sponsored enterprises	2		—		—		—		2		—
Foreign government	76		4		—		—		76		4
Redeemable preferred stock	9		—		—		—		9		—
Total	$	10,066	$	1,099	$	87	$	18	$	10,153	$	1,117



	Less than 12 Months				12 Months or Longer				Total
December 31, 2019	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	$	914	$	21	$	186	$	11	$	1,100	$	32
States, municipalities and political subdivisions	34		—		—		—		34		—
Asset-backed:
Residential mortgage-backed	249		1		30		—		279		1
Commercial mortgage-backed	381		3		20		2		401		5
Other asset-backed	449		3		33		1		482		4
Total asset-backed	1,079		7		83		3		1,162		10
U.S. Treasury and obligations of government-sponsored enterprises	62		2		2		—		64		2
Foreign government	59		1		1		—		60		1
Total	$	2,148	$	31	$	272	$	14	$	2,420	$	45

The following tables present the estimated fair value and gross unrealized losses of available-for-sale Corporate and other bonds in a gross unrealized loss position at March 31, 2020 across industry sectors and by rating distributions.



March 31, 2020	Estimated Fair Value		Gross Unrealized Losses
(In millions)	Estimated Fair Value		Gross Unrealized Losses
Corporate and other bonds:
Basic Materials	$	727	$	78
Communications	349		27
Consumer, cyclical - Other	390		56
Consumer, non-cyclical - Other	401		27
Energy - Oil & Gas	575		191
Energy - Pipelines	523		112
Entertainment	148		23
Financial - Other	1,711		89
Financial - Real Estate/REITS	599		45
Industrial	468		55
Retail	150		18
Technology	290		30
Transportation	73		5
Travel & Related	269		37
Utilities	407		24
Total Corporate and other bonds	$	7,080	$	817



March 31, 2020	Estimated Fair Value		Gross Unrealized Losses
(In millions)	Estimated Fair Value		Gross Unrealized Losses
Corporate and other bonds:
AAA	$	8	$	—
AA	134		4
A	608		17
BBB	4,987		516
Below investment grade	1,343		280
Total Corporate and other bonds	$	7,080	$	817

The following tables present the estimated fair value and gross unrealized losses of available-for-sale Commercial mortgage-backed securities in a gross unrealized loss position at March 31, 2020 by property type and by rating distributions.



March 31, 2020	Estimated Fair Value		Gross Unrealized Losses
(In millions)	Estimated Fair Value		Gross Unrealized Losses
Commercial mortgage-backed:
Conduits (multi property, multi borrower pools)	$	211	$	11
Single asset, single borrower	986		142
Total Commercial mortgage-backed	$	1,197	$	153



March 31, 2020	Estimated Fair Value		Gross Unrealized Losses
(In millions)	Estimated Fair Value		Gross Unrealized Losses
Commercial mortgage-backed:
US Government, Government agencies and Government sponsored enterprises	$	1	$	—
AAA	60		1
AA	245		17
A	214		22
BBB	484		78
Below investment grade	193		35
Total Commercial mortgage-backed	$	1,197	$	153

The following tables present the estimated fair value and gross unrealized losses of available-for-sale Other asset-backed securities in a gross unrealized loss position at March 31, 2020 by underlying collateral and by rating distributions.

Based on current facts and circumstances, the Company believes the unrealized losses presented in the March 31, 2020 gross unrealized loss position tables above are not indicative of the ultimate collectibility of the current amortized cost of the securities. Rather, the Company believes the gross unrealized losses are attributable primarily to widening credit spreads over risk free rates beyond historic norms, as a result of market uncertainties stemming from the COVID-19 pandemic, as well as supply shocks in the energy sector coupled with demand shocks in multiple sectors from the COVID-19 pandemic, that originated during the first quarter of 2020. 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 impairment losses to be recorded as of March 31, 2020.



	March 31, 2020				December 31, 2019
(In millions)	Cost or Amortized Cost		Estimated Fair Value		Cost or Amortized Cost		Estimated Fair Value
Due in one year or less	$	1,331	$	1,325	$	1,334	$	1,356
Due after one year through five years	11,554		11,812		9,746		10,186
Due after five years through ten years	13,078		13,069		14,892		15,931
Due after ten years	12,056		13,877		12,134		14,714
Total	$	38,019	$	40,083	$	38,106	$	42,187

The Company holds an embedded derivative on a funds withheld liability with a notional value of $196 million and $182 million as of March 31, 2020 and December 31, 2019 and a fair value of $(1) million and $(7) million as of March 31, 2020 and December 31, 2019. 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.

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 March 31, 2020, the Company had commitments to purchase or fund approximately $1,025 million and sell approximately $85 million under the terms of these investments.

The allowance for expected credit losses is developed by assessing the credit quality of pools of mortgage loans in good standing using debt service coverage ratios (DSCR) and loan-to-value ratios (LTV). The DSCR compares a property’s net operating income to its debt service payments, including principal and interest. The LTV ratio compares the current unpaid principal balance of the loan to the estimated fair value of the underlying property collateralizing the loan. The pools developed to measure the credit loss allowance use increments of DSCR and LTV to draw distinctions between risk levels. Changes in the allowance for mortgage loans are presented as a component of Net investment gains (losses) on the Condensed Consolidated Statements of Operations. The Company has adjusted the historical loss rate applied to mortgage loans over the forecast period to reflect higher expected credit losses based on observable economic forecasts, which increased the allowance by $13 million for the period ended March 31, 2020.



	Mortgage Loans Amortized Cost Basis by Origination Year ⁽¹⁾
As of March 31, 2020	2020		2019		2018		2017		2016		Prior		Total
DSCR ≥1.6x
LTV less than 55%	$	60	$	32	$	19	$	92	$	41	$	130	$	374
LTV 55% to 65%	—		32		29		55		4		—		120
LTV greater than 65%	—		5		—		—		—		—		5
DSCR 1.2x - 1.6x
LTV less than 55%	—		33		10		13		16		126		198
LTV 55% to 65%	—		73		32		32		—		—		137
LTV greater than 65%	—		85		—		—		—		—		85
DSCR ≤1.2
LTV less than 55%	—		1		11		27		—		9		48
LTV 55% to 65%	—		14		14		—		—		—		28
LTV greater than 65%	—		22		—		—		24		—		46
Total	$	60	$	297	$	115	$	219	$	85	$	265	$	1,041

As of March 31, 2020, accrued interest receivable on mortgage loans totaled $4 million and is excluded from the amortized cost basis disclosed in the table above and the estimate of expected credit losses. There were no loans that were past due or placed in nonaccrual status as of March 31, 2020. No interest income was written off for the period ended March 31, 2020.