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Investments (Tables)

9 Months Ended

Sep. 30, 2020

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



Periods ended September 30	Three Months						Nine Months
(In millions)	2020			2019			2020			2019
Fixed maturity securities	$	432		$	452		$	1,300		$	1,362
Equity securities	18			16			24			62
Limited partnership investments	64			12			38			125
Mortgage loans	14			13			42			37
Short term investments	1			8			9			27
Trading portfolio	4			2			13			6
Other	—			—			2			2
Gross investment income	533			503			1,428			1,621
Investment expense	(16		)	(16		)	(48		)	(48		)
Net investment income	$	517		$	487		$	1,380		$	1,573

Net realized investment gains (losses)

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



Periods ended September 30	Three Months						Nine Months
(In millions)	2020			2019			2020			2019
Net investment gains (losses):
Fixed maturity securities:
Gross gains	$	44		$	34		$	175		$	98
Gross losses	(18		)	(31		)	(207		)	(104		)
Net investment gains (losses) on fixed maturity securities	26			3			(32		)	(6		)
Equity securities	25			7			(45		)	60
Derivatives	(2		)	(2		)	(7		)	(13		)
Mortgage loans	(3		)	—			(16		)	—
Short term investments and other	(19		)	(1		)	(20		)	(21		)
Net investment gains (losses)	$	27		$	7		$	(120	)	$	20

Debt securities, available-for-sale, allowance for credit loss

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 September 30
(In millions)	Corporate and other bonds			Asset-backed		Total
Allowance for credit losses:
Beginning balance	$	39		$	12	$	51
Additions to the allowance for credit losses:
For securities for which credit losses were not previously recorded	4			—		4
For available-for-sale securities accounted for as PCD assets	1			—		1

Reductions to the allowance for credit losses:
Securities sold during the period (realized)	9			—		9
Intent to sell or more likely than not will be required to sell the security before recovery of its amortized cost basis	—			—		—
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	(1		)	1		—
Ending balance as of September 30, 2020	$	34		$	13	$	47



Nine months ended September 30
(In millions)	Corporate and other bonds			Asset-backed		Total
Allowance for credit losses:
Beginning balance	$	—		$	—	$	—
Additions to the allowance for credit losses:
Impact of adopting ASC 326	6			—		6
For securities for which credit losses were not previously recorded	62			12		74
For available-for-sale securities accounted for as PCD assets	3			—		3

Reductions to the allowance for credit losses:
Securities sold during the period (realized)	15			—		15
Intent to sell or more likely than not will be required to sell the security before recovery of its amortized cost basis	1			—		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	(21		)	1		(20		)
Ending balance as of September 30, 2020	$	34		$	13	$	47

Components of net other than temporary impairment losses recognized in earnings by asset type

The table includes losses on securities with an intention to sell and changes in the allowance for credit losses on securities since acquisition date.



Periods ended September 30	Three Months				Nine Months
(In millions)	2020		2019		2020		2019
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	4	$	12	$	94	$	24
Asset-backed	1		2		14		10
Impairment losses recognized in earnings	$	5	$	14	$	108	$	34

Summary of fixed maturity and equity securities

The following tables present a summary of fixed maturity securities.



September 30, 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	$	20,734	$	3,047	$	89	$	34	$	23,658
States, municipalities and political subdivisions	9,459		1,766		1		—		11,224
Asset-backed:
Residential mortgage-backed	3,796		153		1		—		3,948
Commercial mortgage-backed	2,048		85		70		13		2,050
Other asset-backed	2,097		76		19		—		2,154
Total asset-backed	7,941		314		90		13		8,152
U.S. Treasury and obligations of government-sponsored enterprises	347		4		1		—		350
Foreign government	481		29		—		—		510
Redeemable preferred stock	—		—		—		—		—
Total fixed maturity securities available-for-sale	38,962		5,160		181		47		43,894
Total fixed maturity securities trading	7		—		—		—		7
Total fixed maturity securities	$	38,969	$	5,160	$	181	$	47	$	43,901

(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

Securities in a gross unrealized loss position

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
September 30, 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	$	1,579	$	86	$	56	$	3	$	1,635	$	89
States, municipalities and political subdivisions	154		1		—		—		154		1
Asset-backed:
Residential mortgage-backed	98		1		13		—		111		1
Commercial mortgage-backed	693		69		19		1		712		70
Other asset-backed	432		18		13		1		445		19
Total asset-backed	1,223		88		45		2		1,268		90
U.S. Treasury and obligations of government-sponsored enterprises	25		1		—		—		25		1
Foreign government	20		—		—		—		20		—
Total	$	3,001	$	176	$	101	$	5	$	3,102	$	181



	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

Contractual maturity

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



	September 30, 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	$	1,372	$	1,392	$	1,334	$	1,356
Due after one year through five years	11,955		12,625		9,746		10,186
Due after five years through ten years	13,026		14,359		14,892		15,931
Due after ten years	12,609		15,518		12,134		14,714
Total	$	38,962	$	43,894	$	38,106	$	42,187

Financing receivable credit quality indicators

The following table presents the amortized cost basis of mortgage loans for each credit quality indicator by year of origination.



September 30, 2020	Mortgage Loans Amortized Cost Basis by Origination Year ⁽¹⁾
(In millions)	2020		2019		2018		2017		2016		Prior		Total
DSCR ≥1.6x
LTV less than 55%	$	75	$	33	$	19	$	85	$	33	$	161	$	406
LTV 55% to 65%	—		33		29		55		12		—		129
LTV greater than 65%	—		5		—		—		—		12		17
DSCR 1.2x - 1.6x
LTV less than 55%	—		31		10		13		16		79		149
LTV 55% to 65%	20		54		32		24		—		—		130
LTV greater than 65%	48		103		—		—		—		—		151
DSCR ≤1.2
LTV less than 55%	—		—		—		—		—		—		—
LTV 55% to 65%	—		14		14		—		—		—		28
LTV greater than 65%	—		23		—		45		24		7		99
Total	$	143	$	296	$	104	$	222	$	85	$	259	$	1,109

(1)

The values in the table above reflect DSCR on a standardized amortization period and LTV based on the most recent appraised values trended forward using changes in a commercial real estate price index.