Investments

9 Months Ended

Sep. 30, 2021

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


Periods ended September 30	Three Months				Nine Months
(In millions)	2021		2020		2021		2020
Fixed maturity securities	$	425	$	432	$	1,278	$	1,300
Equity securities	4		18		53		24
Limited partnership investments	85		64		274		38
Mortgage loans	13		14		42		42
Short term investments	1		1		1		9
Trading portfolio	1		4		8		13
Other	(1)		—		—		2
Gross investment income	528		533		1,656		1,428
Investment expense	(15)		(16)		(48)		(48)
Net investment income	$	513	$	517	$	1,608	$	1,380

During the three and nine months ended September 30, 2021, $(7) million and $11 million of Net investment income was recognized due to the change in fair value of common stock still held as of September 30, 2021. During the three and nine months ended September 30, 2020, $4 million and $9 million of Net investment income was recognized due to the change in fair value of common stock still held as of September 30, 2020.

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


Periods ended September 30	Three Months				Nine Months
(In millions)	2021		2020		2021		2020
Net investment gains (losses):
Fixed maturity securities:
Gross gains	$	50	$	44	$	159	$	175
Gross losses	(28)		(18)		(68)		(207)
Net investment gains (losses) on fixed maturity securities	22		26		91		(32)
Equity securities	(2)		25		17		(45)
Derivatives	2		(2)		7		(7)
Mortgage loans	—		(3)		—		(16)
Short term investments and other	—		(19)		2		(20)
Net investment gains (losses)	$	22	$	27	$	117	$	(120)

During the three and nine months ended September 30, 2021, $(2) million of losses and $15 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 September 30, 2021. During the three and nine months ended September 30, 2020, $25 million of gains and $(44) million of losses were recognized in Net investment gains (losses) due to the change in fair value of non-redeemable preferred stock still held as of September 30, 2020. Short term investments and other included a $(20) million loss for the three and nine months ended September 30, 2020 related to the third quarter 2020 redemption of the Company's $400 million senior notes due August 2021.

The following tables present the activity related to the allowance on available-for-sale securities with credit impairments and purchased credit-deteriorated (PCD) assets. Accrued interest receivable on available-for-sale fixed maturity securities totaled $387 million, $371 million and $390 million as of September 30, 2021, December 31, 2020 and September 30, 2020 and is excluded from the estimate of expected credit losses and the amortized cost basis in the tables included within this Note.



(In millions)	Corporate and other bonds		Asset-backed		Total
Allowance for credit losses:
Balance as of July 1, 2021	$	24	$	21	$	45
Additions to the allowance for credit losses:
Securities for which credit losses were not previously recorded	—		—		—
Available-for-sale securities accounted for as PCD assets	2		—		2

Reductions to the allowance for credit losses:
Securities sold during the period (realized)	—		—		—
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	16		—		16
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	—		—		—
Balance as of September 30, 2021	$	10	$	21	$	31



(In millions)	Corporate and other bonds		Asset-backed		Total
Allowance for credit losses:
Balance as of July 1, 2020	$	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		—
Balance as of September 30, 2020	$	34	$	13	$	47




(In millions)	Corporate and other bonds		Asset-backed		Total
Allowance for credit losses:
Balance as of January 1, 2021	$	23	$	17	$	40
Additions to the allowance for credit losses:
Securities for which credit losses were not previously recorded	14		—		14
Available-for-sale securities accounted for as PCD assets	4		4		8

Reductions to the allowance for credit losses:
Securities sold during the period (realized)	6		—		6
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	16		—		16
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	(9)		—		(9)
Balance as of September 30, 2021	$	10	$	21	$	31



(In millions)	Corporate and other bonds		Asset-backed		Total
Allowance for credit losses:
Balance as of January 1, 2020	$	—	$	—	$	—
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)
Balance as of September 30, 2020	$	34	$	13	$	47

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.


Periods ended September 30	Three Months				Nine Months
(In millions)	2021		2020		2021		2020
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	—	$	4	$	5	$	94
Asset-backed	11		1		11		14
Impairment losses (gains) recognized in earnings	$	11	$	5	$	16	$	108

The Company also recognized $3 million and $16 million of losses on mortgage loans during the three and nine months ended September 30, 2020 primarily due to changes in expected credit losses. There were no losses recognized on mortgage loans during the three and nine months ended September 30, 2021.

The following tables present a summary of fixed maturity securities.


September 30, 2021	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Estimated Fair Value
(In millions)
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	21,608	$	2,967	$	42	$	10	$	24,523
States, municipalities and political subdivisions	10,384		1,610		15		—		11,979
Asset-backed:
Residential mortgage-backed	3,176		89		6		—		3,259
Commercial mortgage-backed	2,064		85		16		17		2,116
Other asset-backed	2,429		76		4		4		2,497
Total asset-backed	7,669		250		26		21		7,872
U.S. Treasury and obligations of government-sponsored enterprises	139		1		4		—		136
Foreign government	521		19		2		—		538

Redeemable preferred stock	12		—		—		—		12
Total fixed maturity securities available-for-sale	40,333		4,847		89		31		45,060
Total fixed maturity securities trading	9		—		—		—		9
Total fixed maturity securities	$	40,342	$	4,847	$	89	$	31	$	45,069


December 31, 2020	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Estimated Fair Value
(In millions)
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	20,792	$	3,578	$	22	$	23	$	24,325
States, municipalities and political subdivisions	9,729		1,863		—		—		11,592
Asset-backed:
Residential mortgage-backed	3,442		146		1		—		3,587
Commercial mortgage-backed	1,933		93		42		17		1,967
Other asset-backed	2,179		81		9		—		2,251
Total asset-backed	7,554		320		52		17		7,805
U.S. Treasury and obligations of government-sponsored enterprises	339		2		3		—		338
Foreign government	512		32		—		—		544
Redeemable preferred stock	—		—		—		—		—
Total fixed maturity securities available-for-sale	38,926		5,795		77		40		44,604
Total fixed maturity securities trading	27		—		—		—		27
Total fixed maturity securities	$	38,953	$	5,795	$	77	$	40	$	44,631

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, 2021 and December 31, 2020, the net unrealized gains on investments included in AOCI were correspondingly reduced by Shadow Adjustments of $2,481 million and $2,773 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
September 30, 2021	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	$	1,853	$	37	$	88	$	5	$	1,941	$	42
States, municipalities and political subdivisions	885		15		—		—		885		15
Asset-backed:
Residential mortgage-backed	1,295		6		—		—		1,295		6
Commercial mortgage-backed	317		4		194		12		511		16
Other asset-backed	439		3		58		1		497		4
Total asset-backed	2,051		13		252		13		2,303		26
U.S. Treasury and obligations of government-sponsored enterprises	65		4		1		—		66		4
Foreign government	73		2		—		—		73		2
Total	$	4,927	$	71	$	341	$	18	$	5,268	$	89


	Less than 12 Months				12 Months or Longer				Total
December 31, 2020	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	$	609	$	21	$	12	$	1	$	621	$	22
States, municipalities and political subdivisions	33		—		—		—		33		—
Asset-backed:
Residential mortgage-backed	71		1		11		—		82		1
Commercial mortgage-backed	533		40		28		2		561		42
Other asset-backed	344		9		13		—		357		9
Total asset-backed	948		50		52		2		1,000		52
U.S. Treasury and obligations of government-sponsored enterprises	63		3		—		—		63		3
Foreign government	13		—		—		—		13		—
Total	$	1,666	$	74	$	64	$	3	$	1,730	$	77

Based on current facts and circumstances, the Company believes the unrealized losses presented in the September 30, 2021 securities in a gross unrealized loss position table above are not indicative of the ultimate collectability 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 impairment losses to be recorded as of September 30, 2021.

Contractual Maturity

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


	September 30, 2021				December 31, 2020
(In millions)	Cost or Amortized Cost		Estimated Fair Value		Cost or Amortized Cost		Estimated Fair Value
Due in one year or less	$	1,648	$	1,656	$	1,456	$	1,458
Due after one year through five years	10,776		11,517		12,304		13,098
Due after five years through ten years	13,628		14,794		12,319		13,878
Due after ten years	14,281		17,093		12,847		16,170
Total	$	40,333	$	45,060	$	38,926	$	44,604

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 $272 million and $190 million and a fair value of $(11) million and $(19) million as of September 30, 2021 and December 31, 2020. 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 private placement securities. As of September 30, 2021, the Company had commitments to purchase or fund approximately $1,250 million and sell approximately $55 million under the terms of these investments.

Mortgage Loans

The following table presents the amortized cost basis of mortgage loans for each credit quality indicator by year of origination. The primary credit quality indicators utilized are debt service coverage ratios (DSCR) and loan-to-value ratios (LTV).


September 30, 2021	Mortgage Loans Amortized Cost Basis by Origination Year (1)
(In millions)	2021		2020		2019		2018		2017		Prior		Total
DSCR ≥1.6x
LTV less than 55%	$	8	$	75	$	16	$	37	$	116	$	203	$	455
LTV 55% to 65%	—		38		15		18		—		1		72
LTV greater than 65%	17		—		14		7		—		23		61
DSCR 1.2x - 1.6x
LTV less than 55%	13		15		95		—		5		58		186
LTV 55% to 65%	25		—		—		24		10		4		63
LTV greater than 65%	—		24		9		—		8		—		41
DSCR ≤1.2
LTV less than 55%	—		—		35		—		30		—		65
LTV 55% to 65%	—		—		42		—		—		—		42
LTV greater than 65%	—		9		56		—		—		7		72
Total	$	63	$	161	$	282	$	86	$	169	$	296	$	1,057

(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.

As of September 30, 2021, 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.