INVESTMENTS

Investment Holdings

The amortized cost for our investments in debt and perpetual securities, the cost for equity securities and the fair values of these investments are shown in the following tables.



	June 30, 2016
(In millions)	Cost or Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value
Securities available for sale, carried at fair value:
Fixed maturities:
Yen-denominated:
Japan government and agencies		$	22,176		$	5,828		$	0		$	28,004
Municipalities		200			60			0			260
Mortgage- and asset-backed securities		870			51			0			921
Public utilities		1,639			277			13			1,903
Sovereign and supranational		927			189			0			1,116
Banks/financial institutions		2,704			382			119			2,967
Other corporate		3,926			650			55			4,521
Total yen-denominated		32,442			7,437			187			39,692
Dollar-denominated:
U.S. government and agencies		123			16			0			139
Municipalities		943			164			7			1,100
Mortgage- and asset-backed securities		199			18			0			217
Public utilities		5,724			776			76			6,424
Sovereign and supranational		352			97			0			449
Banks/financial institutions		2,742			533			16			3,259
Other corporate		27,474			2,316			784			29,006
Total dollar-denominated		37,557			3,920			883			40,594
Total fixed maturities		69,999			11,357			1,070			80,286
Perpetual securities:
Yen-denominated:
Banks/financial institutions		1,650			77			199			1,528
Other corporate		214			20			0			234
Dollar-denominated:
Banks/financial institutions		52			18			0			70
Total perpetual securities		1,916			115			199			1,832
Equity securities:
Yen-denominated		694			29			76			647
Dollar-denominated		551			17			18			550
Total equity securities		1,245			46			94			1,197
Total securities available for sale		$	73,160		$	11,518		$	1,363		$	83,315



	June 30, 2016
(In millions)	Cost or Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value
Securities held to maturity, carried at amortized cost:
Fixed maturities:
Yen-denominated:
Japan government and agencies		$	23,440		$	8,636		$	0		$	32,076
Municipalities		398			167			0			565
Mortgage- and asset-backed securities		39			2			0			41
Public utilities		3,623			415			10			4,028
Sovereign and supranational		2,994			404			7			3,391
Banks/financial institutions		4,659			293			32			4,920
Other corporate		3,193			590			8			3,775
Total yen-denominated		38,346			10,507			57			48,796
Total securities held to maturity		$	38,346		$	10,507		$	57		$	48,796



	December 31, 2015
(In millions)	Cost or Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value
Securities available for sale, carried at fair value:
Fixed maturities:
Yen-denominated:
Japan government and agencies		$	17,293		$	1,862		$	0		$	19,155
Municipalities		128			9			0			137
Mortgage- and asset-backed securities		322			33			0			355
Public utilities		1,400			210			10			1,600
Sovereign and supranational		791			180			0			971
Banks/financial institutions		2,321			325			105			2,541
Other corporate		3,337			448			33			3,752
Total yen-denominated		25,592			3,067			148			28,511
Dollar-denominated:
U.S. government and agencies		110			11			0			121
Municipalities		926			151			6			1,071
Mortgage- and asset-backed securities		200			27			0			227
Public utilities		5,464			636			221			5,879
Sovereign and supranational		331			105			0			436
Banks/financial institutions		2,865			634			21			3,478
Other corporate		25,154			1,774			1,302			25,626
Total dollar-denominated		35,050			3,338			1,550			36,838
Total fixed maturities		60,642			6,405			1,698			65,349
Perpetual securities:
Yen-denominated:
Banks/financial institutions		1,581			143			93			1,631
Other corporate		183			22			0			205
Dollar-denominated:
Banks/financial institutions		77			35			1			111
Total perpetual securities		1,841			200			94			1,947
Equity securities:
Yen-denominated		472			19			4			487
Dollar-denominated		8			3			0			11
Total equity securities		480			22			4			498
Total securities available for sale		$	62,963		$	6,627		$	1,796		$	67,794



	December 31, 2015
(In millions)	Cost or Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value
Securities held to maturity, carried at amortized cost:
Fixed maturities:
Yen-denominated:
Japan government and agencies		$	20,004		$	3,387		$	0		$	23,391
Municipalities		341			74			0			415
Mortgage- and asset-backed securities		36			2			0			38
Public utilities		3,092			205			94			3,203
Sovereign and supranational		2,555			182			26			2,711
Banks/financial institutions		4,431			168			53			4,546
Other corporate		3,000			260			44			3,216
Total yen-denominated		33,459			4,278			217			37,520
Total securities held to maturity		$	33,459		$	4,278		$	217		$	37,520

The methods of determining the fair values of our investments in fixed-maturity securities, perpetual securities and equity securities are described in Note 5.

Beginning in 2015 and continuing into the first six months of 2016, we increased our investment in yen-denominated publicly traded equity securities. During the first six months of 2016, we also increased our investment in U.S. dollar-denominated publicly traded equity securities. These securities are classified as available for sale and carried on our balance sheet at fair value.

During the first and second quarters of 2016 and 2015, respectively, we did not reclassify any investments from the held-to-maturity category to the available-for-sale category.

Contractual and Economic Maturities

The contractual maturities of our investments in fixed maturities at June 30, 2016, were as follows:



	Aflac Japan						Aflac U.S.
(In millions)	Amortized Cost			Fair Value			Amortized Cost			Fair Value
Available for sale:
Due in one year or less		$	305		$	312		$	60		$	62
Due after one year through five years		3,882			3,972			722			789
Due after five years through 10 years		11,905			12,101			2,487			2,726
Due after 10 years		40,332			48,573			8,776			10,124
Mortgage- and asset-backed securities		926			988			34			41
Total fixed maturities available for sale		$	57,350		$	65,946		$	12,079		$	13,742
Held to maturity:
Due in one year or less		$	49		$	49		$	0		$	0
Due after one year through five years		1,983			2,087			0			0
Due after five years through 10 years		2,084			2,283			0			0
Due after 10 years		34,191			44,336			0			0
Mortgage- and asset-backed securities		39			41			0			0
Total fixed maturities held to maturity		$	38,346		$	48,796		$	0		$	0

At June 30, 2016, the Parent Company and other business segments had portfolios of available-for-sale fixed-maturity securities totaling $570 million at amortized cost and $598 million at fair value, which are not included in the table above.

Expected maturities may differ from contractual maturities because some issuers have the right to call or prepay obligations with or without call or prepayment penalties.

The majority of our perpetual securities are subordinated to other debt obligations of the issuer, but rank higher than the issuer's equity securities. Perpetual securities have characteristics of both debt and equity investments, along with unique features that create economic maturity dates for the securities. Although perpetual securities have no contractual maturity date, they have stated interest coupons that were fixed at their issuance and subsequently change to a floating short-term interest rate after some period of time. The instruments are generally callable by the issuer at the time of changing from a fixed coupon rate to a new variable rate of interest, which is determined by the combination of some market index plus a fixed amount of basis points. The net effect is to create an expected maturity date for the instrument. The economic maturities of our investments in perpetual securities, which were all reported as available for sale at June 30, 2016, were as follows:



	Aflac Japan						Aflac U.S.
(In millions)	Amortized Cost			Fair Value			Amortized Cost			Fair Value
Due in one year or less		$	221		$	195		$	0		$	0
Due after one year through five years		306			316			0			0
Due after 10 years		1,350			1,269			39			52
Total perpetual securities available for sale		$	1,877		$	1,780		$	39		$	52

Investment Concentrations

Our process for credit-related investments begins with an independent approach to underwriting each issuer's fundamental credit quality. We evaluate independently those factors which we believe could influence an issuer's ability to make payments under the contractual terms of our instruments. This includes a thorough analysis of a variety of items including the issuer's country of domicile (including political, legal, and financial considerations); the industry in which the issuer competes (with an analysis of industry structure, end-market dynamics, and regulation); company specific issues (such as management, assets, earnings, cash generation, and capital needs); and contractual provisions of the instrument (such as financial covenants and position in the capital structure). We further evaluate the investment considering broad business and portfolio management objectives, including asset/liability needs, portfolio diversification, and expected income.

Investment exposures that individually exceeded 10% of shareholders' equity as of June 30, 2016 and December 31, 2015 were as follows:



	June 30, 2016			December 31, 2015
(In millions)	Credit Rating	Amortized Cost	Fair Value	Credit Rating	Amortized Cost	Fair Value
Japan National Government⁽¹⁾	A	$45,064	$59,305	A	$36,859	$42,025

⁽¹⁾Japan Government Bonds (JGBs) or JGB-backed securities

Realized Investment Gains and Losses

Information regarding pretax realized gains and losses from investments is as follows:



	Three Months Ended June 30,					Six Months Ended June 30,
(In millions)	2016			2015		2016			2015
Realized investment gains (losses):
Fixed maturities:
Available for sale:
Gross gains from sales	$	6		$	55	$	8		$	104
Gross losses from sales	(12		)	0		(16		)	0
Net gains (losses) from redemptions	(5		)	7		78			26
Other-than-temporary impairment losses	(9		)	0		(21		)	(6		)
Total fixed maturities	(20		)	62		49			124
Perpetual securities:
Available for sale:
Net gains (losses) from redemptions	30			30		40			30
Other-than-temporary impairment losses	0			0		(2		)	0
Total perpetual securities	30			30		38			30
Equity securities:
Gross gains from sales	2			0		5			0
Gross losses from sales	(8		)	0		(11		)	0
Other-than-temporary impairment losses	(24		)	0		(24		)	0
Total equity securities	(30		)	0		(30		)	0
Derivatives and other:
Derivative gains (losses)	(167		)	35		(171		)	(14		)
Total derivatives and other	(167		)	35		(171		)	(14		)
Total realized investment gains (losses)	$	(187	)	$	127	$	(114	)	$	140

Other-than-temporary Impairment

The majority of our fixed maturity and perpetual security investments are evaluated for other-than-temporary impairment using our debt impairment model. Our debt impairment model focuses on the ultimate collection of the cash flows from our investments and whether we have the intent to sell or if it is more likely than not we would be required to sell the security prior to recovery of its amortized cost. The fair values of our fixed maturity and perpetual security investments fluctuate based on changes in interest rates, foreign exchange, and credit spreads in the global financial markets. Fair values can also be heavily influenced by the values of the assets of the issuer and expected ultimate recovery values upon a default, bankruptcy or other financial restructuring. Credit spreads are most impacted by the general credit environment and global market liquidity. Interest rates are driven by numerous factors including, but not limited to, supply and demand, governmental monetary actions, expectations of inflation and economic growth. We believe that fluctuations in the fair values of our investment securities related to general changes in the level of credit spreads or interest rates have little bearing on underlying credit quality of the issuer, and whether our investment is ultimately recoverable. Generally, we consider such declines in fair values to be temporary even in situations where an investment remains in an unrealized loss position for an extended period of time.

In the course of our review process, we may determine that it is unlikely that our fixed maturity or perpetual security investment will recover in value within an acceptable time frame. Factors which may influence this determination include the severity of the price decline, the length of time the price has been impaired, if the price decline was driven by issuer credit deterioration, and our view of the likelihood of the security defaulting or otherwise being subject to an unfavorable restructuring. In those cases where we believe the security will not recover in price within an acceptable period of time, we consider such a decline in the investment's fair value, to the extent it is below the investment's cost or amortized cost, to be an other-than-temporary impairment of the investment and reduce the book value of the investment to its fair value.

The perpetual securities we hold were largely issued by banks that are integral to the financial markets of the sovereign country of the issuer. As a result of the issuer's position within the economy of the sovereign country, our perpetual securities may be subject to a higher risk of nationalization of their issuers in connection with capital injections from an issuer's sovereign government. We cannot be assured that such capital support will extend to all levels of an issuer's capital structure. In addition, certain governments or regulators may consider imposing interest and principal payment restrictions on issuers of hybrid securities to preserve cash and preserve the issuer's capital. Beyond the cash flow impact that additional deferrals would have on our portfolio, such deferrals could result in ratings downgrades of the affected securities, which in turn could result in a reduction of fair value of the securities and increase our regulatory capital requirements. We consider these factors in our credit review process.

When determining our intention to sell a security prior to recovery of its fair value to amortized cost, we evaluate facts and circumstances such as, but not limited to, future cash flow needs, decisions to reposition our security portfolio, and risk profile of individual investment holdings. We perform ongoing analyses of our liquidity needs, which includes cash flow testing of our policy liabilities, debt maturities, projected dividend payments and other cash flow and liquidity needs. Our cash flow testing includes extensive duration analysis of our investment portfolio and policy liabilities. Based on our analyses, we have concluded that we have sufficient excess cash flows to meet our liquidity needs without selling any of our investments prior to their maturity.

Our investments in perpetual securities that are rated below investment grade and equity securities are evaluated for other-than-temporary impairment under our equity impairment model. Our equity impairment model focuses on the severity of a security’s decline in fair value coupled with the length of time the fair value of the security has been below cost or amortized cost and the financial condition and near-term prospects of the issuer. For equity securities, we also verify our intent to hold the securities until they recover in value. The fair value of our investments in equity securities may decline for various reasons, such as general market conditions which reflect prospects for the economy as a whole, or due to specific information pertaining to an industry or an individual company. For those equity securities evaluated for impairment under the equity impairment model that are in an unrealized loss position, if we believe the security will not recover in price within an acceptable period of time, or we do not have the intent to hold until recovery, we will record an other-than-temporary impairment of the investment and reduce the cost of the investment to its fair value on that date.

The following table details our pretax other-than-temporary impairment losses by investment category that resulted from our impairment evaluation process.



	Three Months Ended June 30,				Six Months Ended June 30,
(In millions)	2016		2015		2016		2015
Perpetual securities	$	0	$	0	$	2	$	0
Corporate bonds	9		0		21		2
Bank/financial institution bonds	0		0		0		4
Equity securities	24		0		24		0
Total other-than-temporary impairment losses realized ⁽¹⁾	$	33	$	0	$	47	$	6

⁽¹⁾Includes $33 and an immaterial amount for the three-month periods and $47 and $6 for the six-month periods ended June 30, 2016 and 2015, respectively, from change in intent to sell securities or change in intent to hold securities until recovery

Unrealized Investment Gains and Losses

Effect on Shareholders’ Equity

The net effect on shareholders’ equity of unrealized gains and losses from investment securities was as follows:



(In millions)	June 30, 2016				December 31, 2015
Unrealized gains (losses) on securities available for sale		$	10,155			$	4,831
Deferred income taxes		(3,714		)		(1,845		)
Shareholders’ equity, unrealized gains (losses) on investment securities		$	6,441			$	2,986

Gross Unrealized Loss Aging

The following tables show the fair values and gross unrealized losses of our available-for-sale and held-to-maturity investments that were in an unrealized loss position, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.



	June 30, 2016
	Total						Less than 12 months						12 months or longer
(In millions)	Fair Value			Unrealized Losses			Fair Value			Unrealized Losses			Fair Value			Unrealized Losses
Fixed Maturities:
Municipalities:
Dollar-denominated		$	46		$	7		$	0		$	0		$	46		$	7
Public utilities:
Dollar-denominated		1,216			76			283			12			933			64
Yen-denominated		823			23			182			13			641			10
Sovereign and supranational:
Yen-denominated		236			7			0			0			236			7
Banks/financial institutions:
Dollar-denominated		148			16			78			6			70			10
Yen-denominated		1,428			151			240			3			1,188			148
Other corporate:
Dollar-denominated		8,556			784			3,203			255			5,353			529
Yen-denominated		970			63			327			18			643			45
Total fixed maturities		13,423			1,127			4,313			307			9,110			820
Perpetual securities:
Yen-denominated		989			199			500			42			489			157
Total perpetual securities		989			199			500			42			489			157
Equity securities:
Dollar-denominated		268			18			268			18			0			0
Yen-denominated		411			76			411			76			0			0
Total equity securities		679			94			679			94			0			0
Total		$	15,091		$	1,420		$	5,492		$	443		$	9,599		$	977



	December 31, 2015
	Total						Less than 12 months						12 months or longer
(In millions)	Fair Value			Unrealized Losses			Fair Value			Unrealized Losses			Fair Value			Unrealized Losses
Fixed Maturities:
Municipalities:
Dollar-denominated		$	80		$	6		$	80		$	6		$	0		$	0
Public utilities:
Dollar-denominated		2,127			221			1,689			132			438			89
Yen-denominated		1,487			104			1,062			73			425			31
Sovereign and supranational:
Yen-denominated		580			26			385			13			195			13
Banks/financial institutions:
Dollar-denominated		366			21			348			11			18			10
Yen-denominated		2,350			158			1,147			14			1,203			144
Other corporate:
Dollar-denominated		13,430			1,302			11,068			770			2,362			532
Yen-denominated		1,151			77			343			5			808			72
Total fixed maturities		21,571			1,915			16,122			1,024			5,449			891
Perpetual securities:
Dollar-denominated		6			1			0			0			6			1
Yen-denominated		645			93			216			12			429			81
Total perpetual securities		651			94			216			12			435			82
Equity securities:
Yen-denominated		191			4			191			4			0			0
Total equity securities		191			4			191			4			0			0
Total		$	22,413		$	2,013		$	16,529		$	1,040		$	5,884		$	973

Analysis of Securities in Unrealized Loss Positions

The unrealized losses on our fixed maturity or perpetual securities investments have been primarily related to general market changes in interest rates, foreign exchange rates, and/or the levels of credit spreads rather than specific concerns with the issuer's ability to pay interest and repay principal. The unrealized losses on our investments in equity securities are primarily related to foreign exchange rates, general market conditions which reflect prospects for the economy as a whole, or specific information pertaining to an industry or an individual company.

For any significant declines in fair value of our fixed income or perpetual securities, we perform a more focused review of the related issuers' credit profile. For corporate issuers, we evaluate their assets, business profile including industry dynamics and competitive positioning, financial statements and other available financial data. For non-corporate issuers, we analyze all sources of credit support, including issuer-specific factors. We utilize information available in the public domain and, for certain private placement issuers, from consultations with the issuers directly. We also consider ratings from Nationally Recognized Statistical Rating Organizations (NRSROs), as well as the specific characteristics of the security we own including seniority in the issuer's capital structure, covenant predictions, or other relevant features. From these reviews, we evaluate the issuers' continued ability to service our investment through payment of interest and principal.

For any significant declines in fair value of our equity securities, we review the severity of the security’s decline in fair value coupled with the length of time the fair value of the security has been below cost. We also perform a more focused review of the financial condition and near-term prospects of the issuer as well as general market conditions reflecting the prospects for the economy as a whole, and determine whether we have the intent to hold the securities until they recover in value.

The following table provides more information on our unrealized loss position on fixed maturities, perpetual securities and equity securities.



		June 30, 2016									December 31, 2015
(In millions)	Investments in an Unrealized Loss Position			Gross Unrealized Losses			Gross Unrealized Losses that are Investment Grade			Investments in an Unrealized Loss Position			Gross Unrealized Losses			Gross Unrealized Losses that are Investment Grade
Fixed Maturities:
Public utilities		13	%		7	%		88	%		16	%		16	%		93	%
Sovereign and supranational		2			1			100			3			1			100
Banks/financial institutions		11			12			36			12			9			59
Other corporate		63			59			47			66			69			86
Total fixed maturities		89			79						97			95
Perpetual securities		7			14			100			3			5			100
Equity securities		4			7						0			0
Total		100	%		100	%					100	%		100	%

The decrease in the percentage of gross unrealized losses that are investment grade for the banks and financial institutions sector for the period ending June 30, 2016 was due to the redemption of an investment-grade security that contributed to a large portion of investment-grade unrealized losses at December 31, 2015. The decrease in the percentage of gross unrealized loss for the other corporate sector for the period ending June 30, 2016 was due to the increase in unrealized losses of dollar-denominated below-investment-grade securities mainly attributable to the strengthening of the yen/dollar exchange rate.

Assuming no credit-related factors develop, unrealized gains and losses on fixed maturities and perpetual securities are expected to diminish as investments near maturity. Based on our credit analysis, we believe that the issuers of our fixed maturity and perpetual security investments in the sectors shown in the table above have the ability to service their obligations to us.

Variable Interest Entities (VIEs)

As a condition of our involvement or investment in a VIE, we enter into certain protective rights and covenants that preclude changes in the structure of the VIE that would alter the creditworthiness of our investment or our beneficial interest in the VIE.

For those VIEs in which we are not the arranger, our involvement is passive in nature. We are not, nor have we been, required to purchase any securities issued in the future by these VIEs.

Our ownership interest in VIEs is limited to holding the obligations issued by them. We have no direct or contingent obligations to fund the limited activities of these VIEs, nor do we have any direct or indirect financial guarantees related to the limited activities of these VIEs. We have not provided any assistance or any other type of financing support to any of the VIEs we invest in, nor do we have any intention to do so in the future. For those VIEs in which we hold debt obligations, the weighted-average lives of our notes are very similar to the underlying collateral held by these VIEs where applicable.

We also utilize unit trust structures in our Aflac Japan segment to invest in various asset classes. As the arranger and sole investor of these VIEs, we are required to consolidate these entities under U.S. GAAP.

Our risk of loss related to our interests in any of our VIEs is limited to the carrying value of the related investments held in the VIE.

VIEs - Consolidated

The following table presents the cost or amortized cost, fair value and balance sheet caption in which the assets and liabilities of consolidated VIEs are reported.

Investments in Consolidated Variable Interest Entities



	June 30, 2016						December 31, 2015
(In millions)	Cost or Amortized Cost			Fair Value			Cost or Amortized Cost			Fair Value
Assets:
Fixed maturities, available for sale		$	4,878		$	5,493		$	3,739		$	4,554
Perpetual securities, available for sale		267			197			255			228
Equity securities		1,018			941			363			363
Other investments		165			169			0			0
Other assets		177			177			102			102
Total assets of consolidated VIEs		$	6,505		$	6,977		$	4,459		$	5,247
Liabilities:
Other liabilities		$	117		$	117		$	293		$	293
Total liabilities of consolidated VIEs		$	117		$	117		$	293		$	293

We are substantively the only investor in the consolidated VIEs listed in the table above. As the sole investor in these VIEs, we have the power to direct the activities of a variable interest entity that most significantly impact the entity's economic performance and are therefore considered to be the primary beneficiary of the VIEs that we consolidate. We also participate in substantially all of the variability created by these VIEs. The activities of these VIEs are limited to holding debt, equity, and perpetual securities and foreign currency, and/or credit default swaps (CDS), as appropriate, and utilizing the cash flows from these securities to service our investment. Neither we nor any of our creditors are able to obtain the underlying collateral of the VIEs unless there is an event of default or other specified event. For those VIEs that contain a swap, we are not a direct counterparty to the swap contracts and have no control over them. Our loss exposure to these VIEs is limited to our original investment. Our consolidated VIEs do not rely on outside or ongoing sources of funding to support their activities beyond the underlying collateral and swap contracts, if applicable. With the exception of our investment in senior secured bank loans (bank loans), commercial mortgage loans, and certain equity securities through unit trust structures, the underlying collateral assets and funding of our consolidated VIEs are generally static in nature and the underlying collateral and the reference corporate entities covered by any CDS contracts were all investment grade at the time of issuance.

We invest in bank loans, yen-denominated public equities, dollar-denominated public equities, and commercial mortgage loans through unit trust structures in which we are the only investor, requiring us to consolidate these trusts under U.S. GAAP. The bank loans are classified as available-for-sale fixed-maturity securities in the financial statements. As of June 30, 2016, the amortized cost and fair value of our bank loan investments was $2.1 billion and $1.9 billion, respectively, compared with an amortized cost and fair value of $1.4 billion as of December 31, 2015. The yen-denominated and dollar-denominated equities are classified as available-for-sale in the financial statements. As of June 30, 2016, the amortized cost and fair value of these equities was $1.0 billion and $941 million, respectively, compared with amortized cost and fair value of $363 million as of December 31, 2015. The commercial mortgage loans, all of which were purchased in the first six months of 2016, are classified as held for investment and reflected in other investments on the consolidated balance sheets. As of June 30, 2016, the amortized cost of these loans, net of loan loss reserves, was $165 million.

We are exposed to credit losses within our consolidated collateralized debt obligation (CDO) that could result in principal losses to our investment. However, we have mitigated the risk of credit loss through the structure of the VIE, which contractually requires the subordinated tranches within the VIE to absorb the majority of the expected losses from the underlying credit default swaps. We currently own only senior mezzanine CDO tranches. Based on our statistical analysis models and the current subordination levels in our CDO, the VIE can sustain a reasonable number of defaults in the underlying reference entities in the CDS with no loss to our investment.

VIEs-Not Consolidated

The table below reflects the amortized cost, fair value and balance sheet caption in which our investment in VIEs not consolidated are reported.

Investments in Variable Interest Entities Not Consolidated



	June 30, 2016						December 31, 2015
(In millions)	Amortized Cost			Fair Value			Amortized Cost			Fair Value
Assets:
Fixed maturities, available for sale		$	5,158		$	5,656		$	4,731		$	5,093
Perpetual securities, available for sale		292			279			249			253
Fixed maturities, held to maturity		2,902			3,336			2,477			2,636
Total investments in VIEs not consolidated		$	8,352		$	9,271		$	7,457		$	7,982

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2016 related to consolidations.

The VIEs that we are not required to consolidate are investments that are in the form of debt obligations from the VIEs that are irrevocably and unconditionally guaranteed by their corporate parents or sponsors. These VIEs are the primary financing vehicles used by their corporate sponsors to raise financing in the capital markets. The variable interests created by these VIEs are principally or solely a result of the debt instruments issued by them. We do not have the power to direct the activities that most significantly impact the entity's economic performance, nor do we have the obligation to absorb losses of the entity or the right to receive benefits from the entity. As such, we are not the primary beneficiary of these VIEs and are therefore not required to consolidate them. These VIE investments comprise securities from 143 separate issuers with an average credit rating of BBB.

Loans and Loan Receivables

We classify our loans and loan receivables as held-for-investment and include them in the other investments line on the consolidated balance sheets. We carry them on the balance sheet at amortized cost less an estimated allowance for loan losses. Our loan allowance for losses is established using both specific and general allowances. The specific allowance is used on an individual loan basis for those impaired loans where we expect to incur a loss. The general allowance is used for loans grouped by similar risk characteristics where a loan-specific or market-specific risk has not been identified, but for which we anticipate to incur a loss.

Middle Market Loans

As of June 30, 2016, and December 31, 2015, our investment in middle market loan receivables, net of loan loss reserves, was $227 million and $118 million, respectively, which included an unfunded amount of $31 million and $53 million, respectively, that was reflected in other liabilities on the consolidated balance sheets. As of June 30, 2016 and December 31, 2015, we had no loans that were past due in regards to principal and/or interest payments. Additionally, we held no loans that were on nonaccrual status or considered impaired as of June 30, 2016 and December 31, 2015. Our middle market loan allowance for losses was immaterial as of June 30, 2016 and December 31, 2015. We had no troubled debt restructurings during the six months ended June 30, 2016 and 2015.

As of June 30, 2016, we had commitments of $72 million to fund potential future loan originations related to this investment program. These commitments are contingent upon the availability of middle market loans that meet our underwriting criteria.

Commercial Mortgage Loans

In 2016, we began funding investments in commercial mortgage loans. As of June 30, 2016, the amortized cost of these investments, net of loan loss reserves, was $188 million, $165 million of which was held in unit trust structures as discussed above. We had no loans that were past due in regards to principal and/or interest payments, and we held no loans that were on nonaccrual status or considered impaired as of June 30, 2016. Our commercial mortgage loan allowance for losses was immaterial as of June 30, 2016. We had no troubled debt restructurings during the six months ended June 30, 2016.

As of June 30, 2016, we had $177 million in outstanding commitments to fund commercial mortgage loans. These commitments are contingent on the final underwriting and due diligence to be performed.

Securities Lending and Pledged Securities

We lend fixed-maturity securities to financial institutions in short-term security-lending transactions. These short-term security-lending arrangements increase investment income with minimal risk. Our security lending policy requires that the fair value of the securities and/or unrestricted cash received as collateral be 102% or more of the fair value of the loaned securities. These securities continue to be carried as investment assets on our balance sheet during the terms of the loans and are not reported as sales. We receive cash or other securities as collateral for such loans. For loans involving unrestricted cash or securities as collateral, the collateral is reported as an asset with a corresponding liability for the return of the collateral.

Details of our securities lending activities were as follows:



Securities Lending Transactions Accounted for as Secured Borrowings
June 30, 2016
Remaining Contractual Maturity of the Agreements
(In millions)	Overnight and Continuous⁽¹⁾		Up to 30 days		Total
Securities lending transactions:
Japan government and agencies	$	0	$	372	$	372
Public utilities	104		0		104
Banks/financial institutions	24		0		24
Other corporate	326		0		326
Total borrowings	$	454	$	372	$	826
Gross amount of recognized liabilities for securities lending transactions					$	826
Amounts related to agreements not included in offsetting disclosure in Note 4					$	0

⁽¹⁾These securities are pledged as collateral under our U.S. securities lending program and can be called at our discretion; therefore, they are classified as Overnight and Continuous.



Securities Lending Transactions Accounted for as Secured Borrowings
December 31, 2015
Remaining Contractual Maturity of the Agreements
(In millions)	Overnight and Continuous⁽¹⁾		Up to 30 days		Total
Securities lending transactions:
Japan government and agencies	$	0	$	499	$	499
Public utilities	108		0		108
Banks/financial institutions	13		0		13
Other corporate	321		0		321
Total borrowings	$	442	$	499	$	941
Gross amount of recognized liabilities for securities lending transactions					$	941
Amounts related to agreements not included in offsetting disclosure in Note 4					$	0

⁽¹⁾These securities are pledged as collateral under our U.S. securities lending program and can be called at our discretion; therefore, they are classified as Overnight and Continuous.

We did not have any repurchase agreements or repurchase-to-maturity transactions outstanding as of June 30, 2016 and December 31, 2015, respectively.

Certain fixed-maturity securities have been pledged as collateral as part of derivative transactions, or pledged to support state deposit requirements or certain investment programs. For additional information regarding pledged securities related to derivative transactions, see Note 4.