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INVESTMENTS (Tables)
6 Months Ended
Jun. 30, 2019
Available-for-Sale Debt Securities
The amortized cost for the Company's investments in fixed maturity securities, the cost for equity securities and the fair values of these investments are shown in the following tables.
  
June 30, 2019
(In millions)
Cost or
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
  Fair
  Value
Securities available for sale, carried at fair value
through other comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Yen-denominated:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Japan government and agencies
 
$
32,154

 
 
 
$
5,800

 
 
 
$
0

 
 
 
$
37,954

 
Municipalities
 
525

 
 
 
120

 
 
 
1

 
 
 
644

 
Mortgage- and asset-backed securities
 
237

 
 
 
29

 
 
 
0

 
 
 
266

 
Public utilities
 
1,865

 
 
 
392

 
 
 
0

 
 
 
2,257

 
Sovereign and supranational
 
762

 
 
 
60

 
 
 
0

 
 
 
822

 
Banks/financial institutions
 
6,126

 
 
 
700

 
 
 
106

 
 
 
6,720

 
Other corporate
 
5,333

 
 
 
932

 
 
 
22

 
 
 
6,243

 
Total yen-denominated
 
47,002

 
 
 
8,033

 
 
 
129

 
 
 
54,906

 
  U.S. dollar-denominated:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government and agencies
 
195

 
 
 
11

 
 
 
0

 
 
 
206

 
Municipalities
 
1,198

 
 
 
133

 
 
 
0

 
 
 
1,331

 
Mortgage- and asset-backed securities
 
143

 
 
 
7

 
 
 
0

 
 
 
150

 
Public utilities
 
3,941

 
 
 
634

 
 
 
27

 
 
 
4,548

 
Sovereign and supranational
 
257

 
 
 
73

 
 
 
0

 
 
 
330

 
Banks/financial institutions
 
2,880

 
 
 
566

 
 
 
14

 
 
 
3,432

 
Other corporate
 
25,579

 
 
 
2,492

 
 
 
539

 
 
 
27,532

 
Total U.S. dollar-denominated
 
34,193

 
 
 
3,916

 
 
 
580

 
 
 
37,529

 
Total securities available for sale
 
$
81,195

 
 
 
$
11,949

 
 
 
$
709

 
 
 
$
92,435

 


  
December 31, 2018
(In millions)
Cost or
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
  Fair
  Value
Securities available for sale, carried at fair value
  through other comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Yen-denominated:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Japan government and agencies
 
$
30,637

 
 
 
$
3,700

 
 
 
$
140

 
 
 
$
34,197

 
Municipalities
 
385

 
 
 
32

 
 
 
9

 
 
 
408

 
Mortgage- and asset-backed securities
 
155

 
 
 
22

 
 
 
0

 
 
 
177

 
Public utilities
 
1,732

 
 
 
280

 
 
 
4

 
 
 
2,008

 
Sovereign and supranational
 
826

 
 
 
123

 
 
 
0

 
 
 
949

 
Banks/financial institutions
 
5,440

 
 
 
502

 
 
 
238

 
 
 
5,704

 
Other corporate
 
4,852

 
 
 
649

 
 
 
44

 
 
 
5,457

 
Total yen-denominated
 
44,027

 
 
 
5,308

 
 
 
435

 
 
 
48,900

 
  U.S dollar-denominated:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government and agencies
 
137

 
 
 
9

 
 
 
1

 
 
 
145

 
Municipalities
 
1,343

 
 
 
120

 
 
 
8

 
 
 
1,455

 
Mortgage- and asset-backed securities
 
155

 
 
 
8

 
 
 
1

 
 
 
162

 
Public utilities
 
4,772

 
 
 
496

 
 
 
105

 
 
 
5,163

 
Sovereign and supranational
 
251

 
 
 
60

 
 
 
0

 
 
 
311

 
Banks/financial institutions
 
2,860

 
 
 
389

 
 
 
35

 
 
 
3,214

 
Other corporate
 
23,311

 
 
 
1,343

 
 
 
1,109

 
 
 
23,545

 
Total U.S. dollar-denominated
 
32,829

 
 
 
2,425

 
 
 
1,259

 
 
 
33,995

 
Total securities available for sale
 
$
76,856

 
 
 
$
7,733

 
 
 
$
1,694

 
 
 
$
82,895

 

Held-to-maturity Securities
  
June 30, 2019
(In millions)
Cost or
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair  
Value  
Securities held to maturity, carried at amortized cost:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Yen-denominated:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Japan government and agencies
 
$
22,611

 
 
 
$
6,606

 
 
 
$
0

 
 
 
$
29,217

 
Municipalities
 
836

 
 
 
274

 
 
 
0

 
 
 
1,110

 
Mortgage- and asset-backed securities
 
19

 
 
 
1

 
 
 
0

 
 
 
20

 
Public utilities
 
2,762

 
 
 
386

 
 
 
0

 
 
 
3,148

 
Sovereign and supranational
 
1,188

 
 
 
192

 
 
 
0

 
 
 
1,380

 
Banks/financial institutions
 
978

 
 
 
110

 
 
 
12

 
 
 
1,076

 
Other corporate
 
2,613

 
 
 
477

 
 
 
6

 
 
 
3,084

 
Total yen-denominated
 
31,007

 
 
 
8,046

 
 
 
18

 
 
 
39,035

 
Total securities held to maturity
 
$
31,007

 
 
 
$
8,046

 
 
 
$
18

 
 
 
$
39,035

 



  
December 31, 2018
(In millions)
Cost or
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Securities held to maturity, carried at amortized cost:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Yen-denominated:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Japan government and agencies
 
$
21,712

 
 
 
$
5,326

 
 
 
$
0

 
 
 
$
27,038

 
Municipalities
 
359

 
 
 
110

 
 
 
0

 
 
 
469

 
Mortgage- and asset-backed securities
 
14

 
 
 
1

 
 
 
0

 
 
 
15

 
Public utilities
 
2,727

 
 
 
254

 
 
 
8

 
 
 
2,973

 
Sovereign and supranational
 
1,551

 
 
 
289

 
 
 
0

 
 
 
1,840

 
Banks/financial institutions
 
1,445

 
 
 
158

 
 
 
20

 
 
 
1,583

 
Other corporate
 
2,510

 
 
 
332

 
 
 
38

 
 
 
2,804

 
Total yen-denominated
 
30,318

 
 
 
6,470

 
 
 
66

 
 
 
36,722

 
Total securities held to maturity
 
$
30,318

 
 
 
$
6,470

 
 
 
$
66

 
 
 
$
36,722

 

Equity securities, FV-NI
(In millions)
June 30, 2019
 
December 31, 2018
Equity securities, carried at fair value through net earnings:
Fair Value
 
Fair Value
Equity securities:
 
 
 
 
 
 
 
      Yen-denominated
 
$
679

 
 
 
$
641

 
      U.S. dollar-denominated
 
408

 
 
 
346

 
Total equity securities
 
$
1,087

 
 
 
$
987

 


Investments Classified by Contractual Maturity Date
The contractual and economic maturities of the Company's investments in fixed maturity securities at June 30, 2019, were as follows:
(In millions)
Amortized
Cost
 
Fair
Value
 
Available for sale:
 
 
 
 
 
 
 
 
Due in one year or less
 
$
1,093

 
 
 
$
1,153

 
 
Due after one year through five years
 
8,423

 
 
 
8,478

 
 
Due after five years through 10 years
 
9,887

 
 
 
10,961

 
 
Due after 10 years
 
61,412

 
 
 
71,427

 
 
Mortgage- and asset-backed securities
 
380

 
 
 
416

 
 
Total fixed maturity securities available for sale
 
$
81,195

 
 
 
$
92,435

 
 
Held to maturity:
 
 
 
 
 
 
 
 
Due in one year or less
 
$
139

 
 
 
$
140

 
 
Due after one year through five years
 
1,284

 
 
 
1,367

 
 
Due after five years through 10 years
 
726

 
 
 
815

 
 
Due after 10 years
 
28,839

 
 
 
36,693

 
 
Mortgage- and asset-backed securities
 
19

 
 
 
20

 
 
Total fixed maturity securities held to maturity
 
$
31,007

 
 
 
$
39,035

 
 


Investment Exposures Exceeding Ten Percent Shareholders Equity
Investment exposures that individually exceeded 10% of shareholders' equity were as follows:
 
June 30, 2019
 
December 31, 2018
(In millions)
Credit
Rating
 
Amortized
Cost
 
Fair
Value
 
Credit
Rating
 
Amortized
Cost
 
Fair
Value
Japan National Government(1)
A+
 
$53,298
 
$65,321
 
A+
 
$51,207
 
$59,945
(1)Japan Government Bonds (JGBs) or JGB-backed securities


Gain (Loss) on Investments
Information regarding pretax realized gains and losses from investments is as follows:
  
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
(In millions)
2019
 
2018
 
2019
 
2018
 
Realized investment gains (losses):
 
 
 
 
 
 
 
 
Fixed maturity securities:
 
 
 
 
 
 
 
 
Available for sale:
 
 
 
 
 
 
 
 
Gross gains from sales
$
32

 
$
12

 
$
44

 
$
22

 
Gross losses from sales
(3
)
 
(71
)
 
(11
)
 
(73
)
 
Foreign currency gains (losses) on sales and redemptions
(4
)
 
29

 
9

 
24

 
Other-than-temporary impairment losses
0

 
(2
)
 
0

 
(2
)
 
Total fixed maturity securities
25

 
(32
)
 
42

 
(29
)
 
Equity securities
(11
)

18

 
47

 
(28
)
 
Loan receivables:
 
 
 
 
 
 
 
 
Loan loss reserves
(2
)
 
(3
)
 
(4
)
 
(10
)
 
Total loan receivables
(2
)
 
(3
)
 
(4
)
 
(10
)
 
Derivatives and other:
 
 
 
 
 
 
 
 
Derivative gains (losses)
122

 
(172
)
 
122

 
(28
)
 
Foreign currency gains (losses)
(200
)
 
192

 
(202
)
 
(36
)
 
Total derivatives and other
(78
)
 
20

 
(80
)
 
(64
)
 
Total realized investment gains (losses)
$
(66
)
 
$
3

 
$
5

 
$
(131
)
 


Net Effect on Shareholders' Equity of Unrealized Gains and Losses from Investment Securities
The net effect on shareholders’ equity of unrealized gains and losses from fixed maturity securities was as follows:
(In millions)
June 30, 2019
 
December 31,
2018
Unrealized gains (losses) on securities available for sale
 
$
11,240

 
 
 
$
6,039

 
Deferred income taxes
 
(3,185
)
 
 
 
(1,805
)
 
Shareholders’ equity, unrealized gains (losses) on fixed maturity securities
 
$
8,055

 
 
 
$
4,234

 


Investments Gross Unrealized Loss Aging
The following tables show the fair values and gross unrealized losses of the Company's 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, 2019
  
Total
 
Less than 12 months
 
12 months or longer
(In millions)
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
Fixed maturity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Municipalities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Yen-denominated
 
$
14

 
 
 
$
1

 
 
 
$
14

 
 
 
$
1

 
 
 
$
0

 
 
 
$
0

 
  Public utilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  U.S. dollar-denominated
 
597

 
 
 
27

 
 
 
116

 
 
 
5

 
 
 
481

 
 
 
22

 
  Banks/financial institutions:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  U.S. dollar-denominated
 
284

 
 
 
14

 
 
 
110

 
 
 
5

 
 
 
174

 
 
 
9

 
  Yen-denominated
 
1,862

 
 
 
118

 
 
 
1,862

 
 
 
118

 
 
 
0

 
 
 
0

 
  Other corporate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  U.S. dollar-denominated
 
7,957

 
 
 
539

 
 
 
2,125

 
 
 
143

 
 
 
5,832

 
 
 
396

 
  Yen-denominated
 
713

 
 
 
28

 
 
 
713

 
 
 
28

 
 
 
0

 
 
 
0

 
  Total
 
$
11,427

 
 
 
$
727

 
 
 
$
4,940

 
 
 
$
300

 
 
 
$
6,487

 
 
 
$
427

 



  
December 31, 2018
  
Total
 
Less than 12 months
 
12 months or longer
(In millions)
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
Fixed maturity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  U.S. government and
agencies:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  U.S. dollar-denominated
 
$
67

 
 
 
$
1

 
 
 
$
67

 
 
 
$
1

 
 
 
$
0

 
 
 
$
0

 
  Japan government and
agencies:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Yen-denominated
 
3,604

 
 
 
140

 
 
 
3,604

 
 
 
140

 
 
 
0

 
 
 
0

 
  Municipalities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  U.S. dollar-denominated
 
515

 
 
 
8

 
 
 
515

 
 
 
8

 
 
 
0

 
 
 
0

 
  Yen-denominated
 
148

 
 
 
9

 
 
 
148

 
 
 
9

 
 
 
0

 
 
 
0

 
Mortgage- and asset-
backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  U.S. dollar-denominated
 
74

 
 
 
1

 
 
 
74

 
 
 
1

 
 
 
0

 
 
 
0

 
  Public utilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  U.S. dollar-denominated
 
1,585

 
 
 
105

 
 
 
892

 
 
 
48

 
 
 
693

 
 
 
57

 
  Yen-denominated
 
604

 
 
 
12

 
 
 
604

 
 
 
12

 
 
 
0

 
 
 
0

 
  Banks/financial institutions:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  U.S. dollar-denominated
 
625

 
 
 
35

 
 
 
340

 
 
 
19

 
 
 
285

 
 
 
16

 
  Yen-denominated
 
3,057

 
 
 
258

 
 
 
3,057

 
 
 
258

 
 
 
0

 
 
 
0

 
  Other corporate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  U.S. dollar-denominated
 
12,899

 
 
 
1,109

 
 
 
5,782

 
 
 
407

 
 
 
7,117

 
 
 
702

 
  Yen-denominated
 
1,306

 
 
 
82

 
 
 
1,306

 
 
 
82

 
 
 
0

 
 
 
0

 
  Total
 
$
24,484

 
 
 
$
1,760

 
 
 
$
16,389

 
 
 
$
985

 
 
 
$
8,095

 
 
 
$
775

 


Composition of Commercial Mortgage and Other Loans
The following table reflects the composition of commercial mortgage and other loans by portfolio segment as of the periods presented.
(In millions)
June 30, 2019
 
 
December 31, 2018
 
 
Commercial mortgage and other loans:
 
 
 
 
 
 
 
 
 
 
Transitional real estate loans
 
$
4,592

 
 
 
 
$
4,394

 
 
 
Commercial mortgage loans
 
1,161

 
 
 
 
1,065

 
 
 
Middle market loans
 
1,900

 
 
 
 
1,487

 
 
 
Total gross commercial mortgage and other loans
 
7,653

 
 
 
 
6,946

 
 
 
Allowance for loan loss
 
(31
)
 
 
 
 
(27
)
 
 
 
Total net commercial mortgage and other loans
 
$
7,622

 
 
 
 
$
6,919

 
 
 

Allowance for Loan Losses by Portfolio Segment The following table presents the rollforward of the general allowance for loan losses by portfolio segment during the six-month period ended June 30.
(In millions)
Commercial Mortgage Loans
 
Transitional Real Estate Loans
 
Middle Market Loans
 
Total
Allowance for loan losses at December 31, 2018
 
$
(1
)
 
 
 
$
(17
)
 
 
 
$
(9
)
 
 
 
$
(27
)
 
Addition to (release of) allowance for credit losses
 
0

 
 
 
(1
)
 
 
 
(3
)
 
 
 
(4
)
 
Allowance for loan losses at June 30, 2019
 
$
(1
)
 
 
 
$
(18
)
 
 
 
$
(12
)
 
 
 
$
(31
)
 

Other Investments
The table below reflects the composition of the carrying value for other investments as of the periods presented.
(In millions)
June 30, 2019
 
December 31, 2018
Other investments:
 
 
 
 
 
 
 
Policy loans
 
$
246

 
 
 
$
232

 
Short-term investments (1)
 
677

 
 
 
152

 
Limited partnerships
 
471

 
 
 
377

 
Other
 
33

 
 
 
26

 
Total other investments
 
$
1,427

 
 
 
$
787

 
(1) Includes securities lending collateral
Securities Lending Transactions Accounted for as Secured Borrowings
Details of collateral by loaned security type and remaining maturity of the agreements were as follows:
Securities Lending Transactions Accounted for as Secured Borrowings
June 30, 2019
Remaining Contractual Maturity of the Agreements
(In millions)
Overnight
and
Continuous
(1)
 
Up to 30
days
 
Greater
than 90
days
 
Total
Securities lending transactions:
 
 
 
 
 
 
 
Fixed maturity securities:
 
 
 
 
 
 
 
Japan government and agencies
$
0

 
$
605

 
$
2,539

 
$
3,144

Public utilities
56

 
0

 
0

 
56

Banks/financial institutions
78

 
0

 
0

 
78

Other corporate
804

 
0

 
0

 
804

Equity securities
14

 
0

 
0

 
14

          Total borrowings
$
952

 
$
605

 
$
2,539

 
$
4,096

Gross amount of recognized liabilities for securities lending transactions
 
 
 
$
1,557

Amounts related to agreements not included in offsetting disclosure in Note 4
 
 
 
$
2,539

(1) The related loaned security, under the Company's U.S. securities lending program, can be returned to the Company at the transferee's discretion; therefore, they are classified as Overnight and Continuous.

Securities Lending Transactions Accounted for as Secured Borrowings
December 31, 2018
Remaining Contractual Maturity of the Agreements
(In millions)
Overnight
and
Continuous
(1)
 
Up to 30
days
 
Greater
than 90
days
 
Total
Securities lending transactions:
 
 
 
 
 
 
 
Fixed maturity securities:
 
 
 
 
 
 
 
Japan government and agencies
$
0

 
$
387

 
$
1,190

 
$
1,577

Municipalities
5

 
0

 
0

 
5

Public utilities
27

 
0

 
0

 
27

Banks/financial institutions
74

 
0

 
0

 
74

Other corporate
549

 
0

 
0

 
549

Equity securities
10

 
0

 
0

 
10

          Total borrowings
$
665

 
$
387

 
$
1,190

 
$
2,242

Gross amount of recognized liabilities for securities lending transactions
 
 
$
1,052

Amounts related to agreements not included in offsetting disclosure in Note 4
 
 
$
1,190

(1) The related loaned security, under the Company's U.S. securities lending program, can be returned to the Company at the transferee's discretion; therefore, they are classified as Overnight and Continuous

Variable Interest Entity, Consolidated  
Investments in Variable Interest Entities
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, 2019
 
December 31, 2018
(In millions)
Cost or Amortized
Cost
 
Fair
Value
 
Cost or Amortized
Cost
 
Fair
Value
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturity securities, available for sale
 
$
3,729

 
 
 
$
4,599

 
 
 
$
3,849

 
 
 
$
4,466

 
Equity securities
 
187

 
 
 
187

 
 
 
160

 
 
 
160

 
Commercial mortgage and other loans
 
6,233

 
 
 
6,259

 
 
 
5,528

 
 
 
5,506

 
Other investments (1)
 
410

 
 
 
410

 
 
 
328

 
 
 
328

 
Other assets (2)
 
201

 
 
 
201

 
 
 
182

 
 
 
182

 
Total assets of consolidated VIEs
 
$
10,760

 
 
 
$
11,656

 
 
 
$
10,047

 
 
 
$
10,642

 
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other liabilities (2)
 
$
107

 
 
 
$
107

 
 
 
$
102

 
 
 
$
102

 
Total liabilities of consolidated VIEs
 
$
107

 
 
 
$
107

 
 
 
$
102

 
 
 
$
102

 

(1) Consists entirely of alternative investments in limited partnerships
(2) Consists entirely of derivatives
Variable Interest Entity, Not Consolidated  
Investments in Variable Interest Entities
VIEs - Not Consolidated
The table below reflects the amortized cost, fair value and balance sheet caption in which the Company's investment in VIEs not consolidated are reported.
Investments in Variable Interest Entities Not Consolidated
  
June 30, 2019
 
December 31, 2018
(In millions)
Amortized
Cost
 
Fair
Value
 
Amortized
Cost
 
Fair
Value
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturity securities, available for sale
 
$
4,309

 
 
 
$
4,961

 
 
 
$
4,575

 
 
 
$
4,982

 
Fixed maturity securities, held to maturity
 
2,019

 
 
 
2,389

 
 
 
2,007

 
 
 
2,254

 
Other investments (1)
 
61

 
 
 
61

 
 
 
49

 
 
 
49

 
Total investments in VIEs not consolidated
 
$
6,389

 
 
 
$
7,411

 
 
 
$
6,631

 
 
 
$
7,285

 

(1) Consists entirely of alternative investments in limited partnerships