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INVESTMENTS

12 Months Ended

Dec. 31, 2023

INVESTMENTS

Net Investment Income

The components of net investment income for the years ended December 31 were as follows:


(In millions)	2023			2022			2021
Fixed maturity securities		$	2,873		$	2,926		$	3,068
Equity securities		28			31			35
Commercial mortgage and other loans		1,002			716			570
Other investments (1)		(70)			131			356
Short-term investments and cash equivalents		213			78			7
Gross investment income		4,046			3,882			4,036
Less investment expenses		235			226			218
Net investment income		$	3,811		$	3,656		$	3,818

(1) The change in value of federal historic rehabilitation and solar investments in partnerships of $343, $91, and $138 in 2023, 2022, and 2021, respectively, is included as a reduction to net investment income. Tax credits on these investments of $334, $83, and $115 in 2023, 2022, and 2021, respectively, have been recorded as an income tax benefit in the consolidated statement of earnings.

Investment Holdings

The amortized cost and allowance for credit losses for the Company's investments in fixed maturity securities and the fair values of these investments as well as the fair value of the Company's investments in equity securities are shown in the following tables.


	2023
(In millions)	Amortized Cost		Allowance for Credit Losses		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	$	23,067	$	0	$	1,040	$	1,696	$	22,411
Municipalities	968		0		115		58		1,025
Mortgage- and asset-backed securities	215		0		6		11		210
Public utilities	3,757		0		325		82		4,000
Sovereign and supranational	373		0		24		7		390
Banks/financial institutions	5,896		0		320		365		5,851
Other corporate	5,898		0		699		294		6,303
Total yen-denominated	40,174		0		2,529		2,513		40,190
U.S. dollar-denominated:
U.S. government and agencies	191		0		2		4		189
Municipalities	1,246		0		65		38		1,273
Mortgage- and asset-backed securities	2,748		0		184		56		2,876
Public utilities	3,346		0		360		114		3,592
Sovereign and supranational	122		0		33		8		147
Banks/financial institutions	2,676		0		359		51		2,984
Other corporate	20,186		0		2,518		665		22,039
Total U.S. dollar-denominated	30,515		0		3,521		936		33,100
Total securities available-for-sale	$	70,689	$	0	$	6,050	$	3,449	$	73,290


	2022
(In millions)	Amortized Cost		Allowance for Credit Losses		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	$	25,418	$	0	$	1,259	$	1,724	$	24,953
Municipalities	1,034		0		124		61		1,097
Mortgage- and asset-backed securities	241		0		8		12		237
Public utilities	3,932		0		301		108		4,125
Sovereign and supranational	659		0		24		5		678
Banks/financial institutions	6,348		0		324		531		6,141
Other corporate	6,288		0		555		408		6,435
Total yen-denominated	43,920		0		2,595		2,849		43,666
U.S. dollar-denominated:
U.S. government and agencies	169		0		0		8		161
Municipalities	1,269		0		43		89		1,223
Mortgage- and asset-backed securities	1,926		0		67		84		1,909
Public utilities	3,481		0		240		180		3,541
Sovereign and supranational	133		0		35		12		156
Banks/financial institutions	2,992		0		271		105		3,158
Other corporate	21,579		0		1,549		1,201		21,927
Total U.S. dollar-denominated	31,549		0		2,205		1,679		32,075
Total securities available-for-sale	$	75,469	$	0	$	4,800	$	4,528	$	75,741


	2023
(In millions)	Amortized Cost		Allowance for Credit Losses		Net Carrying Amount		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	$	17,085	$	2	$	17,083	$	1,746	$	0	$	18,829
Municipalities	266		0		266		41		0		307

Public utilities	34		0		34		4		0		38
Sovereign and supranational	421		3		418		44		0		462

Other corporate	18		0		18		3		0		21
Total yen-denominated	17,824		5		17,819		1,838		0		19,657
Total securities held-to-maturity	$	17,824	$	5	$	17,819	$	1,838	$	0	$	19,657


	2022
(In millions)	Amortized Cost		Allowance for Credit Losses		Net Carrying Amount		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	$	18,269	$	2	$	18,267	$	2,045	$	0	$	20,312
Municipalities	287		0		287		48		0		335

Public utilities	38		1		37		4		0		41
Sovereign and supranational	450		4		446		54		0		500

Other corporate	19		0		19		3		0		22
Total yen-denominated	19,063		7		19,056		2,154		0		21,210
Total securities held-to-maturity	$	19,063	$	7	$	19,056	$	2,154	$	0	$	21,210


	2023			2022
(In millions)	Fair Value			Fair Value
Equity securities, carried at fair value through net earnings:
Equity securities:
Yen-denominated		$	751		$	670
U.S. dollar-denominated		252			374
Other currencies		85			47
Total equity securities		$	1,088		$	1,091

The methods of determining the fair values of the Company's investments in fixed maturity securities and equity securities are described in Note 5.

During 2023 and 2022, the Company did not reclassify any investments from the held-to-maturity category to the available-for-sale category.

Contractual and Economic Maturities

The contractual and economic maturities of the Company's investments in fixed maturity securities at December 31, 2023, were as follows:


(In millions)	Amortized Cost (1)			Fair Value
Available-for-sale:
Due in one year or less		$	1,422		$	1,440
Due after one year through five years		6,690			7,358
Due after five years through 10 years		18,885			20,740
Due after 10 years		40,729			40,666
Mortgage- and asset-backed securities		2,963			3,086
Total fixed maturity securities available-for-sale		$	70,689		$	73,290
Held-to-maturity:
Due in one year or less		$	0		$	0
Due after one year through five years		37			39
Due after five years through 10 years		9,504			10,458
Due after 10 years		8,278			9,160

Total fixed maturity securities held-to-maturity		$	17,819		$	19,657

(1) Net of allowance for credit losses

Economic maturities are used for certain debt instruments with no stated maturity where the expected maturity date is based on the combination of features in the financial instrument such as the right to call or prepay obligations or changes in coupon rates.

Investment Concentrations

The Company's process for investing in credit-related investments begins with an independent approach to underwriting each issuer's fundamental credit quality. The Company evaluates independently those factors that it believes could influence an issuer's ability to make payments under the contractual terms of the Company's 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). The Company further evaluates 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 December 31 were as follows:

2023

2022

(In millions)

Credit
Rating

Amortized
Cost

Fair
Value

Credit
Rating

Amortized
Cost

Fair
Value

Japan National Government(1)

A+

$39,151

$40,222

A+

$42,618

$44,178

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

Net Investment Gains and Losses

Information regarding pretax net gains and losses from investments for the years ended December 31 follows:


(In millions)	2023		2022		2021
Net investment gains (losses):
Sales and redemptions:
Fixed maturity securities available-for-sale:
Gross gains from sales	$	24	$	93	$	64
Gross losses from sales	(61)		(78)		(52)
Foreign currency gains (losses)	204		442		1
Other investments:
Gross gains (losses) from sales and redemptions	33		10		0
Total sales and redemptions	200		467		13
Equity securities	88		(341)		164
Credit losses:
Fixed maturity securities available-for-sale	0		0		38
Fixed maturity securities held-to-maturity	1		0		1
Commercial mortgage and other loans	(146)		(18)		6
Impairment losses	0		(25)		(20)
Loan commitments	9		9		4
Reinsurance recoverables and other	(3)		(2)		(2)
Total credit losses	(139)		(36)		27
Derivatives and other:
Derivative gains (losses)	(531)		(1,151)		(805)
Foreign currency gains (losses)	972		1,424		1,069
Total derivatives and other	441		273		264
Total net investment gains (losses)	$	590	$	363	$	468

The unrealized holding gains, net of losses, recorded as a component of net investment gains and losses for the year ended December 31, 2023, that relate to equity securities held at the December 31, 2023, reporting date were $63 million. The unrealized holding losses, net of gains, recorded as a component of net investment gains and losses for the year ended December 31, 2022, that relate to equity securities held at the December 31, 2022, reporting date was $340 million. The unrealized holding gains, net of losses, recorded as a component of net investment gains and losses for the year ended December 31, 2021, that relate to equity securities held at the December 31, 2021, reporting date was $141 million.

Unrealized Investment Gains and Losses

Information regarding changes in unrealized gains and losses from investments recorded in AOCI for the years ended December 31 follows:


(In millions)	2023			2022			2021
Changes in unrealized gains (losses):
Fixed maturity securities, available-for-sale		$	2,327		$	(13,056)		$	(960)
Total change in unrealized gains (losses)		$	2,327		$	(13,056)		$	(960)

Effect on Shareholders' Equity

The net effect on shareholders' equity of unrealized gains and losses from fixed maturity securities at December 31 was as follows:


(In millions)	2023			2022
Unrealized gains (losses) on securities available-for-sale		$	2,601		$	272
Deferred income taxes		(1,462)			(974)
Shareholders’ equity, unrealized gains (losses) on fixed maturity securities		$	1,139		$	(702)

Gross Unrealized Loss Aging

The following tables show the fair values and gross unrealized losses of the Company's available-for-sale investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31.


	2023
	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 available- for-sale:
U.S. government and agencies:
U.S. dollar-denominated		$	123		$	4		$	53		$	1		$	70		$	3
Japan government and agencies:
Yen-denominated		8,393			1,696			1,657			303			6,736			1,393
Municipalities:
U.S. dollar-denominated		703			38			31			1			672			37
Yen-denominated		301			58			34			0			267			58
Mortgage- and asset- backed securities:
U.S. dollar-denominated		925			56			340			6			585			50
Yen-denominated		58			11			0			0			58			11
Public utilities:
U.S. dollar-denominated		1,120			114			228			4			892			110
Yen-denominated		1,028			82			444			13			584			69
Sovereign and supranational:
U.S. dollar-denominated		35			8			0			0			35			8
Yen-denominated		60			7			0			0			60			7
Banks/financial institutions:
U.S. dollar-denominated		655			51			159			4			496			47
Yen-denominated		3,673			365			186			4			3,487			361
Other corporate:
U.S. dollar-denominated		6,380			665			799			19			5,581			646
Yen-denominated		1,948			294			308			9			1,640			285
Total		$	25,402		$	3,449		$	4,239		$	364		$	21,163		$	3,085


	2022
	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 available- for-sale:
U.S. government and agencies:
U.S. dollar-denominated		$	159		$	8		$	85		$	3		$	74		$	5
Japan government and agencies:
Yen-denominated		8,856			1,724			3,733			580			5,123			1,144
Municipalities:
U.S. dollar-denominated		854			89			735			57			119			32
Yen-denominated		286			61			150			26			136			35
Mortgage- and asset- backed securities:
U.S. dollar-denominated		936			84			640			42			296			42
Yen-denominated		62			12			38			6			24			6
Public utilities:
U.S. dollar-denominated		1,852			180			1,667			144			185			36
Yen-denominated		880			108			576			61			304			47
Sovereign and supranational:
U.S. dollar-denominated		30			12			0			0			30			12
Yen-denominated		71			5			34			4			37			1
Banks/financial institutions:
U.S. dollar-denominated		1,147			105			786			58			361			47
Yen-denominated		3,957			531			1,760			174			2,197			357
Other corporate:
U.S. dollar-denominated		10,529			1,201			8,636			785			1,893			416
Yen-denominated		2,090			408			1,507			273			583			135
Total		$	31,709		$	4,528		$	20,347		$	2,213		$	11,362		$	2,315

Analysis of Securities in Unrealized Loss Positions

The unrealized losses on the Company's available-for-sale securities 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.

For any available-for-sale securities with significant declines in fair value, the Company performs detailed analyses to identify whether the drivers of the declines are due to general market drivers, such as the recent rise in interest rates, or due to credit-related factors. Identifying the drivers of the declines in fair value helps to align and allocate the Company‘s resources to securities with real credit-related concerns that could impact ultimate collection of principal and interest. For any significant declines in fair value determined to be non-interest rate or market related, the Company performs a more focused review of the related issuers' specific credit profile.

For corporate issuers, the Company evaluates their assets, business profile including industry dynamics and competitive positioning, financial statements and other available financial data. For non-corporate issuers, the Company analyzes all sources of credit support, including issuer-specific factors. The Company utilizes information available in the public domain and, for certain private placement issuers, from consultations with the issuers directly. The Company also considers ratings from Nationally Recognized Statistical Rating Organizations (NRSROs), as well as the specific characteristics of the security it owns including seniority in the issuer's capital structure, covenant protections, or other relevant features. From these reviews, the Company evaluates the issuers' continued ability to service the Company's investment through payment of interest and principal.

Assuming no credit-related factors develop, unrealized gains and losses on available-for-sale securities are expected to diminish as investments near maturity. Based on its credit analysis, the Company believes that the issuers of its available-for-sale investments in the sectors shown in the table above have the ability to service their obligations to the Company. Further, the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be at maturity.

However, from time to time the Company identifies certain available-for-sale securities where the amortized cost basis exceeds the present value of the cash flows expected to be collected due to credit-related factors and as a result, a credit allowance will be estimated. Based on an evaluation of its securities currently in an unrealized loss position, the Company has determined that those securities should not have a credit loss allowance as of December 31, 2023. Refer to the Allowance for Credit Losses section below for additional information.

As of December 31, 2023, the Company had an immaterial amount of fixed maturity securities on nonaccrual status.

Commercial Mortgage and Other Loans

The Company classifies its TREs, CMLs, MMLs, and other loans as held-for-investment and includes them in the commercial mortgage and other loans line on the consolidated balance sheets. The Company carries them on the balance sheet at amortized cost less an estimated allowance for credit losses.

The following table reflects the composition of the carrying value for commercial mortgage and other loans by property type as of December 31.


(In millions)	2023				2022
	Amortized Cost		% of Total		Amortized Cost		% of Total
Commercial Mortgage and other loans:
Transitional real estate loans:
Office	$	1,807	14.1	%	$	2,158	15.8	%
Retail	473		3.7		493		3.6
Apartments/Multi-Family	2,608		20.4		2,701		19.7
Industrial	157		1.2		123		.9
Hospitality	814		6.4		803		5.9
Other	255		2.0		231		1.7
Total transitional real estate loans	6,114		47.8		6,509		47.6
Commercial mortgage loans:
Office	359		2.8		383		2.8
Retail	301		2.4		310		2.3
Apartments/Multi-Family	586		4.6		620		4.5
Industrial	463		3.6		471		3.4


Total commercial mortgage loans	1,709		13.4		1,784		13.0
Middle market loans	4,677		36.5		5,157		37.7
Other loans	301		2.3	%	238		1.7	%
Total commercial mortgage and other loans	$	12,801	100.0	%	$	13,688	100.0	%
Allowance for credit losses	(274)				(192)
Total net commercial mortgage and other loans	$	12,527			$	13,496

CMLs and TREs were secured by properties entirely within the U.S. (with the largest concentrations in California (21%), Texas (12%) and Florida (11%)). MMLs are issued only to companies domiciled within the U.S. and Canada.

Transitional Real Estate Loans

TREs are commercial mortgage loans that are typically relatively short-term floating rate instruments secured by a first lien on the property. These loans provide funding for properties undergoing a change in their physical characteristics and/or economic profile and do not typically require any principal repayment prior to the maturity date.

As of December 31, 2023, the Company had $488 million in outstanding commitments to fund TREs. These commitments are contingent on the final underwriting and due diligence to be performed.

Commercial Mortgage Loans

CMLs are typically fixed rate loans on commercial real estate with partial repayment of principal over the life of the loan with the remaining outstanding principal being repaid upon maturity. This loan portfolio is generally considered higher quality investment grade loans.

Middle Market Loans

MMLs are typically first lien senior secured cash flow loans to small to mid-size companies for working capital, refinancing, acquisition, and recapitalization. These loans are generally considered to be below investment grade. The carrying value for MMLs included $24 million and $28 million for a short-term credit facility that is reflected in other liabilities on the consolidated balance sheets, as of December 31, 2023, and 2022, respectively.

As of December 31, 2023, the Company had commitments of approximately $820 million to fund future MMLs. These commitments are contingent upon the availability of MMLs that meet the Company's underwriting criteria.

Other Loans

Other loans are primarily infrastructure loans. Infrastructure loans are typically senior secured, financing operating portfolios of contracted solar and wind assets generating cash flow for loan repayment. The infrastructure loan portfolio weighted average rating is investment grade.

Credit Quality Indicators

For TREs, the Company’s key credit quality indicators include loan-to-value (LTV), which is calculated by dividing the current outstanding loan balance by the estimated property value at origination, and performance of the loan. Given that TREs involve properties undergoing a repositioning of their commercial profile, LTV provides the most insight into the credit risk of the loan. The Company monitors the performance of the loans periodically, but not less frequently than quarterly. The monitoring process also focuses on higher risk loans, which include those that are delinquent or for which foreclosure or deed in lieu of foreclosure is anticipated.

For CMLs, the Company’s key credit quality indicators include LTV and debt service coverage ratios (DSCR). DSCR is the most recently available net operating income of the underlying property compared to the required debt service of the loan.

For MMLs and held-to-maturity fixed maturity securities, the Company’s key credit quality indicator is credit ratings. The Company’s held-to-maturity portfolio is composed of investment grade securities that are senior unsecured instruments, while its MMLs generally have below-investment-grade ratings but are typically senior secured instruments. The Company monitors the credit ratings periodically, but not less frequently than quarterly.

For other loans, the Company's key credit quality indicator is credit ratings. The Company monitors the credit ratings periodically, but not less frequently than quarterly.

The following tables present as of December 31, 2023 the amortized cost basis of TREs, CMLs, MMLs, and other loans by year of origination and credit quality indicator.


Transitional Real Estate Loans
(In millions)	2023		2022		2021		2020		2019		Prior		Total
Loan-to-Value Ratio:
0%-59.99%	$	252	$	603	$	506	$	36	$	125	$	2	$	1,524
60%-69.99%	91		534		667		18		420		123		1,853
70%-79.99%	14		835		898		85		3		64		1,899
80% or greater	0		217		250		80		87		204		838
Total	$	357	$	2,189	$	2,321	$	219	$	635	$	393	$	6,114
Current-period gross writeoffs:	$	0	$	0	$	0	$	4	$	12	$	50	$	66


Commercial Mortgage Loans
(In millions)	2023		2022		2021		2020		2019		Prior		Total		Weighted-Average DSCR
Loan-to-Value Ratio:
0%-59.99%	$	33	$	0	$	310	$	45	$	422	$	599	$	1,409	2.56
60%-69.99%	0		0		0		0		17		29		46		1.76
70%-79.99%	0		0		0		0		39		105		144		2.46
80% or greater	0		0		0		0		90		20		110		1.85
Total	$	33	$	0	$	310	$	45	$	568	$	753	$	1,709	2.49
Weighted Average DSCR	2.64		0.00		3.24		2.05		2.44		2.23
Current-period gross writeoffs:	$	0	$	0	$	0	$	0	$	0	$	0	$	0


Middle Market Loans
(In millions)	2023		2022		2021		2020		2019		Prior		Revolving Loans		Total
Credit Ratings:
BBB	$	7	$	45	$	142	$	68	$	38	$	45	$	120	$	465
BB	35		313		413		253		176		104		398		1,692
B	64		213		601		322		432		230		275		2,137
CCC	0		20		26		51		78		128		39		342
CC	0		0		0		0		0		10		0		10
C and lower	0		0		0		0		0		12		19		31
Total	$	106	$	591	$	1,182	$	694	$	724	$	529	$	851	$	4,677
Current-period gross writeoffs:	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0


Other Loans
(In millions)	2023		2022		2021		2020		2019		Prior		Revolving Loans		Total
Credit Ratings:
A	$	22	$	115	$	0	$	0	$	0	$	0	$	0	$	137
AA	0		5		5		0		0		0		0		10
BBB	73		0		5		0		0		0		0		78
BB	0		76		0		0		0		0		0		76




Total	95		196		10		0		0		0		0		301
Current-period gross writeoffs:	0		0		0		0		0		0		0		0

Loan Modifications to Borrowers Experiencing Financial Difficulties

The Company granted certain loan modifications to borrowers experiencing financial difficulty in its MML and TRE portfolios during the year ended December 31, 2023. The Company also granted certain loan modifications in its MML and TRE portfolios during the year ended December 31, 2022. The amount, timing, and extent of modifications granted are considered in determining any credit loss allowance recorded. For the years ended December 31, 2023 and 2022, these loan modifications did not have a material impact on the Company’s results of operations.

Past Due and Nonaccrual Loans

The following table presents an aging of past due and nonaccrual loans at amortized cost, before allowance for credit losses, as of December 31.


	2023
(In millions)	Current		Less Than 90 Days Past Due		90 Days or More Past Due(1)		Total Past Due		Total Loans		Nonaccrual Status
Transitional real estate loans	$	5,481	$	108	$	525	$	633	$	6,114	$	633
Commercial mortgage loans	1,676		33		0		33		1,709		0
Middle market loans	4,592		0		85		85		4,677		85
Other loans	301		0		0		0		301		0
Total	$	12,050	$	141	$	610	$	751	$	12,801	$	718

(1) As of December 31, 2023, there were no loans that were 90 days or more past due that continued to accrue interest.

For the year ended December 31, 2023, the Company recognized no interest income for TREs, CMLs, MMLs, or other loans on nonaccrual status. Of these loans, TREs with an amortized cost of $160 million had no credit loss allowance as of December 31, 2023 because these loans are collateral dependent assets for which the estimated fair values of the collateral were in excess of amortized cost. As of December 31, 2023, there were no MMLs on nonaccrual status without an allowance for credit losses.

As of December 31, 2022, the Company had an immaterial amount of loans on nonaccrual status.

Allowance for Credit Losses

The Company calculates its allowance for credit losses for held-to-maturity securities, loan receivables, loan commitments and reinsurance recoverable by grouping assets with similar risk characteristics when there is not a specific expectation of a loss for an individual asset. For held-to-maturity securities, MMLs, and MML commitments, the Company groups assets by credit ratings, industry, and country.

The Company groups CMLs and TREs and respective loan commitments by property type, property location and the property’s LTV and DSCR. On a quarterly basis, CMLs and TREs within a portfolio segment that share similar risk characteristics are pooled for calculation of credit loss allowance. On an ongoing basis, TREs and CMLs with dissimilar risk characteristics (i.e., loans with significant declines in credit quality), such as collateral dependent mortgage loans (i.e., when the borrower is experiencing financial difficulty, including when foreclosure is probable), are evaluated individually for credit loss. For example, the credit loss allowance for a collateral dependent loan is established as the excess of amortized cost over the estimated fair value of the loan’s underlying collateral, less selling cost when foreclosure is probable. Accordingly, the change in the estimated fair value of the collateral dependent loans, which are evaluated individually for credit loss, is recorded as a change in the credit loss allowance.

The credit allowance for held-to-maturity fixed maturity securities and loan receivables is estimated using a probability-of-default (PD) / loss-given-default (LGD) method, discounted for the time value of money. For held-to-maturity fixed maturity securities, available-for-sale fixed maturity securities and loan receivables, the Company includes the change in present value due to the passage of time in the change in the allowance for credit losses. The Company’s methodology for estimating credit losses utilizes the contractual maturity date of the financial asset, adjusted when necessary to reflect the expected timing of repayment (such as prepayment options, renewal options, call options, or extension options). The Company applies reasonable and supportable forecasts of macroeconomic variables that impact the determination of PD/LGD over a two-year period for held-to-maturity fixed maturity securities and MMLs. The Company reverts to historical loss information over one year, following the two-year forecast period. For the CML and TRE portfolio, the Company applies reasonable and supportable forecasts of macroeconomic variables as well as national and local real-estate market factors to estimate future credit losses where the market factors revert back to historical levels over time with the period being dependent on current market conditions, projected market conditions and difference in the current and historical market levels for each factor. The Company continuously monitors the estimation methodology, due to changes in portfolio composition, changes in underwriting practices and significant events or conditions and makes adjustments as necessary.

The Company’s held-to-maturity portfolio includes Japan Government and Agency securities of $16.9 billion amortized cost as of December 31, 2023 that meet the requirements for zero-credit-loss expectation and therefore these asset classes have been excluded from the current expected credit loss measurement.

An investment in an available-for-sale security may be impaired if the fair value falls below amortized cost. The Company regularly reviews its available-for-sale portfolio for declines in fair value. The Company's available-for-sale impairment model focuses on the ultimate collection of the cash flows from its investments and whether the Company has the intent to sell or if it is more likely than not the Company would be required to sell the security prior to recovery of its amortized cost. The determination of the amount of impairments under this model is based upon the Company's periodic evaluation and assessment of known and inherent risks associated with the respective securities. Such evaluations and assessments are revised as conditions change and new information becomes available.

When determining the Company's intention to sell a security prior to recovery of its fair value to amortized cost, the Company evaluates facts and circumstances such as, but not limited to, future cash flow needs, decisions to reposition its security portfolio, and risk profile of individual investment holdings. The Company performs ongoing analyses of its liquidity needs, which includes cash flow testing of its policy liabilities, debt maturities, projected dividend payments, and other cash flow and liquidity needs.

The Company’s methodology for estimating credit losses for available-for-sale securities utilizes the discounted cash flow model, based on past events, current market conditions and future economic conditions, as well as industry analysis and credit ratings of the securities. In addition, the Company evaluates the specific issuer’s probability of default and expected recovery of its position in the event of default based on the underlying financial condition and assets of the borrower as well as seniority and/or security of other debt holders in the issuer when developing management’s best estimate of expected cash flows.

The following table presents the roll forward of the allowance for credit losses by portfolio segment for loans and by accounting classification for securities.


(In millions)	Transitional Real Estate Loans		Commercial Mortgage Loans		Middle Market Loans		Other Loans and Loan Commitments		Held-to-Maturity Securities		Available-for-Sale Securities		Total
Balance at December 31, 2020	$	(63)	$	(32)	$	(85)	$	(35)	$	(10)	$	(38)	$	(263)
(Addition to) release of allowance for credit losses	(5)		22		(11)		4		1		26		37
Write-offs, net of recoveries	0		0		0		0		0		12		12
Change in foreign exchange	0		0		0		0		1		0		1
Balance at December 31, 2021	(68)		(10)		(96)		(31)		(8)		0		(213)
(Addition to) release of allowance for credit losses	14		1		(39)		7		0		0		(17)
Write-offs, net of recoveries	0		0		6		0		0		0		6
Change in foreign exchange	0		0		0		0		1		0		1
Balance at December 31, 2022	(54)		(9)		(129)		(24)		(7)		0		(223)
(Addition to) release of allowance for credit losses (1)	(124)		(7)		(17)		8		1		0		(139)
Write-offs, net of recoveries	66		0		0		0		0		0		66
Change in foreign exchange	0		0		0		0		1		0		1
Balance at December 31, 2023	$	(112)	$	(16)	$	(146)	$	(16)	$	(5)	$	0	$	(295)

(1) Includes an allowance for credit losses of $4 recognized on financial assets accounted for as purchased financial assets with credit deterioration that is not recorded in earnings upon recognition.

For the year ended December 31, 2023, the Company completed foreclosure or deed in lieu of foreclosure on TREs collateralized with commercial real estate properties with an amortized cost of $284 million. As a result of the excess of amortized cost over the estimated fair value of the collateral of the TREs, upon consummating the foreclosures or deed in lieu of foreclosure transactions, the Company recognized a net loss of $66 million for the year ended December 31, 2023, in net investment gains (losses). Refer to the Other Investments section below for additional information.

As of December 31, 2023, the Company identified additional TREs with an amortized cost of $502 million in anticipation of potential foreclosure or deed in lieu of foreclosure transactions. As of December 31, 2023, the Company established a credit allowance of $55 million for $600 million of loans for which the fair value of the collateral was below the amortized cost.

Other Investments

The table below reflects the composition of the carrying value for other investments as of December 31.


(In millions)	2023			2022
Other investments:
Policy loans		$	214		$	214
Short-term investments (1)		1,304			1,532
Limited partnerships		2,750			2,290
Real estate owned		227			0
Other		35			34
Total other investments		$	4,530		$	4,070

(1) Includes securities lending collateral

The Parent Company invests in partnerships that specialize in rehabilitating historic structures or the installation of solar equipment in order to receive federal historic rehabilitation and solar tax credits. These investments are classified as limited partnerships and included in other investments in the consolidated balance sheets. The change in value of each investment is recorded as a reduction to net investment income. Tax credits generated by these investments are recorded as an income tax benefit in the consolidated statements of earnings.

REO consists of office buildings or other commercial properties obtained through foreclosure or deed in lieu of foreclosure of certain of the Company’s TREs. As of December 31, 2023, $17 million of REO was classified as held-for-sale, which is carried at the lower of depreciated cost or fair value less cost to sell and is not further depreciated once classified as such.

The remaining $210 million classified as held-and-used is held for the production of income and is carried at cost less accumulated depreciation. Depreciation expense was immaterial for the year ended December 31, 2023. Additionally, as of December 31, 2023, accumulated depreciation was immaterial.

As of December 31, 2022, the Company did not have REO.

As of December 31, 2023, the Company had $2.3 billion in outstanding commitments to fund alternative investments in limited partnerships.

Variable Interest Entities (VIEs)

As a condition of its involvement or investment in a VIE, the Company enters into certain protective rights and covenants that preclude changes in the structure of the VIE that would alter the creditworthiness of the Company's investment or its beneficial interest in the VIE.

For those VIEs other than certain unit trust structures, the Company's involvement is passive in nature. The Company is not, nor has it been, required to purchase any securities issued in the future by these VIEs.

The Company's ownership interest in VIEs is limited to holding the obligations issued by them. The Company has no direct or contingent obligations to fund the limited activities of these VIEs, nor does it have any direct or indirect financial guarantees related to the limited activities of these VIEs. The Company has not provided any assistance or any other type of financing support to any of the VIEs it invests in, nor does it have any intention to do so in the future. For those VIEs in which the Company holds debt obligations, the weighted-average lives of the Company's notes are very similar to the underlying collateral held by these VIEs where applicable.

The Company's risk of loss related to its interests in any of its 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 as of December 31.

Investments in Consolidated Variable Interest Entities


	2023						2022
(In millions)	Amortized Cost (1)			Fair Value			Amortized Cost (1)			Fair Value
Assets:
Fixed maturity securities, available-for-sale		$	2,882		$	3,712		$	3,223		$	3,805
Commercial mortgage and other loans		10,150			9,915			10,832			10,762
Other investments (2)		2,381			2,381			1,909			1,909
Other assets (3)		55			55			62			62
Total assets of consolidated VIEs		$	15,468		$	16,063		$	16,026		$	16,538
Liabilities:
Other liabilities (3)		$	507		$	507		$	390		$	390
Total liabilities of consolidated VIEs		$	507		$	507		$	390		$	390

(1) Net of allowance for credit losses

(2) Consists entirely of alternative investments in limited partnerships

(3) Consists entirely of derivatives

The Company is substantively the only investor in the consolidated VIEs listed in the table above. As the sole investor in these VIEs, the Company has the power to direct the activities of a variable interest entity that most significantly impact the entity's economic performance and is therefore considered to be the primary beneficiary of the VIEs that it consolidates. The Company also participates in substantially all of the variability created by these VIEs. The activities of these VIEs are limited to holding invested assets and foreign currency swaps, as appropriate, and utilizing the cash flows from these securities to service its investment. Neither the Company nor any of its 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, the Company is not a direct counterparty to the swap contracts and has no control over them. The Company's loss exposure to these VIEs is limited to its original investment. The Company's 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 its investment in unit trust structures, the underlying collateral assets and funding of the Company's consolidated VIEs are generally static in nature.

Investments in Unit Trust Structures

The Company also utilizes unit trust structures in its Aflac Japan segment to invest in various asset classes. As the sole investor of these VIEs, the Company is required to consolidate these trusts under U.S. GAAP.

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 as of December 31.

Investments in Variable Interest Entities Not Consolidated


	2023						2022
(In millions)	Amortized Cost			Fair Value			Amortized Cost			Fair Value
Assets:
Fixed maturity securities, available-for-sale		$	5,904		$	6,424		$	3,998		$	4,259

Other investments (1)		369			369			381			381
Total investments in VIEs not consolidated		$	6,273		$	6,793		$	4,379		$	4,640

(1) Consists entirely of alternative investments in limited partnerships

Certain investments in VIEs that the Company is 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. The Company does not have the power to direct the activities that most significantly impact the entity's economic performance, nor does it have the obligation to absorb losses of the entity or the right to receive benefits from the entity. As such, the Company is not the primary beneficiary of these VIEs and is therefore not required to consolidate them.

Securities Lending and Pledged Securities

The Company lends fixed maturity and public equity securities to financial institutions in short-term securities lending transactions. These short-term securities lending arrangements increase investment income with minimal risk. The Company receives cash or other securities as collateral for such loans. The Company's securities lending policy requires that the fair value of the securities received as collateral be 102% or more of the fair value of the loaned securities and that unrestricted cash received as collateral be 100% or more of the fair value of the loaned securities. The securities loaned continue to be carried as investment assets on the Company's balance sheet during the terms of the loans and are not reported as sales. 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. For loans where the Company receives as collateral securities that the Company is not permitted to sell or repledge, the collateral is not reflected on the consolidated financial statements.

Details of collateral by loaned security type and remaining maturity of the agreements as of December 31 were as follows:


Securities Lending Transactions Accounted for as Secured Borrowings
Remaining Contractual Maturity of the Agreements
	2023				2022
(In millions)	Overnight and Continuous(1)		Up to 30 days		Total		Overnight and Continuous(1)		Up to 30 days		Total
Securities lending transactions:
Fixed maturity securities:
Japan government and agencies	$	0	$	737	$	737	$	0	$	1,087	$	1,087

Public utilities	19		0		19		12		0		12

Banks/financial institutions	72		0		72		89		0		89
Other corporate	675		0		675		621		0		621
Total borrowings	$	766	$	737	$	1,503	$	722	$	1,087	$	1,809
Gross amount of recognized liabilities for securities lending transactions					$	1,503					$	1,809

(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.

In connection with securities lending, in addition to cash collateral received, the Company received from counterparties securities collateral of $4.3 billion and $6.8 billion at December 31, 2023, and 2022, respectively, which may not be sold or re-pledged, unless the counterparty is in default. Such securities collateral is not reflected on the consolidated financial statements.

The Company did not have any repurchase agreements or repurchase-to-maturity transactions outstanding as of December 31, 2023 and 2022, respectively.

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

At December 31, 2023, debt securities with a fair value of $20 million were on deposit with regulatory authorities in the U.S. (including U.S. territories). The Company retains ownership of all securities on deposit and receives the related investment income.

For general information regarding the Company's investment accounting policies, see Note 1.