VARIABLE INTEREST ENTITIES

3 Months Ended

Mar. 31, 2020

VARIABLE INTEREST ENTITIES

VARIABLE INTEREST ENTITIES

8. Variable Interest Entities

We enter into various arrangements with variable interest entities (VIEs) in the normal course of business and consolidate the VIEs when we determine we are the primary beneficiary. This analysis includes a review of the VIE’s capital structure, related contractual relationships and terms, nature of the VIE’s operations and purpose, nature of the VIE’s interests issued and our involvement with the entity. When assessing the need to consolidate a VIE, we evaluate the design of the VIE as well as the related risks the entity was designed to expose the variable interest holders to.

The primary beneficiary is the entity that has both (1) the power to direct the activities of the VIE that most significantly affect the entity’s economic performance and (2) the obligation to absorb losses or the right to receive benefits that could be potentially significant to the VIE. While also considering these factors, the consolidation conclusion depends on the breadth of our decision-making ability and our ability to influence activities that significantly affect the economic performance of the VIE.

Balance Sheet Classification and Exposure to Loss

The following table presents the total assets and total liabilities associated with our variable interests in consolidated VIEs, as classified in the Condensed Consolidated Balance Sheets:

		Real Estate and				Affordable
		Investment		Securitization		Housing
(in millions)		Entities(d)		Vehicles(e)		Partnerships		Other		Total
March 31, 2020
Assets:
Bonds available for sale	$	256	$	6,255	$	-	$	-	$	6,511
Other bond securities		-		2,266		-		1		2,267
Mortgage and other loans receivable		-		4,025		-		-		4,025
Other invested assets		5,180		-		3,635		42		8,857
Other(a)		500		1,915		483		42		2,940
Total assets(b)	$	5,936	$	14,461	$	4,118	$	85	$	24,600
Liabilities:
Long-term debt	$	2,794	$	4,515	$	2,201	$	4	$	9,514
Other(c)		184		193		195		23		595
Total liabilities	$	2,978	$	4,708	$	2,396	$	27	$	10,109
December 31, 2019
Assets:
Bonds available for sale	$	177	$	7,239	$	-	$	-	$	7,416
Other bond securities		-		3,324		-		1		3,325
Mortgage and other loans receivable		-		3,860		-		-		3,860
Other invested assets		5,231		-		3,464		42		8,737
Other(a)		615		1,996		469		42		3,122
Total assets(b)	$	6,023	$	16,419	$	3,933	$	85	$	26,460
Liabilities:
Long-term debt	$	2,810	$	4,356	$	2,074	$	4	$	9,244
Other(c)		236		359		195		24		814
Total liabilities	$	3,046	$	4,715	$	2,269	$	28	$	10,058

(a)Comprised primarily of Short-term investments and Other assets at March 31, 2020 and December 31, 2019.

(b)The assets of each VIE can be used only to settle specific obligations of that VIE.

(c)Comprised primarily of Other liabilities at March 31, 2020 and December 31, 2019.

(d)At March 31, 2020 and December 31, 2019, off-balance sheet exposure primarily consisting of commitments to real estate and investment entities was $2.4 billion and $2.6 billion, respectively.

(e)At March 31, 2020 and December 31, 2019, the company had contributed total assets of $13.7 billion and $15.6 billion, respectively, into consolidated securitization vehicles.

We calculate our maximum exposure to loss to be (i) the amount invested in the debt or equity of the VIE, (ii) the notional amount of VIE assets or liabilities where we have also provided credit protection to the VIE with the VIE as the referenced obligation, and (iii) other commitments and guarantees to the VIE. Interest holders in VIEs sponsored by us generally have recourse only to the assets and cash flows of the VIEs and do not have recourse to us, except in limited circumstances when we have provided a guarantee to the VIE’s interest holders.

The following table presents total assets of unconsolidated VIEs in which we hold a variable interest, as well as our maximum exposure to loss associated with these VIEs:

			Maximum Exposure to Loss
		Total VIE		On-Balance		Off-Balance
(in millions)		Assets		Sheet(b)		Sheet			Total
March 31, 2020
Real estate and investment entities(a)	$	288,131	$	5,810	$	3,546		$	9,356
Affordable housing partnerships		3,064		397		-			397
Other		5,514		358		561	(c)		919
Total	$	296,709	$	6,565	$	4,107		$	10,672
December 31, 2019
Real estate and investment entities(a)	$	283,349	$	6,519	$	3,286		$	9,805
Affordable housing partnerships		3,351		453		-			453
Other		5,320		310		561	(c)		871
Total	$	292,020	$	7,282	$	3,847		$	11,129

(a)Comprised primarily of hedge funds and private equity funds.

(b)At March 31, 2020 and December 31, 2019, $6.4 billion and $7.0 billion, respectively, of our total unconsolidated VIE assets were recorded as Other invested assets.

(c)These amounts represent our estimate of the maximum exposure to loss under certain insurance policies issued to VIEs if a hypothetical loss occurred to the extent of the full amount of the insured value. Our insurance policies cover defined risks and our estimate of liability is included in our insurance reserves on the balance sheet.

For additional information on VIEs see Note 11 to the Consolidated Financial Statements in the 2019 Annual Report.