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Investments
 6 Months Ended
Jun. 30, 2021
Investments [Abstract]  
Investments
3. Investments


Net investment income is as follows:

  
Three Months Ended
June 30,
    
Six Months Ended
June 30,
  
   
2021
    
2020
    
2021
    
2020
  
(In millions)
                        
                         
Fixed maturity securities
  
$
425
    
$
430
    
$
853
    
$
868
  
Limited partnership investments
    
149
      
57
      
196
      
(45
)
Short term investments
            
2
              
9
  
Equity securities
    
20
      
50
      
49
      
6
  
Income (loss) from trading portfolio (a)
    
26
      
107
      
76
      
(22
)
Other
    
14
      
16
      
30
      
30
  
Total investment income
    
634
      
662
      
1,204
      
846
  
Investment expenses
    
(18
)
    
(18
)
    
(38
)
    
(39
)
Net investment income
  
$
616
    
$
644
    
$
1,166
    
$
807
  

(a)
Net unrealized gains (losses) related to changes in fair value on securities still held were $28 and $80 for the three months ended June 30, 2021 and 2020 and $58 and $7 for the six months ended June 30, 2021 and 2020.


Investment gains (losses) are as follows:

  
Three Months Ended
June 30,
    
Six Months Ended
June 30,
  
   
2021
    
2020
    
2021
    
2020
  
(In millions)
                        
                         
Fixed maturity securities
  
$
31
    
$
17
    
$
69
    
$
(58
)
Equity securities
    
17
      
63
      
19
      
(70
)
Derivative instruments
    
(12
)
    
(10
)
    
5
      
(5
)
Short term investments and other
    
2
      
(1
)
    
2
      
(14
)
Sale of 47% interest in Altium Packaging (see Note 2)
    
555
              
555
          
Deconsolidation of Diamond Offshore
    
(15
)
    
(1,211
)
    
(15
)
    
(1,211
)
Investment gains (losses) (a)
  
$
578
    
$
(1,142
)
  
$
635
    
$
(1,358
)

(a)
Gross investment gains on available-for-sale securities were $51 and $102 for the three months ended June 30, 2021 and 2020 and $109 and $131 for the six months ended June 30, 2021 and 2020. Gross investment losses on available-for-sale securities were $20 and $85 for the three months ended June 30, 2021 and 2020 and $40 and $189 for the six months ended June 30, 2021 and 2020. During the three and six months ended June 30, 2021, $15 of investment gains were recognized due to the change in fair value of non-redeemable preferred stock still held as of June 30, 2021. During the three and six months ended June 30, 2020, $63 of investment gains and $70 of investment losses were recognized due to the change in fair value of non-redeemable preferred stock still held as of June 30, 2020.


The following tables present the activity related to the allowance on available-for-sale securities with credit impairments and purchased credit-deteriorated (“PCD”) assets. Accrued interest receivables on available-for-sale fixed maturity securities totaled $374 million, $371 million and $373 million as of June 30, 2021, December 31, 2020 and June 30, 2020 and are excluded from the estimate of expected credit losses and the amortized cost basis in the tables within this Note.

Three months ended June 30, 2021
  
Corporate and
Other Bonds
    
Asset-
backed
    
Total
  
(In millions)
                  
                   
Allowance for credit losses:
                  
Balance as of April 1, 2021
  
$
27
    
$
16
    
$
43
  
Additions to the allowance for credit losses:
                        
Securities for which credit losses were not previously recorded
                        
Available-for-sale securities accounted for as PCD assets
            
4
      
4
  
                         
Reductions to the allowance for credit losses:
                        
Securities sold during the period (realized)
                        
                         
Additional increases or (decreases) to the allowance for credit losses on securities that had an allowance recorded in a previous period
    
(3
)
    
1
      
(2
)
Total allowance for credit losses
  
$
24
    
$
21
    
$
45
  

Three months ended June 30, 2020
                  
                   
Allowance for credit losses:
                  
Balance as of April 1, 2020
  
$
49
    
$
-
    
$
49
  
Additions to the allowance for credit losses:
                        
Securities for which credit losses were not previously recorded
    
10
      
12
      
22
  
Available-for-sale securities accounted for as PCD assets
    
1
              
1
  
                         
Reductions to the allowance for credit losses:
                        
Securities sold during the period (realized)
    
1
              
1
  
                         
Additional increases or (decreases) to the allowance for credit losses on securities that had an allowance recorded in a previous period
    
(20
)
            
(20
)
Total allowance for credit losses
  
$
39
    
$
12
    
$
51
  

Six months ended June 30, 2021
  
Corporate and
Other Bonds
    
Asset-
backed
    
Total
  
(In millions)
                  
                   
Allowance for credit losses:
                  
Balance as of January 1, 2021
  
$
23
    
$
17
    
$
40
  
Additions to the allowance for credit losses:
                        
Securities for which credit losses were not previously recorded
    
14
              
14
  
Available-for-sale securities accounted for as PCD assets
    
2
      
4
      
6
  
                         
Reductions to the allowance for credit losses:
                        
Securities sold during the period (realized)
    
6
              
6
  
Intent to sell or more likely than not will be required to sell the security before recovery of its amortized cost basis
                        
                         
Additional increases or (decrease) to the allowance for credit losses on securities that had an allowance recorded in a previous period
    
(9
)
            
(9
)
Total allowance for credit losses
  
$
24
    
$
21
    
$
45
  

Six months ended June 30, 2020
                  
                   
Allowance for credit losses:
                  
Balance as of January 1, 2020
  
$
-
    
$
-
    
$
-
  
Additions to the allowance for credit losses:
                        
Impact of adopting ASC 326
    
6
              
6
  
Securities for which credit losses were not previously recorded
    
58
      
12
      
70
  
Available-for-sale securities accounted for as PCD assets
    
2
              
2
  
                         
Reductions to the allowance for credit losses:
                        
Securities sold during the period (realized)
    
6
              
6
  
Intent to sell or more likely than not will be required to sell the security before recovery of its amortized cost basis
    
1
              
1
  
                         
Additional increases or (decrease) to the allowance for credit losses on securities that had an allowance recorded in a previous period
    
(20
)
            
(20
)
Total allowance for credit losses
  
$
39
    
$
12
    
$
51
  


The components of available-for-sale impairment losses recognized in earnings by asset type are presented in the following table. The table includes losses on securities with an intention to sell and changes in the allowance for credit losses on securities since acquisition date:

  
Three Months Ended
June 30,
    
Six Months Ended
June 30,
  
   
2021
    
2020
    
2021
    
2020
  
(In millions)
                        
                         
Fixed maturity securities available-for-sale:
                        
Corporate and other bonds
  
$
(2
)
  
$
(1
)
  
$
5
    
$
90
  
Asset-backed
    
1
      
12
              
13
  
Impairment losses (gains) recognized in earnings
  
$
(1
)
  
$
11
    
$
5
    
$
103
  


There were $13 million of losses on mortgage loans recognized during the six months ended June 30, 2020 due to changes in expected credit losses. There were no losses recognized on mortgage loans during the three and six months ended June 30, 2021 or during the three months ended June 30, 2020.


The amortized cost and fair values of fixed maturity securities are as follows:

June 30, 2021
  
Cost or
Amortized
Cost
    
Gross
Unrealized
Gains
    
Gross
Unrealized
Losses
    
Allowance
for Credit
Losses
    
Estimated
Fair Value
  
(In millions)
                              
                               
Fixed maturity securities:
                              
Corporate and other bonds
  
$
21,291
    
$
3,153
    
$
35
    
$
24
    
$
24,385
  
States, municipalities and political subdivisions
    
10,125
      
1,743
      
2
              
11,866
  
Asset-backed:
                                        
Residential mortgage-backed
    
3,337
      
99
      
10
              
3,426
  
Commercial mortgage-backed
    
2,068
      
98
      
14
      
17
      
2,135
  
Other asset-backed
    
2,338
      
84
      
3
      
4
      
2,415
  
Total asset-backed
    
7,743
      
281
      
27
      
21
      
7,976
  
U.S. Treasury and obligations of government-sponsored enterprises
    
142
              
5
              
137
  
Foreign government
    
515
      
22
      
1
              
536
  
Fixed maturities available-for-sale
    
39,816
      
5,199
      
70
      
45
      
44,900
  
Fixed maturities trading
    
10
                              
10
  
Total fixed maturity securities
  
$
39,826
    
$
5,199
    
$
70
    
$
45
    
$
44,910
  

December 31, 2020
                              
                               
Fixed maturity securities:
                              
Corporate and other bonds
  
$
20,792
    
$
3,578
    
$
22
    
$
23
    
$
24,325
  
States, municipalities and political subdivisions
    
9,729
      
1,863
                      
11,592
  
Asset-backed:
                                        
Residential mortgage-backed
    
3,442
      
146
      
1
              
3,587
  
Commercial mortgage-backed
    
1,933
      
93
      
42
      
17
      
1,967
  
Other asset-backed
    
2,179
      
81
      
9
              
2,251
  
Total asset-backed
    
7,554
      
320
      
52
      
17
      
7,805
  
U.S. Treasury and obligations of government-sponsored enterprises
    
339
      
2
      
3
              
338
  
Foreign government
    
512
      
32
                      
544
  
Fixed maturities available-for-sale
    
38,926
      
5,795
      
77
      
40
      
44,604
  
Fixed maturities trading
    
37
      
5
                      
42
  
Total fixed maturity securities
  
$
38,963
    
$
5,800
    
$
77
    
$
40
    
$
44,646
  



The net unrealized gains on available-for-sale investments included in the tables above are recorded as a component of Accumulated other comprehensive income (loss) (“AOCI”). When presented in AOCI, these amounts are net of tax and noncontrolling interests and any required Shadow Adjustments. To the extent that unrealized gains on fixed income securities supporting long term care products and structured settlements not funded by annuities would result in a premium deficiency if those gains were realized, a related increase in Insurance reserves is recorded, net of tax and noncontrolling interests, as a reduction of net unrealized gains through Other comprehensive income (loss) (“Shadow Adjustments”). As of June 30, 2021 and December 31, 2020, the net unrealized gains on investments included in AOCI were correspondingly reduced by Shadow Adjustments of $2.4 billion and $2.5 billion (after tax and noncontrolling interests).


The available-for-sale securities in a gross unrealized loss position for which an allowance for credit losses has not been recorded are as follows:

  
Less than
12 Months
    
12 Months
or Longer
    
Total
  
June 30, 2021
  
Estimated
Fair Value
    
Gross
Unrealized
Losses
    
Estimated
Fair Value
    
Gross
Unrealized
Losses
    
Estimated
Fair Value
    
Gross
Unrealized
Losses
  
(In millions)
                                    
                                     
Fixed maturity securities:
                                    
Corporate and other bonds
  
$
1,190
    
$
33
    
$
61
    
$
2
    
$
1,251
    
$
35
  
States, municipalities and political subdivisions
    
128
      
2
                      
128
      
2
  
Asset-backed:
                                                
Residential mortgage-backed
    
932
      
10
      
10
              
942
      
10
  
Commercial mortgage-backed
    
153
      
2
      
206
      
12
      
359
      
14
  
Other asset-backed
    
255
      
2
      
74
      
1
      
329
      
3
  
Total asset-backed
    
1,340
      
14
      
290
      
13
      
1,630
      
27
  
U.S. Treasury and obligations of government-sponsored enterprises
    
80
      
5
                      
80
      
5
  
Foreign government
    
48
      
1
                      
48
      
1
  
Total fixed maturity securities
  
$
2,786
    
$
55
    
$
351
    
$
15
    
$
3,137
    
$
70
  
                                                 
December 31, 2020
                                                
                                                 
Fixed maturity securities:
                                                
Corporate and other bonds
  
$
609
    
$
21
    
$
12
    
$
1
    
$
621
    
$
22
  
States, municipalities and political subdivisions
    
33
                              
33
          
Asset-backed:
                                                
Residential mortgage-backed
    
71
      
1
      
11
              
82
      
1
  
Commercial mortgage-backed
    
533
      
40
      
28
      
2
      
561
      
42
  
Other asset-backed
    
344
      
9
      
13
              
357
      
9
  
Total asset-backed
    
948
      
50
      
52
      
2
      
1,000
      
52
  
U.S. Treasury and obligations of government-sponsored enterprises
    
63
      
3
                      
63
      
3
  
Foreign government
    
13
                              
13
          
Total fixed maturity securities
  
$
1,666
    
$
74
    
$
64
    
$
3
    
$
1,730
    
$
77
  


Based on current facts and circumstances, the Company believes the unrealized losses presented in the June 30, 2021 securities in a gross unrealized loss position table above are not indicative of the ultimate collectability of the current amortized cost of the securities, but rather are attributable to changes in interest rates, credit spreads and other factors. There is no current intent to sell securities with unrealized losses, nor is it more likely than not that sale will be required prior to recovery of amortized cost; accordingly, it was determined that there are no additional impairment losses to be recorded at June 30, 2021.

Contractual Maturity


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

  
June 30, 2021
    
December 31, 2020
  
   
Cost or
Amortized
Cost
    
Estimated
Fair
Value
    
Cost or
Amortized
Cost
    
Estimated
Fair
Value
  
(In millions)
                        
                         
Due in one year or less
  
$
1,685
    
$
1,702
    
$
1,456
    
$
1,458
  
Due after one year through five years
    
10,723
      
11,479
      
12,304
      
13,098
  
Due after five years through ten years
    
13,775
      
15,012
      
12,319
      
13,878
  
Due after ten years
    
13,633
      
16,707
      
12,847
      
16,170
  
Total
  
$
39,816
    
$
44,900
    
$
38,926
    
$
44,604
  


Actual maturities may differ from contractual maturities because certain securities may be called or prepaid. Securities not due at a single date are allocated based on weighted average life.

Mortgage Loans


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

  
Mortgage Loans Amortized Cost Basis by Origination Year (a)
  
As of June 30, 2021
  
2021
    
2020
    
2019
    
2018
    
2017
    
Prior
    
Total
  
(In millions)
                                          
                                           
DSCR ≥1.6x
                                          
LTV less than 55%
        
$
89
    
$
33
    
$
50
    
$
113
    
$
183
    
$
468
  
LTV 55% to 65%
                  
19
              
9
      
4
      
32
  
LTV greater than 65%
  
$
5
              
6
                      
24
      
35
  
DSCR 1.2x - 1.6x
                                                        
LTV less than 55%
                    
16
              
5
      
71
      
92
  
LTV 55% to 65%
    
10
      
38
      
39
      
42
      
27
              
156
  
LTV greater than 65%
            
34
      
44
              
8
      
12
      
98
  
DSCR ≤1.2x
                                                        
LTV less than 55%
                    
50
              
8
      
10
      
68
  
LTV 55% to 65%
                    
47
                              
47
  
LTV greater than 65%
                    
29
                      
7
      
36
  
Total
  
$
15
    
$
161
    
$
283
    
$
92
    
$
170
    
$
311
    
$
1,032
  

(a)
The values in the table above reflect DSCR on a standardized amortization period and LTV ratios based on the most recent appraised values trended forward using changes in a commercial real estate price index.

Derivative Financial Instruments


A summary of the aggregate contractual or notional amounts and gross estimated fair values related to derivative financial instruments follows. The contractual or notional amounts for derivatives are used to calculate the exchange of contractual payments under related agreements and may not be representative of the potential for gain or loss on these instruments. Gross estimated fair values of derivative positions are currently presented in Equity securities, Receivables and Payable to brokers on the Consolidated Condensed Balance Sheets.
June 30, 2021
  
December 31, 2020
 
Contractual/
Notional
  
Estimated Fair Value
  
Contractual/
Notional
  
Estimated Fair Value
 
Amount
  
Asset
  
(Liability)
  
Amount
  
Asset
  
(Liability)
(In millions)
                                  
                                   
With hedge designation:
                                  
Interest rate swaps
                  
$
675
        
$
(26)
                                   
Without hedge designation:
                                  
Equity markets:
                                  
Options – purchased
$
6
                
135
  
$
3
      
Interest rate swaps
  
100
        
$
(2)
    
100
          
(3)
Embedded derivative on funds withheld liability
  
274
          
(13)
    
190
          
(19)

Investment Commitments


As part of the overall investment strategy, investments are made in various assets which require future purchase, sale or funding commitments. These investments are recorded once funded, and the related commitments may include future capital calls from various third-party limited partnerships, signed and accepted mortgage loan applications and obligations related to private placement securities. As of June 30, 2021, commitments to purchase or fund were approximately $1.3 billion and to sell were approximately $95 million under the terms of these investments.