Investments (Tables)

3 Months Ended

Mar. 31, 2019

Total investments at March 31, 2019 and December 31, 2018 were as follows:



	March 31, 2019						December 31, 2018
In millions	Current		Long-term		Total		Current		Long-term		Total
Debt securities available for sale	$	2,286	$	13,611	$	15,897	$	2,359	$	12,896	$	15,255
Mortgage loans	123		1,215		1,338		145		1,216		1,361
Other investments	17		1,584		1,601		18		1,620		1,638
Total investments	$	2,426	$	16,410	$	18,836	$	2,522	$	15,732	$	18,254

Debt and equity securities available for sale

Debt securities available for sale at March 31, 2019 and December 31, 2018 were as follows:



In millions	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
March 31, 2019
Debt securities:
U.S. government securities	$	1,704	$	40	$	—		$	1,744
States, municipalities and political subdivisions	2,246		71		—			2,317
U.S. corporate securities	6,777		288		(1		)	7,064
Foreign securities	2,243		110		—			2,353
Residential mortgage-backed securities	577		18		—			595
Commercial mortgage-backed securities	608		29		—			637
Other asset-backed securities	1,148		8		(7		)	1,149
Redeemable preferred securities	32		6		—			38
Total debt securities ⁽¹⁾	$	15,335	$	570	$	(8	)	$	15,897

December 31, 2018
Debt securities:
U.S. government securities	$	1,662	$	26	$	—		$	1,688
States, municipalities and political subdivisions	2,370		30		(1		)	2,399
U.S. corporate securities	6,444		61		(16		)	6,489
Foreign securities	2,355		31		(3		)	2,383
Residential mortgage-backed securities	567		10		—			577
Commercial mortgage-backed securities	594		11		—			605
Other asset-backed securities	1,097		3		(15		)	1,085
Redeemable preferred securities	30		—		(1		)	29
Total debt securities ⁽¹⁾	$	15,119	$	172	$	(36	)	$	15,255

^{_____________________________________________}

(1)

Investment risks associated with the Company’s experience-rated products generally do not impact the Company’s consolidated operating results. At March 31, 2019, debt securities with a fair value of $939 million, gross unrealized capital gains of $45 million and no gross unrealized capital losses and at December 31, 2018, debt securities with a fair value of $916 million, gross unrealized capital gains of $12 million and gross unrealized capital losses of $2 million were included in total debt securities, but support experience-rated products. Changes in net unrealized capital gains (losses) on these securities are not reflected in accumulated other comprehensive income.

Fair value of debt securities by contractual maturity

The fair value of debt securities at March 31, 2019 is shown below by contractual maturity. Actual maturities may differ from contractual maturities because securities may be restructured, called or prepaid, or the Company intends to sell a security prior to maturity.



In millions	Amortized Cost		Fair Value
Due to mature:
Less than one year	$	990	$	993
One year through five years	5,511		5,630
After five years through ten years	2,991		3,125
Greater than ten years	3,510		3,768
Residential mortgage-backed securities	577		595
Commercial mortgage-backed securities	608		637
Other asset-backed securities	1,148		1,149
Total	$	15,335	$	15,897

Debt and Equity Securities in an Unrealized Capital Loss Position

Summarized below are the debt securities the Company held at March 31, 2019 and December 31, 2018 that were in an unrealized capital loss position:



In millions, except number of securities	Number of Securities	Fair Value		Unrealized Losses
March 31, 2019
Debt securities:
U.S. government securities	12	$	30	$	—
States, municipalities and political subdivisions	26	39		—
U.S. corporate securities	70	94		1
Foreign securities	39	47		—
Residential mortgage-backed securities	23	—		—
Commercial mortgage-backed securities	1	2		—
Other asset-backed securities	487	486		7
Redeemable preferred securities	1	6		—
Total debt securities	659	$	704	$	8

December 31, 2018
Debt securities:
U.S. government securities	8	$	26	$	—
States, municipalities and political subdivisions	54	86		1
U.S. corporate securities	1,399	1,431		16
Foreign securities	243	314		3
Residential mortgage-backed securities	45	1		—
Other asset-backed securities	516	528		15
Redeemable preferred securities	14	23		1
Total debt securities	2,279	$	2,409	$	36

Maturity dates for debt securities

Since Aetna’s investment portfolio was measured at fair value as of the Aetna Acquisition Date, each of the securities in the table above were in an unrealized loss position for less than 12 months. The Company reviewed the securities in the tables above and concluded that these are performing assets generating investment income to support the needs of the Company’s business. In performing this review, the Company considered factors such as the quality of the investment security based on research performed by the Company’s internal credit analysts and external rating agencies and the prospects of realizing the carrying value of the security based on the investment’s current prospects for recovery. As of March 31, 2019, the Company did not intend to sell these securities, and did not believe it was more likely than not that it would be required to sell these securities prior to anticipated recovery of their amortized cost basis.

The maturity dates for debt securities in an unrealized capital loss position at March 31, 2019 were as follows:



	Supporting experience-rated products				Supporting remaining products				Total
In millions	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Due to mature:
Less than one year	$	1	$	—	$	20	$	—	$	21	$	—
One year through five years	—		—		43		1		43		1
After five years through ten years	6		—		82		—		88		—
Greater than ten years	4		—		60		—		64		—
Residential mortgage-backed securities	—		—		—		—		—		—
Commercial mortgage-backed securities	—		—		2		—		2		—
Other asset-backed securities	—		—		486		7		486		7
Total	$	11	$	—	$	693	$	8	$	704	$	8

Activity in mortgage loan portfolio

The Company’s mortgage loans are collateralized by commercial real estate. The Company did not have any mortgage loans during the three months ended March 31, 2018. During the three months ended March 31, 2019, the Company had the following activity in its mortgage loan portfolio:



In millions
New mortgage loans	$	41
Mortgage loans fully repaid	52
Mortgage loans foreclosed	—

Mortgage loan internal credit rating

Based upon the most recent assessments at March 31, 2019 and December 31, 2018, the Company’s mortgage loans were given the following credit quality indicators:



In millions, except credit ratings indicator	March 31, 2019		December 31, 2018
1	$	41	$	42
2 to 4	1,283		1,301
5 and 6	14		18
7	—		—
Total	$	1,338	$	1,361

Net Investment Income

Sources of net investment income for the three months ended March 31, 2019 and 2018 were as follows:



	Three Months Ended March 31,
In millions	2019			2018
Debt securities	$	156		$	50
Mortgage loans	17			—
Other investments	26			—
Gross investment income	199			50
Investment expenses	(9		)	—
Net investment income (excluding net realized capital gains or losses)	190			50
Net realized capital gains ⁽¹⁾	59			—
Net investment income ⁽²⁾	$	249		$	50

^{_____________________________________________}


(1)	Other-than-temporary impairment (“OTTI”) losses on debt securities recognized in the unaudited condensed consolidated statements of operations were $7 million for the three months ended March 31, 2019. There were no OTTI losses on debt securities for the three months ended March 31, 2018.


(2)	Net investment income includes $11 million for the three months ended March 31, 2019 related to investments supporting experience-rated products. The Company had no investments supporting experience-rated products during the three months ended March 31, 2018.

The Company did not have any material proceeds from the sale of available for sale debt securities or related gross realized capital gains or losses for the three months ended March 31, 2018. Excluding amounts related to experience-rated products, proceeds from the sale of available for sale debt securities and the related gross realized capital gains and losses for the three months ended March 31, 2019 were as follows:



In millions
Proceeds from sales	$	1,489
Gross realized capital gains	35
Gross realized capital losses	2