Investments

9 Months Ended

Sep. 30, 2020

Total investments at September 30, 2020 and December 31, 2019 were as follows:


	September 30, 2020						December 31, 2019
In millions	Current		Long-term		Total		Current		Long-term		Total
Debt securities available for sale	$	2,578	$	17,820	$	20,398	$	2,251	$	14,671	$	16,922
Mortgage loans	253		871		1,124		122		1,091		1,213
Other investments	—		1,525		1,525		—		1,552		1,552
Total investments	$	2,831	$	20,216	$	23,047	$	2,373	$	17,314	$	19,687

Debt Securities

Debt securities available for sale at September 30, 2020 and December 31, 2019 were as follows:


In millions	Gross Amortized Cost		Allowance for Credit Losses (1)		Net Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
September 30, 2020
Debt securities:
U.S. government securities	$	2,455	$	—	$	2,455	$	146	$	—	$	2,601
States, municipalities and political subdivisions	2,393		—		2,393		150		(3)		2,540
U.S. corporate securities	7,665		(4)		7,661		878		(15)		8,524
Foreign securities	2,479		—		2,479		252		(10)		2,721
Residential mortgage-backed securities	680		—		680		33		—		713
Commercial mortgage-backed securities	930		—		930		82		—		1,012
Other asset-backed securities	2,239		—		2,239		33		(10)		2,262
Redeemable preferred securities	22		—		22		3		—		25
Total debt securities (2)	$	18,863	$	(4)	$	18,859	$	1,577	$	(38)	$	20,398

December 31, 2019
Debt securities:
U.S. government securities	$	1,791	$	—	$	1,791	$	62	$	(1)	$	1,852
States, municipalities and political subdivisions	2,202		—		2,202		108		(1)		2,309
U.S. corporate securities	7,167		—		7,167		573		(3)		7,737
Foreign securities	2,149		—		2,149		200		(1)		2,348
Residential mortgage-backed securities	508		—		508		25		—		533
Commercial mortgage-backed securities	654		—		654		46		—		700
Other asset-backed securities	1,397		—		1,397		13		(5)		1,405
Redeemable preferred securities	30		—		30		8		—		38
Total debt securities (2)	$	15,898	$	—	$	15,898	$	1,035	$	(11)	$	16,922

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(1)Effective January 1, 2020, the Company adopted the available-for-sale debt security impairment model under ASU 2016-13, Financial Instruments - Credit Losses (Topic 326). The new impairment model requires the write down of amortized cost through an allowance for credit losses, rather than through a reduction of the amortized cost basis of the available-for-sale debt security. As the Company adopted the new available-for-sale debt security impairment model on a prospective basis, there was no allowance for credit losses recorded on available-for-sale debt securities at December 31, 2019.

(2)Investment risks associated with the Company’s experience-rated products generally do not impact the Company’s consolidated operating results. At September 30, 2020, debt securities with a fair value of $928 million, gross unrealized capital gains of $122 million and gross unrealized capital losses of $1 million and at December 31, 2019, debt securities with a fair value of $965 million, gross unrealized capital gains of $83 million and no gross unrealized capital losses 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.

The net amortized cost and fair value of debt securities at September 30, 2020 are 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	Net Amortized Cost		Fair Value
Due to mature:
Less than one year	$	1,588	$	1,604
One year through five years	6,009		6,329
After five years through ten years	3,466		3,774
Greater than ten years	3,947		4,704
Residential mortgage-backed securities	680		713
Commercial mortgage-backed securities	930		1,012
Other asset-backed securities	2,239		2,262
Total	$	18,859	$	20,398

Summarized below are the debt securities the Company held at September 30, 2020 and December 31, 2019 that were in an unrealized capital loss position, aggregated by the length of time the investments have been in that position:


	Less than 12 months					Greater than 12 months					Total
In millions, except number of securities	Number of Securities	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses
September 30, 2020
Debt securities:
U.S. government securities	58	$	311	$	—	—	$	—	$	—	58	$	311	$	—
States, municipalities and political subdivisions	95	196		3		—	—		—		95	196		3
U.S. corporate securities	704	639		15		4	2		—		708	641		15
Foreign securities	198	312		10		—	—		—		198	312		10
Residential mortgage-backed securities	19	70		—		3	—		—		22	70		—
Commercial mortgage-backed securities	28	106		—		—	—		—		28	106		—
Other asset-backed securities	288	543		7		90	80		3		378	623		10

Total debt securities	1,390	$	2,177	$	35	97	$	82	$	3	1,487	$	2,259	$	38

December 31, 2019
Debt securities:
U.S. government securities	52	$	168	$	1	—	$	—	$	—	52	$	168	$	1
States, municipalities and political subdivisions	66	115		1		2	5		—		68	120		1
U.S. corporate securities	181	305		2		2	—		1		183	305		3
Foreign securities	39	75		1		—	—		—		39	75		1
Residential mortgage-backed securities	30	16		—		9	—		—		39	16		—
Commercial mortgage-backed securities	16	49		—		—	—		—		16	49		—
Other asset-backed securities	138	254		1		187	182		4		325	436		5
Total debt securities	522	$	982	$	6	200	$	187	$	5	722	$	1,169	$	11

The Company reviewed the securities in the table above and concluded that they 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. Unrealized capital losses at September 30, 2020 were generally caused by the widening of credit spreads on these securities relative to the interest rates on U.S. Treasury securities, driven by the adverse economic conditions in the U.S. and abroad caused by the COVID-19 pandemic. As of September 30, 2020, 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 the anticipated recovery of their amortized cost basis.

The maturity dates for debt securities in an unrealized capital loss position at September 30, 2020 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	$	—	$	—	$	36	$	—	$	36	$	—
One year through five years	1		—		623		7		624		7
After five years through ten years	11		1		493		12		504		13
Greater than ten years	11		—		285		8		296		8
Residential mortgage-backed securities	—		—		70		—		70		—
Commercial mortgage-backed securities	2		—		104		—		106		—
Other asset-backed securities	7		—		616		10		623		10
Total	$	32	$	1	$	2,227	$	37	$	2,259	$	38

Mortgage Loans

The Company’s mortgage loans are collateralized by commercial real estate. During the three and nine months ended September 30, 2020 and 2019, the Company had the following activity in its mortgage loan portfolio:


	Three Months Ended September 30,				Nine Months Ended September 30,
In millions	2020		2019		2020		2019
New mortgage loans	$	31	$	12	$	55	$	90
Mortgage loans fully repaid	37		56		114		127
Mortgage loans foreclosed	—		—		—		—

The Company assesses mortgage loans on a regular basis for credit impairments, and assigns a credit quality indicator to each loan. The Company’s credit quality indicator is internally developed and categorizes each loan in its portfolio on a scale from 1 to 7. These indicators are based upon several factors, including current loan-to-value ratios, current and future property cash flow, property condition, market trends, creditworthiness of the borrower and deal structure.

•Category 1 - Represents loans of superior quality.

•Categories 2 to 4 - Represent loans where credit risk is minimal to acceptable; however, these loans may display some susceptibility to economic changes.

•Categories 5 and 6 - Represent loans where credit risk is not substantial, but these loans warrant management’s close attention.

•Category 7 - Represents loans where collections are potentially at risk; if necessary, an impairment is recorded.

Based on the Company’s assessments at September 30, 2020 and December 31, 2019, the amortized cost basis of the Company's mortgage loans within each credit quality indicator by year of origination was as follows:


	Amortized Cost Basis by Year of Origination
In millions, except credit quality indicator	2020		2019		2018		2017		2016		Prior		Total
September 30, 2020
1	$	—	$	—	$	—	$	23	$	—	$	39	$	62
2 to 4	57		95		90		129		129		516		1,016
5 and 6	—		—		4		4		—		29		37
7	—		—		—		9		—		—		9
Total	$	57	$	95	$	94	$	165	$	129	$	584	$	1,124

December 31, 2019
1			$	—	$	—	$	15	$	—	$	43	$	58
2 to 4			93		93		206		140		611		1,143
5 and 6			—		—		—		—		12		12
7			—		—		—		—		—		—
Total			$	93	$	93	$	221	$	140	$	666	$	1,213

Net Investment Income

Sources of net investment income for the three and nine months ended September 30, 2020 and 2019 were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
In millions	2020		2019		2020		2019
Debt securities	$	151	$	145	$	441	$	437
Mortgage loans	15		19		45		54
Other investments	37		60		64		163
Gross investment income	203		224		550		654
Investment expenses	(8)		(10)		(25)		(28)
Net investment income (excluding net realized capital gains or losses)	195		214		525		626
Net realized capital gains (1)	9		49		25		179
Net investment income (2)	$	204	$	263	$	550	$	805

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(1)Net realized capital gains include credit-related and yield-related impairment losses on debt securities of $1 million and $2 million, respectively, in the three months ended September 30, 2020. Net realized capital gains include credit-related and yield-related impairment losses on debt securities of $4 million and $44 million, respectively, in the nine months ended September 30, 2020. Net realized capital gains are net of other than temporary impairment losses on debt securities of $9 million and $22 million, respectively, in the three and nine months ended September 30, 2019.

(2)Net investment income includes $10 million and $31 million for the three and nine months ended September 30, 2020, respectively, and $10 million and $33 million for the three and nine months ended September 30, 2019, respectively, related to investments supporting experience-rated products.

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 and nine months ended September 30, 2020 and 2019 were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
In millions	2020		2019		2020		2019
Proceeds from sales	$	905	$	1,325	$	2,324	$	4,087
Gross realized capital gains	17		55		60		127
Gross realized capital losses	3		9		59		13