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Variable Interest Entities
3 Months Ended
Mar. 31, 2017
Variable Interest Entities [Abstract]  
Variable interest entities

Note 12 – Variable Interest Entities

 

When the Company becomes involved with a variable interest entity, as well as when there is a change in the Company's involvement with an entity, the Company evaluates the following to determine if it is the primary beneficiary and must consolidate the entity:

 

  • the structure and purpose of the entity;
  • the risks and rewards created by and shared through the entity; and
  • the Company's ability to direct its activities, receive its benefits and absorb its losses relative to the other parties involved with the entity including its sponsors, equity holders, guarantors, creditors and servicers.

 

The Company owns interests in security and real estate limited partnerships defined as variable interest entities that invest in the equity or mezzanine debt of privately held companies and real estate properties. General partners unaffiliated with the Company control decisions that most significantly impact the partnership's operations and the limited partners do not have substantive kick-out or participating rights. The Company's maximum exposure to these entities of $2.2 billion across approximately 100 limited partnerships as of March 31, 2017 includes $1.1 billion reported in other long-term investments and commitments to contribute an additional $1.1 billion. The Company's non-controlling interest in each of these limited partnerships is generally less than 10% of the partnership ownership interests.

 

In the normal course of its investing activities, the Company also makes passive investments in certain asset-backed and corporate securities that are issued by variable interest entities whose sponsors or issuers are unaffiliated with the Company. The Company receives fixed-rate cash flows from these investments and the maximum potential exposure to loss is limited to the carrying amount of $0.5 billion as of March 31, 2017, that is reported in fixed maturities. The Company's combined ownership interests are insignificant relative to the total principal amounts issued by these entities.

 

The Company is also involved in real estate joint ventures with carrying values of $0.2 billion where all decisions significantly affecting the entities' economic performance are subject to unanimous approval by the equity holders. As a result, the Company determined that the power over these entities is shared equally, and there is no primary beneficiary. The Company's maximum exposure to loss was approximately equal to its carrying value that is reported in other long-term investments.

 

To provide certain services to its Medicare Advantage customers, the Company contracts with independent physician associations (“IPAs”) that are variable interest entities. Physicians provide health care services to Medicare Advantage customers and the Company provides medical management and administrative services to the IPAs. The Company's maximum exposure to loss related to the IPA arrangements is limited to their liability for incurred but not reported medical costs for the Company's Medicare Advantage customers. These liabilities are not material and are generally secured by deposits maintained by the IPAs.

 

The Company is not the primary beneficiary of any of the variable interest entities described above and does not consolidate these entities because either:

 

  • it has no power to direct the activities that most significantly impact the entities' economic performance; or
  • it has neither the right to receive benefits nor the obligation to absorb losses that could be significant to these variable interest entities.

 

The Company has not provided, and does not intend to provide, financial support to these entities that it is not contractually required to provide. The Company performs ongoing qualitative analyses of its involvement with these variable interest entities to determine if consolidation is required.