Financing Receivables

The Company’s financing receivables include commercial mortgage loans, syndicated loans, consumer loans, policy loans, certificate loans and margin loans. Commercial mortgage loans, syndicated loans, consumer loans, policy loans and certificate loans are reflected in investments. Margin loans are recorded in receivables.

Allowance for Loan Losses

Policy and certificate loans do not exceed the cash surrender value at origination. As there is minimal risk of loss related to policy and certificate loans, the Company does not record an allowance for loan losses. The Company monitors collateral supporting margin loans and requests additional collateral when necessary in order to mitigate the risk of loss. As there is minimal risk of loss related to margin loans, the allowance for loan losses is immaterial.

The following table presents a rollforward of the allowance for loan losses for commercial mortgage loans, syndicated loans and consumer loans for the nine months ended and the ending balance of the allowance for loan losses by impairment method:



	September 30,
	2015			2014
	(in millions)
Beginning balance	$	35		$	37
Charge-offs	(3		)	(4		)
Provisions	1			2
Ending balance	$	33		$	35

Individually evaluated for impairment	$	6		$	9
Collectively evaluated for impairment	27			26

The recorded investment in commercial mortgage loans, syndicated loans and consumer loans by impairment method was as follows:



	September 30, 2015		December 31, 2014
	(in millions)
Individually evaluated for impairment	$	39	$	42
Collectively evaluated for impairment	3,923		3,951
Total	$	3,962	$	3,993

As of September 30, 2015 and December 31, 2014, the Company’s recorded investment in financing receivables individually evaluated for impairment for which there was no related allowance for loan losses was $20 million and $13 million, respectively. Unearned income, unamortized premiums and discounts, and net unamortized deferred fees and costs are not material to the Company’s total loan balance.

During the three months ended September 30, 2015 and 2014, the Company purchased $93 million and $96 million, respectively, and sold $9 million and $1 million, respectively, of syndicated loans. During the nine months ended September 30, 2015 and 2014, the Company purchased $134 million and $186 million, respectively, and sold $16 million and $11 million, respectively, consisting primarily of syndicated loans.

The Company has not acquired any loans with deteriorated credit quality as of the acquisition date.

Credit Quality Information

Nonperforming loans, which are generally loans 90 days or more past due, were $10 million and $12 million as of September 30, 2015 and December 31, 2014, respectively. All other loans were considered to be performing.

Commercial Mortgage Loans

The Company reviews the credit worthiness of the borrower and the performance of the underlying properties in order to determine the risk of loss on commercial mortgage loans. Based on this review, the commercial mortgage loans are assigned an internal risk rating, which management updates as necessary. Commercial mortgage loans which management has assigned its highest risk rating were 1% of total commercial mortgage loans at both September 30, 2015 and December 31, 2014. Loans with the highest risk rating represent distressed loans which the Company has identified as impaired or expects to become delinquent or enter into foreclosure within the next six months. In addition, the Company reviews the concentrations of credit risk by region and property type.

Concentrations of credit risk of commercial mortgage loans by U.S. region were as follows:



	Loans				Percentage
	September 30, 2015		December 31, 2014		September 30, 2015		December 31, 2014
	(in millions)
East North Central	$	202	$	238	7	%	9	%
East South Central	76		62		3		2
Middle Atlantic	210		217		8		8
Mountain	247		245		9		9
New England	130		140		5		5
Pacific	755		694		27		25
South Atlantic	773		740		28		27
West North Central	231		233		8		9
West South Central	133		160		5		6
	2,757		2,729		100	%	100	%
Less: allowance for loan losses	22		25
Total	$	2,735	$	2,704

Concentrations of credit risk of commercial mortgage loans by property type were as follows:



	Loans				Percentage
	September 30, 2015		December 31, 2014		September 30, 2015		December 31, 2014
	(in millions)
Apartments	$	509	$	500	18	%	18	%
Hotel	35		34		1		1
Industrial	482		461		18		17
Mixed use	36		45		1		2
Office	542		545		20		20
Retail	953		988		35		36
Other	200		156		7		6
	2,757		2,729		100	%	100	%
Less: allowance for loan losses	22		25
Total	$	2,735	$	2,704

Syndicated Loans

The recorded investment in syndicated loans at September 30, 2015 and December 31, 2014 was $545 million and $511 million, respectively. The Company’s syndicated loan portfolio is diversified across industries and issuers. The primary credit indicator for syndicated loans is whether the loans are performing in accordance with the contractual terms of the syndication. Total nonperforming syndicated loans at September 30, 2015 and December 31, 2014 were $6 million and $4 million, respectively.

Consumer Loans

The recorded investment in consumer loans at September 30, 2015 and December 31, 2014 was $660 million and $753 million, respectively. The Company considers the credit worthiness of borrowers (FICO score), collateral characteristics such as loan-to-value (“LTV”) and geographic concentration in determining the allowance for loan losses for consumer loans. At a minimum, management updates FICO scores and LTV ratios semiannually.

As of September 30, 2015 and December 31, 2014, approximately 4% and 6%, respectively, of consumer loans had FICO scores below 640. As of both September 30, 2015 and December 31, 2014, approximately 2% of the Company’s residential mortgage loans had LTV ratios greater than 90%. The Company’s most significant geographic concentration for consumer loans is in California representing 37% of the portfolio as of both September 30, 2015 and December 31, 2014. No other state represents more than 10% of the total consumer loan portfolio.

Troubled Debt Restructurings

The recorded investment in restructured loans was not material as of September 30, 2015 and December 31, 2014. The troubled debt restructurings did not have a material impact to the Company’s allowance for loan losses or income recognized for the three months and nine months ended September 30, 2015 and 2014. There are no material commitments to lend additional funds to borrowers whose loans have been restructured.