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 the nine months ended and the ending balance of the allowance for loan losses by impairment method:



	September 30,
	2016			2015
	(in millions)
Beginning balance	$	32		$	35
Charge-offs	(1		)	(3		)
Provisions	(1		)	1
Ending balance	$	30		$	33

Individually evaluated for impairment	$	2		$	6
Collectively evaluated for impairment	28			27

The recorded investment in financing receivables by impairment method was as follows:



	September 30, 2016		December 31, 2015
	(in millions)
Individually evaluated for impairment	$	18	$	34
Collectively evaluated for impairment	3,480		3,910
Total	$	3,498	$	3,944

As of September 30, 2016 and December 31, 2015, the Company’s recorded investment in financing receivables individually evaluated for impairment for which there was no related allowance for loan losses was $12 million and $21 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, 2016 and 2015, the Company purchased $22 million and $93 million, respectively, and sold nil and $9 million, respectively, primarily of syndicated loans. During the nine months ended September 30, 2016 and 2015, the Company purchased $65 million and $134 million, respectively, and sold $271 million and $16 million, respectively, of loans. The loans sold during the nine months ended September 30, 2016 consisted of consumer loans, which were sold in the first quarter of 2016. See below for additional discussion on the sale of these 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 $7 million and $10 million as of September 30, 2016 and December 31, 2015, 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 nil and 1% of total commercial mortgage loans at September 30, 2016 and December 31, 2015, respectively. 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, 2016		December 31, 2015		September 30, 2016		December 31, 2015
	(in millions)
East North Central	$	202	$	211	7	%	8	%
East South Central	76		74		3		3
Middle Atlantic	199		210		7		8
Mountain	260		248		10		9
New England	100		123		4		4
Pacific	721		741		27		27
South Atlantic	770		782		29		28
West North Central	226		229		8		8
West South Central	128		137		5		5
	2,682		2,755		100	%	100	%
Less: allowance for loan losses	21		21
Total	$	2,661	$	2,734

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



	Loans				Percentage
	September 30, 2016		December 31, 2015		September 30, 2016		December 31, 2015
	(in millions)
Apartments	$	492	$	504	18	%	18	%
Hotel	43		35		1		1
Industrial	447		459		17		17
Mixed use	37		35		1		1
Office	496		541		19		20
Retail	961		984		36		36
Other	206		197		8		7
	2,682		2,755		100	%	100	%
Less: allowance for loan losses	21		21
Total	$	2,661	$	2,734

Syndicated Loans

The recorded investment in syndicated loans at September 30, 2016 and December 31, 2015 was $499 million and $553 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 both September 30, 2016 and December 31, 2015 were $6 million.

Consumer Loans

The recorded investment in consumer loans at September 30, 2016 and December 31, 2015 was $317 million and $636 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 both September 30, 2016 and December 31, 2015, approximately 4% of consumer loans had FICO scores below 640. As of September 30, 2016 and December 31, 2015, nil and approximately 2%, respectively, of the Company’s consumer loans had LTV ratios greater than 90%. The Company’s most significant geographic concentration for consumer loans is in California representing 52% and 37% of the portfolio as of September 30, 2016 and December 31, 2015, respectively, and in Colorado and Washington representing 19% and 13%, respectively, of the portfolio as of September 30, 2016. No other state represents more than 10% of the total consumer loan portfolio.

On March 30, 2016, the Company sold $271 million of its consumer loans to a third party. The Company received cash proceeds of $260 million and recognized a loss of $11 million.

Troubled Debt Restructurings

The recorded investment in restructured loans was not material as of September 30, 2016 and December 31, 2015. 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, 2016 and 2015. There are no commitments to lend additional funds to borrowers whose loans have been restructured.