The Company provides asset management services to investment entities which are considered to be VIEs, such as CLOs, hedge funds and other private funds, property funds and certain non-U.S. series funds (such as OEICs and SICAVs) (collectively, “investment entities”), which are sponsored by the Company. In addition, the Company invests in structured investments other than CLOs and certain affordable housing partnerships which are considered VIEs. The Company consolidates certain investment entities (collectively, “consolidated investment entities”) if the Company is deemed to be the primary beneficiary. The Company has no obligation to provide financial or other support to the non-consolidated VIEs beyond its initial investment and existing future funding commitments, and the Company has not provided any other support to these entities.

CLOs are asset backed financing entities collateralized by a pool of assets, primarily syndicated loans and, to a lesser extent, high-yield bonds. Multiple tranches of debt securities are issued by a CLO, offering investors various maturity and credit risk characteristics. The debt securities issued by the CLOs are non-recourse to the Company. The CLO’s debt holders have recourse only to the assets of the CLO. The assets of the CLOs cannot be used by the Company. Scheduled debt payments are based on the

performance of the CLO’s collateral pool. The Company earns management fees from the CLOs based on the value of the CLO’s collateral pool and, in certain instances, may also receive incentive fees. The fee arrangement is at market and commensurate with the level of effort required to provide those services. The Company has invested in a portion of the unrated, junior subordinated notes of certain CLOs. The Company consolidates certain CLOs where it is the primary beneficiary and has the power to direct the activities that most significantly impact the economic performance of the CLO.

The Company’s maximum exposure to loss with respect to non-consolidated CLOs is limited to its carrying value, which was $3 million and $4 million as of March 31, 2020 and December 31, 2019, respectively. The Company classifies these investments as Available-for-Sale securities. See Note 6 for additional information on these investments.

The Company provides investment advice and related services to property funds some of which are considered VIEs. For investment management services, the Company generally earns management fees based on the market value of assets under management, and in certain instances may also receive performance-based fees. The fee arrangement is at market and commensurate with the level of effort required to provide those services. The Company does not have a significant economic interest and is not required to consolidate any of the property funds. The Company’s maximum exposure to loss with respect to its investment in these entities is limited to its carrying value. The carrying value of the Company’s investment in property funds is reflected in other investments and was $12 million as of both March 31, 2020 and December 31, 2019.

The Company does not consolidate hedge funds and other private funds which are sponsored by the Company and considered VIEs. For investment management services, the Company earns management fees based on the market value of assets under management, and in certain instances may also receive performance-based fees. The fee arrangement is at market and commensurate with the level of effort required to provide those services and the Company does not have a significant economic interest in any fund. The Company’s maximum exposure to loss with respect to its investment in these entities is limited to its carrying value. The carrying value of the Company’s investment in these entities is reflected in other investments and was nil as of both March 31, 2020 and December 31, 2019.

The Company manages non-U.S. series funds, which are considered VIEs. For investment management services, the Company earns management fees based on the market value of assets under management, and in certain instances may also receive performance-based fees. The fee arrangement is at market and commensurate with the level of effort required to provide those services. The Company does not consolidate these funds and its maximum exposure to loss is limited to its carrying value. The carrying value of the Company’s investment in these funds is reflected in other investments and was $26 million and $15 million as of March 31, 2020 and December 31, 2019, respectively.

The Company is a limited partner in affordable housing partnerships that qualify for government-sponsored low income housing tax credit programs and partnerships that invest in multi-family residential properties that were originally developed with an affordable housing component. The Company has determined it is not the primary beneficiary and therefore does not consolidate these partnerships.

A majority of the limited partnerships are VIEs. The Company’s maximum exposure to loss as a result of its investment in the VIEs is limited to the carrying value. The carrying value is reflected in other investments and was $255 million and $270 million as of March 31, 2020 and December 31, 2019, respectively. The Company had a $12 million and a $15 million liability recorded as of March 31, 2020 and December 31, 2019, respectively, related to original purchase commitments not yet remitted to the VIEs. The Company has not provided any additional support and is not contractually obligated to provide additional support to the VIEs beyond the funding commitments.

The Company invests in structured investments which are considered VIEs for which it is not the sponsor. These structured investments typically invest in fixed income instruments and are managed by third parties and include asset backed securities, commercial and residential mortgage backed securities. The Company classifies these investments as Available-for-Sale securities. The Company has determined that it is not the primary beneficiary of these structures due to the size of the Company’s investment in the entities and position in the capital structure of these entities. The Company’s maximum exposure to loss as a result of its investment in these structured investments is limited to its amortized cost. See Note 6 for additional information on these structured investments.



	March 31, 2020
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets
Investments:
Corporate debt securities	$	—	$	7	$	—	$	7
Common stocks	1		—		—		1
Syndicated loans	—		1,088		302		1,390
Total investments	1		1,095		302		1,398
Receivables	—		3		—		3
Total assets at fair value	$	1	$	1,098	$	302	$	1,401

Liabilities
Debt ⁽¹⁾	$	—	$	1,376	$	—	$	1,376
Other liabilities	—		106		—		106
Total liabilities at fair value	$	—	$	1,482	$	—	$	1,482



	December 31, 2019
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets
Investments:
Corporate debt securities	$	—	$	8	$	—	$	8
Common stocks	1		—		—		1
Syndicated loans	—		1,454		143		1,597
Total investments	1		1,462		143		1,606
Receivables	—		8		—		8
Total assets at fair value	$	1	$	1,470	$	143	$	1,614

Liabilities
Debt ⁽¹⁾	$	—	$	1,628	$	—	$	1,628
Other liabilities	—		84		—		84
Total liabilities at fair value	$	—	$	1,712	$	—	$	1,712



	Syndicated Loans
	(in millions)
Balance, January 1, 2020	$	143
Total gains (losses) included in:
Net income	(39		)	⁽¹⁾
Purchases	43
Sales	(7		)
Settlements	(10		)
Transfers into Level 3	248
Transfers out of Level 3	(76		)
Balance, March 31, 2020	$	302

Changes in unrealized gains (losses) included in income relating to assets held at March 31, 2020	$	(37	)	⁽¹⁾



	Syndicated Loans
	(in millions)
Balance, January 1, 2019	$	226
Purchases	22
Sales	(1		)
Settlements	(7		)
Transfers into Level 3	25
Transfers out of Level 3	(148		)
Balance, March 31, 2019	$	117

Changes in unrealized gains (losses) included in income relating to assets held at March 31, 2019	$	—

Securities and loans transferred from Level 3 primarily represent assets with fair values that are now obtained from a third-party pricing service with observable inputs or priced in active markets. Securities and loans transferred to Level 3 represent assets with fair values that are now based on a single non-binding broker quote.

All Level 3 measurements as of March 31, 2020 and December 31, 2019 were obtained from non-binding broker quotes where unobservable inputs utilized in the fair value calculation are not reasonably available to the Company.

The fair value of syndicated loans obtained from third-party pricing services using a market approach with observable inputs is classified as Level 2. The fair value of syndicated loans obtained from third-party pricing services with a single non-binding broker quote as the underlying valuation source is classified as Level 3. The underlying inputs used in non-binding broker quotes are not readily available to the Company. See Note 12 for a description of the Company’s determination of the fair value of corporate debt securities, common stocks and other investments.

For receivables of the consolidated CLOs, the carrying value approximates fair value as the nature of these assets has historically been short term and the receivables have been collectible. The fair value of these receivables is classified as Level 2.

The fair value of the CLOs’ assets, typically syndicated bank loans, is more observable than the fair value of the CLOs’ debt tranches for which market activity is limited and less transparent. As a result, the fair value of the CLOs’ debt is set equal to the fair value of the CLOs’ assets and is classified as Level 2.

Other liabilities consist primarily of securities purchased but not yet settled held by consolidated CLOs. The carrying value approximates fair value as the nature of these liabilities has historically been short term. The fair value of these liabilities is classified as Level 2.

The Company has elected the fair value option for the financial assets and liabilities of the consolidated CLOs. Management believes that the use of the fair value option better matches the changes in fair value of assets and liabilities related to the CLOs.



	March 31, 2020			December 31, 2019
	(in millions)
Syndicated loans
Unpaid principal balance	$	1,696		$	1,678
Excess unpaid principal over fair value	(306		)	(81		)
Fair value	$	1,390		$	1,597
Fair value of loans more than 90 days past due	$	3		$	4
Fair value of loans in nonaccrual status	73			42
Difference between fair value and unpaid principal of loans more than 90 days past due, loans in nonaccrual status or both	64			18

Debt
Unpaid principal balance	$	1,732		$	1,761
Excess unpaid principal over fair value	(356		)	(133		)
Carrying value ⁽¹⁾	$	1,376		$	1,628

⁽¹⁾ The carrying value of the CLOs’ debt is set equal to the fair value of the CLOs’ assets. The estimated fair value of the CLOs’ debt was $1.4 billion and $1.7 billion as of March 31, 2020 and December 31, 2019, respectively.

Interest income from syndicated loans, bonds and structured investments is recorded based on contractual rates in net investment income. Gains and losses related to changes in the fair value of investments and gains and losses on sales of investments are also recorded in net investment income. Interest expense on debt is recorded in interest and debt expense with gains and losses related to changes in the fair value of debt recorded in net investment income.

Total net gains (losses) recognized in net investment income related to changes in the fair value of financial assets and liabilities for which the fair value option was elected were $(6) million and $(4) million for the three months ended March 31, 2020 and 2019, respectively.



	Carrying Value				Weighted Average Interest Rate
	March 31, 2020		December 31, 2019		March 31, 2020		December 31, 2019
	(in millions)
Debt of consolidated CLOs due 2025-2030	$	1,376	$	1,628	3.3	%	3.5	%