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Financing Receivables

9 Months Ended

Sep. 30, 2021

Financing receivables are comprised of commercial loans, consumer loans, and the deposit receivable.

Allowance for Credit Losses

The following tables present a rollforward of the allowance for credit losses for the nine months ended September 30:


	Commercial Loans		Consumer Loans		Total
	(in millions)


Balance, January 1, 2021	$	66	$	2	$	68
Provisions	(14)		1		(13)
Charge-offs	(6)		(1)		(7)
Recoveries	—		1		1
Other	2		—		2
Balance, September 30, 2021	$	48	$	3	$	51


	Commercial Loans		Consumer Loans		Total
	(in millions)
Balance, December 31, 2019 (1)	$	51	$	—	$	51
Cumulative effect of adoption of current expected credit losses guidance	2		3		5
Balance, January 1, 2020	53		3		56
Provisions	16		3		19
Charge-offs	(2)		(2)		(4)

Balance, September 30, 2020	$	67	$	4	$	71

(1) Prior to January 1, 2020, the allowance for credit losses was based on an incurred loss model that did not require estimating expected credit losses over the expected life of the asset.

The decrease in the allowance for credit losses provision for commercial loans reflects the sale of certain commercial mortgage loans and syndicated loans in conjunction with the fixed deferred and immediate annuity reinsurance transaction discussed in Note 1.

Accrued interest on commercial loans was $13 million and $16 million as of September 30, 2021 and December 31, 2020, respectively, and is recorded in receivables on the Consolidated Balance Sheets and excluded from the amortized cost basis of commercial loans.

Purchases and Sales

During the three months and nine months ended September 30, 2021, the Company sold $746 million of commercial mortgage loans.

During the three months ended September 30, 2021 and 2020, the Company purchased nil and $96 million, respectively, of syndicated loans, and sold $360 million and $5 million, respectively, of syndicated loans. During the nine months ended September 30, 2021 and 2020, the Company purchased $37 million and $165 million, respectively, of syndicated loans, and sold $368 million and $12 million, respectively, of syndicated loans.

During the three months ended September 30, 2021 and 2020, the Company purchased $1 million and nil, respectively, of residential mortgage loans, and sold $3 million and nil, respectively, of residential mortgage loans. During the nine months ended September 30, 2021 and 2020, the Company purchased $7 million and $22 million, respectively, of residential mortgage loans, and sold $3 million and nil, respectively, of residential mortgage loans. The allowance for credit losses for residential mortgage loans was not material as of both September 30, 2021 and 2020.

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

Credit Quality Information

Nonperforming loans were $9 million and $21 million as of September 30, 2021 and December 31, 2020, respectively. All other loans were considered to be performing.

Commercial Loans

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. Loan-to-value ratio is the primary credit quality indicator included in this review.

Based on this review, the commercial mortgage loans are assigned an internal risk rating, which management updates when credit risk changes. Commercial mortgage loans which management has assigned its highest risk rating were less than 1% of total commercial mortgage loans as of both September 30, 2021 and December 31, 2020. 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. Total commercial mortgage loan modifications through December 31, 2020 due to the COVID-19 pandemic consisted of 93 loans with a total unpaid balance of $369 million. Modifications primarily consisted of short-term forbearance and interest only payments. There were no additional modifications through September 30, 2021. As of September 30, 2021, there were no loans remaining that were modified due to COVID-19. All loans returned to their normal payment schedules. Total commercial mortgage loans past due were nil as of September 30, 2021 and December 31, 2020, respectively.

The tables below present the amortized cost basis of commercial mortgage loans by the year of origination and loan-to-value ratio :


	September 30, 2021
Loan-to-Value Ratio	2021		2020		2019		2018		2017		Prior		Total
	(in millions)
> 100%	$	—	$	—	$	20	$	10	$	—	$	30	$	60
80% - 100%	9		14		9		6		—		37		75
60% - 80%	95		69		68		29		61		133		455
40% - 60%	23		34		95		69		60		420		701
< 40%	9		7		41		3		56		494		610
Total	$	136	$	124	$	233	$	117	$	177	$	1,114	$	1,901


	December 31, 2020
Loan-to-Value Ratio	2020		2019		2018		2017		2016		Prior		Total
	(in millions)
> 100%	$	—	$	—	$	2	$	—	$	—	$	10	$	12
80% - 100%	15		16		12		3		7		15		68
60% - 80%	89		166		27		32		46		144		504
40% - 60%	23		57		74		155		113		551		973
< 40%	7		23		80		99		64		895		1,168
Total	$	134	$	262	$	195	$	289	$	230	$	1,615	$	2,725

Loan-to-value ratio is based on income and expense data provided by borrowers at least annually and long-term capitalization rate assumptions based on property type.

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, 2021		December 31, 2020		September 30, 2021		December 31, 2020
	(in millions)
East North Central	$	187	$	259	10	%	10	%
East South Central	69		115		4		4
Middle Atlantic	125		178		7		7
Mountain	124		247		6		9
New England	29		54		2		2
Pacific	608		825		32		30
South Atlantic	496		681		26		25
West North Central	140		198		7		7
West South Central	123		168		6		6
	1,901		2,725		100	%	100	%
Less: allowance for credit losses	14		29
Total	$	1,887	$	2,696

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


	Loans				Percentage
	September 30, 2021		December 31, 2020		September 30, 2021		December 31, 2020
	(in millions)
Apartments	$	499	$	713	26	%	26	%
Hotel	15		50		1		2
Industrial	306		427		16		16
Mixed use	68		87		4		3
Office	272		372		14		14
Retail	625		881		33		32
Other	116		195		6		7
	1,901		2,725		100	%	100	%
Less: allowance for credit losses	14		29
Total	$	1,887	$	2,696

Syndicated Loans

The recorded investment in syndicated loans as of September 30, 2021 and December 31, 2020 were $152 million and $595 million, respectively. The Company’s syndicated loan portfolio is diversified across industries and issuers. Total syndicated loans past due were nil and $3 million as of September 30, 2021 and December 31, 2020, respectively. The Company assigns an internal risk rating to each syndicated loan in its portfolio ranging from 1 through 5, with 5 reflecting the lowest quality.

The tables below present the amortized cost basis of syndicated loans by origination year and internal risk rating:


	September 30, 2021
Internal Risk Rating	2021		2020		2019		2018		2017		Prior		Total
	(in millions)
Risk 5	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Risk 4	—		—		1		1		1		1		4
Risk 3	—		—		4		4		5		9		22
Risk 2	16		5		9		11		16		9		66
Risk 1	9		3		7		9		16		16		60
Total	$	25	$	8	$	21	$	25	$	38	$	35	$	152


	December 31, 2020
Internal Risk Rating	2020		2019		2018		2017		2016		Prior		Total
	(in millions)
Risk 5	$	—	$	—	$	—	$	—	$	—	$	3	$	3
Risk 4	—		—		4		9		—		10		23
Risk 3	—		9		8		25		13		25		80
Risk 2	30		57		62		69		14		41		273
Risk 1	17		32		47		58		22		40		216
Total	$	47	$	98	$	121	$	161	$	49	$	119	$	595

Financial Advisor Loans

The Company offers loans to financial advisors for transitional cost assistance. Repayment of the loan is highly dependent on the retention of the financial advisor. In the event a financial advisor is no longer affiliated with the Company, any unpaid balances become immediately due. Accordingly, the primary risk factor for advisor loans is termination status. The allowance for credit losses related to loans to advisors that have terminated their relationship with the Company was $6 million and $7 million as of September 30, 2021 and December 31, 2020, respectively.

The tables below present the amortized cost basis of advisor loans by origination year and termination status:


	September 30, 2021
Termination Status	2021		2020		2019		2018		2017		Prior		Total
	(in millions)
Active	$	104	$	155	$	124	$	91	$	119	$	128	$	721
Terminated	2		—		—		—		1		7		10
Total	$	106	$	155	$	124	$	91	$	120	$	135	$	731


	December 31, 2020
Termination Status	2020		2019		2018		2017		2016		Prior		Total
	(in millions)
Active	$	171	$	137	$	101	$	127	$	83	$	86	$	705
Terminated	—		—		—		1		1		8		10
Total	$	171	$	137	$	101	$	128	$	84	$	94	$	715

Consumer Loans

Credit Card Receivables

The credit cards are co-branded with Ameriprise Financial, Inc. and issued to the Company’s customers by a third party. FICO scores and delinquency rates are the primary credit quality indicators for the credit card portfolio. Delinquency rates are measured based on the number of days past due. Credit card receivables over 30 days past due were 1% of total credit card receivables as of both September 30, 2021 and December 31, 2020.

The table below presents the amortized cost basis of credit card receivables by FICO score:


	September 30, 2021		December 31, 2020
	(in millions)
> 800	$	27	$	28
750 - 799	23		23
700 - 749	24		25
650 - 699	14		15
< 650	5		5
Total	$	93	$	96

Policy Loans

Policy loans do not exceed the cash surrender value at origination. As there is minimal risk of loss related to policy loans, there is no allowance for credit losses.

Margin Loans

The margin loans balance was $1.2 billion and $1.0 billion as of September 30, 2021 and December 31, 2020, respectively. The Company monitors collateral supporting margin loans and requests additional collateral when necessary in order to mitigate the risk of loss. As of both September 30, 2021 and December 31, 2020, the allowance for credit losses on margin loans was not material.

Pledged Asset Lines of Credit

The pledged asset lines of credit balance was $408 million and $224 million as of September 30, 2021 and December 31, 2020, respectively. The Company monitors collateral supporting pledged asset lines of credit and requests additional collateral when necessary in order to mitigate the risk of loss. As of September 30, 2021 and December 31, 2020, there was no allowance for credit losses on pledged asset lines of credit.

Deposit Receivable

The deposit receivable was $8.0 billion and $1.4 billion as of September 30, 2021 and December 31, 2020, respectively. The deposit receivable is fully collateralized by the fair value of the assets held in trusts. Based on management’s evaluation of the nature of the underlying assets and the potential for changes in the collateral value, there was no allowance for credit losses for the deposit receivable as of both September 30, 2021 and December 31, 2020. The increase in the deposit receivable is primarily driven by the reinsurance transaction, effective July 1, 2021, to reinsure fixed deferred and non-life contingent immediate annuity policies. See Note 1 for more information on the fixed deferred and immediate annuity reinsurance transaction.

Troubled Debt Restructurings

There were no loans accounted for as a troubled debt restructuring by the Company during the each of the three months and nine months ended September 30, 2021 and 2020. There are no commitments to lend additional funds to borrowers whose loans have been restructured.