Investments

6 Months Ended

Jun. 30, 2019

INVESTMENTS

Fixed Maturities

The amortized cost and fair value of investments in fixed maturities classified as available for sale were as follows:



	Amortized		Gross Unrealized				Fair
(at June 30, 2019, in millions)	Cost		Gains		Losses		Value
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities	$	2,000	$	20	$	2	$	2,018
Obligations of states, municipalities and political subdivisions:
Local general obligation	15,187		692		1		15,878
Revenue	9,701		499		—		10,200
State general obligation	1,273		53		—		1,326
Pre-refunded	2,251		75		—		2,326
Total obligations of states, municipalities and political subdivisions	28,412		1,319		1		29,730
Debt securities issued by foreign governments	1,112		14		1		1,125
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	2,839		90		4		2,925
All other corporate bonds	30,371		982		32		31,321
Redeemable preferred stock	50		3		—		53
Total	$	64,784	$	2,428	$	40	$	67,172



	Amortized		Gross Unrealized				Fair
(at December 31, 2018, in millions)	Cost		Gains		Losses		Value
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities	$	2,076	$	4	$	16	$	2,064
Obligations of states, municipalities and political subdivisions:
Local general obligation	14,473		219		120		14,572
Revenue	9,755		172		74		9,853
State general obligation	1,329		18		13		1,334
Pre-refunded	2,772		80		—		2,852
Total obligations of states, municipalities and political subdivisions	28,329		489		207		28,611
Debt securities issued by foreign governments	1,255		7		5		1,257
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	2,557		54		38		2,573
All other corporate bonds	29,307		156		583		28,880
Redeemable preferred stock	77		2		—		79
Total	$	63,601	$	712	$	849	$	63,464

Pre-refunded bonds of $2.33 billion and $2.85 billion at June 30, 2019 and December 31, 2018, respectively, were bonds for which states or municipalities have established irrevocable trusts, almost exclusively comprised of U.S. Treasury securities and obligations of U.S. government and government agencies and authorities. These trusts were created to fund the payment of principal and interest due under the bonds.

Proceeds from sales of fixed maturities classified as available for sale were $1.50 billion and $2.61 billion during the six months ended June 30, 2019 and 2018, respectively. Gross gains of $35 million and $24 million and gross losses of $4 million and $11 million were realized on those sales during the six months ended June 30, 2019 and 2018, respectively.

Equity Securities

The cost and fair value of investments in equity securities were as follows:



							Fair
(at June 30, 2019, in millions)	Cost		Gross Gains		Gross Losses		Value
Public common stock	$	337	$	31	$	5	$	363
Non-redeemable preferred stock	36		7		—		43
Total	$	373	$	38	$	5	$	406



							Fair
(at December 31, 2018, in millions)	Cost		Gross Gains		Gross Losses		Value
Public common stock	$	338	$	2	$	24	$	316
Non-redeemable preferred stock	44		8		—		52
Total	$	382	$	10	$	24	$	368

For the six months ended June 30, 2019, the Company recognized $45 million of net gains on equity securities still held as of June 30, 2019. For the six months ended June 30, 2018, the Company recognized $3 million of net gains on equity securities still held as of June 30, 2018.

Unrealized Investment Losses

The following tables summarize, for all investments in an unrealized loss position at June 30, 2019 and December 31, 2018, the aggregate fair value and gross unrealized loss by length of time those securities have been continuously in an unrealized loss position. The fair value amounts reported in the tables are estimates that are prepared using the process described in note 4 herein and in note 4 of notes to the consolidated financial statements in the Company’s 2018 Annual Report. The Company also relies upon estimates of several factors in its review and evaluation of individual investments, using the process described in note 1 of notes to the consolidated financial statements in the Company’s 2018 Annual Report to determine whether such investments are other-than-temporarily impaired.



	Less than 12 months				12 months or longer				Total
(at June 30, 2019, in millions)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Fixed maturities
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities	$	15	$	—	$	503	$	2	$	518	$	2
Obligations of states, municipalities and political subdivisions	126		—		232		1		358		1
Debt securities issued by foreign governments	24		—		210		1		234		1
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	88		—		472		4		560		4
All other corporate bonds	277		2		3,014		30		3,291		32
Total fixed maturities	$	530	$	2	$	4,431	$	38	$	4,961	$	40



	Less than 12 months				12 months or longer				Total
(at December 31, 2018, in millions)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Fixed maturities
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities	$	484	$	5	$	1,011	$	11	$	1,495	$	16
Obligations of states, municipalities and political subdivisions	5,241		82		3,298		125		8,539		207
Debt securities issued by foreign governments	96		—		328		5		424		5
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	593		9		1,070		29		1,663		38
All other corporate bonds	12,622		303		6,872		280		19,494		583
Total fixed maturities	$	19,036	$	399	$	12,579	$	450	$	31,615	$	849

At June 30, 2019, the amount of gross unrealized losses for all fixed maturity investments reported at fair value for which fair value was less than 80% of amortized cost was not significant.

Impairment Charges

Impairment charges included in net realized investment gains in the consolidated statement of income were $1 million for each of the three months ended June 30, 2019 and 2018, and $2 million and $1 million for the six months ended June 30, 2019 and 2018, respectively.

The cumulative amount of credit losses on fixed maturities held at June 30, 2019 and 2018 that were recognized in the consolidated statement of income from other-than-temporary impairments (OTTI) and for which a portion of the OTTI was recognized in other comprehensive income (loss) in the consolidated balance sheet was $54 million and $67 million, respectively. These credit losses represent less than 1% of the fixed maturity portfolio on a pre-tax basis and less than 1% of shareholders’ equity on an after-tax basis at both dates. There were no significant changes in the credit component of OTTI during the three months and six months ended June 30, 2019 and 2018 compared to what was disclosed in note 3 of notes to the consolidated financial statements in the Company’s 2018 Annual Report.