Investments

9 Months Ended

Sep. 30, 2019

Investments [Abstract]

Investments

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 September 30, 2019, in millions)	Cost		Gains		Losses		Value
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities	$	2,001	$	20	$	1	$	2,020
Obligations of states, municipalities and political subdivisions:
Local general obligation	15,418		881		2		16,297
Revenue	9,666		626		1		10,291
State general obligation	1,196		69		—		1,265
Pre-refunded	1,991		72		—		2,063
Total obligations of states, municipalities and political subdivisions	28,271		1,648		3		29,916
Debt securities issued by foreign governments	1,118		13		1		1,130
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	3,064		101		3		3,162
All other corporate bonds	30,518		1,238		25		31,731
Redeemable preferred stock	49		3		—		52
Total	$	65,021	$	3,023	$	33	$	68,011

	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 $2.06 billion and $2.85 billion at September 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 $1.80 billion and $3.19 billion during the nine months ended September 30, 2019 and 2018, respectively. Gross gains of $51 million and $47 million and gross losses of $6 million and $16 million were realized on those sales during the nine months ended September 30, 2019 and 2018, respectively.

Equity Securities

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

							Fair
(at September 30, 2019, in millions)	Cost		Gross Gains		Gross Losses		Value
Public common stock	$	340	$	36	$	6	$	370
Non-redeemable preferred stock	35		7		—		42
Total	$	375	$	43	$	6	$	412

 

							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 nine months ended September 30, 2019, the Company recognized $49 million of net gains on equity securities still held as of September 30, 2019. For the nine months ended September 30, 2018, the Company recognized $5 million of net gains on equity securities still held as of September 30, 2018.

Unrealized Investment Losses

The following tables summarize, for all investments in an unrealized loss position at September 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 September 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	$	54	$	—	$	352	$	1	$	406	$	1
Obligations of states, municipalities and political subdivisions	413		3		13		—		426		3
Debt securities issued by foreign governments	67		—		157		1		224		1
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	288		1		235		2		523		3
All other corporate bonds	818		8		985		17		1,803		25
Total fixed maturities	$	1,640	$	12	$	1,742	$	21	$	3,382	$	33

	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 September 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 $0 million for each of the three months ended September 30, 2019 and 2018, and $2 million and $1 million for the nine months ended September 30, 2019 and 2018, respectively.

The cumulative amount of credit losses on fixed maturities held at September 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 $17 million and $54 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 nine months ended September 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.