
	Amortized		Allowance for Expected Credit Losses		Gross Unrealized				Fair
(at December 31, 2020, in millions)	Cost				Gains		Losses		Value
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities	$	2,111	$	—	$	38	$	—	$	2,149
Obligations of states, municipalities and political subdivisions:
Local general obligation	17,289		—		1,370		2		18,657
Revenue	11,806		—		909		—		12,715
State general obligation	1,343		—		101		—		1,444
Pre-refunded	3,325		—		219		—		3,544
Total obligations of states, municipalities and political subdivisions	33,763		—		2,599		2		36,360
Debt securities issued by foreign governments	1,028		—		26		—		1,054
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	2,222		—		139		—		2,361
All other corporate bonds	29,683		2		2,382		9		32,054
Redeemable preferred stock	23		—		2		—		25
Total	$	68,830	$	2	$	5,186	$	11	$	74,003


	Amortized		Gross Unrealized				Fair
(at December 31, 2019, in millions)	Cost		Gains		Losses		Value
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities	$	2,076	$	19	$	—	$	2,095
Obligations of states, municipalities and political subdivisions:
Local general obligation	15,490		829		4		16,315
Revenue	9,731		586		2		10,315
State general obligation	1,167		64		—		1,231
Pre-refunded	1,968		88		—		2,056
Total obligations of states, municipalities and political subdivisions	28,356		1,567		6		29,917
Debt securities issued by foreign governments	1,167		8		2		1,173
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	3,192		91		3		3,280
All other corporate bonds	30,442		1,195		18		31,619
Redeemable preferred stock	48		2		—		50
Total	$	65,281	$	2,882	$	29	$	68,134

The amortized cost and fair value of fixed maturities by contractual maturity follow. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


(at December 31, 2020, in millions)	Amortized Cost		Fair Value
Due in one year or less	$	5,074	$	5,127
Due after 1 year through 5 years	18,476		19,660
Due after 5 years through 10 years	18,200		19,936
Due after 10 years	24,858		26,919
	66,608		71,642
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	2,222		2,361
Total	$	68,830	$	74,003

Pre-refunded bonds of $3.54 billion and $2.06 billion at December 31, 2020 and 2019, 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.

The Company’s fixed maturity investment portfolio at December 31, 2020 and 2019 included $2.36 billion and $3.28 billion, respectively, of residential mortgage-backed securities, which include pass-through securities and collateralized mortgage obligations (CMOs). Included in the totals at December 31, 2020 and 2019 were $1.24 billion and $1.52 billion, respectively, of GNMA, FNMA, FHLMC (excluding FHA project loans) and Canadian government guaranteed residential mortgage-backed pass-through securities classified as available for sale. Also included in those totals were residential CMOs classified as available for sale with a fair value of $1.12 billion and $1.76 billion at December 31, 2020 and 2019, respectively. Approximately 65% and 54% of the Company’s CMO holdings at December 31, 2020 and 2019, respectively, were guaranteed by or fully collateralized by securities issued by GNMA, FNMA or FHLMC. The weighted average credit rating of the $396 million and $816 million of non-guaranteed CMO holdings at December 31, 2020 and 2019, respectively, was “Aa1” and “Aaa/Aa1,” respectively. The weighted average credit rating of all of the above securities was "Aaa/Aa1” at both December 31, 2020 and 2019.

At December 31, 2020 and 2019, the Company held commercial mortgage-backed securities (CMBS, including FHA project loans) of $1.42 billion and $1.51 billion, respectively, which are included in “All other corporate bonds” in the tables above. At December 31, 2020 and 2019, approximately $392 million and $559 million of these securities, respectively, or the loans backing such securities, contained guarantees by the U.S. government or a government-sponsored enterprise. The weighted average credit rating of the $1.03 billion and $950 million of non-guaranteed securities at December 31, 2020 and 2019, respectively, was “Aaa” at both dates. The CMBS portfolio is supported by loans that are diversified across economic sectors and geographical areas. The weighted average credit rating of the CMBS portfolio was “Aaa” at both December 31, 2020 and 2019.

Proceeds from sales of fixed maturities classified as available for sale were $3.06 billion, $2.19 billion and $3.55 billion in 2020, 2019 and 2018, respectively. Gross gains of $70 million, $67 million and $51 million and gross losses of $3 million, $8 million and $18 million were realized on those sales in 2020, 2019 and 2018, respectively.

At December 31, 2020 and 2019, the Company’s insurance subsidiaries had $4.45 billion and $4.34 billion, respectively, of securities on deposit at financial institutions in certain states pursuant to the respective states’ insurance regulatory requirements. Funds deposited with third parties to be used as collateral to secure various liabilities on behalf of insureds, cedants and other creditors had a fair value of $52 million and $54 million at December 31, 2020 and 2019, respectively. Other

investments pledged as collateral securing outstanding letters of credit had a fair value of $1 million at both December 31, 2020 and 2019. In addition, the Company utilizes Lloyd’s trust deposits, whereby owned securities with a fair value of approximately $119 million and $173 million held by a wholly-owned subsidiary at December 31, 2020 and 2019, respectively, and $35 million and $34 million held by TRV at December 31, 2020 and 2019, respectively, were pledged into Lloyd’s trust accounts to provide a portion of the capital needed to support the Company’s obligations at Lloyd’s.

The Company’s real estate investments include warehouses, office buildings and other commercial land and properties that are directly owned. The Company negotiates commercial leases with individual tenants through unrelated, licensed real estate brokers. Negotiated terms and conditions include, among others, rental rates, length of lease period and improvements to the premises to be provided by the landlord.

Proceeds from the sale of real estate investments were not material in 2020, $0 in 2019 and $74 million in 2018. Gross gains of $23 million and gross losses of $0 million were realized on those sales in 2018. Accumulated depreciation on real estate held for investment purposes was $462 million and $422 million at December 31, 2020 and 2019, respectively.

Future minimum rental income on operating leases relating to the Company’s real estate properties is expected to be $115 million, $101 million, $75 million, $58 million and $38 million for 2021, 2022, 2023, 2024 and 2025, respectively, and $75 million for 2026 and thereafter.

The Company’s short-term securities consist of Aaa-rated registered money market funds, U.S. Treasury securities, high-quality commercial paper (primarily A1/P1) and high-quality corporate securities purchased within a year to their maturity with a combined average of 45 days to maturity at December 31, 2020. The amortized cost of these securities, which totaled $5.51 billion and $4.94 billion at December 31, 2020 and 2019, respectively, approximated their fair value.

Included in other investments are private equity, hedge fund and real estate partnerships that are accounted for under the equity method of accounting and typically report their financial statement information to the Company one month to three months following the end of the reporting period. Accordingly, the impact of any volatility in global financial markets on net investment income from these other investments is generally reflected in the Company's financial statements on a quarter lag basis.

Entities which do not have sufficient equity at risk to allow the entity to finance its activities without additional financial support or in which the equity investors, as a group, do not have the characteristic of a controlling financial interest are referred to as variable interest entities (VIE). A VIE is consolidated by the variable interest holder that is determined to have the controlling financial interest (primary beneficiary) as a result of having both the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses or right to receive benefits from the VIE that could potentially be significant to the VIE. The Company determines whether it is the primary beneficiary of an entity subject to consolidation based on a qualitative assessment of the VIE’s capital structure, contractual terms, nature of the VIE’s operations and purpose and the Company’s relative exposure to the related risks of the VIE on the date it becomes initially involved in the VIE. The Company reassesses its VIE determination with respect to an entity on an ongoing basis.

The Company is a passive investor in limited partner equity interests issued by third party VIEs. These include certain of the Company’s investments in private equity limited partnerships, hedge funds and real estate partnerships where the Company is not related to the general partner. These investments are generally accounted for under the equity method and reported in the Company’s consolidated balance sheet as other investments unless the Company is deemed the primary beneficiary. These equity interests generally cannot be redeemed. Distributions from these investments are received by the Company as a result of liquidation of the underlying investments of the funds and/or as income distribution. The Company’s maximum exposure to loss with respect to these investments is limited to the investment carrying amounts reported in the Company’s consolidated balance sheet and any unfunded commitment. The Company considers an investment in a VIE in which it has a 20% or greater equity interest as a significant VIE. Neither the Company’s carrying amounts nor the unfunded commitments related to these significant VIE’s are material individually or in the aggregate.

The following tables summarize, for all fixed maturities classified as available for sale in an unrealized loss position at December 31, 2020 and 2019, 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. The Company also relies upon estimates of several factors in its review and evaluation of individual investments, using the process described in note 1, in determining whether a credit loss impairment exists.


	Less than 12 months				12 months or longer				Total
(at December 31, 2020, 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	$	92	$	—	$	—	$	—	$	92	$	—
Obligations of states, municipalities and political subdivisions	245		2		—		—		245		2
Debt securities issued by foreign governments	7		—		—		—		7		—
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	20		—		1		—		21		—
All other corporate bonds	681		6		97		3		778		9
Total fixed maturities	$	1,045	$	8	$	98	$	3	$	1,143	$	11


	Less than 12 months				12 months or longer				Total
(at December 31, 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	$	5	$	—	$	193	$	—	$	198	$	—
Obligations of states, municipalities and political subdivisions	668		6		12		—		680		6
Debt securities issued by foreign governments	257		1		147		1		404		2
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	399		2		131		1		530		3
All other corporate bonds	1,571		10		662		8		2,233		18
Total fixed maturities	$	2,900	$	19	$	1,145	$	10	$	4,045	$	29


(for the year ended December 31, in millions)	2020		2019		2018
Fixed maturities
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities	$	—	$	—	$	—
Obligations of states, municipalities and political subdivisions	—		—		—
Debt securities issued by foreign governments	—		—		—
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	—		—		—
All other corporate bonds	15		4		1
Redeemable preferred stock	—		—		—
Total fixed maturities	15		4		1




Other investments	40		—		—
Total	$	55	$	4	$	1


	Fixed Maturities
(for the twelve months ended December 31, 2020 in millions)	Mortgage-Backed Securities, Collateralized Mortgage Obligations and Pass-Through Securities		All Other Corporate Bonds		Total

Balance, January 1, 2020	$	—	$	—	$	—
Additions for expected credit losses on securities where no credit losses were previously recognized	—		10		10
Additions (reductions) for expected credit losses on securities where credit losses were previously recognized	—		(6)		(6)
Reductions due to sales/defaults of credit-impaired securities	—		(2)		(2)
Reductions for impairments of securities which the Company intends to sell or more likely than not will be required to sell (1)	—		—		—
Balance, December 31, 2020	$	—	$	2	$	2

(1)Credit impairment charges recognized in net realized investment gains for the twelve months ended December 31, 2020 included $13 million of credit losses on fixed maturity securities which the Company intends to sell. An allowance for expected credit losses was not previously recorded for these securities.

The following table presents the cumulative amount of, and the changes during the year in, credit losses on fixed maturities held at December 31, 2019 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:


	Fixed Maturities
(for the twelve months ended December 31, 2019 in millions)	Mortgage-Backed Securities, Collateralized Mortgage Obligations and Pass-Through Securities		All Other Corporate Bonds		Total

Cumulative OTTI Credit Losses Recognized for Securities Held, December 31, 2018	$	15	$	42	$	57
Additions for OTTI losses on securities where no credit losses were previously recognized	—		—		—
Additions (reductions) for OTTI losses on securities where credit losses were previously recognized	—		—		—
Reductions due to sales/defaults of credit-impaired securities	(9)		(49)		(58)
Adjustments to book value of credit-impaired securities due to changes in cash flows	3		10		13
Cumulative OTTI Credit Losses Recognized for Securities Held, December 31, 2019	$	9	$	3	$	12

Credit losses related to the fixed maturity portfolio for 2020 and 2019 represented 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 December 31, 2020 and 2019.

Concentrations of credit risk arise from exposure to counterparties that are engaged in similar activities and have similar economic characteristics that could cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions. The Company seeks to mitigate credit risk by actively monitoring the creditworthiness of counterparties, obtaining collateral as deemed appropriate and applying controls that include credit approvals, limits of credit exposure and other monitoring procedures.

At December 31, 2020 and 2019, other than U.S. Treasury securities and obligations of U.S. government and government agencies and authorities, the Company was not exposed to any concentration of credit risk of a single issuer greater than 5% of the Company’s shareholders’ equity.

Included in fixed maturities are below investment grade securities totaling $1.34 billion and $1.46 billion at December 31, 2020 and 2019, respectively. The Company defines its below investment grade securities as those securities rated below investment grade by external rating agencies, or the equivalent by the Company when a public rating does not exist. Such securities include below investment grade bonds that are publicly traded and certain other privately issued bonds that are classified as below investment grade loans.


(for the year ended December 31, in millions)	2020		2019		2018
Gross investment income
Fixed maturities	$	2,011	$	2,070	$	1,980
Equity securities	15		15		16
Short-term securities	44		105		92
Real estate investments	48		55		48
Other investments	146		263		377
Gross investment income	2,264		2,508		2,513
Investment expenses	37		40		39
Net investment income	$	2,227	$	2,468	$	2,474


(at and for the year ended December 31, in millions)	2020		2019		2018
Changes in net unrealized investment gains (losses)
Fixed maturities	$	2,322	$	2,990	$	(1,515)

Other investments	—		—		(1)
Change in net pre-tax unrealized gains (losses) on investment securities	2,322		2,990		(1,516)
Related tax expense (benefit)	494		631		(319)
Change in net unrealized gains (losses) on investment securities	1,828		2,359		(1,197)
Cumulative effect of adoption of updated accounting guidance for equity financial instruments at January 1, 2018	—		—		(22)
Reclassification of certain tax effects from accumulated other comprehensive income at January 1, 2018	—		—		152
Balance, beginning of year	2,246		(113)		954
Balance, end of year	$	4,074	$	2,246	$	(113)

From time to time, the Company enters into U.S. Treasury note futures contracts to modify the effective duration of specific assets within the investment portfolio. U.S. Treasury futures contracts require a daily mark-to-market and settlement with the broker. At December 31, 2020 and 2019, the Company had no open U.S. Treasury futures contracts. Net realized investment gains and losses related to U.S. Treasury futures contracts in 2020, 2019 and 2018 were not significant.

The Company has a put/call option that was entered into in connection with a business acquisition that allows the Company to acquire the remaining shares of the acquired company at a future date. Net realized investment gains and losses related to this put/call option in 2020 and 2019 were not significant.

The Company also sells a small amount of U.S. equity index put option contracts that are settled for cash upon their expiration or when they are rolled over. Net realized investment gains and losses related to these derivatives in 2020, 2019 and 2018 were not significant.