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


	Amortized		Allowance for Expected Credit Losses		Gross Unrealized				Fair
(at December 31, 2021, in millions)	Cost				Gains		Losses		Value
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities	$	3,574	$	—	$	20	$	32	$	3,562
Obligations of states, municipalities and political subdivisions:
Local general obligation	18,668		—		1,045		46		19,667
Revenue	11,274		—		693		27		11,940
State general obligation	1,158		—		67		2		1,223
Pre-refunded	3,825		—		207		—		4,032
Total obligations of states, municipalities and political subdivisions	34,925		—		2,012		75		36,862
Debt securities issued by foreign governments	1,041		—		7		7		1,041
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	1,754		—		68		5		1,817
All other corporate bonds	33,445		3		1,247		175		34,514
Redeemable preferred stock	12		—		2		—		14
Total	$	74,751	$	3	$	3,356	$	294	$	77,810


	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

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, 2021, in millions)	Amortized Cost		Fair Value
Due in one year or less	$	4,592	$	4,635
Due after 1 year through 5 years	18,081		18,833
Due after 5 years through 10 years	25,645		26,401
Due after 10 years	24,679		26,124
	72,997		75,993
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	1,754		1,817
Total	$	74,751	$	77,810

Pre-refunded bonds of $4.03 billion and $3.54 billion at December 31, 2021 and 2020, 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, 2021 and 2020 included $1.82 billion and $2.36 billion, respectively, of residential mortgage-backed securities, which include pass-through securities and collateralized mortgage obligations (CMOs). Included in the totals at December 31, 2021 and 2020 were $846 million and $1.24 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 $971 million and $1.12 billion at December 31, 2021 and 2020, respectively. Approximately 47% and 65% of the Company’s CMO holdings at December 31, 2021 and 2020, respectively, were guaranteed

by or fully collateralized by securities issued by GNMA, FNMA or FHLMC. The weighted average credit rating of the $511 million and $396 million of non-guaranteed CMO holdings at December 31, 2021 and 2020, respectively, was “Aaa/Aa1” and “Aa1,” respectively. The weighted average credit rating of all of the above securities was "Aaa/Aa1” at both December 31, 2021 and 2020.

At December 31, 2021 and 2020, the Company held commercial mortgage-backed securities (CMBS, including FHA project loans) of $1.30 billion and $1.42 billion, respectively, which are included in “All other corporate bonds” in the tables above. At December 31, 2021 and 2020, approximately $207 million and $392 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 $1.09 billion and $1.03 billion of non-guaranteed securities at December 31, 2021 and 2020, 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, 2021 and 2020.

Proceeds from sales of fixed maturities classified as available for sale were $3.17 billion, $3.06 billion and $2.19 billion in 2021, 2020 and 2019, respectively. Gross gains of $74 million, $70 million and $67 million and gross losses of $5 million, $3 million and $8 million were realized on those sales in 2021, 2020 and 2019, respectively.

At December 31, 2021 and 2020, the Company’s insurance subsidiaries had $4.32 billion and $4.45 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 $58 million and $52 million at December 31, 2021 and 2020, respectively. Other investments pledged as collateral securing outstanding letters of credit had a fair value of $1 million at both December 31, 2021 and 2020. In addition, the Company utilizes Lloyd’s trust deposits, whereby owned securities with a fair value of approximately $33 million and $119 million held by a wholly-owned subsidiary at December 31, 2021 and 2020, respectively, and $34 million and $35 million held by TRV at December 31, 2021 and 2020, 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 cost and fair value of investments in equity securities were as follows:


(at December 31, 2021, in millions)	Cost		Gross Gains		Gross Losses		Fair Value
Common stock	$	694	$	137	$	4	$	827
Non-redeemable preferred stock	55		11		—		66
Total	$	749	$	148	$	4	$	893

The Company reclassified non-public common and preferred equities into equity securities on the consolidated balance sheet in the fourth quarter of 2021. Previously, these equities were reported in other investments. The reclassification has been made to the 2020 financial statements to conform to the 2021 presentation.

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 $31 million in 2021 and $0 million in both 2020 and 2019. Gains of $8 million were realized on those sales in 2021. Accumulated depreciation on real estate held for investment purposes was $497 million and $462 million at December 31, 2021 and 2020, respectively.

Future minimum rental income on operating leases relating to the Company’s real estate properties is expected to be $117 million, $93 million, $75 million, $51 million and $36 million for 2022, 2023, 2024, 2025 and 2026, respectively, and $67 million for 2027 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 29 days to maturity at December 31, 2021. The amortized cost of these securities, which totaled $3.84 billion and $5.51 billion at December 31, 2021 and 2020, 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, 2021 and 2020, 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, 2021, 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	$	2,438	$	32	$	5	$	—	$	2,443	$	32
Obligations of states, municipalities and political subdivisions	3,873		69		153		6		4,026		75
Debt securities issued by foreign governments	452		7		7		—		459		7
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	426		5		1		—		427		5
All other corporate bonds	7,306		153		436		22		7,742		175
Total fixed maturities	$	14,495	$	266	$	602	$	28	$	15,097	$	294


	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

Credit impairment charges included in net realized investment gains in the consolidated statement of income were as follows:


(for the year ended December 31, in millions)	2021		2020		2019
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	2		15		4
Redeemable preferred stock	—		—		—
Total fixed maturities	2		15		4




Other investments	—		40		—
Total	$	2	$	55	$	4

The following table presents changes in the allowance for expected credit losses on fixed maturities classified as available for sale for the category of All Other Corporate Bonds (no other categories of fixed maturities currently have an allowance for expected credit losses):


	Fixed Maturities
	All Other Corporate Bonds
(in millions)	At and For the Twelve Months Ended December 31, 2021		At and For the Twelve Months Ended December 31, 2020

Balance, beginning of period	$	2	$	—
Additions for expected credit losses on securities where no credit losses were previously recognized	1		10
Additions (reductions) for expected credit losses on securities where credit losses were previously recognized	1		(6)
Reductions due to sales/defaults of credit-impaired securities	(1)		(2)
Reductions for impairments of securities which the Company intends to sell or more likely than not will be required to sell (1)	—		—
Balance, end of period	$	3	$	2

_________________________________________________________

(1)Credit impairment charges recognized in net realized investment gains included $0 million and $13 million for the twelve months ended December 31, 2021 and 2020, respectively, 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.

Credit losses related to the fixed maturity portfolio for 2021 and 2020 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, 2021 and 2020.

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, 2021 and 2020, 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 $1.11 billion and $1.34 billion at December 31, 2021 and 2020, 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.

Net Investment Income


(for the year ended December 31, in millions)	2021		2020		2019
Gross investment income
Fixed maturities	$	1,989	$	2,011	$	2,070
Equity securities	19		15		15
Short-term securities	7		44		105
Real estate investments	59		48		55
Other investments	999		146		263
Gross investment income	3,073		2,264		2,508
Investment expenses	40		37		40
Net investment income	$	3,033	$	2,227	$	2,468


(at and for the year ended December 31, in millions)	2021		2020		2019
Changes in net unrealized investment gains (losses)
Fixed maturities	$	(2,113)	$	2,322	$	2,990

Other investments	(2)		—		—
Change in net pre-tax unrealized gains (losses) on investment securities	(2,115)		2,322		2,990
Related tax expense (benefit)	(456)		494		631
Change in net unrealized gains (losses) on investment securities	(1,659)		1,828		2,359


Balance, beginning of year	4,074		2,246		(113)
Balance, end of year	$	2,415	$	4,074	$	2,246

From time to time, the Company enters into certain derivative financial instruments that are reported on the balance sheet at fair value. The change in fair value of these investments is reported in net realized investment gains and losses.

The Company uses U.S. Treasury note futures contracts to modify the effective duration of specific assets within the investment portfolio. The U.S. Treasury futures contracts require a daily mark-to-market and are settled daily with the broker. At December 31, 2021 and 2020, the Company had no open U.S. Treasury futures contracts. Net realized investment gains and losses related to U.S. Treasury futures contracts in 2021, 2020 and 2019 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 2021, 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 2021, 2020 and 2019 were not significant.