Investments

3 Months Ended

Mar. 31, 2022

INVESTMENTS

Fixed Maturities

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


	Amortized Cost		Allowance for Expected Credit Losses		Gross Unrealized				Fair Value
(at March 31, 2022, in millions)					Gains		Losses
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities	$	3,356	$	—	$	7	$	190	$	3,173
Obligations of U.S. states, municipalities and political subdivisions:
Local general obligation	19,345		—		275		821		18,799
Revenue	11,585		—		172		396		11,361
State general obligation	1,180		—		19		46		1,153
Pre-refunded	3,882		—		93		—		3,975
Total obligations of U.S. states, municipalities and political subdivisions	35,992		—		559		1,263		35,288
Debt securities issued by foreign governments	1,073		—		—		32		1,041
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	1,791		—		23		54		1,760
Corporate and all other bonds	33,946		4		257		1,075		33,124
Total	$	76,158	$	4	$	846	$	2,614	$	74,386


	Amortized Cost		Allowance for Expected Credit Losses		Gross Unrealized				Fair Value
(at December 31, 2021, in millions)					Gains		Losses
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities	$	3,574	$	—	$	20	$	32	$	3,562
Obligations of U.S. 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 U.S. 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
Corporate and all other bonds	33,457		3		1,249		175		34,528
Total	$	74,751	$	3	$	3,356	$	294	$	77,810

Pre-refunded bonds of $3.98 billion and $4.03 billion at March 31, 2022 and December 31, 2021, respectively, were bonds for which U.S. 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 $1.04 billion and $1.24 billion during the three months ended March 31, 2022 and 2021, respectively. Gross gains of $5 million and $15 million and gross losses of $2 million and $1 million were realized on those sales during the three months ended March 31, 2022 and 2021, respectively.

Equity Securities

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


							Fair
(at March 31, 2022, in millions)	Cost		Gross Gains		Gross Losses		Value
Common stock	$	705	$	118	$	7	$	816
Non-redeemable preferred stock	56		9		1		64
Total	$	761	$	127	$	8	$	880


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

For the three months ended March 31, 2022 and 2021, the Company recognized $(14) million and $23 million of net gains (losses) on equity securities still held as of March 31, 2022 and 2021, respectively.

Unrealized Investment Losses

The following tables summarize, for all fixed maturities classified as available for sale in an unrealized loss position at March 31, 2022 and December 31, 2021, the aggregate fair value and gross unrealized loss by the 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 2021 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 2021 Annual Report to determine whether a credit loss impairment exists.


	Less than 12 months				12 months or longer				Total
(at March 31, 2022, 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	$	2,344	$	167	$	228	$	23	$	2,572	$	190
Obligations of U.S. states, municipalities and political subdivisions	10,923		1,100		1,177		163		12,100		1,263
Debt securities issued by foreign governments	633		21		145		11		778		32
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	1,336		53		21		1		1,357		54
Corporate and all other bonds	15,170		836		1,964		239		17,134		1,075
Total	$	30,406	$	2,177	$	3,535	$	437	$	33,941	$	2,614


	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 U.S. 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
Corporate and all other bonds	7,306		153		436		22		7,742		175
Total	$	14,495	$	266	$	602	$	28	$	15,097	$	294

At March 31, 2022, 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 $142 million due to higher interest rates.

Credit Impairment Charges

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


	Fixed Maturities
	Corporate and All Other Bonds
(in millions)	At and For the Three Months Ended March 31, 2022		At and For the Three Months Ended March 31, 2021

Balance, beginning of period	$	3	$	2
Additions for expected credit losses on securities where no credit losses were previously recognized	—		—
Additions (reductions) for expected credit losses on securities where credit losses were previously recognized	1		—
Reductions due to sales/defaults of credit-impaired securities	—		—
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	$	4	$	2

(1)Credit impairment charges recognized in net realized investment gains (losses) for both the three months ended March 31, 2022 and 2021 included no credit losses on fixed maturity securities which the Company intends to sell.

Total net credit impairment charges included in net realized investment gains (losses) in the consolidated statement of income were $1 million and $0 million for the three months ended March 31, 2022 and 2021, respectively. Credit losses related to the fixed maturity portfolio for the three months ended March 31, 2022 and 2021 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.

Other Investments

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, net investment income from these other investments is generally reflected in the Company's financial statements on a quarter lag basis.