Net Investment Income



	For the years ended December 31,
(Before tax)	2019			2018			2017
Fixed maturities [1]	$	1,559		$	1,459		$	1,303
Equity securities	46			32			24
Mortgage loans	165			141			124
Limited partnerships and other alternative investments	232			205			174
Other investments [2]	32			20			49
Investment expenses	(83		)	(77		)	(71		)
Total net investment income	$	1,951		$	1,780		$	1,603



	For the years ended December 31,
(Before tax)	2019			2018			2017
Gross gains on sales	$	234		$	114		$	275
Gross losses on sales	(56		)	(172		)	(113		)
Equity securities [1]	254			(48		)	—
Net OTTI losses recognized in earnings	(3		)	(1		)	(8		)
Valuation allowances on mortgage loans	1			—			(1		)
Other, net [2]	(35		)	(5		)	12
Net realized capital gains (losses)	$	395		$	(112	)	$	165

Sales of AFS Securities



	For the years ended December 31,
	2019			2018			2017
Fixed maturities, AFS
Sale proceeds	$	14,421		$	21,327		$	17,614
Gross gains	233			90			204
Gross losses	(56		)	(169		)	(90		)
Equity securities, AFS
Sale proceeds							$	607
Gross gains							69
Gross losses							(23		)

The Company will record an OTTI for fixed maturities if the Company intends to sell or it is more likely than not that the Company will be required to sell the security before a recovery in value. A corresponding charge is recorded in net realized capital losses equal to the difference between the fair value and amortized cost basis of the security.

The Company will also record an OTTI for those fixed maturities for which the Company does not expect to recover the entire amortized cost basis. For these securities, the excess of the amortized cost basis over its fair value is separated into the portion representing a credit OTTI, which is recorded in net realized capital losses, and the remaining non-credit amount, which is recorded in OCI. The credit OTTI amount is the excess of its amortized cost basis over the Company’s best estimate of discounted expected future cash flows. The non-credit amount is the excess of the best estimate of the discounted expected future cash flows over the fair value. The Company’s best estimate of discounted expected future cash flows becomes the new cost basis and accretes prospectively into net investment income over the estimated remaining life of the security.

Developing the Company’s best estimate of expected future cash flows is a quantitative and qualitative process that incorporates information received from third-party sources along with certain internal assumptions regarding the future performance. The Company's considerations include, but are not limited to, (a) changes in the financial condition of the issuer and the underlying collateral, (b) whether the issuer is current on contractually obligated interest and principal payments, (c) credit ratings, (d) payment structure of the security and (e) the extent to which the fair value has been less than the amortized cost of the security.

For non-structured securities, assumptions include, but are not limited to, economic and industry-specific trends and fundamentals, security-specific developments, industry earnings multiples and the issuer’s ability to restructure and execute asset sales.

For structured securities, assumptions include, but are not limited to, various performance indicators such as historical and projected default and recovery rates, credit ratings, current and projected delinquency rates, loan-to-value ("LTV") ratios, average cumulative collateral loss rates that vary by vintage year, prepayment speeds, and property value declines. These assumptions require the use of significant management judgment and include the probability of issuer default and estimates regarding timing and amount of expected recoveries which may include estimating the underlying collateral value.

Prior to January 1, 2018, the Company recorded an OTTI for certain equity securities with debt-like characteristics if the Company intended to sell or it was more likely than not that the Company was required to sell the security before a recovery in value as well as for those equity securities for which the Company did not expect to recover the entire amortized cost basis. The Company also recorded an OTTI for equity securities where the decline in the fair value was deemed to be other-than-temporary.

Cumulative Credit Impairments



	For the years ended December 31,
(Before tax)	2019			2018			2017
Balance as of beginning of period	$	(19	)	$	(25	)	$	(110	)
Additions for credit impairments recognized on [1]:
Securities not previously impaired	(3		)	—			(1		)
Securities previously impaired	—			(1		)	(1		)
Reductions for credit impairments previously recognized on:
Securities that matured or were sold during the period	3			7			76
Securities due to an increase in expected cash flows	—			—			11
Balance as of end of period	$	(19	)	$	(19	)	$	(25	)



	December 31, 2019												December 31, 2018
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Non- Credit OTTI [1]			Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Non- Credit OTTI [1]
ABS	$	1,461	$	18	$	(3	)	$	1,476	$	—		$	1,272	$	5	$	(1	)	$	1,276	$	—
CLOs	2,186		5		(8		)	2,183		—			1,455		2		(20		)	1,437		—
CMBS	4,210		141		(13		)	4,338		(4		)	3,581		35		(64		)	3,552		(5		)
Corporate	16,435		986		(25		)	17,396		—			13,696		148		(446		)	13,398		—
Foreign govt./govt. agencies	1,057		66		—			1,123		—			866		7		(26		)	847		—
Municipal	8,763		737		(2		)	9,498		—			9,972		421		(47		)	10,346		—
RMBS	4,775		97		(3		)	4,869		—			3,270		44		(35		)	3,279		—
U.S. Treasuries	1,191		75		(1		)	1,265		—			1,491		41		(15		)	1,517		—
Total fixed maturities, AFS	40,078		2,125		(55		)	42,148		(4		)	35,603		703		(654		)	35,652		(5		)



	December 31, 2019				December 31, 2018
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
One year or less	$	1,082	$	1,090	$	999	$	1,002
Over one year through five years	7,200		7,401		5,786		5,791
Over five years through ten years	7,395		7,803		6,611		6,495
Over ten years	11,769		12,988		12,629		12,820
Subtotal	27,446		29,282		26,025		26,108
Mortgage-backed and asset-backed securities	12,632		12,866		9,578		9,544
Total fixed maturities, AFS	$	40,078	$	42,148	$	35,603	$	35,652

Estimated maturities may differ from contractual maturities due to security call or prepayment provisions. Due to the potential for variability in payment speeds (i.e. prepayments or extensions), mortgage-backed and asset-backed securities are not categorized by contractual maturity.

The Company aims to maintain a diversified investment portfolio including issuer, sector and geographic stratification, where applicable, and has established certain exposure limits, diversification standards and review procedures to mitigate credit risk. The Company had no investment exposure to any credit concentration risk of a single issuer greater than 10% of the Company's stockholders' equity, other than the U.S. government and certain U.S. government agencies as of December 31, 2019 or December 31, 2018. As of December 31, 2019, other than U.S. government and certain U.S. government agencies, the Company’s three largest exposures by issuer were the Government of United Kingdom, New York State Dormitory Authority, and the Wells Fargo & Company each of which comprised less than 1% of total invested assets. As of December 31, 2018, other than U.S. government and certain U.S. government agencies, the Company’s three largest exposures by

issuer were New York State Dormitory Authority, Commonwealth of Massachusetts, and the New York City Transitional Finance Authority each of which comprised less than 1% of total invested assets. The Company’s three largest exposures by sector as of December 31, 2019 were the municipal, RMBS, and CMBS sectors which comprised approximately 18%, 9% and 8%, respectively, of total invested assets. The Company’s three largest exposures by sector as of December 31, 2018 were municipal securities, CMBS, and the financial services sectors which comprised approximately 22%, 8% and 7%, respectively, of total invested assets.



	Less Than 12 Months							12 Months or More							Total
	Amortized Cost		Fair Value		Unrealized Losses			Amortized Cost		Fair Value		Unrealized Losses			Amortized Cost		Fair Value		Unrealized Losses
ABS	$	401	$	398	$	(3	)	$	9	$	9	$	—		$	410	$	407	$	(3	)
CLOs	681		679		(2		)	929		923		(6		)	1,610		1,602		(8		)
CMBS	545		538		(7		)	26		20		(6		)	571		558		(13		)
Corporate	798		789		(9		)	344		328		(16		)	1,142		1,117		(25		)
Foreign govt./govt. agencies	101		101		—			29		29		—			130		130		—
Municipal	224		222		(2		)	—		—		—			224		222		(2		)
RMBS	617		614		(3		)	68		68		—			685		682		(3		)
U.S. Treasuries	88		88		—			35		34		(1		)	123		122		(1		)
Total fixed maturities, AFS in an unrealized loss position	$	3,455	$	3,429	$	(26	)	$	1,440	$	1,411	$	(29	)	$	4,895	$	4,840	$	(55	)



	Less Than 12 Months							12 Months or More							Total
	Amortized Cost		Fair Value		Unrealized Losses			Amortized Cost		Fair Value		Unrealized Losses			Amortized Cost		Fair Value		Unrealized Losses
ABS	$	566	$	566	$	—		$	113	$	112	$	(1	)	$	679	$	678	$	(1	)
CLOs	1,358		1,338		(20		)	7		7		—			1,365		1,345		(20		)
CMBS	896		882		(14		)	1,129		1,079		(50		)	2,025		1,961		(64		)
Corporate	7,174		6,903		(271		)	2,541		2,366		(175		)	9,715		9,269		(446		)
Foreign govt./govt. agencies	407		391		(16		)	203		193		(10		)	610		584		(26		)
Municipal	1,643		1,613		(30		)	292		275		(17		)	1,935		1,888		(47		)
RMBS	1,344		1,329		(15		)	648		628		(20		)	1,992		1,957		(35		)
U.S. Treasuries	497		492		(5		)	339		329		(10		)	836		821		(15		)
Total fixed maturities, AFS in an unrealized loss position	13,885		13,514		(371		)	5,272		4,989		(283		)	19,157		18,503		(654		)

As of December 31, 2019, AFS securities in an unrealized loss position consisted of 871 securities, primarily in the corporate and CMBS sectors, which were depressed primarily due to widening of credit spreads since the securities were purchased. As of December 31, 2019, 96% of these securities were depressed less than 20% of cost or amortized cost. The decrease in unrealized losses during 2019 was primarily attributable to lower interest rates and tighter credit spreads.

Most of the securities depressed for twelve months or more relate to corporate, CMBS, and CLO securities. Corporate, CMBS, and CLO securities were primarily depressed because current market spreads are wider than at the securities' respective purchase dates. Certain other corporate securities were depressed because the securities have floating-rate coupons and have long-dated maturities, and current credit spreads are wider than when these securities were purchased. The Company neither has an intention to sell nor does it expect to be required to sell the securities outlined in the preceding discussion.

Mortgage loans are considered to be impaired when management estimates that, based upon current information and events, it is probable that the Company will be unable to collect amounts due according to the contractual terms of the loan agreement. The

Company reviews mortgage loans on a quarterly basis to identify potential credit losses. Among other factors, management reviews current and projected macroeconomic trends, such as unemployment rates and property-specific factors such as rental rates, occupancy levels, LTV ratios and debt service coverage ratios (“DSCR”). In addition, the Company considers historical, current and projected delinquency rates and property values. Estimates of collectibility require the use of significant management judgment and include the probability and timing of borrower default and loss severity estimates. In addition, cash flow projections may change based upon new information about the borrower's ability to pay and/or the value of underlying collateral such as changes in projected property value estimates.

For mortgage loans that are deemed impaired, a valuation allowance is established for the difference between the carrying amount and estimated fair value. The mortgage loan's estimated fair value is most frequently the Company's share of the fair value of the collateral but may also be the Company’s share of either (a) the present value of the expected future cash flows discounted at the loan’s effective interest rate or (b) the loan’s observable market price. A valuation allowance may be recorded for an individual loan or for a group of loans that have an LTV ratio of 90% or greater, a low DSCR or have other lower credit quality characteristics. Changes in valuation allowances are recorded in net realized capital gains and losses. Interest income on impaired loans is accrued to the extent it is deemed collectible and the borrowers continue to make payments under the original or

restructured loan terms. The Company stops accruing interest income on loans when it is probable that the Company will not receive interest and principal payments according to the contractual terms of the loan agreement. The Company resumes accruing interest income when it determines that sufficient collateral exists to satisfy the full amount of the loan principal and interest payments and when it is probable cash will be received in the foreseeable future. Interest income on defaulted loans is recognized when received.

As of December 31, 2019, mortgage loans had an amortized cost of $4.2 billion and carrying value of $4.2 billion, with no valuation allowance. As of December 31, 2018, mortgage loans had an amortized cost of $3.7 billion and carrying value of $3.7 billion, with a valuation allowance of $1.

As of December 31, 2019, there were no mortgage loans that had a valuation allowance. As of December 31, 2018, the carrying value of mortgage loans that had a valuation allowance was $23. There were no mortgage loans held-for-sale as of both December 31, 2019 and December 31, 2018. As of December 31, 2019, the Company had no mortgage loans that have had extensions or restructurings other than what is allowable under the original terms of the contract.

The following table presents the activity within the Company’s valuation allowance for mortgage loans. These loans have been evaluated both individually and collectively for impairment. Loans evaluated collectively for impairment are immaterial.

The weighted-average LTV ratio of the Company’s mortgage loan portfolio was 52% as of December 31, 2019, while the weighted-average LTV ratio at origination of these loans was 61%. LTV ratios compare the loan amount to the value of the underlying property collateralizing the loan. The loan collateral values are updated no less than annually through reviews of the underlying properties. Factors considered in estimating property values include, among other things, actual and expected property cash flows, geographic market data and the ratio of the property's net operating income to its value. DSCR compares a property’s net operating income to the borrower’s principal and interest payments. As of December 31, 2019 and December 31, 2018, the Company held no delinquent commercial mortgages loan past due by 90 days or more.

Mortgage Loans Credit Quality



	December 31, 2019			December 31, 2018
Loan-to-value	Carrying Value		Avg. Debt-Service Coverage Ratio	Carrying Value		Avg. Debt-Service Coverage Ratio
65% - 80%	376		1.53x	386		1.60x
Less than 65%	3,839		2.56x	3,318		2.59x
Total mortgage loans	$	4,215	2.46x	$	3,704	2.49x

Mortgage Loans by Region



	December 31, 2019				December 31, 2018
	Carrying Value		Percent of Total		Carrying Value		Percent of Total
East North Central	$	270	6.4	%	$	250	6.8	%
Middle Atlantic	319		7.5	%	270		7.3	%
Mountain	109		2.6	%	30		0.8	%
New England	344		8.2	%	330		8.9	%
Pacific	906		21.5	%	917		24.8	%
South Atlantic	944		22.4	%	712		19.2	%
West North Central	46		1.1	%	148		4.0	%
West South Central	439		10.4	%	420		11.3	%
Other [1]	838		19.9	%	627		16.9	%
Total mortgage loans	$	4,215	100.0	%	$	3,704	100.0	%

Mortgage Loans by Property Type



	December 31, 2019				December 31, 2018
	Carrying Value		Percent of Total		Carrying Value		Percent of Total
Commercial
Industrial	1,167		27.7	%	1,108		29.9	%
Multifamily	1,313		31.2	%	1,138		30.7	%
Office	723		17.2	%	708		19.1	%
Retail	735		17.4	%	392		10.6	%
Single Family	137		3.2	%	82		2.2	%
Other	140		3.3	%	276		7.5	%
Total mortgage loans	$	4,215	100.0	%	$	3,704	100.0	%

The Company originates, sells and services commercial mortgage loans on behalf of third parties and recognizes servicing fee income over the period that services are performed. As of December 31, 2019, under this program, the Company serviced mortgage loans with a total outstanding principal of $6.4 billion, of which $3.5 billion was serviced on behalf of third parties and $2.9 billion was retained and reported in total investments on the Company's Consolidated Balance Sheets. As of December 31, 2018, the Company serviced mortgage loans with a total outstanding principal balance of $6.0 billion, of which $3.6 billion

was serviced on behalf of third parties and $2.4 billion was retained and reported in total investments on the Company's Consolidated Balance Sheets. Servicing rights are carried at the lower of cost or fair value and were $0 as of December 31, 2019 and 2018, because servicing fees were market-level fees at origination and remain adequate to compensate the Company for servicing the loans.

A VIE is an entity that either has investors that lack certain essential characteristics of a controlling financial interest, such as simple majority kick-out rights, or lacks sufficient funds to finance its own activities without financial support provided by other entities. The Company performs ongoing qualitative assessments of its VIEs to determine whether the Company has a controlling financial interest in the VIE and therefore is the primary beneficiary. The Company is deemed to have a controlling financial interest when it has both the ability to direct the activities that most significantly impact the economic performance of the VIE and the obligation to absorb losses or right to receive benefits from the VIE that could potentially be significant to the VIE. Based on the Company’s assessment, if it determines it is the primary beneficiary, the Company consolidates the VIE in the Company’s Consolidated Financial Statements.

The Company, through normal investment activities, makes passive investments in limited partnerships and other alternative investments. For these non-consolidated VIEs, the Company has determined it is not the primary beneficiary as it has no ability to direct activities that could significantly affect the economic performance of the investments. The Company’s maximum exposure to loss as of December 31, 2019 and 2018 is limited to the total carrying value of $1.1 billion and $1.0 billion, respectively, which are included in limited partnerships and other alternative investments in the Company's Consolidated Balance Sheets. As of December 31, 2019 and 2018, the Company has outstanding commitments totaling $851 and $718, respectively, whereby the Company is committed to fund these investments and may be called by the partnership during the commitment period to fund the purchase of new investments and partnership expenses. These investments are generally of a passive nature in that the Company does not take an active role in management.

In addition, the Company makes passive investments in structured securities issued by VIEs for which the Company is not the manager. These investments are included in ABS, CLOs, CMBS and RMBS and are reported in fixed maturities, available-for-sale, and fixed maturities, FVO, in the Company’s Consolidated Balance Sheets. The Company has not provided financial or other support with respect to these investments other than its original investment. For these investments, the Company determined it is not the primary beneficiary due to the relative size of the Company’s investment in comparison to the

principal amount of the structured securities issued by the VIEs, the level of credit subordination which reduces the Company’s obligation to absorb losses or right to receive benefits and the Company’s inability to direct the activities that most significantly impact the economic performance of the VIEs. The Company’s maximum exposure to loss on these investments is limited to the amount of the Company’s investment.



Securities Lending and Repurchase Agreements
	December 31, 2019		December 31, 2018
	Fair Value		Fair Value
Securities Lending Transactions:
Gross amount of securities on loan	$	606	$	820
Gross amount of associated liability for collateral received [1]	$	621	$	840

Repurchase agreements:
Gross amount of recognized liabilities for repurchase agreements	$	—	$	72
Gross amount of collateral pledged related to repurchase agreements [2]	$	—	$	73
Gross amount of recognized receivables for reverse repurchase agreements	$	15	$	64

Under a securities lending program, the Company lends certain fixed maturities within the corporate, foreign government/government agencies, and municipal sectors as well as equity securities to qualifying third-party borrowers in return for collateral in the form of cash or securities. For domestic and non-domestic loaned securities, respectively, borrowers provide collateral of 102% and 105% of the fair value of the securities lent at the time of the loan. Borrowers will return the securities to the Company for cash or securities collateral at maturity dates generally of 90 days or less. Security collateral on deposit from counterparties in connection with securities lending transactions may not be sold or re-pledged, except in the event of default by the counterparty, and is not reflected on the Company’s Consolidated Balance Sheets. Additional collateral is obtained if the fair value of the collateral falls below 100% of the fair value of the loaned securities. The agreements are continuous and do not have stated maturity dates and provide the counterparty the

right to sell or re-pledge the securities loaned. If cash, rather than securities, is received as collateral, the cash is typically invested in short-term investments or fixed maturities and is reported as an asset on the Company's Consolidated Balance Sheets. Income associated with securities lending transactions is reported as a component of net investment income in the Company’s Consolidated Statements of Operations.

From time to time, the Company enters into repurchase agreements to manage liquidity or to earn incremental income. A repurchase agreement is a transaction in which one party (transferor) agrees to sell securities to another party (transferee) in return for cash (or securities), with a simultaneous agreement to repurchase the same securities at a specified price at a later date. The maturity of these transactions is generally ninety days or less. Repurchase agreements include master netting provisions that provide both parties the right to offset claims and apply securities held by them with respect to their obligations in the event of a default. Although the Company has the contractual right to offset claims, the Company's current positions do not meet the specific conditions for net presentation.

Under repurchase agreements, the Company transfers collateral of U.S. government and government agency securities and receives cash. For repurchase agreements, the Company obtains cash in an amount equal to at least 95% of the fair value of the securities transferred. The agreements require additional collateral to be transferred when necessary and provide the counterparty the right to sell or re-pledge the securities transferred. The cash received from the repurchase program is typically invested in short-term investments or fixed maturities and is reported as an asset on the Company's Consolidated Balance Sheets. The Company accounts for the repurchase agreements as collateralized borrowings. The securities transferred under repurchase agreements are included in fixed maturities, AFS with the obligation to repurchase those securities recorded in other liabilities on the Company's Consolidated Balance Sheets.

From time to time, the Company enters into reverse repurchase agreements where the Company purchases securities and simultaneously agrees to resell the same or substantially the same securities. The maturity of these transactions is generally within one year. The agreements require additional collateral to be transferred to the Company when necessary and the Company has the right to sell or re-pledge the securities received. The Company accounts for reverse repurchase agreements as collateralized financing. The receivable for reverse repurchase agreements is included within short-term investments in the Company's Consolidated Balance Sheets.

As of December 31, 2019 and 2018, the Company pledged collateral of $37 and $47, respectively, of U.S. government securities and municipal securities or cash primarily related to certain bank loan participations committed to through a limited partnership agreement. These amounts also include collateral related to letters of credit.

The Company is required by law to deposit securities with government agencies in certain states in which it conducts business. As of December 31, 2019 and 2018, the fair value of securities on deposit was $2.3 billion and $2.2 billion, respectively.

In addition, as of December 31, 2019, the Company held fixed maturities and short-term investments of $447 and $189, respectively, in a trust for the benefit of syndicate policyholders and other investments of $38 primarily consisting of overseas deposits in various countries with Lloyd's to support underwriting activities in those countries.

The majority of the Company's investments in limited partnerships and other alternative investments, including hedge funds, real estate funds, and private equity funds (collectively, “limited partnerships”), are accounted for under the equity method of accounting. The remainder of investments in limited partnerships and other alternative investments consists of investments in insurer-owned life insurance accounted for at cash surrender value. The Company's investment in Hopmeadow Holdings LP is reported in other assets on the Company's Consolidated Balance Sheets and is accounted for under the equity method of accounting. For further discussion on Hopmeadow Holdings LP, see Note 21 - Business Dispositions and Discontinued Operations of Notes to the Consolidated Financial Statements.

The Company recognized total equity method income of $267, $214, and $168 for the periods ended December 31, 2019, 2018 and 2017, respectively. Equity method income is reported in net investment income, except amounts related to strategic investments classified in other assets which are reported in other revenues. For investments accounted for under the equity method, the Company’s maximum exposure to loss as of December 31, 2019 is limited to the total carrying value of $1.6 billion. In addition, the Company has outstanding commitments totaling $852 to fund limited partnership investments as of December 31, 2019. The Company’s investments accounted for under the equity method are generally of a passive nature in that the Company does not take an active role in the management.

In 2019, aggregate investment income from investments accounted for under the equity method exceeded 10% of the Company’s pre-tax consolidated net income (loss). Accordingly, the Company is disclosing aggregated, summarized financial data for the Company’s investments accounted for under the equity method. This aggregated, summarized financial data does not represent the Company’s proportionate share of investees' assets or earnings. Aggregate total assets of the investees totaled $329.4 billion and $311.0 billion as of December 31, 2019 and 2018, respectively. Aggregate total liabilities of the investees totaled $191.2 billion and $187.7 billion as of December 31, 2019 and 2018, respectively. Aggregate net investment income of the investees totaled $618, $773, and $1.9 billion for the periods ended December 31, 2019, 2018 and 2017, respectively. Aggregate net income excluding net investment income of the investees totaled $13.4 billion, $12.3 billion and $9.8 billion for the periods ended December 31, 2019, 2018 and 2017, respectively. As of, and for the period ended, December 31, 2019,