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Investments | 12 Months Ended
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Dec. 31, 2018
Investments [Abstract] |
Investments | Investments On November 28, 2018, the Company completed the Aetna Acquisition. Prior to the Aetna Acquisition Date, the Company’s short term investments balance was comprised of certificates of deposit with initial maturities of greater than three months when purchased that mature in less than one year from the balance sheet date. These investments totaled $111 million as of December 31, 2017 and were classified as available for sale. In addition, the Company had $112 million of additional long-term investments as of December 31, 2017 which primarily consisted of cost method and equity method investments. Since the total amount of investments prior to the Aetna Acquisition was not material to the consolidated financial statements, the Company will include additional disclosures for investments on a prospective basis starting from the Aetna Acquisition Date. Total investments at December 31, 2018 were as follows:
In millions | Current |  | Long-term |  | Total
Debt securities available for sale | $ | 2,359 |  |  | $ | 12,896 |  |  | $ | 15,255 |
Mortgage loans | 145 |  |  | 1,216 |  |  | 1,361 |
Other investments | 18 |  |  | 1,620 |  |  | 1,638 |
Total investments | $ | 2,522 |  |  | $ | 15,732 |  |  | $ | 18,254 |
At December 31, 2018, the Company held investments of $531 million related to the 2012 conversion of an existing group annuity contract from a participating to a non-participating contract. The conversion occurred prior to the Aetna Acquisition. These investments are included in the total investments of large case pensions supporting non-experience-rated products. Although these investments are not accounted for as Separate Accounts assets, they are legally segregated and are not subject to claims that arise out of the Company’s business and only support future policy benefits obligations under that group annuity contract. Debt Securities Debt securities available for sale at December 31, 2018 were as follows:
In millions | Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Value
December 31, 2018 |  |  |  |  |  |  |
Debt securities: |  |  |  |  |  |  |
U.S. government securities | $ | 1,662 |  |  | $ | 26 |  |  | $ | — |  |  | $ | 1,688 |
States, municipalities and political subdivisions | 2,370 |  |  | 30 |  |  | (1 | ) |  | 2,399 |
U.S. corporate securities | 6,444 |  |  | 61 |  |  | (16 | ) |  | 6,489 |
Foreign securities | 2,355 |  |  | 31 |  |  | (3 | ) |  | 2,383 |
Residential mortgage-backed securities | 567 |  |  | 10 |  |  | — |  |  | 577 |
Commercial mortgage-backed securities | 594 |  |  | 11 |  |  | — |  |  | 605 |
Other asset-backed securities | 1,097 |  |  | 3 |  |  | (15 | ) |  | 1,085 |
Redeemable preferred securities | 30 |  |  | — |  |  | (1 | ) |  | 29 |
Total debt securities (1) | $ | 15,119 |  |  | $ | 172 |  |  | $ | (36 | ) |  | $ | 15,255 |
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(1) | Investment risks associated with the Company’s experience-rated products generally do not impact the Company’s consolidated results of operations. At December 31, 2018, debt securities with a fair value of $916 million, gross unrealized capital gains of $12 million and gross unrealized capital losses of $2 million were included in total debt securities, but support experience-rated products.
The fair value of debt securities at December 31, 2018 is shown below by contractual maturity. Actual maturities may differ from contractual maturities because securities may be restructured, called or prepaid, or the Company intends to sell a security prior to maturity.
In millions | Amortized Cost |  | Fair Value
Due to mature: |  |  |
Less than one year | $ | 901 |  |  | $ | 902 |
One year through five years | 5,489 |  |  | 5,521 |
After five years through ten years | 2,973 |  |  | 2,999 |
Greater than ten years | 3,498 |  |  | 3,566 |
Residential mortgage-backed securities | 567 |  |  | 577 |
Commercial mortgage-backed securities | 594 |  |  | 605 |
Other asset-backed securities | 1,097 |  |  | 1,085 |
Total | $ | 15,119 |  |  | $ | 15,255 |
Mortgage-Backed and Other Asset-Backed Securities All of the Company’s residential mortgage-backed securities at December 31, 2018 were issued by the Government National Mortgage Association, the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation and carry agency guarantees and explicit or implicit guarantees by the United States Government. At December 31, 2018, the Company’s residential mortgage-backed securities had an average credit quality rating of AAA and a weighted average duration of 4.8 years. The Company’s commercial mortgage-backed securities have underlying loans that are dispersed throughout the United States. Significant market observable inputs used to value these securities include loss severity and probability of default. At December 31, 2018, these securities had an average credit quality rating of AAA and a weighted average duration of 6.3 years. The Company’s other asset-backed securities have a variety of underlying collateral (e.g., automobile loans, credit card receivables, home equity loans and commercial loans). Significant market observable inputs used to value these securities include the unemployment rate, loss severity and probability of default. At December 31, 2018, these securities had an average credit quality rating of AA and a weighted average duration of 1.3 years. Summarized below are the debt securities the Company held at December 31, 2018 that were in an unrealized capital loss position:
In millions, except number of securities | Number of Securities |  | Fair Value |  | Unrealized Losses
Debt securities: |  |  |  |  |
U.S. government securities | 8 |  |  | $ | 26 |  |  | $ | — |
States, municipalities and political subdivisions | 54 |  |  | 86 |  |  | 1 |
U.S. corporate securities | 1,399 |  |  | 1,431 |  |  | 16 |
Foreign securities | 243 |  |  | 314 |  |  | 3 |
Residential mortgage-backed securities | 45 |  |  | 1 |  |  | — |
Other asset-backed securities | 516 |  |  | 528 |  |  | 15 |
Redeemable preferred securities | 14 |  |  | 23 |  |  | 1 |
Total debt securities | 2,279 |  |  | $ | 2,409 |  |  | $ | 36 |
Since Aetna’s investment portfolio was measured at fair value as of the Aetna Acquisition Date, each of the securities in the table above were in an unrealized loss position for less than 12 months. The Company reviewed the securities in the table above and concluded that they are performing assets generating investment income to support the needs of the Company’s businesses. In performing this review, the Company considered factors such as the quality of the investment security based on research performed by the Company’s internal credit analysts and external rating agencies and the prospects of realizing the carrying value of the security based on the investment’s current prospects for recovery. As of December 31, 2018, the Company did not intend to sell these securities, and did not believe it was more likely than not that it would be required to sell these securities prior to anticipated recovery of their amortized cost basis. The maturity dates for debt securities in an unrealized capital loss position at December 31, 2018 were as follows:
| Supporting experience-rated products |  | Supporting remaining products |  | Total
In millions | Fair Value |  | Unrealized Losses |  | Fair Value |  | Unrealized Losses |  | Fair Value |  | Unrealized Losses
Due to mature: |  |  |  |  |  |  |  |  |  |  |
Less than one year | $ | 21 |  |  | $ | — |  |  | $ | 308 |  |  | $ | — |  |  | $ | 329 |  |  | $ | — |
One year through five years | 36 |  |  | 2 |  |  | 557 |  |  | 5 |  |  | 593 |  |  | 7 |
After five years through ten years | 47 |  |  | — |  |  | 492 |  |  | 9 |  |  | 539 |  |  | 9 |
Greater than ten years | 49 |  |  | — |  |  | 370 |  |  | 5 |  |  | 419 |  |  | 5 |
Residential mortgage-backed securities | — |  |  | — |  |  | 1 |  |  | — |  |  | 1 |  |  | — |
Other asset-backed securities | 4 |  |  | — |  |  | 524 |  |  | 15 |  |  | 528 |  |  | 15 |
Total | $ | 157 |  |  | $ | 2 |  |  | $ | 2,252 |  |  | $ | 34 |  |  | $ | 2,409 |  |  | $ | 36 |
Mortgage Loans The Company’s mortgage loans are collateralized by commercial real estate. From the Aetna Acquisition Date through December 31, 2018, the Company had the following activity in its mortgage loan portfolio:
In millions |
New mortgage loans | $ | 4 |
Mortgage loans fully-repaid | 27 |
Mortgage loans foreclosed | — |
The Company assesses mortgage loans on a regular basis for credit impairments, and annually assign a credit quality indicator to each loan. The Company’s credit quality indicator is internally developed and categorizes its portfolio on a scale from 1 to 7. These indicators are based upon several factors, including current loan-to-value ratios, property condition, market trends, creditworthiness of the borrower and deal structure. The vast majority of the Company’s mortgage loans fall into categories 2 to 4.
• | Category 1 - Represents loans of superior quality
• | Categories 2 to 4 - Represents loans where credit risk is minimal to acceptable; however, these loans may display some susceptibility to economic changes.
• | Categories 5 and 6 - Represents loans where credit risk is not substantial, but these loans warrant management’s close attention.
• | Category 7 - Represents loans where collections are potentially at risk; if necessary, an impairment is recorded.
Based upon the most recent assessments at December 31, 2018, the Company’s mortgage loans were given the following credit quality indicators:
In millions, except credit ratings indicator |
1 | $ | 42 |
2 to 4 | 1,301 |
5 and 6 | 18 |
7 | — |
Total | $ | 1,361 |
At December 31, 2018 scheduled mortgage loan principal repayments were as follows:
In millions |
2019 | $ | 145 |
2020 | 109 |
2021 | 269 |
2022 | 228 |
2023 | 83 |
Thereafter | 527 |
Total | $ | 1,361 |
Net Investment Income Sources of net investment income for the year ended December 31, 2018 were as follows:
In millions |
Debt securities | $ | 637 |
Mortgage loans | 6 |
Other investments | 17 |
Gross investment income | 660 |
Investment expenses | (3 | )
Net investment income (excluding net realized capital gains or losses) | 657 |
Net realized capital gains | 3 |
Net investment income (1) | $ | 660 |
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(1) | Net investment income in 2018 includes $4 million related to investments supporting experience-rated products.
The Company’s net investment income was $21 million and $20 million in 2017 and 2016, respectively, relating to interest income on debt securities. The Company did not have any material realized capital gains or losses during 2017 or 2016. The portion of unrealized capital gains and losses recognized during the year ended December 31, 2018 related to investments in equity securities held as of December 31, 2018 was not material. Excluding amounts related to experience-rated products, proceeds from the sale of available for sale debt securities and the related gross realized capital gains and losses from the Aetna Acquisition Date through December 31, 2018 were as follows:(1)
In millions |
Proceeds from sales | $ | 389 |
Gross realized capital gains | 2 |
Gross realized capital losses | (2 | )
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(1) | The proceeds from sales and gross realized capital gains and losses exclude the impact of the sales of short-term debt securities which primarily relate to the Company’s investments in mutual funds. These investments were excluded from the disclosed amounts because they represent an immaterial amount of aggregate gross realized capital gains or losses and have a high volume of sales activity.

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