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Investments | 6 Months Ended
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Jun. 30, 2019
Investments [Abstract] |
Investments |
Note 5 | Investments
Amortized cost, gross unrealized gains (losses) and fair value for fixed income securities
($ in millions) |  | Amortized cost |  | Gross unrealized |  | Fair value
|  | Gains |  | Losses |
June 30, 2019 |  |  |  |  |  |  |  |  |  |  |  |
U.S. government and agencies |  | $ | 3,980 |  |  | $ | 180 |  |  | $ | — |  |  | $ | 4,160 |
Municipal |  | 8,378 |  |  | 516 |  |  | (3 | ) |  | 8,891 |
Corporate |  | 41,620 |  |  | 1,731 |  |  | (78 | ) |  | 43,273 |
Foreign government |  | 766 |  |  | 26 |  |  | (1 | ) |  | 791 |
Asset-backed securities (“ABS”) |  | 853 |  |  | 11 |  |  | (5 | ) |  | 859 |
Residential mortgage-backed securities (“RMBS”) |  | 325 |  |  | 94 |  |  | (1 | ) |  | 418 |
Commercial mortgage-backed securities (“CMBS”) |  | 65 |  |  | 8 |  |  | (3 | ) |  | 70 |
Redeemable preferred stock |  | 21 |  |  | 1 |  |  | — |  |  | 22 |
Total fixed income securities |  | $ | 56,008 |  |  | $ | 2,567 |  |  | $ | (91 | ) |  | $ | 58,484 |
December 31, 2018 |  |  |  |  |  |  |  |  |  |  |  |
U.S. government and agencies |  | $ | 5,386 |  |  | $ | 137 |  |  | $ | (6 | ) |  | $ | 5,517 |
Municipal |  | 8,963 |  |  | 249 |  |  | (43 | ) |  | 9,169 |
Corporate |  | 40,536 |  |  | 490 |  |  | (890 | ) |  | 40,136 |
Foreign government |  | 739 |  |  | 13 |  |  | (5 | ) |  | 747 |
ABS |  | 1,049 |  |  | 6 |  |  | (10 | ) |  | 1,045 |
RMBS |  | 377 |  |  | 89 |  |  | (2 | ) |  | 464 |
CMBS |  | 63 |  |  | 8 |  |  | (1 | ) |  | 70 |
Redeemable preferred stock |  | 21 |  |  | 1 |  |  | — |  |  | 22 |
Total fixed income securities |  | $ | 57,134 |  |  | $ | 993 |  |  | $ | (957 | ) |  | $ | 57,170 |
Scheduled maturities for fixed income securities
($ in millions) |  | As of June 30, 2019
| Amortized cost |  | Fair value
Due in one year or less |  | $ | 2,827 |  |  | $ | 2,849 |
Due after one year through five years |  | 25,060 |  |  | 25,659 |
Due after five years through ten years |  | 17,602 |  |  | 18,394 |
Due after ten years |  | 9,276 |  |  | 10,235 |
|  | 54,765 |  |  | 57,137 |
ABS, RMBS and CMBS |  | 1,243 |  |  | 1,347 |
Total |  | $ | 56,008 |  |  | $ | 58,484 |
Actual maturities may differ from those scheduled as a result of calls and make-whole payments by the issuers. ABS, RMBS and CMBS are shown separately because of the potential for prepayment of principal prior to contractual maturity dates.
Net investment income |  |  |  |
($ in millions) |  | Three months ended June 30, |  | Six months ended June 30,
| 2019 |  | 2018 |  | 2019 |  | 2018
Fixed income securities |  | $ | 543 |  |  | $ | 509 |  |  | $ | 1,081 |  |  | $ | 1,017 |
Equity securities |  | 68 |  |  | 61 |  |  | 98 |  |  | 95 |
Mortgage loans |  | 54 |  |  | 60 |  |  | 107 |  |  | 111 |
Limited partnership interests |  | 254 |  |  | 173 |  |  | 263 |  |  | 353 |
Short-term investments |  | 26 |  |  | 19 |  |  | 52 |  |  | 31 |
Other |  | 67 |  |  | 68 |  |  | 130 |  |  | 134 |
Investment income, before expense |  | 1,012 |  |  | 890 |  |  | 1,731 |  |  | 1,741 |
Investment expense |  | (70 | ) |  | (66 | ) |  | (141 | ) |  | (131 | )
Net investment income |  | $ | 942 |  |  | $ | 824 |  |  | $ | 1,590 |  |  | $ | 1,610 |
Realized capital gains (losses) by asset type |  |  |  |  |  |  |  |
($ in millions) |  | Three months ended June 30, |  | Six months ended June 30,
| 2019 |  | 2018 |  | 2019 |  | 2018
Fixed income securities |  | $ | 79 |  |  | $ | (80 | ) |  | $ | 143 |  |  | $ | (123 | )
Equity securities |  | 178 |  |  | 74 |  |  | 731 |  |  | (19 | )
Mortgage loans |  | — |  |  | 2 |  |  | — |  |  | 2 |
Limited partnership interests |  | 21 |  |  | (43 | ) |  | 93 |  |  | (33 | )
Derivatives |  | 22 |  |  | 23 |  |  | (24 | ) |  | 15 |
Other |  | 24 |  |  | (1 | ) |  | 43 |  |  | (1 | )
Realized capital gains and losses |  | $ | 324 |  |  | $ | (25 | ) |  | $ | 986 |  |  | $ | (159 | )
Realized capital gains (losses) by transaction type |  |  |  |  |  |  |  |
($ in millions) |  | Three months ended June 30, |  | Six months ended June 30,
| 2019 |  | 2018 |  | 2019 |  | 2018
Impairment write-downs |  | $ | (15 | ) |  | $ | (4 | ) |  | $ | (29 | ) |  | $ | (5 | )
Sales |  | 117 |  |  | (75 | ) |  | 212 |  |  | (117 | )
Valuation of equity investments (1) |  | 200 |  |  | 34 |  |  | 827 |  |  | (49 | )
Valuation and settlements of derivative instruments |  | 22 |  |  | 20 |  |  | (24 | ) |  | 12 |
Realized capital gains and losses |  | $ | 324 |  |  | $ | (25 | ) |  | $ | 986 |  |  | $ | (159 | )
(1) | Includes valuation of equity securities and certain limited partnership interests where the underlying assets are predominately public equity securities.
Sales of fixed income securities resulted in gross gains of $115 million and $29 million and gross losses of $27 million and $107 million during the three months ended June 30, 2019 and 2018, respectively. Sales of fixed income securities resulted in gross gains of $241 million and $74 million and gross losses of $87 million and $194 million during the six months ended June 30, 2019 and 2018, respectively. The following table presents the net pre-tax appreciation (decline) during 2019 and 2018 of equity securities and limited partnership interests carried at fair value still held as of June 30, 2019 and June 30, 2018 recognized in net income.
Net appreciation (decline) recognized in net income |  |  |  |  |  |
($ in millions) |  | Three months ended June 30, |  | Six months ended June 30,
| 2019 |  | 2018 |  | 2019 |  | 2018
Equity securities |  | $ | 207 |  |  | $ | 94 |  |  | $ | 688 |  |  | $ | 71 |
Limited partnership interests carried at fair value |  | 95 |  |  | 28 |  |  | 59 |  |  | 106 |
Total |  | $ | 302 |  |  | $ | 122 |  |  | $ | 747 |  |  | $ | 177 |
OTTI losses by asset type
($ in millions) |  | Three months ended |  | Three months ended
| June 30, 2019 |  | June 30, 2018
| Gross |  | Included in OCI |  | Net |  | Gross |  | Included in OCI |  | Net
Fixed income securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate |  | $ | (3 | ) |  | $ | (4 | ) |  | $ | (7 | ) |  | $ | — |  |  | $ | — |  |  | $ | — |
ABS |  | (1 | ) |  | (1 | ) |  | (2 | ) |  | (1 | ) |  | — |  |  | (1 | )
RMBS |  | — |  |  | — |  |  | — |  |  | (1 | ) |  | — |  |  | (1 | )
CMBS |  | (2 | ) |  | 2 |  |  | — |  |  | — |  |  | — |  |  | — |
Total fixed income securities |  | (6 | ) |  | (3 | ) |  | (9 | ) |  | (2 | ) |  | — |  |  | (2 | )
Limited partnership interests |  | (2 | ) |  | — |  |  | (2 | ) |  | (1 | ) |  | — |  |  | (1 | )
Other |  | (4 | ) |  | — |  |  | (4 | ) |  | (1 | ) |  | — |  |  | (1 | )
OTTI losses |  | $ | (12 | ) |  | $ | (3 | ) |  | $ | (15 | ) |  | $ | (4 | ) |  | $ | — |  |  | $ | (4 | )
|  | Six months ended |  | Six months ended
| June 30, 2019 |  | June 30, 2018
| Gross |  | Included in OCI |  | Net |  | Gross |  | Included in OCI |  | Net
Fixed income securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate |  | $ | (5 | ) |  | $ | (2 | ) |  | $ | (7 | ) |  | $ | — |  |  | $ | — |  |  | $ | — |
ABS |  | (3 | ) |  | — |  |  | (3 | ) |  | (1 | ) |  | — |  |  | (1 | )
RMBS |  | — |  |  | (1 | ) |  | (1 | ) |  | (1 | ) |  | — |  |  | (1 | )
CMBS |  | (2 | ) |  | 2 |  |  | — |  |  | — |  |  | (1 | ) |  | (1 | )
Total fixed income securities |  | (10 | ) |  | (1 | ) |  | (11 | ) |  | (2 | ) |  | (1 | ) |  | (3 | )
Limited partnership interests |  | (3 | ) |  | — |  |  | (3 | ) |  | (1 | ) |  | — |  |  | (1 | )
Other |  | (15 | ) |  | — |  |  | (15 | ) |  | (1 | ) |  | — |  |  | (1 | )
OTTI losses |  | $ | (28 | ) |  | $ | (1 | ) |  | $ | (29 | ) |  | $ | (4 | ) |  | $ | (1 | ) |  | $ | (5 | )
OTTI losses included in AOCI at the time of impairment for fixed income securities which were not included in earnings
($ in millions) |  | June 30, 2019 |  | December 31, 2018
Municipal |  | $ | (5 | ) |  | $ | (5 | )
Corporate |  | — |  |  | (2 | )
ABS |  | (10 | ) |  | (10 | )
RMBS |  | (61 | ) |  | (67 | )
CMBS |  | (4 | ) |  | (2 | )
Total |  | $ | (80 | ) |  | $ | (86 | )
The amounts exclude $185 million and $180 million as of June 30, 2019 and December 31, 2018, respectively, of net unrealized gains related to changes in valuation of the fixed income securities subsequent to the impairment measurement date.
Rollforward of the cumulative credit losses recognized in earnings for fixed income securities held as of June 30,
($ in millions) |  | Three Months Ended June 30, |  | Six Months Ended June 30,
| 2019 |  | 2018 |  | 2019 |  | 2018
Beginning balance |  | $ | (202 | ) |  | $ | (212 | ) |  | $ | (204 | ) |  | $ | (226 | )
Additional credit loss for securities previously other-than-temporarily impaired |  | (6 | ) |  | (1 | ) |  | (8 | ) |  | (2 | )
Additional credit loss for securities not previously other-than-temporarily impaired |  | (3 | ) |  | (1 | ) |  | (3 | ) |  | (1 | )
Reduction in credit loss for securities disposed or collected |  | 3 |  |  | 7 |  |  | 7 |  |  | 22 |
Change in credit loss due to accretion of increase in cash flows |  | — |  |  | 1 |  |  | — |  |  | 1 |
Ending balance |  | $ | (208 | ) |  | $ | (206 | ) |  | $ | (208 | ) |  | $ | (206 | )
The Company uses its best estimate of future cash flows expected to be collected from the fixed income security, discounted at the security’s original or current effective rate, as appropriate, to calculate a recovery value and determine whether a credit loss exists. The determination of cash flow estimates is inherently subjective and methodologies may vary depending on facts and circumstances specific to the security. All reasonably available information relevant to the collectability of the security, including past events, current conditions, and reasonable and supportable assumptions and forecasts, are considered when developing the estimate of cash flows expected to be collected. That information generally includes, but is not limited to, the remaining payment terms of the security, prepayment speeds, foreign exchange rates, the financial condition and future earnings potential of the issue or issuer, expected defaults, expected recoveries, the value of underlying collateral, vintage, geographic concentration of underlying collateral, available reserves or escrows, current subordination levels, third-party guarantees and other credit enhancements. Other information, such as industry analyst reports and forecasts, sector credit ratings, financial condition of the bond insurer for insured fixed income securities, and other market data relevant to the realizability of contractual cash flows, may also be considered. The estimated fair value of collateral will be used to estimate recovery value if the Company determines that the security is dependent on the liquidation of collateral for ultimate settlement. If the estimated recovery value is less than the amortized cost of the security, a credit loss exists and an OTTI for the difference between the estimated recovery value and amortized cost is recorded in earnings. The portion of the unrealized loss related to factors other than credit remains classified in AOCI. If the Company determines that the fixed income security does not have sufficient cash flow or other information to estimate a recovery value for the security, the Company may conclude that the entire decline in fair value is deemed to be credit related and the loss is recorded in earnings.
Unrealized net capital gains and losses included in AOCI
($ in millions) |  | Fair value |  | Gross unrealized |  | Unrealized net gains (losses)
June 30, 2019 |  |  | Gains |  | Losses |
Fixed income securities |  | $ | 58,484 |  |  | $ | 2,567 |  |  | $ | (91 | ) |  | $ | 2,476 |
Short-term investments |  | 3,740 |  |  | — |  |  | — |  |  | — |
Derivative instruments |  | — |  |  | — |  |  | (3 | ) |  | (3 | )
Equity method of accounting (“EMA”) limited partnerships (1) |  |  |  |  |  |  |  |  |  |  | (1 | )
Unrealized net capital gains and losses, pre-tax |  |  |  |  |  |  |  |  |  |  | 2,472 |
Amounts recognized for: |  |  |  |  |  |  |  |  |  |  |  |
Insurance reserves (2) |  |  |  |  |  |  |  |  |  |  | (178 | )
DAC and DSI (3) |  |  |  |  |  |  |  |  |  |  | (194 | )
Amounts recognized |  |  |  |  |  |  |  |  |  |  | (372 | )
Deferred income taxes |  |  |  |  |  |  |  |  |  |  | (446 | )
Unrealized net capital gains and losses, after-tax |  |  |  |  |  |  |  |  |  |  | $ | 1,654 |
(1) | Unrealized net capital gains and losses for limited partnership interests represent the Company’s share of EMA limited partnerships’ OCI. Fair value and gross unrealized gains and losses are not applicable.
(2) | The insurance reserves adjustment represents the amount by which the reserve balance would increase if the net unrealized gains in the applicable product portfolios were realized and reinvested at lower interest rates, resulting in a premium deficiency. This adjustment primarily relates to structured settlement annuities with life contingencies (a type of immediate fixed annuities).
(3) | The DAC and DSI adjustment balance represents the amount by which the amortization of DAC and DSI would increase or decrease if the unrealized gains or losses in the respective product portfolios were realized.
Unrealized net capital gains and losses included in AOCI
($ in millions) |  | Fair value |  | Gross unrealized |  | Unrealized net gains (losses)
December 31, 2018 |  |  | Gains |  | Losses |
Fixed income securities |  | $ | 57,170 |  |  | $ | 993 |  |  | $ | (957 | ) |  | $ | 36 |
Short-term investments |  | 3,027 |  |  | — |  |  | — |  |  | — |
Derivative instruments |  | — |  |  | — |  |  | (3 | ) |  | (3 | )
EMA limited partnerships |  |  |  |  |  |  |  |  |  |  | — |
Unrealized net capital gains and losses, pre-tax |  |  |  |  |  |  |  |  |  |  | 33 |
Amounts recognized for: |  |  |  |  |  |  |  |  |  |  |  |
Insurance reserves |  |  |  |  |  |  |  |  |  |  | — |
DAC and DSI |  |  |  |  |  |  |  |  |  |  | (33 | )
Amounts recognized |  |  |  |  |  |  |  |  |  |  | (33 | )
Deferred income taxes |  |  |  |  |  |  |  |  |  |  | (2 | )
Unrealized net capital gains and losses, after-tax |  |  |  |  |  |  |  |  |  |  | $ | (2 | )
Change in unrealized net capital gains (losses)
($ in millions) |  | Six months ended June 30, 2019
Fixed income securities |  | $ | 2,440 |
Derivative instruments |  | — |
EMA limited partnerships |  | (1 | )
Total |  | 2,439 |
Amounts recognized for: |  |  |
Insurance reserves |  | (178 | )
DAC and DSI |  | (161 | )
Amounts recognized |  | (339 | )
Deferred income taxes |  | (444 | )
Increase in unrealized net capital gains and losses, after-tax |  | $ | 1,656 |
Portfolio monitoring The Company has a comprehensive portfolio monitoring process to identify and evaluate each fixed income security whose carrying value may be other-than-temporarily impaired. For each fixed income security in an unrealized loss position, the Company assesses whether management with the appropriate authority has made the decision to sell or whether it is more likely than not the Company will be required to sell the security before recovery of the amortized cost basis for reasons such as liquidity, contractual or regulatory purposes. If a security meets either of these criteria, the security’s decline in fair value is considered other than temporary and is recorded in earnings. If the Company has not made the decision to sell the fixed income security and it is not more likely than not the Company will be required to sell the fixed income security before recovery of its amortized cost basis, the Company evaluates whether it expects to receive cash flows sufficient to recover the entire amortized cost basis of the security. The Company calculates the estimated recovery value by discounting the best estimate of future cash flows at the security’s original or current effective rate, as appropriate, and compares this to the amortized cost of the security. If the Company does not expect to receive cash flows sufficient to recover the entire amortized cost basis of the fixed income security, the credit loss component of the impairment is recorded in earnings, with the remaining amount of the unrealized loss related to other factors recognized in OCI. The Company’s portfolio monitoring process includes a quarterly review of all securities to identify instances where the fair value of a security compared to its amortized cost is below established thresholds. The process also includes the monitoring of other impairment indicators such as ratings, ratings downgrades and payment defaults. The securities identified, in addition to other securities for which the Company may have a concern, are evaluated for potential OTTI using all reasonably available information relevant to the collectability or recovery of the security. Inherent in the Company’s evaluation of OTTI for these securities are assumptions and estimates about the financial condition and future earnings potential of the issue or issuer. Some of the factors that may be considered in evaluating whether a decline in fair value is other than temporary are: 1) the financial condition, near-term and long-term prospects of the issue or issuer, including relevant industry specific market conditions and trends, geographic location and implications of rating agency actions and offering prices; 2) the specific reasons that a security is in an unrealized loss position, including overall market conditions which could affect liquidity; and 3) the length of time and extent to which the fair value has been less than amortized cost.
Gross unrealized losses and fair value by type and length of time held in a continuous unrealized loss position
($ in millions) |  | Less than 12 months |  | 12 months or more |  | Total unrealized losses
| Number of issues |  | Fair value |  | Unrealized losses |  | Number of issues |  | Fair value |  | Unrealized losses |
June 30, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed income securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. government and agencies |  | — |  |  | $ | — |  |  | $ | — |  |  | 21 |  |  | $ | 63 |  |  | $ | — |  |  | $ | — |
Municipal |  | 85 |  |  | 133 |  |  | — |  |  | 103 |  |  | 98 |  |  | (3 | ) |  | (3 | )
Corporate |  | 129 |  |  | 1,120 |  |  | (19 | ) |  | 271 |  |  | 3,054 |  |  | (59 | ) |  | (78 | )
Foreign government |  | 2 |  |  | 46 |  |  | — |  |  | 6 |  |  | 141 |  |  | (1 | ) |  | (1 | )
ABS |  | 18 |  |  | 121 |  |  | (2 | ) |  | 18 |  |  | 97 |  |  | (3 | ) |  | (5 | )
RMBS |  | 52 |  |  | 8 |  |  | — |  |  | 165 |  |  | 39 |  |  | (1 | ) |  | (1 | )
CMBS |  | 2 |  |  | 8 |  |  | (3 | ) |  | 1 |  |  | — |  |  | — |  |  | (3 | )
Redeemable preferred stock |  | 1 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total fixed income securities |  | 289 |  |  | $ | 1,436 |  |  | $ | (24 | ) |  | 585 |  |  | $ | 3,492 |  |  | $ | (67 | ) |  | $ | (91 | )
Investment grade fixed income securities |  | 201 |  |  | $ | 801 |  |  | $ | (3 | ) |  | 514 |  |  | $ | 3,068 |  |  | $ | (44 | ) |  | $ | (47 | )
Below investment grade fixed income securities |  | 88 |  |  | 635 |  |  | (21 | ) |  | 71 |  |  | 424 |  |  | (23 | ) |  | (44 | )
Total fixed income securities |  | 289 |  |  | $ | 1,436 |  |  | $ | (24 | ) |  | 585 |  |  | $ | 3,492 |  |  | $ | (67 | ) |  | $ | (91 | )
December 31, 2018 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed income securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. government and agencies |  | 11 |  |  | $ | 55 |  |  | $ | — |  |  | 38 |  |  | $ | 364 |  |  | $ | (6 | ) |  | $ | (6 | )
Municipal |  | 943 |  |  | 1,633 |  |  | (10 | ) |  | 1,147 |  |  | 1,554 |  |  | (33 | ) |  | (43 | )
Corporate |  | 1,735 |  |  | 19,243 |  |  | (543 | ) |  | 645 |  |  | 8,374 |  |  | (347 | ) |  | (890 | )
Foreign government |  | 7 |  |  | 20 |  |  | (1 | ) |  | 27 |  |  | 412 |  |  | (4 | ) |  | (5 | )
ABS |  | 64 |  |  | 454 |  |  | (5 | ) |  | 28 |  |  | 161 |  |  | (5 | ) |  | (10 | )
RMBS |  | 166 |  |  | 30 |  |  | — |  |  | 195 |  |  | 52 |  |  | (2 | ) |  | (2 | )
CMBS |  | 3 |  |  | 7 |  |  | — |  |  | 2 |  |  | — |  |  | (1 | ) |  | (1 | )
Redeemable preferred stock |  | 1 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total fixed income securities |  | 2,930 |  |  | $ | 21,442 |  |  | $ | (559 | ) |  | 2,082 |  |  | $ | 10,917 |  |  | $ | (398 | ) |  | $ | (957 | )
Investment grade fixed income securities |  | 2,348 |  |  | $ | 17,485 |  |  | $ | (331 | ) |  | 2,021 |  |  | $ | 10,626 |  |  | $ | (360 | ) |  | $ | (691 | )
Below investment grade fixed income securities |  | 582 |  |  | 3,957 |  |  | (228 | ) |  | 61 |  |  | 291 |  |  | (38 | ) |  | (266 | )
Total fixed income securities |  | 2,930 |  |  | $ | 21,442 |  |  | $ | (559 | ) |  | 2,082 |  |  | $ | 10,917 |  |  | $ | (398 | ) |  | $ | (957 | )
Gross unrealized losses by unrealized loss position and credit quality as of June 30, 2019
($ in millions) |  | Investment grade |  | Below investment grade |  | Total
Fixed income securities with unrealized loss position less than 20% of amortized cost (1) (2) |  | $ | (35 | ) |  | $ | (38 | ) |  | $ | (73 | )
Fixed income securities with unrealized loss position greater than or equal to 20% of amortized cost (3) (4) |  | (12 | ) |  | (6 | ) |  | (18 | )
Total unrealized losses |  | $ | (47 | ) |  | $ | (44 | ) |  | $ | (91 | )
(1) | Includes $18 million of below investment grade fixed income securities that have been in an unrealized loss position for less than twelve months.
(2) | Related to securities with an unrealized loss position less than 20% of amortized cost, the degree of which suggests that these securities do not pose a high risk of being other-than-temporarily impai red.
(3) | Includes $2 million of below investment grade fixed income securities that have been in unrealized loss position for a period of twelve or more consecutive months.
(4) | Evaluated based on factors such as discounted cash flows and the financial condition and near-term and long-term prospects of the issue or issuer and were determined to have adequate resources to fulfill contractual obligations.
Investment grade is defined as a security having a rating of Aaa, Aa, A or Baa from Moody’s, a rating of AAA, AA, A or BBB from S&P Global Ratings (“S&P”), a comparable rating from another nationally recognized rating agency, or a comparable internal rating if an externally provided rating is not available. Market prices for certain securities may have credit spreads which imply higher or lower credit quality than the current third-party rating. Unrealized losses on investment grade securities are principally related to an increase in market yields which may include increased risk-free interest rates and/or wider credit spreads since the time of initial purchase. T he unrealized losses are expected to reverse as the securities approach maturity. ABS, RMBS and CMBS in an unrealized loss position were evaluated based on actual and projected collateral losses relative to the securities’ positions in the respective securitization trusts, security specific expectations of cash flows, and credit ratings. This evaluation also takes into consideration credit enhancement, measured in terms of (i) subordination from other classes of securities in the trust that are contractually obligated to absorb losses before the class of security the Company owns, and (ii) the expected impact of other structural features embedded in the securitization trust beneficial to the class of securities the Company owns, such as overcollateralization and excess spread. Municipal bonds in an unrealized loss position were evaluated based on the underlying credit quality of the primary obligor, obligation type and quality of the underlying assets. As of June 30, 2019, the Company has not made the decision to sell and it is not more likely than not the Company will be required to sell fixed income securities with unrealized losses before recovery of the amortized cost basis. Limited partnerships Investments in limited partnership interests include interests in private equity funds, real estate funds and other funds. As of June 30, 2019 and December 31, 2018, the carrying value of EMA limited partnerships totaled $6.03 billion and $5.73 billion, respectively, and limited partnerships carried at fair value totaled $1.79 billion and $1.78 billion, respectively. Mortgage loans Mortgage loans are evaluated for impairment on a specific loan basis through a quarterly credit monitoring process and review of key credit quality indicators. Mortgage loans are considered impaired when it is probable that the Company will not collect the contractual principal and interest. Valuation allowances are established for impaired loans to reduce the carrying value to the fair value of the collateral less costs to sell or the present value of the loan’s expected future repayment cash flows discounted at the loan’s original effective interest rate. Impaired mortgage loans may not have a valuation allowance when the fair value of the collateral less costs to sell is higher than the carrying value. Valuation allowances are adjusted for subsequent changes in the fair value of the collateral less costs to sell or present value of the loan’s expected future repayment cash flows. Mortgage loans are charged off against their corresponding valuation allowances when there is no reasonable expectation of recovery. The impairment evaluation is non-statistical in respect to the aggregate portfolio but considers facts and circumstances attributable to each loan. It is not considered probable that additional impairment losses, beyond those identified on a specific loan basis, have been incurred as of June 30, 2019. Accrual of income is suspended for mortgage loans that are in default or when full and timely collection of principal and interest payments is not probable. Cash receipts on mortgage loans on non-accrual status are generally recorded as a reduction of carrying value. Debt service coverage ratio is considered a key credit quality indicator when mortgage loans are evaluated for impairment. Debt service coverage ratio represents the amount of estimated cash flows from the property available to the borrower to meet principal and interest payment obligations. Debt service coverage ratio estimates are updated annually or more frequently if conditions are warranted based on the Company’s credit monitoring process.
Carrying value of non-impaired mortgage loans summarized by debt service coverage ratio distribution
($ in millions) |  | June 30, 2019 |  | December 31, 2018
Debt service coverage ratio distribution |  | Fixed rate mortgage loans |  | Variable rate mortgage loans |  | Total |  | Fixed rate mortgage loans |  | Variable rate mortgage loans |  | Total
Below 1.0 |  | $ | 2 |  |  | $ | 31 |  |  | $ | 33 |  |  | $ | 6 |  |  | $ | 31 |  |  | $ | 37 |
1.0 - 1.25 |  | 222 |  |  | — |  |  | 222 |  |  | 273 |  |  | — |  |  | 273 |
1.26 - 1.50 |  | 1,329 |  |  | — |  |  | 1,329 |  |  | 1,192 |  |  | — |  |  | 1,192 |
Above 1.50 |  | 2,996 |  |  | 103 |  |  | 3,099 |  |  | 3,063 |  |  | 101 |  |  | 3,164 |
Total non-impaired mortgage loans |  | $ | 4,549 |  |  | $ | 134 |  |  | $ | 4,683 |  |  | $ | 4,534 |  |  | $ | 132 |  |  | $ | 4,666 |
Mortgage loans with a debt service coverage ratio below 1.0 that are not considered impaired primarily relate to instances where the borrower has the financial capacity to fund the revenue shortfalls from the properties for the foreseeable term, the decrease in cash flows from the properties is considered temporary, or there are other risk mitigating circumstances such as additional collateral, escrow balances or borrower guarantees.
Net carrying value of impaired mortgage loans
($ in millions) |  | June 30, 2019 |  | December 31, 2018
Impaired mortgage loans with a valuation allowance |  | $ | 4 |  |  | $ | 4 |
Impaired mortgage loans without a valuation allowance |  | — |  |  | — |
Total impaired mortgage loans |  | $ | 4 |  |  | $ | 4 |
Valuation allowance on impaired mortgage loans |  | $ | 3 |  |  | $ | 3 |
The valuation allowance on impaired loans had no activity for the three months and six months ended June 30, 2019 and 2018. The average balance of impaired loans was $4 million for both the six months ended June 30, 2019 and 2018.
Payments on all mortgage loans were current as of June 30, 2019 and December 31, 2018.
Short-term investments Short-term investments, including commercial paper, money market funds, U.S. Treasury bills and other short-term investments, are carried at fair value. As of June 30, 2019 and December 31, 2018, the fair value of short-term investments totaled $3.74 billion and $3.03 billion, respectively. Other investments Other investments primarily consist of bank loans, policy loans, real estate, agent loans and derivatives. Bank loans are primarily senior secured corporate loans and are carried at amortized cost. Policy loans are carried at unpaid principal balances. Real estate is carried at cost less accumulated depreciation. Agent loans are loans issued to exclusive Allstate agents and are carried at unpaid principal balances, net of valuation allowances and unamortized deferred fees or costs. Derivatives are carried at fair value.
Other investments by asset type
($ in millions) |  | June 30, 2019 |  | December 31, 2018
Bank loans |  | $ | 1,259 |  |  | $ | 1,350 |
Policy loans |  | 880 |  |  | 891 |
Real estate |  | 872 |  |  | 791 |
Agent loans |  | 654 |  |  | 620 |
Derivatives and other |  | 191 |  |  | 200 |
Total |  | $ | 3,856 |  |  | $ | 3,852 |

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