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Investment Holding Level 1 (Notes)
 9 Months Ended
Sep. 30, 2016
Schedule of Investments [Abstract]  
Investment Holdings [Text Block]
Net Realized Capital Gains (Losses)
 
Three Months Ended September 30,
Nine Months Ended September 30,
(Before tax)
2016
2015
2016
2015
Gross gains on sales
$
114

$
83

$
328

$
401

Gross losses on sales
(24
)
(73
)
(157
)
(333
)
Net OTTI losses recognized in earnings
(14
)
(40
)
(44
)
(63
)
Valuation allowances on mortgage loans
—

1

—

(2
)
Periodic net coupon settlements on credit derivatives
2

3

2

8

Results of variable annuity hedge program





GMWB derivatives, net
6

(32
)
(8
)
(35
)
Macro hedge program
(64
)
51

(98
)
24

Total results of variable annuity hedge program
(58
)
19

(106
)
(11
)
Other, net [1]
(37
)
(37
)
(142
)
(30
)
Net realized capital gains (losses)
$
(17
)
$
(44
)
$
(119
)
$
(30
)

[1]
Includes changes in the value of non-qualifying derivatives and transactional foreign currency revaluation gains (losses). For the three months ended September 30, 2016 and 2015, transactional foreign currency revaluation losses were $(19) and $(17), respectively, and related to yen denominated fixed payout annuity liabilities as well as the change in equity of the U.K. P&C runoff subsidiaries, currently held for sale, which were largely offset by gains of $18 and $8, respectively, on derivative instruments used to hedge the foreign currency exposure. For the nine months ended September 30, 2016 and 2015, the transactional foreign currency revaluation losses were $(150) and $(1), respectively, while there were also gains (losses) on the related hedging instruments of $135 and $(23), respectively. The three and nine months ended September 30, 2016 also include an estimated capital loss on sale of the Company's U.K. property and casualty run-off subsidiaries of $59, before tax. This excludes a related income tax benefit of $65 included within income tax expense on the Condensed Consolidated Statements of Operations, for an estimated after-tax net gain of $6 on the sale.
Net realized capital gains and losses from investment sales are reported as a component of revenues and are determined on a specific identification basis. Before tax, net gains (losses) on sales and impairments previously reported as unrealized gains (losses) in AOCI were $77 and $128, respectively, for the three and nine months ended September 30, 2016, and $(29) and $14 for the three and nine months ended September 30, 2015, respectively. Proceeds from sales of AFS securities totaled $4.3 billion and $13.3 billion, respectively, for the three and nine months ended September 30, 2016, and $4.5 billion and $16.3 billion for three and nine months ended September 30, 2015, respectively.
Recognition and Presentation of Other-Than-Temporary Impairments
The Company deems bonds and certain equity securities with debt-like characteristics (collectively “debt securities”) to be other-than-temporarily impaired (“impaired”) if a security meets the following conditions: a) 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, or b) the Company does not expect to recover the entire amortized cost basis of the security. 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 charge is recorded in net realized capital losses equal to the difference between the fair value and amortized cost basis of the security. For those impaired debt securities which do not meet the first condition and for which the Company does not expect to recover the entire amortized cost basis, the difference between the security’s amortized cost basis and the fair value is separated into the portion representing a credit OTTI, which is recorded in net realized capital losses, and the remaining non-credit impairment, which is recorded in OCI. Generally, the Company determines a security’s credit impairment as the difference between its amortized cost basis and its best estimate of expected future cash flows discounted at the security’s effective yield prior to impairment. The remaining non-credit impairment is the difference between the security’s fair value and the Company’s best estimate of expected future cash flows discounted at the security’s effective yield prior to the impairment, which typically includes current market liquidity and risk premiums. The previous amortized cost basis less the impairment recognized in net realized capital losses becomes the security’s new cost basis. The Company accretes the new cost basis to the estimated future cash flows over the expected remaining life of the security by prospectively adjusting the security’s yield, if necessary.
The Company’s evaluation of whether a credit impairment exists for debt securities includes but is not limited to, the following factors: (a) changes in the financial condition of the security’s underlying collateral, (b) whether the issuer is current on contractually obligated interest and principal payments, (c) changes in the financial condition, credit rating and near-term prospects of the issuer, (d) the extent to which the fair value has been less than the amortized cost of the security and (e) the payment structure of the security. The Company’s best estimate of expected future cash flows used to determine the credit loss amount is a quantitative and qualitative process that incorporates information received from third-party sources along with certain internal assumptions and judgments regarding the future performance of the security. The Company’s best estimate of future cash flows involves assumptions including, but not limited to, earnings multiples, underlying asset valuations and various performance indicators, such as historical and projected default and recovery rates, credit ratings, current and projected delinquency rates, and loan-to-value ("LTV") ratios. In addition, for structured securities, the Company considers factors including, but not limited to, average cumulative collateral loss rates that vary by vintage year, commercial and residential property value declines that vary by property type and location and commercial real estate delinquency levels. 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. In addition, projections of expected future debt security cash flows may change based upon new information regarding the performance of the issuer and/or underlying collateral such as changes in the projections of the underlying property value estimates.
For equity securities where the decline in the fair value is deemed to be other-than-temporary, a charge is recorded in net realized capital losses equal to the difference between the fair value and cost basis of the security. The previous cost basis less the impairment becomes the security’s new cost basis. The Company asserts its intent and ability to retain those equity securities deemed to be temporarily impaired until the price recovers. Once identified, these securities are systematically restricted from trading unless approved by investment and accounting professionals.
The primary factors considered in evaluating whether an impairment exists for an equity security may include, but are not limited to: (a) the length of time and extent to which the fair value has been less than the cost of the security, (b) changes in the financial condition, credit rating and near-term prospects of the issuer, (c) whether the issuer is current on preferred stock dividends and (d) the intent and ability of the Company to retain the investment for a period of time sufficient to allow for recovery.
The following table presents the Company's impairments by impairment type.
 
Three Months Ended September 30,
Nine Months Ended September 30,
 
2016
2015
2016
2015
Credit impairments
$
13

$
12

$
36

$
16

Intent-to-sell impairments
—

21

3

38

Impairments on equity securities
1

6

5

6

Other impairments
—

1

—

3

Total impairments
$
14

$
40

$
44

$
63


The following table presents a roll-forward of the Company’s cumulative credit impairments on fixed maturities held.
 
Three Months Ended September 30,
Nine Months Ended September 30,
(Before tax)
2016
2015
2016
2015
Balance as of beginning of period
$
(293
)
$
(388
)
$
(324
)
$
(424
)
Additions for credit impairments recognized on [1]:
 
 
 
 
Securities not previously impaired
(4
)
—

(25
)
(3
)
Securities previously impaired
(9
)
(12
)
(11
)
(13
)
Reductions for credit impairments previously recognized on:
 
 
 
 
Securities that matured or were sold during the period
14

51

50

61

Securities the Company made the decision to sell or more likely than not will be required to sell
—

—

—

2

Securities due to an increase in expected cash flows
5

12

23

40

Balance as of end of period
$
(287
)
$
(337
)
$
(287
)
$
(337
)
[1]
These additions are included in the net OTTI losses recognized in earnings in the Condensed Consolidated Statements of Operations.
Available-for-Sale Securities
The following table presents the Company’s AFS securities by type.
 
September 30, 2016
December 31, 2015
 
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
$
2,683

$
35

$
(33
)
$
2,685

$
—

$
2,520

$
24

$
(45
)
$
2,499

$
—

CDOs [2]
2,514

67

(9
)
2,573

—

2,989

75

(23
)
3,038

—

CMBS
5,066

226

(24
)
5,268

(7
)
4,668

105

(56
)
4,717

(8
)
Corporate
24,615

2,370

(81
)
26,904

—

25,876

1,342

(416
)
26,802

(3
)
Foreign govt./govt. agencies
1,106

83

(3
)
1,186

—

1,321

34

(47
)
1,308

—

Municipal
11,345

1,254

(5
)
12,594

—

11,124

1,008

(11
)
12,121

—

RMBS
4,815

131

(10
)
4,936

—

3,986

82

(22
)
4,046

—

U.S. Treasuries
3,598

484

(3
)
4,079

—

4,481

222

(38
)
4,665

—

Total fixed maturities, AFS
$
55,742

$
4,650

$
(168
)
$
60,225

$
(7
)
$
56,965

$
2,892

$
(658
)
$
59,196

$
(11
)
Equity securities, AFS [3]
812

80

(17
)
875

—

842

38

(41
)
839

—

Total AFS securities
$
56,554

$
4,730

$
(185
)
$
61,100

$
(7
)
$
57,807

$
2,930

$
(699
)
$
60,035

$
(11
)
[1]
Represents the amount of cumulative non-credit OTTI losses recognized in OCI on securities that also had credit impairments. These losses are included in gross unrealized losses as of September 30, 2016, and December 31, 2015.
[2]
Gross unrealized gains (losses) exclude the fair value of bifurcated embedded derivatives within certain securities. Subsequent changes in value are recorded in net realized capital gains (losses).
[3]
Excluded equity securities, FVO, with a cost and fair value of $293 and $282 as of December 31, 2015. The Company held no equity securities, FVO as of September 30, 2016.
The following table presents the Company’s fixed maturities, AFS, by contractual maturity year.
 
September 30, 2016
December 31, 2015
Contractual Maturity
Amortized Cost
Fair Value
Amortized Cost
Fair Value
One year or less
$
1,832

$
1,848

$
2,373

$
2,405

Over one year through five years
9,623

10,052

10,929

11,200

Over five years through ten years
9,082

9,671

9,322

9,497

Over ten years
20,127

23,192

20,178

21,794

Subtotal
40,664

44,763

42,802

44,896

Mortgage-backed and asset-backed securities
15,078

15,462

14,163

14,300

Total fixed maturities, AFS
$
55,742

$
60,225

$
56,965

$
59,196


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.
Concentration of Credit Risk
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 September 30, 2016, and December 31, 2015.
Unrealized Losses on AFS Securities
The following tables present the Company’s unrealized loss aging for AFS securities by type and length of time the security was in a continuous unrealized loss position.
 
September 30, 2016
 
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
$
321

$
320

$
(1
)
$
364

$
332

$
(32
)
$
685

$
652

$
(33
)
CDOs [1]
665

664

(2
)
1,028

1,021

(7
)
1,693

1,685

(9
)
CMBS
548

540

(8
)
259

243

(16
)
807

783

(24
)
Corporate
1,759

1,725

(34
)
812

765

(47
)
2,571

2,490

(81
)
Foreign govt./govt. agencies
105

104

(1
)
27

25

(2
)
132

129

(3
)
Municipal
334

331

(3
)
47

45

(2
)
381

376

(5
)
RMBS
278

278

—

707

697

(10
)
985

975

(10
)
U.S. Treasuries
347

344

(3
)
—

—

—

347

344

(3
)
Total fixed maturities, AFS
$
4,357

$
4,306

$
(52
)
$
3,244

$
3,128

$
(116
)
$
7,601

$
7,434

$
(168
)
Equity securities, AFS [2]
171

160

(11
)
68

62

(6
)
239

222

(17
)
Total securities in an unrealized loss position
$
4,528

$
4,466

$
(63
)
$
3,312

$
3,190

$
(122
)
$
7,840

$
7,656

$
(185
)
 
December 31, 2015
 
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
$
1,619

$
1,609

$
(10
)
$
357

$
322

$
(35
)
$
1,976

$
1,931

$
(45
)
CDOs [1]
1,164

1,154

(10
)
1,243

1,227

(13
)
2,407

2,381

(23
)
CMBS
1,726

1,681

(45
)
189

178

(11
)
1,915

1,859

(56
)
Corporate
9,206

8,866

(340
)
656

580

(76
)
9,862

9,446

(416
)
Foreign govt./govt. agencies
679

646

(33
)
124

110

(14
)
803

756

(47
)
Municipal
440

430

(10
)
18

17

(1
)
458

447

(11
)
RMBS
1,349

1,340

(9
)
415

402

(13
)
1,764

1,742

(22
)
U.S. Treasuries
2,432

2,394

(38
)
8

8

—

2,440

2,402

(38
)
Total fixed maturities, AFS
$
18,615

$
18,120

$
(495
)
$
3,010

$
2,844

$
(163
)
$
21,625

$
20,964

$
(658
)
Equity securities, AFS [2]
480

449

(31
)
62

52

(10
)
542

501

(41
)
Total securities in an unrealized loss position
$
19,095

$
18,569

$
(526
)
$
3,072

$
2,896

$
(173
)
$
22,167

$
21,465

$
(699
)
[1]
Unrealized losses exclude the change in fair value of bifurcated embedded derivatives within certain securities, for which changes in fair value are recorded in net realized capital gains (losses).
[2]
As of September 30, 2016, and December 31, 2015, excludes equity securities, FVO which are included in equity securities, AFS on the Condensed Consolidated Balance Sheets.
As of September 30, 2016, AFS securities in an unrealized loss position consisted of 3,022 securities, primarily in the corporate sector, which were depressed primarily due to widening of credit spreads since the securities were purchased. As of September 30, 2016, 92% of these securities were depressed less than 20% of cost or amortized cost. The decrease in unrealized losses during 2016 was primarily attributable to a decline in interest rates and tighter credit spreads.
Most of the securities depressed for twelve months or more relate to student loan ABS, corporate securities concentrated in the financial services sector, and structured securities with exposure to commercial and residential real estate. Corporate financial services securities and student loan ABS were primarily depressed because the securities have floating-rate coupons and long-dated maturities, and current credit spreads are wider than when these securities were purchased. For certain commercial and residential real estate securities, current spreads are wider than spreads at the securities' respective purchase dates. 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
Mortgage Loan Valuation Allowances
The Company’s security monitoring process reviews mortgage loans on a quarterly basis to identify potential credit losses. Commercial 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. Criteria used to determine if an impairment exists include, but are not limited to: current and projected macroeconomic factors, 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 historic, current and projected delinquency rates and property values. These assumptions require the use of significant management judgment and include the probability and timing of borrower default and loss severity estimates. In addition, projections of expected future cash flows may change based upon new information regarding the performance of the borrower and/or underlying collateral such as changes in the projections of the underlying property value estimates.
For mortgage loans that are deemed impaired, a valuation allowance is established for the difference between the carrying amount and the Company’s share of either (a) the present value of the expected future cash flows discounted at the loan’s effective interest rate, (b) the loan’s observable market price or, most frequently, (c) the fair value of the collateral. A valuation allowance has been established for either individual loans or as a projected loss contingency for loans with an LTV ratio of 90% or greater and after consideration of other credit quality factors, including DSCR. 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 loans continue to perform under the original or restructured terms. Interest income ceases to accrue for loans when it is probable that the Company will not receive interest and principal payments according to the contractual terms of the loan agreement. Loans may resume accrual status when it is determined that sufficient collateral exists to satisfy the full amount of the loan and interest payments as well as when it is probable cash will be received in the foreseeable future. Interest income on defaulted loans is recognized when received.
 
September 30, 2016
December 31, 2015
 
Amortized Cost [1]
Valuation Allowance
Carrying Value
Amortized Cost [1]
Valuation Allowance
Carrying Value
Total commercial mortgage loans
$
5,630

$
(19
)
$
5,611

$
5,647

$
(23
)
$
5,624

[1]
Amortized cost represents carrying value prior to valuation allowances, if any.
As of September 30, 2016, and December 31, 2015, the carrying value of mortgage loans associated with the valuation allowance was $31 and $82, respectively. There were no mortgage loans held-for-sale as of September 30, 2016, and December 31, 2015. As of September 30, 2016, loans within the Company’s mortgage loan portfolio that have had extensions or restructurings other than what is allowable under the original terms of the contract are immaterial.
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.
 
2016
2015
Balance, as of January 1
$
(23
)
$
(18
)
(Additions)/Reversals
—

(4
)
Deductions
4

2

Balance, as of September 30
$
(19
)
$
(20
)

The weighted-average LTV ratio of the Company’s commercial mortgage loan portfolio was 53% as of September 30, 2016, while the weighted-average LTV ratio at origination of these loans was 62%. LTV ratios compare the loan amount to the value of the underlying property collateralizing the loan. The loan values are updated no less than annually through property level reviews of the portfolio. Factors considered in the property valuation include, but are not limited to, actual and expected property cash flows, geographic market data and capitalization rates. DSCR compares a property’s net operating income to the borrower’s principal and interest payments. As of September 30, 2016, the Company held one delinquent commercial mortgage loan past due by 90 days or more. The loan had a total carrying value and valuation allowance of $15 and $16, respectively, and was not accruing income. As of December 31, 2015, the Company held two delinquent commercial mortgage loans, past due by 90 days or more. The loans had a total carrying value and valuation allowance of $17 and $20, respectively, and were not accruing income.
The following table presents the carrying value of the Company’s commercial mortgage loans by LTV and DSCR.
Commercial Mortgage Loans Credit Quality
 
 
 
 
 
September 30, 2016
December 31, 2015
Loan-to-value
Carrying Value
Avg. Debt-Service Coverage Ratio
Carrying Value
Avg. Debt-Service Coverage Ratio
Greater than 80%
$
15

0.45x
$
24

0.81x
65% - 80%
640

2.06x
623

1.82x
Less than 65%
4,956

2.79x
4,977

2.75x
Total commercial mortgage loans
$
5,611

2.68x
$
5,624

2.63x
 
The following tables present the carrying value of the Company’s mortgage loans by region and property type.
Mortgage Loans by Region
 
September 30, 2016
December 31, 2015
 
Carrying Value
Percent of Total
Carrying Value
Percent of Total
East North Central
$
294

5.2
%
$
289

5.1
%
East South Central
14

0.3
%
14

0.2
%
Middle Atlantic
418

7.4
%
384

6.8
%
Mountain
35

0.6
%
32

0.6
%
New England
400

7.1
%
446

7.9
%
Pacific
1,635

29.2
%
1,669

29.7
%
South Atlantic
1,193

21.3
%
1,174

20.9
%
West North Central
29

0.5
%
29

0.5
%
West South Central
338

6.0
%
318

5.7
%
Other [1]
1,255

22.4
%
1,269

22.6
%
Total mortgage loans
$
5,611

100.0
%
$
5,624

100.0
%
[1]
Primarily represents loans collateralized by multiple properties in various regions.
Mortgage Loans by Property Type
 
September 30, 2016
December 31, 2015
 
Carrying Value
Percent of Total
Carrying
Value
Percent of Total
Commercial
 
 
 
 
Agricultural
$
16

0.3
%
$
26

0.5
%
Industrial
1,444

25.7
%
1,422

25.3
%
Lodging
25

0.4
%
26

0.5
%
Multifamily
1,386

24.7
%
1,345

23.9
%
Office
1,451

25.9
%
1,547

27.5
%
Retail
1,050

18.7
%
1,109

19.7
%
Other
239

4.3
%
149

2.6
%
Total mortgage loans
$
5,611

100.0
%
$
5,624

100.0
%

Mortgage Servicing
The Company originates, sells and services commercial mortgage loans on behalf of third parties and recognizes servicing fees over the period that services are performed in fee income. As of September 30, 2016, the Company serviced commercial mortgage loans under this program with a total outstanding principal of $571, of which $186 was serviced on behalf of third parties and $385 was retained and reported on the Company’s Condensed Consolidated Balance Sheets, including $104 in separate account assets. As of December 31, 2015, the Company serviced commercial mortgage loans under this program with a total outstanding principal of $359, of which $129 was serviced on behalf of third parties and $230 was retained and reported on the Company’s Condensed Consolidated Balance Sheets, including $54 in separate account assets. Servicing rights are carried at the lower of cost or fair value and were zero as of September 30, 2016 and December 31, 2015, because servicing fees were market-level fees at origination and remain adequate to compensate the Company to administer the servicing.
Variable Interest Entities
The Company is involved with various special purpose entities and other entities that are deemed to be VIEs primarily as a collateral or investment manager and as an investor through normal investment activities as well as a means of accessing capital through a contingent capital facility.
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 Condensed Consolidated Financial Statements.
Consolidated VIEs
The following table presents the carrying value of assets and liabilities, and the maximum exposure to loss relating to the VIEs for which the Company is the primary beneficiary. Creditors have no recourse against the Company in the event of default by these VIEs nor does the Company have any implied or unfunded commitments to these VIEs. The Company’s financial or other support provided to these VIEs is limited to its collateral or investment management services and original investment.
 
September 30, 2016
December 31, 2015
 
Total Assets
Total Liabilities [1]
Maximum Exposure to Loss [2]
Total Assets
Total Liabilities [1]
Maximum Exposure to Loss [2]
CDO [3]
$
5

$
5

$
—

$
5

$
5

$
—

Investment funds [4]
—

—

—

159

7

151

Limited partnerships and other alternative investments [5]
—

—

—

2

—

2

Total
$
5

$
5

$
—

$
166

$
12

$
153

[1]
Included in other liabilities on the Company’s Condensed Consolidated Balance Sheets.
[2]
The maximum exposure to loss represents the maximum loss amount that the Company could recognize as a reduction in net investment income or as a realized capital loss and is the cost basis of the Company’s investment.
[3]
Total assets included in cash on the Company’s Condensed Consolidated Balance Sheets.
[4]
Total assets included in fixed maturities, FVO, short-term investments, equity, AFS, and cash on the Company’s Condensed Consolidated Balance Sheets.
[5]
Total assets included in limited partnerships and other alternative investments on the Company’s Condensed Consolidated Balance Sheets.
Effective January 1, 2016, the Company adopted new consolidation guidance and determined that three investment funds, that were previously identified as consolidated VIEs and for which the Company has management and control of the investments, are voting interest entities under the new consolidation guidance. The Company still owns a majority interest in one investment fund that is still consolidated on the Company's Condensed Consolidated Financial Statements; however, as of September 30, 2016, this fund is not included as VIE in the table above. The remaining two investment funds previously identified as consolidated VIEs were disposed of during the first six months of the year. CDO represents a structured investment vehicle for which the Company has a controlling financial interest as it provides collateral management services, earns a fee for those services and also holds investments in the security issued by this vehicle. For further information on the adoption, see Note 1 - Basis of Presentation and Significant Accounting Policies of Notes to Condensed Consolidated Financial Statements.
Non-Consolidated VIEs
The Company, through normal investment activities, makes passive investments in limited partnerships and other alternative investments. Upon the adoption of the new consolidation guidance, discussed above, these investments are now considered VIEs. 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 September 30, 2016 and December 31, 2015 is limited to the total carrying value of $1.8 billion and $1.5 billion, respectively, which are included in limited partnerships and other alternative investments in the Company's Condensed Consolidated Balance Sheets. As of September 30, 2016 and December 31, 2015, the Company has outstanding commitments totaling $1.3 billion and $692 million, 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. For further discussion of these investments, see Equity Method Investments within Note 6 - Investments and Derivatives of Notes to Consolidated Financial Statements included in the Company’s 2015 Form 10-K Annual Report.
In addition, the Company also makes passive investments in structured securities issued by VIEs for which the Company is not the manager and, therefore, does not consolidate. These investments are included in ABS, CDOs, CMBS and RMBS in the Available-for-Sale Securities table and fixed maturities, FVO, in the Company’s Condensed 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.
The Company also holds a significant variable interest in a VIE for which it is not the primary beneficiary. This VIE represents a contingent capital facility ("facility") that has been held by the Company since February 2007 and for which the Company has no implied or unfunded commitments. Assets and liabilities recorded for the contingent capital facility were $2 and $3, respectively, as of September 30, 2016, and $7 and $8, respectively, as of December 31, 2015. Additionally, the Company has a maximum exposure to loss of $3 and $3, respectively, as of September 30, 2016, and December 31, 2015, which represents the issuance costs that were incurred to establish the facility. The Company does not have a controlling financial interest as it does not manage the assets of the facility nor does it have the obligation to absorb losses or the right to receive benefits that could potentially be significant to the facility, as the asset manager has significant variable interest in the vehicle. The Company’s financial or other support provided to the facility is limited to providing ongoing support to cover the facility’s operating expenses. As such, the Company does not consolidate its variable interest in the facility. For further information on the facility, see Note 11 - Debt of Notes to Consolidated Financial Statements included in The Hartford’s 2015 Form 10-K Annual Report.
Securities Lending, Repurchase Agreements, and Similar Transactions and Other Collateral Transactions
The Company participates in securities lending programs to generate additional income. Through these programs, certain fixed maturities within the corporate, foreign government/government agencies, and municipal sectors as well as equity securities are loaned from the Company’s portfolio to qualifying third-party borrowers in return for collateral in the form of cash or securities. Borrowers of these securities provide collateral of 102% and 105% of the fair value of the securities lent at the time of the loan for domestic and non-domestic securities, respectively. The borrower 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, and is not reflected on the Company’s consolidated balance sheets. The fair value of the loaned securities is monitored and additional collateral is obtained if the fair value of the collateral falls below 100% of the fair value of the loaned securities. The agreements provide the counterparty the right to sell or re-pledge the securities transferred. 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 consolidated balance sheets. Income associated with securities lending transactions is reported as a component of net investment income on the Company’s consolidated statements of operations. As of September 30, 2016, the fair value of securities on loan and the associated liability for cash collateral received was $168 and $114, respectively. The Company also received securities collateral of $57 which was not included in the Company's Condensed Consolidated Balance Sheets. As of December 31, 2015, the fair value of securities on loan and the associated liability for cash collateral received was $67 and $68, respectively.
From time to time, the Company enters into repurchase agreements and similar transactions to manage liquidity or to earn incremental spread 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. A dollar roll is a type of repurchase agreement where a mortgage backed security is sold with an agreement to repurchase substantially the same security at a specified time in the future. Repurchase transactions generally have a contractual maturity of ninety days or less.
As part of 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 contain contractual provisions that 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. Repurchase agreements include master netting provisions that provide the counterparties 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, fixed maturities do not meet the specific conditions for net presentation under U.S. GAAP. 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 Condensed Consolidated Balance Sheets.
As of September 30, 2016, the Company reported in fixed maturities, AFS on the Condensed Consolidated Balance Sheets financial collateral pledged relating to repurchase agreements of $358. The Company reported a corresponding obligation to repurchase the pledged securities of $356 in other liabilities on the Condensed Consolidated Balance Sheets. As of December 31, 2015, the Company reported financial collateral pledged relating to repurchase agreements $440 in fixed maturities, AFS and $5 in cash. The Company reported a corresponding obligation to repurchase the pledged securities of $445 in other liabilities on the Condensed Consolidated Balance Sheets. The Company had no outstanding dollar roll transactions as of September 30, 2016 or December 31, 2015.
The Company is required by law to deposit securities with government agencies in certain states in which it conducts business. As of September 30, 2016, and December 31, 2015, the fair value of securities on deposit was approximately $2.6 billion and $2.5 billion, respectively.
As of September 30, 2016 and December 31, 2015, the Company has pledged as collateral $75 and $35, respectively, of U.S. government securities and government agency securities or cash primarily related to certain bank loan participations committed to through a limited partnership agreement. Also included is collateral related to letters of credit.
For disclosure of collateral in support of derivative transactions, refer to the Derivative Collateral Arrangements section of Note - 7 Derivative Instruments.