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Investments | 6 Months Ended
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Jun. 30, 2019
Investments [Abstract] |
Investments | 6. INVESTMENTS
Net Realized Capital Gains
| Three Months Ended June 30, |  | Six Months Ended June 30,
(Before tax) | 2019 | 2018 |  | 2019 | 2018
Gross gains on sales | $ | 69 |  | $ | 46 |  |  | $ | 113 |  | $ | 65 |
Gross losses on sales | (19 | ) | (31 | ) |  | (40 | ) | (88 | )
Equity securities [1] | 30 |  | 26 |  |  | 162 |  | 42 |
Net OTTI losses recognized in earnings | — |  | — |  |  | (2 | ) | — |
Valuation allowances on mortgage loans | 1 |  | — |  |  | 1 |  | — |
Transactional foreign currency revaluation | — |  | — |  |  | — |  | 1 |
Non-qualifying foreign currency derivatives | (1 | ) | 4 |  |  | — |  | 1 |
Other, net [2] | — |  | 7 |  |  | 9 |  | 1 |
Net realized capital gains | $ | 80 |  | $ | 52 |  |  | $ | 243 |  | $ | 22 |
[1] | Includes all changes in fair value and trading gains and losses for equity securities. The net unrealized gain (loss) on equity securities included in net realized capital gains (losses) related to equity securities still held as of June 30, 2019, were $29 and $74 for the three and six months ended June 30, 2019, respectively. The net unrealized gain (loss) on equity securities included in net realized capital gains (losses) related to equity securities still held as of June 30, 2018, were $17 and $11 for the three and six months ended June 30, 2018, respectively.
[2] | Includes gains (losses) on non-qualifying derivatives, excluding foreign currency derivatives, of $(6) and $8, respectively, for the three months ended June 30, 2019 and 2018. For the six months ended June 30, 2019 and 2018, the non-qualifying derivatives, excluding foreign currency derivatives, were $8 and $(2) respectively.
Net realized capital gains (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 $50 and $71 for the three and six months ended June 30, 2019, respectively, and $(6) and $(44) for the three and six months ended June 30, 2018, respectively. Proceeds from the sales of AFS securities totaled $4.6 billion and $8.9 billion for the three and six months ended June 30, 2019 , respectively, and $4.2 billion and $8.5 billion, for the three and six months ended June 30, 2018, respectively. Recognition and Presentation of Other-Than-Temporary Impairments The Company will record an other-than-temporary impairment (“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.
Impairments in Earnings by Type
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2019 | 2018 |  | 2019 | 2018
Credit impairments | $ | — |  | $ | — |  |  | $ | 2 |  | $ | — |
Intent-to-sell impairments | — |  | — |  |  | — |  | — |
Total impairments | $ | — |  | $ | — |  |  | $ | 2 |  | $ | — |
Cumulative Credit Impairments
| Three Months Ended June 30, |  | Six Months Ended June 30,
(Before tax) | 2019 | 2018 |  | 2019 | 2018
Balance as of beginning of period | $ | (18 | ) | $ | (21 | ) |  | $ | (19 | ) | $ | (25 | )
Additions for credit impairments recognized on [1]: |  |  |  |  |
Securities not previously impaired | — |  | — |  |  | (2 | ) | — |
Reductions for credit impairments previously recognized on: |  |  |  |  |
Securities that matured or were sold during the period | — |  | 1 |  |  | 3 |  | 5 |
Balance as of end of period | $ | (18 | ) | $ | (20 | ) |  | $ | (18 | ) | $ | (20 | )
[1] | These additions are included in the net OTTI losses recognized in earnings in the Condensed Consolidated Statements of Operations.
Available-for-Sale Securities
AFS Securities by Type
| June 30, 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 | $ | 1,010 |  | $ | 19 |  | $ | — |  | $ | 1,029 |  | $ | — |  |  | $ | 1,272 |  | $ | 5 |  | $ | (1 | ) | $ | 1,276 |  | $ | — |
CLOs | 1,929 |  | 4 |  | (8 | ) | 1,925 |  | — |  |  | 1,455 |  | 2 |  | (20 | ) | 1,437 |  | — |
CMBS | 3,774 |  | 139 |  | (8 | ) | 3,905 |  | (4 | ) |  | 3,581 |  | 35 |  | (64 | ) | 3,552 |  | (5 | )
Corporate | 16,078 |  | 718 |  | (48 | ) | 16,748 |  | — |  |  | 13,696 |  | 148 |  | (446 | ) | 13,398 |  | — |
Foreign govt./govt. agencies | 1,025 |  | 48 |  | (1 | ) | 1,072 |  | — |  |  | 866 |  | 7 |  | (26 | ) | 847 |  | — |
Municipal | 9,568 |  | 710 |  | — |  | 10,278 |  | — |  |  | 9,972 |  | 421 |  | (47 | ) | 10,346 |  | — |
RMBS | 4,478 |  | 90 |  | (2 | ) | 4,566 |  | — |  |  | 3,270 |  | 44 |  | (35 | ) | 3,279 |  | — |
U.S. Treasuries | 1,567 |  | 77 |  | (1 | ) | 1,643 |  | — |  |  | 1,491 |  | 41 |  | (15 | ) | 1,517 |  | — |
Total fixed maturities, AFS | $ | 39,429 |  | $ | 1,805 |  | $ | (68 | ) | $ | 41,166 |  | $ | (4 | ) |  | $ | 35,603 |  | $ | 703 |  | $ | (654 | ) | $ | 35,652 |  | $ | (5 | )
[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 June 30, 2019 and December 31, 2018.
Fixed maturities, AFS, by Contractual Maturity Year
| June 30, 2019 |  | December 31, 2018
| Amortized Cost | Fair Value |  | Amortized Cost | Fair Value
One year or less | $ | 1,094 |  | $ | 1,100 |  |  | $ | 999 |  | $ | 1,002 |
Over one year through five years | 7,164 |  | 7,332 |  |  | 5,786 |  | 5,791 |
Over five years through ten years | 7,580 |  | 7,910 |  |  | 6,611 |  | 6,495 |
Over ten years | 12,400 |  | 13,399 |  |  | 12,629 |  | 12,820 |
Subtotal | 28,238 |  | 29,741 |  |  | 26,025 |  | 26,108 |
Mortgage-backed and asset-backed securities | 11,191 |  | 11,425 |  |  | 9,578 |  | 9,544 |
Total fixed maturities, AFS | $ | 39,429 |  | $ | 41,166 |  |  | $ | 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. 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 as of June 30, 2019 or December 31, 2018 other than U.S. government securities and certain U.S. government agencies. Unrealized Losses on AFS Securities
Unrealized Loss Aging for AFS Securities by Type and Length of Time as of June 30, 2019
| 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 | $ | 90 |  | $ | 90 |  | $ | — |  |  | $ | 29 |  | $ | 29 |  | $ | — |  |  | $ | 119 |  | $ | 119 |  | $ | — |
CLOs | 1,229 |  | 1,223 |  | (6 | ) |  | 155 |  | 153 |  | (2 | ) |  | 1,384 |  | 1,376 |  | (8 | )
CMBS | 49 |  | 48 |  | (1 | ) |  | 372 |  | 365 |  | (7 | ) |  | 421 |  | 413 |  | (8 | )
Corporate | 315 |  | 309 |  | (6 | ) |  | 1,504 |  | 1,462 |  | (42 | ) |  | 1,819 |  | 1,771 |  | (48 | )
Foreign govt./govt. agencies | 23 |  | 23 |  | — |  |  | 62 |  | 61 |  | (1 | ) |  | 85 |  | 84 |  | (1 | )
Municipal | 36 |  | 36 |  | — |  |  | 7 |  | 7 |  | — |  |  | 43 |  | 43 |  | — |
RMBS | 90 |  | 90 |  | — |  |  | 356 |  | 354 |  | (2 | ) |  | 446 |  | 444 |  | (2 | )
U.S. Treasuries | 16 |  | 16 |  | — |  |  | 163 |  | 162 |  | (1 | ) |  | 179 |  | 178 |  | (1 | )
Total fixed maturities, AFS in an unrealized loss position | $ | 1,848 |  | $ | 1,835 |  | $ | (13 | ) |  | $ | 2,648 |  | $ | 2,593 |  | $ | (55 | ) |  | $ | 4,496 |  | $ | 4,428 |  | $ | (68 | )
Unrealized Loss Aging for AFS Securities by Type and Length of Time as of December 31, 2018
| 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 June 30, 2019, AFS securities in an unrealized loss position consisted of 906 securities, primarily in the corporate sector, which were depressed primarily due to widening of credit spreads since the securities were purchased. As of June 30, 2019, 96% of these securities were depressed less than 20% of cost or amortized cost. The decrease in unrealized losses during the six months ended June 30, 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 securities which were primarily depressed because current market spreads are wider than 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 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 June 30, 2019, mortgage loans had an amortized cost of $3.6 billion and carrying value of $3.6 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 June 30, 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 June 30, 2019 or December 31, 2018. As of June 30, 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.
Valuation Allowance Activity
| 2019 | 2018
Balance, as of January 1 | $ | (1 | ) | $ | (1 | )
Reversals | 1 |  | — |
Deductions | — |  | — |
Balance, as of June 30 | $ | — |  | $ | (1 | )
The weighted-average LTV ratio of the Company’s mortgage loan portfolio was 52% as of June 30, 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 June 30, 2019 and December 31, 2018, the Company held no delinquent commercial mortgage loans past due by 90 days or more.
Mortgage Loans Credit Quality
| June 30, 2019 |  | December 31, 2018
Loan-to-value | Carrying Value | Avg. Debt-Service Coverage Ratio |  | Carrying Value | Avg. Debt-Service Coverage Ratio
65% - 80% | 404 |  | 1.70x |  | 386 |  | 1.60x
Less than 65% | 3,208 |  | 2.56x |  | 3,318 |  | 2.59x
Total mortgage loans | $ | 3,612 |  | 2.47x |  | $ | 3,704 |  | 2.49x
Mortgage Loans by Region
| June 30, 2019 |  | December 31, 2018
| Carrying Value | Percent of Total |  | Carrying Value | Percent of Total
East North Central | $ | 250 |  | 6.9 | % |  | $ | 250 |  | 6.8 | %
Middle Atlantic | 268 |  | 7.4 | % |  | 270 |  | 7.3 | %
Mountain | 33 |  | 0.9 | % |  | 30 |  | 0.8 | %
New England | 346 |  | 9.7 | % |  | 330 |  | 8.9 | %
Pacific | 884 |  | 24.5 | % |  | 917 |  | 24.8 | %
South Atlantic | 742 |  | 20.5 | % |  | 712 |  | 19.2 | %
West North Central | 121 |  | 3.3 | % |  | 148 |  | 4.0 | %
West South Central | 407 |  | 11.3 | % |  | 420 |  | 11.3 | %
Other [1] | 561 |  | 15.5 | % |  | 627 |  | 16.9 | %
Total mortgage loans | $ | 3,612 |  | 100.0 | % |  | $ | 3,704 |  | 100.0 | %
[1] | Primarily represents loans collateralized by multiple properties in various regions.
Mortgage Loans by Property Type
| June 30, 2019 |  | December 31, 2018
| Carrying Value | Percent of Total |  | Carrying Value | Percent of Total
Commercial |  |  |  |  |
Industrial | $ | 1,000 |  | 27.7 | % |  | $ | 1,108 |  | 29.9 | %
Multifamily | 1,156 |  | 32.0 | % |  | 1,138 |  | 30.7 | %
Office | 691 |  | 19.2 | % |  | 708 |  | 19.1 | %
Retail | 409 |  | 11.3 | % |  | 392 |  | 10.6 | %
Single Family | 81 |  | 2.2 | % |  | 82 |  | 2.2 | %
Other | 275 |  | 7.6 | % |  | 276 |  | 7.5 | %
Total mortgage loans | $ | 3,612 |  | 100.0 | % |  | $ | 3,704 |  | 100.0 | %
Mortgage Servicing 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 June 30, 2019, under this program, the Company serviced mortgage loans with a total outstanding principal of $5.9 billion, of which $3.5 billion was serviced on behalf of third parties and $2.4 billion was retained and reported in total investments on the Company's Condensed 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 Condensed Consolidated Balance Sheets. Servicing rights are carried at the lower of cost or fair value and were zero as of June 30, 2019 and December 31, 2018, because servicing fees were market-level fees at origination and remain adequate to compensate the Company for servicing the loans. Variable Interest Entities The Company is engaged with various special purpose entities and other entities that are deemed to be VIEs primarily as an investor through normal investment activities but also as an investment manager. 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 As of June 30, 2019 and December 31, 2018, the Company did not hold any securities for which it is the primary beneficiary. Non-consolidated VIEs 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 June 30, 2019 and December 31, 2018 was 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 Condensed Consolidated Balance Sheets. As of June 30, 2019 and December 31, 2018, the Company has outstanding commitments totaling $797 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. For further discussion of these investments, see Equity Method Investments within Note 6 - Investments of Notes to Consolidated Financial Statements included in the Company’s 2018 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. These investments include ABS, CLOs, CMBS and RMBS and are reported in fixed maturities, available-for-sale, 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. Securities Lending, Repurchase Agreements, and Other Collateral Transactions and Restricted Investments The Company enters into securities financing transactions as a way to earn additional income or manage liquidity, primarily through securities lending and repurchase agreements.
Payables for Collateral on Investments
| June 30, 2019 | December 31, 2018
| Fair Value | Fair Value |
Securities Lending Transactions: |  |
Gross amount of securities on loan | $ | 585 |  | $ | 820 |
Gross amount of associated liability for collateral received [1] | $ | 599 |  | $ | 840 |
Repurchase agreements: |  |
Gross amount of recognized liabilities for repurchase agreements | $ | 154 |  | $ | 72 |
Gross amount of collateral pledged related to repurchase agreements [2] | $ | 158 |  | $ | 73 |
Gross amount of recognized receivables for reverse repurchase agreements | $ | 54 |  | $ | 64 |
[1] | Cash collateral received is reinvested in fixed maturities, AFS and short-term investments which are included in the Condensed Consolidated Balance Sheets. Amount includes additional securities collateral received of $18 and $3 which are excluded from the Company's Condensed Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018, respectively.
[2] | Collateral pledged is included within fixed maturities, AFS and short-term investments in the Company's Condensed Consolidated Balance Sheets.
Securities Lending 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 Condensed 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 Condensed Consolidated Balance Sheets. Income associated with securities lending transactions is reported as a component of net investment income in the Company’s Condensed Consolidated Statements of Operations. Repurchase Agreements 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 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, 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 Condensed 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 Condensed 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 Condensed Consolidated Balance Sheets. Other Collateral Transactions As of June 30, 2019 and December 31, 2018, the Company pledged collateral of $36 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. For disclosure of collateral in support of derivative transactions, refer to the Derivative Collateral Arrangements section in Note 7 - Derivatives of Notes to Condensed Consolidated Financial Statements. For disclosure of collateral in support of credit facilities, refer to Note 10 - Debt of Notes to Condensed Consolidated Financial Statements. Other Restricted Investments The Company is required by law to deposit securities with government agencies in certain states in which it conducts business. As of June 30, 2019 and December 31, 2018, the fair value of securities on deposit was $2.4 billion and $2.2 billion, respectively. In addition, as of June 30, 2019, the Company held fixed maturities and short-term investments of $489 and $1, respectively in trust for the benefit of syndicate policyholders and other investments of $49 primarily consisting of overseas deposits in various countries with Lloyd's to support underwriting activities in those countries.

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