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Investments | 9 Months Ended
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Sep. 30, 2021
Investments [Abstract] |
Investments | 5. INVESTMENTS
Net Realized Gains (Losses)
| Three Months Ended September 30, |  | Nine Months Ended September 30,
(Before tax) | 2021 | 2020 |  | 2021 | 2020
Gross gains on sales | $ | 63 |  | $ | 27 |  |  | $ | 162 |  | $ | 201 |
Gross losses on sales | (8) |  | (12) |  |  | (54) |  | (42) |
Equity securities [1] | 3 |  | 42 |  |  | 134 |  | (269) |
Net credit losses on fixed maturities, AFS | — |  | (1) |  |  | 4 |  | (33) |
Change in ACL on mortgage loans | (2) |  | 5 |  |  | 12 |  | (19) |
Intent-to-sell impairments | — |  | — |  |  | — |  | (5) |
Other, net [2] | 14 |  | (55) |  |  | 39 |  | 51 |
Net realized gains (losses) | $ | 70 |  | $ | 6 |  |  | $ | 297 |  | $ | (116) |
[1]The net unrealized gains (losses) on equity securities included in net realized gains (losses) related to equity securities still held as of September 30, 2021, were $(17) and $92 for the three and nine months ended September 30, 2021 respectively. The net unrealized gains on equity securities included in net realized gains (losses) related to equity securities still held as of September 30, 2020, were $36 and $6 for the three and nine months ended September 30, 2020 respectively. [2]For both the three and nine months ended September 30, 2021 includes gains (losses) from transactional foreign currency revaluation of $6 and $(1), respectively, non-qualifying derivatives of $10 and $16, respectively, and an additional loss of $(2) and $(20), respectively, on the pending sale of Continental Europe Operations. For the nine months ended September 30, 2021, there was also a gain of $46 on the sale of the Company's previously owned equity interest in Talcott Resolution. For the three and nine months ended September 30, 2020, includes gains (losses) from transactional foreign currency revaluation of $(4) and $6, respectively, non-qualifying derivatives of $(2) and $97, respectively, and a loss of $51 related to the pending sale of the Continental Europe Operations. Proceeds from the sales of fixed maturities, AFS totaled $2.9 billion and $11.1 billion for the three and nine months ended September 30, 2021 respectively, and $4.5 billion and $11.7 billion for the three and nine months ended September 30, 2020, respectively. Accrued Interest Receivable on Fixed Maturities, AFS and Mortgage Loans As of September 30, 2021 and December 31, 2020, the Company reported accrued interest receivable related to fixed maturities, AFS of $326 and $327, respectively, and accrued interest receivable related to mortgage loans of $15 and $14, respectively. These amounts are recorded in other assets on the Condensed Consolidated Balance Sheets and are not included in the carrying value of the fixed maturities or mortgage loans. The Company does not include the current accrued interest receivable balance when estimating the ACL. The Company has a policy to write-off accrued interest receivable balances that are more than 90 days past due. Write-offs of accrued interest receivable are recorded as a credit loss component of net realized gains and losses. Interest income on fixed maturities and mortgage loans is accrued unless it is past due over 90 days or management deems the interest uncollectible. Recognition and Presentation of Intent-to-Sell Impairments and ACL on Fixed Maturities, AFS The Company will record an "intent-to-sell impairment" as a reduction to the amortized cost of fixed maturities, AFS in an unrealized loss position if the Company intends to sell or it is more likely than not that the Company will be required to sell the fixed maturity before a recovery in value. A corresponding charge is recorded in net realized losses equal to the difference between the fair value on the impairment date and the amortized cost basis of the fixed maturity before recognizing the impairment. When fixed maturities are in an unrealized loss position and the Company does not record an intent-to-sell impairment, the Company will record an ACL for the portion of the unrealized loss due to a credit loss. Any remaining unrealized loss on a fixed maturity after recording an ACL is the non-credit amount and is recorded in OCI. The ACL is the excess of the amortized cost over the greater of the Company's best estimate of the present value of expected future cash flows or the security's fair value. Cash flows are discounted at the effective yield that is used to record interest income. The ACL cannot exceed the unrealized loss and, therefore, it may fluctuate with changes in the fair value of the fixed maturity if the fair value is greater than the Company's best estimate of the present value of expected future cash flows. The initial ACL and any subsequent changes are recorded in net realized gains and losses. The ACL is written off against the amortized cost in the period in which all or a portion of the related fixed maturity is determined to be uncollectible. 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/or 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, instrument-specific developments including changes in credit ratings, industry earnings multiples and the issuer’s ability to restructure, access capital markets, 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 ratios ("LTVs"), 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.
ACL on Fixed Maturities, AFS by Type
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2021 |  | 2020 |  | 2021 |  | 2020
(Before tax) | Corporate | Total |  | Corporate | Municipal | Total |  | Corporate | Total |  | Corporate | Municipal | Total
Balance as of beginning of period | $ | 4 |  | $ | 4 |  |  | $ | 32 |  | $ | — |  | $ | 32 |  |  | $ | 23 |  | $ | 23 |  |  | $ | — |  | $ | — |  | $ | — |
Credit losses on fixed maturities where an allowance was not previously recorded | — |  | — |  |  | — |  | 3 |  | 3 |  |  | 2 |  | 2 |  |  | 35 |  | 3 |  | 38 |
Reduction due to sales | — |  | — |  |  | (1) |  | — |  | (1) |  |  | (15) |  | (15) |  |  | (3) |  | — |  | (3) |
Net increases (decreases) on fixed maturities where an allowance was previously recorded | — |  | — |  |  | (2) |  | — |  | (2) |  |  | (6) |  | (6) |  |  | (3) |  | — |  | (3) |
Balance as of end of period | $ | 4 |  | $ | 4 |  |  | $ | 29 |  | $ | 3 |  | $ | 32 |  |  | $ | 4 |  | $ | 4 |  |  | $ | 29 |  | $ | 3 |  | $ | 32 |
Fixed Maturities, AFS, by Type
| September 30, 2021 |  | December 31, 2020
| Amortized Cost | ACL | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value |  |  | Amortized Cost | ACL | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value |
ABS | $ | 1,187 |  | $ | — |  | $ | 20 |  | $ | — |  | $ | 1,207 |  |  |  | $ | 1,525 |  | $ | — |  | $ | 39 |  | $ | — |  | $ | 1,564 |  |
CLOs | 3,002 |  | — |  | 10 |  | (1) |  | 3,011 |  |  |  | 2,780 |  | — |  | 7 |  | (7) |  | 2,780 |  |
CMBS | 3,969 |  | — |  | 231 |  | (9) |  | 4,191 |  |  |  | 4,219 |  | — |  | 286 |  | (21) |  | 4,484 |  |
Corporate | 17,597 |  | (4) |  | 1,310 |  | (42) |  | 18,861 |  |  |  | 18,401 |  | (23) |  | 1,926 |  | (31) |  | 20,273 |  |
Foreign govt./govt. agencies | 916 |  | — |  | 40 |  | (3) |  | 953 |  |  |  | 842 |  | — |  | 77 |  | — |  | 919 |  |
Municipal | 8,113 |  | — |  | 776 |  | (11) |  | 8,878 |  |  |  | 8,564 |  | — |  | 940 |  | (1) |  | 9,503 |  |
RMBS | 3,212 |  | — |  | 85 |  | (11) |  | 3,286 |  |  |  | 3,966 |  | — |  | 144 |  | (3) |  | 4,107 |  |
U.S. Treasuries | 3,489 |  | — |  | 83 |  | (17) |  | 3,555 |  |  |  | 1,264 |  | — |  | 141 |  | — |  | 1,405 |  |
Total fixed maturities, AFS | $ | 41,485 |  | $ | (4) |  | $ | 2,555 |  | $ | (94) |  | $ | 43,942 |  |  |  | $ | 41,561 |  | $ | (23) |  | $ | 3,560 |  | $ | (63) |  | $ | 45,035 |  |
Fixed Maturities, AFS, by Contractual Maturity Year
| September 30, 2021 |  | December 31, 2020
| Amortized Cost | Fair Value |  | Amortized Cost | Fair Value
One year or less | $ | 1,319 |  | $ | 1,340 |  |  | $ | 1,411 |  | $ | 1,432 |
Over one year through five years | 8,214 |  | 8,577 |  |  | 7,832 |  | 8,286 |
Over five years through ten years | 9,088 |  | 9,520 |  |  | 7,622 |  | 8,354 |
Over ten years | 11,494 |  | 12,810 |  |  | 12,206 |  | 14,028 |
Subtotal | 30,115 |  | 32,247 |  |  | 29,071 |  | 32,100 |
Mortgage-backed and asset-backed securities | 11,370 |  | 11,695 |  |  | 12,490 |  | 12,935 |
Total fixed maturities, AFS | $ | 41,485 |  | $ | 43,942 |  |  | $ | 41,561 |  | $ | 45,035 |
Estimated maturities may differ from contractual maturities due to 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 September 30, 2021 or December 31, 2020 other than U.S. government securities and certain U.S. government agencies. Unrealized Losses on Fixed Maturities, AFS
Unrealized Loss Aging for Fixed Maturities, AFS by Type and Length of Time as of September 30, 2021
|  | Less Than 12 Months |  |  | 12 Months or More |  |  | Total
|  | Fair Value | Unrealized Losses |  |  | Fair Value | Unrealized Losses |  |  | Fair Value | Unrealized Losses
ABS |  | $ | 204 |  | $ | — |  |  |  | $ | — |  | $ | — |  |  |  | $ | 204 |  | $ | — |
CLOs |  | 842 |  | (1) |  |  |  | 159 |  | — |  |  |  | 1,001 |  | (1) |
CMBS |  | 298 |  | (3) |  |  |  | 87 |  | (6) |  |  |  | 385 |  | (9) |
Corporate |  | 2,229 |  | (34) |  |  |  | 208 |  | (8) |  |  |  | 2,437 |  | (42) |
Foreign govt./govt. agencies |  | 265 |  | (3) |  |  |  | — |  | — |  |  |  | 265 |  | (3) |
Municipal |  | 695 |  | (11) |  |  |  | 12 |  | — |  |  |  | 707 |  | (11) |
RMBS |  | 880 |  | (8) |  |  |  | 100 |  | (3) |  |  |  | 980 |  | (11) |
U.S. Treasuries |  | 2,707 |  | (17) |  |  |  | 3 |  | — |  |  |  | 2,710 |  | (17) |
Total fixed maturities, AFS in an unrealized loss position |  | $ | 8,120 |  | $ | (77) |  |  |  | $ | 569 |  | $ | (17) |  |  |  | $ | 8,689 |  | $ | (94) |
Unrealized Loss Aging for Fixed Maturities, AFS by Type and Length of Time as of December 31, 2020
|  | Less Than 12 Months |  |  | 12 Months or More |  |  | Total
|  | Fair Value | Unrealized Losses |  |  | Fair Value | Unrealized Losses |  |  | Fair Value | Unrealized Losses
ABS |  | $ | 44 |  | $ | — |  |  |  | $ | — |  | $ | — |  |  |  | $ | 44 |  | $ | — |
CLOs |  | 758 |  | (2) |  |  |  | 715 |  | (5) |  |  |  | 1,473 |  | (7) |
CMBS |  | 410 |  | (17) |  |  |  | 19 |  | (4) |  |  |  | 429 |  | (21) |
Corporate |  | 466 |  | (13) |  |  |  | 212 |  | (18) |  |  |  | 678 |  | (31) |
Foreign govt./govt. agencies |  | 24 |  | — |  |  |  | — |  | — |  |  |  | 24 |  | — |
Municipal |  | 34 |  | (1) |  |  |  | — |  | — |  |  |  | 34 |  | (1) |
RMBS |  | 461 |  | (3) |  |  |  | 21 |  | — |  |  |  | 482 |  | (3) |
U.S. Treasuries |  | 39 |  | — |  |  |  | — |  | — |  |  |  | 39 |  | — |
Total fixed maturities, AFS in an unrealized loss position |  | $ | 2,236 |  | $ | (36) |  |  |  | $ | 967 |  | $ | (27) |  |  |  | $ | 3,203 |  | $ | (63) |
As of September 30, 2021, fixed maturities, AFS in an unrealized loss position consisted of 1,057 instruments, primarily in the corporate sectors, most notably financial services, technology and communications, capital goods, and utilities, as well as U.S. Treasuries which were depressed largely due to higher interest rates and/or wider credit spreads since the purchase date. As of September 30, 2021, 98% of these fixed maturities were depressed less than 20% of cost or amortized cost. The increase in unrealized losses during the nine months ended September 30, 2021, was primarily attributable to higher interest rates, partially offset by tighter credit spreads. Most of the fixed maturities depressed for twelve months or more relate to the corporate and CMBS sectors which were primarily depressed because current market spreads are wider than at the respective purchase dates. Additionally, certain corporate fixed maturities were also depressed because of their variable-rate coupons and long-dated maturities. The Company neither has an intention to sell nor does it expect to be required to sell the fixed maturities outlined in the preceding discussion. The decision to record credit losses on fixed maturities, AFS in the form of an ACL requires us to make qualitative and quantitative estimates of expected future cash flows. Given the uncertainty about the ultimate impact of the COVID-19 pandemic on issuers of these securities, actual cash flows could ultimately deviate significantly from our expectations resulting in realized losses in future periods. MORTGAGE LOANS ACL on Mortgage Loans The Company reviews mortgage loans on a quarterly basis to estimate the ACL with changes in the ACL recorded in net realized gains and losses. Apart from an ACL recorded on individual mortgage loans where the borrower is experiencing financial difficulties, the Company records an ACL on the pool of mortgage loans based on lifetime expected credit losses. The Company utilizes a third-party forecasting model to estimate lifetime expected credit losses at a loan level under multiple economic scenarios. The scenarios use macroeconomic data provided by an internationally recognized economics firm that generates forecasts of varying economic factors such as GDP growth, unemployment and interest rates. The economic scenarios are projected over 10 years. The first two to four years of the 10-year period assume a specific modeled economic scenario (including moderate upside, moderate recession and severe recession scenarios) and then revert to historical long-term assumptions over the remaining period. Using these economic scenarios, the forecasting model projects property-specific operating income and capitalization rates used to estimate the value of a future operating income stream. The operating income and the property valuations derived from capitalization rates are compared to loan payment and principal amounts to create debt service coverage ratios ("DSCRs") and loan-to-value ratios ("LTVs") over the forecast period. The model overlays historical data about mortgage loan performance based on DSCRs and LTVs and projects the probability of default, amount of loss given a default and resulting expected loss through maturity for each loan under each economic scenario. Economic scenarios are probability-weighted based on a statistical analysis of the forecasted economic factors and qualitative analysis. The Company records the change in the ACL on mortgage loans based on the weighted-average expected credit losses across the selected economic scenarios. When a borrower is experiencing financial difficulty, including when foreclosure is probable, the Company measures an ACL on individual mortgage loans. The ACL is established for any shortfall between the amortized cost of the loan and the fair value of the collateral less costs to sell. Estimates of collectibility from an individual borrower 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. As of September 30, 2021, the Company did not have any mortgage loans for which an ACL was established on an individual basis. There were no mortgage loans held-for-sale as of September 30, 2021 or December 31, 2020. For the three and nine months ended September 30, 2021 and 2020, respectively, the Company had no mortgage loans that have had extensions or restructurings other than what is allowable under the original terms of the contract.
ACL on Mortgage Loans
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2021 | 2020 |  | 2021 | 2020
ACL as of beginning of period | $ | 24 |  | $ | 43 |  |  | $ | 38 |  | $ | — |
Cumulative effect of accounting changes [1] |  |  |  |  | 19 |
Adjusted beginning ACL | 24 |  | 43 |  |  | 38 |  | 19 |
Current period provision (release) | 2 |  | (5) |  |  | (12) |  | 19 |
ACL as of September 30, | $ | 26 |  | $ | 38 |  |  | $ | 26 |  | $ | 38 |
[1]Represents the adjustment to the ACL recorded on adoption of accounting guidance for credit losses on January 1, 2020. For further information, see the Financial Instruments - Credit Losses section within Note 1 - Basis of Presentation and Significant Accounting Policies, included in The Hartford's 2020 Form 10-K Annual Report. The increase in the allowance for the three months ended September 30, 2021, is driven by net additions of new loans. The decrease in the allowance for the nine months ended September 30, 2021, is the result of improved economic scenarios, including improved GDP growth and unemployment, and higher property valuations as compared to the prior periods, partially offset by an increase driven by net additions of new loans. We continue to monitor the impact on our mortgage loan portfolio from borrower behavior in response to the economic stress. Borrowers with lower LTVs have an incentive to continue to make payments of principal and/or interest in order to preserve the equity they have in the underlying commercial real estate properties. During the first nine months of 2020, the Company increased the estimate of the ACL in response to significant economic stress experienced as a result of the COVID-19 pandemic. The weighted-average LTV ratio of the Company’s mortgage loan portfolio was 52% as of September 30, 2021, while the weighted-average LTV ratio at origination of these loans was 60%. LTV ratios compare the loan amount to the value of the underlying property collateralizing the loan with property values based on appraisals updated no less than annually. 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 and are updated no less than annually through reviews of underlying properties.
Mortgage Loans LTV & DSCR by Origination Year as of September 30, 2021
| 2021 | 2020 | 2019 | 2018 | 2017 | 2016 & Prior | Total
Loan-to-value | Amortized Cost | Avg. DSCR | Amortized Cost | Avg. DSCR | Amortized Cost | Avg. DSCR | Amortized Cost | Avg. DSCR | Amortized Cost | Avg. DSCR | Amortized Cost | Avg. DSCR | Amortized Cost [1] | Avg. DSCR
65% - 80% | $ | 3 |  | 2.25x | $ | 51 |  | 2.63x | $ | 91 |  | 1.37x | $ | 111 |  | 1.04x | $ | 45 |  | 1.75x | $ | 125 |  | 1.52x | $ | 426 |  | 1.52x
Less than 65% | 1,020 |  | 2.86x | 654 |  | 2.76x | 772 |  | 2.71x | 485 |  | 2.21x | 419 |  | 1.88x | 1,356 |  | 2.46x | 4,706 |  | 2.55x
Total mortgage loans | $ | 1,023 |  | 2.86x | $ | 705 |  | 2.75x | $ | 863 |  | 2.57x | $ | 596 |  | 1.99x | $ | 464 |  | 1.87x | $ | 1,481 |  | 2.38x | $ | 5,132 |  | 2.47x
[1]Amortized cost of mortgage loans excludes ACL of $26.
Mortgage Loans LTV & DSCR by Origination Year as of December 31, 2020
| 2020 | 2019 | 2018 | 2017 | 2016 | 2015 & Prior | Total
Loan-to-value | Amortized Cost | Avg. DSCR | Amortized Cost | Avg. DSCR | Amortized Cost | Avg. DSCR | Amortized Cost | Avg. DSCR | Amortized Cost | Avg. DSCR | Amortized Cost | Avg. DSCR | Amortized Cost [1] | Avg. DSCR
65% - 80% | $ | 28 |  | 1.62x | $ | 243 |  | 1.58x | $ | 212 |  | 1.33x | $ | 45 |  | 2.02x | $ | 51 |  | 1.92x | $ | 115 |  | 1.74x | $ | 694 |  | 1.59x
Less than 65% | 659 |  | 2.56x | 676 |  | 2.85x | 410 |  | 2.25x | 446 |  | 1.89x | 235 |  | 2.99x | 1,411 |  | 3.01x | 3,837 |  | 2.69x
Total mortgage loans | $ | 687 |  | 2.52x | $ | 919 |  | 2.51x | $ | 622 |  | 1.94x | $ | 491 |  | 1.90x | $ | 286 |  | 2.80x | $ | 1,526 |  | 2.92x | $ | 4,531 |  | 2.52x
[1]Amortized cost of mortgage loans excludes ACL of $38.
Mortgage Loans by Region
| September 30, 2021 |  | December 31, 2020
| Amortized Cost | Percent of Total |  | Amortized Cost | Percent of Total
East North Central | $ | 294 |  | 5.7 | % |  | $ | 290 |  | 6.4 | %
Middle Atlantic | 304 |  | 5.9 | % |  | 291 |  | 6.4 | %
Mountain | 418 |  | 8.1 | % |  | 254 |  | 5.6 | %
New England | 394 |  | 7.7 | % |  | 397 |  | 8.8 | %
Pacific | 1,216 |  | 23.7 | % |  | 1,001 |  | 22.1 | %
South Atlantic | 1,407 |  | 27.4 | % |  | 1,038 |  | 22.9 | %
West North Central | 44 |  | 0.9 | % |  | 44 |  | 1.0 | %
West South Central | 388 |  | 7.6 | % |  | 433 |  | 9.5 | %
Other [1] | 667 |  | 13.0 | % |  | 783 |  | 17.3 | %
Total mortgage loans | 5,132 |  | 100.0 | % |  | 4,531 |  | 100.0 | %
ACL | (26) |  |  |  | (38) |  |
Total mortgage loans, net of ACL | $ | 5,106 |  |  |  | $ | 4,493 |  |
[1]Primarily represents loans collateralized by multiple properties in various regions.
Mortgage Loans by Property Type
| September 30, 2021 |  | December 31, 2020
| Amortized Cost | Percent of Total |  | Amortized Cost | Percent of Total
Commercial |  |  |  |  |
Industrial | $ | 1,804 |  | 35.2 | % |  | $ | 1,339 |  | 29.5 | %
Multifamily | 1,695 |  | 33.0 | % |  | 1,498 |  | 33.1 | %
Office | 650 |  | 12.7 | % |  | 774 |  | 17.1 | %
Retail [1] | 916 |  | 17.8 | % |  | 788 |  | 17.4 | %
Single Family | 27 |  | 0.5 | % |  | 92 |  | 2.0 | %
Other | 40 |  | 0.8 | % |  | 40 |  | 0.9 | %
Total mortgage loans | 5,132 |  | 100.0 | % |  | 4,531 |  | 100.0 | %
ACL | (26) |  |  |  | (38) |  |
Total mortgage loans, net of ACL | $ | 5,106 |  |  |  | $ | 4,493 |  |
[1]Primarily comprised of grocery-anchored retail centers, with no exposure to regional shopping malls. Past-Due Mortgage Loans Mortgage loans are considered past due if a payment of principal or interest is not received according to the contractual terms of the loan agreement, which typically includes a grace period. As of September 30, 2021 and December 31, 2020, the Company held no mortgage loans considered past due. 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 September 30, 2021, under this program, the Company serviced mortgage loans with a total outstanding principal of $7.9 billion, of which $3.9 billion was serviced on behalf of third parties and $4.0 billion was retained and reported in total investments on the Company's Condensed Consolidated Balance Sheets. As of December 31, 2020, the Company serviced mortgage loans with a total outstanding principal balance of $6.9 billion, of which $3.7 billion was serviced on behalf of third parties and $3.2 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 $0 as of September 30, 2021 and December 31, 2020, 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 September 30, 2021 and December 31, 2020, 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 September 30, 2021 and December 31, 2020 was limited to the total carrying value of $1.7 billion and $1.3 billion, respectively, which are included in limited partnerships and other alternative investments in the Company's Condensed Consolidated Balance Sheets. As of September 30, 2021 and December 31, 2020, the Company has outstanding commitments totaling $1.2 billion and $768 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 of Notes to Consolidated Financial Statements included in the Company’s 2020 Form 10-K Annual Report. In addition, the Company makes passive investments in structured securities issued by VIEs for which the Company is not the manager. These investments are included in ABS, CLOs, CMBS, and RMBS and are reported in fixed maturities, AFS, and other investments. 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 Company’s inability to direct the activities that most significantly impact the economic performance of the VIEs, and, where applicable, the level of credit subordination which reduces the Company’s obligation to absorb losses or right to receive benefits. The Company’s maximum exposure to loss on these investments is limited to the amount of the Company’s investment. SECURITIES LENDING, REVERSE REPURCHASE AGREEMENTS, OTHER COLLATERAL TRANSACTIONS AND RESTRICTED INVESTMENTS 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. While the Company had securities on loan as part of a securities lending program during 2020, as of September 30, 2021 and December 31, 2020, the Company did not have any securities on loan as part of a securities lending program. Reverse Repurchase Agreements 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 under specified conditions and the Company has the right to sell or re-pledge the securities received. The Company accounts for reverse repurchase agreements as collateralized financing. As of September 30, 2021 and December 31, 2020, the Company reported $23 and $30, respectively, within short-term investments on the Condensed Consolidated Balance Sheets representing a receivable for the amount of cash transferred to purchase the securities. Other Collateral Transactions As of September 30, 2021 and December 31, 2020, the Company pledged collateral of $9 and $34, respectively, of U.S. government securities or cash primarily related to certain bank loan participations committed through a limited partnership agreement. 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 6 - Derivatives 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 September 30, 2021 and December 31, 2020, the fair value of securities on deposit was $2.5 billion and $2.6 billion, respectively. In addition, as of September 30, 2021, the Company held fixed maturities of $682 and short-term investments of $2 in trust for the benefit of syndicate policyholders, held fixed maturities of $170 in a Lloyd's of London ("Lloyd's") trust account to provide a portion of the required capital, and maintained other investments of $62 primarily consisting of overseas deposits in various countries with Lloyd's to support underwriting activities in those countries. As of December 31, 2020, the Company held fixed maturities of $661 and short-term investments of $26 in trust for the benefit of syndicate policyholders, held fixed maturities of $175 in a Lloyd's trust account to provide a portion of the required capital, and maintained other investments of $54 primarily consisting of overseas deposits in various countries with Lloyd's to support underwriting activities in those countries. Lloyd's is an insurance market-place operating worldwide. Lloyd's does not underwrite risks. The Company accepts risks as the sole member of Lloyd's Syndicate 1221 ("Lloyd's Syndicate"). Equity Method Investments On June 30, 2021, Hopmeadow Holdings LP, the legal entity that acquired Talcott Resolution in May 2018 (collectively referred to as "Talcott Resolution"), was sold and, as a result, the Company sold its retained 9.7% interest. The Company received a total $217 in connection with the sale of its 9.7% ownership interest, resulting in a realized gain on sale of $46 before tax for the nine months ended September 30, 2021.

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