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Investments | 6 Months Ended
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Jun. 30, 2019
Investments, Debt and Equity Securities [Abstract] |
Investments | 3. Investments Net investment income is as follows:
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2019 |  |  | 2018 |  |  | 2019 |  |  | 2018 |
(In millions) |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturity securities |  | $ | 455 |  |  | $ | 444 |  |  | $ | 910 |  |  | $ | 890 |
Limited partnership investments |  |  | 43 |  |  |  | 60 |  |  |  | 124 |  |  |  | 108 |
Short term investments |  |  | 14 |  |  |  | 11 |  |  |  | 29 |  |  |  | 20 |
Equity securities |  |  | 16 |  |  |  | 12 |  |  |  | 46 |  |  |  | 22 |
Income from trading portfolio (a) |  |  | 29 |  |  |  | 23 |  |  |  | 110 |  |  |  | 20 |
Other |  |  | 12 |  |  |  | 17 |  |  |  | 26 |  |  |  | 28 |
Total investment income |  |  | 569 |  |  |  | 567 |  |  |  | 1,245 |  |  |  | 1,088 |
Investment expenses |  |  | (18 | ) |  |  | (16 | ) |  |  | (37 | ) |  |  | (31 | )
Net investment income |  | $ | 551 |  |  | $ | 551 |  |  | $ | 1,208 |  |  | $ | 1,057 |
(a) | Net unrealized gains (losses) related to changes in fair value on securities still held were $ 8 and $(4) for the three months ended June 30, 2019 and 2018 and $ 48 and $ (25 ) for the six months ended June 30, 2019 and 2018.
Investment gains (losses) are as follows:
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2019 |  |  | 2018 |  |  | 2019 |  |  | 2018 |
(In millions) |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturity securities |  | $ | (3 | ) |  | $ | 4 |  |  | $ | (9 | ) |  | $ | 22 |
Equity securities |  |  | 11 |  |  |  | (10 | ) |  |  | 53 |  |  |  | (25 | )
Derivative instruments |  |  | (6 | ) |  |  | 4 |  |  |  | (11 | ) |  |  | 9 |
Short term investments and other |  |  |  |  |  |  | (1 | ) |  |  |  |  |  |  |  |
Investment gains (losses) (a) |  | $ | 2 |  |  | $ | (3 | ) |  | $ | 33 |  |  | $ | 6 |
(a) | Gross investment gains on available-for-sale securities were $ 28 and $ 37 for the three months ended June 30, 2019 and 2018 and $ 64 and $ 106 for the six months ended June 30, 2019 and 2018. Gross investment losses on available-for-sale securities were $ 31 and $ 33 for the three months ended June 30, 2019 and 2018 and $ 73 and $ 84 f or the six months ended June 30, 2019 and 2018. During the three and six months ended June 30, 2019, $ 11 and $ 53 of Net investment gains were recognized due to the change in fair value of non-redeemable preferred stock still held as of June 30, 2019. During the three and six months ended June 30, 2018, $ 10 and $ 25 of Net investment losses were recognized due to the change in fair value of non-redeemable preferred stock still held as of June 30, 2018.
The components of other-than-temporary impairment (“OTTI”) losses recognized in earnings by asset type are as follows:
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2019 |  |  | 2018 |  |  | 2019 |  |  | 2018 |
(In millions) |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturity securities available-for-sale: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate and other bonds |  | $ | 6 |  |  |  |  |  |  | $ | 12 |  |  | $ | 5 |
Asset-backed |  |  |  |  |  |  |  |  |  |  | 8 |  |  |  | 1 |
Net OTTI losses recognized in earnings |  | $ | 6 |  |  | $ | - |  |  | $ | 20 |  |  | $ | 6 |
The amortized cost and fair values of fixed maturity securities are as follows:
June 30, 2019 |  | Cost or Amortized Cost |  |  | Gross Unrealized Gains |  |  | Gross Unrealized Losses |  |  | Estimated Fair Value |  |  | Unrealized OTTI Losses (Gains) |
(In millions) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturity securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate and other bonds |  | $ | 19,654 |  |  | $ | 1,880 |  |  | $ | 44 |  |  | $ | 21,490 |  |  |  |  |
States, municipalities and political subdivisions |  |  | 9,196 |  |  |  | 1,507 |  |  |  |  |  |  |  | 10,703 |  |  |  |  |
Asset-backed: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage-backed |  |  | 4,668 |  |  |  | 131 |  |  |  | 2 |  |  |  | 4,797 |  |  | $ | (24 | )
Commercial mortgage-backed |  |  | 2,032 |  |  |  | 93 |  |  |  | 4 |  |  |  | 2,121 |  |  |  |  |
Other asset-backed |  |  | 1,865 |  |  |  | 40 |  |  |  | 7 |  |  |  | 1,898 |  |  |  | (2 | )
Total asset-backed |  |  | 8,565 |  |  |  | 264 |  |  |  | 13 |  |  |  | 8,816 |  |  |  | (26 | )
U.S. Treasury and obligations of government-sponsored enterprises |  |  | 118 |  |  |  | 5 |  |  |  |  |  |  |  | 123 |  |  |  |  |
Foreign government |  |  | 480 |  |  |  | 17 |  |  |  |  |  |  |  | 497 |  |  |  |  |
Redeemable preferred stock |  |  | 10 |  |  |  |  |  |  |  |  |  |  |  | 10 |  |  |  |  |
Fixed maturities available-for-sale |  |  | 38,023 |  |  |  | 3,673 |  |  |  | 57 |  |  |  | 41,639 |  |  |  | (26 | )
Fixed maturities trading |  |  | 22 |  |  |  | 2 |  |  |  |  |  |  |  | 24 |  |  |  |  |
Total fixed maturity securities |  | $ | 38,045 |  |  | $ | 3,675 |  |  | $ | 57 |  |  | $ | 41,663 |  |  | $ | (26 | )
December 31, 2018 |  | Cost or Amortized Cost |  |  | Gross Unrealized Gains |  |  | Gross Unrealized Losses |  |  | Estimated Fair Value |  |  | Unrealized OTTI Losses (Gains) |
Fixed maturity securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate and other bonds |  | $ | 18,764 |  |  | $ | 791 |  |  | $ | 395 |  |  | $ | 19,160 |  |  |  |  |
States, municipalities and political subdivisions |  |  | 9,681 |  |  |  | 1,076 |  |  |  | 9 |  |  |  | 10,748 |  |  |  |  |
Asset-backed: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage-backed |  |  | 4,815 |  |  |  | 68 |  |  |  | 57 |  |  |  | 4,826 |  |  | $ | (20 | )
Commercial mortgage-backed |  |  | 2,200 |  |  |  | 28 |  |  |  | 32 |  |  |  | 2,196 |  |  |  |  |
Other asset-backed |  |  | 1,975 |  |  |  | 11 |  |  |  | 24 |  |  |  | 1,962 |  |  |  |  |
Total asset-backed |  |  | 8,990 |  |  |  | 107 |  |  |  | 113 |  |  |  | 8,984 |  |  |  | (20 | )
U.S. Treasury and obligations of government- sponsored enterprises |  |  | 156 |  |  |  | 3 |  |  |  |  |  |  |  | 159 |  |  |  |  |
Foreign government |  |  | 480 |  |  |  | 5 |  |  |  | 4 |  |  |  | 481 |  |  |  |  |
Redeemable preferred stock |  |  | 10 |  |  |  |  |  |  |  |  |  |  |  | 10 |  |  |  |  |
Fixed maturities available-for-sale |  |  | 38,081 |  |  |  | 1,982 |  |  |  | 521 |  |  |  | 39,542 |  |  |  | (20 | )
Fixed maturities trading |  |  | 153 |  |  |  | 4 |  |  |  |  |  |  |  | 157 |  |  |  |  |
Total fixed maturities |  | $ | 38,234 |  |  | $ | 1,986 |  |  | $ | 521 |  |  | $ | 39,699 |  |  | $ | (20 | )
The net unrealized gains on available-for-sale investments included in the tables above are recorded as a component of Accumulated other comprehensive income (“AOCI”). When presented in AOCI, these amounts are net of tax and noncontrolling interests and any required Shadow Adjustments. To the extent that unrealized gains on fixed income securities supporting long term care products and structured settlements not funded by annuities would result in a premium deficiency if those gains were realized, a related increase in Insurance reserves is recorded, net of tax and noncontrolling interests, as a reduction of net unrealized gains through Other comprehensive income (“Shadow Adjustments”). As of June 30, 2019 and December 31, 2018, the net unrealized gains on investments included in AOCI were correspondingly reduced by Shadow Adjustments of $ 1.6 billion and $964 million (after tax and noncontrolling interests). The available-for-sale securities in a gross unrealized loss position are as follows:
|  | Less than 12 Months |  |  | 12 Months or Longer |  |  | Total |
June 30, 2019 |  | Estimated Fair Value |  |  | Gross Unrealized Losses |  |  | Estimated Fair Value |  |  | Gross Unrealized Losses |  |  | Estimated Fair Value |  |  | Gross Unrealized Losses |
(In millions) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturity securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate and other bonds |  | $ | 776 |  |  | $ | 22 |  |  | $ | 498 |  |  | $ | 22 |  |  | $ | 1,274 |  |  | $ | 44 |
States, municipalities and political subdivisions |  |  | 19 |  |  |  |  |  |  |  | 2 |  |  |  |  |  |  |  | 21 |  |  |  |  |
Asset-backed: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage-backed |  |  | 163 |  |  |  |  |  |  |  | 134 |  |  |  | 2 |  |  |  | 297 |  |  |  | 2 |
Commercial mortgage-backed |  |  | 58 |  |  |  | 2 |  |  |  | 69 |  |  |  | 2 |  |  |  | 127 |  |  |  | 4 |
Other asset-backed |  |  | 386 |  |  |  | 5 |  |  |  | 77 |  |  |  | 2 |  |  |  | 463 |  |  |  | 7 |
Total asset-backed |  |  | 607 |  |  |  | 7 |  |  |  | 280 |  |  |  | 6 |  |  |  | 887 |  |  |  | 13 |
U.S. Treasury and obligations of government-sponsored enterprises |  |  |  |  |  |  |  |  |  |  | 4 |  |  |  |  |  |  |  | 4 |  |  |  |  |
Foreign government |  |  | 3 |  |  |  |  |  |  |  | 11 |  |  |  |  |  |  |  | 14 |  |  |  |  |
Total fixed maturity securities |  | $ | 1,405 |  |  | $ | 29 |  |  | $ | 795 |  |  | $ | 28 |  |  | $ | 2,200 |  |  | $ | 57 |
December 31, 2018 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturity securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate and other bonds |  | $ | 8,543 |  |  | $ | 340 |  |  | $ | 825 |  |  | $ | 55 |  |  | $ | 9,368 |  |  | $ | 395 |
States, municipalities and political subdivisions |  |  | 517 |  |  |  | 8 |  |  |  | 5 |  |  |  | 1 |  |  |  | 522 |  |  |  | 9 |
Asset-backed: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage-backed |  |  | 1,932 |  |  |  | 23 |  |  |  | 1,119 |  |  |  | 34 |  |  |  | 3,051 |  |  |  | 57 |
Commercial mortgage-backed |  |  | 728 |  |  |  | 10 |  |  |  | 397 |  |  |  | 22 |  |  |  | 1,125 |  |  |  | 32 |
Other asset-backed |  |  | 834 |  |  |  | 21 |  |  |  | 125 |  |  |  | 3 |  |  |  | 959 |  |  |  | 24 |
Total asset-backed |  |  | 3,494 |  |  |  | 54 |  |  |  | 1,641 |  |  |  | 59 |  |  |  | 5,135 |  |  |  | 113 |
U.S. Treasury and obligations of government-sponsored enterprises |  |  | 21 |  |  |  |  |  |  |  | 19 |  |  |  |  |  |  |  | 40 |  |  |  |  |
Foreign government |  |  | 114 |  |  |  | 2 |  |  |  | 124 |  |  |  | 2 |  |  |  | 238 |  |  |  | 4 |
Total fixed maturity securities |  | $ | 12,689 |  |  | $ | 404 |  |  | $ | 2,614 |  |  | $ | 117 |  |  | $ | 15,303 |  |  | $ | 521 |
Based on current facts and circumstances, the Company believes the unrealized losses presented in the June 30, 2019 securities in a gross unrealized loss position table above are not indicative of the ultimate collectibility of the current amortized cost of the securities, but rather are attributable to changes in interest rates, credit spreads and other factors. The Company has no current intent to sell securities with unrealized losses, nor is it more likely than not that it will be required to sell prior to recovery of amortized cost; accordingly, the Company has determined that there are no additional OTTI losses to be recorded as of June 30, 2019. The following table presents the activity related to the pretax credit loss component reflected in Retained earnings on fixed maturity securities still held as of June 30, 2019 and 2018 for which a portion of an OTTI loss was recognized in OCI.
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2019 |  |  | 2018 |  |  | 2019 |  |  | 2018 |
(In millions) |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance of credit losses on fixed maturity securities |  | $ | 17 |  |  | $ | 25 |  |  | $ | 18 |  |  | $ | 27 |
Reductions for securities sold during the period |  |  | (1 | ) |  |  | (4 | ) |  |  | (2 | ) |  |  | (6 | )
Ending balance of credit losses on fixed maturity securities |  | $ | 16 |  |  | $ | 21 |  |  | $ | 16 |  |  | $ | 21 |
Contractual Maturity The following table presents available-for-sale fixed maturity securities by contractual maturity.
|  | June 30, 2019 |  |  | December 31, 2018 |
|  | Cost or Amortized Cost |  |  | Estimated Fair Value |  |  | Cost or Amortized Cost |  |  | Estimated Fair Value |
(In millions) |  |  |  |  |  |  |  |  |  |  |  |
Due in one year or less |  | $ | 1,018 |  |  | $ | 1,032 |  |  | $ | 1,350 |  |  | $ | 1,359 |
Due after one year through five years |  |  | 8,097 |  |  |  | 8,476 |  |  |  | 7,979 |  |  |  | 8,139 |
Due after five years through ten years |  |  | 16,403 |  |  |  | 17,297 |  |  |  | 16,859 |  |  |  | 16,870 |
Due after ten years |  |  | 12,505 |  |  |  | 14,834 |  |  |  | 11,893 |  |  |  | 13,174 |
Total |  | $ | 38,023 |  |  | $ | 41,639 |  |  | $ | 38,081 |  |  | $ | 39,542 |
Actual maturities may differ from contractual maturities because certain securities may be called or prepaid. Securities not due at a single date are allocated based on weighted average life. Derivative Financial Instruments A summary of the aggregate contractual or notional amounts and gross estimated fair values related to derivative financial instruments follows. The contractual or notional amounts for derivatives are used to calculate the exchange of contractual payments under the agreements and may not be representative of the potential for gain or loss on these instruments. Gross estimated fair values of derivative positions are currently presented in Equity securities, Receivables and Payable to brokers on the Consolidated Condensed Balance Sheets.
|  | June 30, 2019 |  |  | December 31, 2018 |
|  | Contractual/ Notional |  |  | Estimated Fair Value |  |  | Contractual/ Notional |  |  | Estimated Fair Value |
|  | Amount |  |  | Asset |  |  | (Liability) |  |  | Amount |  |  | Asset |  | (Liability)
(In millions) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
With hedge designation: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps |  | $ | 540 |  |  |  |  |  |  | $ | (9 | ) |  | $ | 500 |  |  | $ | 11 |  |  |  |  |
Without hedge designation: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Equity markets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Options – purchased |  |  | 303 |  |  | $ | 5 |  |  |  |  |  |  |  | 213 |  |  |  | 18 |  |  |  |  |
– written |  |  | 95 |  |  |  |  |  |  |  | (3 | ) |  |  | 239 |  |  |  |  |  |  | $ | (17 | )
Futures – short |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity futures – long |  |  | 11 |  |  |  |  |  |  |  |  |  |  |  | 32 |  |  |  |  |  |  |  |  |
Embedded derivative on funds withheld liability |  |  | 172 |  |  |  |  |  |  |  | (8 | ) |  |  | 172 |  |  |  | 4 |  |  |  |  |

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- Definition The entire disclosure for investments in certain debt and equity securities. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 320 -URI http://asc.fasb.org/subtopic&trid=2209399 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 946 -SubTopic 320 -URI http://asc.fasb.org/subtopic&trid=2324412 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -URI http://asc.fasb.org/topic&trid=2196928 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 940 -SubTopic 320 -URI http://asc.fasb.org/subtopic&trid=2176304 + Details
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