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Investments | 3 Months Ended
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Mar. 31, 2021
Investments [Abstract] |
Investments | 3. Investments Net investment income is as follows:
Three Months Ended March 31 |  | 2021 |  |  | 2020 |
(In millions) |  |  |  |  |  |
Fixed maturity securities |  | $ | 428 |  |  | $ | 438 |
Limited partnership investments |  |  | 47 |  |  |  | (102 | )
Short term investments |  |  |  |  |  |  | 7 |
Equity securities |  |  | 29 |  |  |  | (44 | )
Income (loss) from trading portfolio (a) |  |  | 50 |  |  |  | (129 | )
Other |  |  | 16 |  |  |  | 14 |
Total investment income |  |  | 570 |  |  |  | 184 |
Investment expenses |  |  | (20 | ) |  |  | (21 | )
Net investment income |  | $ | 550 |  |  | $ | 163 |
(a) | Net unrealized gains (losses) related to changes in fair value on securities still held were $32 and $(117) for the three months ended March 31, 2021 and 2020.
Investment gains (losses) are as follows:
Three Months Ended March 31 |  | 2021 |  |  | 2020 |
(In millions) |  |  |  |  |  |
Fixed maturity securities |  | $ | 38 |  |  | $ | (75 | )
Equity securities |  |  | 2 |  |  |  | (133 | )
Derivative instruments |  |  | 17 |  |  |  | 5 |
Short term investments and other |  |  |  |  |  |  | (13 | )
Investment gains (losses) (a) |  | $ | 57 |  |  | $ | (216 | )
(a) | Gross investment gains on available-for-sale securities were $58 and $29 for the three months ended March 31, 2021 and 2020. Gross investment losses on available-for-sale securities were $20 and $104 for the three months ended March 31, 2021 and 2020. During the three months ended March 31, 2021 and 2020, $2 of investment gains and $133 of investment losses were recognized due to the change in fair value of non-redeemable preferred stock still held as of March 31, 2021 and 2020.
The following tables present the activity related to the allowance on available-for-sale securities with credit impairments and purchased credit-deteriorated (“PCD”) assets. Accrued interest receivables on available-for-sale fixed maturity securities totaled $389 million, $371 million and $390 million as of March 31, 2021, December 31, 2020 and March 31, 2020 and are excluded from the estimate of expected credit losses and the amortized cost basis in the tables within this Note.
Three months ended March 31, 2021 |  | Corporate and Other Bonds |  |  | Asset-backed |  |  | Total |
(In millions) |  |  |  |  |  |  |  |  |
Allowance for credit losses: |  |  |  |  |  |  |  |  |
Balance as of January 1, 2021 |  | $ | 23 |  |  | $ | 17 |  |  | $ | 40 |
Additions to the allowance for credit losses: |  |  |  |  |  |  |  |  |  |  |  |
Securities for which credit losses were not previously recorded |  |  | 14 |  |  |  |  |  |  |  | 14 |
Available-for-sale securities accounted for as PCD assets |  |  | 2 |  |  |  |  |  |  |  | 2 |
Reductions to the allowance for credit losses: |  |  |  |  |  |  |  |  |  |  |  |
Securities sold during the period (realized) |  |  | 6 |  |  |  |  |  |  |  | 6 |
Intent to sell or more likely than not will be required to sell the security before recovery of its amortized cost basis |  |  |  |  |  |  |  |  |  |  |  |
Additional decreases to the allowance for credit losses on securities that had an allowance recorded in a previous period |  |  | (6 | ) |  |  | (1 | ) |  |  | (7 | )
Total allowance for credit losses |  | $ | 27 |  |  | $ | 16 |  |  | $ | 43 |
Three months ended March 31, 2020 |  |  |  |  |  |  |  |  |  |  |  |
Allowance for credit losses: |  |  |  |  |  |  |  |  |  |  |  |
Balance as of January 1, 2020 |  | $ | - |  |  | $ | - |  |  | $ | - |
Additions to the allowance for credit losses: |  |  |  |  |  |  |  |  |  |  |  |
Impact of adopting ASC 326 |  |  | 6 |  |  |  |  |  |  |  | 6 |
Securities for which credit losses were not previously recorded |  |  | 48 |  |  |  |  |  |  |  | 48 |
Available-for-sale securities accounted for as PCD assets |  |  | 1 |  |  |  |  |  |  |  | 1 |
Reductions to the allowance for credit losses: |  |  |  |  |  |  |  |  |  |  |  |
Securities sold during the period (realized) |  |  | 5 |  |  |  |  |  |  |  | 5 |
Intent to sell or more likely than not will be required to sell the security before recovery of its amortized cost basis |  |  | 1 |  |  |  |  |  |  |  | 1 |
Total allowance for credit losses |  | $ | 49 |  |  | $ | - |  |  | $ | 49 |
The components of available-for-sale impairment losses recognized in earnings by asset type are presented in the following table. The table includes losses on securities with an intention to sell and changes in the allowance for credit losses on securities since acquisition date:
Three Months Ended March 31 |  | 2021 |  |  | 2020 |
(In millions) |  |  |  |  |  |
Fixed maturity securities available-for-sale: |  |  |  |  |  |
Corporate and other bonds |  | $ | 7 |  |  | $ | 91 |
Asset-backed |  |  | (1 | ) |  |  | 1 |
Impairment losses recognized in earnings |  | $ | 6 |  |  | $ | 92 |
There were no losses recognized on mortgage loans during the three months ended March 31, 2021. During the three months ended March 31, 2020, $13 million of losses were recognized related to mortgage loans due to changes in expected credit losses. The amortized cost and fair values of fixed maturity securities are as follows:
March 31, 2021 |  | Cost or Amortized Cost |  |  | Gross Unrealized Gains |  |  | Gross Unrealized Losses |  |  | Allowance for Credit Losses |  |  | Estimated Fair Value |
(In millions) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturity securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate and other bonds |  | $ | 21,110 |  |  | $ | 2,644 |  |  | $ | 71 |  |  | $ | 27 |  |  | $ | 23,656 |
States, municipalities and political subdivisions |  |  | 10,041 |  |  |  | 1,590 |  |  |  | 31 |  |  |  |  |  |  |  | 11,600 |
Asset-backed: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage-backed |  |  | 3,215 |  |  |  | 108 |  |  |  | 40 |  |  |  |  |  |  |  | 3,283 |
Commercial mortgage-backed |  |  | 1,952 |  |  |  | 76 |  |  |  | 24 |  |  |  | 16 |  |  |  | 1,988 |
Other asset-backed |  |  | 2,281 |  |  |  | 71 |  |  |  | 7 |  |  |  |  |  |  |  | 2,345 |
Total asset-backed |  |  | 7,448 |  |  |  | 255 |  |  |  | 71 |  |  |  | 16 |  |  |  | 7,616 |
U.S. Treasury and obligations of government-sponsored enterprises |  |  | 138 |  |  |  | 1 |  |  |  | 7 |  |  |  |  |  |  |  | 132 |
Foreign government |  |  | 508 |  |  |  | 23 |  |  |  | 2 |  |  |  |  |  |  |  | 529 |
Redeemable preferred stock |  |  | 12 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 12 |
Fixed maturities available-for-sale |  |  | 39,257 |  |  |  | 4,513 |  |  |  | 182 |  |  |  | 43 |  |  |  | 43,545 |
Fixed maturities trading |  |  | 36 |  |  |  | 3 |  |  |  |  |  |  |  |  |  |  |  | 39 |
Total fixed maturity securities |  | $ | 39,293 |  |  | $ | 4,516 |  |  | $ | 182 |  |  | $ | 43 |  |  | $ | 43,584 |
December 31, 2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturity securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate and other bonds |  | $ | 20,792 |  |  | $ | 3,578 |  |  | $ | 22 |  |  | $ | 23 |  |  | $ | 24,325 |
States, municipalities and political subdivisions |  |  | 9,729 |  |  |  | 1,863 |  |  |  |  |  |  |  |  |  |  |  | 11,592 |
Asset-backed: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage-backed |  |  | 3,442 |  |  |  | 146 |  |  |  | 1 |  |  |  |  |  |  |  | 3,587 |
Commercial mortgage-backed |  |  | 1,933 |  |  |  | 93 |  |  |  | 42 |  |  |  | 17 |  |  |  | 1,967 |
Other asset-backed |  |  | 2,179 |  |  |  | 81 |  |  |  | 9 |  |  |  |  |  |  |  | 2,251 |
Total asset-backed |  |  | 7,554 |  |  |  | 320 |  |  |  | 52 |  |  |  | 17 |  |  |  | 7,805 |
U.S. Treasury and obligations of government-sponsored enterprises |  |  | 339 |  |  |  | 2 |  |  |  | 3 |  |  |  |  |  |  |  | 338 |
Foreign government |  |  | 512 |  |  |  | 32 |  |  |  |  |  |  |  |  |  |  |  | 544 |
Fixed maturities available-for-sale |  |  | 38,926 |  |  |  | 5,795 |  |  |  | 77 |  |  |  | 40 |  |  |  | 44,604 |
Fixed maturities trading |  |  | 37 |  |  |  | 5 |  |  |  |  |  |  |  |  |  |  |  | 42 |
Total fixed maturity securities |  | $ | 38,963 |  |  | $ | 5,800 |  |  | $ | 77 |  |  | $ | 40 |  |  | $ | 44,646 |
The net unrealized gains on available-for-sale investments included in the tables above are recorded as a component of Accumulated other comprehensive income (loss) (“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 (loss) (“Shadow Adjustments”). As of March 31, 2021 and December 31, 2020, the net unrealized gains on investments included in AOCI were correspondingly reduced by Shadow Adjustments of $2.1 billion and $2.5 billion (after tax and noncontrolling interests). The available-for-sale securities in a gross unrealized loss position for which an allowance for credit losses has not been recorded are as follows:
|  | Less than 12 Months |  |  | 12 Months or Longer |  |  | Total |
March 31, 2021 |  | 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 |  | $ | 1,868 |  |  | $ | 66 |  |  | $ | 82 |  |  | $ | 5 |  |  | $ | 1,950 |  |  | $ | 71 |
States, municipalities and political subdivisions |  |  | 866 |  |  |  | 31 |  |  |  |  |  |  |  |  |  |  |  | 866 |  |  |  | 31 |
Asset-backed: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage-backed |  |  | 1,584 |  |  |  | 40 |  |  |  | 12 |  |  |  |  |  |  |  | 1,596 |  |  |  | 40 |
Commercial mortgage-backed |  |  | 320 |  |  |  | 9 |  |  |  | 285 |  |  |  | 15 |  |  |  | 605 |  |  |  | 24 |
Other asset-backed |  |  | 337 |  |  |  | 3 |  |  |  | 97 |  |  |  | 4 |  |  |  | 434 |  |  |  | 7 |
Total asset-backed |  |  | 2,241 |  |  |  | 52 |  |  |  | 394 |  |  |  | 19 |  |  |  | 2,635 |  |  |  | 71 |
U.S. Treasury and obligations of government-sponsored enterprises |  |  | 65 |  |  |  | 7 |  |  |  |  |  |  |  |  |  |  |  | 65 |  |  |  | 7 |
Foreign government |  |  | 45 |  |  |  | 2 |  |  |  |  |  |  |  |  |  |  |  | 45 |  |  |  | 2 |
Total fixed maturity securities |  | $ | 5,085 |  |  | $ | 158 |  |  | $ | 476 |  |  | $ | 24 |  |  | $ | 5,561 |  |  | $ | 182 |
December 31, 2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturity securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate and other bonds |  | $ | 609 |  |  | $ | 21 |  |  | $ | 12 |  |  | $ | 1 |  |  | $ | 621 |  |  | $ | 22 |
States, municipalities and political subdivisions |  |  | 33 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 33 |  |  |  |  |
Asset-backed: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage-backed |  |  | 71 |  |  |  | 1 |  |  |  | 11 |  |  |  |  |  |  |  | 82 |  |  |  | 1 |
Commercial mortgage-backed |  |  | 533 |  |  |  | 40 |  |  |  | 28 |  |  |  | 2 |  |  |  | 561 |  |  |  | 42 |
Other asset-backed |  |  | 344 |  |  |  | 9 |  |  |  | 13 |  |  |  |  |  |  |  | 357 |  |  |  | 9 |
Total asset-backed |  |  | 948 |  |  |  | 50 |  |  |  | 52 |  |  |  | 2 |  |  |  | 1,000 |  |  |  | 52 |
U.S. Treasury and obligations of government-sponsored enterprises |  |  | 63 |  |  |  | 3 |  |  |  |  |  |  |  |  |  |  |  | 63 |  |  |  | 3 |
Foreign government |  |  | 13 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 13 |  |  |  |  |
Total fixed maturity securities |  | $ | 1,666 |  |  | $ | 74 |  |  | $ | 64 |  |  | $ | 3 |  |  | $ | 1,730 |  |  | $ | 77 |
Based on current facts and circumstances, the Company believes the unrealized losses presented in the March 31, 2021 securities in a gross unrealized loss position table above are not indicative of the ultimate collectability of the current amortized cost of the securities, but rather are attributable to changes in interest rates, credit spreads and other factors. There is no current intent to sell securities with unrealized losses, nor is it more likely than not that sale will be required prior to recovery of amortized cost; accordingly, it was determined that there are no additional impairment losses to be recorded at March 31, 2021. Contractual Maturity The following table presents available-for-sale fixed maturity securities by contractual maturity.
|  | March 31, 2021 |  |  | December 31, 2020 |
|  | Cost or Amortized Cost |  |  | Estimated Fair Value |  |  | Cost or Amortized Cost |  |  | Estimated Fair Value |
(In millions) |  |  |  |  |  |  |  |  |  |  |  |
Due in one year or less |  | $ | 1,468 |  |  | $ | 1,473 |  |  | $ | 1,456 |  |  | $ | 1,458 |
Due after one year through five years |  |  | 10,837 |  |  |  | 11,583 |  |  |  | 12,304 |  |  |  | 13,098 |
Due after five years through ten years |  |  | 13,640 |  |  |  | 14,685 |  |  |  | 12,319 |  |  |  | 13,878 |
Due after ten years |  |  | 13,312 |  |  |  | 15,804 |  |  |  | 12,847 |  |  |  | 16,170 |
Total |  | $ | 39,257 |  |  | $ | 43,545 |  |  | $ | 38,926 |  |  | $ | 44,604 |
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. Mortgage Loans The following table presents the amortized cost basis of mortgage loans for each credit quality indicator by year of origination. The primary credit quality indicators utilized are debt service coverage ratios (“DSCR”) and loan-to-value (“LTV”) ratios:
|  | Mortgage Loans Amortized Cost Basis by Origination Year (a) |
As of March 31, 2021 |  | 2021 |  |  | 2020 |  |  | 2019 |  |  | 2018 |  |  | 2017 |  |  | Prior |  |  | Total |
(In millions) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
DSCR ≥1.6x |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
LTV less than 55% |  |  |  |  | $ | 75 |  |  | $ | 32 |  |  | $ | 36 |  |  | $ | 114 |  |  | $ | 187 |  |  | $ | 444 |
LTV 55% to 65% |  |  |  |  |  | 14 |  |  |  | 20 |  |  |  | 14 |  |  |  | 15 |  |  |  | 11 |  |  |  | 74 |
LTV greater than 65% |  | $ | 5 |  |  |  |  |  |  |  | 5 |  |  |  |  |  |  |  |  |  |  |  | 24 |  |  |  | 34 |
DSCR 1.2x - 1.6x |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
LTV less than 55% |  |  |  |  |  |  |  |  |  |  | 16 |  |  |  |  |  |  |  | 5 |  |  |  | 77 |  |  |  | 98 |
LTV 55% to 65% |  |  |  |  |  |  | 20 |  |  |  | 40 |  |  |  | 53 |  |  |  | 27 |  |  |  |  |  |  |  | 140 |
LTV greater than 65% |  |  | 10 |  |  |  | 52 |  |  |  | 44 |  |  |  |  |  |  |  | 9 |  |  |  | 12 |  |  |  | 127 |
DSCR ≤1.2x |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
LTV less than 55% |  |  |  |  |  |  |  |  |  |  | 50 |  |  |  |  |  |  |  | 8 |  |  |  | 10 |  |  |  | 68 |
LTV 55% to 65% |  |  |  |  |  |  |  |  |  |  | 48 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 48 |
LTV greater than 65% |  |  |  |  |  |  |  |  |  |  | 29 |  |  |  |  |  |  |  |  |  |  |  | 7 |  |  |  | 36 |
Total |  | $ | 15 |  |  | $ | 161 |  |  | $ | 284 |  |  | $ | 103 |  |  | $ | 178 |  |  | $ | 328 |  |  | $ | 1,069 |
(a) | The values in the table above reflect DSCR on a standardized amortization period and LTV ratios based on the most recent appraised values trended forward using changes in a commercial real estate price index.
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 related 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.
|  | March 31, 2021 |  |  | December 31, 2020 |
|  | Contractual/ Notional |  |  | Estimated Fair Value |  |  | Contractual/ Notional |  |  | Estimated Fair Value |
|  | Amount |  |  | Asset |  |  | (Liability) |  |  | Amount |  |  | Asset |  |  | (Liability) |
(In millions) |  |  |  |  | _ |  |  |  | - |  |  |  |  |  |  |  |  |  |
With hedge designation: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps (a) |  |  |  |  |  |  |  |  |  |  |  | $ | 675 |  |  |  |  |  | $ | (26 | )
Without hedge designation: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Equity markets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Options – purchased |  | $ | 200 |  |  | $ | 2 |  |  | _ |  |  |  | 135 |  |  | $ | 3 |  |  |  |  |
Interest rate swaps |  |  | 100 |  |  |  |  |  |  | $ | (2 | ) |  |  | 100 |  |  |  |  |  |  |  | (3 | )
Embedded derivative on funds withheld liability |  |  | 256 |  |  |  |  |  |  |  | (2 | ) |  |  | 190 |  |  |  |  |  |  |  | (19 | )
(a) | As of March 31, 2021, Interest rate swaps exclude amounts classified as held for sale. See Note 2 for further discussion.
Investment Commitments As part of the overall investment strategy, investments are made in various assets which require future purchase, sale or funding commitments. These investments are recorded once funded, and the related commitments may include future capital calls from various third-party limited partnerships, signed and accepted mortgage loan applications and obligations related to private placement securities. As of March 31, 2021, commitments to purchase or fund were approximately $1.4 billion and to sell were approximately $100 million under the terms of these investments.

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