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Investments | 12 Months Ended
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Dec. 31, 2022
Investments [Abstract] |
Investments | 2. INVESTMENTS The tables below present the amortized cost, allowance for credit losses, gross unrealized appreciation/(depreciation) and market value of fixed maturity securities - available for sale for the periods indicated. At December 31, 2022 Amortized Allowance for Unrealized Unrealized Fair (Dollars in millions) Cost Credit Losses Appreciation Depreciation Value Fixed maturity securities - available for sale: U.S. Treasury securities and obligations of U.S. government agencies and corporations $ 1,334 $ - $ 6 $ (82) $ 1,257 Obligations of U.S. states and political subdivisions 444 - 2 (32) 413 Corporate securities 7,044 (45) 31 (561) 6,469 Asset-backed securities 4,229 - 5 (171) 4,063 Mortgage-backed securities Commercial 1,023 - - (105) 919 Agency residential 3,382 - 7 (290) 3,099 Non-agency residential 5 - - (1) 4 Foreign government securities 1,586 - 8 (179) 1,415 Foreign corporate securities 5,143 (10) 23 (562) 4,596 Total fixed maturity securities - available for sale $ 24,191 $ (54) $ 81 $ (1,982) $ 22,236 (Some amounts may not reconcile due to rounding.) At December 31, 2021 Amortized Allowance for Unrealized Unrealized Fair (Dollars in millions) Cost Credit Losses Appreciation Depreciation Value Fixed maturity securities - available for sale: U.S. Treasury securities and obligations of U.S. government agencies and corporations $ 1,407 $ - $ 24 $ (10) $ 1,421 Obligations of U.S. states and political subdivisions 559 - 29 (1) 587 Corporate securities 7,444 (19) 195 (63) 7,557 Asset-backed securities 3,579 (8) 22 (12) 3,582 Mortgage-backed securities Commercial 1,032 - 38 (6) 1,064 Agency residential 2,361 - 33 (19) 2,375 Non-agency residential 7 - - - 7 Foreign government securities 1,424 - 42 (28) 1,438 Foreign corporate securities 4,251 (3) 95 (65) 4,279 Total fixed maturity securities - available for sale $ 22,064 $ (30) $ 478 $ (203) $ 22,308 (Some amounts may not reconcile due to rounding.) The following table shows amortized cost, allowance for credit losses, gross unrealized appreciation/(depreciation) and fair value of fixed maturity securities held to maturity for the periods indicated: At December 31, 2022 Amortized Allowance for Unrealized Unrealized Fair (Dollars in millions) Cost Credit Losses Appreciation Depreciation Value Fixed maturity securities - held to maturity: Corporate securities $ 152 $ (2) $ - $ (6) $ 144 Asset-backed securities 661 (6) 2 (15) 642 Mortgage-backed securities - Commercial 7 - - - 7 Foreign corporate securities 28 (1) 2 - 28 Total fixed maturity securities - held to maturity $ 848 $ (9) $ 3 $ (22) $ 821 (Some amounts may not reconcile due to rounding.) The amortized cost and market value of fixed maturity securities available for sale are shown in the following table by contractual maturity. Mortgage-backed securities are generally more likely to be prepaid than other fixed maturity securities. As the stated maturity of such securities may not be indicative of actual maturities, the totals for mortgage-backed and asset-backed securities are shown separately. At December 31, 2022 At December 31, 2021 Amortized Fair Amortized Fair (Dollars in millions) Cost Value Cost Value Fixed maturity securities – available for sale: Due in one year or less $ 1,331 $ 1,314 $ 1,399 $ 1,398 Due after one year through five years 8,131 7,546 7,075 7,154 Due after five years through ten years 4,636 4,057 5,004 5,101 Due after ten years 1,454 1,233 1,606 1,627 Asset-backed securities 4,229 4,063 3,579 3,582 Mortgage-backed securities: Commercial 1,023 919 1,032 1,064 Agency residential 3,382 3,099 2,361 2,375 Non-agency residential 5 4 7 7 Total fixed maturity securities -available for sale $ 24,191 $ 22,236 $ 22,064 $ 22,308 (Some amounts may not reconcile due to rounding.) The amortized cost and fair value of fixed maturity securities held to maturity are shown in the following table by contractual maturity. Mortgage-backed securities are generally more likely to be prepaid than other fixed maturity securities. As the stated maturity of such securities may not be indicative of actual maturities, the totals for mortgage-backed and asset-backed securities are shown separately. At December 31, 2022 Amortized Fair (Dollars in millions) Cost Value Fixed maturity securities – held to maturity: Due in one year or less $ 5 $ 5 Due after one year through five years 63 61 Due after five years through ten years 43 41 Due after ten years 68 65 Asset-backed securities 661 642 Mortgage-backed securities: Commercial 7 7 Total fixed maturity securities - held to maturity $ 848 $ 821 (Some amounts may not reconcile due to rounding.) During 2022, the Company re-designated a portion of its fixed maturity securities from its fixed maturity – available for sale portfolio to its fixed maturity – held to maturity portfolio. The fair value of the securities reclassified at the date of transfer was $ 722 million, net of allowance for current expected credit losses, which was subsequently recognized as the new amortized cost basis. As of the date of transfer, these securities had an unrealized loss of $ 53 million, which remained in accumulated other comprehensive income on the balance sheet and will be amortized into income through an adjustment to the yields of the underlying securities over the remaining life of the securities. The Company evaluated fixed maturity securities classified as held to maturity for current expected credit losses as of December 31, 2022 utilizing risk characteristics of each security, including credit rating, remaining time to maturity, adjusted for prepayment considerations, and subordination level, and applying default and recovery rates, which include the incorporation of historical credit loss experience and macroeconomic forecasts, to develop an estimate of current expected credit losses. These fixed maturities classified as held to maturity are of a high credit quality and are all rated investment grade as of December 31, 2022. The changes in net unrealized appreciation (depreciation) for the Company’s investments are derived from the following sources for the periods indicated: Years Ended December 31, (Dollars in millions) 2022 2021 Increase (decrease) during the period between the fair value and cost of investments carried at fair value, and deferred taxes thereon: Fixed maturity securities and short-term investments $ (2,225) $ (542) Change in unrealized appreciation (depreciation), pre-tax (2,225) (542) Deferred tax benefit (expense) 277 58 Change in unrealized appreciation (depreciation), net of deferred taxes, included in shareholders’ equity $ (1,948) $ (485) (Some amounts may not reconcile due to rounding.) The tables below display the aggregate market value and gross unrealized depreciation of fixed maturity securities, by security type and contractual maturity, in each case subdivided according to length of time that individual securities had been in a continuous unrealized loss position for the periods indicated. Duration of Unrealized Loss at December 31, 2022 By Security Type Less than 12 months Greater than 12 months Total Gross Gross Gross Unrealized Unrealized Unrealized (Dollars in millions) Fair Value Depreciation Fair Value Depreciation Fair Value Depreciation Fixed maturity securities - available for sale: U.S. Treasury securities and obligations of U.S. government agencies and corporations $ 668 $ (31) $ 487 $ (52) $ 1,155 $ (82) Obligations of U.S. states and political subdivisions 235 (23) 27 (9) 261 (32) Corporate securities 4,143 (326) 1,316 (234) 5,459 (561) Asset-backed securities 3,204 (142) 456 (29) 3,661 (171) Mortgage-backed securities Commercial 806 (90) 101 (15) 907 (105) Agency residential 1,905 (132) 870 (158) 2,776 (289) Non-agency residential 4 - 1 (1) 4 - Foreign government securities 985 (100) 321 (79) 1,306 (179) Foreign corporate securities 3,264 (372) 853 (189) 4,117 (561) Total $ 15,213 $ (1,217) $ 4,432 $ (764) $ 19,645 $ (1,982) Securities where an allowance for credit loss was recorded 2 - - - 2 - Total fixed maturity securities - available for sale $ 15,215 $ (1,217) $ 4,432 $ (764) $ 19,647 $ (1,982) (Some amounts may not reconcile due to rounding.) Duration of Unrealized Loss at December 31, 2022 By Maturity Less than 12 months Greater than 12 months Total Gross Gross Gross Unrealized Unrealized Unrealized (Dollars in millions) Fair Value Depreciation Fair Value Depreciation Fair Value Depreciation Fixed maturity securities - available for sale: Due in one year or less $ 989 $ (19) $ 40 $ (7) $ 1,029 $ (26) Due in one year through five years 4,935 (383) 1,645 (209) 6,580 (592) Due in five years through ten years 2,698 (360) 911 (230) 3,609 (590) Due after ten years 672 (91) 408 (116) 1,080 (207) Asset-backed securities 3,204 (142) 456 (29) 3,661 (171) Mortgage-backed securities 2,715 (222) 972 (173) 3,687 (395) Total $ 15,213 $ (1,217) $ 4,432 $ (764) $ 19,645 $ (1,982) Securities where an allowance for credi t loss was recorded 2 - - - 2 - Total fixed maturity securities - available for sale $ 15,215 $ (1,217) $ 4,432 $ (764) $ 19,647 $ (1,982) (Some amounts may not reconcile due to rounding.) The aggregate market value and gross unrealized losses related to investments in an unrealized loss position at December 31, 2022 were $ 19.6 billion and $ 2.0 billion, respectively. The market value of securities for the single issuer (the United States government) whose securities comprised the largest unrealized loss position at December 31, 2022, did not exceed 5.2 % of the overall market value of the Company’s fixed maturity securities. The market value of the securities for the issuer with the second largest unrealized loss comprised less than 0.2 % of the Company’s fixed maturity securities. In addition, as indicated on the above table, there was no significant concentration of unrealized losses in any one market sector. The $ 1.2 billion of unrealized losses related to fixed maturity securities that have been in an unrealized loss position for less than one year were generally comprised of domestic and foreign corporate securities, asset-backed securities, agency residential mortgage-backed securities and foreign government securities. Of these unrealized losses, $ 1.1 billion were related to securities that were rated investment grade by at least one nationally recognized statistical rating agency. The $ 764 million of unrealized losses related to fixed maturity securities in an unrealized loss position for more than one year related primarily to domestic and foreign corporate securities, agency residential mortgage-backed securities and foreign government securities. Of these unrealized losses, $ 732 million were related to securities that were rated investment grade by at least one nationally recognized statistical rating agency. In all instances, there were no projected cash flow shortfalls to recover the full book value of the investments and the related interest obligations. The mortgage-backed securities still have excess credit coverage and are current on interest and principal payments. The Company, given the size of its investment portfolio and capital position, does not have the intent to sell these securities; and it is more likely than not that the Company will not have to sell the security before recovery of its cost basis. In addition, all securities currently in an unrealized loss position are current with respect to principal and interest payments. The tables below display the aggregate market value and gross unrealized depreciation of fixed maturity securities, by security type and contractual maturity, in each case subdivided according to length of time that individual securities had been in a continuous unrealized loss position for the periods indicated. The amounts presented in the tables below include $ 16 million of market value and $ (0.4) million of gross unrealized depreciation as of December 31, 2021 related to fixed maturity securities for which the Company has recorded an allowance for credit losses. Duration of Unrealized Loss at December 31, 2021 By Security Type Less than 12 months Greater than 12 months Total Gross Gross Gross Unrealized Unrealized Unrealized (Dollars in millions) Fair Value Depreciation Fair Value Depreciation Fair Value Depreciation Fixed maturity securities - available for sale: U.S. Treasury securities and obligations of U.S. government agencies and corporations $ 504 $ (6) $ 92 $ (4) $ 596 $ (10) Obligations of U.S. states and political subdivisions 51 (1) 3 - 54 (1) Corporate securities 2,133 (38) 473 (24) 2,605 (63) Asset-backed securities 1,954 (11) 42 (1) 1,996 (12) Mortgage-backed securities Commercial 222 (3) 40 (3) 262 (6) Agency residential 1,101 (12) 280 (7) 1,381 (19) Non-agency residential 2 - - - 2 - Foreign government securities 392 (10) 101 (18) 493 (28) Foreign corporate securities 1,735 (46) 211 (18) 1,945 (65) Total fixed maturity securities - available for sale $ 8,094 $ (128) $ 1,241 $ (75) $ 9,335 $ (203) (Some amounts may not reconcile due to rounding.) Duration of Unrealized Loss at December 31, 2021 By Maturity Less than 12 months Greater than 12 months Total Gross Gross Gross Unrealized Unrealized Unrealized (Dollars in millions) Fair Value Depreciation Fair Value Depreciation Fair Value Depreciation Fixed maturity securities - available for sale: Due in one year or less $ 130 $ (2) $ 137 $ (12) $ 267 $ (14) Due in one year through five years 2,165 (35) 446 (29) 2,612 (64) Due in five years through ten years 1,728 (47) 244 (22) 1,972 (69) Due after ten years 792 (16) 51 (3) 843 (19) Asset-backed securities 1,954 (11) 42 (1) 1,996 (12) Mortgage-backed securities 1,325 (15) 320 (10) 1,646 (25) Total fixed maturity securities - available for sale $ 8,094 $ (128) $ 1,241 $ (75) $ 9,335 $ (203) (Some amounts may not reconcile due to rounding.) The aggregate market value and gross unrealized losses related to investments in an unrealized loss position at December 31, 2021 were $ 9.3 billion and $ 203 million, respectively. The market value of securities for the single issuer (the United States government) whose securities comprised the largest unrealized loss position at December 31, 2021, did not exceed 2.7 % of the overall market value of the Company’s fixed maturity securities. The market value of the securities for the issuer with the second largest unrealized loss comprised less than 0.5 % of the Company’s fixed maturity securities. In addition, as indicated on the above table, there was no significant concentration of unrealized losses in any one market sector. The $ 128 million of unrealized losses related to fixed maturity securities that have been in an unrealized loss position for less than one year were generally comprised of domestic and foreign corporate securities, agency residential asset-backed securities and foreign government securities. Of these unrealized losses, $ 116 million were related to securities that were rated investment grade by at least one nationally recognized statistical rating agency. The $ 75 million of unrealized losses related to fixed maturity securities in an unrealized loss position for more than one year related primarily to domestic and foreign corporate securities, foreign government securities and agency residential mortgage- backed securities. Of these unrealized losses, $ 72 million were related to securities that were rated investment grade by at least one nationally recognized statistical rating agency. In all instances, there were no projected cash flow shortfalls to recover the full book value of the investments and the related interest obligations. The mortgage-backed securities still have excess credit coverage and are current on interest and principal payments. The components of net investment income are presented in the table below for the periods indicated: Years Ended December 31, (Dollars in millions) 2022 2021 2020 Fixed maturities $ 742 $ 561 $ 542 Equity securities 16 17 19 Short-term investments and cash 28 1 5 Other invested assets Limited partnerships 75 565 113 Other 29 63 2 Gross investment income before adjustments 890 1,208 681 Funds held interest income (expense) 2 12 13 Future policy benefit reserve income (expense) - (1) (1) Gross investment income 892 1,219 692 Investment expenses (62) (54) (50) Net investment income $ 830 $ 1,165 $ 642 (Some amounts may not reconcile due to rounding.) The Company records results from limited partnership investments on the equity method of accounting with changes in value reported through net investment income. The net investment income from limited partnerships is dependent upon the Company’s share of the net asset values of interests underlying each limited partnership. Due to the timing of receiving financial information from these partnerships, the results are generally reported on a one month or quarter lag. If the Company determines there has been a significant decline in value of a limited partnership during this lag period, a loss will be recorded in the period in which the Company identifies the decline. The Company had contractual commitments to invest up to an additional $ 2.6 billion in limited partnerships and private placement loans at December 31, 2022. These commitments will be funded when called in accordance with the partnership and loan agreements, which have investment periods that expire, unless extended, through 2026 . During the fourth quarter of 2022, the Company entered into corporate -owned life insurance policies, which are carried within other invested assets at policy cash surrender value of $ 939 million as of December 31, 2022. 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 Consolidated Financial Statements. As of December 31, 2022 and 2021, the Company did no t hold any securities for which it is the primary beneficiary. The Company, through normal investment activities, makes passive investments in general and 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 December 31, 2022 and 2021 is limited to the total carrying value of $ 4.1 billion and $ 2.9 billion, respectively, which are included in general and limited partnerships and other alternative investments in Other Invested Assets in the Company's Consolidated Balance Sheets. As of December 31, 2022, the Company has outstanding commitments totaling $ 2.1 billion 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. 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 asset-backed securities, which includes collateralized loan obligations and are classified as fixed maturities. The Company has not provided financial or other support with respect to these investments other than its original investment. For these investments, the Company determined it is not the primary beneficiary due to the relative size of the Company’s investment in comparison to the principal amount of the structured securities issued by the VIEs, the level of credit subordination which reduces the Company’s obligation to absorb losses or right to receive benefits and the Company’s inability to direct the activities that most significantly impact the economic performance of the VIEs. The Company’s maximum exposure to loss on these investments is limited to the amount of the Company’s investment. The components of net realized capital gains (losses) are presented in the table below for the periods indicated: Years Ended December 31, (Dollars in millions) 2022 2021 2020 Fixed maturity securities: Allowance for credit losses $ (33) $ (28) $ (2) Net realized gains (losses) from dispositions (87) 17 (5) Gains (losses) from fair value adjustments - - 2 Equity securities: Net realized gains (losses) from dispositions 112 28 (9) Gains (losses) from fair value adjustments (460) 236 278 Other invested assets 13 6 2 Short-term investments gain (loss) - - 1 Total net realized gains (losses) on investments $ (455) $ 258 $ 268 (Some amounts may not reconcile due to rounding.) The following tables provide a roll forward of the Company’s beginning and ending balance of allowance for credit losses for the periods indicated: Roll Forward of Allowance for Credit Losses Twelve Months Ended December 31, 2022 Foreign Corporate Asset-Backed Corporate Securities Securities Securities Total (Dollars in millions) Beginning Balance $ (19) $ (8) $ (3) $ (30) Credit losses on securities where credit losses were not previously recorded (1) (13) (6) (17) (35) Increases in allowance on previously impaired securities (20) - (1) (21) Decreases in allowance on previously impaired securities - - - - Reduction in allowance due to disposals 6 8 10 23 Balance as of December 31 $ (46) $ (6) $ (11) $ (63) (Some amounts may not reconcile due to rounding.) (1) Credit losses recorded as of December 31, 2022 for HTM were $ 2 million, $ 6 million and $ 1 million for Corporate, asset-backed securities and foreign corporate securities, respectively. The proceeds and split between gross gains and losses, from sales of fixed maturity securities - available for sale and equity securities, are presented in the table below for the periods indicated: Years Ended December 31, (Dollars in millions) 2022 2021 2020 Proceeds from sales of fixed maturity securities - available for sale $ 1,403 $ 1,916 $ 1,951 Gross gains from sales 40 72 80 Gross losses from sales (127) (55) (85) Proceeds from sales of equity securities $ 2,217 $ 990 $ 376 Gross gains from sales 165 42 37 Gross losses from sales (53) (15) (46) Securities with a carrying value amount of $ 1.4 billion at December 31, 2022 were on deposit with various state or governmental insurance departments in compliance with insurance laws.

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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 https://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 https://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 https://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 https://asc.fasb.org/subtopic&trid=2176304 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher SEC -Name Regulation S-K (SK) -Number 229 -Section 1403 -Paragraph (b) + Details
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