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Investments | 3 Months Ended
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Mar. 31, 2020
Investments [Abstract] |
Investments | Investments Fixed Maturity Securities Available-for-Sale The Company holds various types of fixed maturity securities available-for-sale and classifies them as corporate securities (“Corporate”), Canadian and Canadian provincial government securities (“Canadian government”), residential mortgage-backed securities (“RMBS”), asset-backed securities (“ABS”), commercial mortgage-backed securities (“CMBS”), U.S. government and agencies (“U.S. government”), state and political subdivisions, and other foreign government, supranational and foreign government-sponsored enterprises (“Other foreign government”). RMBS, ABS and CMBS are collectively “structured securities.” The following tables provide information relating to investments in fixed maturity securities by type as of March 31, 2020 and December 31, 2019 (dollars in millions):
March 31, 2020: |  | Amortized |  | Allowance for |  | Unrealized |  | Unrealized |  | Estimated Fair |  | % of
|  | Cost |  | Credit Losses |  | Gains |  | Losses |  | Value |  | Total
Available-for-sale: |  |  |  |  |  |  |  |  |  |  |  |
Corporate |  | $ | 29,203 |  |  | $ | 26 |  |  | $ | 1,294 |  |  | $ | 977 |  |  | $ | 29,494 |  |  | 60.8 | %
Canadian government |  | 2,793 |  |  | — |  |  | 1,445 |  |  | 1 |  |  | 4,237 |  |  | 8.7 |
RMBS |  | 2,241 |  |  | — |  |  | 77 |  |  | 27 |  |  | 2,291 |  |  | 4.7 |
ABS |  | 2,940 |  |  | — |  |  | 4 |  |  | 277 |  |  | 2,667 |  |  | 5.5 |
CMBS |  | 1,841 |  |  | — |  |  | 24 |  |  | 56 |  |  | 1,809 |  |  | 3.7 |
U.S. government |  | 1,398 |  |  | — |  |  | 244 |  |  | — |  |  | 1,642 |  |  | 3.4 |
State and political subdivisions |  | 1,071 |  |  | — |  |  | 108 |  |  | 10 |  |  | 1,169 |  |  | 2.4 |
Other foreign government |  | 5,133 |  |  | 7 |  |  | 233 |  |  | 113 |  |  | 5,246 |  |  | 10.8 |
Total fixed maturity securities |  | $ | 46,620 |  |  | $ | 33 |  |  | $ | 3,429 |  |  | $ | 1,461 |  |  | $ | 48,555 |  |  | 100.0 | %
December 31, 2019: |  | Amortized |  | Unrealized |  | Unrealized |  | Estimated Fair |  | % of |  | Impairments
|  | Cost |  | Gains |  | Losses |  | Value |  | Total |  | in AOCI
Available-for-sale: |  |  |  |  |  |  |  |  |  |  |  |
Corporate |  | $ | 29,205 |  |  | $ | 2,269 |  |  | $ | 81 |  |  | $ | 31,393 |  |  | 61.4 | % |  | $ | — |
Canadian government |  | 3,016 |  |  | 1,596 |  |  | — |  |  | 4,612 |  |  | 9.0 |  |  | — |
RMBS |  | 2,339 |  |  | 62 |  |  | 3 |  |  | 2,398 |  |  | 4.7 |  |  | — |
ABS |  | 2,973 |  |  | 19 |  |  | 14 |  |  | 2,978 |  |  | 5.8 |  |  | — |
CMBS |  | 1,841 |  |  | 61 |  |  | 3 |  |  | 1,899 |  |  | 3.7 |  |  | — |
U.S. government |  | 2,096 |  |  | 57 |  |  | 1 |  |  | 2,152 |  |  | 4.2 |  |  | — |
State and political subdivisions |  | 1,074 |  |  | 93 |  |  | 3 |  |  | 1,164 |  |  | 2.3 |  |  | — |
Other foreign government |  | 4,209 |  |  | 321 |  |  | 5 |  |  | 4,525 |  |  | 8.9 |  |  | — |
Total fixed maturity securities |  | $ | 46,753 |  |  | $ | 4,478 |  |  | $ | 110 |  |  | $ | 51,121 |  |  | 100.0 | % |  | $ | — |
The Company enters into various collateral arrangements with counterparties that require both the pledging and acceptance of fixed maturity securities as collateral. Pledged fixed maturity securities are included in fixed maturity securities available-for-sale in the condensed consolidated balance sheets. Fixed maturity securities received as collateral are held in separate custodial accounts and are not recorded on the Company’s condensed consolidated balance sheets. Subject to certain constraints, the Company is permitted by contract to sell or repledge collateral it receives; however, as of March 31, 2020 and December 31, 2019, none of the collateral received had been sold or repledged. The Company also holds assets in trust to satisfy collateral requirements under derivative transactions and certain third-party reinsurance treaties. The following table includes fixed maturity securities pledged and received as collateral and assets in trust held to satisfy collateral requirements under derivative transactions and certain third-party reinsurance treaties as of March 31, 2020 and December 31, 2019 (dollars in millions):
| March 31, 2020 |  | December 31, 2019
| Amortized Cost |  | Estimated Fair Value |  | Amortized Cost |  | Estimated Fair Value
Fixed maturity securities pledged as collateral | $ | 142 |  |  | $ | 154 |  |  | $ | 113 |  |  | $ | 116 |
Fixed maturity securities received as collateral | n/a |  |  | 1,172 |  |  | n/a |  |  | 727 |
Assets in trust held to satisfy collateral requirements | 27,080 |  |  | 27,441 |  |  | 27,290 |  |  | 29,239 |
The Company monitors its concentrations of financial instruments on an ongoing basis and mitigates credit risk by maintaining a diversified investment portfolio that limits exposure to any one issuer. The Company’s exposure to concentrations of credit risk from single issuers greater than 10% of the Company’s stockholders’ equity included securities of the U.S. government and its agencies, as well as the securities disclosed below, as of March 31, 2020 and December 31, 2019 (dollars in millions).
| March 31, 2020 |  | December 31, 2019
| Amortized Cost |  | Estimated Fair Value |  | Amortized Cost |  | Estimated Fair Value
Fixed maturity securities guaranteed or issued by: |  |  |  |  |  |  |
Government of Japan | $ | 1,660 |  |  | $ | 1,672 |  |  | $ | 813 |  |  | $ | 852 |
Canadian province of Quebec | 1,132 |  |  | 1,986 |  |  | 1,205 |  |  | 2,163 |
Canadian province of Ontario | 941 |  |  | 1,289 |  |  | 1,014 |  |  | 1,379 |
The amortized cost and estimated fair value of fixed maturity securities classified as available-for-sale as of March 31, 2020, are shown by contractual maturity in the table below (dollars in millions). Actual maturities can differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Structured securities are shown separately in the table below, as they are not due at a single maturity date.
|  | Amortized Cost |  | Estimated Fair Value
Available-for-sale: |  |  |  |
Due in one year or less |  | $ | 1,176 |  |  | $ | 1,172 |
Due after one year through five years |  | 8,125 |  |  | 8,184 |
Due after five years through ten years |  | 9,629 |  |  | 9,880 |
Due after ten years |  | 20,668 |  |  | 22,552 |
Structured securities |  | 7,022 |  |  | 6,767 |
Total |  | $ | 46,620 |  |  | $ | 48,555 |
Corporate Fixed Maturity Securities The tables below show the major sectors of the Company’s corporate fixed maturity holdings as of March 31, 2020 and December 31, 2019 (dollars in millions):
March 31, 2020: |  |  |  | Estimated |  |
|  | Amortized Cost |  | Fair Value |  | % of Total
Finance |  | $ | 10,979 |  |  | $ | 11,056 |  |  | 37.5 | %
Industrial |  | 14,703 |  |  | 14,756 |  |  | 50.0 |
Utility |  | 3,521 |  |  | 3,682 |  |  | 12.5 |
Total |  | $ | 29,203 |  |  | $ | 29,494 |  |  | 100.0 | %
December 31, 2019: |  |  |  | Estimated |  |
|  | Amortized Cost |  | Fair Value |  | % of Total
Finance |  | $ | 10,896 |  |  | $ | 11,653 |  |  | 37.2 | %
Industrial |  | 14,692 |  |  | 15,803 |  |  | 50.3 |
Utility |  | 3,617 |  |  | 3,937 |  |  | 12.5 |
Total |  | $ | 29,205 |  |  | $ | 31,393 |  |  | 100.0 | %
Allowance for Credit Losses and Impairments – Fixed Maturity Securities Available-for-Sale As discussed in Note 1 – “Business and Basis of Presentation,” allowances for credit losses on fixed maturity securities are recognized in investment related gains (losses), net on the condensed consolidated statements of income. For these securities, the net amount recognized represents the difference between the amortized cost of the security and the net present value of its projected future cash flows discounted at the effective interest rate implicit in the fixed maturity security prior to the allowance for credit losses. Any remaining difference between the fair value and amortized cost is recognized in AOCI. The amount of pre-tax credit loss impairments on fixed maturity securities held by the Company, for which a portion of the impairment loss was recognized in AOCI, was $2 million and $4 million as of March 31, 2020 and March 31, 2019, respectively. There were no changes in these amounts from their respective prior-year ending balances. The following table presents the rollforward of the allowance for credit losses in fixed maturity securities by type as of March 31, 2020 (dollars in millions):
| March 31, 2020
| Corporate |  | Other Foreign Government |  | Total
Balance, beginning of period | $ | — |  |  | $ | — |  |  | $ | — |
Credit losses recognized on securities for which credit losses were not previously recorded | 26 |  |  | 7 |  |  | 33 |
Balance, end of period | $ | 26 |  |  | $ | 7 |  |  | $ | 33 |
Unrealized Losses for Fixed Maturity Securities Available-for-Sale The following table presents the total gross unrealized losses for the 3,102 and 1,072 fixed maturity securities as of March 31, 2020 and December 31, 2019, where the estimated fair value had declined and remained below amortized cost by the indicated amount (dollars in millions):
|  | March 31, 2020 |  | December 31, 2019
|  | Gross Unrealized Losses |  | % of Total |  | Gross Unrealized Losses |  | % of Total
Less than 20% |  | $ | 1,052 |  |  | 72.0 | % |  | $ | 76 |  |  | 69.1 | %
20% or more for less than six months |  | 409 |  |  | 28.0 |  |  | 20 |  |  | 18.2 |
20% or more for six months or greater |  | — |  |  | — |  |  | 14 |  |  | 12.7 |
Total |  | $ | 1,461 |  |  | 100.0 | % |  | $ | 110 |  |  | 100.0 | %
The Company’s determination of whether a decline in value necessitates the recording of an allowance for credit losses includes an analysis of whether the issuer is current on its contractual payments, evaluating whether it is probable that the Company will be able to collect all amounts due according to the contractual terms of the security and analyzing the overall ability of the Company to recover the amortized cost of the investment. The following tables present the estimated fair values and gross unrealized losses for fixed maturity securities that have estimated fair values below amortized cost as of March 31, 2020 and December 31, 2019 (dollars in millions). These investments are presented by class and grade of security, as well as the length of time the related fair value has remained below amortized cost.
|  | Less than 12 months |  | 12 months or greater |  | Total
|  |  |  | Gross |  |  |  | Gross |  |  |  | Gross
March 31, 2020: |  | Estimated |  | Unrealized |  | Estimated |  | Unrealized |  | Estimated |  | Unrealized
|  | Fair Value |  | Losses |  | Fair Value |  | Losses |  | Fair Value |  | Losses
Investment grade securities: |  |  |  |  |  |  |  |  |  |  |  |
Corporate |  | $ | 9,666 |  |  | $ | 729 |  |  | $ | 93 |  |  | $ | 18 |  |  | $ | 9,759 |  |  | $ | 747 |
Canadian government |  | — |  |  | — |  |  | 6 |  |  | 1 |  |  | 6 |  |  | 1 |
RMBS |  | 1,047 |  |  | 25 |  |  | 41 |  |  | 2 |  |  | 1,088 |  |  | 27 |
ABS |  | 1,936 |  |  | 203 |  |  | 552 |  |  | 65 |  |  | 2,488 |  |  | 268 |
CMBS |  | 913 |  |  | 52 |  |  | 21 |  |  | 1 |  |  | 934 |  |  | 53 |
U.S. government |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
State and political subdivisions |  | 158 |  |  | 9 |  |  | 12 |  |  | 1 |  |  | 170 |  |  | 10 |
Other foreign government |  | 1,813 |  |  | 94 |  |  | 7 |  |  | 4 |  |  | 1,820 |  |  | 98 |
Total investment grade securities |  | 15,533 |  |  | 1,112 |  |  | 732 |  |  | 92 |  |  | 16,265 |  |  | 1,204 |
Below investment grade securities: |  |  |  |  |  |  |  |  |  |  |  |
Corporate |  | 1,106 |  |  | 219 |  |  | 66 |  |  | 11 |  |  | $ | 1,172 |  |  | $ | 230 |
ABS |  | 15 |  |  | 9 |  |  | — |  |  | — |  |  | 15 |  |  | 9 |
CMBS |  | 23 |  |  | 3 |  |  | — |  |  | — |  |  | 23 |  |  | 3 |
Other foreign government |  | 150 |  |  | 13 |  |  | 7 |  |  | 2 |  |  | 157 |  |  | 15 |
Total below investment grade securities |  | 1,294 |  |  | 244 |  |  | 73 |  |  | 13 |  |  | 1,367 |  |  | 257 |
Total fixed maturity securities |  | $ | 16,827 |  |  | $ | 1,356 |  |  | $ | 805 |  |  | $ | 105 |  |  | $ | 17,632 |  |  | $ | 1,461 |
|  | Less than 12 months |  | 12 months or greater |  | Total
|  |  |  | Gross |  |  |  | Gross |  |  |  | Gross
December 31, 2019: |  | Estimated |  | Unrealized |  | Estimated |  | Unrealized |  | Estimated |  | Unrealized
|  | Fair Value |  | Losses |  | Fair Value |  | Losses |  | Fair Value |  | Losses
Investment grade securities: |  |  |  |  |  |  |  |  |  |  |  |
Corporate |  | $ | 1,936 |  |  | $ | 29 |  |  | $ | 293 |  |  | $ | 7 |  |  | $ | 2,229 |  |  | $ | 36 |
Canadian government |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
RMBS |  | 367 |  |  | 2 |  |  | 84 |  |  | 1 |  |  | 451 |  |  | 3 |
ABS |  | 773 |  |  | 5 |  |  | 739 |  |  | 9 |  |  | 1,512 |  |  | 14 |
CMBS |  | 253 |  |  | 3 |  |  | — |  |  | — |  |  | 253 |  |  | 3 |
U.S. government |  | 49 |  |  | 1 |  |  | — |  |  | — |  |  | 49 |  |  | 1 |
State and political subdivisions |  | 103 |  |  | 2 |  |  | 12 |  |  | 1 |  |  | 115 |  |  | 3 |
Other foreign government |  | 278 |  |  | 4 |  |  | — |  |  | — |  |  | 278 |  |  | 4 |
Total investment grade securities |  | 3,759 |  |  | 46 |  |  | 1,128 |  |  | 18 |  |  | 4,887 |  |  | 64 |
Below investment grade securities: |  |  |  |  |  |  |  |  |  |  |  |
Corporate |  | 220 |  |  | 38 |  |  | 100 |  |  | 7 |  |  | 320 |  |  | 45 |
ABS |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
CMBS |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Other foreign government |  | — |  |  | — |  |  | 10 |  |  | 1 |  |  | 10 |  |  | 1 |
Total below investment grade securities |  | 220 |  |  | 38 |  |  | 110 |  |  | 8 |  |  | 330 |  |  | 46 |
Total fixed maturity securities |  | $ | 3,979 |  |  | $ | 84 |  |  | $ | 1,238 |  |  | $ | 26 |  |  | $ | 5,217 |  |  | $ | 110 |
The Company has no intention to sell, nor does it expect to be required to sell, the securities outlined in the table above, as of the dates indicated. However, unforeseen facts and circumstances may cause the Company to sell fixed maturity securities in the ordinary course of managing its portfolio to meet certain diversification, credit quality and liquidity guidelines. Changes in unrealized losses are primarily driven by changes in interest rates. Investment Income, Net of Related Expenses Major categories of investment income, net of related expenses, consist of the following (dollars in millions):
| Three months ended March 31,
| 2020 |  | 2019
Fixed maturity securities available-for-sale | $ | 480 |  |  | $ | 415 |
Equity securities | 2 |  |  | 1 |
Mortgage loans on real estate | 67 |  |  | 60 |
Policy loans | 15 |  |  | 14 |
Funds withheld at interest | 53 |  |  | 62 |
Short-term investments and cash and cash equivalents | 4 |  |  | 7 |
Other invested assets | (5 | ) |  | 42 |
Investment income | 616 |  |  | 601 |
Investment expense | (22 | ) |  | (21 | )
Investment income, net of related expenses | $ | 594 |  |  | $ | 580 |
Investment Related Gains (Losses), Net Investment related gains (losses), net, consist of the following (dollars in millions):
| Three months ended March 31,
| 2020 |  | 2019
Fixed maturity securities available-for-sale: |  |  |
Impairment losses and change in allowance for credit losses | $ | (34 | ) |  | $ | (9 | )
Gain on investment activity | 27 |  |  | 28 |
Loss on investment activity | (8 | ) |  | (19 | )
Net gains (losses) on equity securities | (23 | ) |  | 4 |
Other impairment losses and change in mortgage loan provision | (13 | ) |  | (2 | )
Derivatives and other, net | (234 | ) |  | 6 |
Total investment related gains (losses), net | $ | (285 | ) |  | $ | 8 |
The impairment losses and change in allowance for credit losses on fixed maturity securities for the three months ended March 31, 2020, includes $1 million in impairment losses on securities the Company intends to sell and an increase of $33 million in the allowance for credit losses related to high-yield securities as result of the uncertainty in the global markets due to the novel coronavirus (“COVID-19”) pandemic. The fixed maturity impairment losses for the three months ended March 31, 2019, were primarily related to a U.S. utility company. The fluctuations in investment related gains (losses) for equity securities for the three months ended March 31, 2020, was primarily driven by the change in unrealized gains/losses of these securities recognized in earnings due to the broad market weakness related to the COVID-19 pandemic. The other impairment losses and change in mortgage loan provision for the three months ended March 31, 2020, were primarily due to an increase in the mortgage loan valuation allowance to reflect the estimated impact from the COVID-19 pandemic. The fluctuations in investment related gains (losses) for derivatives and other for the three months ended March 31, 2020, compared to the same period in 2019, are primarily due to changes in the fair value of embedded derivatives related to modified coinsurance and funds withheld treaties, as a result of changes in interest rates, and widening credit spreads, both of which were a result of the COVID-19 pandemic uncertainty. Securities Borrowing, Lending and Other The following table includes the amount of borrowed securities, securities lent and securities collateral received as part of the securities lending program and repurchased/reverse repurchased securities pledged and received as of March 31, 2020 and December 31, 2019 (dollars in millions).
| March 31, 2020 |  | December 31, 2019
| Amortized Cost |  | Estimated Fair Value |  | Amortized Cost |  | Estimated Fair Value
Borrowed securities | $ | 325 |  |  | $ | 334 |  |  | $ | 339 |  |  | $ | 369 |
Securities lending: |  |  |  |  |  |  |
Securities loaned | 98 |  |  | 99 |  |  | 98 |  |  | 104 |
Securities received | n/a |  |  | 107 |  |  | n/a |  |  | 107 |
Repurchase program/reverse repurchase program: |  |  |  |  |  |  |
Securities pledged | 398 |  |  | 408 |  |  | 356 |  |  | 384 |
Securities received | n/a |  |  | 344 |  |  | n/a |  |  | 370 |
The Company held cash collateral for repurchase/reverse repurchase programs of $5 million and $1 million as of March 31, 2020 and December 31, 2019, respectively. No cash or securities were pledged by the Company for its securities borrowing program as of March 31, 2020 and December 31, 2019. The following tables present information on the Company’s securities lending and repurchase/reverse repurchase transactions as of March 31, 2020 and December 31, 2019 (dollars in millions). Collateral associated with certain borrowed securities is not included within the tables, as the collateral pledged to each counterparty is the right to reinsurance treaty cash flows.
| March 31, 2020
| Remaining Contractual Maturity of the Agreements
| Overnight and Continuous |  | Up to 30 Days |  | 30-90 Days |  | Greater than 90 Days |  | Total
Securities lending transactions: |  |  |  |  |  |  |  |  |
Corporate | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 99 |  |  | $ | 99 |
Total | — |  |  | — |  |  | — |  |  | 99 |  |  | 99 |
Repurchase/reverse repurchase transactions: |  |  |  |  |  |  |  |  |
Corporate | — |  |  | — |  |  | — |  |  | 303 |  |  | 303 |
Other foreign government | — |  |  | — |  |  | — |  |  | 105 |  |  | 105 |
Total | — |  |  | — |  |  | — |  |  | 408 |  |  | 408 |
Total borrowings | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 507 |  |  | $ | 507 |
Gross amount of recognized liabilities for securities lending and repurchase/reverse repurchase transactions in preceding table |  | $ | 451 |
Amounts related to agreements not included in offsetting disclosure |  | $ | 56 |
| December 31, 2019
| Remaining Contractual Maturity of the Agreements
| Overnight and Continuous |  | Up to 30 Days |  | 30-90 Days |  | Greater than 90 Days |  | Total
Securities lending transactions: |  |  |  |  |  |  |  |  |
Corporate | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 104 |  |  | $ | 104 |
Total | — |  |  | — |  |  | — |  |  | 104 |  |  | 104 |
Repurchase/reverse repurchase transactions: |  |  |  |  |  |  |  |  |
Corporate | — |  |  | — |  |  | — |  |  | 286 |  |  | 286 |
Other foreign government | — |  |  | — |  |  | — |  |  | 98 |  |  | 98 |
Total | — |  |  | — |  |  | — |  |  | 384 |  |  | 384 |
Total borrowings | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 488 |  |  | $ | 488 |
Gross amount of recognized liabilities for securities lending and repurchase/reverse repurchase transactions in preceding table |  | $ | 478 |
Amounts related to agreements not included in offsetting disclosure |  | $ | 10 |
The Company has elected to offset amounts recognized as receivables and payables resulting from the repurchase/reverse repurchase programs. After the effect of offsetting, the net amount presented on the condensed consolidated balance sheets was a liability of $5 million and $1 million as of March 31, 2020 and December 31, 2019, respectively. As of March 31, 2020 and December 31, 2019, the Company recognized payables resulting from cash received as collateral associated with a repurchase/reverse repurchase agreement, as discussed above. Amounts owed to and due from the counterparties may be settled in cash or offset, in accordance with the agreements. Mortgage Loans on Real Estate As of March 31, 2020, mortgage loans are geographically dispersed throughout the U.S. with the largest concentrations in California (15.2%), Texas (14.7%) and Washington (8.7%) and include loans secured by properties in Canada (2.9%) and United Kingdom (0.9%). The recorded investment in mortgage loans on real estate presented below is gross of unamortized deferred loan origination fees and expenses, and valuation allowances. The distribution of mortgage loans by property type is as follows as of March 31, 2020 and December 31, 2019 (dollars in millions):
|  | March 31, 2020 |  | December 31, 2019
Property type: |  | Carrying Value |  | % of Total |  | Carrying Value |  | % of Total
Office building |  | $ | 1,783 |  |  | 29.4 | % |  | $ | 1,771 |  |  | 31.0 | %
Retail |  | 1,712 |  |  | 28.2 |  |  | 1,686 |  |  | 29.4 |
Industrial |  | 1,253 |  |  | 20.7 |  |  | 1,169 |  |  | 20.4 |
Apartment |  | 872 |  |  | 14.4 |  |  | 766 |  |  | 13.4 |
Other commercial |  | 443 |  |  | 7.3 |  |  | 335 |  |  | 5.8 |
Recorded investment |  | $ | 6,063 |  |  | 100.0 | % |  | $ | 5,727 |  |  | 100.0 | %
Unamortized balance of loan origination fees and expenses |  | (10 | ) |  |  |  | (9 | ) |  |
Valuation allowances |  | (39 | ) |  |  |  | (12 | ) |  |
Total mortgage loans on real estate |  | $ | 6,014 |  |  |  |  | $ | 5,706 |  |  |
The maturities of mortgage loans as of March 31, 2020 and December 31, 2019 are as follows (dollars in millions):
|  | March 31, 2020 |  | December 31, 2019
|  | Recorded Investment |  | % of Total |  | Recorded Investment |  | % of Total
Due within five years |  | $ | 2,011 |  |  | 33.2 | % |  | $ | 1,841 |  |  | 32.2 | %
Due after five years through ten years |  | 3,107 |  |  | 51.2 |  |  | 2,944 |  |  | 51.4 |
Due after ten years |  | 945 |  |  | 15.6 |  |  | 942 |  |  | 16.4 |
Total |  | $ | 6,063 |  |  | 100.0 | % |  | $ | 5,727 |  |  | 100.0 | %
The following tables set forth certain key credit quality indicators of the Company’s recorded investment in mortgage loans as of March 31, 2020 and December 31, 2019 (dollars in millions):
| Recorded Investment
| Debt Service Ratios |  |  |  |
| >1.20x |  | 1.00x - 1.20x |  | <1.00x |  | Total |  | % of Total
March 31, 2020: |  |  |  |  |  |  |  |  |
Loan-to-Value Ratio |  |  |  |  |  |  |  |  |
0% - 59.99% | $ | 3,119 |  |  | $ | 80 |  |  | $ | 5 |  |  | $ | 3,204 |  |  | 52.8 | %
60% - 69.99% | 2,015 |  |  | 40 |  |  | — |  |  | 2,055 |  |  | 33.9 |
70% - 79.99% | 565 |  |  | 12 |  |  | 39 |  |  | 616 |  |  | 10.2 |
Greater than 80% | 101 |  |  | 61 |  |  | 26 |  |  | 188 |  |  | 3.1 |
Total | $ | 5,800 |  |  | $ | 193 |  |  | $ | 70 |  |  | $ | 6,063 |  |  | 100.0 | %
| Recorded Investment
| Debt Service Ratios |  |  |  |
| >1.20x |  | 1.00x - 1.20x |  | <1.00x |  | Total |  | % of Total
December 31, 2019: |  |  |  |  |  |  |  |  |
Loan-to-Value Ratio |  |  |  |  |  |  |  |  |
0% - 59.99% | $ | 3,025 |  |  | $ | 52 |  |  | $ | 7 |  |  | $ | 3,084 |  |  | 53.8 | %
60% - 69.99% | 1,841 |  |  | 53 |  |  | 11 |  |  | 1,905 |  |  | 33.3 |
70% - 79.99% | 492 |  |  | 13 |  |  | 39 |  |  | 544 |  |  | 9.5 |
Greater than 80% | 96 |  |  | 61 |  |  | 37 |  |  | 194 |  |  | 3.4 |
Total | $ | 5,454 |  |  | $ | 179 |  |  | $ | 94 |  |  | $ | 5,727 |  |  | 100.0 | %
The following table sets forth credit quality grades by year of origination of the Company’s recorded investment in mortgage loans as of March 31, 2020 (dollars in millions):
| Recorded Investment
| Year of Origination |  |
| 2020 |  | 2019 |  | 2018 |  | 2017 |  | 2016 |  | Prior |  | Total
March 31, 2020: |  |  |  |  |  |  |  |  |  |  |  |  |
Internal credit quality grade: |  |  |  |  |  |  |  |  |  |  |  |  |
High investment grade | $ | 302 |  |  | $ | 675 |  |  | $ | 623 |  |  | $ | 403 |  |  | $ | 603 |  |  | $ | 1,177 |  |  | $ | 3,783 |
Investment grade | 236 |  |  | 516 |  |  | 317 |  |  | 342 |  |  | 269 |  |  | 422 |  |  | 2,102 |
Average | — |  |  | — |  |  | 10 |  |  | 25 |  |  | 27 |  |  | 95 |  |  | 157 |
Watch list | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 4 |  |  | 4 |
In or near default | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 17 |  |  | 17 |
Total | $ | 538 |  |  | $ | 1,191 |  |  | $ | 950 |  |  | $ | 770 |  |  | $ | 899 |  |  | $ | 1,715 |  |  | $ | 6,063 |
None of the payments due to the Company on its recorded investment in mortgage loans were delinquent as of March 31, 2020 and December 31, 2019. The following table presents the recorded investment in mortgage loans, by method of measuring impairment, and the related valuation allowances as of March 31, 2020 and December 31, 2019 (dollars in millions):
|  | March 31, 2020 |  | December 31, 2019
Mortgage loans: |  |  |  |
Individually measured for impairment |  | $ | 17 |  |  | $ | 17 |
Collectively measured for impairment |  | 6,046 |  |  | 5,710 |
Recorded investment |  | $ | 6,063 |  |  | $ | 5,727 |
Valuation allowances: |  |  |  |
Individually measured for impairment |  | $ | — |  |  | $ | — |
Collectively measured for impairment |  | 39 |  |  | 12 |
Total valuation allowances |  | $ | 39 |  |  | $ | 12 |
Information regarding the Company’s loan valuation allowances for mortgage loans for the three months ended March 31, 2020 and 2019 is as follows (dollars in millions):
| Three months ended March 31,
| 2020 |  | 2019
Balance, beginning of period | $ | 12 |  |  | $ | 11 |
Adoption of new accounting standard, see Note 13 | 14 |  |  | — |
Provision (release) | 13 |  |  | — |
Balance, end of period | $ | 39 |  |  | $ | 11 |
Information regarding the portion of the Company’s mortgage loans that were impaired as of March 31, 2020 and December 31, 2019 is as follows (dollars in millions):
|  | Unpaid Principal Balance |  | Recorded Investment |  | Related Allowance |  | Carrying Value
March 31, 2020: |  |  |  |  |  |  |  |
Impaired mortgage loans with no valuation allowance recorded |  | $ | 17 |  |  | $ | 17 |  |  | $ | — |  |  | $ | 17 |
Impaired mortgage loans with valuation allowance recorded |  | — |  |  | — |  |  | — |  |  | — |
Total impaired mortgage loans |  | $ | 17 |  |  | $ | 17 |  |  | $ | — |  |  | $ | 17 |
December 31, 2019: |  |  |  |  |  |  |  |
Impaired mortgage loans with no valuation allowance recorded |  | $ | 17 |  |  | $ | 17 |  |  | $ | — |  |  | $ | 17 |
Impaired mortgage loans with valuation allowance recorded |  | — |  |  | — |  |  | — |  |  | — |
Total impaired mortgage loans |  | $ | 17 |  |  | $ | 17 |  |  | $ | — |  |  | $ | 17 |
The Company’s average investment balance of impaired mortgage loans and the related interest income are reflected in the table below for the periods indicated (dollars in millions):
|  | Three months ended March 31,
|  | 2020 |  | 2019
|  | Average Recorded Investment(1) |  | Interest Income |  | Average Recorded Investment(1) |  | Interest Income
Impaired mortgage loans with no valuation allowance recorded |  | $ | 17 |  |  | $ | — |  |  | $ | 24 |  |  | $ | — |
Impaired mortgage loans with valuation allowance recorded |  | — |  |  | — |  |  | — |  |  | — |
Total impaired mortgage loans |  | $ | 17 |  |  | $ | — |  |  | $ | 24 |  |  | $ | — |
(1) Average recorded investment represents the average loan balances as of the beginning of period and all subsequent quarterly end of period balances. The Company did not acquire any impaired mortgage loans during the three months ended March 31, 2020 and 2019. The Company had no mortgage loans that were on a nonaccrual status as of March 31, 2020 and December 31, 2019. Policy Loans The majority of policy loans are associated with one client. These policy loans present no credit risk as the amount of the loan cannot exceed the obligation due to the ceding company upon the death of the insured or surrender of the underlying policy. The provisions of the treaties in force and the underlying policies determine the policy loan interest rates. The Company earns a spread between the interest rate earned on policy loans and the interest rate credited to corresponding liabilities. Funds Withheld at Interest As of March 31, 2020, $3.2 billion of the funds withheld at interest balance is associated with one client. For reinsurance agreements written on a modco basis and certain agreements written on a coinsurance funds withheld basis, assets equal to the net statutory reserves are withheld and legally owned and managed by the ceding company and are reflected as funds withheld at interest on the Company’s condensed consolidated balance sheets. In the event of a ceding company’s insolvency, the Company would need to assert a claim on the assets supporting its reserve liabilities. However, the risk of loss to the Company is mitigated by its ability to offset amounts it owes the ceding company for claims or allowances against amounts owed to the Company from the ceding company. Other Invested Assets Other invested assets include limited partnership interests, joint ventures (other than operating joint ventures), lifetime mortgages, derivative contracts and fair value option (“FVO”) contractholder-directed unit-linked investments. Other invested assets also includes FHLB common stock, which is included in Other in the table below. The allowance for credit losses for lifetime mortgages as of both March 31, 2020 and December 31, 2019, was $2 million. Carrying values of these assets as of March 31, 2020 and December 31, 2019 are as follows (dollars in millions):
|  | March 31, 2020 |  | December 31, 2019
Limited partnership interests and real estate joint ventures |  | $ | 1,183 |  |  | $ | 1,134 |
Lifetime mortgages |  | 763 |  |  | 775 |
Derivatives |  | 252 |  |  | 117 |
FVO contractholder-directed unit-linked investments |  | 235 |  |  | 260 |
Other |  | 109 |  |  | 77 |
Total other invested assets |  | $ | 2,542 |  |  | $ | 2,363 |

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