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v3.23.1

Investments | 3 Months Ended
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Mar. 31, 2023
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”), Japanese government and agencies (“Japanese government”), asset-backed securities (“ABS”), commercial mortgage-backed securities (“CMBS”), residential mortgage-backed securities (“RMBS”), 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”). ABS, CMBS and RMBS are collectively “structured securities.” The following tables provide information relating to investments in fixed maturity securities by type as of March 31, 2023 and December 31, 2022 (dollars in millions):
March 31, 2023: |  | Amortized |  | Allowance for |  | Unrealized |  | Unrealized |  | Estimated Fair |  | % of |  |
|  | Cost |  | Credit Losses |  | Gains |  | Losses |  | Value |  | Total |  |
Available-for-sale: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate |  | $ | 39,621 |  |  | $ | 69 |  |  | $ | 255 |  |  | $ | 4,330 |  |  | $ | 35,477 |  |  | 63.3 | % |  |
Canadian government |  | 3,345 |  |  | — |  |  | 455 |  |  | 45 |  |  | 3,755 |  |  | 6.7 |  |  |
Japanese government |  | 3,749 |  |  | — |  |  | 9 |  |  | 315 |  |  | 3,443 |  |  | 6.1 |  |  |
ABS |  | 4,470 |  |  | 10 |  |  | 8 |  |  | 365 |  |  | 4,103 |  |  | 7.3 |  |  |
CMBS |  | 1,882 |  |  | — |  |  | — |  |  | 212 |  |  | 1,670 |  |  | 3.0 |  |  |
RMBS |  | 1,120 |  |  | — |  |  | 2 |  |  | 98 |  |  | 1,024 |  |  | 1.8 |  |  |
U.S. government |  | 1,923 |  |  | — |  |  | 6 |  |  | 184 |  |  | 1,745 |  |  | 3.1 |  |  |
State and political subdivisions |  | 1,261 |  |  | — |  |  | 9 |  |  | 132 |  |  | 1,138 |  |  | 2.0 |  |  |
Other foreign government |  | 4,123 |  |  | — |  |  | 31 |  |  | 424 |  |  | 3,730 |  |  | 6.7 |  |  |
Total fixed maturity securities |  | $ | 61,494 |  |  | $ | 79 |  |  | $ | 775 |  |  | $ | 6,105 |  |  | $ | 56,085 |  |  | 100.0 | % |  |
December 31, 2022: |  | Amortized |  | Allowance for |  | Unrealized |  | Unrealized |  | Estimated Fair |  | % of
|  | Cost |  | Credit Losses |  | Gains |  | Losses |  | Value |  | Total
Available-for-sale: |  |  |  |  |  |  |  |  |  |  |  |
Corporate |  | $ | 38,963 |  |  | $ | 27 |  |  | $ | 168 |  |  | $ | 5,135 |  |  | $ | 33,969 |  |  | 64.2 | %
Canadian government |  | 3,311 |  |  | — |  |  | 381 |  |  | 66 |  |  | 3,626 |  |  | 6.9 |
Japanese government |  | 3,033 |  |  | — |  |  | 4 |  |  | 478 |  |  | 2,559 |  |  | 4.8 |
ABS |  | 4,324 |  |  | 10 |  |  | 4 |  |  | 440 |  |  | 3,878 |  |  | 7.3 |
CMBS |  | 1,835 |  |  | — |  |  | — |  |  | 212 |  |  | 1,623 |  |  | 3.1 |
RMBS |  | 1,054 |  |  | — |  |  | 1 |  |  | 114 |  |  | 941 |  |  | 1.8 |
U.S. government |  | 1,690 |  |  | — |  |  | 4 |  |  | 212 |  |  | 1,482 |  |  | 2.8 |
State and political subdivisions |  | 1,282 |  |  | — |  |  | 10 |  |  | 173 |  |  | 1,119 |  |  | 2.1 |
Other foreign government |  | 4,171 |  |  | — |  |  | 22 |  |  | 489 |  |  | 3,704 |  |  | 7.0 |
Total fixed maturity securities |  | $ | 59,663 |  |  | $ | 37 |  |  | $ | 594 |  |  | $ | 7,319 |  |  | $ | 52,901 |  |  | 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, 2023 and December 31, 2022, 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, 2023 and December 31, 2022 (dollars in millions):
| March 31, 2023 |  | December 31, 2022
| Amortized Cost |  | Estimated Fair Value |  | Amortized Cost |  | Estimated Fair Value
Fixed maturity securities pledged as collateral | $ | 414 |  |  | $ | 366 |  |  | $ | 355 |  |  | $ | 292 |
Fixed maturity securities received as collateral | n/a |  | 1,506 |  |  | n/a |  | 1,428 |
Assets in trust held to satisfy collateral requirements | 31,586 |  |  | 28,622 |  |  | 31,510 |  |  | 27,817 |
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 equity included securities of the U.S. government and its agencies and the Japanese government and its agencies, as well as the securities disclosed below, as of March 31, 2023 and December 31, 2022 (dollars in millions).
| March 31, 2023 |  | December 31, 2022
| Amortized Cost |  | Estimated Fair Value |  | Amortized Cost |  | Estimated Fair Value
Fixed maturity securities guaranteed or issued by: |  |  |  |  |  |  |
Canadian province of Quebec | $ | 1,388 |  |  | $ | 1,642 |  |  | $ | 1,436 |  |  | $ | 1,649 |
Canadian province of Ontario | 1,033 |  |  | 1,146 |  |  | 982 |  |  | 1,068 |
The amortized cost and estimated fair value of fixed maturity securities classified as available-for-sale as of March 31, 2023, 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 |  | $ | 1,899 |  |  | $ | 1,849 |
Due after one year through five years |  | 10,092 |  |  | 9,879 |
Due after five years through ten years |  | 11,375 |  |  | 10,513 |
Due after ten years |  | 30,656 |  |  | 27,047 |
Structured securities |  | 7,472 |  |  | 6,797 |
Total |  | $ | 61,494 |  |  | $ | 56,085 |
Corporate Fixed Maturity Securities The tables below show the major sectors of the Company’s corporate fixed maturity holdings as of March 31, 2023 and December 31, 2022 (dollars in millions):
March 31, 2023: |  |  |  | Estimated |  |
|  | Amortized Cost |  | Fair Value |  | % of Total
Finance |  | $ | 14,732 |  |  | $ | 13,043 |  |  | 36.8 | %
Industrial |  | 19,945 |  |  | 18,108 |  |  | 51.0 |
Utility |  | 4,944 |  |  | 4,326 |  |  | 12.2 |
Total |  | $ | 39,621 |  |  | $ | 35,477 |  |  | 100.0 | %
December 31, 2022: |  |  |  | Estimated |  |
|  | Amortized Cost |  | Fair Value |  | % of Total
Finance |  | $ | 14,551 |  |  | $ | 12,680 |  |  | 37.3 | %
Industrial |  | 19,624 |  |  | 17,257 |  |  | 50.8 |
Utility |  | 4,788 |  |  | 4,032 |  |  | 11.9 |
Total |  | $ | 38,963 |  |  | $ | 33,969 |  |  | 100.0 | %
Allowance for Credit Losses and Impairments – Fixed Maturity Securities Available-for-Sale As discussed in Note 2 – “Significant Accounting Policies and Pronouncements” of the Company’s 2022 Annual Report, allowances for credit losses on fixed maturity securities are recognized in investment related gains (losses), net. The 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 OCI. The following tables present the rollforward of the allowance for credit losses in fixed maturity securities by type for the three months ended March 31, 2023 and 2022 (dollars in millions):
For the three months ended March 31, 2023: |
| Corporate |  | ABS |  | CMBS |  | Other Foreign Government |  |  |  | Total
Balance, beginning of year | $ | 27 |  |  | $ | 10 |  |  | $ | — |  |  | $ | — |  |  |  |  | $ | 37 |
Credit losses recognized on securities for which credit losses were not previously recorded | 43 |  |  | — |  |  | — |  |  | — |  |  |  |  | 43 |
Reductions for securities sold during the period | (3) |  |  | — |  |  | — |  |  | — |  |  |  |  | (3) |
Additional increases or decreases for credit losses on securities that had an allowance recorded in a previous period | 2 |  |  | — |  |  | — |  |  | — |  |  |  |  | 2 |
Balance, end of period | $ | 69 |  |  | $ | 10 |  |  | $ | — |  |  | $ | — |  |  |  |  | $ | 79 |
For the three months ended March 31, 2022: |
| Corporate |  | ABS |  | CMBS |  | Other Foreign Government |  | Total
Balance, beginning of year | $ | 26 |  |  | $ | — |  |  | $ | 1 |  |  | $ | 4 |  |  | $ | 31 |
Credit losses recognized on securities for which credit losses were not previously recorded | 6 |  |  | 5 |  |  | — |  |  | — |  |  | 11 |
Reductions for securities sold during the period | (1) |  |  | — |  |  | — |  |  | (1) |  |  | (2) |
Additional increases or decreases for credit losses on securities that had an allowance recorded in a previous period | 2 |  |  | — |  |  | — |  |  | — |  |  | 2 |
Balance, end of period | $ | 33 |  |  | $ | 5 |  |  | $ | 1 |  |  | $ | 3 |  |  | $ | 42 |
Unrealized Losses for Fixed Maturity Securities Available-for-Sale 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 the 6,228 and 6,441 fixed maturity securities for which an allowance for credit loss has not been recorded as of March 31, 2023 and December 31, 2022, and the estimated fair value had declined and remained below amortized cost (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 continuously remained below amortized cost.
|  | Less than 12 months |  | 12 months or greater |  | Total
|  |  |  | Gross |  |  |  | Gross |  |  |  | Gross
March 31, 2023: |  | Estimated |  | Unrealized |  | Estimated |  | Unrealized |  | Estimated |  | Unrealized
|  | Fair Value |  | Losses |  | Fair Value |  | Losses |  | Fair Value |  | Losses
Investment grade securities: |  |  |  |  |  |  |  |  |  |  |  |
Corporate |  | $ | 9,861 |  |  | $ | 486 |  |  | $ | 18,130 |  |  | $ | 3,705 |  |  | $ | 27,991 |  |  | $ | 4,191 |
Canadian government |  | 395 |  |  | 15 |  |  | 165 |  |  | 30 |  |  | 560 |  |  | 45 |
Japanese government |  | 379 |  |  | 4 |  |  | 2,291 |  |  | 311 |  |  | 2,670 |  |  | 315 |
ABS |  | 811 |  |  | 38 |  |  | 2,777 |  |  | 311 |  |  | 3,588 |  |  | 349 |
CMBS |  | 341 |  |  | 20 |  |  | 1,271 |  |  | 188 |  |  | 1,612 |  |  | 208 |
RMBS |  | 332 |  |  | 16 |  |  | 513 |  |  | 82 |  |  | 845 |  |  | 98 |
U.S. government |  | 909 |  |  | 5 |  |  | 606 |  |  | 179 |  |  | 1,515 |  |  | 184 |
State and political subdivisions |  | 350 |  |  | 10 |  |  | 635 |  |  | 122 |  |  | 985 |  |  | 132 |
Other foreign government |  | 1,073 |  |  | 38 |  |  | 1,763 |  |  | 325 |  |  | 2,836 |  |  | 363 |
Total investment grade securities |  | 14,451 |  |  | 632 |  |  | 28,151 |  |  | 5,253 |  |  | 42,602 |  |  | 5,885 |
Below investment grade securities: |  |  |  |  |  |  |  |  |  |  |  |
Corporate |  | 550 |  |  | 58 |  |  | 546 |  |  | 79 |  |  | 1,096 |  |  | $ | 137 |
ABS |  | 45 |  |  | 3 |  |  | 46 |  |  | 10 |  |  | 91 |  |  | 13 |
Other foreign government |  | — |  |  | — |  |  | 187 |  |  | 61 |  |  | 187 |  |  | 61 |
Total below investment grade securities |  | 595 |  |  | 61 |  |  | 779 |  |  | 150 |  |  | 1,374 |  |  | 211 |
Total fixed maturity securities |  | $ | 15,046 |  |  | $ | 693 |  |  | $ | 28,930 |  |  | $ | 5,403 |  |  | $ | 43,976 |  |  | $ | 6,096 |
|  | Less than 12 months |  | 12 months or greater |  | Total
|  |  |  | Gross |  |  |  | Gross |  |  |  | Gross
December 31, 2022: |  | Estimated |  | Unrealized |  | Estimated |  | Unrealized |  | Estimated |  | Unrealized
|  | Fair Value |  | Losses |  | Fair Value |  | Losses |  | Fair Value |  | Losses
Investment grade securities: |  |  |  |  |  |  |  |  |  |  |  |
Corporate |  | $ | 21,867 |  |  | $ | 2,756 |  |  | $ | 6,840 |  |  | $ | 2,225 |  |  | $ | 28,707 |  |  | $ | 4,981 |
Canadian government |  | 554 |  |  | 42 |  |  | 71 |  |  | 23 |  |  | 625 |  |  | 65 |
Japanese government |  | 815 |  |  | 86 |  |  | 1,694 |  |  | 392 |  |  | 2,509 |  |  | 478 |
ABS |  | 1,596 |  |  | 153 |  |  | 1,931 |  |  | 269 |  |  | 3,527 |  |  | 422 |
CMBS |  | 1,314 |  |  | 144 |  |  | 281 |  |  | 65 |  |  | 1,595 |  |  | 209 |
RMBS |  | 664 |  |  | 62 |  |  | 181 |  |  | 53 |  |  | 845 |  |  | 115 |
U.S. government |  | 1,202 |  |  | 64 |  |  | 253 |  |  | 148 |  |  | 1,455 |  |  | 212 |
State and political subdivisions |  | 819 |  |  | 124 |  |  | 131 |  |  | 50 |  |  | 950 |  |  | 174 |
Other foreign government |  | 1,942 |  |  | 167 |  |  | 1,026 |  |  | 260 |  |  | 2,968 |  |  | 427 |
Total investment grade securities |  | 30,773 |  |  | 3,598 |  |  | 12,408 |  |  | 3,485 |  |  | 43,181 |  |  | 7,083 |
Below investment grade securities: |  |  |  |  |  |  |  |  |  |  |  |
Corporate |  | 767 |  |  | 87 |  |  | 305 |  |  | 61 |  |  | 1,072 |  |  | 148 |
ABS |  | 52 |  |  | 6 |  |  | 38 |  |  | 9 |  |  | 90 |  |  | 15 |
Other foreign government |  | 39 |  |  | 2 |  |  | 164 |  |  | 60 |  |  | 203 |  |  | 62 |
Total below investment grade securities |  | 858 |  |  | 95 |  |  | 507 |  |  | 130 |  |  | 1,365 |  |  | 225 |
Total fixed maturity securities |  | $ | 31,631 |  |  | $ | 3,693 |  |  | $ | 12,915 |  |  | $ | 3,615 |  |  | $ | 44,546 |  |  | $ | 7,308 |
The Company has no intention to sell, nor does it expect to be required to sell, the securities outlined in the tables 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 risk-free interest rates and credit spreads. Net Investment Income Major categories of net investment income consist of the following (dollars in millions):
|  |  |  | Three months ended March 31,
|  |  |  |  |  | 2023 |  | 2022
Fixed maturity securities available-for-sale |  |  |  |  |  | $ | 645 |  |  | $ | 533 |
Equity securities |  |  |  |  |  | 2 |  |  | 2 |
Mortgage loans |  |  |  |  |  | 74 |  |  | 73 |
Policy loans |  |  |  |  |  | 13 |  |  | 13 |
Funds withheld at interest |  |  |  |  |  | 72 |  |  | 51 |
Limited partnerships and real estate joint ventures |  |  |  |  |  | 54 |  |  | 161 |
Short-term investments and cash and cash equivalents |  |  |  |  |  | 21 |  |  | 2 |
Other invested assets |  |  |  |  |  | 9 |  |  | 2 |
Investment income |  |  |  |  |  | 890 |  |  | 837 |
Investment expense |  |  |  |  |  | (34) |  |  | (27) |
Net investment income |  |  |  |  |  | $ | 856 |  |  | $ | 810 |
Investment Related Gains (Losses), Net Investment related gains (losses), net consist of the following (dollars in millions):
|  |  | Three months ended March 31,
|  |  |  |  | 2023 |  | 2022
Fixed maturity securities available-for-sale: |  |  |  |  |  |  |
Change in allowance for credit losses |  |  |  |  | $ | (42) |  |  | $ | (11) |
Impairments on fixed maturities |  |  |  |  | (1) |  |  | (1) |
Realized gains on investment activity |  |  |  |  | 31 |  |  | 11 |
Realized losses on investment activity |  |  |  |  | (75) |  |  | (36) |
Net gains (losses) on equity securities |  |  |  |  | 2 |  |  | (8) |
Change in mortgage loan allowance for credit losses |  |  |  |  | 3 |  |  | (2) |
Change in fair value of certain limited partnership investments |  |  |  |  | (3) |  |  | 19 |
Other, net |  |  |  |  | 2 |  |  | 8 |
Net gains (losses) on derivatives |  |  |  |  | 6 |  |  | (119) |
Total investment related gains (losses), net |  |  |  |  | $ | (77) |  |  | $ | (139) |
Securities Borrowing, Lending and Repurchase/Reverse Repurchase Agreements The following table provides information relating to securities borrowing, lending and repurchase/reverse repurchase agreements as of March 31, 2023 and December 31, 2022 (dollars in millions):
| March 31, 2023 |  | December 31, 2022
| Amortized Cost |  | Estimated Fair Value |  | Amortized Cost |  | Estimated Fair Value
Securities borrowing agreements: |  |  |  |  |  |  |
Securities borrowed (1) | n/a |  | $ | 930 |  |  | n/a |  | $ | 852 |
Securities pledged as collateral (2) | 922 |  |  | 804 |  |  | 859 |  |  | 693 |
Securities lending agreements: |  |  |  |  |  |  |
Securities loaned (2) | 60 |  |  | 56 |  |  | 59 |  |  | 55 |
Securities received as collateral (3) | n/a |  | 66 |  |  | n/a |  | 66 |
Repurchase/reverse repurchase agreements: |  |  |  |  |  |  |
Securities sold (2) | 1,071 |  |  | 964 |  |  | 898 |  |  | 779 |
Securities purchased (3) | n/a |  | 629 |  |  | n/a |  | 619 |
Cash received (4) | 248 |  |  | 248 |  |  | 149 |  |  | 149 |
(1)Securities borrowed are not reflected on the condensed consolidated balance sheets. Collateral associated with certain borrowed securities is not included within this table as the collateral pledged to the counterparty is the right to reinsurance treaty cash flows. (2)Securities loaned, pledged or sold to counterparties are included within fixed maturity securities. (3)Securities received as collateral or purchased from counterparties are not reflected on the condensed consolidated financial statements. (4)A payable for the cash received by the Company is included within other liabilities. The following tables present information on the remaining contractual maturity of the Company’s securities lending and repurchase agreements as of March 31, 2023 and December 31, 2022 (dollars in millions):
| March 31, 2023
| Remaining Contractual Maturity of the Agreements
| Overnight and Continuous |  | Up to 30 Days |  | 30 – 90 Days |  | Greater than 90 Days |  | Total
Securities lending agreements: |  |  |  |  |  |  |  |  |
Corporate | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 40 |  |  | $ | 40 |
Canadian government | — |  |  | — |  |  | — |  |  | 5 |  |  | 5 |
State and political subdivisions | — |  |  | — |  |  | — |  |  | 6 |  |  | 6 |
Other foreign government | — |  |  | — |  |  | — |  |  | 5 |  |  | 5 |
Total | — |  |  | — |  |  | — |  |  | 56 |  |  | 56 |
Repurchase agreements: |  |  |  |  |  |  |  |  |
Corporate | — |  |  | — |  |  | — |  |  | 342 |  |  | 342 |
Japanese government | — |  |  | — |  |  | — |  |  | 290 |  |  | 290 |
ABS | — |  |  | — |  |  | — |  |  | 57 |  |  | 57 |
CMBS | — |  |  | — |  |  | — |  |  | 111 |  |  | 111 |
RMBS | — |  |  | — |  |  | — |  |  | 53 |  |  | 53 |
U.S. government | — |  |  | — |  |  | — |  |  | 13 |  |  | 13 |
Other foreign government | — |  |  | — |  |  | — |  |  | 98 |  |  | 98 |
Total | — |  |  | — |  |  | — |  |  | 964 |  |  | 964 |
Total agreements | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 1,020 |  |  | $ | 1,020 |
| December 31, 2022
| Remaining Contractual Maturity of the Agreements
| Overnight and Continuous |  | Up to 30 Days |  | 30 – 90 Days |  | Greater than 90 Days |  | Total
Securities lending agreements: |  |  |  |  |  |  |  |  |
Corporate | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 42 |  |  | $ | 42 |
Canadian government | — |  |  | — |  |  | — |  |  | 5 |  |  | 5 |
State and political subdivisions | — |  |  | — |  |  | — |  |  | 3 |  |  | 3 |
Other foreign government | — |  |  | — |  |  | — |  |  | 5 |  |  | 5 |
Total | — |  |  | — |  |  | — |  |  | 55 |  |  | 55 |
Repurchase agreements: |  |  |  |  |  |  |  |  |
Corporate | — |  |  | — |  |  | — |  |  | 279 |  |  | 279 |
Japanese government | — |  |  | — |  |  | — |  |  | 278 |  |  | 278 |
ABS | — |  |  | — |  |  | — |  |  | 54 |  |  | 54 |
CMBS | — |  |  | — |  |  | — |  |  | 63 |  |  | 63 |
RMBS | — |  |  | — |  |  | — |  |  | 10 |  |  | 10 |
U.S. government | — |  |  | — |  |  | — |  |  | — |  |  | — |
Other foreign government | — |  |  | — |  |  | — |  |  | 95 |  |  | 95 |
Total | — |  |  | — |  |  | — |  |  | 779 |  |  | 779 |
Total agreements | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 834 |  |  | $ | 834 |
Mortgage Loans As of March 31, 2023, mortgage loans were geographically dispersed throughout the U.S. with the largest concentrations in California (12.8%), Texas (12.0%) and Washington (8.0%), in addition to loans secured by properties in Canada (3.5%) and the United Kingdom (2.3%). The recorded investment in mortgage loans presented below is gross of unamortized deferred loan origination fees and expenses and allowance for credit losses. The following table presents the distribution of the Company’s recorded investment in mortgage loans by property type as of March 31, 2023 and December 31, 2022 (dollars in millions):
|  | March 31, 2023 |  | December 31, 2022
Property type: |  | Carrying Value |  | % of Total |  | Carrying Value |  | % of Total
Office |  | $ | 1,710 |  |  | 24.8 | % |  | $ | 1,706 |  |  | 25.6 | %
Retail |  | 2,319 |  |  | 33.6 |  |  | 2,290 |  |  | 34.4 |
Industrial |  | 1,602 |  |  | 23.3 |  |  | 1,518 |  |  | 22.8 |
Apartment |  | 835 |  |  | 12.1 |  |  | 763 |  |  | 11.5 |
Other commercial |  | 429 |  |  | 6.2 |  |  | 376 |  |  | 5.7 |
Recorded investment |  | 6,895 |  |  | 100.0 | % |  | 6,653 |  |  | 100.0 | %
Unamortized balance of loan origination fees and expenses |  | (14) |  |  |  |  | (12) |  |  |
Allowance for credit losses |  | (48) |  |  |  |  | (51) |  |  |
Total mortgage loans |  | $ | 6,833 |  |  |  |  | $ | 6,590 |  |  |
The following table presents the maturities of the Company’s recorded investment in mortgage loans as of March 31, 2023 and December 31, 2022 (dollars in millions):
|  | March 31, 2023 |  | December 31, 2022
|  | Recorded Investment |  | % of Total |  | Recorded Investment |  | % of Total
Due within five years |  | $ | 2,827 |  |  | 41.0 | % |  | $ | 2,652 |  |  | 39.9 | %
Due after five years through ten years |  | 3,101 |  |  | 45.0 |  |  | 2,930 |  |  | 44.0 |
Due after ten years |  | 967 |  |  | 14.0 |  |  | 1,071 |  |  | 16.1 |
Total |  | $ | 6,895 |  |  | 100.0 | % |  | $ | 6,653 |  |  | 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, 2023 and December 31, 2022 (dollars in millions):
| Recorded Investment
| Debt Service Ratios |  | Construction loans |  |  |  |
| >1.20x |  | 1.00x – 1.20x |  | <1.00x |  |  | Total |  | % of Total
March 31, 2023: |  |  |  |  |  |  |  |  |  |  |
Loan-to-Value Ratio |  |  |  |  |  |  |  |  |  |  |
0% – 59.99% | $ | 3,740 |  |  | $ | 210 |  |  | $ | 82 |  |  | $ | 30 |  |  | $ | 4,062 |  |  | 58.9 | %
60% – 69.99% | 1,811 |  |  | 140 |  |  | 70 |  |  | — |  |  | 2,021 |  |  | 29.3 |
70% – 79.99% | 529 |  |  | 41 |  |  | 21 |  |  | — |  |  | 591 |  |  | 8.6 |
80% or greater | 59 |  |  | 30 |  |  | 132 |  |  | — |  |  | 221 |  |  | 3.2 |
Total | $ | 6,139 |  |  | $ | 421 |  |  | $ | 305 |  |  | $ | 30 |  |  | $ | 6,895 |  |  | 100.0 | %
| Recorded Investment
| Debt Service Ratios |  | Construction loans |  |  |  |
| >1.20x |  | 1.00x – 1.20x |  | <1.00x |  |  | Total |  | % of Total
December 31, 2022: |  |  |  |  |  |  |  |  |  |  |
Loan-to-Value Ratio |  |  |  |  |  |  |  |  |  |  |
0% – 59.99% | $ | 3,466 |  |  | $ | 215 |  |  | $ | 56 |  |  | $ | 18 |  |  | $ | 3,755 |  |  | 56.4 | %
60% – 69.99% | 1,894 |  |  | 119 |  |  | 71 |  |  | — |  |  | 2,084 |  |  | 31.3 |
70% – 79.99% | 475 |  |  | 49 |  |  | 91 |  |  | — |  |  | 615 |  |  | 9.3 |
80% or greater | 81 |  |  | — |  |  | 118 |  |  | — |  |  | 199 |  |  | 3.0 |
Total | $ | 5,916 |  |  | $ | 383 |  |  | $ | 336 |  |  | $ | 18 |  |  | $ | 6,653 |  |  | 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, 2023 and December 31, 2022 (dollars in millions):
| Recorded Investment
| Year of Origination |  |
| 2023 |  | 2022 |  | 2021 |  | 2020 |  | 2019 |  | Prior |  | Total
March 31, 2023: |  |  |  |  |  |  |  |  |  |  |  |  |
Internal credit quality grade: |  |  |  |  |  |  |  |  |  |  |  |  |
High investment grade | $ | 66 |  |  | $ | 694 |  |  | $ | 676 |  |  | $ | 335 |  |  | $ | 531 |  |  | $ | 1,944 |  |  | $ | 4,246 |
Investment grade | 245 |  |  | 599 |  |  | 283 |  |  | 238 |  |  | 306 |  |  | 754 |  |  | 2,425 |
Average | — |  |  | — |  |  | 6 |  |  | — |  |  | 39 |  |  | 160 |  |  | 205 |
Watch list | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
In or near default | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 19 |  |  | 19 |
Total | $ | 311 |  |  | $ | 1,293 |  |  | $ | 965 |  |  | $ | 573 |  |  | $ | 876 |  |  | $ | 2,877 |  |  | $ | 6,895 |
| Recorded Investment
| Year of Origination |  |
| 2022 |  | 2021 |  | 2020 |  | 2019 |  | 2018 |  | Prior |  | Total
December 31, 2022: |  |  |  |  |  |  |  |  |  |  |  |  |
Internal credit quality grade: |  |  |  |  |  |  |  |  |  |  |  |  |
High investment grade | $ | 698 |  |  | $ | 684 |  |  | $ | 327 |  |  | $ | 561 |  |  | $ | 422 |  |  | $ | 1,565 |  |  | $ | 4,257 |
Investment grade | 586 |  |  | 284 |  |  | 248 |  |  | 279 |  |  | 252 |  |  | 531 |  |  | 2,180 |
Average | — |  |  | 6 |  |  | — |  |  | 39 |  |  | 52 |  |  | 83 |  |  | 180 |
Watch list | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
In or near default | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 36 |  |  | 36 |
Total | $ | 1,284 |  |  | $ | 974 |  |  | $ | 575 |  |  | $ | 879 |  |  | $ | 726 |  |  | $ | 2,215 |  |  | $ | 6,653 |
The following table presents the current and past due composition of the Company’s recorded investment in mortgage loans as of March 31, 2023 and December 31, 2022.
|  | March 31, 2023 |  | December 31, 2022
Current |  | $ | 6,869 |  |  | $ | 6,617 |
31 – 60 days past due |  | 7 |  |  | — |
Greater than 90 days past due |  | 19 |  |  | 36 |
Total |  | $ | 6,895 |  |  | $ | 6,653 |
The following table presents information regarding the Company’s allowance for credit losses for mortgage loans for the three months ended March 31, 2023 and 2022 (dollars in millions):
|  |  |  | Three months ended March 31,
|  |  |  |  |  | 2023 |  | 2022
Balance, beginning of period |  |  |  |  |  | $ | 51 |  |  | $ | 35 |
Change in allowance for credit losses |  |  |  |  |  | (3) |  |  | 2 |
Balance, end of period |  |  |  |  |  | $ | 48 |  |  | $ | 37 |
During the three months ended March 31, 2023, the Company converted one mortgage loan in the amount of $17 million to an owned property through a deed in lieu of foreclosure. During the three months ended March 31, 2022, the Company restructured three mortgage loans to interest only payments as a result of lower occupancy levels, one of which was paid in full as of December 31, 2022. The total recorded investment before allowance for credit losses for mortgage loans that were modified or met the criteria of Troubled Debt Restructuring (“TDR”) is $77 million as of March 31, 2022. The Company had one mortgage loan in the amount of $19 million that was on a nonaccrual status as of March 31, 2023. The Company had no mortgage loans that were on a nonaccrual status as of March 31, 2022. The Company did not acquire any impaired mortgage loans during the three months ended March 31, 2023 and 2022. 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, 2023, $3.7 billion of the funds withheld at interest balance is primarily associated with two clients. 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. 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. Limited Partnerships and Real Estate Joint Ventures The carrying values of limited partnerships and real estate joint ventures as of March 31, 2023 and December 31, 2022 are as follows (dollars in millions):
|  | March 31, 2023 |  | December 31, 2022
Limited partnerships – equity method |  | $ | 970 |  |  | $ | 934 |
Limited partnerships – fair value |  | 726 |  |  | 683 |
Limited partnerships – cost method |  | 54 |  |  | 49 |
Real estate joint ventures |  | 655 |  | 661 |
Total limited partnerships and real estate joint ventures |  | $ | 2,405 |  |  | $ | 2,327 |
Other Invested Assets Other invested assets include lifetime mortgages and derivative contracts. Other invested assets also includes FHLB common stock, unit-linked investments, and real estate held for investment, which are included in “Other” in the table below. As of March 31, 2023 and December 31, 2022, the allowance for credit losses for lifetime mortgages was not material. The carrying values of other invested assets as of March 31, 2023 and December 31, 2022 are as follows (dollars in millions):
|  | March 31, 2023 |  | December 31, 2022
Lifetime mortgages |  | $ | 897 |  |  | $ | 868 |
Derivatives |  | 100 |  |  | 170 |
Other |  | 114 |  |  | 102 |
Total other invested assets |  | $ | 1,111 |  |  | $ | 1,140 |

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