Investments

12 Months Ended

Dec. 31, 2017

Investments, Debt and Equity Securities [Abstract]

Investments

8. Investments

See Note 10 for information about the fair value hierarchy for investments and the related valuation methodologies.

Investment Risks and Uncertainties

Investments are exposed to the following primary sources of risk: credit, interest rate, liquidity, market valuation, currency and real estate risk. The financial statement risks, stemming from such investment risks, are those associated with the determination of estimated fair values, the diminished ability to sell certain investments in times of strained market conditions, the recognition of impairments, the recognition of income on certain investments and the potential consolidation of VIEs. The use of different methodologies, assumptions and inputs relating to these financial statement risks may have a material effect on the amounts presented within the consolidated financial statements.

The determination of valuation allowances and impairments is highly subjective and is based upon periodic evaluations and assessments of known and inherent risks associated with the respective asset class. Such evaluations and assessments are revised as conditions change and new information becomes available.

The recognition of income on certain investments (e.g. structured securities, including mortgage-backed securities, asset-backed securities (“ABS”), certain structured investment transactions and FVO securities) is dependent upon certain factors such as prepayments and defaults, and changes in such factors could result in changes in amounts to be earned.

Fixed Maturity and Equity Securities AFS

Fixed Maturity and Equity Securities AFS by Sector

The following table presents the fixed maturity and equity securities AFS by sector. Redeemable preferred stock is reported within U.S. corporate and foreign corporate fixed maturity securities and non-redeemable preferred stock is reported within equity securities. Included within fixed maturity securities are structured securities including RMBS, ABS and commercial mortgage-backed securities (“CMBS”) (collectively, “Structured Securities”).

	December 31, 2017											December 31, 2016
	Cost or Amortized Cost		Gross Unrealized							Estimated Fair Value		Cost or Amortized Cost		Gross Unrealized							Estimated Fair Value
			Gains		Temporary Losses		OTTI Losses (1)							Gains		Temporary Losses		OTTI Losses (1)
	(In millions)
Fixed maturity securities:
U.S. corporate	$	76,005	$	7,007	$	351	$	—		$	82,661	$	73,280	$	6,027	$	764	$	—		$	78,543
Foreign government	55,351		6,495		312		—			61,534		49,864		6,485		373		—			55,976
Foreign corporate	52,409		3,836		676		—			55,569		49,308		2,926		1,572		(1		)	50,663
U.S. government and agency	43,446		4,227		279		—			47,394		41,294		3,682		543		—			44,433
RMBS	27,846		1,145		233		(42		)	28,800		28,393		1,039		410		(10		)	29,032
State and political subdivision	10,752		1,717		13		1			12,455		10,977		1,340		85		1			12,231
ABS	12,213		116		39		(1		)	12,291		11,266		90		128		3			11,225
CMBS	8,047		222		42		—			8,227		7,294		237		71		—			7,460
Total fixed maturity securities	$	286,069	$	24,765	$	1,945	$	(42	)	$	308,931	$	271,676	$	21,826	$	3,946	$	(7	)	$	289,563
Equity securities:
Common stock	$	1,687	$	364	$	16	$	—		$	2,035	$	1,827	$	464	$	13	$	—		$	2,278
Non-redeemable preferred stock	453		29		4		—			478		637		19		40		—			616
Total equity securities	$	2,140	$	393	$	20	$	—		$	2,513	$	2,464	$	483	$	53	$	—		$	2,894

__________________

(1) Noncredit OTTI losses included in AOCI in an unrealized gain position are due to increases in estimated fair value subsequent to initial recognition of noncredit losses on such securities. See also “— Net Unrealized Investment Gains (Losses).”

The Company held non-income producing fixed maturity securities with an estimated fair value of $6 million and $1 million with unrealized gains (losses) of ($4) million and ($3) million at December 31, 2017 and 2016, respectively.

Methodology for Amortization of Premium and Accretion of Discount on Structured Securities

Amortization of premium and accretion of discount on Structured Securities considers the estimated timing and amount of prepayments of the underlying loans. Actual prepayment experience is periodically reviewed and effective yields are recalculated when differences arise between the originally anticipated and the actual prepayments received and currently anticipated. Prepayment assumptions for Structured Securities are estimated using inputs obtained from third-party specialists and based on management’s knowledge of the current market. For credit-sensitive Structured Securities and certain prepayment-sensitive securities, the effective yield is recalculated on a prospective basis. For all other Structured Securities, the effective yield is recalculated on a retrospective basis.

Maturities of Fixed Maturity Securities

The amortized cost and estimated fair value of fixed maturity securities, by contractual maturity date, were as follows at December 31, 2017:

	Due in One Year or Less		Due After One Year Through Five Years		Due After Five Years Through Ten Years		Due After Ten Years		Structured Securities		Total Fixed Maturity Securities
	(In millions)
Amortized cost	$	11,378	$	62,647	$	61,043	$	102,895	$	48,106	$	286,069
Estimated fair value	$	11,437	$	65,423	$	64,499	$	118,254	$	49,318	$	308,931

Actual maturities may differ from contractual maturities due to the exercise of call or prepayment options. Fixed maturity securities not due at a single maturity date have been presented in the year of final contractual maturity. Structured Securities are shown separately, as they are not due at a single maturity.

Continuous Gross Unrealized Losses for Fixed Maturity and Equity Securities AFS by Sector

The following table presents the estimated fair value and gross unrealized losses of fixed maturity and equity securities AFS in an unrealized loss position, aggregated by sector and by length of time that the securities have been in a continuous unrealized loss position at:

	December 31, 2017								December 31, 2016
	Less than 12 Months				Equal to or Greater than 12 Months				Less than 12 Months				Equal to or Greater than 12 Months
	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
	(Dollars in millions)
Fixed maturity securities:
U.S. corporate	$	5,604	$	92	$	4,115	$	259	$	11,471	$	466	$	2,938	$	298
Foreign government	4,234		83		3,251		229		5,955		260		918		113
Foreign corporate	4,422		99		6,802		577		10,147		573		5,493		998
U.S. government and agency	18,273		93		3,560		186		9,104		523		141		20
RMBS	6,359		50		4,159		141		9,449		291		1,800		109
State and political subdivision	182		2		346		12		1,747		80		56		6
ABS	1,695		7		729		31		2,224		28		2,328		103
CMBS	1,174		9		413		33		998		22		564		49
Total fixed maturity securities	$	41,943	$	435	$	23,375	$	1,468	$	51,095	$	2,243	$	14,238	$	1,696
Equity securities:
Common stock	$	126	$	16	$	4	$	—	$	105	$	13	$	11	$	—
Non-redeemable preferred stock	42		1		41		3		139		7		125		33
Total equity securities	$	168	$	17	$	45	$	3	$	244	$	20	$	136	$	33
Total number of securities in an unrealized loss position	2,651				1,965				3,580				1,307

Evaluation of AFS Securities for OTTI and Evaluating Temporarily Impaired AFS Securities

Evaluation and Measurement Methodologies

Management considers a wide range of factors about the security issuer and uses its best judgment in evaluating the cause of the decline in the estimated fair value of the security and in assessing the prospects for near-term recovery. Inherent in management’s evaluation of the security are assumptions and estimates about the operations of the issuer and its future earnings potential. Considerations used in the impairment evaluation process include, but are not limited to: (i) the length of time and the extent to which the estimated fair value has been below cost or amortized cost; (ii) the potential for impairments when the issuer is experiencing significant financial difficulties; (iii) the potential for impairments in an entire industry sector or sub-sector; (iv) the potential for impairments in certain economically depressed geographic locations; (v) the potential for impairments where the issuer, series of issuers or industry has suffered a catastrophic loss or has exhausted natural resources; (vi) with respect to fixed maturity securities, whether the Company has the intent to sell or will more likely than not be required to sell a particular security before the decline in estimated fair value below amortized cost recovers; (vii) with respect to Structured Securities, changes in forecasted cash flows after considering the quality of underlying collateral, expected prepayment speeds, current and forecasted loss severity, consideration of the payment terms of the underlying assets backing a particular security, and the payment priority within the tranche structure of the security; (viii) the potential for impairments due to weakening of foreign currencies on non-functional currency denominated fixed maturity securities that are near maturity; and (ix) other subjective factors, including concentrations and information obtained from regulators and rating agencies.

The methodology and significant inputs used to determine the amount of credit loss on fixed maturity securities are as follows:

• The Company calculates the recovery value by performing a discounted cash flow analysis based on the present value of future cash flows. The discount rate is generally the effective interest rate of the security prior to impairment.

• When determining collectability and the period over which value is expected to recover, the Company applies considerations utilized in its overall impairment evaluation process which incorporates information regarding the specific security, fundamentals of the industry and geographic area in which the security issuer operates, and overall macroeconomic conditions. Projected future cash flows are estimated using assumptions derived from management’s best estimates of likely scenario-based outcomes after giving consideration to a variety of variables that include, but are not limited to: payment terms of the security; the likelihood that the issuer can service the interest and principal payments; the quality and amount of any credit enhancements; the security’s position within the capital structure of the issuer; possible corporate restructurings or asset sales by the issuer; and changes to the rating of the security or the issuer by rating agencies.

• Additional considerations are made when assessing the unique features that apply to certain Structured Securities including, but not limited to: the quality of underlying collateral, expected prepayment speeds, current and forecasted loss severity, consideration of the payment terms of the underlying loans or assets backing a particular security, and the payment priority within the tranche structure of the security.

• When determining the amount of the credit loss for U.S. and foreign corporate securities, foreign government securities and state and political subdivision securities, the estimated fair value is considered the recovery value when available information does not indicate that another value is more appropriate. When information is identified that indicates a recovery value other than estimated fair value, management considers in the determination of recovery value the same considerations utilized in its overall impairment evaluation process as described above, as well as any private and public sector programs to restructure such securities.

With respect to securities that have attributes of debt and equity (“perpetual hybrid securities”), consideration is given in the OTTI analysis as to whether there has been any deterioration in the credit of the issuer and the likelihood of recovery in value of the securities that are in a severe and extended unrealized loss position. Consideration is also given as to whether any perpetual hybrid securities with an unrealized loss, regardless of credit rating, have deferred any dividend payments. When an OTTI loss has occurred, the OTTI loss is the entire difference between the perpetual hybrid security’s cost and its estimated fair value with a corresponding charge to earnings.

The cost or amortized cost of fixed maturity and equity securities is adjusted for OTTI in the period in which the determination is made. The Company does not change the revised cost basis for subsequent recoveries in value.

In periods subsequent to the recognition of OTTI on a fixed maturity security, the Company accounts for the impaired security as if it had been purchased on the measurement date of the impairment. Accordingly, the discount (or reduced premium) based on the new cost basis is accreted over the remaining term of the fixed maturity security in a prospective manner based on the amount and timing of estimated future cash flows.

Current Period Evaluation

Based on the Company’s current evaluation of its AFS securities in an unrealized loss position in accordance with its impairment policy, and the Company’s current intentions and assessments (as applicable to the type of security) about holding, selling and any requirements to sell these securities, the Company concluded that these securities were not other-than-temporarily impaired at December 31, 2017. Future OTTI will depend primarily on economic fundamentals, issuer performance (including changes in the present value of future cash flows expected to be collected), changes in credit ratings, collateral valuation, interest rates and credit spreads. If economic fundamentals deteriorate or if there are adverse changes in the above factors, OTTI may be incurred in upcoming periods.

Gross unrealized losses on fixed maturity securities decreased $2.0 billion during the year ended December 31, 2017 to $1.9 billion. The decrease in gross unrealized losses for the year ended December 31, 2017, was primarily attributable to narrowing credit spreads and strengthening foreign currencies on non-functional currency denominated fixed maturity securities.

At December 31, 2017, $117 million of the total $1.9 billion of gross unrealized losses were from 31 fixed maturity securities with an unrealized loss position of 20% or more of amortized cost for six months or greater.

Gross unrealized losses on equity securities decreased $33 million during the year ended December 31, 2017 to $20 million.

Investment Grade Fixed Maturity Securities

Of the $117 million of gross unrealized losses on fixed maturity securities with an unrealized loss of 20% or more of amortized cost for six months or greater, $73 million, or 62%, were related to gross unrealized losses on 12 investment grade fixed maturity securities. Unrealized losses on investment grade fixed maturity securities are principally related to widening credit spreads since purchase and, with respect to fixed-rate fixed maturity securities, rising interest rates since purchase.

Below Investment Grade Fixed Maturity Securities

Of the $117 million of gross unrealized losses on fixed maturity securities with an unrealized loss of 20% or more of amortized cost for six months or greater, $44 million, or 38%, were related to gross unrealized losses on 19 below investment grade fixed maturity securities. Unrealized losses on below investment grade fixed maturity securities are principally related to U.S. and foreign corporate securities (primarily industrial and utility securities) and non-agency RMBS (primarily alternative residential mortgage loans) and are the result of significantly wider credit spreads resulting from higher risk premiums since purchase, largely due to economic and market uncertainty including concerns over lower oil prices in the energy sector and valuations of residential real estate supporting non-agency RMBS. Management evaluates U.S. and foreign corporate securities based on factors such as expected cash flows and the financial condition and near-term and long-term prospects of the issuers and evaluates non-agency RMBS based on actual and projected cash flows after considering the quality of underlying collateral, expected prepayment speeds, current and forecasted loss severity, consideration of the payment terms of the underlying assets backing a particular security and the payment priority within the tranche structure of the security.

Mortgage Loans

Mortgage Loans by Portfolio Segment

Mortgage loans are summarized as follows at:

	December 31,
	2017					2016
	Carrying Value			% of Total		Carrying Value			% of Total
	(Dollars in millions)
Mortgage loans:
Commercial	$	44,375		64.6	%	$	41,512		63.7	%
Agricultural	13,014			18.9		12,564			19.3
Residential	11,136			16.2		10,829			16.6
Subtotal (1)	68,525			99.7		64,905			99.6
Valuation allowances	(314		)	(0.5	)	(304		)	(0.5	)
Subtotal mortgage loans, net	68,211			99.2		64,601			99.1
Residential — FVO	520			0.8		566			0.9
Total mortgage loans, net	$	68,731		100.0	%	$	65,167		100.0	%

__________________

(1) Purchases of mortgage loans, primarily residential, were $3.1 billion and $2.9 billion for the years ended December 31, 2017 and 2016, respectively.

Information on commercial, agricultural and residential mortgage loans is presented in the tables below. Information on residential — FVO is presented in Note 10. The Company elects the FVO for certain residential mortgage loans that are managed on a total return basis.

Mortgage Loans, Valuation Allowance and Impaired Loans by Portfolio Segment

Mortgage loans by portfolio segment, by method of evaluation of credit loss, impaired mortgage loans including those modified in a troubled debt restructuring, and the related valuation allowances, were as follows at and for the years ended:

	Evaluated Individually for Credit Losses										Evaluated Collectively for Credit Losses				Impaired Loans
	Impaired Loans with a Valuation Allowance						Impaired Loans without a Valuation Allowance
	Unpaid Principal Balance		Recorded Investment		Valuation Allowances		Unpaid Principal Balance		Recorded Investment		Recorded Investment		Valuation Allowances		Carrying Value		Average Recorded Investment
	(In millions)
December 31, 2017
Commercial	$	—	$	—	$	—	$	—	$	—	$	44,375	$	214	$	—	$	5
Agricultural	22		21		2		27		27		12,966		39		46		32
Residential	—		—		—		358		324		10,812		59		324		285
Total	$	22	$	21	$	2	$	385	$	351	$	68,153	$	312	$	370	$	322
December 31, 2016
Commercial	$	—	$	—	$	—	$	12	$	12	$	41,500	$	202	$	12	$	90
Agricultural	11		10		1		27		27		12,527		38		36		49
Residential	—		—		—		265		241		10,588		63		241		188
Total	$	11	$	10	$	1	$	304	$	280	$	64,615	$	303	$	289	$	327

The average recorded investment for impaired commercial, agricultural and residential mortgage loans was $127 million, $60 million and $84 million, respectively, for the year ended December 31, 2015.

Valuation Allowance Rollforward by Portfolio Segment

The changes in the valuation allowance, by portfolio segment, were as follows:

	Commercial			Agricultural			Residential			Total
	(In millions)
Balance at January 1, 2015	$	202		$	35		$	42		$	279
Provision (release)	5			2			30			37
Charge-offs, net of recoveries	(19		)	—			(16		)	(35		)
Balance at December 31, 2015	188			37			56			281
Provision (release) (1)	157			3			23			183
Charge-offs, net of recoveries (1)	(143		)	(1		)	(16		)	(160		)
Balance at December 31, 2016	202			39			63			304
Provision (release)	12			4			8			24
Charge-offs, net of recoveries	—			(2		)	(12		)	(14		)
Balance at December 31, 2017	$	214		$	41		$	59		$	314

__________________

(1) In connection with an acquisition in 2010, certain impaired commercial mortgage loans were acquired and accordingly, were not originated by the Company. Such commercial mortgage loans have been accounted for as purchased credit impaired (“PCI”) commercial mortgage loans. Decreases in cash flows expected to be collected on PCI commercial mortgage loans can result in provisions for losses on mortgage loans. For the year ended December 31,2016, in connection with the maturity of an acquired PCI commercial mortgage loan, an increase to the commercial mortgage loan valuation allowance of$143 millionwas recorded and charged-off upon maturity. The Company has recovered a substantial portion of the loss on the loan incurred through an indemnification agreement entered into in connection with the acquisition in 2010.

Valuation Allowance Methodology

Mortgage loans are considered to be impaired when it is probable that, based upon current information and events, the Company will be unable to collect all amounts due under the loan agreement. Specific valuation allowances are established using the same methodology for all three portfolio segments as the excess carrying value of a loan over either (i) the present value of expected future cash flows discounted at the loan’s original effective interest rate, (ii) the estimated fair value of the loan’s underlying collateral if the loan is in the process of foreclosure or otherwise collateral dependent, or (iii) the loan’s observable market price. A common evaluation framework is used for establishing non-specific valuation allowances for all loan portfolio segments; however, a separate non-specific valuation allowance is calculated and maintained for each loan portfolio segment that is based on inputs unique to each loan portfolio segment. Non-specific valuation allowances are established for pools of loans with similar risk characteristics where a property-specific or market-specific risk has not been identified, but for which the Company expects to incur a credit loss. These evaluations are based upon several loan portfolio segment-specific factors, including the Company’s experience for loan losses, defaults and loss severity, and loss expectations for loans with similar risk characteristics. These evaluations are revised as conditions change and new information becomes available.

Commercial and Agricultural Mortgage Loan Portfolio Segments

The Company typically uses several years of historical experience in establishing non-specific valuation allowances which capture multiple economic cycles. For evaluations of commercial mortgage loans, in addition to historical experience, management considers factors that include the impact of a rapid change to the economy, which may not be reflected in the loan portfolio, and recent loss and recovery trend experience as compared to historical loss and recovery experience. For evaluations of agricultural mortgage loans, in addition to historical experience, management considers factors that include increased stress in certain sectors, which may be evidenced by higher delinquency rates, or a change in the number of higher risk loans. On a quarterly basis, management incorporates the impact of these current market events and conditions on historical experience in determining the non-specific valuation allowance established for commercial and agricultural mortgage loans.

All commercial mortgage loans are reviewed on an ongoing basis which may include an analysis of the property financial statements and rent roll, lease rollover analysis, property inspections, market analysis, estimated valuations of the underlying collateral, loan-to-value ratios, debt service coverage ratios, and tenant creditworthiness. The monitoring process focuses on higher risk loans, which include those that are classified as restructured, delinquent or in foreclosure, as well as loans with higher loan-to-value ratios and lower debt service coverage ratios. All agricultural mortgage loans are monitored on an ongoing basis. The monitoring process for agricultural mortgage loans is generally similar to the commercial mortgage loan monitoring process, with a focus on higher risk loans, including reviews on a geographic and property-type basis. Higher risk loans are reviewed individually on an ongoing basis for potential credit loss and specific valuation allowances are established using the methodology described above. Quarterly, the remaining loans are reviewed on a pool basis by aggregating groups of loans that have similar risk characteristics for potential credit loss, and non-specific valuation allowances are established as described above using inputs that are unique to each segment of the loan portfolio.

For commercial mortgage loans, the primary credit quality indicator is the debt service coverage ratio, which compares a property’s net operating income to amounts needed to service the principal and interest due under the loan. Generally, the lower the debt service coverage ratio, the higher the risk of experiencing a credit loss. The Company also reviews the loan-to-value ratio of its commercial mortgage loan portfolio. Loan-to-value ratios compare the unpaid principal balance of the loan to the estimated fair value of the underlying collateral. Generally, the higher the loan-to-value ratio, the higher the risk of experiencing a credit loss. The debt service coverage ratio and the values utilized in calculating the ratio are updated annually on a rolling basis, with a portion of the portfolio updated each quarter. In addition, the loan-to-value ratio is routinely updated for all but the lowest risk loans as part of the Company’s ongoing review of its commercial mortgage loan portfolio.

For agricultural mortgage loans, the Company’s primary credit quality indicator is the loan-to-value ratio. The values utilized in calculating this ratio are developed in connection with the ongoing review of the agricultural mortgage loan portfolio and are routinely updated.

Residential Mortgage Loan Portfolio Segment

The Company’s residential mortgage loan portfolio is comprised primarily of closed end, amortizing residential mortgage loans. For evaluations of residential mortgage loans, the key inputs of expected frequency and expected loss reflect current market conditions, with expected frequency adjusted, when appropriate, for differences from market conditions and the Company’s historical experience. In contrast to the commercial and agricultural mortgage loan portfolios, residential mortgage loans are smaller-balance homogeneous loans that are collectively evaluated for impairment. Non-specific valuation allowances are established using the evaluation framework described above for pools of loans with similar risk characteristics from inputs that are unique to the residential segment of the loan portfolio. Loan specific valuation allowances are only established on residential mortgage loans when they have been restructured and are established using the methodology described above for all loan portfolio segments.

For residential mortgage loans, the Company’s primary credit quality indicator is whether the loan is performing or nonperforming. The Company generally defines nonperforming residential mortgage loans as those that are 60 or more days past due and/or in nonaccrual status which is assessed monthly. Generally, nonperforming residential mortgage loans have a higher risk of experiencing a credit loss.

Credit Quality of Commercial Mortgage Loans

The credit quality of commercial mortgage loans was as follows at:

	Recorded Investment										Estimated Fair Value		% of Total
	Debt Service Coverage Ratios						Total		% of Total
	> 1.20x		1.00x - 1.20x		< 1.00x
	(Dollars in millions)
December 31, 2017
Loan-to-value ratios:
Less than 65%	$	37,073	$	1,483	$	201	$	38,757	87.4	%	$	39,528	87.7	%
65% to 75%	4,183		98		119		4,400		9.9		4,408		9.8
76% to 80%	235		210		57		502		1.1		476		1.0
Greater than 80%	401		168		147		716		1.6		672		1.5
Total	$	41,892	$	1,959	$	524	$	44,375	100.0	%	$	45,084	100.0	%
December 31, 2016
Loan-to-value ratios:
Less than 65%	$	36,067	$	1,077	$	707	$	37,851	91.2	%	$	38,237	91.5	%
65% to 75%	3,044		—		202		3,246		7.8		3,185		7.6
76% to 80%	195		—		—		195		0.5		182		0.4
Greater than 80%	118		27		75		220		0.5		213		0.5
Total	$	39,424	$	1,104	$	984	$	41,512	100.0	%	$	41,817	100.0	%

Credit Quality of Agricultural Mortgage Loans

The credit quality of agricultural mortgage loans was as follows at:

	December 31,
	2017				2016
	Recorded Investment		% of Total		Recorded Investment		% of Total
	(Dollars in millions)
Loan-to-value ratios:
Less than 65%	$	12,347	94.9	%	$	12,023	95.7	%
65% to 75%	618		4.7		436		3.5
76% to 80%	40		0.3		17		0.1
Greater than 80%	9		0.1		88		0.7
Total	$	13,014	100.0	%	$	12,564	100.0	%

The estimated fair value of agricultural mortgage loans was $13.1 billion and $12.7 billion at December 31, 2017 and 2016, respectively.

Credit Quality of Residential Mortgage Loans

The credit quality of residential mortgage loans was as follows at:

	December 31,
	2017				2016
	Recorded Investment		% of Total		Recorded Investment		% of Total
	(Dollars in millions)
Performance indicators:
Performing	$	10,622	95.4	%	$	10,448	96.5	%
Nonperforming	514		4.6		381		3.5
Total	$	11,136	100.0	%	$	10,829	100.0	%

The estimated fair value of residential mortgage loans was $11.6 billion and $11.2 billion at December 31, 2017 and 2016, respectively.

Past Due and Nonaccrual Mortgage Loans

The Company has a high quality, well performing mortgage loan portfolio, with 99% of all mortgage loans classified as performing at both December 31, 2017 and 2016. The Company defines delinquency consistent with industry practice, when mortgage loans are past due as follows: commercial and residential mortgage loans — 60 days and agricultural mortgage loans — 90 days. The past due and nonaccrual mortgage loans at recorded investment, prior to valuation allowances, by portfolio segment, were as follows at:

	Past Due				Greater than 90 Days Past Due and Still Accruing Interest				Nonaccrual
	December 31, 2017		December 31, 2016		December 31, 2017		December 31, 2016		December 31, 2017		December 31, 2016
	(In millions)
Commercial	$	—	$	3	$	—	$	3	$	—	$	—
Agricultural	134		127		125		104		36		23
Residential	514		381		33		37		481		344
Total	$	648	$	511	$	158	$	144	$	517	$	367

Mortgage Loans Modified in a Troubled Debt Restructuring

The Company may grant concessions related to borrowers experiencing financial difficulties, which are classified as troubled debt restructurings. Generally, the types of concessions include: reduction of the contractual interest rate, extension of the maturity date at an interest rate lower than current market interest rates, and/or a reduction of accrued interest. The amount, timing and extent of the concessions granted are considered in determining any impairment or changes in the specific valuation allowance recorded with the restructuring. Through the continuous monitoring process, a specific valuation allowance may have been recorded prior to the quarter when the mortgage loan is modified in a troubled debt restructuring.

For the year ended December 31, 2017, the Company had 500 residential mortgage loans modified in a troubled debt restructuring with carrying value after specific valuation allowance of $120 million and $108 million pre-modification and post-modification, respectively. For the year ended December 31, 2016, the Company had 557 residential mortgage loans modified in a troubled debt restructuring with carrying value after specific valuation allowance of $136 million and $122 million pre-modification and post-modification, respectively. For the years ended December 31, 2017 and 2016, the Company did not have a significant amount of agricultural mortgage loans and no commercial mortgage loans modified in a troubled debt restructuring.

For both the years ended December 31, 2017 and 2016, the Company did not have a significant amount of mortgage loans modified in a troubled debt restructuring with subsequent payment default.

Other Invested Assets

Other invested assets is comprised primarily of freestanding derivatives with positive estimated fair values (see Note 9), tax credit and renewable energy partnerships and leveraged and direct financing leases.

Tax Credit Partnerships

The carrying value of tax credit partnerships was $1.8 billion and $1.7 billion at December 31, 2017 and 2016, respectively. Losses from tax credit partnerships included within net investment income were $259 million, $167 million, and $163 million for the years ended December 31, 2017, 2016 and 2015, respectively.

Leveraged and Direct Financing Leases

Investment in leveraged and direct financing leases consisted of the following at:

	December 31,
	2017						2016
	Leveraged Leases			Direct Financing Leases			Leveraged Leases			Direct Financing Leases
	(In millions)
Rental receivables, net	$	912		$	2,303		$	1,172		$	1,683
Estimated residual values	838			42			952			71
Subtotal	1,750			2,345			2,124			1,754
Unearned income	(472		)	(1,022		)	(603		)	(639		)
Investment in leases, net of non-recourse debt	$	1,278		$	1,323		$	1,521		$	1,115

Rental receivables are generally due in periodic installments. The payment periods for leveraged leases generally range from one to 15 years but in certain circumstances can be over 25 years, while the payment periods for direct financing leases range from one to 20 years. For rental receivables, the primary credit quality indicator is whether the rental receivable is performing or nonperforming, which is assessed monthly. The Company generally defines nonperforming rental receivables as those that are 90 days or more past due. At both December 31, 2017 and 2016, all leveraged lease receivables were performing and over 99% of direct financing rental receivables were performing.

The deferred income tax liability related to leveraged leases was $934 million and $1.4 billion at December 31, 2017 and 2016, respectively.

Cash Equivalents

The carrying value of cash equivalents, which includes securities and other investments with an original or remaining maturity of three months or less at the time of purchase, was $6.2 billion and $7.4 billion at December 31, 2017 and 2016, respectively.

Net Unrealized Investment Gains (Losses)

Unrealized investment gains (losses) on fixed maturity and equity securities AFS and the effect on DAC, VOBA, DSI, future policy benefits and the policyholder dividend obligation that would result from the realization of the unrealized gains (losses) are included in net unrealized investment gains (losses) in AOCI.

The components of net unrealized investment gains (losses) included in AOCI were as follows:

	Years Ended December 31,
	2017			2016			2015
	(In millions)
Fixed maturity securities	$	22,645		$	20,330		$	18,158
Fixed maturity securities with noncredit OTTI losses included in AOCI	41			8			(76		)
Total fixed maturity securities	22,686			20,338			18,082
Equity securities	421			485			422
Derivatives	1,453			2,923			2,350
Other	46			23			287
Subtotal	24,606			23,769			21,141
Amounts allocated from:
Future policy benefits	(77		)	(1,114		)	(163		)
DAC and VOBA related to noncredit OTTI losses recognized in AOCI	—			(3		)	—
DAC, VOBA and DSI	(1,768		)	(1,430		)	(1,273		)
Policyholder dividend obligation	(2,121		)	(1,931		)	(1,783		)
Subtotal	(3,966		)	(4,478		)	(3,219		)
Deferred income tax benefit (expense) related to noncredit OTTI losses recognized in AOCI	(12		)	(1		)	27
Deferred income tax benefit (expense)	(6,958		)	(6,634		)	(6,149		)
Net unrealized investment gains (losses)	13,670			12,656			11,800
Net unrealized investment gains (losses) attributable to noncontrolling interests	(8		)	(6		)	(31		)
Net unrealized investment gains (losses) attributable to MetLife, Inc.	$	13,662		$	12,650		$	11,769

Net unrealized investment gains (losses) attributable to MetLife, Inc. in the above table include, on a net of income tax basis, $1,250 million and $1,554 million for the years ended December 31, 2016 and 2015, respectively, related to assets and liabilities of a disposed subsidiary.

The changes in net unrealized investment gains (losses) were as follows:

	Years Ended December 31,
	2017			2016			2015
	(In millions)
Balance at January 1,	$	12,650		$	11,769		$	16,300
Fixed maturity securities on which noncredit OTTI losses have been recognized	33			84			36
Unrealized investment gains (losses) during the year	804			2,544			(11,668		)
Unrealized investment gains (losses) relating to:
Future policy benefits	1,037			(951		)	2,723
DAC and VOBA related to noncredit OTTI losses recognized in AOCI	3			(3		)	4
DAC, VOBA and DSI	(338		)	(157		)	673
Policyholder dividend obligation	(190		)	(148		)	1,372
Deferred income tax benefit (expense) related to noncredit OTTI losses recognized in AOCI	(11		)	(28		)	(15		)
Deferred income tax benefit (expense)	(324		)	(485		)	2,342
Net unrealized investment gains (losses)	13,664			12,625			11,767
Net unrealized investment gains (losses) attributable to noncontrolling interests	(2		)	25			2
Balance at December 31,	$	13,662		$	12,650		$	11,769
Change in net unrealized investment gains (losses)	$	1,014		$	856		$	(4,533	)
Change in net unrealized investment gains (losses) attributable to noncontrolling interests	(2		)	25			2
Change in net unrealized investment gains (losses) attributable to MetLife, Inc.	$	1,012		$	881		$	(4,531	)

Net unrealized investment gains (losses) attributable to MetLife, Inc. in the above table include, on a net of income tax basis, ($304) million and ($1,128) million for the years ended December 31, 2016 and 2015, respectively, related to assets and liabilities of a disposed subsidiary.

Concentrations of Credit Risk

Investments in any counterparty that were greater than 10% of the Company’s equity, other than the U.S. government and its agencies, were in fixed income securities of the Japanese government and its agencies with an estimated fair value of $27.5 billion and $24.7 billion at December 31, 2017 and 2016, respectively, and in fixed income securities of the South Korean government and its agencies with an estimated fair value of $6.5 billion at December 31, 2017. At December 31, 2016, the investments in South Korean government and agency fixed income securities were less than 10% of the Company’s equity.

Securities Lending

Elements of the securities lending program are presented below at:

	December 31,
	2017		2016
	(In millions)
Securities on loan: (1)
Amortized cost	$	17,801	$	18,798
Estimated fair value	$	19,028	$	19,753
Cash collateral received from counterparties (2)	$	19,417	$	20,114
Security collateral received from counterparties (3)	$	19	$	20
Reinvestment portfolio — estimated fair value	$	19,508	$	20,133

__________________

(1) Included within fixed maturity securities.

(2) Included within payables for collateral under securities loaned and other transactions.

(3) Security collateral received from counterparties may not be sold or re-pledged, unless the counterparty is in default, and is not reflected on the consolidated financial statements.

The cash collateral liability by loaned security type and remaining tenor of the agreements was as follows at:

	December 31, 2017								December 31, 2016
	Remaining Tenor of Securities Lending Agreements								Remaining Tenor of Securities Lending Agreements
	Open (1)		1 Month or Less		Over  1 to 6 Months		Total		Open (1)		1 Month or Less		Over 1 to 6 Months		Total
	(In millions)
Cash collateral liability by loaned security type:
U.S. government and agency	$	3,753	$	6,031	$	8,607	$	18,391	$	4,480	$	6,496	$	8,383	$	19,359
Foreign government	—		192		834		1,026		—		569		143		712
U.S. corporate	—		—		—		—		—		43		—		43
Total	$	3,753	$	6,223	$	9,441	$	19,417	$	4,480	$	7,108	$	8,526	$	20,114

__________________

(1) The related loaned security could be returned to the Company on the next business day, which would require the Company to immediately return the cash collateral.

If the Company is required to return significant amounts of cash collateral on short notice and is forced to sell securities to meet the return obligation, it may have difficulty selling such collateral that is invested in securities in a timely manner, be forced to sell securities in a volatile or illiquid market for less than what otherwise would have been realized under normal market conditions, or both. The estimated fair value of the securities on loan related to the cash collateral on open at December 31, 2017 was $3.7 billion, all of which were U.S. government and agency securities which, if put back to the Company, could be immediately sold to satisfy the cash requirement.

The reinvestment portfolio acquired with the cash collateral consisted principally of fixed maturity securities (including agency RMBS, U.S. government and agency securities, ABS, U.S. corporate securities) and short-term investments with 59% invested in agency RMBS, U.S. government and agency securities, short-term investments, cash equivalents or held in cash. If the securities on loan or the reinvestment portfolio become less liquid, the Company has the liquidity resources of most of its general account available to meet any potential cash demands when securities on loan are put back to the Company.

Repurchase Agreements

Elements of the short-term repurchase agreements are presented below at:

	December 31, 2017		December 31, 2016
	(In millions)
Securities on loan: (1)
Amortized cost	$	994	$	98
Estimated fair value	$	1,141	$	113
Cash collateral received from counterparties (2)	$	1,102	$	102
Reinvestment portfolio — estimated fair value	$	1,102	$	100

__________________

(1) Included within fixed maturity securities, short-term investments and cash equivalents.

(2) Included within payables for collateral under securities loaned and other transactions and other liabilities.

The cash collateral liability by loaned security type and remaining tenor of the agreements was as follows at:

	December 31, 2017						December 31, 2016
	Remaining Tenor of Repurchase Agreements						Remaining Tenor of Repurchase Agreements
	1 Month or Less		Over 1 to 6  Months		Total		1 Month or Less		Over 1 to 6 Months		Total
	(In millions)
Cash collateral liability by loaned security type:
U.S. government and agency	$	1,005	$	—	$	1,005	$	5	$	—	$	5
All other corporate and government	44		53		97		46		51		97
Total	$	1,049	$	53	$	1,102	$	51	$	51	$	102

The reinvestment portfolio acquired with the cash collateral consisted principally of fixed maturity securities (including U.S. government and agency securities, agency RMBS, ABS), short-term investments and cash equivalents, with 63% invested in U.S. government and agency securities, agency RMBS, short-term investments, cash equivalents or held in cash. If the securities on loan or the reinvestment portfolio become less liquid, the Company has the liquidity resources of most of its general account available to meet any potential cash demands when securities on loan are put back to the Company.

FHLB Boston Advance Agreements

At December 31, 2017, a subsidiary of the Company had pledged state and political subdivision fixed maturity securities with an estimated fair value of $564 million as collateral and received $300 million in cash advances under short-term advance agreements with the FHLB Boston. The liability to return the cash advances is included within payables for collateral under securities loaned and other transactions and the remaining tenor of all liabilities under these agreements was one to six months at December 31, 2017. The estimated fair value of the reinvestment portfolio acquired with the cash advances was $300 million at December 31, 2017 and consisted primarily of U.S. government and agency fixed maturity securities. At December 31, 2017, the reinvestment portfolio also included a $12 million, at estimated fair value, required investment in FHLB Boston common stock. The subsidiary is permitted to withdraw any portion of the pledged collateral over the minimum collateral requirement at any time, other than in the event of a default by the subsidiary. No such transactions were outstanding at December 31, 2016.

Invested Assets on Deposit, Held in Trust and Pledged as Collateral

Invested assets on deposit, held in trust and pledged as collateral are presented below at estimated fair value for all asset classes, except mortgage loans, which are presented at carrying value at:

	December 31,
	2017		2016
	(In millions)
Invested assets on deposit (regulatory deposits)	$	1,879	$	1,925
Invested assets held in trust (collateral financing arrangement and reinsurance agreements)	2,490		2,057
Invested assets pledged as collateral (1)	24,174		23,882
Total invested assets on deposit, held in trust and pledged as collateral	$	28,543	$	27,864

__________________

(1) The Company has pledged invested assets in connection with various agreements and transactions, including funding agreements (see Note 4), derivative transactions (see Note 9), secured debt (see Note 12), and a collateral financing arrangement (see Note 13).

See “— Securities Lending,” “— Repurchase Agreements” and “— FHLB Boston Advance Agreements” for information regarding securities on loan and Note 7 for information regarding investments designated to the closed block.

Purchased Credit Impaired Investments

Investments acquired with evidence of credit quality deterioration since origination and for which it is probable at the acquisition date that the Company will be unable to collect all contractually required payments are classified as PCI investments. For each investment, the excess of the cash flows expected to be collected as of the acquisition date over its acquisition date fair value is referred to as the accretable yield and is recognized as net investment income on an effective yield basis. If, subsequently, based on current information and events, it is probable that there is a significant increase in cash flows previously expected to be collected or if actual cash flows are significantly greater than cash flows previously expected to be collected, the accretable yield is adjusted prospectively. The excess of the contractually required payments (including interest) as of the acquisition date over the cash flows expected to be collected as of the acquisition date is referred to as the nonaccretable difference, and this amount is not expected to be realized as net investment income. Decreases in cash flows expected to be collected can result in OTTI.

The Company’s PCI investments were as follows at:

	December 31,
	2017		2016
	Fixed Maturity Securities
	(In millions)
Outstanding principal and interest balance (1)	$	4,763	$	5,624
Carrying value (2)	$	3,954	$	4,427

__________________

(1) Represents the contractually required payments, which include contractual principal, whether or not currently due, and accrued interest.

(2) Estimated fair value plus accrued interest.

The following table presents information about PCI investments acquired during the periods indicated:

	Years Ended December 31,
	2017		2016
	Fixed Maturity Securities
	(In millions)
Contractually required payments (including interest)	$	95	$	1,464
Cash flows expected to be collected (1)	$	73	$	1,338
Fair value of investments acquired	$	67	$	984

__________________

(1) Represents undiscounted principal and interest cash flow expectations, at the date of acquisition.

The following table presents activity for the accretable yield on PCI investments:

	Years Ended December 31,
	2017			2016
	Fixed Maturity Securities
	(In millions)
Accretable yield, January 1,	$	1,733		$	1,780
Investments purchased	6			354
Accretion recognized in earnings	(281		)	(269		)
Disposals	(42		)	(2		)
Reclassification (to) from nonaccretable difference	104			(130		)
Accretable yield, December 31,	$	1,520		$	1,733

Collectively Significant Equity Method Investments

The Company holds investments in real estate joint ventures, real estate funds and other limited partnership interests consisting of leveraged buy-out funds, hedge funds, private equity funds, joint ventures and other funds. The portion of these investments accounted for under the equity method had a carrying value of $13.8 billion at December 31, 2017. The Company’s maximum exposure to loss related to these equity method investments is limited to the carrying value of these investments plus unfunded commitments of $4.8 billion at December 31, 2017. Except for certain real estate joint ventures, the Company’s investments in real estate funds and other limited partnership interests are generally of a passive nature in that the Company does not participate in the management of the entities.

As described in Note 1, the Company generally records its share of earnings in its equity method investments using a three-month lag methodology and within net investment income. Aggregate net investment income from these equity method investments exceeded 10% of the Company’s consolidated pre-tax income (loss) from continuing operations for two of the three most recent annual periods: 2017 and 2016. The Company is providing the following aggregated summarized financial data for such equity method investments, for the most recent annual periods, in order to provide comparative information. This aggregated summarized financial data does not represent the Company’s proportionate share of the assets, liabilities, or earnings of such entities.

The aggregated summarized financial data presented below reflects the latest available financial information and is as of, and for, the years ended December 31, 2017, 2016 and 2015. Aggregate total assets of these entities totaled $505.6 billion at December 31, 2017 and $436.9 billion at December 31, 2016 (which includes $9.6 billion related to Brighthouse). Aggregate total liabilities of these entities totaled $68.9 billion at December 31, 2017 and $56.4 billion at December 31, 2016 (which includes $177 million related to Brighthouse). Aggregate net income (loss) of these entities totaled $37.9 billion, $26.8 billion and $25.8 billion for the years ended December 31, 2017, 2016 and 2015, respectively, with $270 million and $1.1 billion related to Brighthouse for the years ended December 31, 2016 and 2015, respectively. Aggregate net income (loss) from the underlying entities in which the Company invests is primarily comprised of investment income, including recurring investment income and realized and unrealized investment gains (losses).

Variable Interest Entities

The Company has invested in legal entities that are VIEs. In certain instances, the Company holds both the power to direct the most significant activities of the entity, as well as an economic interest in the entity and, as such, is deemed to be the primary beneficiary or consolidator of the entity. The determination of the VIE’s primary beneficiary requires an evaluation of the contractual and implied rights and obligations associated with each party’s relationship with or involvement in the entity, an estimate of the entity’s expected losses and expected residual returns and the allocation of such estimates to each party involved in the entity.

Consolidated VIEs

Creditors or beneficial interest holders of VIEs where the Company is the primary beneficiary have no recourse to the general credit of the Company, as the Company’s obligation to the VIEs is limited to the amount of its committed investment.

The following table presents the total assets and total liabilities relating to investment related VIEs for which the Company has concluded that it is the primary beneficiary and which are consolidated at December 31, 2017 and 2016.

	December 31,
	2017				2016
	Total Assets		Total Liabilities		Total Assets		Total Liabilities
	(In millions)
Renewable energy partnership (1)	$	116	$	3	$	—	$	—
Securitization entities (assets (primarily FVO securities) and liabilities (primarily debt)) (2)	7		6		9		12
Other investments (3)	25		—		50		—
Total	$	148	$	9	$	59	$	12

__________________

(1) Assets of the renewable energy partnership, primarily consisting of other invested assets, were consolidated in earlier periods as the two investors are subsidiaries of MLIC and Brighthouse, respectively. As a result of the Separation and a reassessment in 2017, the renewable energy partnership was determined to be a consolidated VIE.

(2) The Company consolidates entities that are structured as collateralized debt obligations. The assets of these entities can only be used to settle their respective liabilities, and under no circumstances is the Company liable for any principal or interest shortfalls should any arise.

(3) Other investments is primarily comprised of other invested assets.

Unconsolidated VIEs

The carrying amount and maximum exposure to loss relating to VIEs in which the Company holds a significant variable interest but is not the primary beneficiary and which have not been consolidated were as follows at:

	December 31,
	2017				2016
	Carrying Amount		Maximum Exposure to Loss (1)		Carrying Amount		Maximum Exposure to Loss (1)
	(In millions)
Fixed maturity securities AFS:
Structured Securities (2)	$	47,614	$	47,614	$	46,773	$	46,773
U.S. and foreign corporate	1,560		1,560		1,940		1,940
Other limited partnership interests	4,834		8,543		4,714		8,990
Other invested assets	2,291		2,625		2,206		2,777
Other (3)	82		87		199		215
Total	$	56,381	$	60,429	$	55,832	$	60,695

__________________

(1) The maximum exposure to loss relating to fixed maturity securities AFS is equal to their carrying amounts or the carrying amounts of retained interests. The maximum exposure to loss relating to other limited partnership interests and real estate joint ventures is equal to the carrying amounts plus any unfunded commitments. For certain of its investments in other invested assets, the Company’s return is in the form of income tax credits which are guaranteed by creditworthy third parties. For such investments, the maximum exposure to loss is equal to the carrying amounts plus any unfunded commitments, reduced by income tax credits guaranteed by third parties of $117 million and $150 million at December 31, 2017 and 2016, respectively. Such a maximum loss would be expected to occur only upon bankruptcy of the issuer or investee.

(2) For these variable interests, the Company’s involvement is limited to that of a passive investor in mortgage-backed or asset-backed securities issued by trusts that do not have substantial equity.

(3) Other is primarily comprised of real estate joint ventures and a joint venture related loan.

As described in Note 20, the Company makes commitments to fund partnership investments in the normal course of business. Excluding these commitments, the Company did not provide financial or other support to investees designated as VIEs during each of the years ended December 31, 2017, 2016 and 2015.

During 2017, the Company securitized certain residential mortgage loans and acquired an interest in the related RMBS issued. While the Company has a variable interest in the issuer of the securities, it is not the primary beneficiary of the issuer of the securities since it does not have any rights to remove the servicer or veto rights over the servicer’s actions. The carrying value and the estimated fair value of mortgage loans sold during 2017 were $319 million and $339 million, respectively, resulting in a gain of $20 million during the year ended December 31, 2017, which was included within net investment gains (losses). The estimated fair value of RMBS acquired in connection with the securitization was $52 million. Included in the carrying amount and maximum exposure to loss for Structured Securities presented above at December 31, 2017 were $51 million of such investments. See Note 10 for information on how the estimated fair value of mortgage loans and RMBS is determined, the valuation approaches and key inputs, their placement in the fair value hierarchy, and for certain RMBS, quantitative information about the significant unobservable inputs and the sensitivity of their estimated fair value to changes in those inputs.

Net Investment Income

The components of net investment income were as follows:

	Years Ended December 31,
	2017		2016		2015
	(In millions)
Investment income:
Fixed maturity securities	$	11,497	$	11,721	$	11,809
Equity securities	129		121		124
FVO securities — FVO general account securities (1)	68		37		21
Mortgage loans	3,082		2,858		2,772
Policy loans	517		511		525
Real estate and real estate joint ventures	646		652		872
Other limited partnership interests	798		478		535
Cash, cash equivalents and short-term investments	228		153		140
Operating joint ventures	28		33		25
Other	192		248		200
Subtotal	17,185		16,812		17,023
Less: Investment expenses	1,122		972		1,082
Subtotal, net	16,063		15,840		15,941
FVO securities — FVO contractholder-directed unit-linked investments (1)	1,300		950		264
Net investment income	$	17,363	$	16,790	$	16,205

__________________

(1) Changes in estimated fair value subsequent to purchase for securities still held as of the end of the respective periods included in net investment income were principally from FVO contractholder-directed unit-linked investments, and were $662 million, $427 million and ($456) million for the years ended December 31, 2017, 2016, and 2015, respectively.

FVO securities are primarily comprised of contractholder-directed investments supporting unit-linked variable annuity type liabilities which do not qualify as separate accounts. The remainder is comprised of FVO Brighthouse Common Stock (see Note 3), FVO general account securities and FVO securities held by consolidated securitization entities (“CSEs”). The Company previously maintained a trading securities portfolio, principally invested in fixed maturity securities. During 2016, the Company reinvested this portfolio into other asset classes and at December 31, 2016, the Company no longer held any Actively traded securities.

See “— Variable Interest Entities” for discussion of CSEs.

Net Investment Gains (Losses)

Components of Net Investment Gains (Losses)

The components of net investment gains (losses) were as follows:

	Years Ended December 31,
	2017			2016			2015
	(In millions)
Total gains (losses) on fixed maturity securities:
Total OTTI losses recognized — by sector and industry:
U.S. and foreign corporate securities — by industry:
Consumer	$	(4	)	$	—		$	(20	)
Industrial	—			(63		)	(2		)
Utility	—			(21		)	(15		)
Communications	—			(3		)	—
Total U.S. and foreign corporate securities	(4		)	(87		)	(37		)
ABS	(3		)	(2		)	—
RMBS	—			(18		)	(16		)
State and political subdivision	(3		)	—			(6		)
OTTI losses on fixed maturity securities recognized in earnings	(10		)	(107		)	(59		)
Fixed maturity securities — net gains (losses) on sales and disposals (1)	328			251			318
Total gains (losses) on fixed maturity securities	318			144			259
Total gains (losses) on equity securities:
Total OTTI losses recognized — by sector:
Common stock	(24		)	(75		)	(36		)
Non-redeemable preferred stock	(1		)	—			(1		)
OTTI losses on equity securities recognized in earnings	(25		)	(75		)	(37		)
Equity securities — net gains (losses) on sales and disposals	117			19			43
Total gains (losses) on equity securities	92			(56		)	6
FVO securities — FVO general account securities	—			—			—
Mortgage loans (2)	14			(231		)	(93		)
Real estate and real estate joint ventures	603			182			433
Other limited partnership interests	(59		)	(64		)	(66		)
Other	(113		)	(130		)	1
Subtotal	855			(155		)	540
FVO CSEs:
Securities	—			1			—
Long-term debt — related to securities	(1		)	—			—
Non-investment portfolio gains (losses) (3) (4) (5) (6)	(1,162		)	471			69
Subtotal	(1,163		)	472			69
Total net investment gains (losses)	$	(308	)	$	317		$	609

__________________

(1) Fixedmaturity securities net gains (losses) on sales and disposals for the year endedDecember 31, 2017includes$276 millionin previously deferred gains on prior period transfers of securities to Brighthouse, as such gains are no longer eliminated in consolidation after the Separation. SeeNote 3.

(2) Mortgage loans gains (losses) for the year ended December 31, 2017 include $47 million of previously deferred gains on prior period transfers of mortgage loans to Brighthouse as such gains are no longer eliminated in consolidation after the Separation. See Note 3.

(3) Non-investment portfolio gains (losses) for the year ended December 31, 2017 includes a loss of $1,016 million which represents a mark-to-market loss attributable to the FVO Brighthouse Common Stock held by the Company at Separation. See Note 3.

(4) Non-investment portfolio gains (losses) for the year ended December 31, 2017 includes a loss of $95 million which represents the change in estimated fair value of FVO Brighthouse Common Stock held by the Company from the date of Separation to December 31, 2017. See Note 3.

(5) Non-investment portfolio gains (losses) for the year ended December 31, 2017 includes a $98 million loss due to the disposition of MetLife Afore. See Note 3.

(6) Non-investment portfolio gains (losses) for the year ended December 31, 2016 includes a gain of $102 million in connection with the U.S. Retail Advisor Force Divestiture. See Note 3.

See “— Variable Interest Entities” for discussion of CSEs.

Gains (losses) from foreign currency transactions included within net investment gains (losses) were ($6) million, $225 million and $57 million for the years ended December 31, 2017, 2016 and 2015, respectively.

Sales or Disposals and Impairments of Fixed Maturity and Equity Securities

Investment gains and losses on sales of securities are determined on a specific identification basis. Proceeds from sales or disposals of fixed maturity and equity securities and the components of fixed maturity and equity securities net investment gains (losses) were as shown in the table below.

	Years Ended December 31,
	2017			2016			2015			2017			2016			2015
	Fixed Maturity Securities									Equity Securities
	(In millions)
Proceeds	$	56,509		$	86,179		$	82,871		$	1,255		$	278		$	278
Gross investment gains	$	753		$	1,048		$	1,144		$	131		$	36		$	73
Gross investment losses	(425		)	(797		)	(826		)	(14		)	(17		)	(30		)
OTTI losses	(10		)	(107		)	(59		)	(25		)	(75		)	(37		)
Net investment gains (losses)	$	318		$	144		$	259		$	92		$	(56	)	$	6

Credit Loss Rollforward

The table below presents a rollforward of the cumulative credit loss component of OTTI loss recognized in earnings on fixed maturity securities still held for which a portion of the OTTI loss was recognized in OCI:

	Years Ended December 31,
	2017			2016
	(In millions)
Balance at January 1,	$	187		$	211
Additions:
Initial impairments — credit loss OTTI on securities not previously impaired	—			1
Additional impairments — credit loss OTTI on securities previously impaired	—			18
Reductions:
Sales (maturities, pay downs or prepayments) of securities previously impaired as credit loss OTTI	(48		)	(43		)
Securities impaired to net present value of expected future cash flows	—			(1		)
Increase in cash flows — accretion of previous credit loss OTTI	(1		)	1
Balance at December 31,	$	138		$	187