Investments

6 Months Ended

Jun. 30, 2020

Investments, Debt and Equity Securities [Abstract]

Investments

6. Investments

Fixed Maturity Securities Available-for-Sale

Fixed Maturity Securities Available-for-Sale by Sector

The following table presents the fixed maturity securities AFS by sector. U.S. corporate and foreign corporate sectors include redeemable preferred stock. Residential mortgage-backed securities (“RMBS”) includes agency, prime, alternative and sub-prime mortgage-backed securities. Asset-backed securities (“ABS”) includes securities collateralized by corporate loans and consumer loans. Municipals includes taxable and tax-exempt revenue bonds and, to a much lesser extent, general obligations of states, municipalities and political subdivisions. Commercial mortgage-backed securities (“CMBS”) primarily includes securities collateralized by multiple commercial mortgage loans. RMBS, ABS and CMBS are, collectively, “Structured Products.” In accordance with new guidance adopted January 1, 2020 regarding expected credit loss, securities that incurred a credit loss after December 31, 2019 and were still held as of June 30, 2020, are presented net of ACL. In accordance with previous guidance, both the temporary loss and OTTI loss are presented for securities that were in an unrealized loss position as of December 31, 2019.

	June 30, 2020											December 31, 2019
	Amortized Cost		ACL			Gross Unrealized				Estimated Fair Value		Amortized Cost		Gross Unrealized							Estimated Fair Value
						Gains		Losses						Gains		Temporary Losses		OTTI Losses (1)
	(In millions)
U.S. corporate	$	79,085	$	(30	)	$	11,766	$	709	$	90,112	$	79,115	$	8,943	$	305	$	—		$	87,753
Foreign government	57,964		(129		)	8,260		389		65,706		58,840		8,710		321		—			67,229
Foreign corporate	58,346		(16		)	5,765		1,278		62,817		59,342		5,540		717		—			64,165
U.S. government and agency	37,915		—			9,394		22		47,287		37,586		4,604		106		—			42,084
RMBS	29,963		(2		)	1,999		85		31,875		27,051		1,535		72		(33		)	28,547
ABS	16,603		—			127		406		16,324		14,547		83		88		—			14,542
Municipals	11,930		—			2,685		4		14,611		11,081		2,001		29		—			13,053
CMBS	11,067		—			483		277		11,273		10,093		396		42		—			10,447
Total fixed maturity securities AFS	$	302,873	$	(177	)	$	40,479	$	3,170	$	340,005	$	297,655	$	31,812	$	1,680	$	(33	)	$	327,820

__________________

(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 loss on such securities. See also “— Net Unrealized Investment Gains (Losses).”

Maturities of Fixed Maturity Securities AFS

The amortized cost, net of ACL, and estimated fair value of fixed maturity securities AFS, by contractual maturity date, were as follows at June 30, 2020:

	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 Products		Total Fixed Maturity Securities AFS
	(In millions)
Amortized cost, net of ACL	$	15,497	$	49,042	$	56,906	$	123,620	$	57,631	$	302,696
Estimated fair value	$	15,676	$	51,166	$	63,218	$	150,473	$	59,472	$	340,005

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

Continuous Gross Unrealized Losses for Fixed Maturity Securities AFS by Sector

The following table presents the estimated fair value and gross unrealized losses of fixed maturity securities AFS in an unrealized loss position by sector and aggregated by length of time that the securities have been in a continuous unrealized loss position. Included in the table below are securities without an ACL as of June 30, 2020, in accordance with new guidance adopted January 1, 2020. Also included in the table below are all securities in an unrealized loss position as of December 31, 2019, in accordance with previous guidance.

	June 30, 2020								December 31, 2019
	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)
U.S. corporate	$	9,285	$	617	$	538	$	89	$	3,817	$	107	$	2,226	$	198
Foreign government	4,420		244		1,259		130		3,295		149		1,490		172
Foreign corporate	11,997		1,021		1,794		254		3,188		133		5,873		584
U.S. government and agency	2,033		21		36		1		5,391		97		196		9
RMBS	2,620		69		188		15		2,341		25		584		14
ABS	7,191		249		3,127		157		3,692		22		4,843		66
Municipals	232		4		—		—		1,156		29		1		—
CMBS	3,469		235		400		42		1,926		16		487		26
Total fixed maturity securities AFS	$	41,247	$	2,460	$	7,342	$	688	$	24,806	$	578	$	15,700	$	1,069
Investment grade	$	33,735	$	1,840	$	6,372	$	549	$	22,838	$	437	$	13,813	$	821
Below investment grade	7,512		620		970		139		1,968		141		1,887		248
Total fixed maturity securities AFS	$	41,247	$	2,460	$	7,342	$	688	$	24,806	$	578	$	15,700	$	1,069
Total number of securities in an unrealized loss position	3,419				808				2,153				1,411

Evaluation of Fixed Maturity Securities AFS for Credit Loss

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 credit loss evaluation process include, but are not limited to: (i) the extent to which the estimated fair value has been below amortized cost, (ii) adverse conditions specifically related to a security, an industry sector or sub-sector, or an economically depressed geographic area, adverse change in the financial condition of the issuer of the security, changes in technology, discontinuance of a segment of the business that may affect future earnings, and changes in the quality of credit enhancement, (iii) payment structure of the security and likelihood of the issuer being able to make payments, (iv) failure of the issuer to make scheduled interest and principal payments, (v) the issuer, or series of issuers or an industry has suffered a catastrophic loss or has exhausted natural resources, (vi) 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 Products, changes in forecasted cash flows after considering the changes in the financial condition of the underlying loan obligors and 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) changes in the rating of the security by a rating agency, and (ix) other subjective factors, including concentrations and information obtained from regulators.

The methodology and significant inputs used to determine the amount of credit loss 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 at the time of purchase for fixed-rate securities and the spot rate at the date of evaluation of credit loss for floating-rate securities.

• When determining collectability and the period over which value is expected to recover, the Company applies considerations utilized in its overall credit loss 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 single best estimate, the most likely outcome in a range of possible 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; any private and public sector programs to restructure foreign government securities and municipals; 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 Products including, but not limited to: the quality of underlying collateral, historical performance of the underlying loan obligors, historical rent and vacancy levels, changes in the financial condition of the underlying loan obligors, expected prepayment speeds, current and forecasted loss severity, consideration of the payment terms of the underlying loans or assets backing a particular security, changes in the quality of credit enhancement and the payment priority within the tranche structure of the security.

With respect to securities that have attributes of debt and equity (“perpetual hybrid securities”), consideration is given in the credit loss 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 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.

After the adoption of new guidance on January 1, 2020, in periods subsequent to the recognition of an initial ACL on a security, the Company reassesses credit loss quarterly. Subsequent increases or decreases in the expected cash flow from the security result in corresponding decreases or increases in the ACL which are recorded within net investment gains (losses); however, the previously recorded ACL is not reduced to an amount below zero. Full or partial write-offs are deducted from the ACL in the period the security, or a portion thereof, is considered uncollectible. Recoveries of amounts previously written off are recorded to the ACL in the period received. When the Company has the intent to sell the security or it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost, any ACL is written off and the amortized cost is written down to estimated fair value through a charge within net investment gains (losses), which becomes the new amortized cost of the security.

In accordance with the previous guidance, methodologies to evaluate the recoverability of a security in an unrealized loss position were similar, except: (i) the length of time estimated fair value had been below amortized cost was considered for securities, and (ii) for non-functional currency denominated securities, the impact from weakening non-functional currencies on securities that were near maturity was considered in the evaluation. In addition, measurement methodologies were similar, except: (i) a fair value floor was not utilized to limit the credit loss recognized, (ii) the amortized cost of securities was adjusted for the OTTI to the expected recoverable amount and an ACL was not utilized, (iii) subsequent to a credit loss being recognized, increases in expected cash flows from the security did not result in an immediate increase in valuation recognized in earnings through net investment gains (losses) from reduction of the ACL instead such increases in value were recorded as unrealized gains in OCI, and (iv) in periods subsequent to the recognition of OTTI on a security, the Company accounted 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 was accreted over the remaining term of the security in a prospective manner based on the amount and timing of estimated future cash flows.

Evaluation of Fixed Maturity Securities AFS in an Unrealized Loss Position

Gross unrealized losses on securities without an ACL increased $1.5 billion for the six months ended June 30, 2020 to $3.1 billion. The increase in gross unrealized losses for the six months ended June 30, 2020 was primarily attributable to widening credit spreads and movement in foreign currency exchange rates, partially offset by decreases in interest rates.

Gross unrealized losses on securities without an ACL that have been in a continuous gross unrealized loss position for 12 months or greater were $688 million at June 30, 2020, or 22% of the total gross unrealized losses on securities without an ACL.

Investment Grade Fixed Maturity Securities AFS

Of the $688 million of gross unrealized losses on securities without an ACL that have been in a continuous gross unrealized loss position for 12 months or greater, $549 million, or 80%, were related to 655 investment grade securities. Unrealized losses on investment grade securities are principally related to widening credit spreads since purchase and, with respect to fixed-rate securities, rising interest rates since purchase.

Below Investment Grade Fixed Maturity Securities AFS

Of the $688 million of gross unrealized losses on securities without an ACL that have been in a continuous gross unrealized loss position for 12 months or greater, $139 million, or 20%, were related to 153 below investment grade securities. Unrealized losses on below investment grade securities are principally related to U.S. and foreign corporate securities (primarily industrial and consumer), foreign government securities and ABS and are the result of significantly wider credit spreads resulting from higher risk premiums since purchase, largely due to economic and market uncertainty, as well as with respect to fixed-rate securities, rising interest rates since purchase. Management evaluates U.S. corporate and foreign corporate securities based on factors such as expected cash flows, financial condition and near-term and long-term prospects of the issuers. Management evaluates foreign government securities based on factors impacting the issuers such as expected cash flows, financial condition of the issuers and any country specific economic conditions or public sector programs to restructure foreign government securities. Management evaluates ABS based on actual and projected cash flows after considering the quality of underlying collateral, credit enhancements, expected prepayment speeds, current and forecasted loss severity, the payment terms of the underlying assets backing a particular security and the payment priority within the tranche structure of the security.

Current Period Evaluation

At June 30, 2020, with respect to securities in an unrealized loss position without an ACL, the Company did not intend to sell these securities, and it was not more likely than not that the Company would be required to sell these securities before the anticipated recovery of the remaining amortized cost. Based on the Company’s current evaluation of its securities in an unrealized loss position without an ACL, the Company concluded that these securities had not incurred a credit loss and should not have an ACL at June 30, 2020.

Future provisions for credit loss will depend primarily on economic fundamentals, issuer performance (including changes in the present value of future cash flows expected to be collected), and changes in credit ratings and collateral valuation.

Rollforward of Allowance for Credit Loss for Fixed Maturity Securities AFS By Sector

The rollforward of ACL for fixed maturity securities AFS by sector is as follows:

	U.S.  Corporate			Foreign Government			Foreign Corporate		RMBS		Total
	(In millions)
Three Months Ended June 30, 2020
Balance, beginning of period	$	51		$	136		$	—	$	—	$	187
ACL not previously recorded	7			3			16		2		28
Changes for securities with previously recorded ACL	(7		)	(4		)	—		—		(11		)
Securities sold	(20		)	(6		)	—		—		(26		)
Securities intended/required to be sold prior to recovery of amortized cost basis	(1		)	—			—		—		(1		)
Balance, end of period	$	30		$	129		$	16	$	2	$	177

	U.S. Corporate			Foreign Government			Foreign Corporate		RMBS		Total
	(In millions)
Six Months Ended June 30, 2020
Balance, beginning of period	$	—		$	—		$	—	$	—	$	—
ACL not previously recorded	58			139			16		2		215
Changes for securities with previously recorded ACL	(7		)	(4		)	—		—		(11		)
Securities sold	(20		)	(6		)	—		—		(26		)
Securities intended/required to be sold prior to recovery of amortized cost basis	(1		)	—			—		—		(1		)
Balance, end of period	$	30		$	129		$	16	$	2	$	177

Equity Securities

Equity securities are summarized as follows at:

	June 30, 2020				December 31, 2019
	Estimated Fair Value		% of Total		Estimated Fair Value		% of Total
	(Dollars in millions)
Common stock	$	739	66.9	%	$	944	70.3	%
Non-redeemable preferred stock	366		33.1		398		29.7
Total equity securities	$	1,105	100.0	%	$	1,342	100.0	%

Contractholder-Directed Equity Securities and Fair Value Option Securities

As described more fully in Note 1 of the Notes to the Consolidated Financial Statements included in the 2019 Annual Report, contractholder-directed equity securities and FVO securities (“FVO Securities”) (collectively, “Unit-linked and FVO Securities”) include three categories of investments for which the FVO has been elected, or are otherwise required to be carried at estimated fair value.

Mortgage Loans

Mortgage Loans by Portfolio Segment

Mortgage loans are summarized as follows at:

	June 30, 2020					December 31, 2019
	Carrying Value			% of Total		Carrying Value			% of Total
	(Dollars in millions)
Mortgage loans:
Commercial	$	51,043		61.6	%	$	49,624		61.6	%
Agricultural	17,167			20.7		16,695			20.7
Residential	15,060			18.2		14,316			17.8
Total amortized cost	83,270			100.5		80,635			100.1
Allowance for credit loss	(555		)	(0.7	)	(353		)	(0.4	)
Subtotal mortgage loans, net	82,715			99.8		80,282			99.7
Residential — FVO	175			0.2		188			0.2
Total mortgage loans held-for-investment, net	82,890			100.0		80,470			99.9
Mortgage loans held-for-sale	—			—		59			0.1
Total mortgage loans, net	$	82,890		100.0	%	$	80,529		100.0	%

Information on commercial, agricultural, and residential mortgage loans is presented in the tables below. Information on residential mortgage loans - FVO is presented in Note 8. The Company elects the FVO for certain residential mortgage loans that are managed on a total return basis.

The amount of net discounts, included within total amortized cost, primarily attributable to residential mortgage loans was $973 million and $867 million at June 30, 2020 and December 31, 2019, respectively. The accrued interest income excluded from total amortized cost for commercial, agricultural and residential mortgage loans at June 30, 2020 and December 31, 2019 was $189 million and $188 million; $179 million and $186 million; and $103 million and $94 million, respectively.

Purchases of mortgage loans, primarily residential, were $417 million and $1.7 billion for the three months and six months ended June 30, 2020, respectively, and $567 million and $1.9 billion for the three months and six months ended June 30, 2019, respectively.

Mortgage Loan Concessions

In response to the adverse economic impact of the COVID-19 Pandemic, the Company granted concessions to certain of its commercial, agricultural and residential mortgage loan borrowers, including payment deferrals and other loan modifications. The Company has elected the option under the Coronavirus Aid, Relief, and Economic Security Act and the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised) issued by bank regulatory agencies, not to account for or report qualifying concessions as troubled debt restructurings and does not classify such loans as either past due or nonaccrual during the payment deferral period. Additionally, in accordance with the FASB’s published response to a COVID-19 Pandemic technical inquiry, the Company continues to accrue interest income on such loans that have deferred payment. The Company records an allowance for credit loss on this accrued interest income.

Commercial

For some commercial mortgage loan borrowers (principally in the retail and hotel sectors), the Company granted concessions which were primarily interest and principal payment deferrals generally ranging from three to four months and, to a much lesser extent, maturity date extensions. Deferred commercial mortgage loan interest and principal payments were $64 million at June 30, 2020.

Agricultural

For some agricultural mortgage loan borrowers (principally in the annual crops and agribusiness sectors), the Company granted concessions which were primarily principal payment deferrals generally ranging from three to 12 months, and covenant changes and, to a much lesser extent, maturity date extensions. Deferred agricultural mortgage loan interest and principal payments were $9 million at June 30, 2020.

Residential

For some residential mortgage loan borrowers, the Company granted concessions which were primarily three-month interest and principal payment deferrals. Deferred residential mortgage loan interest and principal payments were $18 million at June 30, 2020.

Allowance for Credit Loss Rollforward by Portfolio Segment

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

	Six Months Ended June 30,
	2020												2019
	Commercial			Agricultural			Residential			Total			Commercial		Agricultural		Residential			Total
	(In millions)
Balance, beginning of period	$	246		$	52		$	55		$	353		$	238	$	46	$	58		$	342
Adoption of new credit loss guidance	(118		)	35			161			78			—		—		—			—
Initial credit losses on PCD loans (1)	—			—			16			16			—		—		—			—
Provision (release)	47			6			62			115			8		2		9			19
Charge-offs, net of recoveries	—			(2		)	(5		)	(7		)	—		—		(4		)	(4		)
Balance, end of period	$	175		$	91		$	289		$	555		$	246	$	48	$	63		$	357

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(1) Represents the initial credit losses on purchased mortgage loans accounted for as purchased financial assets with credit deterioration (“PCD”).

Allowance for Credit Loss Methodology

After the adoption of new guidance on January 1, 2020, the Company records an allowance for expected credit loss in an amount that represents the portion of the amortized cost basis of mortgage loans that the Company does not expect to collect, resulting in mortgage loans being presented at the net amount expected to be collected. In determining the Company’s ACL, management: (i) pools mortgage loans that share similar risk characteristics, (ii) considers lifetime credit loss expected over the contractual term of its mortgage loans adjusted for expected prepayments and any extensions, and (iii) considers past events, current economic conditions and forecasts of future economic conditions. Each of the Company’s commercial, agricultural and residential mortgage loan portfolio segments are evaluated separately. The ACL is calculated for each mortgage loan portfolio segment based on inputs unique to each loan portfolio segment. On a quarterly basis, mortgage loans within a portfolio segment that share similar risk characteristics, such as internal risk ratings or consumer credit scores, are pooled for calculation of ACL. On an ongoing basis, mortgage loans with dissimilar risk characteristics (i.e., loans with significant declines in credit quality), collateral dependent mortgage loans (i.e., when the borrower is experiencing financial difficulty, including when foreclosure is reasonable possible or probable) and reasonably expected troubled debt restructurings (i.e., the Company grants concessions to borrower that is experiencing financial difficulties) are evaluated individually for credit loss. The ACL for loans evaluated individually are established using the same methodologies for all three portfolio segments. For example, the ACL for a collateral dependent loan is established as the excess of amortized cost over the estimated fair value of the loan’s underlying collateral, less selling cost when foreclosure is probable. Accordingly, the change in the estimated fair value of collateral dependent loans, which are evaluated individually for credit loss, is recorded as a change in the ACL which is recorded on a quarterly basis as a charge or credit to earnings in net investment gains (losses).

In accordance with the previous guidance, evaluation and measurement methodologies in determining the ACL were similar, except: (i) credit loss was recognized when incurred (when it was probable, based on current information and events, that all amounts due under the loan agreement would not be collected), (ii) pooling of loans with similar risk characteristics was permitted, but not required, (iii) forecasts of future economic conditions were not considered in the evaluation, (iv) measurement of the expected credit loss over the contractual term, or expected term, was not considered in the measurement, and (v) the credit loss for loans evaluated individually could also be determined using either discounted cash flows using the loans original effective interest rate or observable market prices.

Commercial and Agricultural Mortgage Loan Portfolio Segments

Commercial and agricultural mortgage loan ACL are calculated in a similar manner. Within each loan portfolio segment, commercial and agricultural, loans are pooled by internal risk rating. Estimated lifetime loss rates, which vary by internal risk rating, are applied to the amortized cost of each loan, excluding accrued investment income, on a quarterly basis to develop the ACL. Internal risk ratings are based on an assessment of the loan’s credit quality, which can change over time. The estimated lifetime loss rates are based on several loan portfolio segment-specific factors, including (i) the Company’s experience with defaults and loss severity, (ii) expected default and loss severity over the forecast period, (iii) current and forecasted economic conditions including growth, inflation, interest rates and unemployment levels, (iv) loan specific characteristics including loan-to-value ratios, and (v) internal risk ratings. These evaluations are revised as conditions change and new information becomes available. The Company uses its several decades of historical default and loss severity experience which capture multiple economic cycles. The Company uses a forecast of economic assumptions for a two-year period for most of its commercial and agricultural mortgage loans, while a one-year period is used for loans originated in certain markets. After the applicable forecast period, the Company reverts to its historical loss experience using a straight-line basis over two years. 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, recent loss and recovery trend experience as compared to historical loss and recovery experience, and loan specific characteristics including debt service coverage ratios. In estimating lifetime credit loss expected over the term of its commercial mortgage loans, the Company adjusts for expected prepayment and extension experience during the forecast period using historical prepayment and extension experience considering the expected position in the economic cycle and the loan profile (i.e., floating rate, shorter-term fixed rate and longer-term fixed rate) and after the forecast period using long-term historical prepayment 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. In estimating lifetime credit loss expected over the term of its agricultural mortgage loans, the Company’s experience is much less sensitive to the position in the economic cycle and by loan profile; accordingly, historical prepayment experience is used, while extension terms are not prevalent with the Company’s agricultural mortgage loans.

Commercial mortgage loans are reviewed on an ongoing basis, which review includes, but is not limited to, 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. Agricultural mortgage loans are reviewed on an ongoing basis, which review includes, but is not limited to, property inspections, market analysis, estimated valuations of the underlying collateral, loan-to-value ratios and borrower creditworthiness, as well as reviews on a geographic and property-type basis. The monitoring process for agricultural mortgage loans also focuses on higher risk loans.

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 routinely. 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.

Commitments to lend: After loans are approved, the Company makes commitments to lend and, typically, borrowers draw down on some or all of the commitments. The timing of mortgage loan funding is based on the commitment expiration dates. A liability for expected credit loss for unfunded commercial and agricultural mortgage loan commitments is recorded within net investment gains (losses). The liability is based on estimated lifetime loss rates as described above and the amount of the outstanding commitments, which for lines of credit, considers estimated utilization rates. When the commitment is funded or expires, the liability is adjusted accordingly.

Residential Mortgage Loan Portfolio Segment

The Company’s residential mortgage loan portfolio is comprised primarily of purchased closed end, amortizing residential mortgage loans, including both performing loans purchased within 12 months of origination and reperforming loans purchased after they have been performing for at least 12 months post-modification. Residential mortgage loans are pooled by loan type (i.e., new origination and reperforming) and pooled by similar risk profiles (including consumer credit score and loan-to-value ratios). Estimated lifetime loss rates, which vary by loan type and risk profile, are applied to the amortized cost of each loan excluding accrued investment income on a quarterly basis to develop the ACL. The estimated lifetime loss rates are based on several factors, including (i) industry historical experience and expected results over the forecast period for defaults, (ii) loss severity, (iii) prepayment rates, (iv) current and forecasted economic conditions including growth, inflation, interest rates and unemployment levels, and (v) loan pool specific characteristics including consumer credit scores, loan-to-value ratios, payment history and home prices. These evaluations are revised as conditions change and new information becomes available. The Company uses industry historical experience which captures multiple economic cycles as the Company has purchased most of its residential mortgage loans in the last five years. The Company uses a forecast of economic assumptions for a two-year period for most of its residential mortgage loans. After the applicable forecast period, the Company immediately reverts to industry historical loss experience.

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 Mortgage Loans by Portfolio Segment

The amortized cost of commercial mortgage loans by credit quality indicator and vintage year was as follows at June 30, 2020:

	2020		2019		2018		2017		2016		Prior		Revolving Loans		Total		% of Total
	(Dollars in millions)
Loan-to-value ratios:
Less than 65%	$	2,353	$	5,910	$	6,642	$	4,549	$	5,307	$	11,489	$	2,724	$	38,974	76.4	%
65% to 75%	704		3,095		1,896		1,448		767		1,507		—		9,417		18.4
76% to 80%	2		124		—		267		301		185		—		879		1.7
Greater than 80%	24		27		223		453		133		913		—		1,773		3.5
Total	$	3,083	$	9,156	$	8,761	$	6,717	$	6,508	$	14,094	$	2,724	$	51,043	100.0	%
Debt service coverage ratios:
> 1.20x	$	2,980	$	8,558	$	8,342	$	6,193	$	6,188	$	12,997	$	2,724	$	47,982	94.0	%
1.00x - 1.20x	—		82		113		122		320		902		—		1,539		3.0
<1.00x	103		516		306		402		—		195		—		1,522		3.0
Total	$	3,083	$	9,156	$	8,761	$	6,717	$	6,508	$	14,094	$	2,724	$	51,043	100.0	%

The amortized cost of agricultural mortgage loans by credit quality indicator and vintage year was as follows at June 30, 2020:

	2020		2019		2018		2017		2016		Prior		Revolving Loans		Total		% of Total
	(Dollars in millions)
Loan-to-value ratios:
Less than 65%	$	1,283	$	2,418	$	3,148	$	1,131	$	2,688	$	4,395	$	964	$	16,027	93.4	%
65% to 75%	66		159		86		46		177		552		—		1,086		6.3
76% to 80%	—		—		—		—		—		12		—		12		0.1
Greater than 80%	—		—		—		—		—		42		—		42		0.2
Total	$	1,349	$	2,577	$	3,234	$	1,177	$	2,865	$	5,001	$	964	$	17,167	100.0	%

The amortized cost of residential mortgage loans by credit quality indicator and vintage year was as follows at June 30, 2020:

	2020		2019		2018		2017		2016		Prior		Revolving Loans		Total		% of Total
	(Dollars in millions)
Performance indicators:
Performing	$	562	$	3,106	$	1,293	$	449	$	257	$	8,996	$	—	$	14,663	97.4	%
Nonperforming (1)	3		11		14		11		10		348		—		397		2.6
Total	$	565	$	3,117	$	1,307	$	460	$	267	$	9,344	$	—	$	15,060	100.0	%

__________________

(1) Includes residential mortgage loans in process of foreclosure of $113 million and $118 million at June 30, 2020 and December 31, 2019, respectively.

Past Due and Nonaccrual Mortgage Loans

The Company has a high quality, well performing mortgage loan portfolio, with over 99% of all mortgage loans classified as performing at both June 30, 2020 and December 31, 2019. The Company defines delinquency consistent with industry practice, when mortgage loans are past due more than two or more months, as applicable, by portfolio segment. The past due and nonaccrual mortgage loans at amortized cost, prior to ACL, by portfolio segment, were as follows:

	Past Due				Greater than 90 Days Past Due  and Still Accruing Interest				Nonaccrual
	June 30, 2020		December 31, 2019		June 30, 2020		December 31, 2019		June 30, 2020		December 31, 2019
	(In millions)
Commercial	$	8	$	10	$	6	$	9	$	174	$	176
Agricultural	277		129		84		7		199		137
Residential	397		452		43		35		354		418
Total	$	682	$	591	$	133	$	51	$	727	$	731

The amortized cost for nonaccrual commercial, agricultural and residential mortgage loans at beginning of year 2019 was $176 million, $105 million and $436 million, respectively. The amortized cost for nonaccrual agricultural mortgage loans with no ACL was $144 million and $93 million at June 30, 2020 and December 31, 2019, respectively. There were no nonaccrual commercial or residential mortgage loans without an ACL at either June 30, 2020 or December 31, 2019.

Purchased Investments with Credit Deterioration

Investments that, as of the date of acquisition, have experienced a more-than-insignificant deterioration in credit quality since origination are classified as PCD. The amortized cost for PCD investments is the purchase price plus an ACL for the initial estimate of expected credit losses established upon purchase. Subsequent changes in the ACL on PCD investments are recorded through credit loss expense. The non-credit discount or premium is accreted or amortized to net investment income on an effective yield basis.

The following table reconciles the contractual principal to the purchase price of PCD investments:

	Six Months Ended June 30, 2020
	Contractual Principal		ACL at Acquisition			Non-Credit (Discount) Premium			Purchase Price
	(In millions)
PCD residential mortgage loans	$	512	$	(16	)	$	(18	)	$	478

Real Estate and Real Estate Joint Ventures

The Company’s real estate investment portfolio is diversified by property type, geography and income stream, including income from operating leases, operating income and equity in earnings from equity method real estate joint ventures. Real estate investments, by income type, as well as income earned, are as follows at and for the periods indicated:

	June 30, 2020		December 31, 2019		Three Months Ended June 30,					Six Months Ended June 30,
					2020			2019		2020		2019
	Carrying Value				Income
	(In millions)
Leased real estate investments	$	5,182	$	4,893	$	101		$	90	$	207	$	182
Other real estate investments	417		420		24			56		59		90
Real estate joint ventures	5,925		5,428		(23		)	33		1		37
Total real estate and real estate joint ventures	$	11,524	$	10,741	$	102		$	179	$	267	$	309

The carrying value of real estate investments acquired through foreclosure was $27 million and $36 million at June 30, 2020 and December 31, 2019, respectively. Depreciation expense on real estate investments was $31 million and $59 million for the three months and six months ended June 30, 2020, respectively, and $25 million and $48 million for the three months and six months ended June 30, 2019, respectively. Real estate investments were net of accumulated depreciation of $1.0 billion and $957 million at June 30, 2020 and December 31, 2019, respectively.

As a result of the COVID-19 Pandemic, earnings from certain of the Company’s equity method real estate joint ventures were reduced for the three months and six months ended June 30, 2020, principally hotel properties. Certain of these real estate joint ventures have granted some lessees COVID-19 Pandemic-related lease concessions. See “— Leases — Lease Concessions.”

Leases

Leased Real Estate Investments - Operating Leases

The Company, as lessor, leases investment real estate, principally commercial real estate for office and retail use, through a variety of operating lease arrangements, which typically include tenant reimbursement for property operating costs and options to renew or extend the lease. In some circumstances, leases may include an option for the lessee to purchase the property. In addition, certain leases of retail space may stipulate that a portion of the income earned is contingent upon the level of the tenants’ revenues. The Company has elected a practical expedient of not separating non-lease components related to reimbursement of property operating costs from associated lease components. These property operating costs have the same timing and pattern of transfer as the related lease component, because they are incurred over the same period of time as the operating lease. Therefore, the combined component is accounted for as a single operating lease. Risk is managed through lessee credit analysis, property type diversification, and geographic diversification.

See Note 8 of the Notes to the Consolidated Financial Statements included in the 2019 Annual Report for a summary of leased real estate investments and income earned, by property type.

Leveraged and Direct Financing Leases

The Company has diversified leveraged lease and direct financing lease portfolios. Its leveraged leases principally include renewable energy generation facilities, rail cars, commercial real estate and commercial aircraft, and its direct financing leases principally include commercial real estate. These assets are leased through a variety of lease arrangements, which may include options to renew or extend the lease and options for the lessee to purchase the property. Residual values are estimated using available third-party data at inception of the lease. Risk is managed through lessee credit analysis, asset allocation, geographic diversification, and ongoing reviews of estimated residual values, using available third-party data and, in certain leases, linking the amount of future rental receipts to changes in inflation rates. Generally, estimated residual values are not guaranteed by the lessee or a third party.

Lease receivables are generally due in periodic installments. The payment periods for leveraged leases generally range from one to 12 years but in certain circumstances can be over 12 years, while the payment periods for direct financing leases generally range from one to 25 years but in certain circumstances can be over 25 years.

In accordance with new guidance adopted January 1, 2020 regarding expected credit loss, the Company records an allowance for expected credit loss in an amount that represents the portion of the investment in leases that the Company does not expect to collect, resulting in the investment in leases being presented at the net amount expected to be collected. In determining the ACL, management: (i) pools leases that share similar risk characteristics, (ii) considers lifetime credit loss expected over the contractual term of the lease, and (iii) considers past events, current economic conditions and forecasts of future economic conditions. Leases with dissimilar risk characteristics are evaluated individually for credit loss. Lifetime credit loss on leveraged lease receivables is estimated using a probability of default and loss given default model, where the probability of default incorporates third party credit ratings of the lessee and the related historical default data. Direct financing leases principally relate to leases of commercial real estate; accordingly, lifetime credit loss is estimated on such lease receivables consistent with the methodology for commercial mortgage loans (see “— Mortgage Loans — Allowance for Credit Loss Methodology”). The Company also assesses the non-guaranteed residual values for recoverability by comparison to the current estimated fair value of the leased asset and considers other relevant market information such as independent third-party forecasts, consulting, asset brokerage and investment banking reports and data, comparable market transactions, and factors such as the competitive dynamics impacting specific industries, technological change and obsolescence, government and regulatory rules, tax policy, potential environmental liabilities and litigation.

Prior to the adoption of the new guidance regarding expected credit loss, lease impairment losses were recorded as incurred. Under the incurred loss model, if all amounts due under the lease agreement would not be collected based on current information and events, an impairment loss was recorded. The impairment loss was recorded as a reduction of the investment in lease and within net investment gains (losses).

The investment in leveraged and direct financing leases, net of ACL, was $888 million and $1.2 billion, respectively, at June 30, 2020. The ACL for leveraged and direct financing leases was $68 million at June 30, 2020. The investment in leveraged and direct financing leases was $1.1 billion and $1.2 billion, respectively, at December 31, 2019.

Lease Concessions

In response to the adverse economic impact of the COVID-19 Pandemic, the Company granted concessions to certain of its lessees (operating and direct financing leases), primarily in the form of rent deferrals. In accordance with a Question and Answer document issued by the FASB in response to the COVID-19 Pandemic, the Company has elected not to evaluate whether such lease concessions are lease modifications, continues to accrue income on such leases and records rent receivables on real estate operating leases. The rent deferrals generally range from one to six months for operating leases and three to six months for commercial real estate direct financing leases. Deferred rental payments for both operating and direct financing leases were $11 million at June 30, 2020. The Company has interests in certain unconsolidated real estate joint ventures which have granted COVID-19 Pandemic-related lease concessions.

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 $12.3 billion and $8.6 billion at June 30, 2020 and December 31, 2019, respectively.

Net Unrealized Investment Gains (Losses)

Unrealized investment gains (losses) on fixed maturity securities AFS and derivatives and the effect on DAC, VOBA, deferred sales inducements (“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:

	June 30, 2020			December 31, 2019
	(In millions)
Fixed maturity securities AFS	$	37,287		$	30,050
Fixed maturity securities AFS with noncredit OTTI losses included in AOCI	—			33
Total fixed maturity securities AFS	37,287			30,083
Derivatives	5,357			2,209
Other	442			310
Subtotal	43,086			32,602
Amounts allocated from:
Future policy benefits	(2,218		)	(1,019		)
DAC, VOBA and DSI	(3,670		)	(2,716		)
Policyholder dividend obligation	(2,798		)	(2,020		)
Subtotal	(8,686		)	(5,755		)
Deferred income tax benefit (expense) related to noncredit OTTI losses recognized in AOCI	—			(4		)
Deferred income tax benefit (expense)	(8,469		)	(6,846		)
Net unrealized investment gains (losses)	25,931			19,997
Net unrealized investment gains (losses) attributable to noncontrolling interests	(18		)	(16		)
Net unrealized investment gains (losses) attributable to MetLife, Inc.	$	25,913		$	19,981

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

	Six Months Ended June 30, 2020
	(In millions)
Balance, beginning of period	$	19,981
Fixed maturity securities AFS on which noncredit OTTI losses have been recognized	(33		)
Unrealized investment gains (losses) during the period	10,517
Unrealized investment gains (losses) relating to:
Future policy benefits	(1,199		)
DAC, VOBA and DSI	(954		)
Policyholder dividend obligation	(778		)
Deferred income tax benefit (expense) related to noncredit OTTI losses recognized in AOCI	4
Deferred income tax benefit (expense)	(1,623		)
Net unrealized investment gains (losses)	25,915
Net unrealized investment gains (losses) attributable to noncontrolling interests	(2		)
Balance, end of period	$	25,913
Change in net unrealized investment gains (losses)	$	5,934
Change in net unrealized investment gains (losses) attributable to noncontrolling interests	(2		)
Change in net unrealized investment gains (losses) attributable to MetLife, Inc.	$	5,932

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, at estimated fair value at June 30, 2020 and December 31, 2019, were in fixed income securities of the Japanese government and its agencies of $33.4 billion and $33.7 billion, respectively, and in fixed income securities of the South Korean government and its agencies of $7.3 billion and $7.3 billion, respectively.

Securities Lending, Repurchase Agreements and Federal Home Loan Bank of Boston Advance Agreements

Securities, Collateral and Reinvestment Portfolio

A summary of the outstanding securities lending, repurchase agreements and Federal Home Loan Bank (“FHLB”) of Boston short-term advance agreements is as follows:

	June 30, 2020						December 31, 2019
	Securities (1)						Securities (1)
	Estimated Fair Value		Cash Collateral Received from Counterparties (2), (3)		Reinvestment Portfolio at Estimated Fair Value		Estimated Fair Value		Cash Collateral Received from Counterparties (2), (3)		Reinvestment Portfolio at Estimated Fair Value
	(In millions)
Securities lending	$	18,987	$	19,456	$	19,572	$	16,926	$	17,369	$	17,451
Repurchase agreements	$	3,244	$	3,200	$	3,216	$	2,333	$	2,310	$	2,320
FHLB of Boston advance agreements	$	1,119	$	800	$	833	$	1,083	$	800	$	843

__________________

(1) Securities on loan or securities pledged in connection with these programs are included within fixed maturity securities AFS, short-term investments and cash equivalents.

(2) In connection with securities lending and repurchase agreements, in addition to cash collateral received, the Company received from counterparties security collateral of $25 million and $0 at June 30, 2020 and December 31, 2019, respectively, which is not reflected on the consolidated financial statements.

(3) The liability for cash collateral for these programs is included within payables for collateral under securities loaned, other transactions and other liabilities.

Contractual Maturities

A summary of the remaining contractual maturities of securities lending, repurchase agreements and FHLB of Boston short-term advance agreements is as follows:

	June 30, 2020										December 31, 2019
	Remaining Maturities										Remaining Maturities
	Open (1)		1 Month or Less		Over  1 to 6 Months		Over 6 Months to 1 Year		Total		Open (1)		1 Month or Less		Over 1 to 6 Months		Over 6 Months to 1 Year		Total
	(In millions)
Cash collateral liability by loaned security type:
Securities lending:
U.S. government and agency	$	4,574	$	9,723	$	3,988	$	—	$	18,285	$	2,928	$	6,676	$	6,663	$	—	$	16,267
Foreign government	—		202		890		—		1,092		—		259		767		—		1,026
Agency RMBS	—		70		—		—		70		—		76		—		—		76
U.S. corporate	9		—		—		—		9		—		—		—		—		—
Total	$	4,583	$	9,995	$	4,878	$	—	$	19,456	$	2,928	$	7,011	$	7,430	$	—	$	17,369
Repurchase agreements:
U.S. government and agency	$	—	$	3,200	$	—	$	—	$	3,200	$	—	$	2,310	$	—	$	—	$	2,310
Cash collateral liability by pledged security type: (2)
FHLB of Boston:
Municipals	$	—	$	250	$	550	$	—	$	800	$	—	$	250	$	475	$	75	$	800

__________________

(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.

(2) The Company 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 Company.

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 securities lending, repurchase agreements and FHLB of Boston short-term advance agreements reinvestment portfolios consist principally of high quality, liquid, publicly-traded fixed maturity securities AFS, short-term investments, cash equivalents or cash. If the securities on loan, securities pledged or the reinvestment portfolio become less liquid, liquidity resources within the general account are available to meet any potential cash demands when securities on loan or securities pledged are put back by the counterparty.

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:

	June 30, 2020		December 31, 2019
	(In millions)
Invested assets on deposit (regulatory deposits)	$	1,856	$	2,034
Invested assets held in trust (collateral financing arrangement and reinsurance agreements)	3,233		2,991
Invested assets pledged as collateral (1)	27,765		24,493
Total invested assets on deposit, held in trust and pledged as collateral	$	32,854	$	29,518

__________________

(1) The Company has pledged invested assets in connection with various agreements and transactions, including funding agreements, secured debt, a collateral financing arrangement (see Notes 4, 13 and 14 of the Notes to the Consolidated Financial Statements included in the 2019 Annual Report) and derivative transactions (see Note 7).

See “— Securities Lending, Repurchase Agreements and Federal Home Loan Bank of Boston Advance Agreements” for information regarding securities supporting securities lending, repurchase agreement transactions and FHLB of Boston short-term advance agreements and Note 5 for information regarding investments designated to the closed block. In addition, the Company’s investment in FHLB common stock, which is considered restricted until redeemed by the issuers, was $848 million and $809 million, at redemption value, at June 30, 2020 and December 31, 2019, respectively.

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:

	June 30, 2020				December 31, 2019
	Total Assets (1)		Total Liabilities		Total Assets (1)		Total Liabilities
	(In millions)
Investment funds	$	218	$	1	$	207	$	1
Renewable energy partnership	91		—		94		—
Other investments	12		5		10		5
Total	$	321	$	6	$	311	$	6

__________________

(1) Assets of the investment funds, renewable energy partnership and other investments primarily consisted 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:

	June 30, 2020				December 31, 2019
	Carrying Amount		Maximum Exposure to Loss (1)		Carrying Amount		Maximum Exposure to Loss (1)
	(In millions)
Fixed maturity securities AFS:
Structured Products (2)	$	57,150	$	57,150	$	51,962	$	51,962
U.S. and foreign corporate	2,036		2,036		1,764		1,764
Foreign government	134		134		136		136
Other limited partnership interests	6,770		13,431		6,674		12,016
Other invested assets	1,388		1,491		1,495		1,621
Other investments	537		584		450		497
Total	$	68,015	$	74,826	$	62,481	$	67,996

__________________

(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 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 $5 million and $6 million at June 30, 2020 and December 31, 2019, 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.

As described in Note 15, 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 for either the six months ended June 30, 2020 or 2019.

The Company securitizes certain residential mortgage loans and acquires 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 estimated fair value of the related RMBS acquired in connection with the securitizations is included in the carrying amount and maximum exposure to loss for Structured Products presented in the table above. For both the three months and six months ended June 30, 2019, the carrying value and the estimated fair value of residential mortgage loans securitized were $443 million and $467 million, respectively, resulting in a gain of $24 million which is included within net investment gains (losses). The estimated fair value of RMBS acquired in connection with the securitizations was $133 million at June 30, 2019. See Note 8 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:

	Three Months Ended June 30,					Six Months Ended June 30,
	2020			2019		2020			2019
	(In millions)
Investment income:
Fixed maturity securities AFS	$	2,787		$	3,024	$	5,662		$	5,963
Equity securities	11			15		25			32
FVO Securities (1)	114			38		36			93
Mortgage loans	862			943		1,746			1,855
Policy loans	124			129		250			257
Real estate and real estate joint ventures	102			179		267			309
Other limited partnership interests	(607		)	243		(287		)	366
Cash, cash equivalents and short-term investments	52			113		144			241
Operating joint ventures	31			38		56			56
Other	29			71		131			149
Subtotal	3,505			4,793		8,030			9,321
Less: Investment expenses	236			361		560			717
Subtotal, net	3,269			4,432		7,470			8,604
Unit-linked investments (1)	818			261		(322		)	997
Net investment income	$	4,087		$	4,693	$	7,148		$	9,601

__________________

(1) Changes in estimated fair value subsequent to purchase for investments still held as of the end of the respective periods and included in net investment income were principally from contractholder-directed equity securities supporting unit-linked variable annuity type liabilities (“Unit-linked investments”), and were $766 million and ($322) million for the three months and six months ended June 30, 2020, respectively, and $149 million and $757 million for the three months and six months ended June 30, 2019, respectively.

The Company invests in real estate joint ventures, other limited partnership interests and tax credit and renewable energy partnerships, and also does business through certain operating joint ventures, the majority of which are accounted for under the equity method. Net investment income (loss) from such investments totaled ($688) million and ($365) million for the three months and six months ended June 30, 2020, respectively, and $241 million and $330 million for the three months and six months ended June 30, 2019, respectively.

Net Investment Gains (Losses)

Components of Net Investment Gains (Losses)

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
	(In millions)
Total gains (losses) on fixed maturity securities AFS:
Net credit loss (provision) release (1)	$	(8	)	$	—		$	(223	)	$	(10	)
Net gains (losses) on sales and disposals	158			138			377			124
Total gains (losses) on fixed maturity securities AFS	150			138			154			114
Total gains (losses) on equity securities:
Net gains (losses) on sales and disposals	3			4			11			47
Change in estimated fair value (2)	69			(6		)	(223		)	58
Total gains (losses) on equity securities	72			(2		)	(212		)	105
Mortgage loans	(80		)	14			(143		)	(1		)
Real estate and real estate joint ventures	2			1			3			6
Other limited partnership interests	1			—			5			—
Other (3), (4)	97			(42		)	122			(110		)
Subtotal	242			109			(71		)	114
Change in estimated fair value of other limited partnership interests and real estate joint ventures	(13		)	3			(12		)	(12		)
Non-investment portfolio gains (losses)	2			(51		)	26			(26		)
Subtotal	(11		)	(48		)	14			(38		)
Total net investment gains (losses)	$	231		$	61		$	(57	)	$	76

__________________

(1) Net credit loss provision by sector for industrial corporate securities and RMBS for the six months ended June 30, 2019 were $8 million and $2 million, respectively. See “— Rollforward of Allowance for Credit Loss for Fixed Maturity Securities AFS By Sector.” Due to the adoption of new guidance on January 1, 2020, prior period OTTI loss is presented as credit loss.

(2) Changes in estimated fair value subsequent to purchase for equity securities still held as of the end of the period included in net investment gains (losses) were $63 million and ($193) million for the three months and six months ended June 30, 2020, respectively, and ($1) million and $92 million for the three months and six months ended June 30, 2019, respectively.

(3) Other gains (losses) included a leveraged lease gain of $81 million for both the three months and six months ended June 30, 2020 and a de-designated cash flow hedge gain of $43 million and $55 million for the three months and six months ended June 30, 2020, respectively.

(4) Other gains (losses) for the three months and six months ended June 30, 2019 included tax credit partnership impairment losses of $14 million and $92 million, respectively, and a renewable energy partnership disposal gain of $46 million for the six months ended June 30, 2019.

Gains (losses) from foreign currency transactions included within net investment gains (losses) were $19 million and $70 million for the three months and six months ended June 30, 2020, respectively, and $25 million and $39 million for the three months and six months ended June 30, 2019, respectively.

Fixed Maturity Securities AFS - Sales and Disposals and Credit Loss

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
	(In millions)
Proceeds	$	9,981		$	13,895		$	22,070		$	29,720
Gross investment gains	$	424		$	262		$	761		$	467
Gross investment losses	(266		)	(124		)	(384		)	(343		)
Net credit loss (provision) release	(8		)	—			(223		)	(10		)
Net investment gains (losses)	$	150		$	138		$	154		$	114