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Investments
 6 Months Ended
Jun. 30, 2020
Investments [Abstract]  
Investments
Investments
Fixed Maturity Securities
We evaluate our available-for-sale fixed maturity securities for declines based on qualitative and quantitative factors. The effects of the COVID-19 global health pandemic, or COVID-19, and other market related changes have impacted our fixed maturity securities. We have established an allowance for credit loss and recorded credit loss expense as a reflection of our expected impairment losses. We continue to review our investment portfolios under our impairment review policy. Given the inherent uncertainty of changes in market conditions and the significant judgments involved, there is a continuing risk that declines in fair value may occur and additional material impairment losses on investments may be recorded in future periods.
Our fixed maturity securities were in a net unrealized gain position of $713 and $673 at June 30, 2020 and December 31, 2019, respectively.
A summary of current and long-term fixed maturity securities, available-for-sale, at June 30, 2020 and December 31, 2019 is as follows:
 
Cost or
Amortized
Cost
 
 
 
 
 
 
 
 
 
Non-Credit
Component of
Impairment Recognized in
Accumulated
Other
Comprehensive
Loss
 
 
Gross
Unrealized
Gains
 
Gross Unrealized Losses
 
Allowance For Credit Losses
 
Estimated
Fair Value
 
 
 
 
Less than
12 Months
 
12 Months
or Greater
 
 
 
June 30, 2020
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
United States Government securities
$
1,250

 
$
17

 
$
(1
)
 
$
—

 
$
—

 
$
1,266

 
$
—

Government sponsored securities
96

 
7

 
(1
)
 
—

 
—

 
102

 
—

Foreign government securities
288

 
7

 
(15
)
 
—

 
(1
)
 
279

 
—

States, municipalities and political subdivisions
4,840

 
315

 
(5
)
 
—

 
—

 
5,150

 
—

Corporate securities
9,855

 
469

 
(125
)
 
(28
)
 
(23
)
 
10,148

 
(32
)
Residential mortgage-backed securities
3,696

 
137

 
(26
)
 
(11
)
 
—

 
3,796

 
—

Commercial mortgage-backed securities
80

 
2

 
(2
)
 
(4
)
 
—

 
76

 
—

Other securities
1,744

 
20

 
(34
)
 
(9
)
 
—

 
1,721

 
—

Total fixed maturity securities
$
21,849

 
$
974

 
$
(209
)
 
$
(52
)
 
$
(24
)
 
$
22,538

 
$
(32
)
December 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
United States Government securities
$
524

 
$
4

 
$
(3
)
 
$
—

 
$
—

 
$
525

 
$
—

Government sponsored securities
136

 
5

 
—

 
—

 
—

 
141

 
—

States, municipalities and political subdivisions
4,592

 
262

 
(3
)
 
—

 
—

 
4,851

 
—

Corporate securities
8,870

 
339

 
(9
)
 
(15
)
 
—

 
9,185

 
(3
)
Residential mortgage-backed securities
3,654

 
87

 
(6
)
 
(3
)
 
—

 
3,732

 
—

Commercial mortgage-backed securities
84

 
2

 
—

 
—

 
—

 
86

 
—

Other securities
1,648

 
21

 
(3
)
 
(5
)
 
—

 
1,661

 
—

Total fixed maturity securities
$
19,508

 
$
720

 
$
(24
)
 
$
(23
)
 
$
—

 
$
20,181

 
$
(3
)


For fixed maturity securities in an unrealized loss position at June 30, 2020 and December 31, 2019, the following table summarizes the aggregate fair values and gross unrealized losses by length of time those securities have continuously been in an unrealized loss position: 
 
Less than 12 Months
 
12 Months or Greater
(Securities are whole amounts)
Number of
Securities
 
Estimated
Fair Value
 
Gross
Unrealized
Loss
 
Number of
Securities
 
Estimated
Fair Value
 
Gross
Unrealized
Loss
June 30, 2020
 
 
 
 
 
 
 
 
 
 
 
Fixed maturity securities:
 
 
 
 
 
 
 
 
 
 
 
United States Government securities
5

 
$
832

 
$
(1
)
 
—

 
$
—

 
$
—

Government sponsored securities
1

 
1

 
(1
)
 
1

 
—

 
—

Foreign government securities
219

 
161

 
(15
)
 
—

 
—

 
—

States, municipalities and political subdivisions
111

 
221

 
(5
)
 
3

 
5

 
—

Corporate securities
1,813

 
2,297

 
(125
)
 
185

 
211

 
(28
)
Residential mortgage-backed securities
375

 
654

 
(26
)
 
78

 
117

 
(11
)
Commercial mortgage-backed securities
7

 
17

 
(2
)
 
3

 
3

 
(4
)
Other securities
381

 
924

 
(34
)
 
65

 
161

 
(9
)
Total fixed maturity securities
2,912

 
$
5,107

 
$
(209
)
 
335

 
$
497

 
$
(52
)
December 31, 2019
 
 
 
 
 
 
 
 
 
 
 
Fixed maturity securities:
 
 
 
 
 
 
 
 
 
 
 
United States Government securities
27

 
$
250

 
$
(3
)
 
2

 
$
1

 
$
—

Government sponsored securities
14

 
12

 
—

 
3

 
1

 
—

States, municipalities and political subdivisions
114

 
306

 
(3
)
 
14

 
11

 
—

Corporate securities
386

 
558

 
(9
)
 
224

 
286

 
(15
)
Residential mortgage-backed securities
321

 
635

 
(6
)
 
189

 
237

 
(3
)
Commercial mortgage-backed securities
1

 
3

 
—

 
4

 
8

 
—

Other securities
166

 
415

 
(3
)
 
113

 
358

 
(5
)
Total fixed maturity securities
1,029

 
$
2,179

 
$
(24
)
 
549

 
$
902

 
$
(23
)

Below are discussions by security type for unrealized losses and credit losses as of June 30, 2020:
Foreign government securities: An allowance for credit loss was established on foreign government security holdings of Republic of Ecuador. Notification of the request for delayed interest payments, a rating downgrade and significant decline in fair value were factors indicating a credit loss. No other foreign government securities had material unrealized losses or qualitative factors to indicate a credit loss. We do not intend to sell these investments and it is likely we will not be required to sell these investments prior to maturity or recovery of amortized cost.
Corporate securities: An allowance for credit losses on certain retail, travel and entertainment as well as energy sector fixed maturity corporate securities has been determined based on qualitative and quantitative factors including credit rating, decline in fair value and industry condition along with other available market data. With multiple risk factors present, these securities were reviewed for expected future cash flow to determine the portion of unrealized losses that were credit related and to record an allowance for credit losses. Unrealized losses on our other corporate securities were largely due to market conditions relating to the COVID-19 pandemic; however, qualitative factors did not indicate a credit loss as of June 30, 2020. We do not intend to sell these investments and it is likely we will not have to sell these investments prior to maturity or recovery of amortized cost.
As for the remaining securities shown in the table above, unrealized losses on these securities have not been recognized into income because we do not intend to sell these investments and it is likely that we will not be required to sell these investments prior to their anticipated recovery. The decline in fair value is largely due to changes in interest rates and other market conditions. We have evaluated these securities for any change in credit rating and have determined that no allowance is necessary. The fair value is expected to recover as the securities approach maturity.
The table below presents a roll-forward by major security type of the allowance for credit losses on fixed maturity securities available-for-sale held at period end for the three months ended June 30, 2020:
Three Months Ended June 30
 
Corporate Securities
 
Foreign Government Securities
 
Total
Allowance for credit losses:
 
 
 
 
 
 
 
Beginning balance
 
$
51

 
$
—

 
$
51

 
Additions for securities for which no previous expected credit losses were recognized
 
9

 
1

 
10

 
Securities sold during the period
 
(8
)
 
—

 
(8
)
 
Increases (decreases) to the allowance for credit losses on securities
 
(29
)
 
—

 
(29
)
Total allowance for credit losses
 
$
23

 
$
1

 
$
24

The table below presents a roll-forward by major security type of the allowance for credit losses on fixed maturity securities available-for-sale held at period end for the six months ended June 30, 2020:
Six Months Ended June 30
 
Corporate Securities
 
Foreign Government Securities
 
Total
Allowance for credit losses:
 
 
 
 
 
 
 
Beginning balance
 
$
—

 
$
—

 
$
—

 
Additions for securities for which no previous expected credit losses were recognized
 
60

 
1

 
61

 
Securities sold during the period
 
(8
)
 
—

 
(8
)
 
Increases (decreases) to the allowance for credit losses on securities
 
(29
)
 
—

 
(29
)
Total allowance for credit losses
 
$
23

 
$
1

 
$
24


The amortized cost and fair value of fixed maturity securities at June 30, 2020, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because the issuers of the securities may have the right to prepay obligations.
 
Amortized
Cost
 
Estimated
Fair Value
Due in one year or less
$
1,481

 
$
1,484

Due after one year through five years
5,736

 
5,876

Due after five years through ten years
6,121

 
6,340

Due after ten years
4,735

 
4,966

Mortgage-backed securities
3,776

 
3,872

Total fixed maturity securities
$
21,849

 
$
22,538


Proceeds from sales, maturities, calls or redemptions of fixed maturity securities and the related gross realized gains and gross realized losses for the three and six months ended June 30, 2020 and 2019 are as follows:
 
Three Months Ended 
 June 30
 
Six Months Ended 
 June 30
 
2020
 
2019
 
2020
 
2019
Proceeds
$
2,618

 
$
1,986

 
$
4,549

 
$
3,454

Gross realized gains
37

 
22

 
80

 
40

Gross realized losses
(50
)
 
(17
)
 
(70
)
 
(34
)

In the ordinary course of business, we may sell securities at a loss for a number of reasons, including, but not limited to: (i) changes in the investment environment; (ii) expectation that the fair value could deteriorate further; (iii) desire to reduce exposure to an issuer or an industry; (iv) changes in credit quality; or (v) changes in expected cash flow.
All securities sold resulting in investment gains and losses are recorded on the trade date. Realized gains and losses are determined on the basis of the cost or amortized cost of the specific securities sold.
Equity Securities
A summary of marketable equity securities at June 30, 2020 and December 31, 2019 is as follows:
 
June 30, 2020
 
December 31, 2019
Equity securities:
 
 
 
Exchange traded funds
$
3,224

 
$
44

Fixed maturity mutual funds
152

 
643

Common equity securities
32

 
237

Private equity securities
62

 
85

Total
$
3,470

 
$
1,009


The gains and losses related to equity securities for the three and six months ended June 30, 2020 and 2019 are as follows:
 
Three Months Ended June 30
 
Six Months Ended June 30
 
2020
 
2019
 
2020
 
2019
Net realized gains (losses) recognized on equity securities
$
45

 
$
13

 
$
(5
)
 
$
92

Less: Net realized losses (gains) recognized on equity securities sold during the period
13

 
(29
)
 
(5
)
 
(50
)
Unrealized gains (losses) recognized on equity securities still held at June 30
$
58

 
$
(16
)
 
$
(10
)
 
$
42


Other Invested Assets
Other invested assets include primarily our investments in limited partnerships, joint ventures and other non-controlled corporations, as well as the cash surrender value of corporate-owned life insurance policies. Investments in limited partnerships, joint ventures and other non-controlled corporations are carried at our share in the entities’ undistributed earnings, which approximates fair value. Financial information for certain of these investments are reported on a one or three month lag due to the timing of when we receive financial information from the companies. Given the recent market volatility, there is a risk that the value of some of these investments may decline in future periods.
Investment Income
At June 30, 2020 and December 31, 2019, accrued investment income totaled $182 and $173, respectively. We recognize accrued investment income under the caption “Other receivables” on our consolidated balance sheets.
Securities Lending Programs
We participate in securities lending programs whereby marketable securities in our investment portfolio are transferred to independent brokers or dealers in exchange for cash and securities collateral. The fair value of the collateral received at the time of the transactions amounted to $1,114 and $351 at June 30, 2020 and December 31, 2019, respectively. The value of the collateral represented 102% and 103% of the market value of the securities on loan at June 30, 2020 and December 31, 2019, respectively. We recognize the collateral as an asset under the caption “Other current assets” in our consolidated balance sheets, and we recognize a corresponding liability for the obligation to return the collateral to the borrower under the caption “Other current liabilities.” The securities on loan are reported in the applicable investment category on our consolidated balance sheets.
The remaining contractual maturity of our securities lending agreements at June 30, 2020 is as follows:
 
Overnight and Continuous
Securities lending collateral
 
Cash
$
961

United States Government securities
151

Other securities
2

Total
$
1,114