Investments

6 Months Ended

Jun. 30, 2021

Fixed Maturity Securities

We evaluate our available-for-sale fixed maturity securities for declines based on qualitative and quantitative factors. 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.

A summary of current and long-term fixed maturity securities, available-for-sale, at June 30, 2021 and December 31, 2020 is as follows:


	Cost or Amortized Cost												Non-Credit Component of Impairment Recognized in Accumulated Other Comprehensive (Loss) Income
			Gross Unrealized Gains		Gross Unrealized Losses				Allowance For Credit Losses		Estimated Fair Value
					Less than 12 Months		12 Months or Greater
June 30, 2021
Fixed maturity securities:
United States Government securities	$	1,322	$	10	$	(12)	$	—	$	—	$	1,320	$	—
Government sponsored securities	60		5		—		—		—		65		—
Foreign government securities	344		10		(3)		(1)		—		350		—
States, municipalities and political subdivisions	5,126		360		(2)		(1)		—		5,483		—
Corporate securities	11,661		558		(31)		(8)		(4)		12,176		—

Residential mortgage-backed securities	4,337		117		(12)		(8)		(2)		4,432		—
Commercial mortgage-backed securities	73		3		—		(3)		—		73		—
Other securities	2,506		32		(2)		(6)		—		2,530		—
Total fixed maturity securities	$	25,429	$	1,095	$	(62)	$	(27)	$	(6)	$	26,429	$	—


December 31, 2020
Fixed maturity securities:
United States Government securities	$	765	$	11	$	(2)	$	—	$	—	$	774	$	—
Government sponsored securities	63		6		—		—		—		69		—
Foreign government securities	290		17		(2)		—		—		305		—
States, municipalities and political subdivisions	5,185		395		(1)		—		—		5,579		—
Corporate securities	10,233		697		(20)		(11)		(7)		10,892		(1)

Residential mortgage-backed securities	4,208		154		(8)		(9)		—		4,345		(2)
Commercial mortgage-backed securities	73		3		(1)		(3)		—		72		—
Other securities	1,937		33		(5)		(6)		—		1,959		—
Total fixed maturity securities	$	22,754	$	1,316	$	(39)	$	(29)	$	(7)	$	23,995	$	(3)

For fixed maturity securities in an unrealized loss position at June 30, 2021 and December 31, 2020, 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, 2021
Fixed maturity securities:
United States Government securities	62	$	766	$	(12)	1	$	8	$	—
Government sponsored securities	1	1		—		—	—		—
Foreign government securities	153	114		(3)		22	11		(1)
States, municipalities and political subdivisions	132	231		(2)		4	11		(1)
Corporate securities	1,158	1,718		(31)		179	204		(8)
Residential mortgage-backed securities	385	1,372		(12)		108	147		(8)
Commercial mortgage-backed securities	—	—		—		4	8		(3)
Other securities	228	665		(2)		58	112		(6)
Total fixed maturity securities	2,119	$	4,867	$	(62)	376	$	501	$	(27)


December 31, 2020
Fixed maturity securities:
United States Government securities	27	$	301	$	(2)	—	$	—	$	—
Government sponsored securities	—	—		—		1	—		—
Foreign government securities	55	35		(2)		9	4		—
States, municipalities and political subdivisions	36	57		(1)		1	3		—
Corporate securities	646	765		(20)		150	169		(11)
Residential mortgage-backed securities	224	442		(8)		90	110		(9)
Commercial mortgage-backed securities	6	16		(1)		3	4		(3)
Other securities	207	509		(5)		79	179		(6)
Total fixed maturity securities	1,201	$	2,125	$	(39)	333	$	469	$	(29)

Below are discussions by security type for unrealized losses and credit losses as of June 30, 2021:

Corporate securities: An allowance for credit losses on certain retail, travel and entertainment and 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, 2021. 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.

Residential mortgage-backed securities: An allowance for credit loss was established on certain residential mortgage-backed securities. Notification of maturity and coupon default, as well as a significant and sustained decline in fair value, were factors to indicate a credit loss. No other mortgage 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.

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 and six months ended June 30, 2021 and 2020:


	Three Months Ended June 30, 2021						Six Months Ended June 30, 2021
	Corporate Securities		Residential mortgage-backed securities		Total		Corporate Securities		Residential mortgage-backed securities		Total
Allowance for credit losses:
Beginning balance	$	6	$	2	$	8	$	7	$	—	$	7
Additions for securities for which no previous expected credit losses were recognized	—		—		—		1		—		1

Securities sold during the period	(2)		—		(2)		(2)		—		(2)

(Decreases) increases to the allowance for credit losses on securities	—		—		—		(2)		2		—
Total allowance for credit losses, ending balance	$	4	$	2	$	6	$	4	$	2	$	6


	Three Months Ended June 30, 2020						Six Months Ended June 30, 2020
	Corporate Securities		Foreign Government Securities		Total		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		60		1		61

Securities sold during the period	(8)		—		(8)		(8)		—		(8)

Decreases to the allowance for credit losses on securities	(29)		—		(29)		(29)		—		(29)


Total allowance for credit losses, ending balance	$	23	$	1	$	24	$	23	$	1	$	24

The amortized cost and fair value of fixed maturity securities at June 30, 2021, 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	$	745	$	749
Due after one year through five years	6,392		6,644
Due after five years through ten years	8,370		8,673
Due after ten years	5,512		5,858
Mortgage-backed securities	4,410		4,505
Total fixed maturity securities	$	25,429	$	26,429

Proceeds from sales, maturities, calls or redemptions of fixed maturity securities during the three and six months ended June 30, 2021 and 2020 are as follows:


	Three Months Ended June 30				Six Months Ended June 30
	2021		2020		2021		2020
Proceeds	$	627	$	2,618	$	5,950	$	4,549

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, 2021 and December 31, 2020 is as follows:


	June 30, 2021		December 31, 2020
Equity securities:
Exchange traded funds	$	1,596	$	1,154
Fixed maturity mutual funds	—		144
Common equity securities	73		201
Private equity securities	77		60
Total	$	1,746	$	1,559

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.

Investment Gains and Losses

Net realized investment gains (losses) on investments for the three and six months ended June 30, 2021 and 2020 are as follows:


	Three Months Ended June 30				Six Months Ended June 30
	2021		2020		2021		2020
Net realized gains (losses):
Fixed maturity securities:
Gross realized gains from sales	$	47	$	37	$	103	$	80
Gross realized losses from sales	(12)		(50)		(24)		(70)
Impairment recoveries (losses) recognized in income	2		27		1		(24)
Net realized gains (losses) from sales of fixed maturity securities	37		14		80		(14)
Equity securities:
Gross realized gains	23		64		28		65
Gross realized losses	(5)		(19)		(76)		(70)
Net realized gains (losses) on equity securities	18		45		(48)		(5)
Other invested assets:
Gross realized gains	90		—		95		6

Impairment recoveries (losses) recognized in income	2		(29)		(6)		(35)
Net realized gains (losses) from sales of other investments	92		(29)		89		(29)
Net realized gains (losses) on investments	$	147	$	30	$	121	$	(48)

The gains and losses related to equity securities for the three and six months ended June 30, 2021 and 2020 are as follows:


	Three Months Ended June 30				Six Months Ended June 30
	2021		2020		2021		2020
Net realized gains (losses) recognized on equity securities	$	18	$	45	$	(48)	$	(5)
Less: Net realized gains (losses) recognized on equity securities sold during the period	1		20		(56)		5
Unrealized gains (losses) recognized on equity securities still held at the end of the period	$	17	$	25	$	8	$	(10)

Accrued Investment Income

At June 30, 2021 and December 31, 2020, accrued investment income totaled $195 and $188, 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 $1,841 and $1,199 at June 30, 2021 and December 31, 2020, respectively. The value of the collateral represented 102% of the market value of the securities on loan at each of June 30, 2021 and December 31, 2020. 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, 2021 is as follows:


	Overnight and Continuous
Securities lending collateral
Cash	$	1,739

United States Government securities	102


Total	$	1,841