Investments

6 Months Ended

Jun. 30, 2020

Investments, Debt and Equity Securities [Abstract]

Investments

4. Investments

See Note 1 of the Notes to the Consolidated Financial Statements included in the 2019 Annual Report for a description of the Company’s accounting policies for investments and Note 6 for information about the fair value hierarchy for investments and the related valuation methodologies. In connection with the adoption of new guidance related to the credit losses (see Note 1), effective January 1, 2020, the Company updated its accounting policies on certain investments. Any accounting policy updates required by the new guidance are described in this footnote.

Fixed Maturity Securities Available-for-sale

Fixed Maturity Securities by Sector

Fixed maturity securities by sector were as follows at:

	June 30, 2020										December 31, 2019
	Amortized Cost		Allowance for Credit Losses		Gross Unrealized				Estimated Fair Value		Amortized Cost		Allowance for Credit Losses		Gross Unrealized				Estimated Fair Value
					Gains		Losses								Gains		Losses
	(In millions)
U.S. corporate	$	30,157	$	2	$	4,314	$	204	$	34,265	$	28,375	$	—	$	2,852	$	67	$	31,160
Foreign corporate	9,580		2		881		168		10,291		9,177		—		741		74		9,844
RMBS	7,980		1		617		12		8,584		8,692		—		438		12		9,118
U.S. government and agency	5,673		—		3,252		—		8,925		5,529		—		1,869		2		7,396
CMBS	5,805		—		473		23		6,255		5,500		—		264		9		5,755
State and political subdivision	3,329		—		904		1		4,232		3,358		—		701		2		4,057
ABS	2,469		—		40		46		2,463		1,945		—		21		11		1,955
Foreign government	1,503		—		285		7		1,781		1,503		—		250		2		1,751
Total fixed maturity securities	$	66,496	$	5	$	10,766	$	461	$	76,796	$	64,079	$	—	$	7,136	$	179	$	71,036

The Company held non-income producing fixed maturity securities with an estimated fair value of $1 million at June 30, 2020. The Company did not hold any non-income producing fixed maturity securities at December 31, 2019.

Maturities of Fixed Maturity Securities

The amortized cost and estimated fair value of fixed maturity securities, 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 Securities (1)		Total Fixed Maturity Securities
	(In millions)
Amortized cost	$	1,687	$	7,534	$	13,453	$	27,568	$	16,254	$	66,496
Estimated fair value	$	1,688	$	7,889	$	14,687	$	35,230	$	17,302	$	76,796

_______________

(1)Structured securities include residential mortgage-backed securities (“RMBS”), commercial mortgage-backed securities (“CMBS”) and asset-backed securities (“ABS”) (collectively, “Structured Securities”).

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 Securities by Sector

The estimated fair value and gross unrealized losses of fixed maturity securities in an unrealized loss position, by sector and by length of time that the securities have been in a continuous unrealized loss position, were as follows at:

	June 30, 2020								December 31, 2019
	Less than 12 Months				12 Months or Greater				Less than 12 Months				12 Months or Greater
	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	$	2,761	$	152	$	289	$	52	$	2,017	$	44	$	326	$	23
Foreign corporate	1,260		70		590		98		576		12		561		62
RMBS	294		11		22		1		857		8		386		4
U.S. government and agency	—		—		—		—		40		2		—		—
CMBS	567		21		90		2		559		7		171		2
State and political subdivision	38		1		—		—		143		2		8		—
ABS	853		23		563		23		362		2		676		9
Foreign government	131		6		3		1		65		2		—		—
Total fixed maturity securities	$	5,904	$	284	$	1,557	$	177	$	4,619	$	79	$	2,128	$	100
Total number of securities in an unrealized loss position	1,332				265				720				302

Allowance for Credit Losses for Fixed Maturity Securities

Evaluation and Measurement Methodologies

For fixed maturity securities in an unrealized loss position, management first assesses whether the Company intends to sell, or whether it is more likely than not it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to estimated fair value through net investment gains (losses). For fixed maturity securities that do not meet the aforementioned criteria, management evaluates whether the decline in estimated fair value has resulted from credit losses or other factors. 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 allowance for credit loss evaluation process include, but are not limited to: (i) the extent to which estimated fair value is less than amortized cost; (ii) any changes to the rating of the security by a rating agency; (iii) adverse conditions specifically related to the security, industry or geographic area; and (iv) payment structure of the fixed maturity security and the likelihood of the issuer being able to make payments in the future or the issuer’s failure to make scheduled interest and principal payments. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss is deemed to exist and an allowance for credit losses is recorded, limited by the amount that the estimated fair value is less than the amortized cost basis, with a corresponding charge to net investment gains (losses). Any unrealized losses that have not been recorded through an allowance for credit losses are recognized in other comprehensive income (loss) (“OCI”).

Once a security specific allowance for credit losses is established, the present value of cash flows expected to be collected from the security continues to be reassessed. Any changes in the security specific allowance for credit losses are recorded as a provision for (or reversal of) credit loss expense in net investment gains (losses).

Fixed maturity securities are also evaluated to determine whether any amounts have become uncollectible. When all, or a portion, of a security is deemed uncollectible, the uncollectible portion is written-off with an adjustment to amortized cost and a corresponding reduction to the allowance for credit losses.

Accrued interest receivables are presented separate from the amortized cost basis of fixed maturity securities. An allowance for credit losses is not estimated on an accrued interest receivable, rather receivable balances 90-days past due are deemed uncollectible and are written off with a corresponding reduction to net investment income. The accrued interest receivable on fixed maturity securities totaled $504 million at June 30, 2020 and is included in accrued investment income.

Fixed maturity securities are also evaluated to determine if they qualify as purchased financial assets with credit deterioration (“PCD”). To determine if the credit deterioration experienced since origination is more than insignificant, both (i) the extent of the credit deterioration and (ii) any rating agency downgrades are evaluated. For securities categorized as PCD assets, the present value of cash flows expected to be collected from the security are compared to the par value of the security. If the present value of cash flows expected to be collected is less than the par value, credit losses are embedded in the purchase price of the PCD asset. In this situation, both an allowance for credit losses and amortized cost gross-up is recorded, limited by the amount that the estimated fair value is less than the grossed-up amortized cost basis. Any difference between the purchase price and the present value of cash flows is amortized or accreted into net investment income over the life of the PCD asset. Any subsequent PCD asset allowance for credit losses is evaluated in a manner similar to the process described above for fixed maturity securities.

Current Period Evaluation

Based on the Company’s current evaluation of its fixed maturity securities in an unrealized loss position and the current intent or requirement to sell, the Company recorded an allowance for credit losses of $5 million, relating to 18 securities at June 30, 2020. Management concluded that for all other fixed maturity securities in an unrealized loss position, the unrealized loss was not due to issuer-specific credit-related factors and as a result was recognized in OCI. Where unrealized losses have not been recognized into income, it is primarily because the securities’ bond issuer(s) are of high credit quality, management does not intend to sell and it is likely that management will not be required to sell the securities prior to their anticipated recovery, and the decline in estimated fair value is largely due to changes in interest rates and non-issuer specific credit spreads. These issuers continued to make timely principal and interest payments and the estimated fair value is expected to recover as the securities approach maturity.

Rollforward of the Allowance for Credit Losses for Fixed Maturity Securities by Sector

The changes in the allowance for credit losses by sector were as follows:

	U.S. Corporate		RMBS		Foreign Corporate		Total
	(In millions)
Balance at January 1, 2020	$	3	$	—	$	1	$	4
Allowance on securities where credit losses were not previously recorded	3		1		2		6
Allowance on securities that had an allowance recorded in a previous period	(1)		—		—		(1)
Write-offs charged against allowance (1)	(3)		—		(1)		(4)
Balance at June 30, 2020	$	2	$	1	$	2	$	5

_______________

(1)The Company recorded total write-offs of $13 million during the six months ended June 30, 2020.

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)
Commercial	$	9,715	61.5	%	$	9,721	61.7	%
Agricultural	3,361		21.3		3,388		21.5
Residential	2,807		17.8		2,708		17.2
Total mortgage loans (1)	15,883		100.6		15,817		100.4
Allowance for credit losses	(92)		(0.6)		(64)		(0.4)
Total mortgage loans, net	$	15,791	100.0	%	$	15,753	100.0	%

_______________

(1)Purchases of mortgage loans from third parties were $331 million and $488 million for the three months and six months ended June 30, 2020, respectively, and $86 million and $563 million for the three months and six months ended June 30, 2019, respectively, and were primarily comprised of residential mortgage loans.

Allowance for Credit Losses for Mortgage Loans

Evaluation and Measurement Methodologies

The allowance for credit losses is a valuation account that is deducted from the mortgage loan’s amortized cost basis to present the net amount expected to be collected on the mortgage loan. The loan balance, or a portion of the loan balance, is written-off against the allowance when management believes this amount is uncollectible.

Accrued interest receivables are presented separate from the amortized cost basis of mortgage loans. An allowance for credit losses is generally not estimated on an accrued interest receivable, rather when a loan is placed in nonaccrual status the associated accrued interest receivable balance is written off with a corresponding reduction to net investment income. For mortgage loans that are granted payment deferrals due to the COVID-19 pandemic, interest continues to be accrued during the deferral period if the loan was less than 30 days past due at December 31, 2019 and performing at the onset of the pandemic. Accrued interest on COVID-19 pandemic impacted loans was not significant at June 30, 2020. The accrued interest receivable on mortgage loans is included in accrued investment income and totaled $86 million at June 30, 2020.

The allowance for credit losses is estimated using relevant available information, from internal and external sources, relating to past events, current conditions, and a reasonable and supportable forecast. Historical credit loss experience provides the basis for estimating expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics and environmental conditions. A reasonable and supportable forecast period of two-years is used with an input reversion period of one-year.

Mortgage loans are evaluated in each of the three portfolio segments to determine the allowance for credit losses. The loan-level loss rates are determined using individual loan terms and characteristics, risk pools/internal ratings, national economic forecasts, prepayment speeds, and estimated default and loss severity. The resulting loss rates are applied to the mortgage loan’s amortized cost to generate an allowance for credit losses. In certain situations, the allowance for credit losses is measured as the difference between the loan’s amortized cost and liquidation value of the collateral. These situations include collateral dependent loans, expected troubled debt restructurings (“TDRs”), foreclosure probable loans, and loans with dissimilar risk characteristics.

Mortgage loans are also evaluated to determine if they qualify as PCD assets. To determine if the credit deterioration experienced since origination is more than insignificant, the extent of credit deterioration is evaluated. All re-performing/modified loan (“RPL”) pools purchased after December 31, 2019 are determined to have been acquired with evidence of more than insignificant credit deterioration since origination and are classified as PCD assets. RPLs are pools of residential mortgage loans acquired at discounts which have both credit and non-credit components. For PCD mortgage loans, the allowance for credit losses is determined using a similar methodology described above, except the loss-rate is determined at the pool level instead of the individual loan level. The initial allowance for credit losses, determined on a collective basis, is then allocated to the individual loans. The initial amortized cost of the loan is grossed-up to reflect the sum of the loan’s purchase price and allowance for credit losses. The difference between the grossed-up amortized cost basis and the par value of the loan is a noncredit discount, which is accreted into net investment income over the remaining life of the loan. Any subsequent PCD mortgage loan allowance for credit losses is evaluated in a manner similar to the process described above for each of the three portfolio segments.

Rollforward of the Allowance for Credit Losses for Mortgage Loans by Portfolio Segment

The changes in the allowance for credit losses by portfolio segment were as follows:

	Commercial		Agricultural		Residential		Total
	(In millions)
Balance at December 31, 2019	$	47	$	10	$	7	$	64
Cumulative effect of change in accounting principle	(20)		7		15		2
Balance at January 1, 2020	27		17		22		66
Current period provision	10		(1)		17		26
Balance at June 30, 2020	$	37	$	16	$	39	$	92

PCD Mortgage Loans

Purchases of PCD mortgage loans are summarized as follows:

	Six Months Ended June 30, 2020
	(In millions)
Purchase price	$	77
Allowance at acquisition date	$	2
Discount or premium attributable to other factors	$	2
Par value	$	81

Credit Quality of Mortgage Loans by Portfolio Segment

The amortized cost of mortgage loans by year of origination and credit quality indicator was as follows at:

	2020		2019		2018		2017		2016		Prior		Total
	(In millions)
June 30, 2020
Commercial mortgage loans
Loan-to-value ratios:
Less than 65%	$	193	$	1,683	$	1,109	$	572	$	1,124	$	3,247	$	7,928
65% to 75%	59		306		456		340		10		275		1,446
76% to 80%	—		—		—		—		114		—		114
Greater than 80%	—		—		10		13		6		198		227
Total commercial mortgage loans	252		1,989		1,575		925		1,254		3,720		9,715
Agricultural mortgage loans
Loan-to-value ratios:
Less than 65%	110		564		784		445		492		801		3,196
65% to 75%	2		76		10		45		—		19		152
76% to 80%	8		5		—		—		—		—		13
Total agricultural mortgage loans	120		645		794		490		492		820		3,361
Residential mortgage loans
Performing	168		497		540		132		51		1,371		2,759
Nonperforming	—		1		1		—		1		45		48
Total residential mortgage loans	168		498		541		132		52		1,416		2,807
Total	$	540	$	3,132	$	2,910	$	1,547	$	1,798	$	5,956	$	15,883

The loan-to-value ratio is a measure commonly used to assess the quality of commercial and agricultural mortgage loans. The loan-to-value ratio compares the amount of the loan to the estimated fair value of the underlying property collateralizing the loan and is commonly expressed as a percentage. A loan-to-value ratio less than 100% indicates an excess of collateral value over the loan amount. Loan-to-value ratios greater than 100% indicate that the loan amount exceeds the collateral value. Performing status is a measure commonly used to assess the quality of residential mortgage loans. A loan is considered performing when the borrower makes consistent and timely payments.

The amortized cost of commercial mortgage loans by debt-service coverage ratio was as follows at:

	June 30, 2020				December 31, 2019
	Amortized Cost		% of Total		Amortized Cost		% of Total
	(Dollars in millions)
Debt-Service Coverage Ratios:
Greater than 1.20x	$	9,198	94.7	%	$	9,257	95.2	%
1.00x - 1.20x	314		3.2		298		3.1
Less than 1.00x	203		2.1		166		1.7
Total	$	9,715	100.0	%	$	9,721	100.0	%

The debt-service coverage ratio compares a property’s net operating income to its debt-service payments. Debt-service coverage ratios less than 1.00 times indicate that property operations do not generate enough income to cover the loan’s current debt payments. A debt-service coverage ratio greater than 1.00 times indicates an excess of net operating income over the debt-service payments.

Past Due Mortgage Loans by Portfolio Segment

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. Delinquency is defined 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. To the extent a payment deferral is agreed to with a borrower, in response to the COVID-19 pandemic, the past due status of the impacted loans is locked-in as of March 1, 2020, which reflects the date on which the COVID-19 pandemic began to affect the borrower’s ability to make payments, as provided in the CARES Act. At June 30, 2020, 1% of the COVID-19 pandemic modified loans were classified as delinquent.

The aging of the amortized cost of past due mortgage loans by portfolio segment was as follows at:

	June 30, 2020
	Commercial		Agricultural		Residential		Total
	(In millions)
Current	$	9,715	$	3,350	$	2,705	$	15,770
30-59 days past due	—		—		54		54
60-89 days past due	—		10		19		29
90-179 days past due	—		—		12		12
180+ days past due	—		1		17		18
Total	$	9,715	$	3,361	$	2,807	$	15,883

Mortgage Loans in Nonaccrual Status by Portfolio Segment

Mortgage loans are placed in a nonaccrual status if there are concerns regarding collectability of future payments or the loan is past due, unless the past due loan is well collateralized and in the process of foreclosure. To the extent a payment deferral is agreed to with a borrower, in response to the COVID-19 pandemic, the impacted loans generally will not be reported as in a nonaccrual status during the period of deferral. A COVID-19 pandemic modified loan is only reported as a nonaccrual asset in the event a borrower declares bankruptcy, the borrower experiences significant credit deterioration such that the Company does not expect to collect all principal and interest due, or the loan was 90 days past due at the onset of the pandemic. At June 30, 2020, 1% of the COVID-19 pandemic modified loans were in nonaccrual status.

The amortized cost of mortgage loans in a nonaccrual status by portfolio segment were as follows at:

	Commercial		Agricultural		Residential		Total
	(In millions)
December 31, 2019	$	—	$	21	$	37	$	58
June 30, 2020 (1)	$	—	$	1	$	48	$	49

_______________

(1)The Company had $8 million of residential mortgage loans in nonaccrual status for which there was no related allowance for credit losses at June 30, 2020.

Current period investment income on mortgage loans in nonaccrual status was less than $1 million for the six months ended June 30, 2020.

Modified Mortgage Loans by Portfolio Segment

Under certain circumstances, modifications are granted to non-performing mortgage loans. Each modification is evaluated to determine if a TDR has occurred. A modification is a TDR when the borrower is in financial difficulty and the creditor makes concessions. Generally, the types of concessions may include reducing the amount of debt owed, reducing the contractual interest rate, extending the maturity date at an interest rate lower than current market interest rates and/or reducing accrued interest. The Company did not have a significant amount of mortgage loans modified in a troubled debt restructuring during the six months ended June 30, 2020.

Short-term modifications made on a good faith basis to borrowers who were not more than 30 days past due at December 31, 2019 and in response to the COVID-19 pandemic are not considered TDRs.

Other Invested Assets

Over 90% of other invested assets is comprised of freestanding derivatives with positive estimated fair values. See Note 5 for information about freestanding derivatives with positive estimated fair values. Other invested assets also includes tax credit and renewable energy partnerships, leveraged leases and Federal Home Loan Bank stock.

Leveraged Leases

The carrying value of leveraged leases at June 30, 2020 and December 31, 2019 was $50 million and $64 million, respectively, net of allowance for credit losses of $13 million and $0, respectively. Rental receivables are generally due in periodic installments. The payment periods for leveraged leases generally range from one to 15 years. For rental receivables, the primary credit quality indicator is whether the rental receivable is performing or nonperforming, which is assessed monthly. Nonperforming rental receivables are generally defined as those that are 90 days or more past due. At both June 30, 2020 and December 31, 2019, all leveraged leases were performing.

Net Unrealized Investment Gains (Losses)

Unrealized investment gains (losses) on fixed maturity securities and the effect on DAC, VOBA, deferred sales inducements (“DSI”) and future policy benefits, 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 at:

	June 30, 2020		December 31, 2019
	(In millions)
Fixed maturity securities	$	10,305	$	6,957
Derivatives	660		245
Other	(16)		(13)
Subtotal	10,949		7,189
Amounts allocated from:
Future policy benefits	(4,153)		(2,692)
DAC, VOBA and DSI	(445)		(341)
Subtotal	(4,598)		(3,033)
Deferred income tax benefit (expense)	(1,334)		(873)
Net unrealized investment gains (losses)	$	5,017	$	3,283

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

	Six Months Ended June 30, 2020
	(In millions)
Balance at December 31, 2019	$	3,283
Unrealized investment gains (losses) during the period	3,760
Unrealized investment gains (losses) relating to:
Future policy benefits	(1,461)
DAC, VOBA and DSI	(104)
Deferred income tax benefit (expense)	(461)
Balance at June 30, 2020	$	5,017
Change in net unrealized investment gains (losses)	$	1,734

Concentrations of Credit Risk

There were no investments in any counterparty that were greater than 10% of the Company’s equity, other than the U.S. government and its agencies, at both June 30, 2020 and December 31, 2019.

Securities Lending

Elements of the securities lending program are presented below at:

	June 30, 2020		December 31, 2019
	(In millions)
Securities on loan: (1)
Amortized cost	$	2,065	$	2,031
Estimated fair value	$	3,596	$	2,996
Cash collateral received from counterparties (2)	$	3,674	$	3,074
Securities collateral received from counterparties (3)	$	12	$	—
Reinvestment portfolio — estimated fair value	$	3,794	$	3,174

_______________

(1)Included within fixed maturity securities.

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

(3)Securities collateral received from counterparties is not reported on the consolidated balance sheets and may not be sold or re-pledged unless the counterparty is in default.

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

	June 30, 2020								December 31, 2019
	Open (1)		1 Month or Less		1 to 6 Months		Total		Open (1)		1 Month or Less		1 to 6 Months		Total
	(In millions)
U.S. government and agency	$	1,284	$	2,012	$	373	$	3,669	$	1,279	$	1,094	$	701	$	3,074
U.S. corporate	2		—		—		2		—		—		—		—
Foreign corporate	3		—		—		3		—		—		—		—
Total	$	1,289	$	2,012	$	373	$	3,674	$	1,279	$	1,094	$	701	$	3,074

_______________

(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 June 30, 2020 was $1.3 billion, primarily 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. and foreign corporate securities, ABS, non-agency RMBS and U.S. government and agency securities) with 62% invested in agency RMBS, cash and cash equivalents and U.S. government and agency securities at June 30, 2020. 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.

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

Invested assets on deposit, held in trust and pledged as collateral at estimated fair value were as follows at:

	June 30, 2020		December 31, 2019
	(In millions)
Invested assets on deposit (regulatory deposits) (1)	$	9,922	$	9,349
Invested assets held in trust (reinsurance agreements) (2)	5,456		4,561
Invested assets pledged as collateral (3)	4,506		3,641
Total invested assets on deposit, held in trust and pledged as collateral	$	19,884	$	17,551

_______________

(1)The Company has assets, primarily fixed maturity securities, on deposit with governmental authorities relating to certain policyholder liabilities, of which $147 million and $69 million of the assets on deposit represents restricted cash and cash equivalents at June 30, 2020 and December 31, 2019, respectively.

(2)The Company has assets, primarily fixed maturity securities, held in trust relating to certain reinsurance transactions, of which $102 million and $124 million of the assets held in trust balance represents restricted cash and cash equivalents at June 30, 2020 and December 31, 2019, respectively.

(3)The Company has pledged invested assets in connection with various agreements and transactions, including funding agreements (see Note 3 of the Notes to the Consolidated Financial Statements included in the 2019 Annual Report) and derivative transactions (see Note 5).

See “— Securities Lending” for information regarding securities on loan.

Variable Interest Entities

The Company has invested in legal entities that are variable interest entities (“VIEs”). VIEs are consolidated when the investor is the primary beneficiary. A primary beneficiary is the variable interest holder in a VIE with both the power to (i) direct the activities of the VIE that most significantly impact the economic performance of the VIE and (ii) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.

There were no material VIEs for which the Company has concluded that it is the primary beneficiary at June 30, 2020 or December 31, 2019.

The carrying amount and maximum exposure to loss related to the VIEs for which the Company has concluded that it holds a variable interest, but is not the primary beneficiary, were as follows at:

	June 30, 2020				December 31, 2019
	Carrying Amount		Maximum Exposure to Loss		Carrying Amount		Maximum Exposure to Loss
	(In millions)
Fixed maturity securities	$	13,143	$	12,265	$	13,094	$	12,454
Limited partnerships and LLCs	1,880		3,171		1,907		3,080
Total	$	15,023	$	15,436	$	15,001	$	15,534

The Company’s investments in unconsolidated VIEs are described below.

Fixed Maturity Securities

The Company invests in U.S. corporate bonds, foreign corporate bonds, and Structured Securities issued by VIEs. The Company is not obligated to provide any financial or other support to these VIEs, other than the original investment. The Company’s involvement with these entities is limited to that of a passive investor. The Company has no unilateral right to appoint or remove the servicer, special servicer, or investment manager, which are generally viewed as having the power to direct the activities that most significantly impact the economic performance of the VIE, nor does the Company function in any of these roles. The Company does not have the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the entity; as a result, the Company has determined it is not the primary beneficiary, or consolidator, of the VIE. The Company’s maximum exposure to loss on these fixed maturity securities is limited to the amortized cost of these investments. See “— Fixed Maturity Securities Available-for-sale” for information on these securities.

Limited Partnerships and LLCs

The Company holds investments in certain limited partnerships and LLCs which are VIEs. These ventures include limited partnerships, LLCs, private equity funds, hedge funds, and to a lesser extent tax credit and renewable energy partnerships. The Company is not considered the primary beneficiary, or consolidator, when its involvement takes the form of a limited partner interest and is restricted to a role of a passive investor, as a limited partner’s interest does not provide the Company with any substantive kick-out or participating rights, nor does it provide the Company with the power to direct the activities of the fund. The Company’s maximum exposure to loss on these investments is limited to: (i) the amount invested in debt or equity of the VIE and (ii) commitments to the VIE, as described in Note 10.

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	$	676	$	679	$	1,345	$	1,332
Equity securities	1		1		3		4
Mortgage loans	166		176		332		335
Policy loans	13		17		25		33
Limited partnerships and LLCs (1)	(189)		88		(107)		96
Cash, cash equivalents and short-term investments	14		23		37		37
Other	11		6		25		19
Total investment income	692		990		1,660		1,856
Less: Investment expenses	40		48		92		103
Net investment income	$	652	$	942	$	1,568	$	1,753

_______________

(1)Includes net investment income pertaining to other limited partnership interests of ($192) million and ($119) million for the three months and six months ended June 30, 2020, respectively, and $76 million for both the three months and six months ended June 30, 2019.

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)
Fixed maturity securities	$	(21)	$	68	$	(27)	$	53
Equity securities	7		1		(7)		11
Mortgage loans	(22)		(3)		(26)		(7)
Limited partnerships and LLCs	(2)		(2)		(3)		(5)
Other	4		(1)		10		—
Total net investment gains (losses)	$	(34)	$	63	$	(53)	$	52

Sales or Disposals of Fixed Maturity Securities

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
	(In millions)
Proceeds	$	622	$	3,679	$	1,271	$	6,958
Gross investment gains	$	15	$	106	$	32	$	173
Gross investment losses	(37)		(38)		(43)		(120)
Net investment gains (losses)	$	(22)	$	68	$	(11)	$	53