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Investments (Tables)

12 Months Ended

Dec. 31, 2018

The following table summarizes the amortized cost, unrealized gains and losses and fair value of available-for-sale securities, as of the dates indicated:


(in millions)	Amortized cost		Unrealized gains		Unrealized losses		Fair value
December 31, 2018
Fixed maturity securities:
U.S. government and agencies	$	459	$	28	$	1	$	486
Obligations of states and political subdivisions		4,026		290		23		4,293
Corporate securities		41,991		645		1,403		41,233
Residential mortgage-backed securities		2,797		65		39		2,823
Commercial mortgage-backed securities		1,731		9		19		1,721
Asset-backed securities		2,794		34		47		2,781

Total available-for-sale securities	$	53,798	$	1,071	$	1,532	$	53,337

December 31, 2017
Fixed maturity securities:
U.S. government and agencies	$	358	$	39	$	1	$	396
Obligations of states and political subdivisions		3,433		414		2		3,845
Corporate securities		37,643		2,018		220		39,441
Residential mortgage-backed securities		2,788		107		23		2,872
Commercial mortgage-backed securities		1,154		13		6		1,161
Asset-backed securities		2,466		44		24		2,486

Total fixed maturity securities	$	47,842	$	2,635	$	276	$	50,201
Equity securities¹		73		10		4		79

Total available-for-sale securities	$	47,915	$	2,645	$	280	$	50,280

¹	As disclosed within Note 3, the Company adopted ASU 2016-01 on January 1, 2018, which required the Company to measure equity securities at fair value with any changes in fair value recognized through net realized investment gains and losses.

Summary of Amortized Cost and Fair Value of Fixed Maturity Securities

Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without early redemption penalties.


(in millions)	Amortized cost		Fair value
Fixed maturity securities:
Due in one year or less	$	1,644	$	1,688
Due after one year through five years		11,360		11,371
Due after five years through ten years		17,066		16,641
Due after ten years		16,406		16,312

Subtotal	$	46,476	$	46,012
Residential mortgage-backed securities		2,797		2,823
Commercial mortgage-backed securities		1,731		1,721
Asset-backed securities		2,794		2,781

Total fixed maturity securities	$	53,798	$	53,337

Summary of Components of Net Unrealized Gains and Losses on Available-for-Sale Securities

The following table summarizes the components of net unrealized gains and losses, as of the dates indicated:


	December 31,
	2018			2017
Net unrealized (losses) gains on available-for-sale securities, before adjustments and taxes¹	$	(461	)	$	2,365
Adjustment to DAC and other expenses		161			(478	)
Adjustment to future policy benefits and claims		(10	)		(103	)
Adjustment to policyholder dividend obligation		(21	)		(88	)
Deferred federal income tax benefit (expense)		71			(593	)
Cumulative effect of adoption of accounting principle²		—			232

Net unrealized (losses) gains on available-for-sale securities	$	(260	)	$	1,335

¹	Includes net unrealized gains of $37 million and $38 million as of December 31, 2018 and 2017, respectively, related to the non-credit portion of other-than-temporarily impaired securities.

²	Represents impact of reclassifying AOCI related to available-for-sale securities into retained earnings for the related tax effects resulting from the Tax Cuts and Jobs Act, as disclosed in Note 13.

Summary of Change in Net Unrealized Gains and Losses on Available for Sale Securities

The following table summarizes the change in net unrealized gains and losses reported in AOCI, for the years ended:


(in millions)	December 31,
(in millions)	2018			2017
Balance at beginning of year	$	1,335		$	553
Cumulative effect of adoption of accounting principle¹		(7	)		—

Adjusted balance at beginning of year	$	1,328		$	553
Unrealized (losses) gains arising during the year:
Net unrealized (losses) gains on available-for-sale securities before adjustments		(2,818	)		1,191
Non-credit impairments and subsequent changes in fair value of impaired debt securities		(1	)		37
Net adjustment to DAC and other expense		639			(287	)
Net adjustment to future policy benefits and claims		93			(35	)
Net adjustment to policyholder dividend obligations		67			(14	)
Related federal income tax expense (benefit)		432			(318	)

Unrealized (losses) gains on available-for-sale securities	$	(1,588	)	$	574
Less: Reclassification adjustment for net realized gains and credit-related OTTI on available-for-sale securities, net of tax expense ($0 and $13 as of December 31, 2018 and 2017, respectively)		—			24

Change in net unrealized (losses) gains on available-for-sale securities	$	(1,588	)	$	550
Cumulative effect of adoption of accounting principle²		—			232

Balance at end of year	$	(260	)	$	1,335

1	The Company recognized a cumulative-effect adjustment on January 1, 2018 related to the adoption of ASU 2016-01, resulting in a reclassification of accumulated other comprehensive income into retained earnings. See Note 3 for more information.

2	Represents impacts of reclassifying accumulated other comprehensive income related to available-for-sale securities into retained earnings for the related tax effects resulting from the Tax Cuts and Jobs Act.

Summary of Available for Sale Securities by Asset Class in Gross Unrealized Loss Position

The following table summarizes, by asset class, available-for-sale securities, in an unrealized loss position based on the amount of time each type of security has been in an unrealized loss position, as well as the related fair value, as of the dates indicated:


	Less than or equal to one year				More than one year				Total
(in millions)	Fair value		Unrealized losses		Fair value		Unrealized losses		Unrealized losses¹
December 31, 2018
Fixed maturity securities:
U.S. government and agencies	$	55	$	—	$	31	$	1	$	1
Obligations of states and political subdivisions		843		16		166		7		23
Corporate securities		20,640		847		6,452		556		1,403
Residential mortgage-backed securities		652		8		673		31		39
Commercial mortgage-backed securities		614		8		403		11		19
Asset-backed securities		2,135		27		222		20		47

Total²	$	24,939	$	906	$	7,947	$	626	$	1,532

December 31, 2017
Fixed maturity securities:
U.S. government and agencies	$	53	$	1	$	—	$	—	$	1
Obligations of states and political subdivisions		77		—		111		2		2
Corporate securities		3,363		37		4,058		183		220
Residential mortgage-backed securities		370		3		433		20		23
Commercial mortgage-backed securities		307		2		127		4		6
Asset-backed securities		254		1		82		23		24

Total fixed maturity securities	$	4,424	$	44	$	4,811	$	232	$	276
Equity securities³		12		2		30		2		4

Total²	$	4,436	$	46	$	4,841	$	234	$	280

1	As of December 31, 2018 and 2017, there were $145 million and $67 million, respectively, of unrealized losses related to available-for-sale securities with a fair value to amortized cost ratio of less than 80%.

2	Represents 2,427 and 775 available-for-sale securities in an unrealized loss position as of December 31, 2018 and 2017, respectively.

3	As disclosed within Note 3, the Company adopted ASU 2016-01 on January 1, 2018, which required the Company to measure equity securities at fair value with any changes in fair value recognized through net realized investment gains and losses.

Summary of Amortized Cost of Mortgage Loans

The following table summarizes the amortized cost of mortgage loans by method of evaluation for credit loss, and the related valuation allowances by type of credit loss, as of the dates indicated:


(in millions)	December 31, 2018						December 31, 2017
(in millions)	Commercial		Residential		Total¹		Commercial		Residential		Total¹
Amortized cost:
Loans with non-specific reserves	$	12,417	$	1	$	12,418	$	10,963	$	—	$	10,963

Total amortized cost	$	12,417	$	1	$	12,418	$	10,963	$	—	$	10,963

Valuation allowance:
Non-specific reserves	$	39	$	—	$	39	$	34	$	—	$	34

Total valuation allowance²	$	39	$	—	$	39	$	34	$	—	$	34

Mortgage loans, net of allowance	$	12,378	$	1	$	12,379	$	10,929	$	—	$	10,929

1	The company did not hold any loans with specific reserves as of December 31, 2018 and 2017.

2	Changes in the valuation allowance are primarily due to portfolio growth and current period provisions. These changes for the years ended December 31, 2018 and 2017 were immaterial.

Summary of LTV Ratio and DSC Ratios of Mortgage Loan Portfolio

The following table summarizes the LTV and DSC ratios of the mortgage loan portfolio, as of the dates indicated:


	LTV ratio						DSC ratio
(in millions)	Less than 90%		90% or greater		Total		Greater than 1.00			Less than 1.00			Total
December 31, 2018
Apartment	$	4,550	$	116	$	4,666	$	4,644		$	22		$	4,666
Industrial		1,881		10		1,891		1,887			4			1,891
Office		2,193		—		2,193		2,184			9			2,193
Retail		3,298		6		3,304		3,302			2			3,304
Other		363		—		363		363			—			363

Total	$	12,285	$	132	$	12,417	$	12,380		$	37		$	12,417

Weighted average DSC ratio		2.06		1.48		2.06		n/a			n/a			n/a

Weighted average LTV ratio		n/a		n/a		n/a		58	%		82	%		58	%

December 31, 2017
Apartment	$	4,102	$	102	$	4,204	$	4,181		$	23		$	4,204
Industrial		1,573		10		1,583		1,582			1			1,583
Office		1,752		—		1,752		1,738			14			1,752
Retail		2,995		4		2,999		2,996			3			2,999
Other		425		—		425		425			—			425

Total	$	10,847	$	116	$	10,963	$	10,922		$	41		$	10,963

Weighted average DSC ratio		2.06		1.31		2.05		n/a			n/a			n/a

Weighted average LTV ratio		n/a		n/a		n/a		59	%		81	%		59	%

Summary of Net Investment Income by Investment Type

The following table summarizes net investment income, by investment type, for the years ended:


(in millions)	December 31,
(in millions)	2018			2017			2016
Fixed maturity securities, available-for-sale	$	2,116		$	1,982		$	1,781
Mortgage loans		503			450			407
Alternative investments		42			23			8
Policy loans		59			41			52
Other		50			27			21

Gross investment income	$	2,770		$	2,523		$	2,269
Tax credit fund losses¹		(27	)		(44	)		(68	)
Investment expenses		(68	)		(65	)		(62	)

Net investment income	$	2,675		$	2,414		$	2,139

1	Represents losses on tax credit funds accounted for under the equity method of accounting. Tax benefits on these tax credit funds are recorded in federal income tax benefit.

Net Realized Investment Gains and Losses

The following table summarizes net realized investment gains and losses, including OTTI, by source, for the years ended:


(in millions)	December 31,
(in millions)	2018			2017			2016
Realized gains on sales¹	$	12		$	53		$	50
Realized losses on sales¹		(10	)		(16	)		(90	)
Net realized derivative losses		(309	)		(9	)		(42	)
Valuation losses and other²		(30	)		(5	)		(3	)
OTTI losses^3,4		(3	)		(11	)		(26	)

Net realized investment (losses) gains	$	(340	)	$	12		$	(111	)

1	Gross gains of $12 million, $52 million and $49 million and gross losses of $10 million, $11 million and $89 million were realized on sales of available-for-sale securities during the years ended December 31, 2018, 2017 and 2016, respectively.

2	As disclosed within Note 3, the Company adopted ASU 2016-01 on January 1, 2018, which required the Company to measure equity securities at fair value with any changes in fair value recognized through net realized investment gains and losses.

3	OTTI on fixed maturity securities excludes non-credit losses of $3 million, $4 million and $6 million included in other comprehensive income for the years ended December 31, 2018, 2017 and 2016, respectively.

4	Includes impairments on alternative investment tax credit funds due to corporate tax rate reductions set forth in the Tax Cuts and Jobs Act during the year ended December 31, 2017.

Other-Than-Temporary Impairment Losses

The following table summarizes the reconciliation of the beginning and ending cumulative credit losses for fixed maturity securities as of dates indicated:


(in millions)	December 31,
(in millions)	2018			2017			2016
Cumulative credit losses at beginning of year¹	$	(170	)	$	(195	)	$	(224	)
New credit losses		—			(3	)		(22	)
Incremental credit losses		(2	)		(2	)		—
Losses related to securities included in the beginning balance sold or paid down during the period		17			30			51

Cumulative credit losses at end of year¹	$	(155	)	$	(170	)	$	(195	)

1	Cumulative credit losses are defined as amounts related to the Company’s credit portion of the OTTI losses on debt securities that the Company does not intend to sell and that it is not more likely than not the Company will be required to sell prior to recovery of the amortized cost basis.