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Investments (Tables)
 9 Months Ended
Sep. 30, 2017
Investments [Abstract]  
Schedule for fixed income securities at amortized cost, gross unrealized gains and losses and fair value
The amortized cost, gross unrealized gains and losses and fair value for fixed income securities are as follows:
($ in millions)
Amortized
 
Gross unrealized
 
Fair
 
cost
 
Gains
 
Losses
 
value
September 30, 2017
 

 
 

 
 

 
 

U.S. government and agencies
$
569

 
$
43

 
$
(1
)
 
$
611

Municipal
1,985

 
272

 
(5
)
 
2,252

Corporate
18,516

 
1,027

 
(69
)
 
19,474

Foreign government
286

 
24

 
—

 
310

Asset-backed securities (“ABS”)
373

 
6

 
(7
)
 
372

Residential mortgage-backed securities (“RMBS”)
221

 
49

 
(1
)
 
269

Commercial mortgage-backed securities (“CMBS”)
118

 
8

 
(4
)
 
122

Redeemable preferred stock
13

 
2

 
—

 
15

Total fixed income securities
$
22,081

 
$
1,431

 
$
(87
)
 
$
23,425

 
 
 
 
 
 
 
 
December 31, 2016
 

 
 

 
 

 
 

U.S. government and agencies
$
968

 
$
48

 
$
(2
)
 
$
1,014

Municipal
2,017

 
264

 
(7
)
 
2,274

Corporate
18,945

 
905

 
(169
)
 
19,681

Foreign government
304

 
28

 
—

 
332

ABS
337

 
4

 
(10
)
 
331

RMBS
294

 
42

 
(3
)
 
333

CMBS
233

 
17

 
(9
)
 
241

Redeemable preferred stock
14

 
2

 
—

 
16

Total fixed income securities
$
23,112

 
$
1,310

 
$
(200
)
 
$
24,222
Schedule for fixed income securities based on contractual maturities
The scheduled maturities for fixed income securities are as follows as of September 30, 2017:
($ in millions)
Amortized cost
 
Fair value
Due in one year or less
$
1,581

 
$
1,593

Due after one year through five years
8,243

 
8,649

Due after five years through ten years
7,354

 
7,631

Due after ten years
4,191

 
4,789

 
21,369

 
22,662

ABS, RMBS and CMBS
712

 
763

Total
$
22,081

 
$
23,425
Schedule of net investment income
Net investment income is as follows:
($ in millions)
Three months ended September 30,
 
Nine months ended September 30,
 
2017
 
2016
 
2017
 
2016
Fixed income securities
$
263

 
$
268

 
$
800

 
$
812

Mortgage loans
46

 
50

 
140

 
144

Equity securities
9

 
10

 
38

 
31

Limited partnership interests
115

 
67

 
315

 
196

Short-term investments
3

 
1

 
6

 
4

Policy loans
8

 
8

 
23

 
24

Other
17

 
21

 
57

 
65

Investment income, before expense
461

 
425

 
1,379

 
1,276

Investment expense
(22
)
 
(17
)
 
(63
)
 
(52
)
Net investment income
$
439

 
$
408

 
$
1,316

 
$
1,224
Schedule of realized capital gains and losses by asset type
Realized capital gains and losses by asset type are as follows:
($ in millions)
Three months ended September 30,
 
Nine months ended September 30,
 
2017
 
2016
 
2017
 
2016
Fixed income securities
$
4

 
$
(17
)
 
$
(9
)
 
$
(42
)
Mortgage loans
1

 
—

 
1

 
1

Equity securities
7

 
3

 
3

 
(31
)
Limited partnership interests
11

 
(1
)
 
34

 
12

Derivatives
(4
)
 
(1
)
 
(13
)
 
(2
)
Other
—

 
(3
)
 
(2
)
 
(4
)
Realized capital gains and losses
$
19

 
$
(19
)
 
$
14

 
$
(66
)
Schedule of realized capital gains and losses by transaction type
Realized capital gains and losses by transaction type are as follows:
($ in millions)
Three months ended September 30,
 
Nine months ended September 30,
 
2017
 
2016
 
2017
 
2016
Impairment write-downs
$
(6
)
 
$
(37
)
 
$
(39
)
 
$
(79
)
Change in intent write-downs
—

 
(2
)
 
(4
)
 
(9
)
Net other-than-temporary impairment losses recognized in earnings
(6
)
 
(39
)
 
(43
)
 
(88
)
Sales and other
29

 
21

 
70

 
27

Valuation and settlements of derivative instruments
(4
)
 
(1
)
 
(13
)
 
(5
)
Realized capital gains and losses
$
19

 
$
(19
)
 
$
14

 
$
(66
)
Schedule of other-than-temporary impairment losses by asset type
Other-than-temporary impairment losses by asset type are as follows:
($ in millions)
Three months ended September 30, 2017
 
Three months ended September 30, 2016
 
Gross
 
Included
in OCI
 
Net
 
Gross
 
Included
in OCI
 
Net
Fixed income securities:
 

 
 

 
 

 
 

 
 

 
 

Corporate
$
—

 
$
—

 
$
—

 
$
(12
)
 
$
—

 
$
(12
)
ABS
(1
)
 
—

 
(1
)
 
—

 
—

 
—

CMBS
1

 
(2
)
 
(1
)
 
(3
)
 
—

 
(3
)
Total fixed income securities
—

 
(2
)
 
(2
)
 
(15
)
 
—

 
(15
)
Mortgage loans
(1
)
 
—

 
(1
)
 
—

 
—

 
—

Equity securities
(1
)
 
—

 
(1
)
 
(9
)
 
—

 
(9
)
Limited partnership interests
(2
)
 
—

 
(2
)
 
(12
)
 
—

 
(12
)
Other
—

 
—

 
—

 
(3
)
 
—

 
(3
)
Other-than-temporary impairment losses
$
(4
)
 
$
(2
)
 
$
(6
)
 
$
(39
)
 
$
—

 
$
(39
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine months ended September 30, 2017
 
Nine months ended September 30, 2016
 
Gross
 
Included
in OCI
 
Net
 
Gross
 
Included
in OCI
 
Net
Fixed income securities:
 

 
 

 
 

 
 

 
 

 
 

Municipal
$
(1
)
 
$
—

 
$
(1
)
 
$
—

 
$
—

 
$
—

Corporate
(7
)
 
3

 
(4
)
 
(23
)
 
6

 
(17
)
ABS
(1
)
 
—

 
(1
)
 
(4
)
 
—

 
(4
)
RMBS
—

 
(2
)
 
(2
)
 
—

 
—

 
—

CMBS
(8
)
 
1

 
(7
)
 
(7
)
 
1

 
(6
)
Total fixed income securities
(17
)
 
2

 
(15
)
 
(34
)
 
7

 
(27
)
Mortgage loans
(1
)
 
—

 
(1
)
 
—

 
—

 
—

Equity securities
(16
)
 
—

 
(16
)
 
(51
)
 
—

 
(51
)
Limited partnership interests
(9
)
 
—

 
(9
)
 
(6
)
 
—

 
(6
)
Other
(2
)
 
—

 
(2
)
 
(4
)
 
—

 
(4
)
Other-than-temporary impairment losses
$
(45
)
 
$
2

 
$
(43
)
 
$
(95
)
 
$
7

 
$
(88
)
Schedule of other-than-temporary impairment losses on fixed income securities included in accumulated other comprehensive income
The total amount of other-than-temporary impairment losses included in accumulated other comprehensive income at the time of impairment for fixed income securities, which were not included in earnings, are presented in the following table. The amounts exclude $115 million and $131 million as of September 30, 2017 and December 31, 2016, respectively, of net unrealized gains related to changes in valuation of the fixed income securities subsequent to the impairment measurement date.
($ in millions)
September 30, 2017
 
December 31, 2016
Municipal
$
(4
)
 
$
(5
)
Corporate
(3
)
 
(5
)
ABS
(8
)
 
(11
)
RMBS
(38
)
 
(43
)
CMBS
(5
)
 
(7
)
Total
$
(58
)
 
$
(71
)
Schedule of rollforwards of the cumulative credit losses recognized in earnings for fixed income securities held
Rollforwards of the cumulative credit losses recognized in earnings for fixed income securities held as of the end of the period are as follows:
($ in millions)
Three months ended September 30,
 
Nine months ended September 30,
 
2017
 
2016
 
2017
 
2016
Beginning balance
$
(160
)
 
$
(168
)
 
$
(176
)
 
$
(200
)
Additional credit loss for securities previously other-than-temporarily impaired
(2
)
 
(3
)
 
(7
)
 
(8
)
Additional credit loss for securities not previously other-than-temporarily impaired
—

 
(12
)
 
(8
)
 
(19
)
Reduction in credit loss for securities disposed or collected
13

 
4

 
42

 
48

Ending balance
$
(149
)
 
$
(179
)
 
$
(149
)
 
$
(179
)
Schedule of unrealized net capital gains and losses included in accumulated other comprehensive income
Unrealized net capital gains and losses included in accumulated other comprehensive income are as follows:
($ in millions)
Fair value
 
Gross unrealized
 
Unrealized net gains (losses)
September 30, 2017
 
Gains
 
Losses
 
Fixed income securities
$
23,425

 
$
1,431

 
$
(87
)
 
$
1,344

Equity securities
1,662

 
272

 
(16
)
 
256

Short-term investments
712

 
—

 
—

 
—

Derivative instruments (1)
1

 
2

 
(1
)
 
1

Equity method (“EMA”) limited partnerships (2)
 

 
 

 
 

 
—

Unrealized net capital gains and losses, pre-tax
 

 
 

 
 

 
1,601

Amounts recognized for:
 

 
 

 
 

 
 

Insurance reserves (3)
 

 
 

 
 

 
—

DAC and DSI (4)
 

 
 

 
 

 
(195
)
Amounts recognized
 

 
 

 
 

 
(195
)
Deferred income taxes
 

 
 

 
 

 
(497
)
Unrealized net capital gains and losses, after-tax
 

 
 

 
 

 
$
909

_______________
 
(1) 
Included in the fair value of derivative instruments is $1 million classified as assets.
(2) 
Unrealized net capital gains and losses for limited partnership interests represent the Company’s share of EMA limited partnerships’ other comprehensive income. Fair value and gross unrealized gains and losses are not applicable.
(3) 
The insurance reserves adjustment represents the amount by which the reserve balance would increase if the net unrealized gains in the applicable product portfolios were realized and reinvested at current lower interest rates, resulting in a premium deficiency. Although the Company evaluates premium deficiencies on the combined performance of life insurance and immediate annuities with life contingencies, the adjustment, if any, primarily relates to structured settlement annuities with life contingencies, in addition to annuity buy-outs and certain payout annuities with life contingencies.
(4) 
The DAC and DSI adjustment balance represents the amount by which the amortization of DAC and DSI would increase or decrease if the unrealized gains or losses in the respective product portfolios were realized.
($ in millions)
Fair value
 
Gross unrealized
 
Unrealized net gains (losses)
December 31, 2016
 
Gains
 
Losses
 
Fixed income securities
$
24,222

 
$
1,310

 
$
(200
)
 
$
1,110

Equity securities
1,511

 
117

 
(35
)
 
82

Short-term investments
566

 
—

 
—

 
—

Derivative instruments (1)
5

 
5

 
—

 
5

EMA limited partnerships
 

 
 

 
 

 
(2
)
Unrealized net capital gains and losses, pre-tax
 

 
 

 
 

 
1,195

Amounts recognized for:
 

 
 

 
 

 
 

Insurance reserves
 

 
 

 
 

 
—

DAC and DSI
 

 
 

 
 

 
(140
)
Amounts recognized
 

 
 

 
 

 
(140
)
Deferred income taxes
 

 
 

 
 

 
(374
)
Unrealized net capital gains and losses, after-tax
 

 
 

 
 

 
$
681

_______________
 
(1) 
Included in the fair value of derivative instruments is $5 million classified as assets.
Schedule of change in unrealized net capital gains and losses
The change in unrealized net capital gains and losses for the nine months ended September 30, 2017 is as follows:
($ in millions)
 

Fixed income securities
$
234

Equity securities
174

Derivative instruments
(4
)
EMA limited partnerships
2

Total
406

Amounts recognized for:
 

Insurance reserves
—

DAC and DSI
(55
)
Amounts recognized
(55
)
Deferred income taxes
(123
)
Increase in unrealized net capital gains and losses, after-tax
$
228
Summary of gross unrealized losses and fair value of fixed income and equity securities by length of time
The following table summarizes the gross unrealized losses and fair value of fixed income and equity securities by the length of time that individual securities have been in a continuous unrealized loss position.
 
($ in millions)
Less than 12 months
 
12 months or more
 
Total
unrealized
losses
 
 
Number
of issues
 
Fair
value
 
Unrealized
losses
 
Number
of issues
 
Fair
value
 
Unrealized
losses
 
 
 
September 30, 2017
 

 
 

 
 

 
 

 
 

 
 

 
 

 
Fixed income securities
 

 
 

 
 

 
 

 
 

 
 

 
 

 
U.S. government and agencies
13

 
$
146

 
$
(1
)
 
—

 
$
—

 
$
—

 
$
(1
)
 
Municipal
6

 
26

 
(1
)
 
1

 
10

 
(4
)
 
(5
)
 
Corporate
367

 
2,870

 
(43
)
 
24

 
187

 
(26
)
 
(69
)
 
ABS
25

 
140

 
(1
)
 
8

 
18

 
(6
)
 
(7
)
 
RMBS
50

 
2

 
—

 
43

 
27

 
(1
)
 
(1
)
 
CMBS
6

 
21

 
(2
)
 
3

 
14

 
(2
)
 
(4
)
 
Total fixed income securities
467

 
3,205

 
(48
)
 
79

 
256

 
(39
)
 
(87
)
 
Equity securities
94

 
109

 
(10
)
 
30

 
29

 
(6
)
 
(16
)
 
Total fixed income and equity securities
561

 
$
3,314

 
$
(58
)
 
109

 
$
285

 
$
(45
)
 
$
(103
)
 
Investment grade fixed income securities
399

 
$
2,991

 
$
(39
)
 
53

 
$
162

 
$
(24
)
 
$
(63
)
 
Below investment grade fixed income securities
68

 
214

 
(9
)
 
26

 
94

 
(15
)
 
(24
)
 
Total fixed income securities
467

 
$
3,205

 
$
(48
)
 
79

 
$
256

 
$
(39
)
 
$
(87
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2016
 

 
 

 
 

 
 

 
 

 
 

 
 

 
Fixed income securities
 

 
 

 
 

 
 

 
 

 
 

 
 

 
U.S. government and agencies
6

 
$
104

 
$
(2
)
 
—

 
$
—

 
$
—

 
$
(2
)
 
Municipal
8

 
44

 
(1
)
 
3

 
18

 
(6
)
 
(7
)
 
Corporate
629

 
4,767

 
(118
)
 
56

 
414

 
(51
)
 
(169
)
 
ABS
18

 
95

 
(1
)
 
13

 
76

 
(9
)
 
(10
)
 
RMBS
47

 
3

 
—

 
50

 
38

 
(3
)
 
(3
)
 
CMBS
12

 
57

 
(4
)
 
4

 
15

 
(5
)
 
(9
)
 
Redeemable preferred stock
1

 
—

 
—

 
—

 
—

 
—

 
—

 
Total fixed income securities
721

 
5,070

 
(126
)
 
126

 
561

 
(74
)
 
(200
)
 
Equity securities
167

 
200

 
(19
)
 
62

 
80

 
(16
)
 
(35
)
 
Total fixed income and equity securities
888

 
$
5,270

 
$
(145
)
 
188

 
$
641

 
$
(90
)
 
$
(235
)
 
Investment grade fixed income securities
559

 
$
4,348

 
$
(100
)
 
75

 
$
350

 
$
(47
)
 
$
(147
)
 
Below investment grade fixed income securities
162

 
722

 
(26
)
 
51

 
211

 
(27
)
 
(53
)
 
Total fixed income securities
721

 
$
5,070

 
$
(126
)
 
126

 
$
561

 
$
(74
)
 
$
(200
)
Summary of carrying value of non-impaired fixed and variable rate mortgage loans by debt service coverage ratio distribution
The following table reflects the carrying value of non-impaired fixed rate mortgage loans summarized by debt service coverage ratio distribution.
($ in millions)
September 30, 2017
 
December 31, 2016
Below 1.0
$
4

 
$
52

1.0 - 1.25
330

 
321

1.26 - 1.50
1,008

 
1,196

Above 1.50
2,378

 
2,364

Total non-impaired mortgage loans
$
3,720

 
$
3,933
Schedule of net carrying value of impaired mortgage loans
The net carrying value of impaired mortgage loans is as follows:
($ in millions)
September 30, 2017
 
December 31, 2016
Impaired mortgage loans with a valuation allowance
$
15

 
$
5

Impaired mortgage loans without a valuation allowance
—

 
—

Total impaired mortgage loans
$
15

 
$
5

Valuation allowance on impaired mortgage loans
$
4

 
$
3
Schedule of rollforward of the valuation allowance on impaired mortgage loans
The rollforward of the valuation allowance on impaired mortgage loans is as follows:
($ in millions)
Three months ended September 30,
 
Nine months ended September 30,
 
2017
 
2016
 
2017
 
2016
Beginning balance
$
3

 
$
3

 
$
3

 
$
3

Net increase in valuation allowance
1

 
—

 
1

 
—

Charge offs
—

 
—

 
—

 
—

Ending balance
$
4

 
$
3

 
$
4

 
$
3