XML 27 R17.htm IDEA: XBRL DOCUMENT v3.19.2
Investments (Tables)
 6 Months Ended
Jun. 30, 2019
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
June 30, 2019
 

 
 

 
 

 
 

U.S. government and agencies
$
558

 
$
39

 
$
—

 
$
597

Municipal
1,757

 
275

 
(3
)
 
2,029

Corporate
17,520

 
1,001

 
(46
)
 
18,475

Foreign government
155

 
9

 
—

 
164

Asset-backed securities (“ABS”)
347

 
7

 
(3
)
 
351

Residential mortgage-backed securities (“RMBS”)
133

 
47

 
—

 
180

Commercial mortgage-backed securities (“CMBS”)
29

 
7

 
(3
)
 
33

Redeemable preferred stock
13

 
1

 
—

 
14

Total fixed income securities
$
20,512

 
$
1,386

 
$
(55
)
 
$
21,843

 
 
 
 
 
 
 
 
December 31, 2018
 

 
 

 
 

 
 

U.S. government and agencies
$
740

 
$
33

 
$
—

 
$
773

Municipal
1,997

 
202

 
(4
)
 
2,195

Corporate
17,521

 
433

 
(381
)
 
17,573

Foreign government
170

 
9

 
—

 
179

ABS
429

 
3

 
(3
)
 
429

RMBS
154

 
44

 
(1
)
 
197

CMBS
33

 
7

 
—

 
40

Redeemable preferred stock
13

 
1

 
—

 
14

Total fixed income securities
$
21,057

 
$
732

 
$
(389
)
 
$
21,400
Schedule for fixed income securities based on contractual maturities
The scheduled maturities for fixed income securities are as follows:
($ in millions)
As of June 30, 2019
Amortized cost
 
Fair value
Due in one year or less
$
1,251

 
$
1,267

Due after one year through five years
7,969

 
8,265

Due after five years through ten years
7,113

 
7,499

Due after ten years
3,670

 
4,248

 
20,003

 
21,279

ABS, RMBS and CMBS
509

 
564

Total
$
20,512

 
$
21,843
Schedule of net investment income
Net investment income is as follows:
($ in millions)
Three months ended June 30,
 
Six months ended June 30,
 
2019
 
2018
 
2019
 
2018
Fixed income securities
$
241

 
$
247

 
$
486

 
$
498

Mortgage loans
46

 
53

 
92

 
97

Equity securities
14

 
16

 
20

 
23

Limited partnership interests
102

 
92

 
105

 
188

Short-term investments
8

 
5

 
16

 
9

Policy loans
8

 
8

 
16

 
15

Other
24

 
23

 
46

 
45

Investment income, before expense
443

 
444

 
781

 
875

Investment expense
(26
)
 
(25
)
 
(53
)
 
(49
)
Net investment income
$
417

 
$
419

 
$
728

 
$
826
Schedule of realized capital gains and losses by asset type
Realized capital gains (losses) by asset type are as follows:
($ in millions)
Three months ended June 30,
 
Six months ended June 30,
 
2019
 
2018
 
2019
 
2018
Fixed income securities
$
4

 
$
(12
)
 
$
(2
)
 
$
(18
)
Mortgage loans
—

 
2

 
—

 
2

Equity securities
39

 
20

 
185

 
(6
)
Limited partnership interests
—

 
(11
)
 
10

 
(8
)
Derivatives
4

 
10

 
8

 
7

Other
(1
)
 
(1
)
 
(7
)
 
(1
)
Realized capital gains (losses)
$
46

 
$
8

 
$
194

 
$
(24
)
Schedule of realized capital gains and losses by transaction type
Realized capital gains (losses) by transaction type are as follows:
($ in millions)
Three months ended June 30,
 
Six months ended June 30,
 
2019
 
2018
 
2019
 
2018
Impairment write-downs
$
(5
)
 
$
(2
)
 
$
(12
)
 
$
(3
)
Sales
6

 
(7
)
 
—

 
(12
)
Valuation of equity investments (1)

41

 
10

 
198

 
(13
)
Valuation and settlements of derivative instruments
4

 
7

 
8

 
4

Realized capital gains (losses)
$
46

 
$
8

 
$
194

 
$
(24
)
_______________
 
(1) 
Includes valuation of equity securities and certain limited partnership interests where the underlying assets are predominately public equity securities.
Realized gain (loss) on investments
The following table presents the net pre-tax appreciation (decline) during 2019 and 2018 of equity securities and limited partnership interests carried at fair value still held as of June 30, 2019 and June 30, 2018 recognized in net income.
($ in millions)
Three months ended June 30,
 
Six months ended June 30,
 
2019
 
2018
 
2019
 
2018
Equity securities
$
46

 
$
20

 
$
163

 
$
14

Limited partnership interests carried at fair value
38

 
11

 
19

 
49

Total
$
84

 
$
31

 
$
182

 
$
63
Schedule of other-than-temporary impairment losses by asset type
OTTI losses by asset type are as follows:
 
Three months ended
 
Three months ended
($ in millions)
June 30, 2019
 
June 30, 2018
 
Gross
 
Included
in OCI
 
Net
 
Gross
 
Included
in OCI
 
Net
Fixed income securities:
 

 
 

 
 

 
 

 
 

 
 

Corporate
$
(1
)
 
$
(1
)
 
$
(2
)
 
$
—

 
$
—

 
$
—

ABS
(1
)
 
—

 
(1
)
 
—

 
—

 
—

RMBS
—

 
—

 
—

 
(1
)
 
—

 
(1
)
CMBS
(2
)
 
2

 
—

 
—

 
—

 
—

Total fixed income securities
(4
)
 
1

 
(3
)
 
(1
)
 
—

 
(1
)
Limited partnership interests
(1
)
 
—

 
(1
)
 
—

 
—

 
—

Other
(1
)
 
—

 
(1
)
 
(1
)
 
—

 
(1
)
OTTI losses
$
(6
)
 
$
1

 
$
(5
)
 
$
(2
)
 
$
—

 
$
(2
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Six months ended
 
Six months ended
 
June 30, 2019
 
June 30, 2018
 
Gross
 
Included
in OCI
 
Net
 
Gross
 
Included
in OCI
 
Net
Fixed income securities:
 

 
 

 
 

 
 

 
 

 
 

Corporate
$
(1
)
 
$
(1
)
 
$
(2
)
 
$
—

 
$
—

 
$
—

ABS
(1
)
 
—

 
(1
)
 
—

 
—

 
—

RMBS
—

 
—

 
—

 
(1
)
 
—

 
(1
)
CMBS
(2
)
 
2

 
—

 
—

 
(1
)
 
(1
)
Total fixed income securities
(4
)
 
1

 
(3
)
 
(1
)
 
(1
)
 
(2
)
Limited partnership interests
(2
)
 
—

 
(2
)
 
—

 
—

 
—

Other
(7
)
 
—

 
(7
)
 
(1
)
 
—

 
(1
)
OTTI losses
$
(13
)
 
$
1

 
$
(12
)
 
$
(2
)
 
$
(1
)
 
$
(3
)
 
Schedule of other-than-temporary impairment losses on fixed income securities included in accumulated other comprehensive income
The total amount of OTTI losses included in AOCI at the time of impairment for fixed income securities, which were not included in earnings, are presented in the following table. The amounts exclude $103 million and $101 million as of June 30, 2019 and December 31, 2018, respectively, of net unrealized gains related to changes in valuation of the fixed income securities subsequent to the impairment measurement date.
($ in millions)
June 30, 2019
 
December 31, 2018
Municipal
$
(4
)
 
$
(4
)
Corporate
—

 
(1
)
ABS
(5
)
 
(5
)
RMBS
(29
)
 
(32
)
CMBS
(4
)
 
(2
)
Total
$
(42
)
 
$
(44
)
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 June 30,
 
Six months ended June 30,
 
2019
 
2018
 
2019
 
2018
Beginning balance
$
(121
)
 
$
(128
)
 
$
(123
)
 
$
(138
)
Additional credit loss for securities previously other-than-temporarily impaired
(3
)
 
(1
)
 
(3
)
 
(2
)
Reduction in credit loss for securities disposed or collected
2

 
5

 
4

 
16

Ending balance
$
(122
)
 
$
(124
)
 
$
(122
)
 
$
(124
)
Schedule of unrealized net capital gains and losses included in accumulated other comprehensive income
Unrealized net capital gains and losses included in AOCI are as follows:
($ in millions)
Fair value
 
Gross unrealized
 
Unrealized net gains (losses)
June 30, 2019
 
Gains
 
Losses
 
Fixed income securities
$
21,843

 
$
1,386

 
$
(55
)
 
$
1,331

Short-term investments
1,217

 
—

 
—

 
—

Equity method of accounting (“EMA”) limited partnerships (1)
 

 
 

 
 

 
(1
)
Unrealized net capital gains and losses, pre-tax
 

 
 

 
 

 
1,330

Amounts recognized for:
 

 
 

 
 

 
 

Insurance reserves (2)
 

 
 

 
 

 
(178
)
DAC and DSI (3)
 

 
 

 
 

 
(191
)
Amounts recognized
 

 
 

 
 

 
(369
)
Deferred income taxes
 

 
 

 
 

 
(202
)
Unrealized net capital gains and losses, after-tax
 

 
 

 
 

 
$
759

_______________
(1) 
Unrealized net capital gains and losses for limited partnership interests represent the Company’s share of EMA limited partnerships’ OCI. Fair value and gross unrealized gains and losses are not applicable.
(2) 
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 lower interest rates, resulting in a premium deficiency. This adjustment primarily relates to structured settlement annuities with life contingencies (a type of immediate fixed annuities).
(3) 
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, 2018
 
Gains
 
Losses
 
Fixed income securities
$
21,400

 
$
732

 
$
(389
)
 
$
343

Short-term investments
810

 
—

 
—

 
—

EMA limited partnerships
 

 
 

 
 

 
—

Unrealized net capital gains and losses, pre-tax
 

 
 

 
 

 
343

Amounts recognized for:
 

 
 

 
 

 
 

Insurance reserves
 

 
 

 
 

 
—

DAC and DSI
 

 
 

 
 

 
(35
)
Amounts recognized
 

 
 

 
 

 
(35
)
Deferred income taxes
 

 
 

 
 

 
(65
)
Unrealized net capital gains and losses, after-tax
 

 
 

 
 

 
$
243
Schedule of change in unrealized net capital gains and losses
The change in unrealized net capital gains and losses for the six months ended June 30, 2019 is as follows:
($ in millions)
 

Fixed income securities
$
988

EMA limited partnerships
(1
)
Total
987

Amounts recognized for:
 

Insurance reserves
(178
)
DAC and DSI
(156
)
Amounts recognized
(334
)
Deferred income taxes
(137
)
Increase in unrealized net capital gains and losses, after-tax
$
516
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 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
 
 
 
June 30, 2019
 

 
 

 
 

 
 

 
 

 
 

 
 

 
Fixed income securities
 

 
 

 
 

 
 

 
 

 
 

 
 

 
U.S. government and agencies
—

 
$
—

 
$
—

 
—

 
$
—

 
$
—

 
$
—

 
Municipal
—

 
—

 
—

 
1

 
13

 
(3
)
 
(3
)
 
Corporate
101

 
329

 
(7
)
 
175

 
1,278

 
(39
)
 
(46
)
 
ABS
7

 
28

 
(1
)
 
4

 
8

 
(2
)
 
(3
)
 
RMBS
31

 
5

 
—

 
31

 
4

 
—

 
—

 
CMBS
2

 
8

 
(3
)
 
1

 
—

 
—

 
(3
)
 
Redeemable preferred stock
1

 
—

 
—

 
—

 
—

 
—

 
—

 
Total fixed income securities
142

 
$
370

 
$
(11
)
 
212

 
$
1,303

 
$
(44
)
 
$
(55
)
 
Investment grade fixed income securities
63

 
$
133

 
$
(1
)
 
162

 
$
1,108

 
$
(31
)
 
$
(32
)
 
Below investment grade fixed income securities
79

 
237

 
(10
)
 
50

 
195

 
(13
)
 
(23
)
 
Total fixed income securities
142

 
$
370

 
$
(11
)
 
212

 
$
1,303

 
$
(44
)
 
$
(55
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2018
 

 
 

 
 

 
 

 
 

 
 

 
 

 
Fixed income securities
 

 
 

 
 

 
 

 
 

 
 

 
 

 
U.S. government and agencies
2

 
$
6

 
$
—

 
1

 
$
1

 
$
—

 
$
—

 
Municipal
38

 
98

 
(1
)
 
5

 
26

 
(3
)
 
(4
)
 
Corporate
1,260

 
6,799

 
(218
)
 
370

 
2,633

 
(163
)
 
(381
)
 
ABS
30

 
167

 
(1
)
 
11

 
31

 
(2
)
 
(3
)
 
RMBS
124

 
11

 
—

 
47

 
10

 
(1
)
 
(1
)
 
CMBS
3

 
7

 
—

 
2

 
—

 
—

 
—

 
Redeemable preferred stock
1

 
—

 
—

 
—

 
—

 
—

 
—

 
Total fixed income securities
1,458

 
$
7,088

 
$
(220
)
 
436

 
$
2,701

 
$
(169
)
 
$
(389
)
 
Investment grade fixed income securities
948

 
$
5,255

 
$
(121
)
 
388

 
$
2,551

 
$
(147
)
 
$
(268
)
 
Below investment grade fixed income securities
510

 
1,833

 
(99
)
 
48

 
150

 
(22
)
 
(121
)
 
Total fixed income securities
1,458

 
$
7,088

 
$
(220
)
 
436

 
$
2,701

 
$
(169
)
 
$
(389
)
Gross unrealized losses by unrealized loss position and credit quality
The following table summarizes gross unrealized losses by unrealized loss position and credit quality as of June 30, 2019.
($ in millions)
Investment grade
 
Below investment grade
 
Total
Fixed income securities with unrealized loss position less than 20% of amortized cost (1) (2)
$
(20
)
 
$
(19
)
 
$
(39
)
Fixed income securities with unrealized loss position greater than or equal to 20% of amortized cost (3) (4)
(12
)
 
(4
)
 
(16
)
Total unrealized losses
$
(32
)
 
$
(23
)
 
$
(55
)
_______________
(1) 
Below investment grade fixed income securities include $7 million that have been in an unrealized loss position for less than twelve months.
(2) 
Related to securities with an unrealized loss position less than 20% of amortized cost, the degree of which suggests that these securities do not pose a high risk of being other-than-temporarily impaired.
(3) 
Below investment grade fixed income securities include $1 million that have been in an unrealized loss position for a period of twelve or more consecutive months.
(4) 
Evaluated based on factors such as discounted cash flows and the financial condition and near-term and long-term prospects of the issue or issuer and were determined to have adequate resources to fulfill contractual obligations.
Summary of carrying value of non-impaired fixed and variable rate mortgage loans by debt service coverage ratio distribution
The following table reflects the carrying value of non-impaired mortgage loans summarized by debt service coverage ratio distribution.
($ in millions)
 
June 30, 2019
 
December 31, 2018
Debt service coverage ratio distribution
 
Fixed rate
mortgage
loans
 
Variable rate
mortgage
loans
 
Total
 
Fixed rate
mortgage
loans
 
Variable rate
mortgage
loans
 
Total
Below 1.0
 
$
2

 
$
15

 
$
17

 
$
6

 
$
15

 
$
21

1.0 - 1.25
 
187

 
—

 
187

 
221

 
—

 
221

1.26 - 1.50
 
1,193

 
—

 
1,193

 
1,048

 
—

 
1,048

Above 1.50
 
2,599

 
43

 
2,642

 
2,659

 
42

 
2,701

Total non-impaired mortgage loans
 
$
3,981

 
$
58

 
$
4,039

 
$
3,934

 
$
57

 
$
3,991
Schedule of rollforward of the valuation allowance on impaired mortgage loans
The net carrying value of impaired mortgage loans is as follows:
($ in millions)
June 30, 2019
 
December 31, 2018
Impaired mortgage loans with a valuation allowance
$
4

 
$
4

Impaired mortgage loans without a valuation allowance
—

 
—

Total impaired mortgage loans
$
4

 
$
4

Valuation allowance on impaired mortgage loans
$
3

 
$
3
Schedule of other investments, by type The following table summarizes other investments by asset type.
($ in millions)
 
June 30, 2019
 
December 31, 2018
Agent loans
 
$
654

 
$
620

Bank loans
 
370

 
422

Real estate
 
242

 
228

Derivatives and other
 
86

 
30

Total
 
$
1,352

 
$
1,300