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Investments (Tables)
 12 Months Ended
Dec. 31, 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 cost
 
Gross unrealized
 
Fair value
 
 
Gains
 
Losses
 
December 31, 2019
 

 
 

 
 

 
 

U.S. government and agencies
$
848

 
$
34

 
$
—

 
$
882

Municipal
1,483

 
279

 
(7
)
 
1,755

Corporate
17,301

 
1,170

 
(30
)
 
18,441

Foreign government
142

 
7

 
—

 
149

ABS
316

 
4

 
(3
)
 
317

MBS
127

 
55

 
(1
)
 
181

Total fixed income securities
$
20,217

 
$
1,549

 
$
(41
)
 
$
21,725

 
 
 
 
 
 
 
 
December 31, 2018
 

 
 

 
 

 
 

U.S. government and agencies
$
740

 
$
33

 
$
—

 
$
773

Municipal
1,997

 
202

 
(4
)
 
2,195

Corporate
17,534

 
434

 
(381
)
 
17,587

Foreign government
170

 
9

 
—

 
179

ABS
429

 
3

 
(3
)
 
429

MBS
187

 
51

 
(1
)
 
237

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 December 31, 2019
Amortized
cost
 
Fair
value
Due in one year or less
$
1,360

 
$
1,374

Due after one year through five years
7,690

 
7,994

Due after five years through ten years
7,455

 
7,955

Due after ten years
3,269

 
3,904

 
19,774

 
21,227

ABS and MBS
443

 
498

Total
$
20,217

 
$
21,725
Schedule of net investment income
Net investment income for the years ended December 31 is as follows:
($ in millions)
2019
 
2018
 
2017
Fixed income securities
$
963

 
$
991

 
$
1,058

Mortgage loans
190

 
188

 
182

Equity securities
29

 
39

 
48

Limited partnership interests
175

 
327

 
457

Short-term investments
31

 
21

 
9

Policy loans
34

 
31

 
31

Other
93

 
91

 
79

Investment income, before expense
1,515

 
1,688

 
1,864

Investment expense
(104
)
 
(103
)
 
(87
)
Net investment income
$
1,411

 
$
1,585

 
$
1,777
Schedule of realized capital gains and losses by asset type
Realized capital gains (losses) by asset type for the years ended December 31 are as follows:
($ in millions)
2019
 
2018
 
2017
Fixed income securities
$
25

 
$
(40
)
 
$
(6
)
Mortgage loans
—

 
2

 
1

Equity securities
276

 
(124
)
 
21

Limited partnership interests
43

 
(22
)
 
46

Derivatives
11

 
10

 
(16
)
Other
(14
)
 
(1
)
 
3

Realized capital gains (losses)
$
341

 
$
(175
)
 
$
49
Schedule of realized capital gains and losses by transaction type
Realized capital gains (losses) by transaction type for the years ended December 31 are as follows:
($ in millions)
2019
 
2018
 
2017
Impairment write-downs
$
(21
)
 
$
(9
)
 
$
(41
)
Change in intent write-downs
—

 
—

 
(4
)
Net OTTI losses recognized in earnings
(21
)
 
(9
)
 
(45
)
Sales
54

 
(27
)
 
110

Valuation of equity investments (1)
297

 
(146
)
 
—

Valuation and settlements of derivative instruments
11

 
7

 
(16
)
Realized capital gains (losses)
$
341

 
$
(175
)
 
$
49

_______________
(1) 
Includes valuation of equity securities and certain limited partnership interests where the underlying assets are predominately public equity securities.
Schedule of valuation changes
The following table presents the net pre-tax appreciation (decline) recognized in net income of equity securities and limited partnership interests carried at fair value that are still held as of December 31, 2019 and 2018, respectively.
 
For the years ended December 31,
($ in millions)
2019
 
2018
Equity securities
$
216

 
$
(78
)
Limited partnership interests carried at fair value
57

 
113

Total
$
273

 
$
35
Schedule of other-than-temporary impairment losses by asset type
OTTI losses by asset type for the years ended December 31 are as follows:
($ in millions)
2019
 
2018
 
2017
 
Gross
 
Included
in OCI
 
Net
 
Gross
 
Included
in OCI
 
Net
 
Gross
 
Included
in OCI
 
Net
Fixed income securities:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Municipal
$
(2
)
 
$
2

 
$
—

 
$
—

 
$
—

 
$
—

 
$
(1
)
 
$
—

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

 
(1
)
 
(7
)
 
3

 
(4
)
ABS
(1
)
 
—

 
(1
)
 
—

 
(1
)
 
(1
)
 
(1
)
 
(1
)
 
(2
)
MBS
(4
)
 
2

 
(2
)
 
(5
)
 
(1
)
 
(6
)
 
(9
)
 
(1
)
 
(10
)
Total fixed income securities
(8
)
 
3

 
(5
)
 
(6
)
 
(2
)
 
(8
)
 
(18
)
 
1

 
(17
)
Mortgage loans
—

 
—

 
—

 
—

 
—

 
—

 
(1
)
 
—

 
(1
)
Equity securities
—

 
—

 
—

 
—

 
—

 
—

 
(16
)
 
—

 
(16
)
Limited partnership interests
(2
)
 
—

 
(2
)
 
—

 
—

 
—

 
(9
)
 
—

 
(9
)
Other
(14
)
 
—

 
(14
)
 
(1
)
 
—

 
(1
)
 
(2
)
 
—

 
(2
)
OTTI losses
$
(24
)
 
$
3

 
$
(21
)
 
$
(7
)
 
$
(2
)
 
$
(9
)
 
$
(46
)
 
$
1

 
$
(45
)
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.
($ in millions)
December 31, 2019
 
December 31, 2018
Municipal
$
(6
)
 
$
(4
)
Corporate
—

 
(1
)
ABS
(4
)
 
(5
)
MBS
(30
)
 
(34
)
Total (1)
$
(40
)
 
$
(44
)
____________
(1) 
The amounts exclude $92 million and $101 million as of December 31, 2019 and 2018, respectively, of net unrealized gains related to changes in valuation of the fixed income securities subsequent to the impairment measurement date.
Schedule of rollforwards of the cumulative credit losses recognized in earnings for fixed income securities held
Rollforwards of the cumulative credit losses recognized in earnings for fixed income securities held as of December 31 are as follows:
($ in millions)
2019
 
2018
 
2017
Beginning balance
$
(123
)
 
$
(138
)
 
$
(176
)
Additional credit loss for securities previously other-than-temporarily impaired
(4
)
 
(7
)
 
(9
)
Additional credit loss for securities not previously other-than-temporarily impaired
(1
)
 
(1
)
 
(8
)
Reduction in credit loss for securities disposed or collected
25

 
22

 
54

Change in credit loss due to accretion of increase in cash flows
—

 
1

 
1

Ending balance 
$
(103
)
 
$
(123
)
 
$
(138
)
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)
December 31, 2019
 
Gains
 
Losses
 
Fixed income securities
$
21,725

 
$
1,549

 
$
(41
)
 
$
1,508

Short-term investments 
1,191

 
—

 
—

 
—

Derivative instruments
—

 
—

 
—

 
—

EMA limited partnerships (1)
 

 
 

 
 

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

 
 

 
 

 
1,506

Amounts recognized for:
 

 
 

 
 

 
 

Insurance reserves (2)
 

 
 

 
 

 
(126
)
DAC and DSI (3)
 

 
 

 
 

 
(213
)
Amounts recognized
 

 
 

 
 

 
(339
)
Deferred income taxes
 

 
 

 
 

 
(245
)
Unrealized net capital gains and losses, after-tax
 

 
 

 
 

 
$
922

 
 
 
 
 
 
 
 
December 31, 2018
 
 
 
 
 
 
 
Fixed income securities
$
21,400

 
$
732

 
$
(389
)
 
$
343

Short-term investments
810

 
—

 
—

 
—

Derivative instruments
—

 
—

 
—

 
—

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

____________
(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.
Schedule of change in unrealized net capital gains and losses
The change in unrealized net capital gains and losses for the years ended December 31 is as follows:
($ in millions)
2019
 
2018
 
2017
Fixed income securities
$
1,165

 
$
(914
)
 
$
147

Equity securities (1)
—

 
—

 
226

Derivative instruments
—

 
(2
)
 
(3
)
EMA limited partnerships
(2
)
 
(1
)
 
3

Total
1,163

 
(917
)
 
373

Amounts recognized for:
 

 
 

 
 

Insurance reserves
(126
)
 
315

 
(315
)
DAC and DSI
(178
)
 
154

 
(49
)
Amounts recognized
(304
)
 
469

 
(364
)
Deferred income taxes
(180
)
 
94

 
145

Increase (decrease) in unrealized net capital gains and losses, after-tax
$
679

 
$
(354
)
 
$
154

_______________
(1) 
Upon adoption of the recognition and measurement accounting standard on January 1, 2018, $308 million of pre-tax unrealized net capital gains for equity securities were reclassified from AOCI to retained income.
Summary of gross unrealized losses and fair value of fixed income and equity securities by length of time
The following table summarizes the gross unrealized losses and fair value of securities by the length of time that individual securities have been in a continuous unrealized loss position.
($ 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
 
 
 
 
 
 
 
 
December 31, 2019
 

 
 

 
 

 
 

 
 

 
 

 
 

Fixed income securities
 

 
 

 
 

 
 

 
 

 
 

 
 

U.S. government and agencies
6

 
$
74

 
$
—

 
—

 
$
—

 
$
—

 
$
—

Municipal
4

 
22

 
(5
)
 
1

 
14

 
(2
)
 
(7
)
Corporate
92

 
504

 
(8
)
 
43

 
237

 
(22
)
 
(30
)
ABS
22

 
61

 
(1
)
 
5

 
19

 
(2
)
 
(3
)
MBS
8

 
1

 
—

 
22

 
5

 
(1
)
 
(1
)
Total fixed income securities
132

 
$
662

 
$
(14
)
 
71

 
$
275

 
$
(27
)
 
$
(41
)
Investment grade fixed income securities
85

 
$
524

 
$
(3
)
 
39

 
$
152

 
$
(17
)
 
$
(20
)
Below investment grade fixed income securities
47

 
138

 
(11
)
 
32

 
123

 
(10
)
 
(21
)
Total fixed income securities
132

 
$
662

 
$
(14
)
 
71

 
$
275

 
$
(27
)
 
$
(41
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2018
 

 
 

 
 

 
 

 
 

 
 

 
 

Fixed income securities
 

 
 

 
 

 
 

 
 

 
 

 
 

U.S. government and agencies
2

 
$
6

 
$
—

 
1

 
$
1

 
$
—

 
$
—

Municipal
38

 
98

 
(1
)
 
5

 
26

 
(3
)
 
(4
)
Corporate
1,261

 
6,799

 
(218
)
 
370

 
2,633

 
(163
)
 
(381
)
ABS
30

 
167

 
(1
)
 
11

 
31

 
(2
)
 
(3
)
MBS
127

 
18

 
—

 
49

 
10

 
(1
)
 
(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
)

The following table summarizes gross unrealized losses by unrealized loss position and credit quality as of December 31, 2019.
($ in millions)
Investment
grade
 
Below investment grade
 
Total
Fixed income securities with unrealized loss position less than 20% of amortized cost (1) (2)
$
(7
)
 
$
(15
)
 
$
(22
)
Fixed income securities with unrealized loss position greater than or equal to 20% of amortized cost (3) (4)
(13
)
 
(6
)
 
(19
)
Total unrealized losses
$
(20
)
 
$
(21
)
 
$
(41
)
_______________
(1) 
Below investment grade fixed income securities include $6 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) 
No below investment grade fixed income securities 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.
Principal geographic distribution of commercial real estate represented in the mortgage portfolio
The following table shows the principal geographic distribution of commercial real estate represented in the Company’s mortgage loan portfolio. No other state represented more than 5% of the portfolio as of December 31.
(% of mortgage loan portfolio carrying value)
2019
 
2018
Texas
16.8
%
 
15.6
%
California
14.1

 
15.2

Illinois
8.0

 
8.5

Florida
6.7

 
6.4

New Jersey
6.0

 
7.2
Types of property collateralizing the mortgage loans
The types of properties collateralizing the mortgage loans as of December 31 are as follows:
(% of mortgage loan portfolio carrying value)
2019
 
2018
Apartment complex
35.6
%
 
33.5
%
Office buildings
22.4

 
23.9

Warehouse
16.2

 
15.9

Retail
14.3

 
15.0

Other
11.5

 
11.7

Total
100.0
%
 
100.0
%
Contractual maturities of the commercial mortgage loan portfolio
The contractual maturities of the mortgage loan portfolio as of December 31, 2019 are as follows:
($ in millions)
Number
of loans
 
Carrying
value
 
Percent
2020
9

 
$
52

 
1.3
%
2021
35

 
371

 
9.3

2022
24

 
336

 
8.4

2023
49

 
684

 
17.2

Thereafter
147

 
2,545

 
63.8

Total
264

 
$
3,988

 
100.0
%
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 as of December 31.
($ in millions)
2019
 
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
$
13

 
$
16

 
$
29

 
$
6

 
$
15

 
$
21

1.0 - 1.25
161

 
—

 
161

 
221

 
—

 
221

1.26 - 1.50
1,057

 
9

 
1,066

 
1,048

 
—

 
1,048

Above 1.50
2,696

 
28

 
2,724

 
2,659

 
42

 
2,701

Total non-impaired mortgage loans
$
3,927

 
$
53

 
$
3,980

 
$
3,934

 
$
57

 
$
3,991
Schedule of net carrying value of impaired mortgage loans
The net carrying value of impaired mortgage loans as of December 31 is as follows:
($ in millions)
2019
 
2018
Impaired mortgage loans with a valuation allowance
$
8

 
$
4

Impaired mortgage loans without a valuation allowance
—

 
—

Total impaired mortgage loans
$
8

 
$
4

Valuation allowance on impaired mortgage loans
$
3

 
$
3
Schedule of rollforward of the valuation allowance on impaired mortgage loans
The rollforward of the valuation allowance on impaired mortgage loans for the years ended December 31 is as follows:
($ in millions)
2019
 
2018
 
2017
Beginning balance
$
3

 
$
3

 
$
3

Net increase in valuation allowance
—

 
—

 
1

Charge offs
—

 
—

 
(1
)
Ending balance
$
3

 
$
3

 
$
3
Principal geographic distribution of municipal bond The following table shows the principal geographic distribution of municipal bond issuers represented in the Company’s portfolio as of December 31. No other state represents more than 5% of the portfolio.
(% of municipal bond portfolio carrying value)
2019
 
2018
Texas
17.8
%
 
17.6
%
California
15.0

 
15.0

Oregon
12.6

 
9.8

New York
7.0

 
5.7

New Jersey
6.7

 
5.0

Illinois
6.3

 
4.6
Schedule of other investments The following table summarizes other investments by asset type.
($ in millions)
 
December 31, 2019
 
December 31, 2018
Agent loans
 
$
666

 
$
620

Bank loans
 
344

 
422

Real estate
 
292

 
228

Derivatives and other
 
125

 
30

Total
 
$
1,427

 
$
1,300