NOTE 3. INVESTMENT SECURITIES

Substantially all of our investment securities are classified as available-for-sale and comprise mainly investment-grade debt securities supporting obligations to annuitants and policyholders in our run-off insurance operations. We do not have any securities classified as held-to-maturity.



	June 30, 2018									December 31, 2017
(In millions)	Amortized cost		Gross unrealized gains		Gross unrealized losses			Estimated fair value(a)		Amortized cost		Gross unrealized gains		Gross unrealized losses			Estimated fair value(a)

Debt
U.S. corporate	$	22,052	$	2,537	$	(235	)	$	24,354	$	20,104	$	3,775	$	(35	)	$	23,843
Non-U.S. corporate	2,827		63		(37		)	2,852		5,455		86		(13		)	5,528
State and municipal	3,653		393		(56		)	3,990		3,775		534		(40		)	4,269
Mortgage and asset-backed	3,260		50		(66		)	3,244		2,820		81		(23		)	2,878
Government and agencies	1,576		64		(27		)	1,612		1,927		75		(2		)	2,000
Equity (b)	559		—		—			559		166		12		—			178
Total	$	33,926	$	3,107	$	(422	)	$	36,611	$	34,246	$	4,564	$	(114	)	$	38,696


(a)	Included $928 million and $569 million of investment securities held by GE at June 30, 2018 and December 31, 2017, respectively, of which $524 million and $141 million are equity securities with readily determinable fair value.

(b)

These securities have readily determinable fair values and subsequent to the adoption of ASU 2016-01 on January 1, 2018, changes in fair value are recorded to earnings. Net unrealized gains (losses) recorded to earnings related to these securities were $293 million and $29 million for the three months ended and $276 million and $29 million for the six months ended June 30, 2018 and 2017, respectively.

Investments with a fair value of $4,268 million and $4,413 million were classified within Level 3 (significant inputs to the valuation model are unobservable) at June 30, 2018 and December 31, 2017, respectively. The remaining investments are substantially all classified within Level 2 (determined based on significant observable inputs). During the six months ended June 30, 2018 and 2017, there were no significant transfers into or out of Level 3.

In addition to equity securities with readily determinable fair value, we hold $594 million of equity securities without readily determinable fair value at June 30, 2018 that are classified within "All other assets" in our Statement of Financial Position and are recorded at cost less impairment and adjusted for observable price changes for identical or similar instruments. We recorded fair value increases of $35 million and $43 million to those securities based on observable transactions and impairments of $10 million and $15 million for the three and six months ended June 30, 2018, respectively.



ESTIMATED FAIR VALUE AND GROSS UNREALIZED LOSSES OF AVAILABLE-FOR-SALE DEBT SECURITIES
	In loss position for
	Less than 12 months					12 months or more
(In millions)	Estimated fair value		Gross unrealized losses			Estimated fair value		Gross unrealized losses

June 30, 2018
U.S. corporate	$	5,536	$	(170	)	$	566	$	(65	)
Non-U.S. corporate	1,043		(33		)	1,282		(5		)
State and municipal	317		(6		)	282		(50		)
Mortgage and asset-backed	1,826		(47		)	384		(19		)
Government and agencies	488		(26		)	109		(1		)
Total	$	9,210	$	(282	)	$	2,623	$	(140	)

December 31, 2017
U.S. corporate	$	502	$	(6	)	$	605	$	(30	)
Non-U.S. corporate	1,169		(4		)	3,685		(10		)
State and municipal	48		(1		)	272		(39		)
Mortgage and asset-backed	979		(11		)	318		(12		)
Government and agencies	395		(2		)	69		—
Total	$	3,093	$	(23	)	$	4,949	$	(91	)

Unrealized losses are not indicative of the amount of credit loss that would be recognized and at June 30, 2018 are primarily due to increases in market yields subsequent to our purchase of the securities. We presently do not intend to sell the vast majority of our debt securities that are in an unrealized loss position and believe that it is not more likely than not that we will be required to sell the vast majority of these securities before anticipated recovery of our amortized cost. The methodologies and significant inputs used to measure the amount of credit loss for our debt securities during 2018 have not changed.

Total pre-tax, other-than-temporary impairments on debt securities recognized in earnings were an insignificant amount for the three and six months ended June 30, 2018 and 2017.



CONTRACTUAL MATURITIES OF INVESTMENT IN AVAILABLE-FOR-SALE DEBT SECURITIES
(EXCLUDING MORTGAGE AND ASSET-BACKED SECURITIES)

(In millions)	Amortized cost		Estimated fair value

Due
Within one year	$	1,903	$	1,910
After one year through five years	3,098		3,192
After five years through ten years	6,268		6,673
After ten years	18,900		21,105

We expect actual maturities to differ from contractual maturities because borrowers have the right to call or prepay certain obligations.

Although we generally do not have the intent to sell any specific securities at the end of the period, in the ordinary course of managing our investment securities portfolio, we may sell securities prior to their maturities for a variety of reasons, including diversification, credit quality, yield and liquidity requirements and the funding of claims and obligations to policyholders. Gross realized gains on available-for-sale debt securities were $9 million and $14 million, and gross realized losses were $(3) million and $(2) million in the three months ended June 30, 2018 and 2017, respectively. Gross realized gains on available-for-sale debt securities were $22 million and $109 million, and gross realized losses were $(3) million and $(3) million in the six months ended June 30, 2018 and 2017, respectively.

Proceeds from investment securities sales and early redemptions by issuers totaled $385 million and $701 million in the three months ended June 30, 2018 and 2017, respectively primarily from sales of U.S. Corporate, state and municipal securities and mortgage and asset backed securities and $706 million and $1,774 million in the six months ended June 30, 2018 and 2017, respectively primarily from sales of U.S. Corporate, mortgage and asset backed securities and state and municipal securities.