INVESTMENT SECURITIES

3 Months Ended

Mar. 31, 2020

Investments, Debt and Equity Securities [Abstract]

NOTE 3. INVESTMENT SECURITIES

All of our debt securities are classified as available-for-sale and substantially all are investment-grade debt securities supporting obligations to annuitants and policyholders in our run-off insurance operations. Changes in fair value of our debt securities are recorded in other comprehensive income. Equity securities with readily determinable fair values are included within this caption and changes in their fair value are recorded in earnings.



	March 31, 2020									December 31, 2019
(In millions)	Amortized cost		Gross unrealized gains		Gross unrealized losses			Estimated fair value		Amortized cost		Gross unrealized gains		Gross unrealized losses			Estimated fair value

Debt
U.S. corporate	$	23,167	$	3,795	$	(493	)	$	26,470	$	23,037	$	4,636	$	(11	)	$	27,661
Non-U.S. corporate	2,155		150		(60		)	2,246		2,161		260		(1		)	2,420
State and municipal	3,090		638		(21		)	3,708		3,086		598		(15		)	3,669
Mortgage and asset-backed	3,296		51		(143		)	3,205		3,117		116		(4		)	3,229
Government and agencies	1,269		157		—			1,427		1,391		126		—			1,516
Equity	5,245		—		—			5,245		10,025		—		—			10,025
Total	$	38,223	$	4,792	$	(716	)	$	42,299	$	42,816	$	5,736	$	(31	)	$	48,521

The amortized cost of debt securities as of March 31, 2020 excludes accrued interest of $432 million, which is reported in Other GE Capital receivables.

The estimated fair values of investment securities at March 31, 2020 decreased since December 31, 2019, primarily due to the mark-to-market effects on our remaining interest in Baker Hughes, as well as an increase in market interest rates as a result of a significant widening in credit spreads, a significant decline in oil prices and a challenging liquidity environment. The fair value of remaining Baker Hughes interest and promissory note receivable was $4,083 million at March 31, 2020.

Gross unrealized losses of $(685) million and $(31) million are associated with debt securities with a fair value of $6,253 million and $173 million that have been in a loss position for less than 12 months and 12 months or more, respectively, at March 31, 2020. Gross unrealized losses of $(11) million and $(20) million are associated with debt securities with a fair value of $724 million and $274 million that have been in a loss position for less than 12 months and 12 months or more, respectively, at December 31, 2019.

At March 31, 2020, gross unrealized losses of $(716) million included $(493) million related to U.S. corporate securities and $(114) million related to commercial mortgage-backed securities (CMBS). Of the U.S. corporate securities in an unrealized loss position, $(313) million and $(57) million related to the energy and consumer industries, respectively. Substantially all of our CMBS in an unrealized loss position have received investment-grade credit ratings from the major rating agencies and are collateralized by pools of commercial mortgage loans on real estate.

With respect to our debt securities that are in an unrealized loss position at March 31, 2020, our current intention is to hold them at least until such time as their individual fair values exceed their amortized cost and based upon the long duration of our insurance liabilities, we have the ability to hold all such debt securities until their maturities. We assessed debt securities in an unrealized loss position for credit losses and recognized an allowance for credit losses on investment securities of $(24) million for the three months ending March 31, 2020. In addition to our qualitative and quantitative evaluation criteria, our credit loss assessment at March 31, 2020 considered the continuing market deterioration that resulted in the lack of liquidity and the historic levels of price volatility and credit spreads in the fixed income market. With respect to corporate bonds, we evaluated the credit quality of the issuers. With respect to CMBS, we evaluated the cash flows from the underlying collateral.

Net unrealized gains (losses) for equity securities with readily determinable fair values, which are recorded in Other income within continuing operations, were $(5,772) million and an insignificant amount for the three months ended March 31, 2020 and 2019, respectively. The amount recognized in the three months ended March 31, 2020 primarily included a loss of $(5,710) million related to our interest in Baker Hughes and $(85) million at GE Capital, predominantly from fixed income exchange traded funds supporting our insurance liabilities and annuity benefits.

Proceeds from debt and equity securities sales, early redemptions by issuers and principal payments on the Baker Hughes promissory note totaled $1,250 million and $1,421 million for the three months ended March 31, 2020 and 2019, respectively. Gross realized gains on investment securities were $46 million and $44 million and gross realized losses and impairments were $(17) million and $(39) million for the three months ended March 31, 2020 and 2019, respectively.

Contractual maturities of investments in debt securities (excluding mortgage and asset-backed securities) at March 31, 2020 are as follows:



(In millions)	Amortized cost		Estimated fair value

Due
Within one year	$	610	$	621
After one year through five years	2,328		2,400
After five years through ten years	6,616		7,226
After ten years	20,128		23,603

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

Substantially all our equity securities are classified within Level 1 and substantially all our debt securities are classified within Level 2 as their valuation is determined based on significant observable inputs. Investments with a fair value of $5,046 million and $5,210 million were classified within Level 3 as significant inputs to the valuation model are unobservable at March 31, 2020 and December 31, 2019, respectively. During the three months ended March 31, 2020 and 2019, there were no significant transfers into or out of Level 3.

In addition to the equity securities described above, we hold $429 million and $517 million of equity securities without readily determinable fair value at March 31, 2020 and December 31, 2019, respectively, that are classified within All other assets in our consolidated Statement of Financial Position. Fair value adjustments, including impairments, recorded in earnings were $(93) million and an insignificant amount for the three months ended March 31, 2020 and 2019, respectively.