INVESTMENT SECURITIES

6 Months Ended

Jun. 30, 2020

Investments, Debt and Equity Securities [Abstract]

INVESTMENT SECURITIES

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.

	June 30, 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	$	23,540	$	5,771	$	(136	)	$	29,175	$	23,037	$	4,636	$	(11	)	$	27,661
Non-U.S. corporate	2,185		337		(5		)	2,517		2,161		260		(1		)	2,420
State and municipal	3,235		826		(22		)	4,039		3,086		598		(15		)	3,669
Mortgage and asset-backed	3,497		97		(136		)	3,458		3,117		116		(4		)	3,229
Government and agencies	1,257		206		—			1,463		1,391		126		—			1,516
Equity	6,465		—		—			6,465		10,025		—		—			10,025
Total	$	40,179	$	7,237	$	(300	)	$	47,117	$	42,816	$	5,736	$	(31	)	$	48,521

The amortized cost of debt securities as of June 30, 2020, excludes accrued interest of $413 million, which is reported in Other GE Capital receivables.

The estimated fair values of investment securities at June 30, 2020 decreased since December 31, 2019, primarily due to the mark-to-market effects on our remaining interest in BKR, partially offset by a decrease in market yields and new investments in our insurance business. The fair value of the remaining BKR interest and promissory note receivable was $5,910 million at June 30, 2020.

Gross unrealized losses of $(271) million and $(29) million are associated with debt securities with a fair value of $3,066 million and $168 million that have been in a loss position for less than 12 months and 12 months or more, respectively, at June 30, 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 June 30, 2020, gross unrealized losses of $(300) million included $(136) million related to U.S. corporate securities, primarily in the energy industry, and $(113) million related to commercial mortgage-backed securities (CMBS). 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.

Net unrealized gains (losses) for equity securities with readily determinable fair values, which are recorded in Other income within continuing operations, were $1,929 million and $(51) million for the three months ended and $(3,843) million and $(42) million for the six months ended June 30, 2020 and 2019, respectively. The amount recognized in the six months ended June 30, 2020 primarily included a loss of $3,865 million related to our interest in BKR.

Proceeds from debt and equity securities sales, early redemptions by issuers and principal payments on the BKR promissory note totaled $1,450 million and $2,913 million for the three months ended and $2,705 million and $4,334 million for the six months ended June 30, 2020 and 2019, respectively. Gross realized gains on investment securities were $82 million and $32 million for the three months ended and $128 million and $76 million for the six months ended June 30, 2020 and 2019, respectively. Gross realized losses and impairments were $(69) million and $(67) million for the three months ended and $(85) million and $(105) million for the six months ended June 30, 2020 and 2019, respectively.

Contractual maturities of investments in debt securities (excluding mortgage and asset-backed securities) at June 30, 2020 are due as follows:

(In millions)	Amortized cost		Estimated fair value
Within one year	$	643	$	657
After one year through five years	2,483		2,676
After five years through ten years	6,516		7,599
After ten years	20,575		26,261

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 $5,453 million and $5,210 million are classified within Level 3, as significant inputs to the valuation model are unobservable at June 30, 2020 and December 31, 2019, respectively. During the six months ended June 30, 2020 and 2019, there were no significant transfers into or out of Level 3.

In addition to the equity securities described above, we hold $288 million and $517 million of equity securities without readily determinable fair value at June 30, 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 $(65) million and $29 million for the three months ended and $(159) million and $23 million for the six months ended June 30, 2020 and 2019, respectively.