INVESTMENT SECURITIES

9 Months Ended

Sep. 30, 2022

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 supporting obligations to annuitants and policyholders in our run-off insurance operations. On November 1, 2021, we received 111.5 million ordinary shares of AerCap (approximately 46% ownership interest) and an AerCap senior note as partial consideration in conjunction with the GECAS transaction, for which we have adopted the fair value option. Our investment in Baker Hughes (BKR) comprises 33.1 million shares (approximately 3% ownership interest) at September 30, 2022. Both our AerCap and BKR investments are recorded as Equity securities with readily determinable fair values. Investment securities held within insurance entities are classified as non-current as they support the long-duration insurance liabilities.


	September 30, 2022								December 31, 2021
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value		Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
Equity and note (AerCap)	$	—	$	—	$	—	$	5,602	$	—	$	—	$	—	$	8,287
Equity (Baker Hughes)	—		—		—		695		—		—		—		4,010
Current investment securities	$	—	$	—	$	—	$	6,297	$	—	$	—	$	—	$	12,297
Debt
U.S. corporate	$	26,038	$	483	$	(2,571)	$	23,950	$	25,182	$	5,502	$	(33)	$	30,652
Non-U.S. corporate	2,455		12		(366)		2,101		2,361		343		(4)		2,701
State and municipal	2,741		67		(236)		2,572		2,639		573		(6)		3,205
Mortgage and asset-backed	3,978		20		(288)		3,710		3,950		117		(47)		4,019
Government and agencies	1,087		34		(142)		979		1,086		104		(2)		1,188
Other equity	311		—		—		311		443		—		—		443
Non-current investment securities	$	36,611	$	615	$	(3,602)	$	33,624	$	35,662	$	6,639	$	(92)	$	42,209

The amortized cost of debt securities excludes accrued interest of $454 million and $415 million at September 30, 2022 and December 31, 2021, respectively, which is reported in All other current assets.

The estimated fair value of investment securities at September 30, 2022 decreased since December 31, 2021, primarily due to higher market yields and widening credit spreads, BKR share sales, and the mark-to-market effect on our equity interest in AerCap, partially offset by new insurance investments and the mark-to-market effect on our equity interest in BKR.

Total estimated fair value of debt securities in an unrealized loss position were $22,173 million and $3,446 million, of which $1,679 million and $644 million had gross unrealized losses of $(380) million and $(42) million and had been in a loss position for 12 months or more at September 30, 2022 and December 31, 2021, respectively. Gross unrealized losses of $(3,602) million at September 30, 2022 included $(2,571) million related to U.S. corporate securities, $(162) million related to commercial mortgage-backed securities (CMBS) collateralized by pools of commercial mortgage loans on real estate, and $(118) million related to Asset-backed securities. The majority of our U.S. corporate securities' gross unrealized losses were in the consumer, technology, electric and energy industries. The majority of our CMBS and Asset-backed securities in an unrealized loss position have received investment-grade credit ratings from the major rating agencies. For our securities in an unrealized loss position, the losses are not indicative of credit losses, we currently do not intend to sell the investments, and it is not likely that we will be required to sell the investments before recovery of their amortized cost basis.

Net unrealized gains (losses) for equity securities with readily determinable fair values, which are recorded in Other income (loss) within continuing operations, were $(139) million and $405 million for the three months ended and $(1,989) million and $1,051 million for the nine months ended September 30, 2022 and 2021, respectively.

Proceeds from debt and equity securities sales, early redemptions by issuers and principal payments on the BKR promissory note totaled $693 million and $1,745 million for the three months ended and $6,116 million and $4,695 million for the nine months ended September 30, 2022 and 2021, respectively. Gross realized gains on debt securities were an insignificant amount and $16 million for the three months ended and $34 million and $59 million for the nine months ended September 30, 2022 and 2021, respectively. Gross realized losses and impairments on debt securities were $(14) million and an insignificant amount for the three months ended and $(29) million and $(10) million for the nine months ended September 30, 2022 and 2021, respectively.

Contractual maturities of our debt securities (excluding mortgage and asset-backed securities) at September 30, 2022 are as follows:


	Amortized cost		Estimated fair value
Within one year	$	339	$	367
After one year through five years	4,201		4,133
After five years through ten years	5,916		5,786
After ten years	21,866		19,317

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

The majority of our equity securities are classified within Level 1 and the majority of our debt securities are classified within Level 2, as their valuation is determined based on significant observable inputs. Investments with a fair value of $5,954 million and $7,222 million are classified within Level 3, as significant inputs to their valuation models are unobservable at September 30, 2022 and December 31, 2021, respectively. During the nine months ended September 30, 2022 and 2021, there were no significant transfers into or out of Level 3.

In addition to the equity securities described above, we hold $728 million and $441 million of equity securities without readily determinable fair values at September 30, 2022 and December 31, 2021, respectively, that are classified within non-current All other assets in our Statement of Financial Position. Fair value adjustments, including impairments, recorded in earnings were insignificant for both the three months ended September 30, 2022 and 2021, and $20 million and $34 million for the nine months ended September 30, 2022 and 2021, respectively.