INVESTMENTS

Fixed Maturities

The following tables provide information relating to fixed maturities classified as available-for-sale (“AFS”).

Available-for-Sale Securities by Classification



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		OTTI in AOCI (4)
	(in millions)
March 31, 2019:
Fixed Maturities:
Corporate (1)	$	30,106	$	867	$	208	$	30,765	$	—
U.S. Treasury, government and agency	12,719		462		213		12,968		—
States and political subdivisions	408		55		—		463		—
Foreign governments	478		27		7		498		—
Residential mortgage-backed (2)	185		10		—		195		—
Asset-backed (3)	608		1		4		605		2
Redeemable preferred stock	422		16		3		435		—
Total at March 31, 2019	$	44,926	$	1,438	$	435	$	45,929	$	2

December 31, 2018:
Fixed Maturities:
Corporate (1)	$	26,690	$	385	$	699	$	26,376	$	—
U.S. Treasury, government and agency	13,646		143		454		13,335		—
States and political subdivisions	408		47		1		454		—
Foreign governments	515		17		13		519		—
Residential mortgage-backed (2)	193		9		—		202		—
Asset-backed (3)	600		1		11		590		2
Redeemable preferred stock	440		16		17		439		—
Total at December 31, 2018	$	42,492	$	618	$	1,195	$	41,915	$	2

______________


(1)	Corporate fixed maturities include both public and private issues.


(2)	Includes publicly traded agency pass-through securities and collateralized obligations.


(3)	Includes credit-tranched securities collateralized by sub-prime mortgages and other asset types and credit tenant loans.


(4)	Amounts represent OTTI losses in AOCI, which were not included in Net income (loss).

The contractual maturities of AFS fixed maturities at March 31, 2019 are shown in the table below. Bonds not due at a single maturity date have been included in the table in the final year of maturity. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

Contractual Maturities of Available-for-Sale Fixed Maturities



	Amortized Cost		Fair Value
	(in millions)
March 31, 2019:
Due in one year or less	$	1,817	$	1,829
Due in years two through five	10,322		10,519
Due in years six through ten	14,953		15,367
Due after ten years	16,619		16,979
Subtotal	43,711		44,694
Residential mortgage-backed	185		195
Asset-backed	608		605
Redeemable preferred stock	422		435
Total at March 31, 2019	$	44,926	$	45,929

The following table shows proceeds from sales, gross gains (losses) from sales and OTTI for AFS fixed maturities during the three months ended March 31, 2019 and 2018:



	Three Months Ended March 31,
	2019			2018
	(in millions)
Proceeds from sales	$	1,361		$	3,428
Gross gains on sales	$	8		$	127
Gross losses on sales	$	(15	)	$	(41	)

Total OTTI	$	—		$	—
Non-credit losses recognized in OCI	—			—
Credit losses recognized in Net income (loss)	$	—		$	—

The following table sets forth the amount of credit loss impairments on AFS fixed maturities held by the Company at the dates indicated and the corresponding changes in such amounts:

Fixed Maturities - Credit Loss Impairments



	Three Months Ended March 31,
	2019			2018
	(in millions)
Balances at January 1,	$	(46	)	$	(10	)
Previously recognized impairments on securities that matured, paid, prepaid or sold	28			—
Recognized impairments on securities impaired to fair value this period (1)	—			—
Impairments recognized this period on securities not previously impaired	—			—
Additional impairments this period on securities previously impaired	—			—
Increases due to passage of time on previously recorded credit losses	—			—
Accretion of previously recognized impairments due to increases in expected cash flows	—			—
Balances at March 31,	$	(18	)	$	(10	)

______________


(1)	Represents circumstances where the Company determined in the current period that it intends to sell the security, or it is more likely than not that it will be required to sell the security before recovery of the security’s amortized cost.

Net unrealized investment gains (losses) on fixed maturities classified as AFS are included in the consolidated balance sheets as a component of AOCI. The table below presents these amounts as of the dates indicated:

Net Unrealized Gains (Losses) on Fixed Maturities Classified as AFS



	March 31, 2019		December 31, 2018
	(in millions)
Fixed maturities available-for-sale:
With OTTI loss	$	—	$	—
All other	1,003		(577		)
Net unrealized gains (losses)	$	1,003	$	(577	)

Changes in net unrealized investment gains (losses) recognized in AOCI include reclassification adjustments to reflect amounts realized in Net income (loss) for the current period that had been part of OCI in earlier periods. The tables that follow below present a roll-forward of net unrealized investment gains (losses) recognized in AOCI, split between amounts related to fixed maturities on which an OTTI loss has been recognized and all other:

Net Unrealized Gains (Losses) on Fixed Maturities with OTTI Losses



	Net Unrealized Gains (Losses) on Investments			DAC			Policyholders’ Liabilities			Deferred Income Tax Asset (Liability)			AOCI Gain (Loss) Related to Net Unrealized Investment Gains (Losses)
	(in millions)
Balances at January 1, 2019	$	—		$	—		$	—		$	—		$	—
Net investment gains (losses) arising during the period	(10		)	—			—			—			(10		)
Reclassification adjustment:
Included in Net income (loss)	10			—			—			—			10
Impact of net unrealized investment gains (losses) on:
DAC	—			—			—			—			—
Deferred income taxes	—			—			—			—			—
Policyholders’ liabilities	—			—			—			—			—
Balances at March 31, 2019	$	—		$	—		$	—		$	—		$	—

Balances at January 1, 2018	$	1		$	1		$	(1	)	$	(5	)	$	(4	)
Net investment gains (losses) arising during the period	—			—			—			—			—
Reclassification adjustment:
Included in Net income (loss)	(2		)	—			—			—			(2		)
Impact of net unrealized investment gains (losses) on:
DAC	—			(1		)	—			—			(1		)
Deferred income taxes	—			—			—			—			—
Policyholders’ liabilities	—			—			1			—			1
Balances at March 31, 2018	$	(1	)	$	—		$	—		$	(5	)	$	(6	)

All Other Net Unrealized Investment Gains (Losses) in AOCI



	Net Unrealized Gains (Losses) on Investments			DAC			Policyholders’ Liabilities			Deferred Income Tax Asset (Liability)			AOCI Gain (Loss) Related to Net Unrealized Investment Gains (Losses)
	(in millions)
Balances at January 1, 2019	$	(577	)	$	39		$	(55	)	$	125		$	(468	)
Net investment gains (losses) arising during the period	1,583			—			—			—			1,583
Reclassification adjustment:													—
Included in Net income (loss)	(3		)	—			—			—			(3		)
Impact of net unrealized investment gains (losses) on:
DAC	—			(655		)	—			—			(655		)
Deferred income taxes	—			—			—			(211		)	(211		)
Policyholders’ liabilities	—			—			77			—			77
Balances at March 31, 2019	$	1,003		$	(616	)	$	22		$	(86	)	$	323

Balances at January 1, 2018	$	1,526		$	(315	)	$	(232	)	$	(300	)	$	679
Net investment gains (losses) arising during the period	(1,245		)	—			—			—			(1,245		)
Reclassification adjustment:
Included in Net income (loss)	(88		)	—			—			—			(88		)
Impact of net unrealized investment gains (losses) on:
DAC	—			288			—			—			288
Deferred income taxes	—			—			—			197			197
Policyholders’ liabilities	—			—			108			—			108
Balances at March 31, 2018	$	193		$	(27	)	$	(124	)	$	(103	)	$	(61	)

The following tables disclose the fair values and gross unrealized losses of the 674 issues at March 31, 2019 and the 1,471 issues at December 31, 2018 of fixed maturities that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position for the specified periods at the dates indicated:



	Less Than 12 Months				12 Months or Longer				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	(in millions)
March 31, 2019:
Fixed Maturities:
Corporate	$	653	$	6	$	5,387	$	202	$	6,040	$	208
U.S. Treasury, government and agency	—		—		3,163		213		3,163		213
Foreign governments	—		—		67		7		67		7
Asset-backed	279		1		249		3		528		4
Redeemable preferred stock	44		1		35		2		79		3
Total at March 31, 2019	$	976	$	8	$	8,901	$	427	$	9,877	$	435

December 31, 2018:
Fixed Maturities:
Corporate	$	8,369	$	306	$	6,161	$	393	$	14,530	$	699
U.S. Treasury, government and agency	2,636		68		3,154		386		5,790		454
States and political subdivisions	—		—		19		1		19		1
Foreign governments	109		3		76		10		185		13
Residential mortgage-backed	—		—		13		—		13		—
Asset-backed	558		11		6		—		564		11
Redeemable preferred stock	160		12		31		5		191		17
Total at December 31, 2018	$	11,832	$	400	$	9,460	$	795	$	21,292	$	1,195

The Company’s investments in fixed maturities do not include concentrations of credit risk of any single issuer greater than 10% of the consolidated equity of the Company, other than securities of the U.S. government, U.S. government agencies, and certain securities guaranteed by the U.S. government. The Company maintains a diversified portfolio of corporate securities across industries and issuers and does not have exposure to any single issuer in excess of 0.7% of total investments. The largest exposures to a single issuer of corporate securities held at March 31, 2019 and December 31, 2018 were $218 million and $210 million, respectively, representing 1.8% and 1.7% of the consolidated equity of the Company

Corporate high yield securities, consisting primarily of public high yield bonds, are classified as other than investment grade by the various rating agencies, i.e., a rating below Baa3/BBB- or the National Association of Insurance Commissioners (“NAIC”) designation of 3 (medium investment grade), 4 or 5 (below investment grade) or 6 (in or near default). At March 31, 2019 and December 31, 2018, respectively, approximately $1,250 million and $1,228 million, or 2.8% and 2.9%, of the $44,926 million and $42,492 million aggregate amortized cost of fixed maturities held by the Company were considered to be other than investment grade. These securities had net unrealized losses of $5 million and $30 million at March 31, 2019 and December 31, 2018, respectively.

At March 31, 2019 and December 31, 2018, respectively, the $427 million and $795 million of gross unrealized losses of twelve months or more were concentrated in corporate and U.S. Treasury, government and agency securities. In accordance with the policy described in Note 2, the Company concluded that an adjustment to income for OTTI for the three months ended March 31, 2019 or 2018 for these securities was not warranted. At March 31, 2019 and December 31, 2018, the Company did not intend to sell the securities nor will it likely be required to dispose of the securities before the anticipated recovery of their remaining amortized cost basis.

At March 31, 2019 and December 31, 2018, the fair value of the Company’s trading account securities was $12,704 million and $15,166 million, respectively. At March 31, 2019 and December 31, 2018, trading account securities included the General Account’s investment in Separate Accounts which had carrying values of $50 million and $48 million, respectively.

Net unrealized and realized gains (losses) on trading account equity securities are included in Net investment income (loss) in the Consolidated Statements of Income (Loss). The table below shows a breakdown of Net investment income (loss) from trading account securities during the three months ended March 31, 2019 and 2018:

Net Investment Income (Loss) from Trading Account Securities



	Three Months Ended March 31,
	2019			2018
	(in millions)
Net investment gains (losses) recognized during the period on securities held at the end of the period	$	274		$	(96	)
Net investment gains (losses) recognized on securities sold during the period	(24		)	(1		)
Net investment gains (losses) on trading account securities arising during the period	250			(97		)
Interest and dividend income from trading account securities	90			66
Net investment income (loss) from trading account securities	$	340		$	(31	)

Mortgage Loans

The payment terms of mortgage loans may from time to time be restructured or modified.

At March 31, 2019 and December 31, 2018, the carrying values of problem commercial mortgage loans on real estate that had been classified as non-accrual loans were $0 and $19 million, respectively.

Valuation Allowances for Mortgage Loans:

The change in the valuation allowance for credit losses for commercial mortgage loans during the three months ended March 31, 2019 and 2018 are as follows:



	Three Months Ended March 31,
	2019			2018
	(in millions)
Allowance for credit losses:
Beginning balance, January 1,	$	7		$	8
Charge-offs	(7		)	—
Recoveries	—			(1		)
Provision	—			—
Ending balance, March 31,	$	—		$	7

March 31, Individually Evaluated for Impairment	$	—		$	7

There were no allowances for credit losses for agricultural mortgage loans for the three months ended March 31, 2019 and 2018.

The following tables provide information relating to the loan-to-value and debt service coverage ratios for commercial and agricultural mortgage loans at March 31, 2019 and December 31, 2018. The values used in these ratio calculations were developed as part of the periodic review of the commercial and agricultural mortgage loan portfolio, which includes an evaluation of the underlying collateral value.

Mortgage Loans by Loan-to-Value and Debt Service Coverage Ratios



	Debt Service Coverage Ratio (1)												Total Mortgage Loans
Loan-to-Value Ratio: (2)	Greater than 2.0x		1.8x to 2.0x		1.5x to 1.8x		1.2x to 1.5x		1.0x to 1.2x		Less than 1.0x		Total Mortgage Loans
	(in millions)
March 31, 2019:
Commercial Mortgage Loans
0% - 50%	$	764	$	21	$	215	$	24	$	—	$	—	$	1,024
50% - 70%	4,933		806		1,284		474		—		—		7,497
70% - 90%	266		—		117		334		132		—		849
90% plus	—		—		—		—		—		—		—
Total Commercial Mortgage Loans	$	5,963	$	827	$	1,616	$	832	$	132	$	—	$	9,370
Agricultural Mortgage Loans
0% - 50%	$	278	$	130	$	276	$	563	$	350	$	49	$	1,646
50% - 70%	119		70		248		357		237		34		1,065
70% - 90%	—		—		—		19		—		—		19
90% plus	—		—		—		—		—		—		—
Total Agricultural Mortgage Loans	$	397	$	200	$	524	$	939	$	587	$	83	$	2,730
Total Mortgage Loans
0% - 50%	$	1,042	$	151	$	491	$	587	$	350	$	49	$	2,670
50% - 70%	5,052		876		1,532		831		237		34		8,562
70% - 90%	266		—		117		353		132		—		868
90% plus	—		—		—		—		—		—		—
Total Mortgage Loans	$	6,360	$	1,027	$	2,140	$	1,771	$	719	$	83	$	12,100

December 31, 2018:
Commercial Mortgage Loans
0% - 50%	$	780	$	21	$	247	$	24	$	—	$	—	$	1,072
50% - 70%	4,908		656		1,146		325		151		—		7,186
70% - 90%	260		—		117		370		98		—		845
90% plus	—		—		—		27		—		—		27
Total Commercial Mortgage Loans	$	5,948	$	677	$	1,510	$	746	$	249	$	—	$	9,130
Agricultural Mortgage Loans
0% - 50%	$	282	$	147	$	267	$	543	$	321	$	51	$	1,611
50% - 70%	112		46		246		379		224		31		1,038
70% - 90%	—		—		—		19		27		—		46
90% plus	—		—		—		—		—		—		—
Total Agricultural Mortgage Loans	$	394	$	193	$	513	$	941	$	572	$	82	$	2,695
Total Mortgage Loans
0% - 50%	$	1,062	$	168	$	514	$	567	$	321	$	51	$	2,683
50% - 70%	5,020		702		1,392		704		375		31		8,224
70% - 90%	260		—		117		389		125		—		891
90% plus	—		—		—		27		—		—		27
Total Mortgage Loans	$	6,342	$	870	$	2,023	$	1,687	$	821	$	82	$	11,825

______________


(1)	The debt service coverage ratio is calculated using the most recently reported operating income results from property operations divided by annual debt service.


(2)	The loan-to-value ratio is derived from current loan balance divided by the fair market value of the property. The fair market value of the underlying commercial properties is updated annually.

The following table provides information relating to the aging analysis of past due mortgage loans at March 31, 2019 and December 31, 2018.

Age Analysis of Past Due Mortgage Loans



	30-59 Days		60-89 Days		90 Days or More		Total		Current		Total Financing Receivables		Recorded Investment 90 Days or More and Accruing
							(in millions)
March 31, 2019
Commercial	$	—	$	—	$	—	$	—	$	9,370	$	9,370	$	—
Agricultural	9		26		55		90		2,640		2,730		54
Total Mortgage Loans	$	9	$	26	$	55	$	90	$	12,010	$	12,100	$	54

December 31, 2018
Commercial	$	—	$	—	$	27	$	27	$	9,103	$	9,130	$	—
Agricultural	18		8		42		68		2,627		2,695		40
Total Mortgage Loans	$	18	$	8	$	69	$	95	$	11,730	$	11,825	$	40

The following table provides information relating to impaired mortgage loans at March 31, 2019 and December 31, 2018.

Impaired Mortgage Loans



	Recorded Investment		Unpaid Principal Balance		Related Allowance			Average Recorded Investment (1)		Interest Income Recognized
	(in millions)
March 31, 2019:
With no related allowance recorded:
Agricultural mortgage loans	$	2	$	2	$	—		$	2	$	—
Total	$	2	$	2	$	—		$	2	$	—
With related allowance recorded:
Commercial mortgage loans - other	$	—	$	—	$	—		$	13	$	—
Total	$	—	$	—	$	—		$	13	$	—

December 31, 2018:
With no related allowance recorded:
Agricultural mortgage loans	$	2	$	2	$	—		$	—	$	—
Total	$	2	$	2	$	—		$	—	$	—
With related allowance recorded:
Commercial mortgage loans - other	$	27	$	31	$	(7	)	$	27	$	—
Total	$	27	$	31	$	(7	)	$	27	$	—

______________


(1)	Represents a two-quarter and five-quarter average of recorded amortized cost at March 31, 2019 and December 31, 2018, respectively.