INVESTMENTS

6 Months Ended

Jun. 30, 2019

Investments, Debt and Equity Securities [Abstract]

Investments

INVESTMENTS

Fixed Maturities

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

Available-for-Sale Fixed Maturities by Classification

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		OTTI in AOCI (4)
	(in millions)
June 30, 2019:
Fixed Maturities:
Corporate (1)	$	35,656	$	1,640	$	59	$	37,237	$	—
U.S. Treasury, government and agency	12,397		964		38		13,323		—
States and political subdivisions	452		68		—		520		—
Foreign governments	460		35		5		490		—
Residential mortgage-backed (2)	178		12		—		190		—
Asset-backed (3)	605		3		2		606		2
Redeemable preferred stock	413		10		4		419		—
Total at June 30, 2019	$	50,161	$	2,732	$	108	$	52,785	$	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 June 30, 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)
June 30, 2019:
Due in one year or less	$	2,456	$	2,475
Due in years two through five	12,962		13,305
Due in years six through ten	16,898		17,845
Due after ten years	16,649		17,945
Subtotal	48,965		51,570
Residential mortgage-backed	178		190
Asset-backed	605		606
Redeemable preferred stock	413		419
Total at June 30, 2019	$	50,161	$	52,785

The following table shows proceeds from sales, gross gains (losses) from sales for AFS fixed maturities during the three and six months ended June 30, 2019 and 2018:

Proceeds and Gains (Losses) on Sales for Available-for-Sale Fixed Maturities

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	(in millions)
Proceeds from sales	$	1,556		$	373		$	2,917		$	3,801
Gross gains on sales	$	9		$	7		$	17		$	134
Gross losses on sales	$	(6	)	$	(14	)	$	(21	)	$	(55	)

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:

Available-for-Sale Fixed Maturities - Credit Loss Impairments 

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	(in millions)
Balances, beginning of period	$	(18	)	$	(10	)	$	(46	)	$	(10	)
Previously recognized impairments on securities that matured, paid, prepaid or sold	—			1			28			1
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 June 30,	$	(18	)	$	(9	)	$	(18	)	$	(9	)

______________

(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.

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:

Net Unrealized Gains (Losses) on Available-for-Sale Fixed Maturities

	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 April 1, 2019	$	1,003		$	(616	)	$	22		$	(86	)	$	323
Net investment gains (losses) arising during the period	1,623			—			—			—			1,623
Reclassification adjustment:													—
Included in Net income (loss)	(4		)	—			—			—			(4		)
Excluded from Net income (loss) (1)	—			—			—			—			—
Impact of net unrealized investment gains (losses) on:
DAC	—			82			—			—			82
Deferred income taxes	—			—			—			(334		)	(334		)
Policyholders’ liabilities	—			—			(108		)	—			(108		)
Net unrealized investment gains (losses) excluding OTTI losses	2,622			(534		)	(86		)	(420		)	1,582
Net unrealized investment gains (losses) with OTTI losses	2			—			—			—			2
Balances at June 30, 2019	$	2,624		$	(534	)	$	(86	)	$	(420	)	$	1,584
Balances at April 1, 2018	$	193		$	(27	)	$	(124	)	$	(103	)	$	(61	)
Net investment gains (losses) arising during the period	(441		)	—			—			—			(441		)
Reclassification adjustment:
Included in Net income (loss)	3			—			—			—			3
Excluded from Net income (loss) (1)	—			—			—			—			—
Impact of net unrealized investment gains (losses) on:
DAC	—			38			—			—			38
Deferred income taxes	—			—			—			76			76
Policyholders’ liabilities	—			—			14			—			14
Net unrealized investment gains (losses) excluding OTTI losses	(245		)	11			(110		)	(27		)	(371		)
Net unrealized investment gains (losses) with OTTI losses	1			—			—			—			1
Balances at June 30, 2018	$	(244	)	$	11		$	(110	)	$	(27	)	$	(370	)

	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	3,206			—		—			—		3,206

	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)
Reclassification adjustment:													—
Included in Net income (loss)	(7		)	—			—			—			(7		)
Excluded from Net income (loss) (1)	—			—			—			—			—
Impact of net unrealized investment gains (losses) on:
DAC	—			(573		)	—			—			(573		)
Deferred income taxes	—			—			—			(545		)	(545		)
Policyholders’ liabilities	—			—			(31		)	—			(31		)
Net unrealized investment gains (losses) excluding OTTI losses	2,622			(534		)	(86		)	(420		)	1,582
Net unrealized investment gains (losses) with OTTI losses	2			—			—			—			2
Balances at June 30, 2019	$	2,624		$	(534	)	$	(86	)	$	(420	)	$	1,584
Balances at January 1, 2018	$	1,526		$	(315	)	$	(232	)	$	(300	)	$	679
Net investment gains (losses) arising during the period	(1,686		)	—			—			—			(1,686		)
Reclassification adjustment:
Included in Net income (loss)	(85		)	—			—			—			(85		)
Excluded from Net income (loss) (1)	—			—			—			—			—
Impact of net unrealized investment gains (losses) on:
DAC	—			326			—			—			326
Deferred income taxes	—			—			—			273			273
Policyholders’ liabilities	—			—			122			—			122
Net unrealized investment gains (losses) excluding OTTI losses	(245		)	11			(110		)	(27		)	(371		)
Net unrealized investment gains (losses) with OTTI losses	1			—			—			—			1
Balances at June 30, 2018	$	(244	)	$	11		$	(110	)	$	(27	)	$	(370	)

The following tables disclose the fair values and gross unrealized losses of the 301 securities at June 30, 2019 and the 1,471 securities 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:

Continuous Gross Unrealized for Available-for-Sale Fixed Maturities

	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)
June 30, 2019:
Fixed Maturities:
Corporate	$	350	$	3	$	1,697	$	56	$	2,047	$	59
U.S. Treasury, government and agency	—		—		2,224		38		2,224		38
States and political subdivisions	—		—		—		—		—		—
Foreign governments	2		—		47		5		49		5
Residential mortgage-backed	—		—		—		—		—		—
Asset-backed	227		1		152		1		379		2
Redeemable preferred stock	117		2		19		2		136		4
Total at June 30, 2019	$	696	$	6	$	4,139	$	102	$	4,835	$	108
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 0.6% of total corporate securities. The largest exposures to a single issuer of corporate securities held at June 30, 2019 and December 31, 2018 were $237 million and $210 million, respectively, representing 1.7% 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 June 30, 2019 and December 31, 2018, respectively, approximately $1,309 million and $1,228 million, or 2.6% and 2.9%, of the $50,161 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 unrealized gains (losses) of $1 million and $(30) million at June 30, 2019 and December 31, 2018, respectively.

At June 30, 2019 and December 31, 2018, respectively, the $102 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 these securities was not warranted at either June 30, 2019 or 2018. At June 30, 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 June 30, 2019 and December 31, 2018, the fair value of the Company’s trading account securities was $9,253 million and $15,166 million, respectively. At June 30, 2019 and December 31, 2018, trading account securities included the General Account’s investment in Separate Accounts which had carrying values of $53 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 and six months ended June 30, 2019 and 2018:

Net Investment Income (Loss) from Trading Account Securities

	Three Months Ended June 30,					Six Months Ended June 30,
	2019		2018			2019			2018
	(in millions)
Net investment gains (losses) recognized during the period on securities held at the end of the period	$	150	$	(99	)	$	424		$	(195	)
Net investment gains (losses) recognized on securities sold during the period	1		3			(23		)	2
Net investment gains (losses) on trading securities arising during the period	151		(96		)	401			(193		)
Interest and dividend income from trading securities	71		73			161			139
Net investment income (loss) from trading securities	$	222	$	(23	)	$	562		$	(54	)

Mortgage Loans

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

At June 30, 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.

Allowances for credit losses for commercial mortgage loans were $0 and $7 million for the six months ended June 30, 2019 and 2018, respectively. There were no allowances for credit losses for agricultural mortgage loans for the six months ended June 30, 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 June 30, 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
	(in millions)
June 30, 2019:
Commercial Mortgage Loans:
0% - 50%	$	766	$	21	$	215	$	24	$	—	$	—	$	1,026
50% - 70%	4,929		834		1,191		637		48		—		7,639
70% - 90%	359		—		71		248		136		—		814
90% plus	—		—		46		—		—		—		46
Total Commercial Mortgage Loans	$	6,054	$	855	$	1,523	$	909	$	184	$	—	$	9,525

	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
	(in millions)
Agricultural Mortgage Loans:
0% - 50%	$	287	$	114	$	264	$	555	$	333	$	47	$	1,600
50% - 70%	114		76		240		395		268		33		1,126
70% - 90%	—		—		—		19		—		—		19
90% plus	—		—		—		—		—		—		—
Total Agricultural Mortgage Loans	$	401	$	190	$	504	$	969	$	601	$	80	$	2,745
Total Mortgage Loans:
0% - 50%	$	1,053	$	135	$	479	$	579	$	333	$	47	$	2,626
50% - 70%	5,043		910		1,431		1,032		316		33		8,765
70% - 90%	359		—		71		267		136		—		833
90% plus	—		—		46		—		—		—		46
Total Mortgage Loans	$	6,455	$	1,045	$	2,027	$	1,878	$	785	$	80	$	12,270
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 most recent fair value estimate of the property. The fair 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 June 30, 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)
June 30, 2019:
Commercial	$	—	$	—	$	—	$	—	$	9,525	$	9,525	$	—
Agricultural	46		9		22		77		2,668		2,745		20
Total Mortgage Loans	$	46	$	9	$	22	$	77	$	12,193	$	12,270	$	20
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