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INVESTMENTS
 9 Months Ended
Sep. 30, 2020
Investments, Debt and Equity Securities [Abstract]  
INVESTMENTS INVESTMENTS
Fixed Maturities Available-for-Sale
Accounting for credit impairments of fixed maturities classified as AFS has changed from a direct write-down, or other-than-temporary impairment (“OTTI”) approach to an allowance for credit loss model starting in 2020 upon adoption of CECL (see Note 2, Significant Accounting Policies – Investments).
The components of fair value and amortized cost for fixed maturities classified as AFS on the consolidated balance sheets excludes accrued interest receivable because the Company elected to present accrued interest receivable within Other assets. Accrued interest receivable on AFS fixed maturities at September 30, 2020 was $510 million.
There was no accrued interest written off for AFS fixed maturities for the three and nine months ended September 30, 2020.
Comparative tables as of December 31, 2019 include OTTI, reported net of tax in OCI and in AOCI until realized.
The following tables provide information relating to the Company’s fixed maturities classified as AFS.
AFS Fixed Maturities by Classification
Amortized
Cost
Allowance for Credit Losses (4)
Gross
Unrealized
Gains		Gross
Unrealized
Losses
Fair Value
(in millions)
September 30, 2020:
Fixed Maturities:
Corporate (1)$47,421 $13 $4,281 $170 $51,519 
U.S. Treasury, government and agency13,126 — 4,158 — 17,284 
States and political subdivisions706 — 109 — 815 
Foreign governments828 — 80 6 902 
Residential mortgage-backed (2)132 — 13 — 145 
Asset-backed (3)2,584 — 25 18 2,591 
Commercial mortgage-backed1,067 — 50 — 1,117 
Redeemable preferred stock413 — 31 3 441 
Total at September 30, 2020$66,277 $13 $8,747 $197 $74,814 
December 31, 2019:
Fixed Maturities:
Corporate (1)$42,347 $— $2,178 $61 $44,464 
U.S. Treasury, government and agency14,385 — 1,151 305 15,231 
States and political subdivisions584 — 68 3 649 
Foreign governments460 — 35 5 490 
Residential mortgage-backed (2)161 — 12 — 173 
Asset-backed (3)843 — 3 2 844 
Redeemable preferred stock498 — 18 5 511 
Total at December 31, 2019$59,278 $— $3,465 $381 $62,362 
______________
(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 the allowance for credit losses for 2020 - (see Note 2 Significant Accounting Policies - Investments).
The contractual maturities of AFS fixed maturities at September 30, 2020 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 AFS Fixed Maturities
Amortized Cost (Less Allowance for Credit Losses)
Fair Value
 (in millions)
September 30, 2020:
Contractual maturities:
Due in one year or less$4,094 $4,126 
Due in years two through five14,862 15,722 
Due in years six through ten16,872 18,691 
Due after ten years26,240 31,981 
Subtotal62,068 70,520 
Residential mortgage-backed132 145 
Asset-backed2,584 2,591 
Commercial mortgage-backed1,067 1,117 
Redeemable preferred stock413 441 
Total at September 30, 2020$66,264 $74,814 

The following table shows proceeds from sales, gross gains (losses) from sales and credit losses for AFS fixed maturities for the three and nine months ended September 30, 2020 and 2019:
Proceeds from Sales, Gross Gains (Losses) from Sales and Credit Losses for AFS Fixed Maturities
 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
 (in millions)
Proceeds from sales$1,399 $3,839 $5,985 $6,756 
Gross gains on sales$23 $207 $297 $224 
Gross losses on sales$(5)$(4)$(32)$(25)
Credit losses (1)$— $— $(13)$— 
______________
(1)Commencing with the Company’s adoption of ASU 2016-13 on January 1, 2020, credit losses on AFS debt securities were recognized as an allowance for credit losses. Prior to this, credit losses on AFS fixed maturities were recognized as OTTI.
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.
AFS Fixed Maturities - Credit Loss Impairments
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
(in millions)
Balance, beginning of period$28 $18 $15 $46 
Previously recognized impairments on securities that matured, paid, prepaid or sold— (3)— (31)
Recognized impairments on securities impaired to fair value this period (1)— — — — 
Credit losses recognized this period on securities for which credit losses were not previously recognized(2)— 7 — 
Additional credit losses this period on securities previously impaired2 — 6 — 
Increases due to passage of time on previously recorded credit losses— — — — 
Accretion of previously recognized impairments due to increases in expected cash flows (for OTTI securities 2019 and prior)— — — — 
Balance at September 30,$28 $15 $28 $15 
______________
(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.
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 a credit loss has been recognized, and all other.
Net Unrealized Gains (Losses) on AFS Fixed Maturities
Net Unrealized Gains (Losses) on InvestmentsDAC  Policyholders’ LiabilitiesDeferred Income Tax Asset (Liability)AOCI Gain (Loss) Related to Net Unrealized Investment Gains (Losses) 
(in millions)
Balance, July 1, 2020$8,207 $(494)$(1,801)$(1,242)$4,670 
Net investment gains (losses) arising during the period345 — — — 345 
Reclassification adjustment:— 
Included in Net income (loss)(18)— — — (18)
Excluded from Net income (loss)— — — — — 
Impact of net unrealized investment gains (losses)— 54 (6)(79)(31)
Net unrealized investment gains (losses) excluding credit losses8,534 (440)(1,807)(1,321)4,966 
Net unrealized investment gains (losses) with credit losses3 — (1)— 2 
Balance, September 30, 2020$8,537 $(440)$(1,808)$(1,321)$4,968 
Balance, July 1, 2019$2,622 $(616)$(98)$(420)$1,488 
Net investment gains (losses) arising during the period1,548 — — — 1,548 
Reclassification adjustment:— 
Included in Net income (loss)(201)— — — (201)
Excluded from Net income (loss)— — — — — 
Impact of net unrealized investment gains (losses)— (324)(122)(156)(602)
Net unrealized investment gains (losses) excluding credit losses3,969 (940)(220)(576)2,233 
Net unrealized investment gains (losses) with credit losses (1)1 — — — 1 
Balance, September 30, 2019$3,970 $(940)$(220)$(576)$2,234 
Net Unrealized Gains (Losses) on Investments
DAC  Policyholders’ LiabilitiesDeferred Income Tax Asset (Liability)AOCI Gain (Loss) Related to Net Unrealized Investment Gains (Losses) 
(in millions)
Balance, January 1, 2020$3,084 $(826)$(192)$(433)$1,633 
Net investment gains (losses) arising during the period5,707 — — — 5,707 
Reclassification adjustment:— 
Included in Net income (loss)(248)— — — (248)
Excluded from Net income (loss)— — — — — 
Impact of net unrealized investment gains (losses)— 386 (1,617)(889)(2,120)
Net unrealized investment gains (losses) excluding credit losses8,543 (440)(1,809)(1,322)4,972 
Net unrealized investment gains (losses) with credit losses(6)— 1 1 (4)
Balance, September 30, 2020$8,537 $(440)$(1,808)$(1,321)$4,968 
Balance, January 1, 2019$(577)$37 $(69)$125 $(484)
Net investment gains (losses) arising during the period4,754 — — — 4,754 
Reclassification adjustment:
Included in Net income (loss)(208)— — — (208)
Excluded from Net income (loss)— — — — — 
Impact of net unrealized investment gains (losses)— (977)(151)(701)(1,829)
Net unrealized investment gains (losses) excluding credit losses3,969 (940)(220)(576)2,233 
Net unrealized investment gains (losses) with credit losses (1)1 — — — 1 
Balance, September 30, 2019$3,970 $(940)$(220)$(576)$2,234 
______________
(1)Credit losses for 2019 were OTTI losses.
The following tables disclose the fair values and gross unrealized losses of the 709 issues at September 30, 2020 and the 390 issues at December 31, 2019 that are not deemed to have credit losses, 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:
AFS Fixed Maturities in an Unrealized Loss Position for Which No Allowance Is Recorded
 
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)
September 30, 2020:
Fixed Maturities:
Corporate$4,063 $116 $365 $49 $4,428 $165 
Foreign governments88 1 31 5 119 6 
Asset-backed1,324 16 74 2 1,398 18 
Redeemable preferred stock59 1 11 2 70 3 
Total at September 30, 2020$5,534 $134 $481 $58 $6,015 $192 
December 31, 2019: (1)
 
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)
Fixed Maturities:
Corporate$2,669 $41 $366 $20 $3,035 $61 
U.S. Treasury, government and agency4,245 305 2 — 4,247 305 
States and political subdivisions123 3 — — 123 3 
Foreign governments11 — 47 5 58 5 
Asset-backed319 — 201 2 520 2 
Redeemable preferred stock29 — 49 5 78 5 
Total at December 31, 2019$7,396 $349 $665 $32 $8,061 $381 
______________
(1)Amounts represents fixed maturities in an unrealized loss position that are not deemed to be OTTI for 2019.
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 September 30, 2020 and December 31, 2019 were $321 million and $279 million, respectively, representing 2.2% and 2.4% 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 September 30, 2020 and December 31, 2019, respectively, approximately $2.0 billion and $1.4 billion, or 3.0% and 2.3%, of the $66.3 billion and $59.3 billion aggregate amortized cost of fixed maturities held by the Company were considered to be other than investment grade. These securities had gross unrealized losses of $81 million and $21 million at September 30, 2020 and December 31, 2019, respectively.
At September 30, 2020 and December 31, 2019, respectively, the $58 million and $32 million of gross unrealized losses of twelve months or more were primarily concentrated in corporate securities, as applicable. In accordance with the policy described in Note 2, the Company concluded that an adjustment to income for OTTI (prior to January 1, 2020) nor an allowance for credit losses (after January 1, 2020) for these securities was not warranted at either September 30, 2020 or December 31, 2019. At September 30, 2020 and December 31, 2019, 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.
Based on the Company’s evaluation both qualitatively and quantitatively of the drivers of the decline in fair value of fixed maturity securities as of September 30, 2020, the Company determined that the unrealized loss was primarily due to increases in credit spreads and changes in credit ratings due to the impact of the COVID-19 pandemic on financial markets and assessments of fundamental risks.
Mortgage Loans on Real Estate
Accrued interest receivable on commercial and agricultural mortgage loans at September 30, 2020 was $29 million and $32 million, respectively. There was no accrued interest written off for commercial and agricultural mortgage loans for the three and nine months ended September 30, 2020.
At September 30, 2020, the Company had no loans for which foreclosure was probable included within the individually assessed mortgage loans, and accordingly had no associated allowance for credit losses.
Allowance for Credit Losses on Mortgage Loans
The change in the allowance for credit losses for commercial mortgage loans and agricultural mortgage loans during the three and nine months ended September 30, 2020 was as follows:
Three Months Ended September 30, 2020Nine Months Ended September 30, 2020
(in millions)
Allowance for credit losses on mortgage loans (1):
Commercial mortgages:
Balance, beginning of period$62 $33 
Current-period provision for expected credit losses4 33 
Write-offs charged against the allowance— — 
Recoveries of amounts previously written off— — 
Net change in allowance4 33 
Ending Balance, September 30,$66 $66 
Agricultural mortgages:
Balance, beginning of period$4 $3 
Current-period provision for expected credit losses— 1 
Write-offs charged against the allowance— — 
Recoveries of amounts previously written off— — 
Net change in allowance— 1 
Ending Balance, September 30,$4 $4 
Total allowance for credit losses$70 $70 
____________
(1)    See Note 2 for discussion of the allowance of credit losses transition balance, which is included in the Balance, beginning of period.
The change in the allowance for credit losses is attributable to:
•increases/decreases in the loan balance due to new originations, maturing mortgages, and loan amortization;
•changes in credit quality; and
•changes in market assumptions primarily related to COVID-19 driven economic changes.
Credit Quality Information
The following tables summarize the Company’s mortgage loans segregated by risk rating exposure at September 30, 2020.
LTV Ratios (1)
At September 30, 2020
Amortized Cost Basis by Origination Year
20202019201820172016
Prior
Total
(in millions)
Mortgage loans:
Commercial:
0% - 50%$— $— $— $324 $170 $650 $1,144 
50% - 70%935 411 885 760 2,432 1,608 7,031 
70% - 90%90 394 368 115 153 574 1,694 
90% plus— — 12 5 — 216 233 
Total commercial$1,025 $805 $1,265 $1,204 $2,755 $3,048 $10,102 
At September 30, 2020
Amortized Cost Basis by Origination Year
20202019201820172016
Prior
Total
(in millions)
Agricultural:
0% - 50%$181 $137 $168 $161 $232 $679 $1,558 
50% - 70%253 131 172 110 136 372 1,174 
70% - 90%— — 3 — — 18 21 
90% plus— — — — — — — 
Total agricultural$434 $268 $343 $271 $368 $1,069 $2,753 
Total mortgage loans:
0% - 50%$181 $137 $168 $485 $402 $1,329 $2,702 
50% - 70%1,188 542 1,057 870 2,568 1,980 8,205 
70% - 90%90 394 371 115 153 592 1,715 
90% plus— — 12 5 — 216 233 
Total mortgage loans$1,459 $1,073 $1,608 $1,475 $3,123 $4,117 $12,855 

Debt Service Coverage Ratios (2)
At September 30, 2020
Amortized Cost Basis by Origination Year
20202019201820172016
Prior
Total
(in millions)
Mortgage loans:
Commercial:
Greater than 2.0x$749 $492 $772 $268 $2,036 $1,268 $5,585 
1.8x to 2.0x227 77 118 378 184 524 1,508 
1.5x to 1.8x49 138 186 480 437 569 1,859 
1.2x to 1.5x— 56 154 78 97 533 918 
1.0x to 1.2x— 42 35 — 1 82 160 
Less than 1.0x— — — — — 72 72 
Total commercial$1,025 $805 $1,265 $1,204 $2,755 $3,048 $10,102 
Agricultural
Greater than 2.0x$52 $27 $39 $38 $73 $158 $387 
1.8x to 2.0x33 36 14 15 21 90 209 
1.5x to 1.8x103 38 45 41 52 212 491 
1.2x to 1.5x165 118 146 105 147 327 1,008 
1.0x to 1.2x77 39 91 71 57 265 600 
Less than 1.0x4 10 8 1 18 17 58 
Total agricultural$434 $268 $343 $271 $368 $1,069 $2,753 
Total mortgage loans
Greater than 2.0x$801 $519 $811 $306 $2,109 $1,426 $5,972 
1.8x to 2.0x260 113 132 393 205 614 1,717 
1.5x to 1.8x152 176 231 521 489 781 2,350 
1.2x to 1.5x165 174 300 183 244 860 1,926 
1.0x to 1.2x77 81 126 71 58 347 760 
Less than 1.0x4 10 8 1 18 89 130 
Total mortgage loans$1,459 $1,073 $1,608 $1,475 $3,123 $4,117 $12,855 
_____________
(1)The LTV ratio is derived from current loan balance divided by the fair value of the property. The fair value of the underlying commercial properties is updated annually for each mortgage loan.
(2)The DSC ratio is calculated using the most recently reported operating income results from property operations divided by annual debt service.
The following tables provide information relating to the LTV and DSC ratios for commercial and agricultural mortgage loans at September 30, 2020 and December 31, 2019. 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 LTV and DSC Ratios
 
DSC Ratio (2) (3)
LTV Ratio (1) (3):
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
 
(in millions)
September 30, 2020:
Mortgage loans:
Commercial:
0% - 50%$935 $— $185 $24 $— $— $1,144 
50% - 70%3,992 1,160 1,342 511 26 — 7,031 
70% - 90%574 348 332 306 134 — 1,694 
90% plus84 — — 77 — 72 233 
Total commercial$5,585 $1,508 $1,859 $918 $160 $72 $10,102 
Agricultural:
0% - 50%$283 $107 $271 $529 $335 $33 $1,558 
50% - 70%104 100 220 460 265 25 1,174 
70% - 90%— 2 — 19 — — 21 
90% plus— — — — — — — 
Total agricultural$387 $209 $491 $1,008 $600 $58 $2,753 
Total mortgage loans:
0% - 50%$1,218 $107 $456 $553 $335 $33 $2,702 
50% - 70%4,096 1,260 1,562 971 291 25 8,205 
70% - 90%574 350 332 325 134 — 1,715 
90% plus84 — — 77 — 72 233 
Total mortgage loans$5,972 $1,717 $2,350 $1,926 $760 $130 $12,855 
December 31, 2019:
Mortgage loans:
Commercial:
0% - 50%$887 $38 $214 $24 $— $— $1,163 
50% - 70%4,097 1,195 1,118 795 242 — 7,447 
70% - 90%251 98 214 154 46 — 763 
90% plus— — — — — — — 
Total commercial$5,235 $1,331 $1,546 $973 $288 $— $9,373 
 
DSC Ratio (2) (3)
LTV Ratio (1) (3):
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
 
(in millions)
Agricultural:
0% - 50%$322 $104 $241 $545 $321 $50 $1,583 
50% - 70%82 87 236 426 251 33 1,115 
70% - 90%— — — 19 — — 19 
90% plus— — — — — — — 
Total agricultural$404 $191 $477 $990 $572 $83 $2,717 
Total mortgage loans:
0% - 50%$1,209 $142 $455 $569 $321 $50 $2,746 
50% - 70%4,179 1,282 1,354 1,221 493 33 8,562 
70% - 90%251 98 214 173 46 — 782 
90% plus— — — — — — — 
Total mortgage loans$5,639 $1,522 $2,023 $1,963 $860 $83 $12,090 
______________
(1)The LTV ratio is derived from current loan balance divided by the fair value of the property. The fair value of the underlying commercial properties is updated annually for each mortgage loan.
(2)The DSC ratio is calculated using the most recently reported operating income results from property operations divided by annual debt service.
(3)Amounts presented at amortized cost basis.
Past-Due and Nonaccrual Mortgage Loan Status
The following table provides information relating to the aging analysis of past-due mortgage loans at September 30, 2020 and December 31, 2019, respectively:
Age Analysis of Past Due Mortgage Loans (1)
Accruing Loans
Non-accruing Loans
Total Loans
Non-accruing Loans with No AllowanceInterest Income on Non-accruing Loans(2)
Past Due
Current
Total
30-59 Days
60-89
Days
90
Days
or  More
Total
(in millions)
September 30, 2020:
Mortgage loans:
Commercial$— $— $— $— $10,102 $10,102 $— $10,102 $— $— 
Agricultural24 6 135 165 2,588 2,753 — 2,753 — — 
Total$24 $6 $135 $165 $12,690 $12,855 $— $12,855 $— $— 
December 31, 2019:
Mortgage loans:
Commercial$— $— $— $— $9,373 $9,373 $— $9,373 $— $— 
Agricultural57 1 66 124 2,593 2,717 — 2,717 — — 
Total$57 $1 $66 $124 $11,966 $12,090 $— $12,090 $— $— 
_______________
(1)Amounts presented at amortized cost basis.
(2) Amounts for 2020 represent results for both the three and nine months ended September 30, 2020.
At September 30, 2020 and December 31, 2019, the carrying values of problem mortgage loans that had been classified as non-accrual loans were $0 million and $0 million, respectively.
Troubled Debt Restructuring
For the nine months ended September 30, 2020, the Company had one commercial mortgage loan on real estate accounted for as a TDR with a pre-modification cost basis of $75 million and post-modification carrying value of $75 million. The one commercial mortgage loan TDR is 0.07% of the Company’s total invested assets. For the nine months ended September 30, 2020, the Company had six new privately negotiated fixed maturity TDRs with a pre-modification cost basis of $50 million and post-modification carrying value of $44 million. These TDRs did not have subsequent payment defaults nor additional commitments to lend. The six privately negotiated fixed maturity TDRs are 0.04% of the Company’s total invested assets. There were no mortgage loan on real estate or fixed maturities accounted for as a TDR during 2019.
Trading Securities
At September 30, 2020 and December 31, 2019, respectively, the fair value of the Company’s trading securities was $5.8 billion and $6.6 billion. At September 30, 2020 and December 31, 2019, respectively, trading securities included the General Account’s investment in Separate Accounts, which had carrying values of $37 million and $58 million.
The table below shows a breakdown of Net investment income (loss) from trading securities during the three and nine months ended September 30, 2020 and 2019:
Net Investment Income (Loss) from Trading Securities
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
(in millions)
Net investment gains (losses) recognized during the period on securities held at the end of the period$(1)$7 $86 $431 
Net investment gains (losses) recognized on securities sold during the period(5)13 12 (10)
Unrealized and realized gains (losses) on trading securities(6)20 98 421 
Interest and dividend income from trading securities58 59 152 220 
Net investment income (loss) from trading securities$52 $79 $250 $641