Investments

12 Months Ended

Dec. 31, 2016

Investments, Debt and Equity Securities [Abstract]

Investments

8. Investments

See Note 10 for information about the fair value hierarchy for investments and the related valuation methodologies.

Investment Risks and Uncertainties

Investments are exposed to the following primary sources of risk: credit, interest rate, liquidity, market valuation, currency and real estate risk. The financial statement risks, stemming from such investment risks, are those associated with the determination of estimated fair values, the diminished ability to sell certain investments in times of strained market conditions, the recognition of impairments, the recognition of income on certain investments and the potential consolidation of VIEs. The use of different methodologies, assumptions and inputs relating to these financial statement risks may have a material effect on the amounts presented on the consolidated financial statements.

The determination of valuation allowances and impairments is highly subjective and is based upon periodic evaluations and assessments of known and inherent risks associated with the respective asset class. Such evaluations and assessments are revised as conditions change and new information becomes available.

The recognition of income on certain investments (e.g. structured securities, including mortgage-backed securities, ABS and certain structured investment transactions) is dependent upon certain factors such as prepayments and defaults, and changes in such factors could result in changes in amounts to be earned.

Fixed Maturity and Equity Securities AFS

Fixed Maturity and Equity Securities AFS by Sector

The following table presents the fixed maturity and equity securities AFS by sector. Redeemable preferred stock is reported within U.S. corporate and foreign corporate fixed maturity securities and non-redeemable preferred stock is reported within equity securities. Included within fixed maturity securities are structured securities including RMBS, commercial mortgage-backed securities (“CMBS”) and ABS (collectively, “Structured Securities”).

	December 31, 2016											December 31, 2015
	Cost or Amortized Cost		Gross Unrealized							Estimated Fair Value		Cost or Amortized Cost		Gross Unrealized							Estimated Fair Value
			Gains		Temporary Losses		OTTI Losses							Gains		Temporary Losses		OTTI Losses
										(In millions)
Fixed maturity securities:
U.S. corporate	$	17,583	$	1,158	$	235	$	—		$	18,506	$	16,160	$	979	$	393	$	—		$	16,746
U.S. government and agency	10,517		1,221		188		—			11,550		12,562		1,297		53		—			13,806
RMBS	6,722		194		101		—			6,815		8,391		201		95		19			8,478
Foreign corporate	5,512		201		158		—			5,555		4,995		153		194		—			4,954
State and political subdivision	2,633		305		24		—			2,914		2,398		321		13		1			2,705
CMBS (1)	2,837		26		26		(1		)	2,838		2,303		20		23		(1		)	2,301
ABS	2,562		11		12		—			2,561		2,694		14		34		—			2,674
Foreign government	946		111		11		—			1,046		651		104		10		—			745
Total fixed maturity securities	$	49,312	$	3,227	$	755	$	(1	)	$	51,785	$	50,154	$	3,089	$	815	$	19		$	52,409
Equity securities:
Non-redeemable preferred stock	$	180	$	6	$	9	$	—		$	177	$	217	$	16	$	9	$	—		$	224
Common stock	100		23		—		—			123		167		23		5		—			185
Total equity securities	$	280	$	29	$	9	$	—		$	300	$	384	$	39	$	14	$	—		$	409

______________

(1) The noncredit loss component of OTTI losses for CMBS was in an unrealized gain position of $1 million at both December 31, 2016and 2015, due to increases in estimated fair value subsequent to initial recognition of noncredit losses on such securities. See also “— Net Unrealized Investment Gains (Losses).”

The Company held non-income producing fixed maturity securities with an estimated fair value of $5 million and $11 million with unrealized gains (losses) of less than $1 million and $1 million at December 31, 2016 and 2015, respectively.

Methodology for Amortization of Premium and Accretion of Discount on Structured Securities

Amortization of premium and accretion of discount on Structured Securities considers the estimated timing and amount of prepayments of the underlying loans. Actual prepayment experience is periodically reviewed and effective yields are recalculated when differences arise between the originally anticipated and the actual prepayments received and currently anticipated. Prepayment assumptions for Structured Securities are estimated using inputs obtained from third-party specialists and based on management’s knowledge of the current market. For credit-sensitive Structured Securities and certain prepayment-sensitive securities, the effective yield is recalculated on a prospective basis. For all other Structured Securities, the effective yield is recalculated on a retrospective basis.

Maturities of Fixed Maturity Securities

The amortized cost and estimated fair value of fixed maturity securities, by contractual maturity date, were as follows at December 31, 2016:

	Due in One Year or Less		Due After One Year Through Five Years		Due After Five Years Through Ten Years		Due After Ten Years		Structured Securities		Total Fixed Maturity Securities
	(In millions)
Amortized cost	$	1,801	$	8,096	$	8,570	$	18,724	$	12,121	$	49,312
Estimated fair value	$	1,805	$	8,460	$	8,684	$	20,622	$	12,214	$	51,785

Actual maturities may differ from contractual maturities due to the exercise of call or prepayment options. Fixed maturity securities not due at a single maturity date have been presented in the year of final contractual maturity. Structured Securities are shown separately, as they are not due at a single maturity.

Continuous Gross Unrealized Losses for Fixed Maturity and Equity Securities AFS by Sector

The following table presents the estimated fair value and gross unrealized losses of fixed maturity and equity securities AFS in an unrealized loss position, aggregated by sector and by length of time that the securities have been in a continuous unrealized loss position at:

	December 31, 2016								December 31, 2015
	Less than 12 Months				Equal to or Greater than 12 Months				Less than 12 Months				Equal to or Greater than 12 Months
	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
	(Dollars in millions)
Fixed maturity securities:
U.S. corporate	$	3,525	$	145	$	625	$	90	$	4,569	$	278	$	571	$	115
U.S. government and agency	3,548		188		—		—		4,037		53		—		—
RMBS	2,642		69		811		32		4,305		73		495		41
Foreign corporate	1,231		60		532		98		1,650		96		605		98
State and political subdivision	548		21		29		3		373		12		19		2
CMBS	1,307		22		164		3		1,346		21		44		1
ABS	433		4		461		8		1,818		28		194		6
Foreign government	228		10		4		1		130		9		6		1
Total fixed maturity securities	$	13,462	$	519	$	2,626	$	235	$	18,228	$	570	$	1,934	$	264
Equity securities:
Non-redeemable preferred stock	$	57	$	2	$	40	$	7	$	25	$	1	$	40	$	8
Common stock	—		—		—		—		6		5		1		—
Total equity securities	$	57	$	2	$	40	$	7	$	31	$	6	$	41	$	8
Total number of securities in an unrealized loss position	1,388				468				1,850				394

Evaluation of AFS Securities for OTTI and Evaluating Temporarily Impaired AFS Securities

Evaluation and Measurement Methodologies

Management considers a wide range of factors about the security issuer and uses its best judgment in evaluating the cause of the decline in the estimated fair value of the security and in assessing the prospects for near-term recovery. Inherent in management’s evaluation of the security are assumptions and estimates about the operations of the issuer and its future earnings potential. Considerations used in the impairment evaluation process include, but are not limited to: (i) the length of time and the extent to which the estimated fair value has been below cost or amortized cost; (ii) the potential for impairments when the issuer is experiencing significant financial difficulties; (iii) the potential for impairments in an entire industry sector or sub-sector; (iv) the potential for impairments in certain economically depressed geographic locations; (v) the potential for impairments where the issuer, series of issuers or industry has suffered a catastrophic loss or has exhausted natural resources; (vi) with respect to fixed maturity securities, whether the Company has the intent to sell or will more likely than not be required to sell a particular security before the decline in estimated fair value below amortized cost recovers; (vii) with respect to Structured Securities, changes in forecasted cash flows after considering the quality of underlying collateral, expected prepayment speeds, current and forecasted loss severity, consideration of the payment terms of the underlying assets backing a particular security, and the payment priority within the tranche structure of the security; (viii) the potential for impairments due to weakening of foreign currencies on non-functional currency denominated fixed maturity securities that are near maturity; and (ix) other subjective factors, including concentrations and information obtained from regulators and rating agencies.

The methodology and significant inputs used to determine the amount of credit loss on fixed maturity securities are as follows: 

• The Company calculates the recovery value by performing a discounted cash flow analysis based on the present value of future cash flows. The discount rate is generally the effective interest rate of the security prior to impairment.

• When determining collectability and the period over which value is expected to recover, the Company applies considerations utilized in its overall impairment evaluation process which incorporates information regarding the specific security, fundamentals of the industry and geographic area in which the security issuer operates, and overall macroeconomic conditions. Projected future cash flows are estimated using assumptions derived from management’s best estimates of likely scenario-based outcomes after giving consideration to a variety of variables that include, but are not limited to: payment terms of the security; the likelihood that the issuer can service the interest and principal payments; the quality and amount of any credit enhancements; the security’s position within the capital structure of the issuer; possible corporate restructurings or asset sales by the issuer; and changes to the rating of the security or the issuer by rating agencies.

• Additional considerations are made when assessing the unique features that apply to certain Structured Securities including, but not limited to: the quality of underlying collateral, expected prepayment speeds, current and forecasted loss severity, consideration of the payment terms of the underlying loans or assets backing a particular security, and the payment priority within the tranche structure of the security.

• When determining the amount of the credit loss for U.S. and foreign corporate securities, state and political subdivision securities and foreign government securities, the estimated fair value is considered the recovery value when available information does not indicate that another value is more appropriate. When information is identified that indicates a recovery value other than estimated fair value, management considers in the determination of recovery value the same considerations utilized in its overall impairment evaluation process as described above, as well as any private and public sector programs to restructure such securities.

With respect to securities that have attributes of debt and equity (“perpetual hybrid securities”), consideration is given in the OTTI analysis as to whether there has been any deterioration in the credit of the issuer and the likelihood of recovery in value of the securities that are in a severe and extended unrealized loss position. Consideration is also given as to whether any perpetual hybrid securities, with an unrealized loss, regardless of credit rating, have deferred any dividend payments. When an OTTI loss has occurred, the OTTI loss is the entire difference between the perpetual hybrid security’s cost and its estimated fair value with a corresponding charge to earnings.

The cost or amortized cost of fixed maturity and equity securities is adjusted for OTTI in the period in which the determination is made. The Company does not change the revised cost basis for subsequent recoveries in value.

In periods subsequent to the recognition of OTTI on a fixed maturity security, the Company accounts for the impaired security as if it had been purchased on the measurement date of the impairment. Accordingly, the discount (or reduced premium) based on the new cost basis is accreted over the remaining term of the fixed maturity security in a prospective manner based on the amount and timing of estimated future cash flows.

Current Period Evaluation

Based on the Company’s current evaluation of its AFS securities in an unrealized loss position in accordance with its impairment policy, and the Company’s current intentions and assessments (as applicable to the type of security) about holding, selling and any requirements to sell these securities, the Company concluded that these securities were not other-than-temporarily impaired at December 31, 2016. Future OTTI will depend primarily on economic fundamentals, issuer performance (including changes in the present value of future cash flows expected to be collected), changes in credit ratings, collateral valuation, interest rates and credit spreads. If economic fundamentals deteriorate or if there are adverse changes in the above factors, OTTI may be incurred in upcoming periods.

Gross unrealized losses on fixed maturity securities decreased $80 million during the year ended December 31, 2016 to $754 million. The decrease in gross unrealized losses for the year ended December 31, 2016, was primarily attributable to narrowing credit spreads, partially offset by an increase in interest rates and, to a lesser extent, the impact of weakening foreign currencies on non-functional currency denominated fixed maturity securities.

At December 31,2016,$57 millionof the total$754 millionof gross unrealized losses were from15fixed maturity securities with an unrealized loss position of20%or more of amortized cost for six months or greater.

The change in gross unrealized losses on equity securities was not significant during the year ended December 31, 2016.

Investment Grade Fixed Maturity Securities

Of the $57 million of gross unrealized losses on fixed maturity securities with an unrealized loss of 20% or more of amortized cost for six months or greater, $53 million, or 93%, were related to gross unrealized losses on six investment grade fixed maturity securities. Unrealized losses on investment grade fixed maturity securities are principally related to widening credit spreads since purchase and, with respect to fixed-rate fixed maturity securities, rising interest rates since purchase.

Below Investment Grade Fixed Maturity Securities

Of the $57 million of gross unrealized losses on fixed maturity securities with an unrealized loss of 20% or more of amortized cost for six months or greater, $4 million, or 7%, were related to gross unrealized losses on nine below investment grade fixed maturity securities. Unrealized losses on below investment grade fixed maturity securities are principally related to U.S. and foreign corporate securities (primarily industrial securities) and are the result of significantly wider credit spreads resulting from higher risk premiums since purchase, largely due to economic and market uncertainties including concerns over lower oil prices in the energy sector. Management evaluates U.S. and foreign corporate securities based on factors such as expected cash flows and the financial condition and near-term and long-term prospects of the issuers.

Mortgage Loans

Mortgage Loans by Portfolio Segment

Mortgage loans are summarized as follows at:

	December 31,
	2016					2015
	Carrying Value			% of Total		Carrying Value			% of Total
	(Dollars in millions)
Mortgage loans
Commercial	$	6,211		69.9	%	$	5,331		73.4	%
Agricultural	1,708			19.2		1,460			20.1
Residential	867			9.8		335			4.6
Subtotal	8,786			98.9		7,126			98.1
Valuation allowances	(38		)	(0.4	)	(36		)	(0.5	)
Subtotal mortgage loans, net	8,748			98.5		7,090			97.6
Commercial mortgage loans held by CSEs — FVO	136			1.5		172			2.4
Total mortgage loans, net	$	8,884		100.0	%	$	7,262		100.0	%

The Company purchases unaffiliated mortgage loans under a master participation agreement, from an affiliate, simultaneously with the affiliate’s origination or acquisition of mortgage loans. The aggregate amount of unaffiliated mortgage loan participation interests purchased by the Company from an affiliate during the years ended December 31, 2016, 2015 and 2014 were $2.3 billion, $2.0 billion and $360 million, respectively. In connection with the mortgage loan participations, the affiliate collected mortgage loan principal and interest payments on the Company’s behalf and the affiliate remitted such payments to the Company in the amount of $1.6 billion, $973 million and $1.0 billion during the years ended December 31, 2016, 2015 and 2014, respectively.

Purchases of mortgage loans from third parties were $619 million and $346 million for the years ended December 31, 2016 and 2015, respectively, and were primarily comprised of residential mortgage loans.

See “— Variable Interest Entities” for discussion of CSEs.

See “— Related Party Investment Transactions” for discussion of related party mortgage loans.

Information on commercial, agricultural and residential mortgage loans is presented in the tables below. Information on commercial mortgage loans held by CSEs - FVO is presented in Note 10. The Company elects the FVO for certain commercial mortgage loans and related long-term debt that are managed on a total return basis.

Mortgage Loans, Valuation Allowance and Impaired Loans by Portfolio Segment

Mortgage loans by portfolio segment, by method of evaluation of credit loss, impaired mortgage loans including those modified in a troubled debt restructuring, and the related valuation allowances, were as follows at and for the years ended:

	Evaluated Individually for Credit Losses										Evaluated Collectively for Credit Losses				Impaired Loans
	Impaired Loans with a Valuation  Allowance						Impaired Loans without a Valuation Allowance
	Unpaid Principal Balance		Recorded Investment		Valuation Allowances		Unpaid Principal Balance		Recorded Investment		Recorded Investment		Valuation Allowances		Carrying Value		Average Recorded Investment
	(In millions)
December 31, 2016
Commercial	$	—	$	—	$	—	$	—	$	—	$	6,211	$	30	$	—	$	—
Agricultural	4		3		—		—		—		1,705		5		3		3
Residential	—		—		—		1		1		866		3		1		—
Total	$	4	$	3	$	—	$	1	$	1	$	8,782	$	38	$	4	$	3
December 31, 2015
Commercial	$	—	$	—	$	—	$	—	$	—	$	5,331	$	28	$	—	$	—
Agricultural	4		3		—		—		—		1,457		5		3		3
Residential	—		—		—		—		—		335		3		—		—
Total	$	4	$	3	$	—	$	—	$	—	$	7,123	$	36	$	3	$	3

The average recorded investment for impaired commercial, agricultural and residential mortgage loans was $43 million, $3 million and $0, respectively, for the year ended December 31, 2014.

Valuation Allowance Rollforward by Portfolio Segment

The changes in the valuation allowance, by portfolio segment, were as follows:

	Commercial			Agricultural		Residential		Total
	(In millions)
Balance at January 1, 2014	$	31		$	4	$	—	$	35
Provision (release)	(10		)	—		—		(10		)
Balance at December 31, 2014	21			4		—		25
Provision (release)	7			1		3		11
Balance at December 31, 2015	28			5		3		36
Provision (release)	2			—		—		2
Balance at December 31, 2016	$	30		$	5	$	3	$	38

Valuation Allowance Methodology

Mortgage loans are considered to be impaired when it is probable that, based upon current information and events, the Company will be unable to collect all amounts due under the loan agreement. Specific valuation allowances are established using the same methodology for all three portfolio segments as the excess carrying value of a loan over either (i) the present value of expected future cash flows discounted at the loan’s original effective interest rate, (ii) the estimated fair value of the loan’s underlying collateral if the loan is in the process of foreclosure or otherwise collateral dependent, or (iii) the loan’s observable market price. A common evaluation framework is used for establishing non-specific valuation allowances for all loan portfolio segments; however, a separate non-specific valuation allowance is calculated and maintained for each loan portfolio segment that is based on inputs unique to each loan portfolio segment. Non-specific valuation allowances are established for pools of loans with similar risk characteristics where a property-specific or market-specific risk has not been identified, but for which the Company expects to incur a credit loss. These evaluations are based upon several loan portfolio segment-specific factors, including the Company’s experience for loan losses, defaults and loss severity, and loss expectations for loans with similar risk characteristics. These evaluations are revised as conditions change and new information becomes available.

Commercial and Agricultural Mortgage Loan Portfolio Segments

The Company typically uses several years of historical experience in establishing non-specific valuation allowances which captures multiple economic cycles. For evaluations of commercial mortgage loans, in addition to historical experience, management considers factors that include the impact of a rapid change to the economy, which may not be reflected in the loan portfolio, and recent loss and recovery trend experience as compared to historical loss and recovery experience. For evaluations of agricultural mortgage loans, in addition to historical experience, management considers factors that include increased stress in certain sectors, which may be evidenced by higher delinquency rates, or a change in the number of higher risk loans. On a quarterly basis, management incorporates the impact of these current market events and conditions on historical experience in determining the non-specific valuation allowance established for commercial and agricultural mortgage loans.

All commercial mortgage loans are reviewed on an ongoing basis which may include an analysis of the property financial statements and rent roll, lease rollover analysis, property inspections, market analysis, estimated valuations of the underlying collateral, loan-to-value ratios, debt service coverage ratios, and tenant creditworthiness. The monitoring process focuses on higher risk loans, which include those that are classified as restructured, delinquent or in foreclosure, as well as loans with higher loan-to-value ratios and lower debt service coverage ratios. All agricultural mortgage loans are monitored on an ongoing basis. The monitoring process for agricultural mortgage loans is generally similar to the commercial mortgage loan monitoring process, with a focus on higher risk loans, including reviews on a geographic and property-type basis. Higher risk loans are reviewed individually on an ongoing basis for potential credit loss and specific valuation allowances are established using the methodology described above. Quarterly, the remaining loans are reviewed on a pool basis by aggregating groups of loans that have similar risk characteristics for potential credit loss, and non-specific valuation allowances are established as described above using inputs that are unique to each segment of the loan portfolio.

For commercial mortgage loans, the primary credit quality indicator is the debt service coverage ratio, which compares a property’s net operating income to amounts needed to service the principal and interest due under the loan. Generally, the lower the debt service coverage ratio, the higher the risk of experiencing a credit loss. The Company also reviews the loan-to-value ratio of its commercial mortgage loan portfolio. Loan-to-value ratios compare the unpaid principal balance of the loan to the estimated fair value of the underlying collateral. Generally, the higher the loan-to-value ratio, the higher the risk of experiencing a credit loss. The debt service coverage ratio and the values utilized in calculating the ratio are updated annually on a rolling basis, with a portion of the portfolio updated each quarter. In addition, the loan-to-value ratio is routinely updated for all but the lowest risk loans as part of the Company’s ongoing review of its commercial mortgage loan portfolio.

For agricultural mortgage loans, the Company’s primary credit quality indicator is the loan-to-value ratio. The values utilized in calculating this ratio are developed in connection with the ongoing review of the agricultural mortgage loan portfolio and are routinely updated.

Residential Mortgage Loan Portfolio Segment

The Company’s residential mortgage loan portfolio is comprised primarily of closed end, amortizing residential mortgage loans. For evaluations of residential mortgage loans, the key inputs of expected frequency and expected loss reflect current market conditions, with expected frequency adjusted, when appropriate, for differences from market conditions and historical experience. In contrast to the commercial and agricultural mortgage loan portfolios, residential mortgage loans are smaller-balance homogeneous loans that are collectively evaluated for impairment. Non-specific valuation allowances are established using the evaluation framework described above for pools of loans with similar risk characteristics from inputs that are unique to the residential segment of the loan portfolio. Loan specific valuation allowances are only established on residential mortgage loans when they have been restructured and are established using the methodology described above for all loan portfolio segments.

For residential mortgage loans, the Company’s primary credit quality indicator is whether the loan is performing or nonperforming. The Company generally defines nonperforming residential mortgage loans as those that are 60 or more days past due and/or in nonaccrual status which is assessed monthly. Generally, nonperforming residential mortgage loans have a higher risk of experiencing a credit loss.

Credit Quality of Commercial Mortgage Loans

The credit quality of commercial mortgage loans was as follows at:

	Recorded Investment										Estimated Fair Value		% of Total
	Debt Service Coverage Ratios						Total		% of Total
	> 1.20x		1.00x - 1.20x		< 1.00x
	(Dollars in millions)
December 31, 2016
Loan-to-value ratios
Less than 65%	$	5,459	$	214	$	166	$	5,839	94.0	%	$	5,922	94.2	%
65% to 75%	281		—		19		300		4.8		294		4.7
76% to 80%	34		—		—		34		0.6		33		0.5
Greater than 80%	24		14		—		38		0.6		37		0.6
Total	$	5,798	$	228	$	185	$	6,211	100.0	%	$	6,286	100.0	%
December 31, 2015
Loan-to-value ratios
Less than 65%	$	4,659	$	151	$	100	$	4,910	92.1	%	$	5,124	92.6	%
65% to 75%	330		—		8		338		6.3		330		6.0
76% to 80%	—		—		—		—		—		—		—
Greater than 80%	44		25		14		83		1.6		80		1.4
Total	$	5,033	$	176	$	122	$	5,331	100.0	%	$	5,534	100.0	%

Credit Quality of Agricultural Mortgage Loans

The credit quality of agricultural mortgage loans was as follows at:

	December 31,
	2016				2015
	Recorded Investment		% of Total		Recorded Investment		% of Total
	(Dollars in millions)
Loan-to-value ratios
Less than 65%	$	1,669	97.7	%	$	1,366	93.6	%
65% to 75%	39		2.3		94		6.4
Total	$	1,708	100.0	%	$	1,460	100.0	%

The estimated fair value of agricultural mortgage loans was $1.7 billion and $1.5 billion at December 31, 2016 and 2015, respectively.

Credit Quality of Residential Mortgage Loans

The credit quality of residential mortgage loans was as follows at:

	December 31,
	2016				2015
	Recorded Investment		% of Total		Recorded Investment		% of Total
	(Dollars in millions)
Performance indicators:
Performing	$	856	98.7	%	$	331	98.8	%
Nonperforming	11		1.3		4		1.2
Total	$	867	100.0	%	$	335	100.0	%

The estimated fair value of residential mortgage loans was $867 million and $345 million at December 31, 2016 and 2015, respectively.

Past Due and Nonaccrual Mortgage Loans

The Company has a high quality, well performing, mortgage loan portfolio, with over99%of all mortgage loans classified as performing as of bothDecember 31, 2016and2015.The Company defines delinquency consistent with industry practice, when mortgage loans are past due as follows: commercial and residential mortgage loans — 60 days and agricultural mortgage loans — 90 days.The Company hadnocommercial or agricultural mortgage loans past due andnocommercial or agricultural mortgage loans in nonaccrual status at eitherDecember 31, 2016, or2015. The recorded investment of residential mortgage loans past due and in nonaccrual status was$11 millionand$4 millionatDecember 31, 2016and2015, respectively.

Mortgage Loans Modified in a Troubled Debt Restructuring

The Company may grant concessions related to borrowers experiencing financial difficulties, which are classified as troubled debt restructurings. Generally, the types of concessions include: reduction of the contractual interest rate, extension of the maturity date at an interest rate lower than current market interest rates, and/or a reduction of accrued interest. The amount, timing and extent of the concessions granted are considered in determining any impairment or changes in the specific valuation allowance. During the year ended December 31, 2016, the Company did not have a significant amount of mortgage loans modified in a troubled debt restructuring. There were no mortgage loans modified in a troubled debt restructuring during the year ended December 31, 2015.

Other Invested Assets

Other invested assets is comprised primarily of freestanding derivatives with positive estimated fair values (see Note 9), operating joint venture, tax credit and renewable energy partnerships, leveraged leases and funds withheld.

Tax Credit Partnerships

The carrying value of tax credit partnerships was $41 million and $42 million at December 31, 2016 and 2015, respectively. Net investment income (loss) from tax credit partnerships were ($1) million for both of the years ended December 31, 2016 and 2015. Net investment income (loss) was $3 million for the year ended December 31, 2014.

Leveraged Leases

Investment in leveraged leases consisted of the following at:

	December 31,
	2016			2015
	(In millions)
Rental receivables, net	$	87		$	90
Estimated residual values	14			14
Subtotal	101			104
Unearned income	(32		)	(33		)
Investment in leveraged leases, net of non-recourse debt	$	69		$	71

Rental receivables are generally due in periodic installments. The payment periods for leveraged leases range from one to 16 years. For rental receivables, the primary credit quality indicator is whether the rental receivable is performing or nonperforming, which is assessed monthly. The Company generally defines nonperforming rental receivables as those that are 90 days or more past due. At December 31, 2016 and 2015, all rental receivables were performing.

The deferred income tax liability related to leveraged leases was $74 million and $76 million at December 31, 2016 and 2015, respectively.

Cash Equivalents

The carrying value of cash equivalents, which includes securities and other investments with an original or remaining maturity of three months or less at the time of purchase, was $1.6 billion and $1.1 billion at December 31, 2016 and 2015, respectively.

Net Unrealized Investment Gains (Losses)

Unrealized investment gains (losses) on fixed maturity and equity securities AFS and the effect on DAC, VOBA, DSI and future policy benefits, that would result from the realization of the unrealized gains (losses), are included in net unrealized investment gains (losses) in accumulated other comprehensive income (loss) (“AOCI”).

The components of net unrealized investment gains (losses), included in AOCI, were as follows:

	Years Ended December 31,
	2016			2015			2014
	(In millions)
Fixed maturity securities	$	2,464		$	2,265		$	4,311
Fixed maturity securities with noncredit OTTI losses included in AOCI	1			(19		)	(34		)
Total fixed maturity securities	2,465			2,246			4,277
Equity securities	32			54			69
Derivatives	393			368			282
Short-term investments	(42		)	—			—
Other	58			78			9
Subtotal	2,906			2,746			4,637
Amounts allocated from:
Future policy benefits	(550		)	(56		)	(503		)
DAC and VOBA related to noncredit OTTI losses recognized in AOCI	(1		)	(1		)	(2		)
DAC, VOBA and DSI	(188		)	(198		)	(403		)
Subtotal	(739		)	(255		)	(908		)
Deferred income tax benefit (expense) related to noncredit OTTI losses recognized in AOCI	—			7			12
Deferred income tax benefit (expense)	(736		)	(844		)	(1,308		)
Net unrealized investment gains (losses)	$	1,431		$	1,654		$	2,433

The changes in fixed maturity securities with noncredit OTTI losses included in AOCI were as follows:

	Years Ended December 31,
	2016			2015
	(In millions)
Balance at January 1,	$	(19	)	$	(34	)
Noncredit OTTI losses and subsequent changes recognized	3			9
Securities sold with previous noncredit OTTI loss	14			17
Subsequent changes in estimated fair value	3			(11		)
Balance at December 31,	$	1		$	(19	)

The changes in net unrealized investment gains (losses) were as follows:

	Years Ended December 31,
	2016			2015			2014
	(In millions)
Balance at January 1,	$	1,654		$	2,433		$	941
Fixed maturity securities on which noncredit OTTI losses have been recognized	20			15			11
Unrealized investment gains (losses) during the year	140			(1,906		)	2,807
Unrealized investment gains (losses) relating to:
Future policy benefits	(494		)	447			(503		)
DAC and VOBA related to noncredit OTTI losses recognized in AOCI	—			1			(2		)
DAC, VOBA and DSI	10			205			(116		)
Deferred income tax benefit (expense) related to noncredit OTTI losses recognized in AOCI	(7		)	(5		)	(3		)
Deferred income tax benefit (expense)	108			464			(702		)
Balance at December 31,	$	1,431		$	1,654		$	2,433
Change in net unrealized investment gains (losses)	$	(223	)	$	(779	)	$	1,492

Concentrations of Credit Risk

There were no investments in any counterparty that were greater than 10% of the Company’s stockholder’s equity, other than the U.S. government and its agencies, at both December 31, 2016 and 2015.

Securities Lending

Elements of the securities lending program are presented below at:

	December 31,
	2016		2015
	(In millions)
Securities on loan: (1)
Amortized cost	$	5,895	$	8,047
Estimated fair value	$	6,555	$	8,830
Cash collateral on deposit from counterparties (2)	$	6,642	$	8,981
Security collateral on deposit from counterparties (3)	$	27	$	23
Reinvestment portfolio — estimated fair value	$	6,571	$	8,938

______________

(1) Included within fixed maturity securities and short-term investments.

(2) Included within payables for collateral under securities loaned and other transactions.

(3) Security collateral on deposit from counterparties may not be sold or re-pledged, unless the counterparty is in default, and is not reflected on the consolidated financial statements.

The cash collateral liability by loaned security type and remaining tenor of the agreements were as follows at:

	December 31, 2016								December 31, 2015
	Remaining Tenor of Securities Lending Agreements								Remaining Tenor of Securities Lending Agreements
	Open (1)		1 Month or Less		1 to 6 Months		Total		Open (1)		1 Month or Less		1 to 6 Months		Total
	(In millions)
Cash collateral liability by loaned security type:
U.S. government and agency	$	2,129	$	1,906	$	1,743	$	5,778	$	2,631	$	3,140	$	1,338	$	7,109
U.S. corporate	—		480		—		480		9		302		—		311
Agency RMBS	—		—		274		274		—		939		579		1,518
Foreign corporate	—		58		—		58		—		—		—		—
Foreign government	—		52		—		52		1		42		—		43
Total	$	2,129	$	2,496	$	2,017	$	6,642	$	2,641	$	4,423	$	1,917	$	8,981

_____________

(1) The related loaned security could be returned to the Company on the next business day which would require the Company to immediately return the cash collateral.

If the Company is required to return significant amounts of cash collateral on short notice and is forced to sell securities to meet the return obligation, it may have difficulty selling such collateral that is invested in securities in a timely manner, be forced to sell securities in a volatile or illiquid market for less than what otherwise would have been realized under normal market conditions, or both. The estimated fair value of the securities on loan related to the cash collateral on open at December 31, 2016 was $2.1 billion, all of which were U.S. government and agency securities which, if put back to the Company, could be immediately sold to satisfy the cash requirement.

The reinvestment portfolio acquired with the cash collateral consisted principally of fixed maturity securities (including agency RMBS, ABS, non-agency RMBS, U.S. corporate securities and U.S. government and agency) with 48% invested in agency RMBS, short-term investments, U.S. government and agency, cash equivalents or held in cash at December 31, 2016. If the securities on loan or the reinvestment portfolio become less liquid, the Company has the liquidity resources of most of its general account available to meet any potential cash demands when securities on loan are put back to the Company.

Invested Assets on Deposit, Held in Trust and Pledged as Collateral

Invested assets on deposit, held in trust and pledged as collateral are presented below at estimated fair value for all asset classes at:

	December 31,
	2016		2015
	(In millions)
Invested assets on deposit (regulatory deposits)	$	7,642	$	7,245
Invested assets held in trust (reinsurance agreements) (1)	721		952
Invested assets pledged as collateral (2)	3,548		2,801
Total invested assets on deposit, held in trust, and pledged as collateral	$	11,911	$	10,998

______________

(1) The Company has held in trust certain investments, primarily fixed maturity securities, in connection with certain reinsurance transactions.

(2) The Company has pledged invested assets in connection with various agreements and transactions, including funding agreements (see Note 5) and derivative transactions (see Note 9).

See “— Securities Lending” for information regarding securities on loan.

Purchased Credit Impaired Investments

Investments acquired with evidence of credit quality deterioration since origination and for which it is probable at the acquisition date that the Company will be unable to collect all contractually required payments are classified as purchased credit impaired (“PCI”) investments. For each investment, the excess of the cash flows expected to be collected as of the acquisition date over its acquisition date fair value is referred to as the accretable yield and is recognized as net investment income on an effective yield basis. If subsequently, based on current information and events, it is probable that there is a significant increase in cash flows previously expected to be collected or if actual cash flows are significantly greater than cash flows previously expected to be collected, the accretable yield is adjusted prospectively. The excess of the contractually required payments (including interest) as of the acquisition date over the cash flows expected to be collected as of the acquisition date is referred to as the nonaccretable difference, and this amount is not expected to be realized as net investment income. Decreases in cash flows expected to be collected can result in OTTI.

The Company’s PCI fixed maturity securities were as follows at:

	December 31,
	2016		2015
	(In millions)
Outstanding principal and interest balance (1)	$	1,423	$	1,224
Carrying value (2)	$	1,087	$	911

______________

(1) Represents the contractually required payments, which is the sum of contractual principal, whether or not currently due, and accrued interest.

(2) Estimated fair value plus accrued interest.

The following table presents information about PCI fixed maturity securities acquired during the periods indicated:

	Years Ended December 31,
	2016		2015
	(In millions)
Contractually required payments (including interest)	$	525	$	785
Cash flows expected to be collected (1)	$	457	$	698
Fair value of investments acquired	$	322	$	512

______________

(1) Represents undiscounted principal and interest cash flow expectations, at the date of acquisition.

The following table presents activity for the accretable yield on PCI fixed maturity securities for:

	Years Ended December 31,
	2016			2015
	(In millions)
Accretable yield, January 1,	$	400		$	251
Investments purchased	135			186
Accretion recognized in earnings	(66		)	(48		)
Disposals	(11		)	(8		)
Reclassification (to) from nonaccretable difference	(50		)	19
Accretable yield, December 31,	$	408		$	400

Collectively Significant Equity Method Investments

The Company holds investments in real estate joint ventures, real estate funds and other limited partnership interests consisting of leveraged buy-out funds, hedge funds, private equity funds, joint ventures and other funds. The portion of these investments accounted for under the equity method had a carrying value of $1.9 billion at December 31, 2016. The Company’s maximum exposure to loss related to these equity method investments is limited to the carrying value of these investments plus unfunded commitments of $1.1 billion at December 31, 2016. Except for certain real estate joint ventures, the Company’s investments in real estate funds and other limited partnership interests are generally of a passive nature in that the Company does not participate in the management of the entities.

As described in Note 1, the Company generally records its share of earnings in its equity method investments using a three-month lag methodology and within net investment income. Aggregate net investment income from these equity method investments exceeded 10% of the Company’s consolidated pre-tax income (loss) for the two of the most recent annual periods: 2015 and 2014. This aggregated summarized financial data does not represent the Company’s proportionate share of the assets, liabilities, or earnings of such entities.

The aggregated summarized financial data presented below reflects the latest available financial information and is as of, and for, the years ended December 31, 2016, 2015 and 2014. Aggregate total assets of these entities totaled $285.1 billion and $294.3 billion at December 31, 2016 and 2015, respectively. Aggregate total liabilities of these entities totaled $26.3 billion and $46.3 billion at December 31, 2016 and 2015, respectively. Aggregate net income (loss) of these entities totaled $21.3 billion, $13.7 billion and $25.1 billion for the years ended December 31, 2016, 2015 and 2014, respectively. Aggregate net income (loss) from the underlying entities in which the Company invests is primarily comprised of investment income, including recurring investment income and realized and unrealized investment gains (losses).

Variable Interest Entities

The Company has invested in certain entities (including CSEs) that are VIEs. In certain instances, the Company holds both the power to direct the most significant activities of the entity, as well as an economic interest in the entity and, as such, is deemed to be the primary beneficiary or consolidator of the entity. The determination of the VIE’s primary beneficiary requires an evaluation of the contractual and implied rights and obligations associated with each party’s relationship with or involvement in the entity, an estimate of the entity’s expected losses and expected residual returns and the allocation of such estimates to each party involved in the entity.

Consolidated VIEs

Creditors or beneficial interest holders of VIEs where the Company is the primary beneficiary have no recourse to the general credit of the Company, as the Company’s obligation to the VIEs is limited to the amount of its committed investment.

The following table presents the total assets and total liabilities relating to VIEs for which the Company has concluded that it is the primary beneficiary and which are consolidated at December 31, 2016 and 2015.

	December 31,
	2016		2015
	(In millions)
CSEs: (1)
Assets:
Mortgage loans (commercial mortgage loans)	$	136	$	172
Accrued investment income	1		1
Total assets	$	137	$	173
Liabilities:
Long-term debt	$	23	$	48
Other liabilities	1		1
Total liabilities	$	24	$	49

______________

(1) The Company consolidates entities that are structured as CMBS. The assets of these entities can only be used to settle their respective liabilities, and under no circumstances is the Company liable for any principal or interest shortfalls should any arise. The Company’s exposure was limited to that of its remaining investment in these entities of $95 million and $105 million at estimated fair value at December 31, 2016 and 2015, respectively.

Unconsolidated VIEs

The carrying amount and maximum exposure to loss relating to VIEs in which the Company holds a significant variable interest but is not the primary beneficiary and which have not been consolidated were as follows at:

	December 31,
	2016				2015
	Carrying Amount		Maximum Exposure to Loss (1)		Carrying Amount		Maximum Exposure to Loss (1)
	(In millions)
Fixed maturity securities AFS:
Structured Securities (2)	$	10,789	$	10,789	$	13,453	$	13,453
U.S. and foreign corporate	505		505		461		461
Other limited partnership interests	1,491		2,287		1,367		1,647
Real estate joint ventures	17		22		35		38
Other investments (3)	61		66		57		62
Total	$	12,863	$	13,669	$	15,373	$	15,661

______________

(1) The maximum exposure to loss relating to fixed maturity and equity securities AFS is equal to their carrying amounts or the carrying amounts of retained interests. The maximum exposure to loss relating to other limited partnership interests and real estate joint ventures is equal to the carrying amounts plus any unfunded commitments. For certain of its investments in other invested assets, the Company’s return is in the form of income tax credits which are guaranteed by creditworthy third parties. For such investments, the maximum exposure to loss is equal to the carrying amounts plus any unfunded commitments, reduced by income tax credits guaranteed by third parties. There were no income tax credits and less than $1 million at December 31, 2016 and 2015, respectively. Such a maximum loss would be expected to occur only upon bankruptcy of the issuer or investee.

(2) For these variable interests, the Company’s involvement is limited to that of a passive investor in mortgage-backed or asset-backed securities issued by trusts that do not have substantial equity.

(3) Other investments is comprised of other invested assets and non-redeemable preferred stock.

As described in Note 16, the Company makes commitments to fund partnership investments in the normal course of business. Excluding these commitments, the Company did not provide financial or other support to investees designated as VIEs during the years ended December 31, 2016, 2015 and 2014.

Net Investment Income

The components of net investment income were as follows:

	Years Ended December 31,
	2016		2015		2014
	(In millions)
Investment income:
Fixed maturity securities	$	2,167	$	2,010	$	1,954
Equity securities	18		18		17
Mortgage loans	384		360		337
Policy loans	54		54		59
Real estate and real estate joint ventures	32		108		80
Other limited partnership interests	163		134		266
Cash, cash equivalents and short-term investments	18		8		5
Operating joint venture	11		11		2
Other	13		11		3
Subtotal	2,860		2,714		2,723
Less: Investment expenses	160		115		103
Subtotal, net	2,700		2,599		2,620
FVO CSEs — interest income — commercial mortgage loans	12		16		49
Net investment income	$	2,712	$	2,615	$	2,669

See “— Variable Interest Entities” for discussion of CSEs.

See “— Related Party Investment Transactions” for discussion of affiliated net investment income and investment expenses.

Net Investment Gains (Losses)

Components of Net Investment Gains (Losses)

The components of net investment gains (losses) were as follows:

	Years Ended December 31,
	2016			2015			2014
	(In millions)
Total gains (losses) on fixed maturity securities:
Total OTTI losses recognized — by sector and industry:
U.S. and foreign corporate securities — by industry:
Industrial	$	(13	)	$	(3	)	$	—
Consumer	—			(8		)	(2		)
Transportation	—			—			(2		)
Total U.S. and foreign corporate securities	(13		)	(11		)	(4		)
RMBS	(6		)	(14		)	(8		)
OTTI losses on fixed maturity securities recognized in earnings	(19		)	(25		)	(12		)
Fixed maturity securities — net gains (losses) on sales and disposals	2			(34		)	26
Total gains (losses) on fixed maturity securities	(17		)	(59		)	14
Total gains (losses) on equity securities:
Total OTTI losses recognized — by sector:
Common stock	(1		)	(3		)	(7		)
Non-redeemable preferred stock	(1		)	—			(8		)
OTTI losses on equity securities recognized in earnings	(2		)	(3		)	(15		)
Equity securities — net gains (losses) on sales and disposals	10			18			14
Total gains (losses) on equity securities	8			15			(1		)
Mortgage loans	7			(11		)	17
Real estate and real estate joint ventures	(34		)	98			(4		)
Other limited partnership interests	(7		)	(1		)	(9		)
Other	11			(2		)	43
Subtotal	(32		)	40			60
FVO CSEs:
Commercial mortgage loans	(2		)	(7		)	(13		)
Long-term debt — related to commercial mortgage loans	1			4			19
Non-investment portfolio gains (losses) (1)	1			(1		)	(535		)
Subtotal	—			(4		)	(529		)
Total net investment gains (losses)	$	(32	)	$	36		$	(469	)

______________

(1) Non-investment portfolio gains (losses) for the year ended December 31, 2014 includes a loss of $608 million related to the disposition of MAL as more fully described in Note 4.

See “— Variable Interest Entities” for discussion of CSEs.

See “— Related Party Investment Transactions” for discussion of affiliated net investment gains (losses) related to transfers of invested assets to affiliates.

Gains (losses) from foreign currency transactions included within net investment gains (losses) were $8 million, ($6) million and $66 million for the years ended December 31, 2016, 2015 and 2014, respectively.

Sales or Disposals and Impairments of Fixed Maturity and Equity Securities

Investment gains and losses on sales of securities are determined on a specific identification basis. Proceeds from sales or disposals of fixed maturity and equity securities and the components of fixed maturity and equity securities net investment gains (losses) were as shown in the table below.

	Years Ended December 31,
	2016			2015			2014			2016			2015			2014
	Fixed Maturity Securities									Equity Securities
	(In millions)
Proceeds	$	33,339		$	29,937		$	14,649		$	48		$	80		$	57
Gross investment gains	$	211		$	165		$	84		$	10		$	25		$	15
Gross investment losses	(209		)	(199		)	(58		)	—			(7		)	(1		)
OTTI losses	(19		)	(25		)	(12		)	(2		)	(3		)	(15		)
Net investment gains (losses)	$	(17	)	$	(59	)	$	14		$	8		$	15		$	(1	)

Credit Loss Rollforward

The table below presents a rollforward of the cumulative credit loss component of OTTI loss recognized in earnings on fixed maturity securities still held for which a portion of the OTTI loss was recognized in OCI:

	Years Ended December 31,
	2016			2015
	(In millions)
Balance at January 1,	$	52		$	57
Additions:
Initial impairments — credit loss OTTI on securities not previously impaired	—			1
Additional impairments — credit loss OTTI on securities previously impaired	5			11
Reductions:
Sales (maturities, pay downs or prepayments) of securities previously impaired as credit loss OTTI	(28		)	(14		)
Increase in cash flows — accretion of previous credit loss OTTI	(1		)	(3		)
Balance at December 31,	$	28		$	52

Related Party Investment Transactions

The Company transfers invested assets, primarily consisting of fixed maturity securities, to and from affiliates. Invested assets transferred to and from affiliates were as follows:

	Years Ended December 31,
	2016		2015		2014
	(In millions)
Estimated fair value of invested assets transferred to affiliates	$	1,465	$	185	$	1,441
Amortized cost of invested assets transferred to affiliates	$	1,370	$	169	$	1,362
Net investment gains (losses) recognized on transfers	$	27	$	16	$	79
Change in additional paid-in-capital recognized on transfers	$	68	$	—	$	—
Estimated fair value of invested assets transferred from affiliates	$	5,428	$	928	$	132

In April 2016, the Company received a transfer of investments and cash and cash equivalents totaling $4.3 billion for the recapture of risks related to certain single premium deferred annuity contracts previously reinsured to MLIC, an affiliate, which are included in the table above. See Note 7 for additional information related to these transfers.

In July 2014, prior to the Mergers, the Company sold affiliated loans to other affiliates, which were included in other invested assets and in the table above, at an estimated fair value totaling $520 million and a $45 million gain was recognized in net investment gains (losses). Net investment income from these affiliated loans was $13 million for the year ended December 31, 2014.

The Company had affiliated loans outstanding to wholly-owned real estate subsidiaries of MLIC, which were included in mortgage loans, with a carrying value of $242 million at December 31, 2014. In August 2015 and November 2014, one affiliated loan with a carrying value of $132 million and two affiliated loans with a total carrying value of $120 million were repaid in cash prior to maturity. The remaining loan with a carrying value of $110 million was repaid in cash upon maturity in December 31, 2015. These affiliated loans were secured by interests in the real estate subsidiaries, which owned operating real estate with an estimated fair value in excess of the affiliated loans. Net investment income from these affiliated loans was $8 million and $34 million for the years ended December 31, 2015 and 2014, respectively. In addition, mortgage loan prepayment income earned from the three repayments prior to maturity described above was $31 million and $16 million for the years ended December 31, 2015 and 2014, respectively.

The Company receives investment administrative services from an affiliate. The related investment administrative service charges were $85 million, $68 million, and $62 million for the years ended December 31, 2016, 2015 and 2014, respectively.

See “— Mortgage Loans — Mortgage Loans by Portfolio Segment” for discussion of mortgage loan participation agreements with an affiliate.