Investments

9 Months Ended

Sep. 30, 2017

Investments, Debt and Equity Securities [Abstract]

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

5. Investments

Fixed Maturity and Equity Securities Available-for-Sale

Fixed Maturity and Equity Securities Available-for-Sale 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 residential mortgage-backed securities (“RMBS”), commercial mortgage-backed securities (“CMBS”) and asset-backed securities (“ABS”) (collectively, “Structured Securities”).



	September 30, 2017											December 31, 2016
	Cost or Amortized Cost		Gross Unrealized							Estimated Fair Value		Cost or Amortized Cost		Gross Unrealized							Estimated Fair Value
	Cost or Amortized Cost		Gains		Temporary Losses		OTTI Losses (1)			Estimated Fair Value		Cost or Amortized Cost		Gains		Temporary Losses		OTTI Losses (1)			Estimated Fair Value
	(In millions)
Fixed maturity securities:
U.S. corporate	$	20,203	$	1,733	$	99	$	—		$	21,837	$	20,663	$	1,287	$	285	$	—		$	21,665
U.S. government and agency	13,579		1,640		127		—			15,092		11,872		1,281		237		—			12,916
RMBS	7,621		282		59		(4		)	7,848		7,876		203		139		—			7,940
Foreign corporate	6,206		359		71		—			6,494		6,071		220		168		—			6,123
State and political subdivision	3,557		489		9		—			4,037		3,520		376		38		—			3,858

CMBS	3,204		55		15		(1		)	3,245		3,687		40		32		(1		)	3,696
ABS	1,700		19		2		—			1,717		2,600		11		13		—			2,598
Foreign government	1,064		151		2		—			1,213		1,000		114		11		—			1,103
Total fixed maturity securities	$	57,134	$	4,728	$	384	$	(5	)	$	61,483	$	57,289	$	3,532	$	923	$	(1	)	$	59,899
Equity securities:
Non-redeemable preferred stock	$	138	$	10	$	1	$	—		$	147	$	180	$	6	$	9	$	—		$	177
Common stock	96		22		—		—			118		100		23		—		—			123
Total equity securities	$	234	$	32	$	1	$	—		$	265	$	280	$	29	$	9	$	—		$	300

__________________


(1)	Noncredit OTTI losses included in accumulated other comprehensive income (“AOCI”) in an unrealized gain position are 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 $3 million and $5 million with unrealized gains (losses) of ($1) million and less than $1 million at September 30, 2017 and December 31, 2016, respectively.

Maturities of Fixed Maturity Securities

The amortized cost and estimated fair value of fixed maturity securities, by contractual maturity date, were as follows at September 30, 2017:



	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	$	1,631	$	10,116	$	10,309	$	22,553	$	12,525	$	57,134
Estimated fair value	$	1,641	$	10,520	$	10,657	$	25,855	$	12,810	$	61,483

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:



	September 30, 2017								December 31, 2016
	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	$	2,285	$	52	$	726	$	47	$	4,632	$	187	$	699	$	98
U.S. government and agency	5,006		71		529		56		4,396		237		—		—
RMBS	2,152		42		383		13		3,457		107		818		32
Foreign corporate	540		12		547		59		1,443		64		573		104
State and political subdivision	300		6		43		3		887		35		29		3
CMBS	667		10		93		4		1,553		26		171		5
ABS	120		—		97		2		450		5		461		8
Foreign government	131		2		10		—		242		10		6		1
Total fixed maturity securities	$	11,201	$	195	$	2,428	$	184	$	17,060	$	671	$	2,757	$	251
Equity securities:
Non-redeemable preferred stock	$	—	$	—	$	16	$	1	$	57	$	2	$	40	$	7
Common stock	1		—		—		—		—		—		—		—
Total equity securities	$	1	$	—	$	16	$	1	$	57	$	2	$	40	$	7
Total number of securities in an unrealized loss position	1,018				362				1,711				475

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

As described more fully in Notes 1 and 8 of the Notes to the Consolidated Financial Statements included in the 2016 Annual Report, the Company performs a regular evaluation of all investment classes for impairment, including fixed maturity securities, equity securities and perpetual hybrid securities, in accordance with its impairment policy, in order to evaluate whether such investments are other-than-temporarily impaired.

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 September 30, 2017. 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, as well as a change in the Company’s intention to hold or sell a security that is in an unrealized loss position. 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 $543 million during the nine months ended September 30, 2017 to $379 million. The decrease in gross unrealized losses for the nine months ended September 30, 2017 was primarily attributable to narrowing credit spreads and decreasing longer-term interest rates.

At September 30, 2017, $4 million of the total $379 million of gross unrealized losses were from eight fixed maturity securities with an unrealized loss position of 20% or more of amortized cost for six months or greater.

The change in gross unrealized losses on equity securities was not significant during the nine months ended September 30, 2017.

Investment Grade Fixed Maturity Securities

Below Investment Grade Fixed Maturity Securities

Of the $4 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, $2 million, or 50%, were related to gross unrealized losses on six 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:



	September 30, 2017					December 31, 2016
	Carrying Value			% of Total		Carrying Value			% of Total
	(Dollars in millions)
Mortgage loans:
Commercial	$	7,011		67.8	%	$	6,497		69.9	%
Agricultural	2,144			20.8		1,830			19.7
Residential	1,098			10.6		867			9.3
Subtotal (1)	10,253			99.2		9,194			98.9
Valuation allowances	(44		)	(0.4	)	(40		)	(0.4	)
Subtotal mortgage loans, net	10,209			98.8		9,154			98.5
Commercial mortgage loans held by CSEs - FVO	119			1.2		136			1.5
Total mortgage loans, net	$	10,328		100.0	%	$	9,290		100.0	%

__________________


(1)	Purchases of mortgage loans were $32 million and $339 million for the three months and nine months ended September 30, 2017, respectively, and $123 million and $354 million for the three months and nine months ended September 30, 2016, respectively, and were primarily comprised of residential mortgage loans.

See “— Variable Interest Entities” for discussion of consolidated securitization entities (“CSEs”).

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 7. 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:



	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
	(In millions)
September 30, 2017
Commercial	$	—	$	—	$	—	$	—	$	—	$	7,011	$	34	$	—
Agricultural	4		3		—		—		—		2,141		6		3
Residential	—		—		—		4		4		1,094		4		4
Total	$	4	$	3	$	—	$	4	$	4	$	10,246	$	44	$	7
December 31, 2016
Commercial	$	—	$	—	$	—	$	—	$	—	$	6,497	$	32	$	—
Agricultural	4		3		—		—		—		1,827		5		3
Residential	—		—		—		1		1		866		3		1
Total	$	4	$	3	$	—	$	1	$	1	$	9,190	$	40	$	4

The average recorded investment for impaired commercial, agricultural and residential mortgage loans was $0, $3 million and $4 million, respectively, for the three months ended September 30, 2017 and $0, $3 million and $2 million, respectively, for the nine months ended September 30, 2017. The average recorded investment for impaired commercial, agricultural and residential mortgage loans was $0, $3 million and $0, respectively, for both the three months and nine months ended September 30, 2016.

Valuation Allowance Rollforward by Portfolio Segment

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



	Nine Months Ended September 30,
	2017								2016
	Commercial		Agricultural		Residential		Total		Commercial		Agricultural		Residential		Total
	(In millions)
Balance, beginning of period	$	32	$	5	$	3	$	40	$	28	$	5	$	3	$	36
Provision (release)	2		1		1		4		4		—		2		6
Balance, end of period	$	34	$	6	$	4	$	44	$	32	$	5	$	5	$	42

Credit Quality of Commercial Mortgage Loans

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



	Recorded Investment
	Debt Service Coverage Ratios								% of Total		Estimated Fair Value		% of Total
	> 1.20x		1.00x - 1.20x		< 1.00x		Total		% of Total		Estimated Fair Value		% of Total
	(Dollars in millions)
September 30, 2017
Loan-to-value ratios:
Less than 65%	$	6,057	$	300	$	33	$	6,390	91.1	%	$	6,555	91.4	%
65% to 75%	519		9		18		546		7.8		547		7.6
76% to 80%	10		32		9		51		0.7		51		0.7
Greater than 80%	—		—		24		24		0.4		23		0.3
Total	$	6,586	$	341	$	84	$	7,011	100.0	%	$	7,176	100.0	%

December 31, 2016
Loan-to-value ratios:
Less than 65%	$	5,718	$	230	$	167	$	6,115	94.1	%	$	6,197	94.3	%
65% to 75%	291		—		19		310		4.8		303		4.6
76% to 80%	34		—		—		34		0.5		33		0.5
Greater than 80%	24		14		—		38		0.6		37		0.6
Total	$	6,067	$	244	$	186	$	6,497	100.0	%	$	6,570	100.0	%

Credit Quality of Agricultural Mortgage Loans

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



	September 30, 2017				December 31, 2016
	Recorded Investment		% of Total		Recorded Investment		% of Total
	(Dollars in millions)
Loan-to-value ratios:
Less than 65%	$	2,011	93.8	%	$	1,789	97.8	%
65% to 75%	133		6.2		41		2.2
Total	$	2,144	100.0	%	$	1,830	100.0	%

The estimated fair value of agricultural mortgage loans was $2.2 billion and $1.9 billion at September 30, 2017 and December 31, 2016, respectively.

Credit Quality of Residential Mortgage Loans

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



	September 30, 2017				December 31, 2016
	Recorded Investment		% of Total		Recorded Investment		% of Total
	(Dollars in millions)
Performance indicators:
Performing	$	1,072	97.6	%	$	856	98.7	%
Nonperforming	26		2.4		11		1.3
Total	$	1,098	100.0	%	$	867	100.0	%

The estimated fair value of residential mortgage loans was $1.1 billion and $867 million at September 30, 2017 and December 31, 2016, respectively.

Past Due and Nonaccrual Mortgage Loans

The Company has a high quality, well performing mortgage loan portfolio, with 99% of all mortgage loans classified as performing at both September 30, 2017 and December 31, 2016. 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 past due and nonaccrual mortgage loans at recorded investment, prior to valuation allowances, by portfolio segment, were as follows at:



	Past Due				Nonaccrual Status
	September 30, 2017		December 31, 2016		September 30, 2017		December 31, 2016
	(Dollars in millions)
Commercial	$	—	$	—	$	—	$	—
Agricultural	—		—		—		—
Residential	26		11		26		11
Total	$	26	$	11	$	26	$	11

Mortgage Loans Modified in a Troubled Debt Restructuring

The Company did not have a significant amount of mortgage loans modified in a troubled debt restructuring during both the three months and nine months ended September 30, 2017 and 2016.

Net Unrealized Investment Gains (Losses)

Unrealized investment gains (losses) on fixed maturity and equity securities AFS and the effect on DAC, VOBA, deferred sales inducements (“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 AOCI.

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



	September 30, 2017			December 31, 2016
	(In millions)
Fixed maturity securities	$	4,335		$	2,600
Fixed maturity securities with noncredit OTTI losses included in AOCI	5			1
Total fixed maturity securities	4,340			2,601
Equity securities	55			32
Derivatives	283			397
Short-term investments	—			(42		)
Other	(9		)	59
Subtotal	4,669			3,047
Amounts allocated from:
Future policy benefits	(2,384		)	(922		)
DAC and VOBA related to noncredit OTTI losses recognized in AOCI	(2		)	(2		)
DAC, VOBA and DSI	(296		)	(193		)
Subtotal	(2,682		)	(1,117		)
Deferred income tax benefit (expense) related to noncredit OTTI losses recognized in AOCI	(1		)	—
Deferred income tax benefit (expense)	(695		)	(653		)
Net unrealized investment gains (losses)	$	1,291		$	1,277

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



	Nine Months Ended September 30, 2017
	(In millions)
Balance, beginning of period	$	1,277
Fixed maturity securities on which noncredit OTTI losses have been recognized	4
Unrealized investment gains (losses) during the period	1,618
Unrealized investment gains (losses) relating to:
Future policy benefits	(1,462		)
DAC, VOBA and DSI	(103		)
Deferred income tax benefit (expense) related to noncredit OTTI losses recognized in AOCI	(1		)
Deferred income tax benefit (expense)	(42		)
Balance, end of period	$	1,291
Change in net unrealized investment gains (losses)	$	14

Concentrations of Credit Risk

There were no investments in any counterparty that were greater than 10% of the Company’s equity, other than the U.S. government and its agencies, at both September 30, 2017 and December 31, 2016.

Securities Lending

Elements of the securities lending program are presented below at:



	September 30, 2017		December 31, 2016
	(In millions)
Securities on loan: (1)
Amortized cost	$	3,169	$	5,895
Estimated fair value	$	3,820	$	6,555
Cash collateral received from counterparties (2)	$	3,902	$	6,642
Security collateral received from counterparties (3)	$	—	$	27
Reinvestment portfolio — estimated fair value	$	3,935	$	6,571

__________________


(1)	Included within fixed maturity securities.


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


(3)	Security collateral received 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:



	September 30, 2017								December 31, 2016
	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	$	1,480	$	1,512	$	910	$	3,902	$	2,129	$	1,906	$	1,743	$	5,778
U.S. corporate	—		—		—		—		—		480		—		480
Agency RMBS	—		—		—		—		—		—		274		274
Foreign corporate	—		—		—		—		—		58		—		58
Foreign government	—		—		—		—		—		52		—		52
Total	$	1,480	$	1,512	$	910	$	3,902	$	2,129	$	2,496	$	2,017	$	6,642

__________________


(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 September 30, 2017 was $1.4 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, U.S. and foreign corporate securities, U.S. government and agency securities and non-agency RMBS) with 60% invested in agency RMBS, U.S. government and agency securities, short-term investments, cash equivalents, or held in cash at September 30, 2017. 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 at:



	September 30, 2017		December 31, 2016
	(In millions)
Invested assets on deposit (regulatory deposits)	$	8,093	$	7,644
Invested assets held in trust (reinsurance agreements)	2,511		9,054
Invested assets pledged as collateral	3,933		3,548
Total invested assets on deposit, held in trust and pledged as collateral	$	14,537	$	20,246

__________________

The Company has pledged invested assets in connection with various agreements and transactions, including funding agreements (see Note 5 of the Notes to the Consolidated Financial Statements included in the 2016 Annual Report) and derivative transactions (see Note 6). The Company held in trust certain investments in connection with certain reinsurance transactions. In April 2017, certain assets held in trust were liquidated in connection with the Contribution Transactions discussed in Note 3. Amounts in the table above include invested assets and cash and cash equivalents.

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

Variable Interest Entities

The Company has invested in legal entities 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:



	September 30, 2017				December 31, 2016
	Total Assets		Total Liabilities		Total Assets		Total Liabilities
	(In millions)
MRSC (collateral financing arrangement (primarily securities)) (1)	$	—	$	—	$	3,422	$	—
CSEs (assets (primarily loans) and liabilities (primarily debt)) (2)	120		14		137		24
Total	$	120	$	14	$	3,559	$	24

__________________


(1)	In April 2017, these assets were liquidated in connection with the Contribution Transactions discussed in Note 3.

(2)

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 $87 million and $95 million at estimated fair value at September 30, 2017 and December 31, 2016, 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:



	September 30, 2017				December 31, 2016
	Carrying Amount		Maximum Exposure to Loss (1)		Carrying Amount		Maximum Exposure to Loss (1)
	(In millions)
Fixed maturity securities AFS:
Structured Securities (2)	$	11,148	$	11,148	$	12,809	$	12,809
U.S. and foreign corporate	498		498		536		536
Other limited partnership interests	1,490		2,391		1,491		2,287
Other investments (3)	77		86		77		88
Total	$	13,213	$	14,123	$	14,913	$	15,720

__________________

(1)

The maximum exposure to loss relating to fixed maturity 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 at both September 30, 2017 and December 31, 2016. 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 real estate joint ventures, other invested assets and non-redeemable preferred stock.

As described in Note 11, 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 both the three months and nine months ended September 30, 2017 and 2016.

Net Investment Income

The components of net investment income were as follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
	(In millions)
Investment income:
Fixed maturity securities	$	582	$	670	$	1,756	$	1,945
Equity securities	3		6		10		16
Mortgage loans	111		94		329		292
Policy loans	12		13		35		42
Real estate and real estate joint ventures	13		10		39		25
Other limited partnership interests	38		79		143		120
Cash, cash equivalents and short-term investments	8		5		25		14
Other	9		6		21		15
Subtotal	776		883		2,358		2,469
Less: Investment expenses	46		44		133		128
Subtotal, net	730		839		2,225		2,341
FVO CSEs — interest income — commercial mortgage loans	2		3		6		8
Net investment income	$	732	$	842	$	2,231	$	2,349

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

See “— Related Party Investment Transactions” for discussion of related party investment expenses.

Net Investment Gains (Losses)

Components of Net Investment Gains (Losses)

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



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
	(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	$	—		$	—		$	—		$	(16	)
Total U.S. and foreign corporate securities	—			—			—			(16		)
RMBS	—			(4		)	—			(6		)
State and political subdivision	—			—			(1		)	—
OTTI losses on fixed maturity securities recognized in earnings	—			(4		)	(1		)	(22		)
Fixed maturity securities — net gains (losses) on sales and disposals	21			47			(15		)	30
Total gains (losses) on fixed maturity securities	21			43			(16		)	8
Total gains (losses) on equity securities:
Total OTTI losses recognized — by sector:
Common stock	—			—			—			(1		)
OTTI losses on equity securities recognized in earnings	—			—			—			(1		)
Equity securities — net gains (losses) on sales and disposals	3			4			4			8
Total gains (losses) on equity securities	3			4			4			7
Mortgage loans	(2		)	10			(7		)	4
Real estate and real estate joint ventures	1			(33		)	4			(34		)
Other limited partnership interests	—			(1		)	(10		)	(7		)
Other	(1		)	5			(6		)	11
Subtotal	22			28			(31		)	(11		)
FVO CSEs:
Commercial mortgage loans	(1		)	(3		)	(2		)	(3		)
Long-term debt — related to commercial mortgage loans	—			1			—			1
Non-investment portfolio gains (losses)	—			—			(1		)	(1		)
Subtotal	(1		)	(2		)	(3		)	(3		)
Total net investment gains (losses)	$	21		$	26		$	(34	)	$	(14	)

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

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

Gains (losses) from foreign currency transactions included within net investment gains (losses) were $0 and ($5) million for the three months and nine months ended September 30, 2017, respectively, and $4 million and $9 million for the three months and nine months ended September 30, 2016, 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.



	Three Months Ended September 30,
	2017			2016			2017		2016
	Fixed Maturity Securities						Equity Securities
	(In millions)
Proceeds	$	4,711		$	8,389		$	16	$	35
Gross investment gains	$	30		$	78		$	3	$	4
Gross investment losses	(9		)	(31		)	—		—
OTTI losses	—			(4		)	—		—
Net investment gains (losses)	$	21		$	43		$	3	$	4



	Nine Months Ended September 30,
	2017			2016			2017			2016
	Fixed Maturity Securities						Equity Securities
	(In millions)
Proceeds	$	9,074		$	23,168		$	29		$	41
Gross investment gains	$	50		$	165		$	5		$	8
Gross investment losses	(65		)	(135		)	(1		)	—
OTTI losses	(1		)	(22		)	—			(1		)
Net investment gains (losses)	$	(16	)	$	8		$	4		$	7

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:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
	(In millions)
Balance, beginning of period	$	9		$	60		$	28		$	66
Additions:
Additional impairments — credit loss OTTI on securities previously impaired	—			3			—			5
Reductions:
Sales (maturities, pay downs or prepayments) of securities previously impaired as credit loss OTTI	(8		)	(7		)	(27		)	(15		)
Balance, end of period	$	1		$	56		$	1		$	56

Related Party Investment Transactions

The Company previously transferred invested assets, primarily consisting of fixed maturity securities, to and from former affiliates, which were as follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017			2016
	(In millions)
Estimated fair value of invested assets transferred to former affiliates	$	—	$	574	$	292		$	732
Amortized cost of invested assets transferred to former affiliates	$	—	$	539	$	294		$	657
Net investment gains (losses) recognized on transfers	$	—	$	13	$	(2	)	$	13
Change in additional paid-in-capital recognized on transfers	$	—	$	21	$	—		$	62
Estimated fair value of invested assets transferred from former affiliates	$	—	$	484	$	—		$	4,763

In April 2016, the Company received a transfer of investments and cash and cash equivalents of $4.3 billion for the recapture of risks related to certain single premium deferred annuity contracts previously reinsured to Metropolitan Life Insurance Company (“MLIC”), a former affiliate, which are included in the table above. See Note 7 of the Notes to the Consolidated Financial Statements included in the 2016 Annual Report for additional information related to the transfer.

The Company had loans outstanding to MetLife, Inc., which were included in other invested assets, totaling $1.1 billion at December 31, 2016. These loans were carried at fixed interest rates of 4.21% and 5.10%, payable semiannually, and were due on September 30, 2032 and December 31, 2033, respectively. In April 2017, the two loans were repaid. See Notes 3 and 8.

The Company receives investment administrative services from MLIC. The related investment administrative service charges were $22 million and $70 million for the three months and nine months ended September 30, 2017, respectively, and $25 million and $72 million for the three months and nine months ended September 30, 2016, respectively.

In January 2017, MLIC recaptured risks related to guaranteed minimum benefit guarantees on certain variable annuities being reinsured by the Company. The Company transferred investments and cash and cash equivalents which are included in the table above. See Note 12 for additional information related to the transfer.

In March 2017, the Company sold an operating joint venture with a book value of $89 million to MLIC for $286 million. The operating joint venture was accounted for under the equity method and included in other invested assets. This sale resulted in an increase in additional paid-in capital of $202 million in the first quarter of 2017.

Investments

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



	Nine Months Ended September 30,
	2017								2016
	Commercial		Agricultural		Residential		Total		Commercial		Agricultural		Residential		Total
	(In millions)
Balance, beginning of period	$	32	$	5	$	3	$	40	$	28	$	5	$	3	$	36
Provision (release)	2		1		1		4		4		—		2		6
Balance, end of period	$	34	$	6	$	4	$	44	$	32	$	5	$	5	$	42

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 $787 million and $4.7 billion at September 30, 2017 and December 31, 2016, respectively.