Investments

9 Months Ended

Sep. 30, 2019

Investments, Debt and Equity Securities [Abstract]

Investments

Investments

Fixed Maturities

Available-for-sale and fair value option ("FVO") fixed maturities were as follows as of September 30, 2019:

	Amortized Cost		Gross Unrealized Capital Gains		Gross Unrealized Capital Losses		Embedded Derivatives(2)		Fair Value		OTTI(3)(4)
Fixed maturities:
U.S. Treasuries	$	564	$	152	$	—	$	—	$	716	$	—
U.S. Government agencies and authorities	19		—		—		—		19		—
State, municipalities and political subdivisions	750		89		—		—		839		—
U.S. corporate public securities	7,219		945		29		—		8,135		—
U.S. corporate private securities	3,742		325		20		—		4,047		—
Foreign corporate public securities and foreign governments(1)	2,453		263		11		—		2,705		—
Foreign corporate private securities(1)	3,151		188		8		—		3,331		—
Residential mortgage-backed securities	3,674		151		15		12		3,822		3
Commercial mortgage-backed securities	2,195		178		—		—		2,373		—
Other asset-backed securities	1,509		20		17		—		1,512		1
Total fixed maturities, including securities pledged	25,276		2,311		100		12		27,499		4
Less: Securities pledged	860		127		8		—		979		—
Total fixed maturities	$	24,416	$	2,184	$	92	$	12	$	26,520	$	4

⁽¹⁾ Primarily U.S. dollar denominated.

⁽²⁾ Embedded derivatives within fixed maturity securities are reported with the host investment. The changes in fair value of embedded derivatives are reported in Other net realized capital gains (losses) in the Condensed Consolidated Statements of Operations.

⁽³⁾ Represents Other-than-Temporary-Impairments ("OTTI") reported as a component of Other comprehensive income (loss).

⁽⁴⁾ Amount excludes $214 of net unrealized gains on impaired available-for-sale securities.

Available-for-sale and FVO fixed maturities were as follows as of December 31, 2018:

	Amortized Cost		Gross Unrealized Capital Gains		Gross Unrealized Capital Losses		Embedded Derivatives(2)		Fair Value		OTTI(3)(4)
Fixed maturities:
U.S. Treasuries	$	651	$	87	$	—	$	—	$	738	$	—
State, municipalities and political subdivisions	754		18		8		—		764		—
U.S. corporate public securities	7,908		288		181		—		8,015		—
U.S. corporate private securities	3,686		73		106		—		3,653		—
Foreign corporate public securities and foreign governments(1)	2,551		69		80		—		2,540		—
Foreign corporate private securities(1)	3,235		37		97		—		3,175		—
Residential mortgage-backed securities	2,966		93		32		9		3,036		3
Commercial mortgage-backed securities	1,917		16		28		—		1,905		—
Other asset-backed securities	1,230		6		28		—		1,208		2
Total fixed maturities, including securities pledged	24,898		687		560		9		25,034		5
Less: Securities pledged	867		45		30		—		882		—
Total fixed maturities	$	24,031	$	642	$	530	$	9	$	24,152	$	5

⁽¹⁾ Primarily U.S. dollar denominated.

⁽²⁾ Embedded derivatives within fixed maturity securities are reported with the host investment. The changes in fair value of embedded derivatives are reported in Other net realized capital gains (losses) in the Condensed Consolidated Statements of Operations.

⁽³⁾ Represents OTTI reported as a component of Other comprehensive income (loss).

⁽⁴⁾ Amount excludes $137 of net unrealized gains on impaired available-for-sale securities.

The amortized cost and fair value of fixed maturities, including securities pledged, as of September 30, 2019, are shown below by contractual maturity. Actual maturities may differ from contractual maturities as securities may be restructured, called or prepaid. Mortgage-backed securities ("MBS") and Other asset-backed securities ("ABS") are shown separately because they are not due at a single maturity date.

	Amortized Cost		Fair Value
Due to mature:
One year or less	$	483	$	488
After one year through five years	3,741		3,892
After five years through ten years	5,531		5,935
After ten years	8,143		9,477
Mortgage-backed securities	5,869		6,195
Other asset-backed securities	1,509		1,512
Fixed maturities, including securities pledged	$	25,276	$	27,499

The investment portfolio is monitored to maintain a diversified portfolio on an ongoing basis. Credit risk is mitigated by monitoring concentrations by issuer, sector and geographic stratification and limiting exposure to any one issuer. 

As of September 30, 2019 and December 31, 2018, the Company did not have any investments in a single issuer, other than obligations of the U.S. Government and government agencies, with a carrying value in excess of 10% of the Company's Total shareholder's equity.

The following tables present the composition of the U.S. and foreign corporate securities within the fixed maturity portfolio by industry category as of the dates indicated:

	Amortized Cost		Gross Unrealized Capital Gains		Gross Unrealized Capital Losses		Fair Value
September 30, 2019
Communications	$	1,026	$	153	$	—	$	1,179
Financial	2,614		281		1		2,894
Industrial and other companies	7,150		680		21		7,809
Energy	1,710		191		36		1,865
Utilities	2,888		304		5		3,187
Transportation	846		78		2		922
Total	$	16,234	$	1,687	$	65	$	17,856
December 31, 2018
Communications	$	1,139	$	55	$	21	$	1,173
Financial	2,707		101		47		2,761
Industrial and other companies	7,604		152		214		7,542
Energy	1,884		55		81		1,858
Utilities	2,974		80		74		2,980
Transportation	729		14		17		726
Total	$	17,037	$	457	$	454	$	17,040

The Company has elected the FVO for certain of its fixed maturities to better match the measurement of assets and liabilities in the Condensed Consolidated Statements of Operations. Certain collateralized mortgage obligations ("CMOs"), primarily interest-only and principal-only strips, are accounted for as hybrid instruments and reported at fair value with changes in the fair value recorded in Other net realized capital gains (losses) in the Condensed Consolidated Statements of Operations.

The Company invests in various categories of CMOs, including CMOs that are not agency-backed, that are subject to different degrees of risk from changes in interest rates and defaults. The principal risks inherent in holding CMOs are prepayment and extension risks related to significant decreases and increases in interest rates resulting in the prepayment of principal from the underlying mortgages, either earlier or later than originally anticipated. As of September 30, 2019 and December 31, 2018, approximately 48.7% and 52.5%, respectively, of the Company’s CMO holdings, were invested in the above mentioned types of CMOs such as interest-only or principal-only strips, that are subject to more prepayment and extension risk than traditional CMOs.

Public corporate fixed maturity securities are distinguished from private corporate fixed maturity securities based upon the manner in which they are transacted. Public corporate fixed maturity securities are issued initially through market intermediaries on a registered basis or pursuant to Rule 144A under the Securities Act of 1933 (the "Securities Act") and are traded on the secondary market through brokers acting as principal. Private corporate fixed maturity securities are originally issued by borrowers directly to investors pursuant to Section 4(a)(2) of the Securities Act, and are traded in the secondary market directly with counterparties, either without the participation of a broker or in agency transactions.

Repurchase Agreements

As of September 30, 2019 and December 31, 2018, the Company did not have any securities pledged in dollar rolls, repurchase agreement transactions or reverse repurchase agreements.

Securities Lending

The Company engages in securities lending whereby the initial collateral is required at a rate of 102% of the market value of the loaned securities.  The lending agent retains the collateral and invests it in high quality liquid assets on behalf of the Company. The market value of the loaned securities is monitored on a daily basis with additional collateral obtained or refunded as the market value of the loaned securities fluctuates. The lending agent indemnifies the Company against losses resulting from the failure of a counterparty to return securities pledged where collateral is insufficient to cover the loss. As of September 30, 2019 and December 31, 2018, the fair value of loaned securities was $851 and $759, respectively, and is included in Securities pledged on the Condensed Consolidated Balance Sheets.

If cash is received as collateral, the lending agent retains the cash collateral and invests it in short-term liquid assets on behalf of the Company. As of September 30, 2019 and December 31, 2018, cash collateral retained by the lending agent and invested in short-term liquid assets on the Company's behalf was $712 and $719, respectively, and is recorded in Short-term investments under securities loan agreements, including collateral delivered on the Condensed Consolidated Balance Sheets. As of September 30, 2019 and December 31, 2018, liabilities to return collateral of $712 and $719, respectively, are included in Payables under securities loan agreements, including collateral held, on the Condensed Consolidated Balance Sheets.

The Company accepts non-cash collateral in the form of securities. The securities retained as collateral by the lending agent may not be sold or re-pledged, except in the event of default, and are not reflected on the Company’s Condensed Consolidated Balance Sheets. This collateral generally consists of U.S. Treasury, U.S. Government agency securities and MBS pools. As of September 30, 2019 and December 31, 2018, the fair value of securities retained as collateral by the lending agent on the Company’s behalf was $170 and $67, respectively.

The following table presents borrowings under securities lending transactions by asset class pledged as of the dates indicated:

	September 30, 2019 (1)(2)		December 31, 2018 (1)(2)
U.S. Treasuries	$	172	$	92
U.S. corporate public securities	480		523
Short-term Investments	51		—
Foreign corporate public securities and foreign governments	179		170
Equity Securities	—		1
Payables under securities loan agreements	$	882	$	786

⁽¹⁾ As of September 30, 2019 and December 31, 2018, borrowings under securities lending transactions include cash collateral of $712 and $719, respectively.

⁽²⁾ As of September 30, 2019 and December 31, 2018, borrowings under securities lending transactions include non-cash collateral of $170 and $67, respectively.

The Company's securities lending activities are conducted on an overnight basis, and all securities loaned can be recalled at any time. The Company does not offset assets and liabilities associated with its securities lending program.

Variable Interest Entities ("VIEs")

The Company holds certain VIEs for investment purposes. VIEs may be in the form of private placement securities, structured securities, securitization transactions or limited partnerships. The Company has reviewed each of its holdings and determined that consolidation of these investments in the Company’s financial statements is not required, as the Company is not the primary beneficiary, because the Company does not have both the power to direct the activities that most significantly impact the entity’s economic performance and the obligation or right to potentially significant losses or benefits, for any of its investments in VIEs. The Company did not provide any non-contractual financial support and its carrying value represents the Company’s exposure to loss. The carrying value of the investments in VIEs was $702 and $583 as of September 30, 2019 and December 31, 2018, respectively; these investments are included in Limited partnerships/corporations on the Condensed Consolidated Balance Sheets. Income and losses recognized on these investments are reported in Net investment income in the Condensed Consolidated Statements of Operations.

Securitizations

The Company invests in various tranches of securitization entities, including Residential mortgage-backed securities ("RMBS"), Commercial mortgage-backed securities ("CMBS") and ABS. Through its investments, the Company is not obligated to provide any financial or other support to these entities. Each of the RMBS, CMBS and ABS entities are thinly capitalized by design and considered VIEs. The Company's involvement with these entities is limited to that of a passive investor. The Company has no unilateral right to appoint or remove the servicer, special servicer or investment manager, which are generally viewed to have the power to direct the activities that most significantly impact the securitization entities' economic performance, in any of these entities, nor does the Company function in any of these roles. The Company, through its investments or other arrangements, does not have the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the entity. Therefore, the Company is not the primary beneficiary and does not consolidate any of the RMBS, CMBS and ABS entities in which it holds investments. These investments are accounted for as investments available-for-sale as described in the Fair Value Measurements Note to these Condensed Consolidated Financial Statements and unrealized capital gains (losses) on these securities are recorded directly in AOCI, except for certain RMBS that are accounted for under the FVO, for which changes in fair value are reflected in Other net realized capital gains (losses) in the Condensed Consolidated Statements of Operations. The Company’s maximum exposure to loss on these structured investments is limited to the amount of its investment.

Unrealized Capital Losses

Unrealized capital losses (including noncredit impairments), along with the fair value of fixed maturity securities, including securities pledged, by market sector and duration were as follows as of September 30, 2019:

	Twelve Months or Less Below Amortized Cost					More Than Twelve Months Below Amortized Cost					Total
	Fair Value		Unrealized Capital Losses			Fair Value		Unrealized Capital Losses			Fair Value		Unrealized Capital Losses
U.S. Treasuries	$	—	$	—		$	13	$	—	*	$	13	$	—	*
State, municipalities and political subdivisions	—		—		*	—					—		—
U.S. corporate public securities	175		3			176		26			351		29
U.S. corporate private securities	148		3			97		17			245		20
Foreign corporate public securities and foreign governments	24		—			92		11			116		11
Foreign corporate private securities	73		2			183		6			256		8
Residential mortgage-backed	695		11			103		4			798		15
Commercial mortgage-backed	99		—			5		—			104		—
Other asset-backed	394		5			376		12			770		17
Total	$	1,608	$	24		$	1,045	$	76		$	2,653	$	100
Total number of securities in an unrealized loss position	318					271					589

*Less than $1.

Unrealized capital losses (including noncredit impairments), along with the fair value of fixed maturity securities, including securities pledged, by market sector and duration were as follows as of December 31, 2018:

	Twelve Months or Less Below Amortized Cost				More Than Twelve Months Below Amortized Cost					Total
	Fair Value		Unrealized Capital Losses		Fair Value		Unrealized Capital Losses			Fair Value		Unrealized Capital Losses
U.S. Treasuries	$	—	$	—	$	15	$	—	*	$	15	$	—	*
State, municipalities and political subdivisions	191		3		88		5			279		8
U.S. corporate public securities	3,060		131		535		50			3,595		181
U.S. corporate private securities	1,502		40		579		66			2,081		106
Foreign corporate public securities and foreign governments	1,159		54		169		26			1,328		80
Foreign corporate private securities	1,504		77		221		20			1,725		97
Residential mortgage-backed	560		11		412		21			972		32
Commercial mortgage-backed	865		16		312		12			1,177		28
Other asset-backed	892		27		61		1			953		28
Total	$	9,733	$	359	$	2,392	$	201		$	12,125	$	560
Total number of securities in an unrealized loss position	1,894				550					2,444

*Less than $1.

Based on the Company's quarterly evaluation of its securities in a unrealized loss position, described below, the Company concluded that these securities were not other-than-temporarily impaired as of September 30, 2019. The Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases.

On a quarterly basis, the Company evaluates its available-for-sale investment portfolio to determine whether there has been an other-than-temporary decline in fair value below the amortized cost basis. All available-for-sale securities with fair values less than amortized cost are included in the Company’s evaluation. Generally, for non-structured securities, management considers the estimated fair value as 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 consideration utilized in its overall impairment evaluation process, which incorporates available information and the Company’s best estimate of scenario based outcomes regarding the specific security and issuer. The Company also considers quality and amount of any credit enhancement; the security's position within the capital structure of the issuer; fundamentals of the industry and geographic area in which the security issuer operates; and the overall macroeconomic conditions. For structured securities, such as non-agency RMBS, CMBS, and ABS, the Company evaluates other-than-temporary impairments based on actual and projected cash flows, after considering the quality and updated loan-to-value ratios, reflecting current home prices of the underlying collateral, forecasted loss severity, the payment priority in the tranche and any credit enhancement within the structure. In assessing credit impairment, the Company performs discounted cash flow analysis comparing the current amortized cost of a security to the present value of the expected future cash flows, including estimated defaults, and prepayments. The discount rate is generally the effective interest rate of the fixed maturity prior to the impairment.

See the Business, Basis of Presentation and Significant Accounting Policies Note to our Consolidated Financial Statements in Part II, Item 8. in our Annual Report on Form 10-K for the policy used to evaluate whether the investments are other-than-temporarily impaired.

Gross unrealized capital losses on fixed maturities, including securities pledged, decreased $460 from $560 to $100 for the nine months ended September 30, 2019. The decrease in gross unrealized capital losses was primarily due to declining interest rates.

At September 30, 2019, $30 of the total $100 of gross unrealized losses were from 6 available-for-sale fixed maturity securities with an unrealized loss position of 20% or more of amortized cost for 12 months or greater.

Evaluating Securities for Other-Than-Temporary Impairments

The Company performs a regular evaluation, on a security-by-security basis, of its available-for-sale securities holdings, including fixed maturity securities in accordance with its impairment policy in order to evaluate whether such investments are other-than-temporarily impaired.

The following tables identify the Company's impairments included in the Condensed Consolidated Statements of Operations, excluding impairments included in Other comprehensive income (loss) by type for the periods indicated:

	Three Months Ended September 30,
	2019				2018
	Impairment			No. of Securities	Impairment		No. of Securities
U.S. corporate public securities	$	—		—	$	5	2
Foreign corporate public securities and foreign governments(1)	1		*	2	$	—	—
Foreign corporate private securities(1)	—		*	1	—		—
Residential mortgage-backed	2			11	1		20
Other asset-backed	—		*	1	—		—
Total	$	3		15	$	6	22
Credit Impairments	$	1
Intent Impairments	$	2
(1) Primarily U.S. dollar denominated.
*Less than $1.
	Nine Months Ended September 30,
	2019				2018
	Impairment			No. of Securities	Impairment		No. of Securities
U.S. corporate public securities	$	—		—	$	5	2
Foreign corporate public securities and foreign governments(1)	2			3	—		—
Foreign corporate private securities(1)	18			4	9		1
Residential mortgage-backed	2			21	2		40
Other asset-backed	—		*	4	—		—
Total	$	22		32	$	16	43
Credit Impairments	$	19
Intent Impairments	$	3
(1) Primarily U.S. dollar denominated.
*Less than $1.

The Company may sell securities during the period in which fair value has declined below amortized cost for fixed maturities. In certain situations, new factors, including changes in the business environment, can change the Company’s previous intent to continue holding a security. Accordingly, these factors may lead the Company to record additional intent related capital losses.

The following tables present the amount of credit impairments on fixed maturities for which a portion of the OTTI loss was recognized in Other comprehensive income (loss) and the corresponding changes in such amounts for the periods indicated:

	Three Months Ended September 30,
	2019		2018
Balance at July 1	$	5	$	5
Additional credit impairments:
On securities not previously impaired	—		—
On securities previously impaired	—		1
Reductions:
Securities intent impaired	—		—
Increase in cash flows	—		—
Securities sold, matured, prepaid or paid down	1		1
Balance at September 30	$	4	$	5
	Nine Months Ended September 30,
	2019		2018
Balance at January 1	$	5	$	16
Additional credit impairments:
On securities previously impaired	—		1
Reductions:
Increase in cash flows	—		—
Securities sold, matured, prepaid or paid down	1		12
Balance at September 30	$	4	$	5

Troubled Debt Restructuring

The Company invests in high quality, well performing portfolios of commercial mortgage loans and private placements. Under certain circumstances, modifications are granted to these contracts. Each modification is evaluated as to whether a troubled debt restructuring has occurred. A modification is a troubled debt restructuring when the borrower is in financial difficulty and the creditor makes concessions. Generally, the types of concessions may include reducing the face amount or maturity amount of the debt as originally stated, reducing the contractual interest rate, extending the maturity date at an interest rate lower than current market interest rates and/or reducing accrued interest. The Company considers the amount, timing and extent of the concession granted in determining any impairment or changes in the specific valuation allowance recorded in connection with the troubled debt restructuring. A valuation allowance may have been recorded prior to the quarter when the loan is modified in a troubled debt restructuring. Accordingly, the carrying value (net of the specific valuation allowance) before and after modification through a troubled debt restructuring may not change significantly, or may increase if the expected recovery is higher than the pre-modification recovery assessment. For the three and nine months ended September 30, 2019, the Company had one new commercial mortgage loan troubled debt restructuring with a pre-modification and post-modification carrying value of $2. For the three months ended September 30, 2019, the Company did not have any new private placement troubled debt restructuring. For the nine months ended September 30, 2019, the Company had one new private placement troubled debt restructuring with a pre-modification cost basis of $74 and post-modification carrying value of $54. For the three and nine months ended September 30, 2018, the Company did not have any new commercial mortgage loan or private placement troubled debt restructuring.

For the three and nine months ended September 30, 2019 and September 30, 2018, the Company did not have any commercial mortgage loans or private placements modified in a troubled debt restructuring with a subsequent payment default.

Mortgage Loans on Real Estate

The Company diversifies its commercial mortgage loan portfolio by geographic region and property type to reduce concentration risk. The Company manages risk when originating commercial mortgage loans by generally lending only up to 75% of the estimated fair value of the underlying real estate. Subsequently, the Company continuously evaluates mortgage loans based on relevant current information including a review of loan-specific credit quality, property characteristics and market trends. Loan performance is monitored on a loan specific basis through the review of submitted appraisals, operating statements, rent revenues and annual inspection reports, among other items. This review ensures properties are performing at a consistent and acceptable level to secure the debt. The components to evaluate debt service coverage are received and reviewed at least annually to determine the level of risk.

The following table summarizes the Company's investment in mortgage loans as of the dates indicated:

	September 30, 2019						December 31, 2018
	Impaired		Non Impaired		Total		Impaired		Non Impaired			Total
Commercial mortgage loans	$	4	$	4,678	$	4,682	$	4	$	4,915		$	4,919
Collective valuation allowance for losses	—		—		—		N/A		(1		)	(1		)
Total net commercial mortgage loans	$	4	$	4,678	$	4,682	$	4	$	4,914		$	4,918
N/A- Not Applicable

There were no impairments on the mortgage loan portfolio for the three months ended September 30, 2019. There was one impairment of $2 on the mortgage loan portfolio for the nine months ended September 30, 2019. There were no impairments on the mortgage loan portfolio for the three and nine months ended September 30, 2018.

The following table summarizes the activity in the allowance for losses for commercial mortgage loans for the periods indicated:

	September 30, 2019			December 31, 2018
Collective valuation allowance for losses, balance at January 1	$	1		$	1
Addition to (reduction of) allowance for losses	(1		)	—
Collective valuation allowance for losses, end of period	$	—		$	1

The carrying values and unpaid principal balances of impaired mortgage loans were as follows as of the dates indicated:

	September 30, 2019		December 31, 2018
Impaired loans, gross	$	4	$	4
Less: Allowances for losses on impaired loans	—		—
Impaired loans, net	$	4	$	4
Unpaid principal balance of impaired loans	$	5	$	5

As of September 30, 2019 and December 31, 2018 the Company did not have any impaired loans with allowances for losses.

Commercial loans are placed on non-accrual status when 90 days in arrears if the Company has concerns regarding the collectability of future payments, or if a loan has matured without being paid off or extended.

As of September 30, 2019 and December 31, 2018, the Company had no loan greater than 60 days in arrears and there were no mortgage loans in the Company's portfolio in process of foreclosure. The Company foreclosed on one loan during the nine months ended September 30, 2019 with a carrying value of $4.

The following tables present information on the average investment during the period in impaired loans and interest income recognized on impaired and troubled debt restructured loans for the periods indicated:

	Three Months Ended September 30,
	2019		2018
Impaired loans, average investment during the period (amortized cost)(1)	$	4	$	4
Interest income recognized on impaired loans, on an accrual basis(1)	—		—
Interest income recognized on impaired loans, on a cash basis(1)	—		—
Interest income recognized on troubled debt restructured loans, on an accrual basis	—		—
(1)Includes amounts for Troubled debt restructured loans.
	Nine Months Ended September 30,
	2019		2018
Impaired loans, average investment during the period (amortized cost)(1)	$	6	$	4
Interest income recognized on impaired loans, on an accrual basis(1)	—		—
Interest income recognized on impaired loans, on a cash basis(1)	—		—
Interest income recognized on troubled debt restructured loans, on an accrual basis	—		—
(1)Includes amounts for Troubled debt restructured loans.

Loan-to-value ("LTV") and debt service coverage ("DSC") ratios are measures commonly used to assess the risk and quality of mortgage loans. The LTV ratio, calculated at time of origination, is expressed as a percentage of the amount of the loan relative to the value of the underlying property. A LTV ratio in excess of 100% indicates the unpaid loan amount exceeds the underlying collateral. The DSC ratio, based upon the most recently received financial statements, is expressed as a percentage of the amount of a property’s net income to its debt service payments. A DSC ratio of less than 1.0 indicates that a property’s operations do not generate sufficient income to cover debt payments. These ratios are utilized as part of the review process described above.

The following tables present the LTV and DSC ratios as of the dates indicated:

	Recorded Investment
	Debt Service Coverage Ratios
	> 1.5x		>1.25x - 1.5x		>1.0x - 1.25x		< 1.0x		Commercial mortgage loans secured by land or construction loans		Total		% of Total
September 30, 2019 (1)
Loan-to-Value Ratios:
0% - 50%	$	268	$	26	$	8	$	—	$	—	$	302	6.5	%
>50% - 60%	1,087		42		23		28		—		1,180		25.2	%
>60% - 70%	1,887		423		271		100		—		2,681		57.2	%
>70% - 80%	193		139		54		79		8		473		10.1	%
>80% and above	24		22		—		—		—		46		1.0	%
Total	$	3,459	$	652	$	356	$	207	$	8	$	4,682	100.0	%
(1) Balances do not include collective valuation allowance for losses.
	Recorded Investment
	Debt Service Coverage Ratios
	> 1.5x		>1.25x - 1.5x		>1.0x - 1.25x		< 1.0x		Commercial mortgage loans secured by land or construction loans		Total		% of Total
December 31, 2018 (1)
Loan-to-Value Ratios:
0% - 50%	$	284	$	24	$	23	$	—	$	—	$	331	6.7	%
>50% - 60%	1,133		40		11		—		—		1,184		24.1	%
>60% - 70%	2,070		328		503		34		26		2,961		60.2	%
>70% - 80%	213		87		66		19		4		389		7.9	%
>80% and above	18		5		10		—		21		54		1.1	%
Total	$	3,718	$	484	$	613	$	53	$	51	$	4,919	100.0	%
(1) Balances do not include collective valuation allowance for losses.

Properties collateralizing mortgage loans are geographically dispersed throughout the United States, as well as diversified by property type, as reflected in the following tables as of the dates indicated:

	September 30, 2019				December 31, 2018
	Gross Carrying Value		% of Total		Gross Carrying Value		% of Total
Commercial Mortgage Loans by U.S. Region:
Pacific	$	995	21.3	%	$	994	20.2	%
South Atlantic	930		19.9	%	1,011		20.5	%
Middle Atlantic	1,014		21.6	%	1,039		21.2	%
West South Central	507		10.8	%	566		11.5	%
Mountain	471		10.1	%	458		9.3	%
East North Central	393		8.4	%	465		9.5	%
New England	84		1.8	%	75		1.5	%
West North Central	222		4.7	%	258		5.2	%
East South Central	66		1.4	%	53		1.1	%
Total Commercial mortgage loans	$	4,682	100.0	%	$	4,919	100.0	%

	September 30, 2019				December 31, 2018
	Gross Carrying Value		% of Total		Gross Carrying Value		% of Total
Commercial Mortgage Loans by Property Type:
Retail	$	1,211	25.9	%	$	1,335	27.2	%
Industrial	1,278		27.2	%	1,323		26.9	%
Apartments	1,142		24.4	%	1,104		22.4	%
Office	684		14.6	%	791		16.1	%
Hotel/Motel	122		2.6	%	111		2.3	%
Mixed Use	45		1.0	%	46		0.9	%
Other	200		4.3	%	209		4.2	%
Total Commercial mortgage loans	$	4,682	100.0	%	$	4,919	100.0	%

Net Investment Income

The following table summarizes Net investment income for the periods indicated:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Fixed maturities	$	352	$	347	$	1,058	$	1,011
Equity securities	2		2		5		4
Mortgage loans on real estate	54		57		163		164
Policy loans	—		2		4		7
Short-term investments and cash equivalents	1		—		3		2
Other	22		37		55		71
Gross investment income	431		445		1,288		1,259
Less: Investment expenses	18		20		53		55
Net investment income	$	413	$	425	$	1,235	$	1,204

As of September 30, 2019 and December 31, 2018, the Company had $1, respectively, of investments in fixed maturities that did not produce net investment income. Fixed maturities are moved to a non-accrual status when the investment defaults.

Interest income on fixed maturities is recorded when earned using an effective yield method, giving effect to amortization of premiums and accretion of discounts. Such interest income is recorded in Net investment income in the Condensed Consolidated Statements of Operations.

Net Realized Capital Gains (Losses)

Net realized capital gains (losses) comprise the difference between the amortized cost of investments and proceeds from sale and redemption, as well as losses incurred due to the credit-related and intent-related other-than-temporary impairment of investments. Realized investment gains and losses are also primarily generated from changes in fair value of embedded derivatives within products and fixed maturities, changes in fair value of fixed maturities recorded at FVO and changes in fair value including accruals on derivative instruments, except for effective cash flow hedges. Net realized capital gains (losses) also include changes in fair value of equity securities.The cost of the investments on disposal is generally determined based on first-in-first-out ("FIFO") methodology.

Net realized capital gains (losses) were as follows for the periods indicated:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Fixed maturities, available-for-sale, including securities pledged	$	44		$	(9	)	$	31		$	(42	)
Fixed maturities, at fair value option	(18		)	(80		)	59			(261		)
Equity securities	—			(1		)	4			(1		)
Derivatives	13			23			(69		)	34
Embedded derivatives - fixed maturities	2			(1		)	4			(5		)
Guaranteed benefit derivatives	(36		)	24			(49		)	56
Other investments	(1		)	—			(2		)	5
Net realized capital gains (losses)	$	4		$	(44	)	$	(22	)	$	(214	)

For the three and nine months ended September 30, 2019 , the change in fair value of equity securities still held as of September 30, 2019 was $0 and $4, respectively. For the three and nine months ended September 30, 2018, the change in fair value of equity securities still held as of September 30, 2018 was $(1).

Proceeds from the sale of fixed maturities, available-for-sale, and equity securities and the related gross realized gains and losses, before tax, were as follows for the periods indicated:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Proceeds on sales	$	340	$	120	$	1,915	$	1,960
Gross gains	6		1		25		12
Gross losses	4		4		18		31