XML 30 R13.htm IDEA: XBRL DOCUMENT v3.22.2.2
Investments
 9 Months Ended
Sep. 30, 2022
Investments [Abstract]  
Investments
Note 5Investments
Portfolio composition
($ in millions)September 30, 2022December 31, 2021
Fixed income securities, at fair value$41,715 $42,136 
Equity securities, at fair value4,723 7,061 
Mortgage loans, net833 821 
Limited partnership interests 7,907 8,018 
Short-term investments, at fair value4,030 4,009 
Other investments, net1,798 2,656 
Total$61,006 $64,701 
Amortized cost, gross unrealized gains (losses) and fair value for fixed income securities
($ in millions)Amortized cost, netGross unrealized
Fair
value
GainsLosses
September 30, 2022    
U.S. government and agencies$8,756 $1 $(313)$8,444 
Municipal6,486 4 (461)6,029 
Corporate27,614 3 (2,885)24,732 
Foreign government933 — (43)890 
ABS1,679 4 (63)1,620 
Total fixed income securities$45,468 $12 $(3,765)$41,715 
December 31, 2021    
U.S. government and agencies$6,287 $12 $(26)$6,273 
Municipal6,130 279 (16)6,393 
Corporate26,834 688 (192)27,330 
Foreign government982 9 (6)985 
ABS1,143 14 (2)1,155 
Total fixed income securities$41,376 $1,002 $(242)$42,136 
Scheduled maturities for fixed income securities
($ in millions)September 30, 2022December 31, 2021
Amortized cost, net Fair valueAmortized cost, netFair value
Due in one year or less$2,429 $2,398 $1,105 $1,111 
Due after one year through five years26,566 24,992 21,039 21,291 
Due after five years through ten years11,356 9,738 13,808 14,079 
Due after ten years3,438 2,967 4,281 4,500 
 43,789 40,095 40,233 40,981 
ABS1,679 1,620 1,143 1,155 
Total$45,468 $41,715 $41,376 $42,136 
Actual maturities may differ from those scheduled as a result of calls and make-whole payments by the issuers. ABS is shown separately because of potential prepayment of principal prior to contractual maturity dates.
Net investment income
($ in millions)Three months ended September 30,Nine months ended September 30,
2022202120222021
Fixed income securities$323 $279 $889 $870 
Equity securities30 24 100 51 
Mortgage loans8 9 25 31 
Limited partnership interests325 438 841 1,467 
Short-term investments30 1 42 3 
Other investments38 50 120 139 
Investment income, before expense754 801 2,017 2,561 
Investment expense(64)(37)(171)(115)
Net investment income
$690 $764 $1,846 $2,446 
Net gains (losses) on investments and derivatives by asset type
($ in millions)Three months ended September 30,Nine months ended September 30,
2022202120222021
Fixed income securities$(166)$86 $(644)$355 
Equity securities(239)6 (1,222)322 
Mortgage loans1 — — 19 
Limited partnership interests(49)(15)(224)1 
Derivatives299 46 889 54 
Other investments(13)(18)34 67 
Net gains (losses) on investments and derivatives$(167)$105 $(1,167)$818 
Net gains (losses) on investments and derivatives by transaction type
($ in millions)
Three months ended September 30,Nine months ended September 30,
2022202120222021
Sales$(175)$80 $(605)$441 
Credit losses(6)(12)(30)2 
Valuation change of equity investments (1)
(285)(9)(1,421)321 
Valuation change and settlements of derivatives299 46 889 54 
Net gains (losses) on investments and derivatives$(167)$105 $(1,167)$818 
(1)Includes valuation change of equity securities and certain limited partnership interests where the underlying assets are predominately public equity securities.
Gross realized gains (losses) on sales of fixed income securities
($ in millions)Three months ended September 30,Nine months ended September 30,
2022202120222021
Gross realized gains$19 $104 $112 $460 
Gross realized losses (181)(18)(748)(106)
The following table presents the net pre-tax appreciation (decline) recognized in net income of equity securities and limited partnership interests carried at fair value that are still held as of September 30, 2022 and 2021, respectively.
Net appreciation (decline) recognized in net income
($ in millions)Three months ended September 30,Nine months ended September 30,
2022202120222021
Equity securities$(209)$(20)$(771)$170 
Limited partnership interests carried at fair value
(36)137 8 415 
Total$(245)$117 $(763)$585 
Credit losses recognized in net income
($ in millions)Three months ended September 30,Nine months ended September 30,
2022202120222021
Assets
Fixed income securities:    
Corporate$(2)$— $(6)$— 
ABS(2)— (2)1 
Total fixed income securities(4)— (8)1 
Mortgage loans1 — — 17 
Limited partnership interests(1)— (4)— 
Other investments
Bank loans(2)(13)(18)(16)
Agent loans— 1 — — 
Total credit losses by asset type$(6)$(12)$(30)$2 
Liabilities
Commitments to fund commercial mortgage loans and bank loans— — — — 
Total $(6)$(12)$(30)$2 
Unrealized net capital gains and losses included in AOCI
($ in millions)
Fair
value
Gross unrealized
Unrealized net
gains (losses)
September 30, 2022GainsLosses
Fixed income securities$41,715 $12 $(3,765)$(3,753)
Short-term investments4,030 — (1)(1)
Derivative instruments— — (3)(3)
Equity method of accounting (“EMA”) limited partnerships (1)
   7 
Unrealized net capital gains and losses, pre-tax   (3,750)
Other unrealized net capital gains and losses, pre-tax (2)
   32 
Deferred income taxes   791 
Unrealized net capital gains and losses, after-tax   $(2,927)
December 31, 2021
Fixed income securities$42,136 $1,002 $(242)$760 
Short-term investments4,009 — — — 
Derivative instruments — — (3)(3)
EMA limited partnerships (1)
 
 
 
(1)
Unrealized net capital gains and losses, pre-tax   756 
Other unrealized net capital gains and losses, pre-tax (2)
   5 
Deferred income taxes   (163)
Unrealized net capital gains and losses, after-tax   $598 
(1)Unrealized net capital gains and losses for limited partnership interests represent the Company’s share of EMA limited partnerships’ OCI. Fair value and gross unrealized gains and losses are not applicable.
(2)Includes amounts recognized for the reclassification of unrealized gains and losses related to noncontrolling interest and the amount by which the amortization of DAC would increase or decrease if the unrealized gains or losses in the respective product portfolios were realized.
Change in unrealized net capital gains (losses)
($ in millions)Nine months ended September 30, 2022
Fixed income securities$(4,513)
Short-term investments(1)
Derivative instruments— 
EMA limited partnerships8 
Total(4,506)
Other unrealized net capital gains and losses, pre-tax27 
Deferred income taxes954 
Decrease in unrealized net capital gains and losses, after-tax$(3,525)
Carrying value for limited partnership interests
($ in millions)September 30, 2022December 31, 2021
EMAFair ValueTotalEMAFair ValueTotal
Private equity$5,287 $1,280 $6,567 $4,905 $1,434 $6,339 
Real estate881 38 919 823 97 920 
Other (1)
421 — 421 759 — 759 
Total$6,589 $1,318 $7,907 $6,487 $1,531 $8,018 
(1)Other consists of certain limited partnership interests where the underlying assets are predominately public equity and debt securities.
Short-term investments Short-term investments, including money market funds, commercial paper, U.S. Treasury bills and other short-term investments, are carried at fair value. As of September 30, 2022 and December 31, 2021, the fair value of short-term investments totaled $4.03 billion and $4.01 billion, respectively.
Other investments Other investments primarily consist of bank loans, real estate, policy loans and derivatives. Bank loans are primarily senior secured corporate loans and are carried at amortized cost, net. Policy loans are carried at unpaid principal balances. Real estate is carried at cost less accumulated depreciation. Derivatives are carried at fair value.
Other investments by asset type
($ in millions)September 30, 2022December 31, 2021
Bank loans, net$748 $1,574 
Real estate774 809 
Policy loans119 148 
Derivatives48 12 
Other109 113 
Total$1,798 $2,656 
Portfolio monitoring and credit losses
Fixed income securities The Company has a comprehensive portfolio monitoring process to identify and evaluate each fixed income security that may require a credit loss allowance.
For each fixed income security in an unrealized loss position, the Company assesses whether management with the appropriate authority has made the decision to sell or whether it is more likely than not the Company will be required to sell the security before recovery of the amortized cost basis for reasons such as liquidity, contractual or regulatory purposes. If a security meets either of these criteria, any existing credit loss allowance would be written-off against the amortized cost basis of the asset along with any remaining unrealized losses, with incremental losses recorded in earnings.
If the Company has not made the decision to sell the fixed income security and it is not more likely than not the Company will be required to sell the fixed income security before recovery of its amortized cost basis, the Company evaluates whether it expects to receive cash flows sufficient to recover the entire amortized cost basis of the security. The Company calculates the estimated recovery value based on the best estimate of future cash flows considering past events, current conditions and reasonable and supportable forecasts. The estimated future cash flows are discounted at the security’s current effective rate and is compared to the amortized cost of the security.
The determination of cash flow estimates is inherently subjective, and methodologies may vary depending on facts and circumstances specific to the security. All reasonably available information relevant
to the collectability of the security is considered when developing the estimate of cash flows expected to be collected. That information generally includes, but is not limited to, the remaining payment terms of the security, prepayment speeds, the financial condition and future earnings potential of the issue or issuer, expected defaults, expected recoveries, the value of underlying collateral, origination vintage year, geographic concentration of underlying collateral, available reserves or escrows, current subordination levels, third-party guarantees and other credit enhancements. Other information, such as industry analyst reports and forecasts, credit ratings, financial condition of the bond insurer for insured fixed income securities, and other market data relevant to the realizability of contractual cash flows, may also be considered. The estimated fair value of collateral will be used to estimate recovery value if the Company determines that the security is dependent on the liquidation of collateral for ultimate settlement.
If the Company does not expect to receive cash flows sufficient to recover the entire amortized cost basis of the fixed income security, a credit loss allowance is recorded in earnings for the shortfall in expected cash flows; however, the amortized cost, net of the credit loss allowance, may not be lower than the fair value of the security. The portion of the unrealized loss related to factors other than credit remains classified in AOCI. If the Company determines that the fixed income security does not have sufficient cash flow or other information to estimate a recovery value for the security, the Company may conclude that the entire decline in fair value is deemed to be credit related and the loss is recorded in earnings.
When a security is sold or otherwise disposed or when the security is deemed uncollectible and written off, the Company removes amounts previously recognized in the credit loss allowance. Recoveries after write-offs are recognized when received. Accrued interest excluded from the amortized cost of fixed income securities totaled $359 million and $311 million as of September 30, 2022 and December 31, 2021, respectively, and is reported within the accrued investment income line of the Condensed Consolidated Statements of Financial Position. The Company monitors accrued interest and writes off amounts when they are not expected to be received.
The Company’s portfolio monitoring process includes a quarterly review of all securities to identify instances where the fair value of a security compared to its amortized cost is below internally established thresholds. The process also includes the monitoring of other credit loss indicators such as ratings, ratings downgrades and payment defaults. The securities
identified, in addition to other securities for which the Company may have a concern, are evaluated for potential credit losses using all reasonably available information relevant to the collectability or recovery of the security. Inherent in the Company’s evaluation of credit losses for these securities are assumptions and estimates about the financial condition and future earnings potential of the issue or issuer. Some of the factors that may be considered in evaluating whether a decline in fair value requires a credit loss allowance are: 1) the financial condition, near-term and long-term prospects of the issue or issuer, including relevant industry specific market conditions and trends, geographic location and implications of rating agency actions and offering prices; 2) the specific reasons that a security is in an unrealized loss position, including overall market conditions which could affect liquidity; and 3) the extent to which the fair value has been less than amortized cost.
Rollforward of credit loss allowance for fixed income securities
Three months ended September 30,Nine months ended September 30,
($ in millions)2022202120222021
Beginning balance$(10)$(2)$(6)$(3)
Credit losses on securities for which credit losses not previously reported(2)— (2)— 
Net (increases) decreases related to credit losses previously reported(2)— (6)1 
Reduction of allowance related to sales1 — 1 — 
Write-offs— — — — 
Ending balance (1) (2)
$(13)$(2)$(13)$(2)
(1)Allowance for fixed income securities as of September 30, 2022 comprised $11 million and $2 million of corporate bonds and ABS, respectively. Allowance for fixed income securities as of September 30, 2021 comprised $1 million and $1 million of corporate bonds and ABS, respectively.
(2)Includes $1 million of credit loss allowance for fixed income securities that were classified as held for sale as of September 30, 2021.
Gross unrealized losses and fair value by type and length of time held in a continuous unrealized loss position
($ in millions)Less than 12 months12 months or more
Total
unrealized
losses
Number
of 
issues
Fair
value
Unrealized
losses
Number
of 
issues
Fair
value
Unrealized
losses
September 30, 2022       
Fixed income securities       
U.S. government and agencies137 $6,980 $(231)53 $1,428 $(82)$(313)
Municipal3,880 5,508 (400)289 341 (61)(461)
Corporate2,611 21,603 (2,305)515 2,879 (580)(2,885)
Foreign government80 744 (27)42 141 (16)(43)
ABS269 1,484 (58)62 36 (5)(63)
Total fixed income securities6,977 $36,319 $(3,021)961 $4,825 $(744)$(3,765)
Investment grade fixed income securities6,313 $32,385 $(2,346)902 $4,474 $(643)$(2,989)
Below investment grade fixed income securities664 3,934 (675)59 351 (101)(776)
Total fixed income securities6,977 $36,319 $(3,021)961 $4,825 $(744)$(3,765)
December 31, 2021       
Fixed income securities       
U.S. government and agencies112 $5,451 $(24)4 $72 $(2)$(26)
Municipal767 1,213 (15)2 14 (1)(16)
Corporate1,197 9,725 (176)22 130 (16)(192)
Foreign government51 415 (6)4 3 — (6)
ABS80 500 (2)53 8 — (2)
Total fixed income securities2,207 $17,304 $(223)85 $227 $(19)$(242)
Investment grade fixed income securities1,993 $15,391 $(188)71 $183 $(8)$(196)
Below investment grade fixed income securities214 1,913 (35)14 44 (11)(46)
Total fixed income securities2,207 $17,304 $(223)85 $227 $(19)$(242)
Gross unrealized losses by unrealized loss position and credit quality as of September 30, 2022
($ in millions)
Investment
grade
Below investment gradeTotal
Fixed income securities with unrealized loss position less than 20% of amortized cost, net (1) (2)
$(2,422)$(439)$(2,861)
Fixed income securities with unrealized loss position greater than or equal to 20% of amortized cost, net (3) (4)
(567)(337)(904)
Total unrealized losses$(2,989)$(776)$(3,765)
(1)Below investment grade fixed income securities include $419 million that have been in an unrealized loss position for less than twelve months.
(2)Related to securities with an unrealized loss position less than 20% of amortized cost, net, the degree of which suggests that these securities do not pose a high risk of having credit losses.
(3)No below investment grade fixed income securities have been in an unrealized loss position for a period of twelve or more consecutive months.
(4)Evaluated based on factors such as discounted cash flows and the financial condition and near-term and long-term prospects of the issue or issuer and were determined to have adequate resources to fulfill contractual obligations.
Investment grade is defined as a security having a National Association of Insurance Commissioners (“NAIC”) designation of 1 or 2, which is comparable to a rating of Aaa, Aa, A or Baa from Moody’s or AAA, AA, A or BBB from S&P Global Ratings (“S&P”), or a comparable internal rating if an externally provided rating is not available. Market prices for certain securities may have credit spreads which imply higher or lower credit quality than the current third-party rating. Unrealized losses on investment grade securities are principally related to an increase in market yields which may include increased risk-free interest rates or wider credit spreads since the time of
initial purchase. The unrealized losses are expected to reverse as the securities approach maturity.
ABS in an unrealized loss position were evaluated based on actual and projected collateral losses relative to the securities’ positions in the respective securitization trusts, security specific expectations of cash flows, and credit ratings. This evaluation also takes into consideration credit enhancement, measured in terms of (i) subordination from other classes of securities in the trust that are contractually obligated to absorb losses before the class of security the Company owns, and (ii) the expected impact of other structural features embedded in the securitization trust beneficial to the class of securities
the Company owns, such as overcollateralization and excess spread. Municipal bonds in an unrealized loss position were evaluated based on the underlying credit quality of the primary obligor, obligation type and quality of the underlying assets.
As of September 30, 2022, the Company has not made the decision to sell and it is not more likely than not the Company will be required to sell fixed income securities with unrealized losses before recovery of the amortized cost basis.
Loans The Company establishes a credit loss allowance for mortgage loans and bank loans when they are originated or purchased, and for unfunded commitments unless they are unconditionally cancellable by the Company. The Company uses a probability of default and loss given default model for mortgage loans and bank loans to estimate current expected credit losses that considers all relevant information available including past events, current conditions, and reasonable and supportable forecasts over the life of an asset. The Company also considers such factors as historical losses, expected prepayments and various economic factors. For mortgage loans the Company considers origination vintage year and property level information such as debt service coverage, property type, property location and collateral value. For bank loans, the Company considers the credit rating of the borrower, credit spreads and type of loan. After the reasonable and supportable forecast period, the Company’s model reverts to historical loss trends.
Loans are evaluated on a pooled basis when they share similar risk characteristics. The Company monitors loans through a quarterly credit monitoring process to determine when they no longer share similar risk characteristics and are to be evaluated individually when estimating credit losses.
Loans are written off against their corresponding allowances when there is no reasonable expectation of recovery. If a loan recovers after a write-off, the estimate of expected credit losses includes the expected recovery.
Accrual of income is suspended for loans that are in default or when full and timely collection of principal and interest payments is not probable. Accrued income receivable is monitored for recoverability and
when not expected to be collected is written off through net investment income. Cash receipts on loans on non-accrual status are generally recorded as a reduction of amortized cost.
Accrued interest is excluded from the amortized cost of loans and is reported within the accrued investment income line of the Condensed Consolidated Statements of Financial Position.
Accrued interest
($ in millions)September 30,December 31,
20222021
Mortgage loans$3 $2 
Bank Loans4 4 
Mortgage loans When it is determined a mortgage loan shall be evaluated individually, the Company uses various methods to estimate credit losses on individual loans such as using collateral value less estimated costs to sell where applicable, including when foreclosure is probable or when repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. When collateral value is used, the mortgage loans may not have a credit loss allowance when the fair value of the collateral exceeds the loan’s amortized cost. An alternative approach may be utilized to estimate credit losses using the present value of the loan’s expected future repayment cash flows discounted at the loan’s current effective interest rate.
Individual loan credit loss allowances are adjusted for subsequent changes in the fair value of the collateral less costs to sell, when applicable, or present value of the loan’s expected future repayment cash flows.
Debt service coverage ratio is considered a key credit quality indicator when mortgage loan credit loss allowances are estimated. Debt service coverage ratio represents the amount of estimated cash flow from the property available to the borrower to meet principal and interest payment obligations. Debt service coverage ratio estimates are updated annually or more frequently if conditions are warranted based on the Company’s credit monitoring process.
Mortgage loans amortized cost by debt service coverage ratio distribution and year of origination
September 30, 2022December 31, 2021
($ in millions)2017 and prior2018201920202021CurrentTotalTotal
Below 1.0$— $— $— $— $— $18 $18 $— 
1.0 - 1.2535 — — 10 — 22 67 46 
1.26 - 1.5013 5 103 — — 7 128 160 
Above 1.5077 101 136 41 217 54 626 621 
Amortized cost before allowance$125 $106 $239 $51 $217 $101 $839 $827 
Allowance(6)(6)
Amortized cost, net$833 $821 
Mortgage loans with a debt service coverage ratio below 1.0 that are not considered impaired primarily relate to situations where the borrower has the financial capacity to fund the revenue shortfalls from the properties for the foreseeable term, the decrease in cash flows from the properties is considered
temporary, or there are other risk mitigating factors such as additional collateral, escrow balances or borrower guarantees. Payments on all mortgage loans were current as of September 30, 2022 and December 31, 2021.
Rollforward of credit loss allowance for mortgage loans
Three months ended September 30,Nine months ended September 30,
($ in millions)2022202120222021
Beginning balance$(7)$(30)$(6)$(67)
Net (increases) decreases related to credit losses1 2 — 39 
Write-offs— — — — 
Ending balance (1)
$(6)$(28)$(6)$(28)
(1)Includes $21 million of credit loss allowance for mortgage loans that were classified as held for sale as of September 30, 2021.
Bank loans When it is determined a bank loan shall be evaluated individually, the Company uses various methods to estimate credit losses on individual loans such as the present value of the loan’s expected future repayment cash flows discounted at the loan’s current effective interest rate.
Credit ratings of the borrower are considered a key credit quality indicator when bank loan credit loss allowances are estimated. The ratings are either received from the Securities Valuation Office of the NAIC based on availability of applicable ratings from rating agencies on the NAIC credit rating provider list or a comparable internal rating. The year of origination is determined to be the year in which the asset is acquired.
Bank loans amortized cost by credit rating and year of origination
September 30, 2022December 31, 2021
($ in millions)2017 and prior2018201920202021CurrentTotalTotal
NAIC 2 / BBB $— $— $7 $5 $37 $— $49 $86 
NAIC 3 / BB9 — 7 3 262 14 295 656 
NAIC 4 / B8 16 18 18 271 30 361 768 
NAIC 5-6/ CCC and below21 10 40 8 11 5 95 125 
Amortized cost before allowance$38 $26 $72 $34 $581 $49 $800 $1,635 
Allowance(52)(61)
Amortized cost, net$748 $1,574 
Rollforward of credit loss allowance for bank loans
($ in millions)Three months ended September 30,Nine months ended September 30,
2022202120222021
Beginning balance$(56)$(52)$(61)$(67)
Net increases related to credit losses(2)(14)(18)(10)
Reduction of allowance related to sales6 2 27 13 
Write-offs— — — — 
Ending balance (1)
$(52)$(64)$(52)$(64)
(1)Includes $7 million of credit loss allowance for bank loans that were classified as held for sale as of September 30, 2021.