| Investments | 6. Investments Fixed Maturity Securities Available-for-Sale Fixed Maturity Securities Available-for-Sale by Sector The following table presents the fixed maturity securities AFS by sector. U.S. corporate and foreign corporate sectors include redeemable preferred stock. Residential mortgage-backed securities (“RMBS”) includes agency, prime, alternative and sub-prime mortgage-backed securities. Asset-backed securities (“ABS”) includes securities collateralized by corporate loans and consumer loans. Municipals includes taxable and tax-exempt revenue bonds and, to a much lesser extent, general obligations of states, municipalities and political subdivisions. Commercial mortgage-backed securities (“CMBS”) primarily includes securities collateralized by multiple commercial mortgage loans. RMBS, ABS and CMBS are, collectively, “Structured Products.” In accordance with new guidance adopted January 1, 2020 regarding expected credit loss, securities that incurred a credit loss after December 31, 2019 and were still held as of June 30, 2020 , are presented net of ACL. In accordance with previous guidance, both the temporary loss and OTTI loss are presented for securities that were in an unrealized loss position as of December 31, 2019. June 30, 2020 December 31, 2019 Amortized ACL Gross Unrealized Estimated Amortized Gross Unrealized Estimated Losses Temporary OTTI (In millions) U.S. corporate $ 79,085 $ (30 ) $ 11,766 $ 709 $ 90,112 $ 79,115 $ 8,943 $ 305 $ — $ 87,753 Foreign government 57,964 (129 ) 8,260 389 65,706 58,840 8,710 321 — 67,229 Foreign corporate 58,346 (16 ) 5,765 1,278 62,817 59,342 5,540 717 — 64,165 U.S. government and agency 37,915 — 9,394 22 47,287 37,586 4,604 106 — 42,084 RMBS 29,963 (2 ) 1,999 85 31,875 27,051 1,535 72 (33 ) 28,547 ABS 16,603 — 127 406 16,324 14,547 83 88 — 14,542 Municipals 11,930 — 2,685 4 14,611 11,081 2,001 29 — 13,053 CMBS 11,067 — 483 277 11,273 10,093 396 42 — 10,447 Total fixed maturity securities AFS $ 302,873 $ (177 ) $ 40,479 $ 3,170 $ 340,005 $ 297,655 $ 31,812 $ 1,680 $ (33 ) $ 327,820 __________________ (1) Noncredit OTTI losses included in AOCI in an unrealized gain position are due to increases in estimated fair value subsequent to initial recognition of noncredit loss on such securities. See also “— Net Unrealized Investment Gains (Losses).” Maturities of Fixed Maturity Securities AFS The amortized cost, net of ACL, and estimated fair value of fixed maturity securities AFS, by contractual maturity date, were as follows at June 30, 2020 : Due in One Due After Due After Five Years Through Ten Years Due After Ten Years Structured Products Total Fixed Maturity Securities AFS (In millions) Amortized cost, net of ACL $ 15,497 $ 49,042 $ 56,906 $ 123,620 $ 57,631 $ 302,696 Estimated fair value $ 15,676 $ 51,166 $ 63,218 $ 150,473 $ 59,472 $ 340,005 Actual maturities may differ from contractual maturities due to the exercise of call or prepayment options. Fixed maturity securities AFS not due at a single maturity date have been presented in the year of final contractual maturity. Structured Products are shown separately, as they are not due at a single maturity. Continuous Gross Unrealized Losses for Fixed Maturity Securities AFS by Sector The following table presents the estimated fair value and gross unrealized losses of fixed maturity securities AFS in an unrealized loss position by sector and aggregated by length of time that the securities have been in a continuous unrealized loss position. Included in the table below are securities without an ACL as of June 30, 2020 , in accordance with new guidance adopted January 1, 2020. Also included in the table below are all securities in an unrealized loss position as of December 31, 2019, in accordance with previous guidance. June 30, 2020 December 31, 2019 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) U.S. corporate $ 9,285 $ 617 $ 538 $ 89 $ 3,817 $ 107 $ 2,226 $ 198 Foreign government 4,420 244 1,259 130 3,295 149 1,490 172 Foreign corporate 11,997 1,021 1,794 254 3,188 133 5,873 584 U.S. government and agency 2,033 21 36 1 5,391 97 196 9 RMBS 2,620 69 188 15 2,341 25 584 14 ABS 7,191 249 3,127 157 3,692 22 4,843 66 Municipals 232 4 — — 1,156 29 1 — CMBS 3,469 235 400 42 1,926 16 487 26 Total fixed maturity securities AFS $ 41,247 $ 2,460 $ 7,342 $ 688 $ 24,806 $ 578 $ 15,700 $ 1,069 Investment grade $ 33,735 $ 1,840 $ 6,372 $ 549 $ 22,838 $ 437 $ 13,813 $ 821 Below investment grade 7,512 620 970 139 1,968 141 1,887 248 Total fixed maturity securities AFS $ 41,247 $ 2,460 $ 7,342 $ 688 $ 24,806 $ 578 $ 15,700 $ 1,069 Total number of securities in an unrealized loss position 3,419 808 2,153 1,411 Evaluation of Fixed Maturity Securities AFS for Credit Loss Evaluation and Measurement Methodologies Management considers a wide range of factors about the security issuer and uses its best judgment in evaluating the cause of the decline in the estimated fair value of the security and in assessing the prospects for near-term recovery. Inherent in management’s evaluation of the security are assumptions and estimates about the operations of the issuer and its future earnings potential. Considerations used in the credit loss evaluation process include, but are not limited to: (i) the extent to which the estimated fair value has been below amortized cost, (ii) adverse conditions specifically related to a security, an industry sector or sub-sector, or an economically depressed geographic area, adverse change in the financial condition of the issuer of the security, changes in technology, discontinuance of a segment of the business that may affect future earnings, and changes in the quality of credit enhancement, (iii) payment structure of the security and likelihood of the issuer being able to make payments, (iv) failure of the issuer to make scheduled interest and principal payments, (v) the issuer, or series of issuers or an industry has suffered a catastrophic loss or has exhausted natural resources, (vi) whether the Company has the intent to sell or will more likely than not be required to sell a particular security before the decline in estimated fair value below amortized cost recovers, (vii) with respect to Structured Products, changes in forecasted cash flows after considering the changes in the financial condition of the underlying loan obligors and quality of underlying collateral, expected prepayment speeds, current and forecasted loss severity, consideration of the payment terms of the underlying assets backing a particular security, and the payment priority within the tranche structure of the security, (viii) changes in the rating of the security by a rating agency, and (ix) other subjective factors, including concentrations and information obtained from regulators. The methodology and significant inputs used to determine the amount of credit loss are as follows: • The Company calculates the recovery value by performing a discounted cash flow analysis based on the present value of future cash flows. The discount rate is generally the effective interest rate of the security at the time of purchase for fixed-rate securities and the spot rate at the date of evaluation of credit loss for floating-rate securities. • When determining collectability and the period over which value is expected to recover, the Company applies considerations utilized in its overall credit loss evaluation process which incorporates information regarding the specific security, fundamentals of the industry and geographic area in which the security issuer operates, and overall macroeconomic conditions. Projected future cash flows are estimated using assumptions derived from management’s single best estimate, the most likely outcome in a range of possible outcomes, after giving consideration to a variety of variables that include, but are not limited to: payment terms of the security; the likelihood that the issuer can service the interest and principal payments; the quality and amount of any credit enhancements; the security’s position within the capital structure of the issuer; possible corporate restructurings or asset sales by the issuer; any private and public sector programs to restructure foreign government securities and municipals; and changes to the rating of the security or the issuer by rating agencies. • Additional considerations are made when assessing the unique features that apply to certain Structured Products including, but not limited to: the quality of underlying collateral, historical performance of the underlying loan obligors, historical rent and vacancy levels, changes in the financial condition of the underlying loan obligors, expected prepayment speeds, current and forecasted loss severity, consideration of the payment terms of the underlying loans or assets backing a particular security, changes in the quality of credit enhancement and the payment priority within the tranche structure of the security. With respect to securities that have attributes of debt and equity (“perpetual hybrid securities”), consideration is given in the credit loss analysis as to whether there has been any deterioration in the credit of the issuer and the likelihood of recovery in value of the securities that are in a severe unrealized loss position. Consideration is also given as to whether any perpetual hybrid securities with an unrealized loss, regardless of credit rating, have deferred any dividend payments. After the adoption of new guidance on January 1, 2020, in periods subsequent to the recognition of an initial ACL on a security, the Company reassesses credit loss quarterly. Subsequent increases or decreases in the expected cash flow from the security result in corresponding decreases or increases in the ACL which are recorded within net investment gains (losses); however, the previously recorded ACL is not reduced to an amount below zero. Full or partial write-offs are deducted from the ACL in the period the security, or a portion thereof, is considered uncollectible. Recoveries of amounts previously written off are recorded to the ACL in the period received. When the Company has the intent to sell the security or it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost, any ACL is written off and the amortized cost is written down to estimated fair value through a charge within net investment gains (losses), which becomes the new amortized cost of the security. In accordance with the previous guidance, methodologies to evaluate the recoverability of a security in an unrealized loss position were similar, except: (i) the length of time estimated fair value had been below amortized cost was considered for securities, and (ii) for non-functional currency denominated securities, the impact from weakening non-functional currencies on securities that were near maturity was considered in the evaluation. In addition, measurement methodologies were similar, except: (i) a fair value floor was not utilized to limit the credit loss recognized, (ii) the amortized cost of securities was adjusted for the OTTI to the expected recoverable amount and an ACL was not utilized, (iii) subsequent to a credit loss being recognized, increases in expected cash flows from the security did not result in an immediate increase in valuation recognized in earnings through net investment gains (losses) from reduction of the ACL instead such increases in value were recorded as unrealized gains in OCI, and (iv) in periods subsequent to the recognition of OTTI on a security, the Company accounted for the impaired security as if it had been purchased on the measurement date of the impairment; accordingly, the discount (or reduced premium) based on the new cost basis was accreted over the remaining term of the security in a prospective manner based on the amount and timing of estimated future cash flows. Evaluation of Fixed Maturity Securities AFS in an Unrealized Loss Position Gross unrealized losses on securities without an ACL increased $1.5 billion for the six months ended June 30, 2020 to $3.1 billion . The increase in gross unrealized losses for the six months ended June 30, 2020 was primarily attributable to widening credit spreads and movement in foreign currency exchange rates, partially offset by decreases in interest rates. Gross unrealized losses on securities without an ACL that have been in a continuous gross unrealized loss position for 12 months or greater were $688 million at June 30, 2020 , or 22% of the total gross unrealized losses on securities without an ACL. Investment Grade Fixed Maturity Securities AFS Of the $688 million of gross unrealized losses on securities without an ACL that have been in a continuous gross unrealized loss position for 12 months or greater, $549 million , or 80% , were related to 655 investment grade securities. Unrealized losses on investment grade securities are principally related to widening credit spreads since purchase and, with respect to fixed-rate securities, rising interest rates since purchase. Below Investment Grade Fixed Maturity Securities AFS Of the $688 million of gross unrealized losses on securities without an ACL that have been in a continuous gross unrealized loss position for 12 months or greater, $139 million , or 20% , were related to 153 below investment grade securities. Unrealized losses on below investment grade securities are principally related to U.S. and foreign corporate securities (primarily industrial and consumer), foreign government securities and ABS and are the result of significantly wider credit spreads resulting from higher risk premiums since purchase, largely due to economic and market uncertainty, as well as with respect to fixed-rate securities, rising interest rates since purchase. Management evaluates U.S. corporate and foreign corporate securities based on factors such as expected cash flows, financial condition and near-term and long-term prospects of the issuers. Management evaluates foreign government securities based on factors impacting the issuers such as expected cash flows, financial condition of the issuers and any country specific economic conditions or public sector programs to restructure foreign government securities. Management evaluates ABS based on actual and projected cash flows after considering the quality of underlying collateral, credit enhancements, expected prepayment speeds, current and forecasted loss severity, the payment terms of the underlying assets backing a particular security and the payment priority within the tranche structure of the security. Current Period Evaluation At June 30, 2020 , with respect to securities in an unrealized loss position without an ACL, the Company did not intend to sell these securities, and it was not more likely than not that the Company would be required to sell these securities before the anticipated recovery of the remaining amortized cost. Based on the Company’s current evaluation of its securities in an unrealized loss position without an ACL, the Company concluded that these securities had not incurred a credit loss and should not have an ACL at June 30, 2020 . Future provisions for credit loss will depend primarily on economic fundamentals, issuer performance (including changes in the present value of future cash flows expected to be collected), and changes in credit ratings and collateral valuation. Rollforward of Allowance for Credit Loss for Fixed Maturity Securities AFS By Sector The rollforward of ACL for fixed maturity securities AFS by sector is as follows: U.S. Corporate Foreign Government Foreign Corporate RMBS Total (In millions) Three Months Ended June 30, 2020 Balance, beginning of period $ 51 $ 136 $ — $ — $ 187 ACL not previously recorded 7 3 16 2 28 Changes for securities with previously recorded ACL (7 ) (4 ) — — (11 ) Securities sold (20 ) (6 ) — — (26 ) Securities intended/required to be sold prior to recovery of amortized cost basis (1 ) — — — (1 ) Balance, end of period $ 30 $ 129 $ 16 $ 2 $ 177 U.S. Corporate Foreign Government Foreign Corporate RMBS Total (In millions) Six Months Ended June 30, 2020 Balance, beginning of period $ — $ — $ — $ — $ — ACL not previously recorded 58 139 16 2 215 Changes for securities with previously recorded ACL (7 ) (4 ) — — (11 ) Securities sold (20 ) (6 ) — — (26 ) Securities intended/required to be sold prior to recovery of amortized cost basis (1 ) — — — (1 ) Balance, end of period $ 30 $ 129 $ 16 $ 2 $ 177 Equity Securities Equity securities are summarized as follows at: June 30, 2020 December 31, 2019 Estimated Fair Value % of Total Estimated Fair Value % of Total (Dollars in millions) Common stock $ 739 66.9 % $ 944 70.3 % Non-redeemable preferred stock 366 33.1 398 29.7 Total equity securities $ 1,105 100.0 % $ 1,342 100.0 % Contractholder-Directed Equity Securities and Fair Value Option Securities As described more fully in Note 1 of the Notes to the Consolidated Financial Statements included in the 2019 Annual Report, contractholder-directed equity securities and FVO securities (“FVO Securities”) (collectively, “Unit-linked and FVO Securities”) include three categories of investments for which the FVO has been elected, or are otherwise required to be carried at estimated fair value. Mortgage Loans by Portfolio Segment Mortgage loans are summarized as follows at: June 30, 2020 December 31, 2019 Carrying Value % of Carrying Value % of (Dollars in millions) Mortgage loans: Commercial $ 51,043 61.6 % $ 49,624 61.6 % Agricultural 17,167 20.7 16,695 20.7 Residential 15,060 18.2 14,316 17.8 Total amortized cost 83,270 100.5 80,635 100.1 Allowance for credit loss (555 ) (0.7 ) (353 ) (0.4 ) Subtotal mortgage loans, net 82,715 99.8 80,282 99.7 Residential — FVO 175 0.2 188 0.2 Total mortgage loans held-for-investment, net 82,890 100.0 80,470 99.9 Mortgage loans held-for-sale — — 59 0.1 Total mortgage loans, net $ 82,890 100.0 % $ 80,529 100.0 % Information on commercial, agricultural, and residential mortgage loans is presented in the tables below. Information on residential mortgage loans - FVO is presented in Note 8 . The Company elects the FVO for certain residential mortgage loans that are managed on a total return basis. The amount of net discounts, included within total amortized cost, primarily attributable to residential mortgage loans was $973 million and $867 million at June 30, 2020 and December 31, 2019 , respectively. The accrued interest income excluded from total amortized cost for commercial, agricultural and residential mortgage loans at June 30, 2020 and December 31, 2019 was $189 million and $188 million ; $179 million and $186 million ; and $103 million and $94 million , respectively. Purchases of mortgage loans, primarily residential, were $417 million and $1.7 billion for the three months and six months ended June 30, 2020 , respectively, and $567 million and $1.9 billion for the three months and six months ended June 30, 2019 , respectively. Mortgage Loan Concessions In response to the adverse economic impact of the COVID-19 Pandemic, the Company granted concessions to certain of its commercial, agricultural and residential mortgage loan borrowers, including payment deferrals and other loan modifications. The Company has elected the option under the Coronavirus Aid, Relief, and Economic Security Act and the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised) issued by bank regulatory agencies, not to account for or report qualifying concessions as troubled debt restructurings and does not classify such loans as either past due or nonaccrual during the payment deferral period. Additionally, in accordance with the FASB’s published response to a COVID-19 Pandemic technical inquiry, the Company continues to accrue interest income on such loans that have deferred payment. The Company records an allowance for credit loss on this accrued interest income. Commercial For some commercial mortgage loan borrowers (principally in the retail and hotel sectors), the Company granted concessions which were primarily interest and principal payment deferrals generally ranging from three to four months and, to a much lesser extent, maturity date extensions. Deferred commercial mortgage loan interest and principal payments were $64 million at June 30, 2020 . Agricultural For some agricultural mortgage loan borrowers (principally in the annual crops and agribusiness sectors), the Company granted concessions which were primarily principal payment deferrals generally ranging from three to 12 months, and covenant changes and, to a much lesser extent, maturity date extensions. Deferred agricultural mortgage loan interest and principal payments were $9 million at June 30, 2020 . Residential For some residential mortgage loan borrowers, the Company granted concessions which were primarily three-month interest and principal payment deferrals. Deferred residential mortgage loan interest and principal payments were $18 million at June 30, 2020 . Allowance for Credit Loss Rollforward by Portfolio Segment The changes in the ACL, by portfolio segment, were as follows: Six Months 2020 2019 Commercial Agricultural Residential Total Commercial Agricultural Residential Total (In millions) Balance, beginning of period $ 246 $ 52 $ 55 $ 353 $ 238 $ 46 $ 58 $ 342 Adoption of new credit loss guidance (118 ) 35 161 78 — — — — Initial credit losses on PCD loans (1) — — 16 16 — — — — Provision (release) 47 6 62 115 8 2 9 19 Charge-offs, net of recoveries — (2 ) (5 ) (7 ) — — (4 ) (4 ) Balance, end of period $ 175 $ 91 $ 289 $ 555 $ 246 $ 48 $ 63 $ 357 __________________ (1) Represents the initial credit losses on purchased mortgage loans accounted for as purchased financial assets with credit deterioration (“PCD”). Allowance for Credit Loss Methodology After the adoption of new guidance on January 1, 2020, the Company records an allowance for expected credit loss in an amount that represents the portion of the amortized cost basis of mortgage loans that the Company does not expect to collect, resulting in mortgage loans being presented at the net amount expected to be collected. In determining the Company’s ACL, management: (i) pools mortgage loans that share similar risk characteristics, (ii) considers lifetime credit loss expected over the contractual term of its mortgage loans adjusted for expected prepayments and any extensions, and (iii) considers past events, current economic conditions and forecasts of future economic conditions. Each of the Company’s commercial, agricultural and residential mortgage loan portfolio segments are evaluated separately. The ACL is calculated for each mortgage loan portfolio segment based on inputs unique to each loan portfolio segment. On a quarterly basis, mortgage loans within a portfolio segment that share similar risk characteristics, such as internal risk ratings or consumer credit scores, are pooled for calculation of ACL. On an ongoing basis, mortgage loans with dissimilar risk characteristics (i.e., loans with significant declines in credit quality), collateral dependent mortgage loans (i.e., when the borrower is experiencing financial difficulty, including when foreclosure is reasonable possible or probable) and reasonably expected troubled debt restructurings (i.e., the Company grants concessions to borrower that is experiencing financial difficulties) are evaluated individually for credit loss. The ACL for loans evaluated individually are established using the same methodologies for all three portfolio segments. For example, the ACL for a collateral dependent loan is established as the excess of amortized cost over the estimated fair value of the loan’s underlying collateral, less selling cost when foreclosure is probable. Accordingly, the change in the estimated fair value of collateral dependent loans, which are evaluated individually for credit loss, is recorded as a change in the ACL which is recorded on a quarterly basis as a charge or credit to earnings in net investment gains (losses). In accordance with the previous guidance, evaluation and measurement methodologies in determining the ACL were similar, except: (i) credit loss was recognized when incurred (when it was probable, based on current information and events, that all amounts due under the loan agreement would not be collected), (ii) pooling of loans with similar risk characteristics was permitted, but not required, (iii) forecasts of future economic conditions were not considered in the evaluation, (iv) measurement of the expected credit loss over the contractual term, or expected term, was not considered in the measurement, and (v) the credit loss for loans evaluated individually could also be determined using either discounted cash flows using the loans original effective interest rate or observable market prices. Commercial and Agricultural Mortgage Loan Portfolio Segments Commercial and agricultural mortgage loan ACL are calculated in a similar manner. Within each loan portfolio segment, commercial and agricultural, loans are pooled by internal risk rating. Estimated lifetime loss rates, which vary by internal risk rating, are applied to the amortized cost of each loan, excluding accrued investment income, on a quarterly basis to develop the ACL. Internal risk ratings are based on an assessment of the loan’s credit quality, which can change over time. The estimated lifetime loss rates are based on several loan portfolio segment-specific factors, including (i) the Company’s experience with defaults and loss severity, (ii) expected default and loss severity over the forecast period, (iii) current and forecasted economic conditions including growth, inflation, interest rates and unemployment levels, (iv) loan specific characteristics including loan-to-value ratios, and (v) internal risk ratings. These evaluations are revised as conditions change and new information becomes available. The Company uses its several decades of historical default and loss severity experience which capture multiple economic cycles. The Company uses a forecast of economic assumptions for a two-year period for most of its commercial and agricultural mortgage loans, while a one-year period is used for loans originated in certain markets. After the applicable forecast period, the Company reverts to its historical loss experience using a straight-line basis over two years. For evaluations of commercial mortgage loans, in addition to historical experience, management considers factors that include the impact of a rapid change to the economy, which may not be reflected in the loan portfolio, recent loss and recovery trend experience as compared to historical loss and recovery experience, and loan specific characteristics including debt service coverage ratios. In estimating lifetime credit loss expected over the term of its commercial mortgage loans, the Company adjusts for expected prepayment and extension experience during the forecast period using historical prepayment and extension experience considering the expected position in the economic cycle and the loan profile (i.e., floating rate, shorter-term fixed rate and longer-term fixed rate) and after the forecast period using long-term historical prepayment experience. For evaluations of agricultural mortgage loans, in addition to historical experience, management considers factors that include increased stress in certain sectors, which may be evidenced by higher delinquency rates, or a change in the number of higher risk loans. In estimating lifetime credit loss expected over the term of its agricultural mortgage loans, the Company’s experience is much less sensitive to the position in the economic cycle and by loan profile; accordingly, historical prepayment experience is used, while extension terms are not prevalent with the Company’s agricultural mortgage loans. Commercial mortgage loans are reviewed on an ongoing basis, which review includes, but is not limited to, an analysis of the property financial statements and rent roll, lease rollover analysis, property inspections, market analysis, estimated valuations of the underlying collateral, loan-to-value ratios, debt service coverage ratios and tenant creditworthiness. The monitoring process focuses on higher risk loans, which include those that are classified as restructured, delinquent or in foreclosure, as well as loans with higher loan-to-value ratios and lower debt service coverage ratios. Agricultural mortgage loans are reviewed on an ongoing basis, which review includes, but is not limited to, property inspections, market analysis, estimated valuations of the underlying collateral, loan-to-value ratios and borrower creditworthiness, as well as reviews on a geographic and property-type basis. The monitoring process for agricultural mortgage loans also focuses on higher risk loans. For commercial mortgage loans, the primary credit quality indicator is the debt service coverage ratio, which compares a property’s net operating income to amounts needed to service the principal and interest due under the loan. Generally, the lower the debt service coverage ratio, the higher the risk of experiencing a credit loss. The Company also reviews the loan-to-value ratio of its commercial mortgage loan portfolio. Loan-to-value ratios compare the unpaid principal balance of the loan to the estimated fair value of the underlying collateral. Generally, the higher the loan-to-value ratio, the higher the risk of experiencing a credit loss. The debt service coverage ratio and the values utilized in calculating the ratio are updated routinely. In addition, the loan-to-value ratio is routinely updated for all but the lowest risk loans as part of the Company’s ongoing review of its commercial mortgage loan portfolio. For agricultural mortgage loans, the Company’s primary credit quality indicator is the loan-to-value ratio. The values utilized in calculating this ratio are developed in connection with the ongoing review of the agricultural mortgage loan portfolio and are routinely updated. Commitments to lend: After loans are approved, the Company makes commitments to lend and, typically, borrowers draw down on some or all of the commitments. The timing of mortgage loan funding is based on the commitment expiration dates. A liability for expected credit loss for unfunded commercial and agricultural mortgage loan commitments is recorded within net investment gains (losses). The liability is based on estimated lifetime loss rates as described above and the amount of the outstanding commitments, which for lines of credit, considers estimated utilization rates. When the commitment is funded or expires, the liability is adjusted accordingly. Residential Mortgage Loan Portfolio Segment The Company’s residential mortgage loan portfolio is comprised primarily of purchased closed end, amortizing residential mortgage loans, including both performing loans purchased within 12 months of origination and reperforming loans purchased after they have been performing for at least 12 months post-modification. Residential mortgage loans are pooled by loan type (i.e., new origination and reperforming) and pooled by similar risk profiles (including consumer credit score and loan-to-value ratios). Estimated lifetime loss rates, which vary by loan type and risk profile, are applied to the amortized cost of each loan excluding accrued investment income on a quarterly basis to develop the ACL. The estimated lifetime loss rates are based on several factors, including (i) industry historical experience and expected results over the forecast period for defaults, (ii) loss severity, (iii) prepayment rates, (iv) current and forecasted economic conditions including growth, inflation, interest rates and unemployment levels, and (v) loan pool specific characteristics including consumer credit scores, loan-to-value ratios, payment history and home prices. These evaluations are revised as conditions change and new information becomes available. The Company uses industry historical experience which captures multiple economic cycles as the Company has purchased most of its residential mortgage loans in the last five years. The Company uses a forecast of economic assumptions for a two-year period for most of its residential mortgage loans. After the app |
