| Investments | 4. Investments See Note 1 of the Notes to the Consolidated Financial Statements included in the 2018 Annual Report for a description of the Company’s accounting policies for investments and Note 6 for information about the fair value hierarchy for investments and the related valuation methodologies. Fixed Maturity Securities Available-for-sale (“AFS”) Fixed Maturity Securities AFS by Sector The following table presents the fixed maturity securities AFS by sector at: March 31, 2019 December 31, 2018 Amortized Gross Unrealized Estimated Amortized Gross Unrealized Estimated Gains Temporary OTTI Gains Temporary OTTI (In millions) Fixed maturity securities: (2) U.S. corporate $ 24,324 $ 1,355 $ 231 $ — $ 25,448 $ 23,902 $ 816 $ 659 $ — $ 24,059 U.S. government and agency 6,259 1,456 29 — 7,686 7,503 1,251 110 — 8,644 RMBS 8,521 298 62 (3 ) 8,760 8,309 246 122 (2 ) 8,435 Foreign corporate 8,732 319 147 — 8,904 8,044 157 306 — 7,895 CMBS 5,210 127 33 — 5,304 5,177 42 87 (1 ) 5,133 State and political subdivision 3,286 511 3 — 3,794 3,202 399 15 — 3,586 ABS 2,060 15 12 — 2,063 2,120 13 22 — 2,111 Foreign government 1,494 146 9 — 1,631 1,415 101 31 — 1,485 Total fixed maturity securities $ 59,886 $ 4,227 $ 526 $ (3 ) $ 63,590 $ 59,672 $ 3,025 $ 1,352 $ (3 ) $ 61,348 __________________ (1) Noncredit OTTI losses included in accumulated other comprehensive income (loss) (“AOCI”) in an unrealized gain position are due to increases in estimated fair value subsequent to initial recognition of noncredit losses on such securities. (2) Redeemable preferred stock is reported within U.S. corporate and foreign corporate fixed maturity securities. Included within fixed maturity securities are structured securities including residential mortgage-backed securities (“RMBS”), commercial mortgage-backed securities (“CMBS”) and asset-backed securities (“ABS”) (collectively, “Structured Securities”). The Company held non-income producing fixed maturity securities with an estimated fair value of $28 million and less than $1 million with unrealized gains (losses) of ($6) million and less than $1 million at March 31, 2019 and December 31, 2018 , respectively. Maturities of Fixed Maturity Securities The amortized cost and estimated fair value of fixed maturity securities, by contractual maturity date, were as follows at March 31, 2019 : Due in One Year or Less Due After One Year Through Five Years Due After Five Years Through Ten Years Due After Ten Years Structured Securities Total Fixed Maturity Securities (In millions) Amortized cost $ 1,373 $ 7,490 $ 11,861 $ 23,371 $ 15,791 $ 59,886 Estimated fair value $ 1,379 $ 7,613 $ 12,112 $ 26,359 $ 16,127 $ 63,590 Actual maturities may differ from contractual maturities due to the exercise of call or prepayment options. Fixed maturity securities not due at a single maturity date have been presented in the year of final contractual maturity. Structured Securities are shown separately, as they are not due at a single maturity. Continuous Gross Unrealized Losses for Fixed Maturity 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, aggregated by sector and by length of time that the securities have been in a continuous unrealized loss position at: March 31, 2019 December 31, 2018 Less than 12 Months Equal to or Greater than 12 Months Less than 12 Months Equal to or Greater than 12 Months Estimated Fair Value Gross Unrealized Losses Estimated Fair Value Gross Unrealized Losses Estimated Fair Value Gross Unrealized Losses Estimated Fair Value Gross Unrealized Losses (Dollars in millions) Fixed maturity securities: U.S. corporate $ 2,647 $ 85 $ 3,743 $ 146 $ 10,450 $ 465 $ 2,290 $ 194 U.S. government and agency 109 1 852 28 359 7 1,355 103 RMBS 747 3 2,609 56 1,550 21 2,567 99 Foreign corporate 1,574 64 1,113 83 3,916 199 746 107 CMBS 310 16 1,024 17 2,264 52 800 34 State and political subdivision 31 1 129 2 346 7 158 8 ABS 860 10 161 2 1,407 21 70 1 Foreign government 257 8 29 1 520 25 132 6 Total fixed maturity securities $ 6,535 $ 188 $ 9,660 $ 335 $ 20,812 $ 797 $ 8,118 $ 552 Total number of securities in an unrealized loss position 1,160 1,235 2,988 1,022 Evaluation of AFS Securities for OTTI and Evaluating Temporarily Impaired AFS Securities Evaluation and Measurement Methodologies Management considers a wide range of factors about the security issuer and uses its best judgment in evaluating the cause of the decline in the estimated fair value of the security and in assessing the prospects for near-term recovery. Inherent in management’s evaluation of the security are assumptions and estimates about the operations of the issuer and its future earnings potential. Considerations used in the impairment evaluation process include, but are not limited to: (i) the length of time and the extent to which the estimated fair value has been below amortized cost; (ii) the potential for impairments when the issuer is experiencing significant financial difficulties; (iii) the potential for impairments in an entire industry sector or sub-sector; (iv) the potential for impairments in certain economically depressed geographic locations; (v) the potential for impairments where the issuer, series of issuers or industry has suffered a catastrophic loss or has exhausted natural resources; (vi) whether the Company has the intent to sell or will more likely than not be required to sell a particular security before the decline in estimated fair value below amortized cost recovers; (vii) with respect to Structured Securities, changes in forecasted cash flows after considering the quality of underlying collateral, expected prepayment speeds, current and forecasted loss severity, consideration of the payment terms of the underlying assets backing a particular security, and the payment priority within the tranche structure of the security; (viii) the potential for impairments due to weakening of foreign currencies on non-functional currency denominated fixed maturity securities that are near maturity; and (ix) other subjective factors, including concentrations and information obtained from regulators and rating agencies. For securities in an unrealized loss position, an OTTI is recognized in earnings when it is anticipated that the amortized cost will not be recovered. When either: (i) the Company has the intent to sell the security; or (ii) it is more likely than not that the Company will be required to sell the security before recovery, the OTTI recognized in earnings is the entire difference between the security’s amortized cost and estimated fair value. If neither of these conditions exists, the difference between the amortized cost of the security and the present value of projected future cash flows expected to be collected is recognized as an OTTI in earnings (“credit loss”). If the estimated fair value is less than the present value of projected future cash flows expected to be collected, this portion of OTTI related to other-than-credit factors (“noncredit loss”) is recorded in other comprehensive income (“OCI”). Current Period Evaluation Based on the Company’s current evaluation of its AFS securities in an unrealized loss position in accordance with its impairment policy, and the Company’s current intentions and assessments (as applicable to the type of security) about holding, selling and any requirements to sell these securities, the Company concluded that these securities were not other-than-temporarily impaired at March 31, 2019 . Gross unrealized losses on fixed maturity securities decreased $826 million during the three months ended March 31, 2019 to $523 million . The decrease in gross unrealized losses for the three months ended March 31, 2019 was primarily attributable to decreasing longer-term interest rates and narrowing credit spreads. At March 31, 2019 , $16 million of the total $523 million of gross unrealized losses were from eight fixed maturity securities with an unrealized loss position of 20% or more of amortized cost for six months or greater. Mortgage Loans Mortgage Loans by Portfolio Segment Mortgage loans are summarized as follows at: March 31, 2019 December 31, 2018 Carrying Value % of Total Carrying Value % of Total (Dollars in millions) Mortgage loans: Commercial $ 8,721 60.5 % $ 8,502 62.6 % Agricultural 3,091 21.4 2,874 21.1 Residential 2,661 18.5 2,276 16.7 Subtotal (1) 14,473 100.4 13,652 100.4 Valuation allowances (2) (60 ) (0.4 ) (56 ) (0.4 ) Total mortgage loans, net $ 14,413 100.0 % $ 13,596 100.0 % __________________ (1) Purchases of mortgage loans from third parties were $477 million and $86 million for the three months ended March 31, 2019 and 2018, respectively, and were primarily comprised of residential mortgage loans. (2) The valuation allowances were primarily from collective evaluation (non-specific loan related). Information on commercial, agricultural and residential mortgage loans is presented in the tables below. Valuation Allowance Methodology Mortgage loans are considered to be impaired when it is probable that, based upon current information and events, the Company will be unable to collect all amounts due under the loan agreement. Specific valuation allowances are established using the same methodology for all three portfolio segments as the excess carrying value of a loan over either (i) the present value of expected future cash flows discounted at the loan’s original effective interest rate, (ii) the estimated fair value of the loan’s underlying collateral if the loan is in the process of foreclosure or otherwise collateral dependent, or (iii) the loan’s observable market price. A common evaluation framework is used for establishing non-specific valuation allowances for all loan portfolio segments; however, a separate non-specific valuation allowance is calculated and maintained for each loan portfolio segment that is based on inputs unique to each loan portfolio segment. Non-specific valuation allowances are established for pools of loans with similar risk characteristics where a property-specific or market-specific risk has not been identified, but for which the Company expects to incur a credit loss. These evaluations are based upon several loan portfolio segment-specific factors, including the Company’s experience for loan losses, defaults and loss severity, and loss expectations for loans with similar risk characteristics. These evaluations are revised as conditions change and new information becomes available. Credit Quality of Commercial Mortgage Loans The credit quality of commercial mortgage loans was as follows at: Recorded Investment Debt Service Coverage Ratios % of Total Estimated Fair Value % of Total > 1.20x 1.00x - 1.20x < 1.00x Total (Dollars in millions) March 31, 2019 Loan-to-value ratios: Less than 65% $ 7,649 $ 89 $ 34 $ 7,772 89.1 % $ 7,960 89.2 % 65% to 75% 800 — — 800 9.2 819 9.2 76% to 80% 140 — 9 149 1.7 146 1.6 Total $ 8,589 $ 89 $ 43 $ 8,721 100.0 % $ 8,925 100.0 % December 31, 2018 Loan-to-value ratios: Less than 65% $ 7,444 $ 89 $ 34 $ 7,567 89.0 % $ 7,642 89.0 % 65% to 75% 762 — 24 786 9.2 797 9.3 76% to 80% 141 — 8 149 1.8 145 1.7 Total $ 8,347 $ 89 $ 66 $ 8,502 100.0 % $ 8,584 100.0 % Credit Quality of Agricultural Mortgage Loans The credit quality of agricultural mortgage loans was as follows at: March 31, 2019 December 31, 2018 Recorded Investment % of Total Recorded Investment % of Total (Dollars in millions) Loan-to-value ratios: Less than 65% $ 2,763 89.4 % $ 2,551 88.8 % 65% to 75% 327 10.6 322 11.2 76% to 80% 1 — 1 — Total $ 3,091 100.0 % $ 2,874 100.0 % The estimated fair value of agricultural mortgage loans was $3.1 billion and $2.9 billion at March 31, 2019 and December 31, 2018 , respectively. Credit Quality of Residential Mortgage Loans The credit quality of residential mortgage loans was as follows at: March 31, 2019 December 31, 2018 Recorded Investment % of Total Recorded Investment % of Total (Dollars in millions) Performance indicators: Performing $ 2,622 98.5 % $ 2,240 98.4 % Nonperforming 39 1.5 36 1.6 Total $ 2,661 100.0 % $ 2,276 100.0 % The estimated fair value of residential mortgage loans was $2.7 billion and $2.3 billion at March 31, 2019 and December 31, 2018 , respectively. Past Due, Nonaccrual and Modified Mortgage Loans The Company has a high quality, well performing mortgage loan portfolio, with over 99% of all mortgage loans classified as performing at both March 31, 2019 and December 31, 2018 . The Company defines delinquency consistent with industry practice, when mortgage loans are past due as follows: commercial and residential mortgage loans — 60 days and agricultural mortgage loans — 90 days. The Company had no commercial mortgage loans past due and no commercial mortgage loans in nonaccrual status at either March 31, 2019 or December 31, 2018 . Agricultural mortgage loans past due totaled $7 million and less than $1 million at March 31, 2019 and December 31, 2018 , respectively. The Company had no agricultural mortgage loans in nonaccrual status at either March 31, 2019 or December 31, 2018. Residential mortgage loans past due and in nonaccrual status totaled $38 million and $36 million at March 31, 2019 and December 31, 2018 , respectively. During the three months ended March 31, 2019 , the Company did not have mortgage loans modified in a troubled debt restructuring. The Company did not have a significant amount of mortgage loans modified in a troubled debt restructuring during the three months ended March 31, 2018. Other Invested Assets Freestanding derivatives with positive estimated fair values comprise over 80% of other invested assets. See Note 5 for information about freestanding derivatives with positive estimated fair values. Other invested assets also includes tax credit and renewable energy partnerships, leveraged leases and Federal Home Loan Bank stock. Cash Equivalents The carrying value of cash equivalents, which includes securities and other investments with an original or remaining maturity of three months or less at the time of purchase, was $894 million and $2.8 billion at March 31, 2019 and December 31, 2018 , respectively. Net Unrealized Investment Gains (Losses) Unrealized investment gains (losses) on fixed maturity securities and the effect on DAC, VOBA, deferred sales inducements (“DSI”) and future policy benefits, that would result from the realization of the unrealized gains (losses), are included in net unrealized investment gains (losses) in AOCI. The components of net unrealized investment gains (losses), included in AOCI, were as follows: March 31, 2019 December 31, 2018 (In millions) Fixed maturity securities $ 3,707 $ 1,679 Derivatives 193 253 Other (13 ) (15 ) Subtotal 3,887 1,917 Amounts allocated from: Future policy benefits (1,564 ) (885 ) DAC, VOBA and DSI (191 ) (90 ) Subtotal (1,755 ) (975 ) Deferred income tax benefit (expense) (448 ) (198 ) Net unrealized investment gains (losses) $ 1,684 $ 744 The changes in net unrealized investment gains (losses) were as follows: Three Months Ended (In millions) Balance, December 31, 2018 $ 744 Unrealized investment gains (losses) during the period 1,970 Unrealized investment gains (losses) relating to: Future policy benefits (679 ) DAC, VOBA and DSI (101 ) Deferred income tax benefit (expense) (250 ) Balance, March 31, 2019 $ 1,684 Change in net unrealized investment gains (losses) $ 940 Concentrations of Credit Risk There were no investments in any counterparty that were greater than 10% of the Company’s equity, other than the U.S. government and its agencies, at both March 31, 2019 and December 31, 2018 . Securities Lending Elements of the securities lending program are presented below at: March 31, 2019 December 31, 2018 (In millions) Securities on loan: (1) Amortized cost $ 2,568 $ 3,056 Estimated fair value $ 3,360 $ 3,628 Cash collateral received from counterparties (2) $ 3,407 $ 3,646 Security collateral received from counterparties (3) $ 36 $ 55 Reinvestment portfolio — estimated fair value $ 3,426 $ 3,658 __________________ (1) Included within fixed maturity securities. (2) Included within payables for collateral under securities loaned and other transactions. (3) Security collateral received from counterparties may not be sold or re-pledged, unless the counterparty is in default, and is not reflected on the consolidated financial statements. The cash collateral liability by loaned security type and remaining tenor of the agreements were as follows at: March 31, 2019 December 31, 2018 Remaining Tenor of Securities Lending Agreements Remaining Tenor of Securities Lending Agreements Open (1) 1 Month or Less 1 to 6 Months Total Open (1) 1 Month or Less 1 to 6 Months Total (In millions) U.S. government and agency $ 1,567 $ 940 $ 900 $ 3,407 $ 1,474 $ 1,823 $ 349 $ 3,646 __________________ (1) The related loaned security could be returned to the Company on the next business day which would require the Company to immediately return the cash collateral. If the Company is required to return significant amounts of cash collateral on short notice and is forced to sell securities to meet the return obligation, it may have difficulty selling such collateral that is invested in securities in a timely manner, be forced to sell securities in a volatile or illiquid market for less than what otherwise would have been realized under normal market conditions, or both. The estimated fair value of the securities on loan related to the cash collateral on open at March 31, 2019 was $1.5 billion , all of which were U.S. government and agency securities which, if put back to the Company, could be immediately sold to satisfy the cash requirement. The reinvestment portfolio acquired with the cash collateral consisted principally of fixed maturity securities (including agency RMBS, U.S. and foreign corporate securities, ABS, non-agency RMBS and U.S. government and agency securities) with 53% invested in agency RMBS, cash and cash equivalents, U.S. government and agency securities, and short-term investments at March 31, 2019 . If the securities on loan or the reinvestment portfolio become less liquid, the Company has the liquidity resources of most of its general account available to meet any potential cash demands when securities on loan are put back to the Company. Invested Assets on Deposit, Held in Trust and Pledged as Collateral Invested assets on deposit, held in trust and pledged as collateral are presented below at estimated fair value at: March 31, 2019 December 31, 2018 (In millions) Invested assets on deposit (regulatory deposits) (1) $ 8,589 $ 8,172 Invested assets held in trust (reinsurance agreements) (2) 3,788 3,455 Invested assets pledged as collateral (3) 3,495 3,340 Total invested assets on deposit, held in trust and pledged as collateral $ 15,872 $ 14,967 __________________ (1) The Company has assets, primarily fixed maturity securities, on deposit with governmental authorities relating to certain policyholder liabilities, of which $101 million and $55 million of the assets on deposit balance represents restricted cash at March 31, 2019 and December 31, 2018 , respectively. (2) The Company has assets, primarily fixed maturity securities, held in trust relating to certain reinsurance transactions. $58 million and $87 million of the assets held in trust balance represents restricted cash at March 31, 2019 and December 31, 2018 , respectively. (3) The Company has pledged invested assets in connection with various agreements and transactions, including funding agreements (see Note 4 of the Notes to the Consolidated Financial Statements included in the 2018 Annual Report ) and derivative transactions (see Note 5 ). See “— Securities Lending” for information regarding securities on loan. Variable Interest Entities The Company has invested in legal entities that are variable interest entities (“VIEs”). VIEs are consolidated when the investor is the primary beneficiary. A primary beneficiary is the variable interest holder in a VIE with both the power to direct the activities of the VIE that most significantly impact the economic performance of the VIE and the obligation to absorb losses, or the right to receive benefits that could potentially be significant to the VIE. There were no material VIEs for which the Company has concluded that it is the primary beneficiary at March 31, 2019 or December 31, 2018 . The Company’s investments in unconsolidated VIEs are described below. Fixed Maturity Securities The Company invests in U.S. corporate bonds, foreign corporate bonds, and Structured Securities issued by VIEs. The Company is not obligated to provide any financial or other support to these VIEs, other than the original investment. 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 as having the power to direct the activities that most significantly impact the economic performance of the VIE, nor does the Company function in any of these roles. The Company 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; as a result, the Company has determined it is not the primary beneficiary, or consolidator, of the VIE. The Company’s maximum exposure to loss on these fixed maturity securities is limited to the amortized cost of these investments. See “— Fixed Maturity Securities AFS” for information on these securities. Limited Partnerships and LLCs The Company holds investments in certain limited partnerships and LLCs which are VIEs. These ventures include real estate limited partnerships/LLCs, private equity funds, hedge funds, and to a lesser extent tax credit and renewable energy partnerships. The Company is not considered the primary beneficiary, or consolidator, when its involvement takes the form of a limited partner interest and is restricted to a role of a passive investor, as a limited partner’s interest does not provide the Company with any substantive kick-out or participating rights, nor does it provide the Company with the power to direct the activities of the fund. The Company’s maximum exposure to loss on these investments is limited to: (i) the amount invested in debt or equity of the VIE and (ii) commitments to the VIE, as described in Note 10 . March 31, 2019 December 31, 2018 Carrying Amount Maximum Exposure to Loss Carrying Amount Maximum Exposure to Loss (In millions) Fixed maturity securities $ 13,056 $ 12,740 $ 12,848 $ 12,848 Limited partnerships and LLCs 1,708 2,873 1,743 3,130 Total $ 14,764 $ 15,613 $ 14,591 $ 15,978 Net Investment Income The components of net investment income were as follows: Three Months Ended 2019 2018 (In millions) Investment income: Fixed maturity securities $ 642 $ 612 Equity securities 3 2 Mortgage loans 158 119 Policy loans 10 10 Real estate limited partnerships and limited liability companies 8 14 Other limited partnership interests — 65 Cash, cash equivalents and short-term investments 10 5 Other 11 7 Subtotal 842 834 Less: Investment expenses 54 42 Net investment income $ 788 $ 792 See “— Related Party Investment Transactions” for discussion of related party investment expenses. Net Investment Gains (Losses) Components of Net Investment Gains (Losses) The components of net investment gains (losses) were as follows: Three Months Ended 2019 2018 (In millions) Fixed maturity securities $ (15 ) $ (38 ) Equity securities 10 (1 ) Mortgage loans (4 ) (4 ) Real estate limited partnerships and limited liability companies (1 ) 42 Other limited partnership interests (1 ) — Other 1 (3 ) Total net investment gains (losses) $ (10 ) $ (4 ) Sales or Disposals of Fixed Maturity Securities Investment gains and losses on sales of securities are determined on a specific identification basis. Proceeds from sales or disposals of fixed maturity securities and the components of fixed maturity securities net investment gains (losses) were as shown in the table below. Three Months Ended 2019 2018 (In millions) Proceeds $ 3,220 $ 2,838 Gross investment gains $ 64 $ 3 Gross investment losses (79 ) (41 ) Net investment gains (losses) $ (15 ) $ (38 ) Related Party Investment Transactions The Company receives investment administrative services from MetLife Investment Advisors, LLC, which was considered a related party investment manager until the completion of the MetLife Divestiture. The related investment administrative service charges were $0 and $23 million for the three months ended March 31, 2019 and 2018 , respectively. All of the charges reported as related party activity in 2018 occurred prior to the MetLife Divestiture. See Note 1 regarding the MetLife Divestiture. |
