| Investments | 4. Investments See Notes 1 and 8 of the Notes to the Consolidated Financial Statements included in the 2020 Annual Report for a description of the Company’s accounting policies for investments and the fair value hierarchy for investments and the related valuation methodologies. Fixed Maturity Securities Available-for-sale Fixed Maturity Securities by Sector Fixed maturity securities by sector were as follows at: June 30, 2021 December 31, 2020 Amortized Allowance Gross Unrealized Estimated Amortized Allowance Gross Unrealized Estimated Gains Losses Gains Losses (In millions) U.S. corporate $ 33,247 $ 1 $ 4,249 $ 167 $ 37,328 $ 32,062 $ 2 $ 5,286 $ 70 $ 37,276 Foreign corporate 10,646 6 1,145 68 11,717 9,926 — 1,493 44 11,375 U.S. government and agency 7,191 — 1,987 78 9,100 5,871 — 2,599 6 8,464 RMBS 8,152 — 543 13 8,682 7,578 — 644 3 8,219 CMBS 6,459 — 462 14 6,907 6,120 — 586 9 6,697 State and political subdivision 3,896 — 866 5 4,757 3,607 — 948 — 4,555 ABS 3,297 — 56 3 3,350 2,831 — 60 10 2,881 Foreign government 1,601 2 276 5 1,870 1,488 — 345 1 1,832 Total fixed maturity securities $ 74,489 $ 9 $ 9,584 $ 353 $ 83,711 $ 69,483 $ 2 $ 11,961 $ 143 $ 81,299 The Company held non-income producing fixed maturity securities with an estimated fair value of $5 million at both June 30, 2021 and December 31, 2020. Maturities of Fixed Maturity Securities The amortized cost and estimated fair value of fixed maturity securities, by contractual maturity date, were as follows at June 30, 2021: Due in One Due After One Due After Due After Ten Structured Total Fixed (In millions) Amortized cost $ 1,187 $ 8,902 $ 15,856 $ 30,636 $ 17,908 $ 74,489 Estimated fair value $ 1,204 $ 9,410 $ 17,167 $ 36,991 $ 18,939 $ 83,711 _______________ (1) Structured securities include residential mortgage-backed securities (“RMBS”), commercial mortgage-backed securities (“CMBS”) and asset-backed securities (“ABS”) (collectively, “Structured Securities”). 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 by Sector The estimated fair value and gross unrealized losses of fixed maturity securities in an unrealized loss position, by sector and by length of time that the securities have been in a continuous unrealized loss position, were as follows at: June 30, 2021 December 31, 2020 Less than 12 Months 12 Months or Greater Less than 12 Months 12 Months or Greater Estimated Gross Estimated Gross Estimated Gross Estimated Gross (Dollars in millions) U.S. corporate $ 3,873 $ 156 $ 299 $ 11 $ 1,726 $ 57 $ 181 $ 13 Foreign corporate 1,033 33 252 35 243 7 345 37 U.S. government and agency 1,685 78 — — 236 6 — — RMBS 1,274 12 41 1 180 2 22 1 CMBS 595 12 59 2 331 7 44 2 State and political subdivision 259 5 — — 46 — — — ABS 756 2 185 1 506 3 629 7 Foreign government 147 5 — — 55 1 — — Total fixed maturity securities $ 9,622 $ 303 $ 836 $ 50 $ 3,323 $ 83 $ 1,221 $ 60 Total number of securities in an unrealized loss position 1,310 261 665 241 Allowance for Credit Losses for Fixed Maturity Securities Evaluation and Measurement Methodologies For fixed maturity securities in an unrealized loss position, management first assesses whether the Company intends to sell, or whether it is more likely than not it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to estimated fair value through net investment gains (losses). For fixed maturity securities that do not meet the aforementioned criteria, management evaluates whether the decline in estimated fair value has resulted from credit losses or other factors. 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 allowance for credit loss evaluation process include, but are not limited to: (i) the extent to which estimated fair value is less than amortized cost; (ii) any changes to the rating of the security by a rating agency; (iii) adverse conditions specifically related to the security, industry or geographic area; and (iv) payment structure of the fixed maturity security and the likelihood of the issuer being able to make payments in the future or the issuer’s failure to make scheduled interest and principal payments. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss is deemed to exist and an allowance for credit losses is recorded, limited by the amount that the estimated fair value is less than the amortized cost basis, with a corresponding charge to net investment gains (losses). Any unrealized losses that have not been recorded through an allowance for credit losses are recognized in other comprehensive income (loss) (“OCI”). Once a security specific allowance for credit losses is established, the present value of cash flows expected to be collected from the security continues to be reassessed. Any changes in the security specific allowance for credit losses are recorded as a provision for (or reversal of) credit loss expense in net investment gains (losses). Fixed maturity securities are also evaluated to determine whether any amounts have become uncollectible. When all, or a portion, of a security is deemed uncollectible, the uncollectible portion is written-off with an adjustment to amortized cost and a corresponding reduction to the allowance for credit losses. Accrued interest receivables are presented separate from the amortized cost basis of fixed maturity securities. An allowance for credit losses is not estimated on an accrued interest receivable, rather receivable balances 90-days past due are deemed uncollectible and are written off with a corresponding reduction to net investment income. The accrued interest receivable on fixed maturity securities totaled $520 million and $506 million at June 30, 2021 and December 31, 2020, respectively, and is included in accrued investment income. Fixed maturity securities are also evaluated to determine if they qualify as purchased financial assets with credit deterioration (“PCD”). To determine if the credit deterioration experienced since origination is more than insignificant, both (i) the extent of the credit deterioration and (ii) any rating agency downgrades are evaluated. For securities categorized as PCD assets, the present value of cash flows expected to be collected from the security are compared to the par value of the security. If the present value of cash flows expected to be collected is less than the par value, credit losses are embedded in the purchase price of the PCD asset. In this situation, both an allowance for credit losses and amortized cost gross-up is recorded, limited by the amount that the estimated fair value is less than the grossed-up amortized cost basis. Any difference between the purchase price and the present value of cash flows is amortized or accreted into net investment income over the life of the PCD asset. Any subsequent PCD asset allowance for credit losses is evaluated in a manner similar to the process described above for fixed maturity securities. Current Period Evaluation Rollforward of the Allowance for Credit Losses for Fixed Maturity Securities by Sector The changes in the allowance for credit losses by sector were as follows: U.S. Corporate Foreign Corporate Foreign Government Total (In millions) Six Months Ended June 30, 2021 Balance, beginning of period $ 2 $ — $ — $ 2 Allowance on securities where credit losses were not previously recorded — 6 2 8 Change in allowance on securities with an allowance recorded in a previous period (1) — — (1) Write-offs charged against allowance (1) — — — — Balance, end of period $ 1 $ 6 $ 2 $ 9 Six Months Ended June 30, 2020 Balance, beginning of period $ 3 $ 1 $ — $ 4 Allowance on securities where credit losses were not previously recorded 3 2 — 5 Change in allowance on securities with an allowance recorded in a previous period (1) — — (1) Write-offs charged against allowance (1) (3) (1) — (4) Balance, end of period $ 2 $ 2 $ — $ 4 _______________ Mortgage Loans Mortgage Loans by Portfolio Segment Mortgage loans are summarized as follows at: June 30, 2021 December 31, 2020 Carrying % of Carrying % of (Dollars in millions) Commercial $ 10,225 61.4 % $ 9,687 61.6 % Agricultural 3,737 22.4 3,479 22.1 Residential 2,786 16.7 2,650 16.9 Total mortgage loans (1) 16,748 100.5 15,816 100.6 Allowance for credit losses (96) (0.5) (94) (0.6) Total mortgage loans, net $ 16,652 100.0 % $ 15,722 100.0 % _______________ (1) Purchases of mortgage loans from third parties were $621 million and $799 million for the three months and six months ended June 30, 2021, respectively, and $331 million and $488 million for the three months and six months ended June 30, 2020, respectively, and were primarily comprised of residential mortgage loans. Allowance for Credit Losses for Mortgage Loans Evaluation and Measurement Methodologies The allowance for credit losses is a valuation account that is deducted from the mortgage loan’s amortized cost basis to present the net amount expected to be collected on the mortgage loan. The loan balance, or a portion of the loan balance, is written-off against the allowance when management believes this amount is uncollectible. Accrued interest receivables are presented separate from the amortized cost basis of mortgage loans. An allowance for credit losses is generally not estimated on an accrued interest receivable, rather when a loan is placed in nonaccrual status the associated accrued interest receivable balance is written off with a corresponding reduction to net investment income. For mortgage loans that are granted payment deferrals due to the impact of the ongoing worldwide pandemic sparked by the novel coronavirus (“COVID-19 pandemic”), interest continues to be accrued during the deferral period if the loan was less than 30 days past due at December 31, 2019 and performing at the onset of the pandemic. Accrued interest on COVID-19 pandemic impacted loans was not significant at both June 30, 2021 and December 31, 2020. The accrued interest receivable on mortgage loans is included in accrued investment income and totaled $88 million at both June 30, 2021 and December 31, 2020. The allowance for credit losses is estimated using relevant available information, from internal and external sources, relating to past events, current conditions, and a reasonable and supportable forecast. Historical credit loss experience provides the basis for estimating expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics and environmental conditions. A reasonable and supportable forecast period of two-years is used with an input reversion period of one-year. Mortgage loans are evaluated in each of the three portfolio segments to determine the allowance for credit losses. The loan-level loss rates are determined using individual loan terms and characteristics, risk pools/internal ratings, national economic forecasts, prepayment speeds, and estimated default and loss severity. The resulting loss rates are applied to the mortgage loan’s amortized cost to generate an allowance for credit losses. In certain situations, the allowance for credit losses is measured as the difference between the loan’s amortized cost and liquidation value of the collateral. These situations include collateral dependent loans, expected troubled debt restructurings (“TDR”), foreclosure probable loans, and loans with dissimilar risk characteristics. Mortgage loans are also evaluated to determine if they qualify as PCD assets. To determine if the credit deterioration experienced since origination is more than insignificant, the extent of credit deterioration is evaluated. All re-performing/modified loan (“RPL”) pools purchased after December 31, 2019 are determined to have been acquired with evidence of more than insignificant credit deterioration since origination and are classified as PCD assets. RPLs are pools of residential mortgage loans acquired at a discount or premium which have both credit and non-credit components. For PCD mortgage loans, the allowance for credit losses is determined using a similar methodology described above, except the loss-rate is determined at the pool level instead of the individual loan level. The initial allowance for credit losses, determined on a collective basis, is then allocated to the individual loans. The initial amortized cost of the loan is grossed-up to reflect the sum of the loan’s purchase price and allowance for credit losses. The difference between the grossed-up amortized cost basis and the par value of the loan is a noncredit discount or premium, which is accreted or amortized into net investment income over the remaining life of the loan. Any subsequent PCD mortgage loan allowance for credit losses is evaluated in a manner similar to the process described above for each of the three portfolio segments. Rollforward of the Allowance for Credit Losses for Mortgage Loans by Portfolio Segment The changes in the allowance for credit losses by portfolio segment were as follows: Commercial Agricultural Residential Total (In millions) Six Months Ended June 30, 2021 Balance, beginning of period $ 44 $ 15 $ 35 $ 94 Current period provision 2 (2) 2 2 Balance, end of period $ 46 $ 13 $ 37 $ 96 Six Months Ended June 30, 2020 Balance, beginning of period $ 27 $ 16 $ 21 $ 64 Current period provision 10 — 18 28 Balance, end of period $ 37 $ 16 $ 39 $ 92 Purchases of PCD mortgage loans are summarized as follows: Six Months Ended June 30, 2021 2020 (In millions) Purchase price $ 229 $ 77 Allowance at acquisition date 1 2 Discount or premium attributable to other factors (16) 2 Par value $ 214 $ 81 Credit Quality of Mortgage Loans by Portfolio Segment The amortized cost of mortgage loans by year of origination and credit quality indicator was as follows at: 2021 2020 2019 2018 2017 Prior Total (In millions) June 30, 2021 Commercial mortgage loans Loan-to-value ratios: Less than 65% $ 692 $ 333 $ 1,424 $ 972 $ 513 $ 3,563 $ 7,497 65% to 75% 219 199 552 511 293 553 2,327 76% to 80% — — — — 44 88 132 Greater than 80% — — — 30 — 239 269 Total commercial mortgage loans 911 532 1,976 1,513 850 4,443 10,225 Agricultural mortgage loans Loan-to-value ratios: Less than 65% 433 540 538 716 342 896 3,465 65% to 75% 61 79 78 11 25 18 272 Total agricultural mortgage loans 494 619 616 727 367 914 3,737 Residential mortgage loans Performing 66 208 351 332 177 1,594 2,728 Nonperforming — 2 2 2 1 51 58 Total residential mortgage loans 66 210 353 334 178 1,645 2,786 Total $ 1,471 $ 1,361 $ 2,945 $ 2,574 $ 1,395 $ 7,002 $ 16,748 2020 2019 2018 2017 2016 Prior Total (In millions) December 31, 2020 Commercial mortgage loans Loan-to-value ratios: Less than 65% $ 317 $ 1,527 $ 1,004 $ 514 $ 1,106 $ 2,808 $ 7,276 65% to 75% 200 450 482 322 59 498 2,011 76% to 80% — — — 44 79 8 131 Greater than 80% — — 29 — 6 234 269 Total commercial mortgage loans 517 1,977 1,515 880 1,250 3,548 9,687 Agricultural mortgage loans Loan-to-value ratios: Less than 65% 566 526 749 377 412 627 3,257 65% to 75% 81 80 10 33 — 18 222 Total agricultural mortgage loans 647 606 759 410 412 645 3,479 Residential mortgage loans Performing 214 381 413 131 70 1,375 2,584 Nonperforming 2 6 4 — 1 53 66 Total residential mortgage loans 216 387 417 131 71 1,428 2,650 Total $ 1,380 $ 2,970 $ 2,691 $ 1,421 $ 1,733 $ 5,621 $ 15,816 The loan-to-value ratio is a measure commonly used to assess the quality of commercial and agricultural mortgage loans. The loan-to-value ratio compares the amount of the loan to the estimated fair value of the underlying property collateralizing the loan and is commonly expressed as a percentage. A loan-to-value ratio less than 100% indicates an excess of collateral value over the loan amount. Loan-to-value ratios greater than 100% indicate that the loan amount exceeds the collateral value. Performing status is a measure commonly used to assess the quality of residential mortgage loans. A loan is considered performing when the borrower makes consistent and timely payments. The amortized cost of commercial mortgage loans by debt-service coverage ratio was as follows at: June 30, 2021 December 31, 2020 Amortized Cost % of Amortized Cost % of (Dollars in millions) Debt-service coverage ratios: Greater than 1.20x $ 9,518 93.1 % $ 9,423 97.3 % 1.00x - 1.20x 359 3.5 204 2.1 Less than 1.00x 348 3.4 60 0.6 Total $ 10,225 100.0 % $ 9,687 100.0 % The debt-service coverage ratio compares a property’s net operating income to its debt-service payments. Debt-service coverage ratios less than 1.00 times indicate that property operations do not generate enough income to cover the loan’s current debt payments. A debt-service coverage ratio greater than 1.00 times indicates an excess of net operating income over the debt-service payments. Past Due Mortgage Loans by Portfolio Segment The Company has a high-quality, well-performing mortgage loan portfolio, with over 99% of all mortgage loans classified as performing at both June 30, 2021 and December 31, 2020. Delinquency is defined 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. To the extent a payment deferral is agreed to with a borrower, in response to the COVID-19 pandemic, the past due status of the impacted loans during the forbearance period is locked-in as of March 1, 2020, which reflects the date on which the COVID-19 pandemic began to affect the borrower’s ability to make payments. At June 30, 2021 and December 31, 2020, $33 million and $38 million, respectively, of the COVID-19 pandemic modified loans were classified as delinquent. The aging of the amortized cost of past due mortgage loans by portfolio segment was as follows at: June 30, 2021 December 31, 2020 Commercial Agricultural Residential Total Commercial Agricultural Residential Total (In millions) Current $ 10,225 $ 3,720 $ 2,683 $ 16,628 $ 9,687 $ 3,479 $ 2,575 $ 15,741 30-59 days past due — — 45 45 — — 9 9 60-89 days past due — — 14 14 — — 24 24 90-179 days past due — 15 28 43 — — 27 27 180+ days past due — 2 16 18 — — 15 15 Total $ 10,225 $ 3,737 $ 2,786 $ 16,748 $ 9,687 $ 3,479 $ 2,650 $ 15,816 Mortgage Loans in Nonaccrual Status by Portfolio Segment Mortgage loans are placed in a nonaccrual status if there are concerns regarding collectability of future payments or the loan is past due, unless the past due loan is well collateralized. To the extent a payment deferral is agreed to with a borrower, in response to the COVID-19 pandemic, the impacted loans generally will not be reported as in a nonaccrual status during the period of deferral. A COVID-19 pandemic modified loan is only reported as a nonaccrual asset in the event a borrower declares bankruptcy, the borrower experiences significant credit deterioration such that the Company does not expect to collect all principal and interest due, or the loan was 90 days past due at the onset of the pandemic. At June 30, 2021 and December 31, 2020, $33 million and $38 million, respectively, of the COVID-19 pandemic modified loans were in nonaccrual status. The amortized cost of mortgage loans in a nonaccrual status by portfolio segment were as follows at: Commercial Agricultural Residential (1) Total (In millions) June 30, 2021 $ — $ 14 $ 58 $ 72 December 31, 2020 $ — $ — $ 66 $ 66 _______________ (1) The Company had $9 million and $7 million of residential mortgage loans in nonaccrual status for which there was no related allowance for credit losses at June 30, 2021 and December 31, 2020, respectively. Current period investment income on mortgage loans in nonaccrual status was less than $1 million for both the six months ended June 30, 2021 and 2020. Modified Mortgage Loans by Portfolio Segment Under certain circumstances, modifications are granted to nonperforming mortgage loans. Each modification is evaluated to determine if a TDR has occurred. A modification is a TDR when the borrower is in financial difficulty and the creditor makes concessions. Generally, the types of concessions may include reducing the amount of debt owed, 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 did not have a significant amount of mortgage loans modified in a troubled debt restructuring during both the six months ended June 30, 2021 and 2020. Other Invested Assets Over 90% of other invested assets is comprised of freestanding derivatives with positive estimated fair values. 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 (“FHLB”) stock. Leveraged Leases The carrying value of leveraged leases was $49 million and $50 million at June 30, 2021 and December 31, 2020, respectively. The allowance for credit losses was $13 million at both June 30, 2021 and December 31, 2020. Rental receivables are generally due in periodic installments. The payment periods for leveraged leases generally range from one to 12 years. For rental receivables, the primary credit quality indicator is whether the rental receivable is performing or nonperforming, which is assessed monthly. Nonperforming rental receivables are generally defined as those that are 90 days or more past due. At both June 30, 2021 and December 31, 2020, all leveraged leases were performing. 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 accumulated other comprehensive income (loss) (“AOCI”). The components of net unrealized investment gains (losses), included in AOCI, were as follows at: June 30, 2021 December 31, 2020 (In millions) Fixed maturity securities $ 9,231 $ 11,818 Derivatives 200 162 Other (17) (16) Subtotal 9,414 11,964 Amounts allocated from: Future policy benefits (3,514) (4,598) DAC, VOBA and DSI (425) (494) Subtotal (3,939) (5,092) Deferred income tax benefit (expense) (1,150) (1,443) Net unrealized investment gains (losses) $ 4,325 $ 5,429 The changes in net unrealized investment gains (losses) were as follows: Six Months Ended June 30, 2021 (In millions) Balance at December 31, 2020 $ 5,429 Unrealized investment gains (losses) during the period (2,550) Unrealized investment gains (losses) relating to: Future policy benefits 1,084 DAC, VOBA and DSI 69 Deferred income tax benefit (expense) 293 Balance at June 30, 2021 $ 4,325 Change in net unrealized investment gains (losses) $ (1,104) 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 June 30, 2021 and December 31, 2020. Securities Lending Elements of the securities lending program are presented below at: June 30, 2021 December 31, 2020 (In millions) Securities on loan: (1) Amortized cost $ 3,071 $ 2,373 Estimated fair value $ 3,969 $ 3,603 Cash collateral received from counterparties (2) $ 4,025 $ 3,674 Securities collateral received from counterparties (3) $ 7 $ — Reinvestment portfolio — estimated fair value $ 4,193 $ 3,830 _______________ (1) Included within fixed maturity securities. (2) Included within payables for collateral under securities loaned and other transactions. (3) Securities collateral received from counterparties may not be sold or re-pledged, unless the counterparty is in default, and is not reported on the consolidated financial statements. The cash collateral liability by loaned security type and remaining tenor of the agreements were as follows at: June 30, 2021 December 31, 2020 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 $ 1,255 $ 2,336 $ 433 $ 4,024 $ 937 $ 2,300 $ 437 $ 3,674 U.S. corporate 1 — — 1 — — — — Total $ 1,256 $ 2,336 $ 433 $ 4,025 $ 937 $ 2,300 $ 437 $ 3,674 _______________ (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 in normal market conditions, or both. The estimated fair value of the securities on loan related to the cash collateral on open at June 30, 2021 was $1.2 billion, primarily comprised of U.S. government and agency securities which, if put back to the Company, could be immediately sold to satisfy the cash requirement. Invested Assets on Deposit, Held in Trust and Pledged as Collateral Invested assets on deposit, held in trust and pledged as collateral at estimated fair value were as follows at: June 30, 2021 December 31, 2020 (In millions) Invested assets on deposit (regulatory deposits) (1) $ 9,895 $ 10,131 Invested assets held in trust (reinsurance agreements) (2) 5,719 5,711 Invested assets pledged as collateral (3) 5,448 5,595 Total invested assets on deposit, held in trust and pledged as collateral $ 21,062 $ 21,437 _______________ (1) The Company has assets, primarily fixed maturity securities, on deposit with governmental authorities relating to certain policyholder liabilities, of which $112 million and $59 million of the assets on deposit represents restricted cash and cash equivalents at June 30, 2021 and December 31, 2020, respectively. (2) The Company has assets, primarily fixed maturity securities, held in trust relating to certain reinsurance transactions, of which $119 million and $101 million of the assets held in trust balance represents restricted cash and cash equivalents at June 30, 2021 and December 31, 2020, respectively. (3) The Company has pledged invested assets in connection with various agreements and transactions, including funding agreements (see Note 3 of the Notes to the Consolidated Financial Statements included in the 2020 Annual Report) and derivative transactions (see Note 5). See “— Securities Lending” for information regarding securities on loan. In addition, the Company’s investment in FHLB common stock, which is considered restricted until redeemed by the issuer, was $63 million and $39 million at redemption value at June 30, 2021 and December 31, 2020, respectively. Variable Interest Entities A variable interest entity (“VIE”) is a legal entity that does not have sufficient equity at risk to finance its activities or is structured such that equity investors lack the ability to make significant decisions relating to the entity’s operations through voting rights or do not substantively participate in the gains and losses of the entity. The Company enters into various arrangements with VIEs in the normal course of business and has invested in legal entities that are VIEs. VIEs are consolidated when it is determined that the Company is the primary beneficiary. A primary beneficiary is the variable interest holder in a VIE with both (i) the power to direct the activities of the VIE that most significantly impact the economic performance of the VIE and (ii) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. In addition, the evaluation of whether a legal entity is a VIE and if the Company is a primary beneficiary includes a review of the capital structure of the VIE, the related contractual relationships and terms, the nature of the operations and purpose of the VIE, the nature of the VIE interests issued and the Company’s involvement with the entity. There were no material VIEs for which the Company has concluded that it is the primary beneficiary at either June 30, 2021 or December 31, 2020. The carrying amount and maximum exposure to loss related to the VIEs for which the Company has concluded that it holds a variable interest, but is not the primary beneficiary, were as follows at: June 30, 2021 December 31, 2020 Carrying Maximum Carrying Maximum (In millions) Fixed maturity securities $ 14,410 $ 13,494 $ 13,494 $ 12,416 Limited partnerships and LLCs 2,985 4,323 2,307 3,565 Total $ 17,395 $ 17,817 $ 15,801 $ 15,981 The Company’s investments in unconsolidated VIEs are described below. Fixed Maturity Securities Limited Partnerships and LLCs The Company holds investments in certain limited partnerships and LLCs which are VIEs. These ventures include 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 9. Net Investment Income The components of net investment income were as follows: Three Months Ended Six Months Ended 2021 2020 2021 2020 (In millions) Investment income: Fixed maturity securities $ 694 $ 667 $ 1,374 $ 1,325 Equity securities 1 1 2 3 Mortgage loans 166 166 329 332 Policy loans 11 8 21 14 Limited partnerships and LLCs (1) 350 (190) 688 (108) Cash, cash equivalents and short-term investments 1 12 2 32 Other 8 11 18 24 Total investment income 1,231 675 2,434 1,622 Less: Investment expenses 35 40 69 91 Net investment income $ 1,196 $ 635 $ 2,365 $ 1,531 _______________ (1) Includes net investment income pertaining to other limited partnership interests of $339 million and $670 million for the three months and six months ended June 30, 2021, respectively, and ($193) million and ($120) million for the three months and six months ended June 30, 2020, respectively. Net Investment Gains (Losses) Components of Net Investment Gains (Losses) The components of net investment gains (losses) were as follows: Three Months Ended Six Months Ended 2021 2020 2021 2020 (In millions) Fixed maturity securities $ (31) $ (20) $ (23) $ (26) Equity securities 3 7 3 (7) Mortgage loans (5) (22) (1) (26) Limited partnerships and LLCs 1 (2) 1 (3) Other (1) 4 (1) 10 Total net investment gains (losses) $ (33) $ (33) $ (21) $ (52) 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 follows: Three Months Ended Six Months Ended 2021 2020 2021 2020 (In millions) Proceeds $ 949 $ 619 $ 2,167 $ 1,266 Gross investment gains $ 8 $ 14 $ 39 $ 31 Gross investment losses (38) (36) (55) (42) Net investment gains (losses) $ (30) $ (22) $ (16) $ (11) |
