| Investments | 20% < 20% > 20% < 20% > 20% December 31, 2018 Six months or less below amortized cost $ 4,531 $ 88 $ 106 $ 21 826 25 More than six months and twelve months or less below amortized cost 5,535 73 235 27 1,063 6 More than twelve months below amortized cost 2,378 80 144 27 519 5 Total $ 12,444 $ 241 $ 485 $ 75 2,408 36 December 31, 2017 Six months or less below amortized cost $ 1,883 $ 67 $ 30 $ 38 433 7 More than six months and twelve months or less below amortized cost 128 7 4 2 37 1 More than twelve months below amortized cost 1,661 72 53 21 335 7 Total $ 3,672 $ 146 $ 87 $ 61 805 15 Unrealized capital losses (including noncredit impairments) in fixed maturities, including securities pledged, by market sector for instances in which fair value declined below amortized cost by greater than or less than 20% were as follows as of the dates indicated: Amortized Cost Unrealized Capital Losses Number of Securities < 20% > 20% < 20% > 20% < 20% > 20% December 31, 2018 U.S. Treasuries $ 15 $ — $ — $ — 5 — State, municipalities and political subdivisions 287 — 8 — 132 — U.S. corporate public securities 3,721 55 164 17 796 8 U.S. corporate private securities 2,120 67 84 22 245 2 Foreign corporate public securities and foreign governments 1,348 60 65 15 307 9 Foreign corporate private securities 1,765 57 76 21 157 6 Residential mortgage-backed 1,004 — 32 — 301 8 Commercial mortgage-backed 1,205 — 28 — 228 — Other asset-backed 979 2 28 — 237 3 Total $ 12,444 $ 241 $ 485 $ 75 2,408 36 December 31, 2017 U.S. Treasuries $ 30 $ — $ — $ — 6 — State, municipalities and political subdivisions 130 — 4 — 96 — U.S. corporate public securities 828 6 24 2 167 2 U.S. corporate private securities 743 66 18 20 71 2 Foreign corporate public securities and foreign governments 254 7 7 2 61 1 Foreign corporate private securities 288 66 8 37 35 6 Residential mortgage-backed 746 — 19 — 194 3 Commercial mortgage-backed 511 — 6 — 131 — Other asset-backed 142 1 1 — 44 1 Total $ 3,672 $ 146 $ 87 $ 61 805 15 Investments with fair values less than amortized cost are included in the Company's other-than-temporary impairment analysis. Impairments were recognized as disclosed in the "Evaluating Securities for Other-Than-Temporary Impairments" section below. The Company evaluates non-agency RMBS and ABS for "other-than-temporary impairments" each quarter based on actual and projected cash flows after considering the quality and updated loan-to-value ratios reflecting current home prices of underlying collateral, forecasted loss severity, the payment priority within the tranche structure of the security and amount of any credit enhancements. The Company's assessment of current levels of cash flows compared to estimated cash flows at the time the securities were acquired (typically pre-2008) indicates the amount and the pace of projected cash flows from the underlying collateral has generally been lower and slower, respectively. However, since cash flows are typically projected at a trust level, the impairment review incorporates the security's position within the trust structure as well as credit enhancement remaining in the trust to determine whether an impairment is warranted. Therefore, while lower and slower cash flows will impact the trust, the effect on the valuation of a particular security within the trust will also be dependent upon the trust structure. Where the assessment continues to project full recovery of principal and interest on schedule, the Company has not recorded an impairment. Based on this analysis, the Company determined that the remaining investments in an unrealized loss position were not other-than-temporarily impaired and therefore no further other-than-temporary impairment was necessary. Troubled Debt Restructuring The Company invests in high quality, well performing portfolios of commercial mortgage loans and private placements. Under certain circumstances, modifications are granted to these contracts. Each modification is evaluated as to whether a troubled debt restructuring has occurred. A modification is a troubled debt restructuring when the borrower is in financial difficulty and the creditor makes concessions. Generally, the types of concessions may include reducing the face amount or maturity amount of the debt as originally stated, reducing the contractual interest rate, extending the maturity date at an interest rate lower than current market interest rates and/or reducing accrued interest. The Company considers the amount, timing and extent of the concession granted in determining any impairment or changes in the specific valuation allowance recorded in connection with the troubled debt restructuring. A valuation allowance may have been recorded prior to the quarter when the loan is modified in a troubled debt restructuring. Accordingly, the carrying value (net of the specific valuation allowance) before and after modification through a troubled debt restructuring may not change significantly, or may increase if the expected recovery is higher than the pre-modification recovery assessment. As of December 31, 2018 , the Company did no t have any new commercial mortgage loan or private placement troubled debt restructuring. As of December 31, 2017 , the Company did no t have any new commercial mortgage loan troubled debt restructuring and had one private placement troubled debt restructuring with a pre-modification and post-modification carrying value of $3 . As of December 31, 2018 and 2017 , the Company did no t have any commercial mortgage loans or private placements modified in a troubled debt restructuring with a subsequent payment default. Mortgage Loans on Real Estate The Company diversifies its commercial mortgage loan portfolio by geographic region and property type to reduce concentration risk. The Company manages risk when originating commercial mortgage loans by generally lending only up to 75% of the estimated fair value of the underlying real estate. Subsequently, the Company continuously evaluates mortgage loans based on relevant current information including a review of loan-specific credit quality, property characteristics and market trends. The components to evaluate debt service coverage are received and reviewed at least annually to determine the level of risk. The following table summarizes the Company's investment in mortgage loans as of the dates indicated: December 31, 2018 December 31, 2017 Impaired Non Impaired Total Impaired Non Impaired Total Commercial mortgage loans $ 4 $ 4,915 $ 4,919 $ 4 $ 4,907 $ 4,911 Collective valuation allowance for losses N/A (1 ) (1 ) N/A (1 ) (1 ) Total net commercial mortgage loans $ 4 $ 4,914 $ 4,918 $ 4 $ 4,906 $ 4,910 N/A - Not Applicable There were no impairments taken on the mortgage loan portfolio for the years ended December 31, 2018 , 2017 and 2016 . The following table summarizes the activity in the allowance for losses for commercial mortgage loans for the periods indicated: December 31, 2018 December 31, 2017 Collective valuation allowance for losses, balance at January 1 $ 1 $ 1 Addition to (reduction of) allowance for losses — — Collective valuation allowance for losses, end of period $ 1 $ 1 The carrying values and unpaid principal balances of impaired mortgage loans were as follows as of the dates indicated: December 31, 2018 December 31, 2017 Impaired loans without allowances for losses $ 4 $ 4 Less: Allowances for losses on impaired loans — — Impaired loans, net $ 4 $ 4 Unpaid principal balance of impaired loans $ 5 $ 6 As of December 31, 2018 and 2017 , the Company did not have any impaired loans with allowances for losses. There were no mortgage loans in the Company's portfolio in process of foreclosure as of December 31, 2018 and 2017 . There was one loan 60 days or less in arrears, with respect to principal and interest as of December 31, 2018 , with a total amortized cost of $6 . There were no loans in arrears, with respect to principal and interest as of December 31, 2017 . The following table presents information on the average investment during the period in impaired loans and interest income recognized on impaired and troubled debt restructured loans for the periods indicated: Year Ended December 31, 2018 2017 2016 Impaired loans, average investment during the period (amortized cost) (1) $ 4 $ 4 $ 8 Interest income recognized on impaired loans, on an accrual basis (1) — — — Interest income recognized on impaired loans, on a cash basis (1) — — — Interest income recognized on troubled debt restructured loans, on an accrual basis — — — (1) Includes amounts for Troubled debt restructured loans. Loan-to-value ("LTV") and debt service coverage ("DSC") ratios are measures commonly used to assess the risk and quality of mortgage loans. The LTV ratio, calculated at time of origination, is expressed as a percentage of the amount of the loan relative to the value of the underlying property. A LTV ratio in excess of 100% indicates the unpaid loan amount exceeds the underlying collateral. The DSC ratio, based upon the most recently received financial statements, is expressed as a percentage of the amount of a property's net income to its debt service payments. A DSC ratio of less than 1.0 indicates that a property's operations do not generate sufficient income to cover debt payments. These ratios are utilized as part of the review process described above. The following tables present the LTV and DSC ratios as of the dates indicated: Recorded Investment Debt Service Coverage Ratios > 1.5x >1.25x - 1.5x >1.0x - 1.25x < 1.0x Commercial mortgage loans secured by land or construction loans Total % of Total December 31, 2018 (1) Loan-to-Value Ratios: 0% - 50% $ 284 $ 24 $ 23 $ — $ — $ 331 6.7 % >50% - 60% 1,133 40 11 — — 1,184 24.1 % >60% - 70% 2,070 328 503 34 26 2,961 60.2 % >70% - 80% 213 87 66 19 4 389 7.9 % >80% and above 18 5 10 — 21 54 1.1 % Total $ 3,718 $ 484 $ 613 $ 53 $ 51 $ 4,919 100.0 % (1) Balances do not include collective valuation allowance for losses. Recorded Investment Debt Service Coverage Ratios > 1.5x >1.25x - 1.5x >1.0x - 1.25x < 1.0x Commercial mortgage loans secured by land or construction loans Total % of Total December 31, 2017 (1) Loan-to-Value Ratios: 0% - 50% $ 297 $ 30 $ — $ 14 $ — $ 341 6.9 % >50% - 60% 1,205 25 21 — 5 1,256 25.7 % >60% - 70% 2,241 228 534 39 — 3,042 61.9 % >70% - 80% 154 57 45 — 6 262 5.3 % >80% and above 5 — — 1 4 10 0.2 % Total $ 3,902 $ 340 $ 600 $ 54 $ 15 $ 4,911 100.0 % (1) Balances do not include collective valuation allowance for losses. Properties collateralizing mortgage loans are geographically dispersed throughout the United States, as well as diversified by property type, as reflected in the following tables as of the dates indicated: December 31, 2018 (1) December 31, 2017 (1) Gross Carrying Value % of Total Gross Carrying Value % of Total Commercial Mortgage Loans by U.S. Region: Pacific $ 994 20.2 % $ 985 20.1 % South Atlantic 1,011 20.5 % 982 20.0 % Middle Atlantic 1,039 21.2 % 1,097 22.4 % West South Central 566 11.5 % 552 11.2 % Mountain 458 9.3 % 457 9.3 % East North Central 465 9.5 % 468 9.5 % New England 75 1.5 % 77 1.6 % West North Central 258 5.2 % 243 4.9 % East South Central 53 1.1 % 50 1.0 % Total Commercial mortgage loans $ 4,919 100.0 % $ 4,911 100.0 % (1) Balances do not include collective valuation allowance for losses. December 31, 2018 (1) December 31, 2017 (1) Gross Carrying Value % of Total Gross Carrying Value % of Total Commercial Mortgage Loans by Property Type: Retail $ 1,335 27.2 % $ 1,383 28.1 % Industrial 1,323 26.9 % 1,326 27.0 % Apartments 1,104 22.4 % 948 19.3 % Office 791 16.1 % 829 16.9 % Hotel/Motel 111 2.3 % 177 3.6 % Mixed Use 46 0.9 % 52 1.1 % Other 209 4.2 % 196 4.0 % Total Commercial mortgage loans $ 4,919 100.0 % $ 4,911 100.0 % (1) Balances do not include collective valuation allowance for losses. The following table presents mortgages by year of origination as of the dates indicated: December 31, 2018 (1) December 31, 2017 (1) Year of Origination: 2018 $ 375 $ — 2017 1,108 1,086 2016 906 867 2015 589 703 2014 490 538 2013 585 644 2012 and prior 866 1,073 Total Commercial mortgage loans $ 4,919 $ 4,911 (1) Balances do not include collective valuation allowance for losses. Evaluating Securities for Other-Than-Temporary Impairments The Company performs a regular evaluation, on a security-by-security basis, of its available-for-sale securities holdings, including fixed maturity securities, in accordance with its impairment policy in order to evaluate whether such investments are other-than-temporarily impaired. The following table identifies the Company's credit-related and intent-related impairments included in the Consolidated Statements of Operations, excluding impairments included in Other comprehensive income (loss) by type for the periods indicated: Year Ended December 31, 2018 2017 2016 Impairment No. of Securities Impairment No. of Securities Impairment No. of Securities U.S. corporate public securities $ 6 2 $ — * 3 $ 3 2 Foreign corporate public securities and foreign governments (1) 2 3 2 3 12 3 Foreign corporate private securities (1) 9 1 9 2 1 2 Residential mortgage-backed 3 58 1 17 3 25 Commercial mortgage-backed — * 1 — * 1 — — Other asset-backed — * 1 — — — — Total $ 20 66 $ 12 26 $ 19 32 (1) Primarily U.S. dollar denominated. *Less than $1. The above table includes $14 , $12 and $1 of write-downs related to credit impairments for the years ended December 31, 2018 , 2017 and 2016 , respectively, in Other-than-temporary impairments, which are recognized in the Consolidated Statements of Operations. The remaining $6 and $18 in write-downs for the year s ended December 31, 2018 and 2016 , respectively, are related to intent impairments. There were immaterial write-downs related to intent impairments for the year ended December 31, 2017 . The following table summarizes these intent impairments, which are also recognized in earnings, by type for the periods indicated: Year Ended December 31, 2018 2017 2016 Impairment No. of Securities Impairment No. of Securities Impairment No. of Securities U.S. corporate public securities $ 5 2 $ — * 3 $ 4 1 Foreign corporate public securities and foreign governments (1) — — — — 12 2 Residential mortgage-backed 1 22 — * 6 2 4 Commercial mortgage-backed — * 1 — * 1 — — Total $ 6 * 25 $ — * 10 $ 18 7 (1) Primarily U.S. dollar denominated. *Less than $1. The Company may sell securities during the period in which fair value has declined below amortized cost for fixed maturities. In certain situations, new factors, including changes in the business environment, can change the Company's previous intent to continue holding a security. Accordingly, these factors may lead the Company to record additional intent related capital losses. The following table presents the amount of credit impairments on fixed maturities for which a portion of the OTTI loss was recognized in Other comprehensive income (loss) and the corresponding changes in such amounts for the periods indicated: Year Ended December 31, 2018 2017 2016 Balance at January 1 $ 16 $ 9 $ 19 Additional credit impairments: On securities not previously impaired — 9 — On securities previously impaired 1 — 1 Reductions: Securities intent impaired 12 — — Increase in cash flows — — 2 Securities sold, matured, prepaid or paid down — 2 9 Balance at December 31 $ 5 $ 16 $ 9 Net Investment Income The following table summarizes Net investment income for the periods indicated: Year Ended December 31, 2018 2017 2016 Fixed maturities $ 1,363 $ 1,302 $ 1,325 Equity securities 5 4 4 Mortgage loans on real estate 220 211 191 Policy loans 9 10 12 Short-term investments and cash equivalents 3 1 1 Other 95 60 30 Gross investment income 1,695 1,588 1,563 Less: investment expenses 72 68 62 Net investment income $ 1,623 $ 1,520 $ 1,501 As of December 31, 2018 and 2017 , the Company had $1 and $3 , respectively, of investments in fixed maturities that did not produce net investment income. Fixed maturities are moved to a non-accrual status when the investment defaults. Interest income on fixed maturities is recorded when earned using an effective yield method, giving effect to amortization of premiums and accretion of discounts. Such interest income is recorded in Net investment income in the Consolidated Statements of Operations. Net Realized Capital Gains (Losses) Net realized capital gains (losses) comprise the difference between the amortized cost of investments and proceeds from sale and redemption, as well as losses incurred due to the credit-related and intent-related other-than-temporary impairment of investments. Realized investment gains and losses are also primarily generated from changes in fair value of embedded derivatives within products and fixed maturities, changes in fair value of fixed maturities recorded at FVO and changes in fair value including accruals on derivative instruments, except for effective cash flow hedges. Upon the adoption of ASU 2016-01 as of January 1, 2018, realized capital gains (losses) also include changes in fair value of equity securities. The cost of the investments on disposal is generally determined based on FIFO methodology. Net realized capital gains (losses) were as follows for the periods indicated: Year Ended December 31, 2018 2017 2016 Fixed maturities, available-for-sale, including securities pledged $ (69 ) $ (29 ) $ (70 ) Fixed maturities, at fair value option (227 ) (226 ) (201 ) Equity securities (4 ) — — Derivatives (36 ) 9 51 Embedded derivatives - fixed maturities (4 ) (5 ) (6 ) Guaranteed benefit derivatives 94 55 13 Other investments 4 (4 ) — Net realized capital gains (losses) $ (242 ) $ (200 ) $ (213 ) For the year ended December 31, 2018 , the change in fair value of equity securities still held as of December 31, 2018 was $(4) . Proceeds from the sale of fixed maturities and equity securities, available-for-sale and the related gross realized gains and losses, before tax were as follows for the periods indicated: Year Ended" id="sjs-B4">Investments Fixed Maturities and Equity Securities Available-for-sale and FVO fixed maturities were as follows as of December 31, 2018 : Amortized Cost Gross Unrealized Capital Gains Gross Unrealized Capital Losses Embedded Derivatives (2) Fair Value OTTI (3)(4) Fixed maturities: U.S. Treasuries $ 651 $ 87 $ — $ — $ 738 $ — U.S. Government agencies and authorities — — — — — — State, municipalities and political subdivisions 754 18 8 — 764 — U.S. corporate public securities 7,908 288 181 — 8,015 — U.S. corporate private securities 3,686 73 106 — 3,653 — Foreign corporate public securities and foreign governments (1) 2,551 69 80 — 2,540 — Foreign corporate private securities (1) 3,235 37 97 — 3,175 — Residential mortgage-backed securities: Agency 1,989 54 20 4 2,027 — Non-Agency 977 39 12 5 1,009 3 Total Residential mortgage-backed securities 2,966 93 32 9 3,036 3 Commercial mortgage-backed securities 1,917 16 28 — 1,905 — Other asset-backed securities 1,230 6 28 — 1,208 2 Total fixed maturities, including securities pledged 24,898 687 560 9 25,034 5 Less: Securities pledged 867 45 30 — 882 — Total fixed maturities 24,031 642 530 9 24,152 5 (1) Primarily U.S. dollar denominated. (2) Embedded derivatives within fixed maturity securities are reported with the host investment. The changes in fair value of embedded derivatives are reported in Other net realized capital gains (losses) in the Consolidated Statements of Operations. (3) Represents OTTI reported as a component of Other comprehensive income (loss). (4) Amount excludes $137 of net unrealized gains on impaired available-for-sale securities. Available-for-sale and FVO fixed maturities and equity securities were as follows as of December 31, 2017 : Amortized Cost Gross Unrealized Capital Gains Gross Unrealized Capital Losses Embedded Derivatives (2) Fair Value OTTI (3)(4) Fixed maturities: U.S. Treasuries $ 547 $ 109 $ — $ — $ 656 $ — U.S. Government agencies and authorities 3 — — — 3 — State, municipalities and political subdivisions 842 40 4 — 878 — U.S. corporate public securities 8,476 786 26 — 9,236 — U.S. corporate private securities 3,387 148 38 — 3,497 — Foreign corporate public securities and foreign governments (1) 2,594 192 9 — 2,777 — Foreign corporate private securities (1) 3,105 155 45 — 3,215 7 Residential mortgage-backed securities: Agency 1,878 65 17 6 1,932 — Non-Agency 639 54 2 6 697 4 Total Residential mortgage-backed securities 2,517 119 19 12 2,629 4 Commercial mortgage-backed securities 1,437 39 6 — 1,470 — Other asset-backed securities 671 11 1 — 681 2 Total fixed maturities, including securities pledged 23,579 1,599 148 12 25,042 13 Less: Securities pledged 864 104 8 — 960 — Total fixed maturities 22,715 1,495 140 12 24,082 13 Equity securities 45 15 — — 60 — Total fixed maturities and equity securities investments $ 22,760 $ 1,510 $ 140 $ 12 $ 24,142 $ 13 (1) Primarily U.S. dollar denominated. (2) Embedded derivatives within fixed maturity securities are reported with the host investment. The changes in fair value of embedded derivatives are reported in Other net realized capital gains (losses) in the Consolidated Statements of Operations. (3) Represents OTTI reported as a component of Other comprehensive income (loss). (4) Amount excludes $190 of net unrealized gains on impaired available-for-sale securities. The amortized cost and fair value of fixed maturities, including securities pledged, as of December 31, 2018 , are shown below by contractual maturity. Actual maturities may differ from contractual maturities as securities may be restructured, called or prepaid. MBS and Other ABS are shown separately because they are not due at a single maturity date. Amortized Fair Due to mature: One year or less $ 548 $ 552 After one year through five years 4,184 4,203 After five years through ten years 5,971 5,864 After ten years 8,082 8,266 Mortgage-backed securities 4,883 4,941 Other asset-backed securities 1,230 1,208 Fixed maturities, including securities pledged $ 24,898 $ 25,034 The investment portfolio is monitored to maintain a diversified portfolio on an ongoing basis. Credit risk is mitigated by monitoring concentrations by issuer, sector and geographic stratification and limiting exposure to any one issuer. As of December 31, 2018 and 2017 , the Company did no t have any investments in a single issuer, other than obligations of the U.S. Government and government agencies, with a carrying value in excess of 10% of the Company's consolidated Shareholder's equity. The following tables present the composition of the U.S. and foreign corporate securities within the fixed maturity portfolio by industry category as of the dates indicated: Amortized Cost Gross Unrealized Capital Gains Gross Unrealized Capital Losses Fair Value December 31, 2018 Communications $ 1,139 $ 55 $ 21 $ 1,173 Financial 2,707 101 47 2,761 Industrial and other companies 7,604 152 214 7,542 Energy 1,884 55 81 1,858 Utilities 2,974 80 74 2,980 Transportation 729 14 17 726 Total $ 17,037 $ 457 $ 454 $ 17,040 December 31, 2017 Communications $ 1,145 $ 114 $ 1 $ 1,258 Financial 2,750 185 4 2,931 Industrial and other companies 7,953 532 65 8,420 Energy 1,970 159 33 2,096 Utilities 2,725 216 11 2,930 Transportation 697 52 2 747 Total $ 17,240 $ 1,258 $ 116 $ 18,382 Fixed Maturities The Company invests in various categories of CMOs, including CMOs that are not agency-backed, that are subject to different degrees of risk from changes in interest rates and defaults. The principal risks inherent in holding CMOs are prepayment and extension risks related to significant decreases and increases in interest rates resulting in the prepayment of principal from the underlying mortgages, either earlier or later than originally anticipated. As of December 31, 2018 and 2017 , approximately 52.5% and 52.1% , respectively, of the Company's CMO holdings, were invested in the above mentioned types of CMOs such as interest-only or principal-only strips, that are subject to more prepayment and extension risk than traditional CMOs. Public corporate fixed maturity securities are distinguished from private corporate fixed maturity securities based upon the manner in which they are transacted. Public corporate fixed maturity securities are issued initially through market intermediaries on a registered basis or pursuant to Rule 144A under the Securities Act of 1933 (the "Securities Act") and are traded on the secondary market through brokers acting as principal. Private corporate fixed maturity securities are originally issued by borrowers directly to investors pursuant to Section 4(a)(2) of the Securities Act, and are traded in the secondary market directly with counterparties, either without the participation of a broker or in agency transactions. Repurchase Agreements As of December 31, 2018 and 2017 , the Company did no t have any securities pledged in dollar rolls, repurchase agreement transactions or reverse repurchase agreements. Securities Lending As of December 31, 2018 and 2017 , the fair value of loaned securities was $759 and $799 , respectively, and is included in Securities pledged on the Consolidated Balance Sheets. If cash is received as collateral, the lending agent retains the cash collateral and invests it in short-term liquid assets on behalf of the Company. As of December 31, 2018 and 2017 , cash collateral retained by the lending agent and invested in short-term liquid assets on the Company's behalf was $719 and $744 , respectively, and is recorded in Short-term investments under securities loan agreements, including collateral delivered on the Consolidated Balance Sheets. As of December 31, 2018 and 2017 , liabilities to return collateral of $719 and $744 , respectively, are included in Payables under securities loan agreements, including collateral held, on the Consolidated Balance Sheets. The Company accepts non-cash collateral in the form of securities. The securities retained as collateral by the lending agent may not be sold or re-pledged, except in the event of default, and are not reflected on the Company’s Consolidated Balance Sheets. This collateral generally consists of U.S. Treasury, U.S. Government agency securities and MBS pools. As of December 31, 2018 and 2017 , the fair value of securities retained as collateral by the lending agent on the Company’s behalf was $67 and $61 , respectively. The following table presents borrowings under securities lending transactions by asset class pledged for the dates indicated: December 31, 2018 1)(2) December 31, 2017 (1)(2) U.S. Treasuries $ 92 $ 177 U.S. corporate public securities 523 460 Foreign corporate public securities and foreign governments 170 168 Equity Securities 1 — Payables under securities loan agreements $ 786 $ 805 (1) As of December 31, 2018 and December 31, 2017 , borrowings under securities lending transactions include cash collateral of $719 and $744 , respectively. (2) As of December 31, 2018 and December 31, 2017 , borrowings under securities lending transactions include non-cash collateral of $67 and $61 , respectively. The Company's securities lending activities are conducted on an overnight basis, and all securities loaned can be recalled at any time. The Company does not offset assets and liabilities associated with its securities lending program. Variable Interest Entities The Company holds certain VIEs for investment purposes. VIEs may be in the form of private placement securities, structured securities, securitization transactions, or limited partnerships. The Company has reviewed each of its holdings and determined that consolidation of these investments in the Company's financial statements is not required, as the Company is not the primary beneficiary, because the Company does not have both the power to direct the activities that most significantly impact the entity's economic performance and the obligation or right to potentially significant losses or benefits, for any of its investments in VIEs. The Company did not provide any non-contractual financial support and its carrying value represents the Company's exposure to loss. The carrying value of the investments in VIEs was $583 and $411 as of December 31, 2018 and 2017 , respectively; these investments are included in Limited partnerships/corporations on the Consolidated Balance Sheets. Income and losses recognized on these investments are reported in Net investment income in the Consolidated Statements of Operations. Securitizations The Company invests in various tranches of securitization entities, including RMBS, CMBS and ABS. Through its investments, the Company is not obligated to provide any financial or other support to these entities. Each of the RMBS, CMBS and ABS entities are thinly capitalized by design and considered VIEs. The Company's involvement with these entities is limited to that of a passive investor. The Company has no unilateral right to appoint or remove the servicer, special servicer or investment manager, which are generally viewed to have the power to direct the activities that most significantly impact the securitization entities' economic performance, in any of these entities, nor does the Company function in any of these roles. The Company, through its investments or other arrangements, does not have the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the entity. Therefore, the Company is not the primary beneficiary and will not consolidate any of the RMBS, CMBS and ABS entities in which it holds investments. These investments are accounted for as investments available-for-sale as described in the Business, Basis of Presentation and Significant Accounting Policies Note to these Consolidated Financial Statements and unrealized capital gains (losses) on these securities are recorded directly in AOCI, except for certain RMBS that are accounted for under the FVO for which changes in fair value are reflected in Other net realized gains (losses) in the Consolidated Statements of Operations. The Company’s maximum exposure to loss on these structured investments is limited to the amount of its investment. Unrealized Capital Losses Unrealized capital losses (including noncredit impairments), along with the fair value of fixed maturity securities, including securities pledged, by market sector and duration were as follows as of December 31, 2018 : Six Months or Less More Than Six More Than Twelve Total Fair Unrealized Fair Unrealized Fair Unrealized Fair Unrealized U.S. Treasuries $ — $ — $ — $ — $ 15 $ — $ 15 $ — State, municipalities and political subdivisions 60 — 131 3 88 5 279 8 U.S. corporate public securities 1,285 37 1,775 94 535 50 3,595 181 U.S. corporate private securities 639 13 863 27 579 66 2,081 106 Foreign corporate public securities and foreign governments 503 12 656 42 169 26 1,328 80 Foreign corporate private securities 604 10 900 67 221 20 1,725 97 Residential mortgage-backed 345 6 215 5 412 21 972 32 Commercial mortgage-backed 447 6 418 10 312 12 1,177 28 Other asset-backed 476 11 416 16 61 1 953 28 Total $ 4,359 $ 95 $ 5,374 $ 264 $ 2,392 $ 201 $ 12,125 $ 560 Unrealized capital losses (including noncredit impairments), along with the fair value of fixed maturity securities, including securities pledged, by market sector and duration were as follows as of December 31, 2017 : Six Months or Less More Than Six More Than Twelve Total Fair Unrealized Fair Unrealized Fair Unrealized Fair Unrealized U.S. Treasuries $ 18 $ — $ — $ — $ 12 $ — $ 30 $ — State, municipalities and political subdivisions 34 — 1 — 91 4 126 4 U.S. corporate public securities 504 11 — — 304 15 808 26 U.S. corporate private securities 226 2 46 2 499 34 771 38 Foreign corporate public securities and foreign governments 148 1 5 — 99 8 252 9 Foreign corporate private securities 135 38 13 — 161 7 309 45 Residential mortgage-backed 263 5 26 1 438 13 727 19 Commercial mortgage-backed 436 5 19 — 50 1 505 6 Other asset-backed 95 1 9 — 38 — 142 1 Total $ 1,859 $ 63 $ 119 $ 3 $ 1,692 $ 82 $ 3,670 $ 148 Of the unrealized capital losses aged more than twelve months, the average market value of the related fixed maturities was 92.2% and 95.4% of the average book value as of December 31, 2018 and 2017 , respectively. Unrealized capital losses (including noncredit impairments) in fixed maturities, including securities pledged, for instances in which fair value declined below amortized cost by greater than or less than 20% for consecutive months as indicated in the tables below, were as follows as of the dates indicated: Amortized Cost Unrealized Capital Losses Number of Securities < 20% > 20% < 20% > 20% < 20% > 20% December 31, 2018 Six months or less below amortized cost $ 4,531 $ 88 $ 106 $ 21 826 25 More than six months and twelve months or less below amortized cost 5,535 73 235 27 1,063 6 More than twelve months below amortized cost 2,378 80 144 27 519 5 Total $ 12,444 $ 241 $ 485 $ 75 2,408 36 December 31, 2017 Six months or less below amortized cost $ 1,883 $ 67 $ 30 $ 38 433 7 More than six months and twelve months or less below amortized cost 128 7 4 2 37 1 More than twelve months below amortized cost 1,661 72 53 21 335 7 Total $ 3,672 $ 146 $ 87 $ 61 805 15 Unrealized capital losses (including noncredit impairments) in fixed maturities, including securities pledged, by market sector for instances in which fair value declined below amortized cost by greater than or less than 20% were as follows as of the dates indicated: Amortized Cost Unrealized Capital Losses Number of Securities < 20% > 20% < 20% > 20% < 20% > 20% December 31, 2018 U.S. Treasuries $ 15 $ — $ — $ — 5 — State, municipalities and political subdivisions 287 — 8 — 132 — U.S. corporate public securities 3,721 55 164 17 796 8 U.S. corporate private securities 2,120 67 84 22 245 2 Foreign corporate public securities and foreign governments 1,348 60 65 15 307 9 Foreign corporate private securities 1,765 57 76 21 157 6 Residential mortgage-backed 1,004 — 32 — 301 8 Commercial mortgage-backed 1,205 — 28 — 228 — Other asset-backed 979 2 28 — 237 3 Total $ 12,444 $ 241 $ 485 $ 75 2,408 36 December 31, 2017 U.S. Treasuries $ 30 $ — $ — $ — 6 — State, municipalities and political subdivisions 130 — 4 — 96 — U.S. corporate public securities 828 6 24 2 167 2 U.S. corporate private securities 743 66 18 20 71 2 Foreign corporate public securities and foreign governments 254 7 7 2 61 1 Foreign corporate private securities 288 66 8 37 35 6 Residential mortgage-backed 746 — 19 — 194 3 Commercial mortgage-backed 511 — 6 — 131 — Other asset-backed 142 1 1 — 44 1 Total $ 3,672 $ 146 $ 87 $ 61 805 15 Investments with fair values less than amortized cost are included in the Company's other-than-temporary impairment analysis. Impairments were recognized as disclosed in the "Evaluating Securities for Other-Than-Temporary Impairments" section below. The Company evaluates non-agency RMBS and ABS for "other-than-temporary impairments" each quarter based on actual and projected cash flows after considering the quality and updated loan-to-value ratios reflecting current home prices of underlying collateral, forecasted loss severity, the payment priority within the tranche structure of the security and amount of any credit enhancements. The Company's assessment of current levels of cash flows compared to estimated cash flows at the time the securities were acquired (typically pre-2008) indicates the amount and the pace of projected cash flows from the underlying collateral has generally been lower and slower, respectively. However, since cash flows are typically projected at a trust level, the impairment review incorporates the security's position within the trust structure as well as credit enhancement remaining in the trust to determine whether an impairment is warranted. Therefore, while lower and slower cash flows will impact the trust, the effect on the valuation of a particular security within the trust will also be dependent upon the trust structure. Where the assessment continues to project full recovery of principal and interest on schedule, the Company has not recorded an impairment. Based on this analysis, the Company determined that the remaining investments in an unrealized loss position were not other-than-temporarily impaired and therefore no further other-than-temporary impairment was necessary. Troubled Debt Restructuring The Company invests in high quality, well performing portfolios of commercial mortgage loans and private placements. Under certain circumstances, modifications are granted to these contracts. Each modification is evaluated as to whether a troubled debt restructuring has occurred. A modification is a troubled debt restructuring when the borrower is in financial difficulty and the creditor makes concessions. Generally, the types of concessions may include reducing the face amount or maturity amount of the debt as originally stated, reducing the contractual interest rate, extending the maturity date at an interest rate lower than current market interest rates and/or reducing accrued interest. The Company considers the amount, timing and extent of the concession granted in determining any impairment or changes in the specific valuation allowance recorded in connection with the troubled debt restructuring. A valuation allowance may have been recorded prior to the quarter when the loan is modified in a troubled debt restructuring. Accordingly, the carrying value (net of the specific valuation allowance) before and after modification through a troubled debt restructuring may not change significantly, or may increase if the expected recovery is higher than the pre-modification recovery assessment. As of December 31, 2018 , the Company did no t have any new commercial mortgage loan or private placement troubled debt restructuring. As of December 31, 2017 , the Company did no t have any new commercial mortgage loan troubled debt restructuring and had one private placement troubled debt restructuring with a pre-modification and post-modification carrying value of $3 . As of December 31, 2018 and 2017 , the Company did no t have any commercial mortgage loans or private placements modified in a troubled debt restructuring with a subsequent payment default. Mortgage Loans on Real Estate The Company diversifies its commercial mortgage loan portfolio by geographic region and property type to reduce concentration risk. The Company manages risk when originating commercial mortgage loans by generally lending only up to 75% of the estimated fair value of the underlying real estate. Subsequently, the Company continuously evaluates mortgage loans based on relevant current information including a review of loan-specific credit quality, property characteristics and market trends. The components to evaluate debt service coverage are received and reviewed at least annually to determine the level of risk. The following table summarizes the Company's investment in mortgage loans as of the dates indicated: December 31, 2018 December 31, 2017 Impaired Non Impaired Total Impaired Non Impaired Total Commercial mortgage loans $ 4 $ 4,915 $ 4,919 $ 4 $ 4,907 $ 4,911 Collective valuation allowance for losses N/A (1 ) (1 ) N/A (1 ) (1 ) Total net commercial mortgage loans $ 4 $ 4,914 $ 4,918 $ 4 $ 4,906 $ 4,910 N/A - Not Applicable There were no impairments taken on the mortgage loan portfolio for the years ended December 31, 2018 , 2017 and 2016 . The following table summarizes the activity in the allowance for losses for commercial mortgage loans for the periods indicated: December 31, 2018 December 31, 2017 Collective valuation allowance for losses, balance at January 1 $ 1 $ 1 Addition to (reduction of) allowance for losses — — Collective valuation allowance for losses, end of period $ 1 $ 1 The carrying values and unpaid principal balances of impaired mortgage loans were as follows as of the dates indicated: December 31, 2018 December 31, 2017 Impaired loans without allowances for losses $ 4 $ 4 Less: Allowances for losses on impaired loans — — Impaired loans, net $ 4 $ 4 Unpaid principal balance of impaired loans $ 5 $ 6 As of December 31, 2018 and 2017 , the Company did not have any impaired loans with allowances for losses. There were no mortgage loans in the Company's portfolio in process of foreclosure as of December 31, 2018 and 2017 . There was one loan 60 days or less in arrears, with respect to principal and interest as of December 31, 2018 , with a total amortized cost of $6 . There were no loans in arrears, with respect to principal and interest as of December 31, 2017 . The following table presents information on the average investment during the period in impaired loans and interest income recognized on impaired and troubled debt restructured loans for the periods indicated: Year Ended December 31, 2018 2017 2016 Impaired loans, average investment during the period (amortized cost) (1) $ 4 $ 4 $ 8 Interest income recognized on impaired loans, on an accrual basis (1) — — — Interest income recognized on impaired loans, on a cash basis (1) — — — Interest income recognized on troubled debt restructured loans, on an accrual basis — — — (1) Includes amounts for Troubled debt restructured loans. Loan-to-value ("LTV") and debt service coverage ("DSC") ratios are measures commonly used to assess the risk and quality of mortgage loans. The LTV ratio, calculated at time of origination, is expressed as a percentage of the amount of the loan relative to the value of the underlying property. A LTV ratio in excess of 100% indicates the unpaid loan amount exceeds the underlying collateral. The DSC ratio, based upon the most recently received financial statements, is expressed as a percentage of the amount of a property's net income to its debt service payments. A DSC ratio of less than 1.0 indicates that a property's operations do not generate sufficient income to cover debt payments. These ratios are utilized as part of the review process described above. The following tables present the LTV and DSC ratios as of the dates indicated: Recorded Investment Debt Service Coverage Ratios > 1.5x >1.25x - 1.5x >1.0x - 1.25x < 1.0x Commercial mortgage loans secured by land or construction loans Total % of Total December 31, 2018 (1) Loan-to-Value Ratios: 0% - 50% $ 284 $ 24 $ 23 $ — $ — $ 331 6.7 % >50% - 60% 1,133 40 11 — — 1,184 24.1 % >60% - 70% 2,070 328 503 34 26 2,961 60.2 % >70% - 80% 213 87 66 19 4 389 7.9 % >80% and above 18 5 10 — 21 54 1.1 % Total $ 3,718 $ 484 $ 613 $ 53 $ 51 $ 4,919 100.0 % (1) Balances do not include collective valuation allowance for losses. Recorded Investment Debt Service Coverage Ratios > 1.5x >1.25x - 1.5x >1.0x - 1.25x < 1.0x Commercial mortgage loans secured by land or construction loans Total % of Total December 31, 2017 (1) Loan-to-Value Ratios: 0% - 50% $ 297 $ 30 $ — $ 14 $ — $ 341 6.9 % >50% - 60% 1,205 25 21 — 5 1,256 25.7 % >60% - 70% 2,241 228 534 39 — 3,042 61.9 % >70% - 80% 154 57 45 — 6 262 5.3 % >80% and above 5 — — 1 4 10 0.2 % Total $ 3,902 $ 340 $ 600 $ 54 $ 15 $ 4,911 100.0 % (1) Balances do not include collective valuation allowance for losses. Properties collateralizing mortgage loans are geographically dispersed throughout the United States, as well as diversified by property type, as reflected in the following tables as of the dates indicated: December 31, 2018 (1) December 31, 2017 (1) Gross Carrying Value % of Total Gross Carrying Value % of Total Commercial Mortgage Loans by U.S. Region: Pacific $ 994 20.2 % $ 985 20.1 % South Atlantic 1,011 20.5 % 982 20.0 % Middle Atlantic 1,039 21.2 % 1,097 22.4 % West South Central 566 11.5 % 552 11.2 % Mountain 458 9.3 % 457 9.3 % East North Central 465 9.5 % 468 9.5 % New England 75 1.5 % 77 1.6 % West North Central 258 5.2 % 243 4.9 % East South Central 53 1.1 % 50 1.0 % Total Commercial mortgage loans $ 4,919 100.0 % $ 4,911 100.0 % (1) Balances do not include collective valuation allowance for losses. December 31, 2018 (1) December 31, 2017 (1) Gross Carrying Value % of Total Gross Carrying Value % of Total Commercial Mortgage Loans by Property Type: Retail $ 1,335 27.2 % $ 1,383 28.1 % Industrial 1,323 26.9 % 1,326 27.0 % Apartments 1,104 22.4 % 948 19.3 % Office 791 16.1 % 829 16.9 % Hotel/Motel 111 2.3 % 177 3.6 % Mixed Use 46 0.9 % 52 1.1 % Other 209 4.2 % 196 4.0 % Total Commercial mortgage loans $ 4,919 100.0 % $ 4,911 100.0 % (1) Balances do not include collective valuation allowance for losses. The following table presents mortgages by year of origination as of the dates indicated: December 31, 2018 (1) December 31, 2017 (1) Year of Origination: 2018 $ 375 $ — 2017 1,108 1,086 2016 906 867 2015 589 703 2014 490 538 2013 585 644 2012 and prior 866 1,073 Total Commercial mortgage loans $ 4,919 $ 4,911 (1) Balances do not include collective valuation allowance for losses. Evaluating Securities for Other-Than-Temporary Impairments The Company performs a regular evaluation, on a security-by-security basis, of its available-for-sale securities holdings, including fixed maturity securities, in accordance with its impairment policy in order to evaluate whether such investments are other-than-temporarily impaired. The following table identifies the Company's credit-related and intent-related impairments included in the Consolidated Statements of Operations, excluding impairments included in Other comprehensive income (loss) by type for the periods indicated: Year Ended December 31, 2018 2017 2016 Impairment No. of Securities Impairment No. of Securities Impairment No. of Securities U.S. corporate public securities $ 6 2 $ — * 3 $ 3 2 Foreign corporate public securities and foreign governments (1) 2 3 2 3 12 3 Foreign corporate private securities (1) 9 1 9 2 1 2 Residential mortgage-backed 3 58 1 17 3 25 Commercial mortgage-backed — * 1 — * 1 — — Other asset-backed — * 1 — — — — Total $ 20 66 $ 12 26 $ 19 32 (1) Primarily U.S. dollar denominated. *Less than $1. The above table includes $14 , $12 and $1 of write-downs related to credit impairments for the years ended December 31, 2018 , 2017 and 2016 , respectively, in Other-than-temporary impairments, which are recognized in the Consolidated Statements of Operations. The remaining $6 and $18 in write-downs for the year s ended December 31, 2018 and 2016 , respectively, are related to intent impairments. There were immaterial write-downs related to intent impairments for the year ended December 31, 2017 . The following table summarizes these intent impairments, which are also recognized in earnings, by type for the periods indicated: Year Ended December 31, 2018 2017 2016 Impairment No. of Securities Impairment No. of Securities Impairment No. of Securities U.S. corporate public securities $ 5 2 $ — * 3 $ 4 1 Foreign corporate public securities and foreign governments (1) — — — — 12 2 Residential mortgage-backed 1 22 — * 6 2 4 Commercial mortgage-backed — * 1 — * 1 — — Total $ 6 * 25 $ — * 10 $ 18 7 (1) Primarily U.S. dollar denominated. *Less than $1. The Company may sell securities during the period in which fair value has declined below amortized cost for fixed maturities. In certain situations, new factors, including changes in the business environment, can change the Company's previous intent to continue holding a security. Accordingly, these factors may lead the Company to record additional intent related capital losses. The following table presents the amount of credit impairments on fixed maturities for which a portion of the OTTI loss was recognized in Other comprehensive income (loss) and the corresponding changes in such amounts for the periods indicated: Year Ended December 31, 2018 2017 2016 Balance at January 1 $ 16 $ 9 $ 19 Additional credit impairments: On securities not previously impaired — 9 — On securities previously impaired 1 — 1 Reductions: Securities intent impaired 12 — — Increase in cash flows — — 2 Securities sold, matured, prepaid or paid down — 2 9 Balance at December 31 $ 5 $ 16 $ 9 Net Investment Income The following table summarizes Net investment income for the periods indicated: Year Ended December 31, 2018 2017 2016 Fixed maturities $ 1,363 $ 1,302 $ 1,325 Equity securities 5 4 4 Mortgage loans on real estate 220 211 191 Policy loans 9 10 12 Short-term investments and cash equivalents 3 1 1 Other 95 60 30 Gross investment income 1,695 1,588 1,563 Less: investment expenses 72 68 62 Net investment income $ 1,623 $ 1,520 $ 1,501 As of December 31, 2018 and 2017 , the Company had $1 and $3 , respectively, of investments in fixed maturities that did not produce net investment income. Fixed maturities are moved to a non-accrual status when the investment defaults. Interest income on fixed maturities is recorded when earned using an effective yield method, giving effect to amortization of premiums and accretion of discounts. Such interest income is recorded in Net investment income in the Consolidated Statements of Operations. Net Realized Capital Gains (Losses) Net realized capital gains (losses) comprise the difference between the amortized cost of investments and proceeds from sale and redemption, as well as losses incurred due to the credit-related and intent-related other-than-temporary impairment of investments. Realized investment gains and losses are also primarily generated from changes in fair value of embedded derivatives within products and fixed maturities, changes in fair value of fixed maturities recorded at FVO and changes in fair value including accruals on derivative instruments, except for effective cash flow hedges. Upon the adoption of ASU 2016-01 as of January 1, 2018, realized capital gains (losses) also include changes in fair value of equity securities. The cost of the investments on disposal is generally determined based on FIFO methodology. Net realized capital gains (losses) were as follows for the periods indicated: Year Ended December 31, 2018 2017 2016 Fixed maturities, available-for-sale, including securities pledged $ (69 ) $ (29 ) $ (70 ) Fixed maturities, at fair value option (227 ) (226 ) (201 ) Equity securities (4 ) — — Derivatives (36 ) 9 51 Embedded derivatives - fixed maturities (4 ) (5 ) (6 ) Guaranteed benefit derivatives 94 55 13 Other investments 4 (4 ) — Net realized capital gains (losses) $ (242 ) $ (200 ) $ (213 ) For the year ended December 31, 2018 , the change in fair value of equity securities still held as of December 31, 2018 was $(4) . Proceeds from the sale of fixed maturities and equity securities, available-for-sale and the related gross realized gains and losses, before tax were as follows for the periods indicated: Year Ended |
