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•	the accuracy of management’s assumptions and estimates;

•	variability in the amount of statutory capital that our insurance and reinsurance subsidiaries have or are required to hold;

•	interest rate and/or foreign currency fluctuations;

•	our potential need for additional capital in the future and the potential unavailability of such capital to us on favorable terms or at all;

•	major public health issues, and specifically the pandemic caused by the effects of the spread of the Coronavirus Disease of 2019 (COVID-19);

•	changes in relationships with important parties in our product distribution network;

•	the activities of our competitors and our ability to grow our retail business in a highly competitive environment;

•	the impact of general economic conditions on our ability to sell our products and on the fair value of our investments;

•	our ability to successfully acquire new companies or businesses and/or integrate such acquisitions into our existing framework;

•	downgrades, potential downgrades or other negative actions by rating agencies;

•	our dependence on key executives and inability to attract qualified personnel, or the potential loss of Bermudian personnel as a result of Bermuda employment restrictions;

•	market and credit risks that could diminish the value of our investments;

•	changes to the creditworthiness of our reinsurance and derivative counterparties;

•	the discontinuation of London Inter-bank Offered Rate (LIBOR);

•	changes in consumer perception regarding the desirability of annuities as retirement savings products;

•	potential litigation (including class action litigation), enforcement investigations or regulatory scrutiny against us and our subsidiaries, which we may be required to defend against or respond to;

•	the impact of new accounting rules or changes to existing accounting rules on our business;

•	interruption or other operational failures in telecommunication and information technology and other operating systems, as well as our ability to maintain the security of those systems;

•	the termination by Apollo Global Management, Inc. (AGM) or any of its subsidiaries (collectively, AGM together with its subsidiaries, Apollo) of its investment management agreements with us and limitations on our ability to terminate such arrangements;

•	Apollo’s dependence on key executives and inability to attract qualified personnel;

•	the accuracy of our estimates regarding the future performance of our investment portfolio;

•	increased regulation or scrutiny of alternative investment advisers and certain trading methods;

•	potential changes to regulations affecting, among other things, transactions with our affiliates, the ability of our subsidiaries to make dividend payments or distributions to AHL, acquisitions by or of us, minimum capitalization and statutory reserve requirements for insurance companies and fiduciary obligations on parties who distribute our products;

•	the failure to obtain or maintain licenses and/or other regulatory approvals as required for the operation of our insurance subsidiaries;

•	increases in our tax liability resulting from the Base Erosion and Anti-Abuse Tax (BEAT);

•	improper interpretation or application of Public Law no. 115-97, the Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018 (Tax Act) or subsequent changes to, clarifications of or guidance under the Tax Act that is counter to our interpretation and has retroactive effect;

•	AHL or any of its non-United States (U.S.) subsidiaries becoming subject to U.S. federal income taxation;

•	adverse changes in U.S. tax law;

•	our being subject to U.S. withholding tax under the Foreign Account Tax Compliance Act (FATCA);

•	changes in our ability to pay dividends or make distributions;

•	our failure to recognize the benefits expected to be derived from the share exchange transaction with Apollo;

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•	the failure to achieve the economic benefits expected to be derived from the Athene Co-Invest Reinsurance Affiliate 1A Ltd. (together with its subsidiaries, ACRA) capital raise or future ACRA capital raises;

•	the failure of third-party ACRA investors to fund their capital commitment obligations; and

•	other risks and factors listed in Part II–Item 1A. Risk Factors included in this report, Part I—Item 1A. Risk Factors included in our 2019 Annual Report and those discussed elsewhere in this report and in our 2019 Annual Report.

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1. Business, Basis of Presentation and Significant Accounting Policies

Athene Holding Ltd. (AHL), a Bermuda exempted company, together with its subsidiaries (collectively, Athene, we, our, us, or the Company), is a leading retirement services company that issues, reinsures and acquires retirement savings products in all United States (U.S.) states and the District of Columbia, and the United Kingdom (UK).

We conduct business primarily through the following consolidated subsidiaries:

•	Our non-U.S. reinsurance subsidiaries, to which AHL’s other insurance subsidiaries and third-party ceding companies directly and indirectly reinsure a portion of their liabilities, including Athene Life Re Ltd. (ALRe), a Bermuda exempted company, and Athene Life Re International Ltd. (ALReI); and

•	Athene USA Corporation, an Iowa corporation (together with its subsidiaries, Athene USA).

In addition, we consolidate certain variable interest entities (VIEs), for which we determined we are the primary beneficiary.

Consolidation and Basis of Presentation—We have prepared the accompanying condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and the United States Securities and Exchange Commission’s rules and regulations for Form 10-Q and Article 10 of Regulation S-X. The accompanying condensed consolidated financial statements are unaudited and reflect all adjustments, consisting only of normal recurring items, considered necessary for fair statement of the results for the interim periods presented. All significant intercompany accounts and transactions have been eliminated. Interim operating results are not necessarily indicative of the results expected for the entire year, particularly in light of the material risks and uncertainties surrounding the spread of the Coronavirus Disease of 2019 (COVID-19), which has resulted in significant volatility in the financial markets.

The condensed consolidated balance sheet as of December 31, 2019 has been derived from the audited financial statements, but does not include all of the information and footnotes required by GAAP for complete financial statements. Therefore, these condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019. The preparation of financial statements requires the use of management estimates. Our estimates may vary as more information about the extent to which COVID-19 and the resulting impact on economic conditions and the financial markets become known. Actual results may differ from estimates used in preparing the condensed consolidated financial statements.

VIE Deconsolidation – During the first quarter 2020, as a result of the Apollo Global Management, Inc. (AGM and, together with its subsidiaries, Apollo) share transaction discussed further in Note 9 – Related Parties, we reassessed the consolidation conclusions for the following VIEs which are managed by Apollo affiliates:

•	AAA Investments (Co-Invest VI), L.P. (CoInvest VI);

•	AAA Investments (Co-Invest VII), L.P. (CoInvest VII);

•	AAA Investments (Other), L.P. (CoInvest Other);

•	Entities included under our agreement to purchase funds managed by Apollo entities (Strategic Partnership).

Following the share transaction we determined that we are no longer the primary beneficiary of these entities, as a result of Apollo receiving significant economics of these entities through their increased economic ownership in the Company. We did not recognize a gain or loss upon deconsolidation, as the deconsolidated VIEs accounted for their assets and liabilities at fair value. As of March 31, 2020, the deconsolidated VIEs are included at net asset value (NAV) in related party investment funds on the condensed consolidated balance sheets.

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Summary of Significant Accounting Policies

The following accounting policies have been updated for the adoption of Accounting Standards Update (ASU) 2016-13 and related ASUs, and apply for reporting periods beginning January 1, 2020.

Investments

Purchased Credit Deteriorated (PCD) Investments – We purchase certain structured securities, primarily residential mortgage backed securities (RMBS), and re-performing mortgage loans having experienced a more-than-insignificant deterioration in credit quality since their origination which upon our assessment have been determined to meet the definition of PCD investments. Additionally, structured securities classified as beneficial interests follow the initial measurement guidance for PCD investments if there is a significant difference between contractual cash flows adjusted for expected prepayments and expected cash flows at the date of recognition. The initial allowance for credit losses for PCD investments is recorded through a gross-up adjustment to the initial amortized cost. For mortgage loans, the initial allowance is determined using the methodology described in the Credit Losses – Assets Held at Amortized Cost and Off-Balance Sheet Credit Exposures section. For structured securities classified as beneficial interests, the initial allowance is calculated as the present value of the difference between contractual cash flows adjusted for expected prepayments and expected cash flows at the date of recognition. The non-credit purchase discount or premium is amortized into investment income using the effective interest method. The credit discount, represented by the allowance for expected credit losses, is remeasured each period following the policies for measuring credit losses described in the Credit Losses – Assets Held at Amortized Cost and Off-Balance Sheet Credit Exposures and Credit Losses – Available-for-Sale Securities sections below.

Credit Losses – Assets Held at Amortized Cost and Off-Balance Sheet Credit Exposures – We establish an allowance for expected credit losses at the time of purchase for assets held at amortized cost, which primarily includes our residential and commercial mortgage loan portfolios, but also includes certain other loans and reinsurance assets. The allowance for expected credit losses represents the portion of the asset's amortized cost basis that we do not expect to collect due to credit losses over the asset's contractual life, considering past events, current conditions, and reasonable and supportable forecasts of future economic conditions or macroeconomic forecasts. We use a quantitative probability of default and loss given default methodology to develop our estimate of expected credit loss. We develop the estimate on a collective basis factoring in the risk characteristics of the assets in the portfolio. If an asset does not share similar risk characteristics with other assets, the asset is individually assessed.

Allowance estimates are highly dependent on expectations of future economic conditions and macroeconomic forecasts, which involve significant judgment and subjectivity. We use quantitative modeling to develop the allowance for expected credit losses. Key inputs into the model include data pertaining to the characteristics of the assets, historical losses and current market conditions. Additionally, the model incorporates management’s expectations around future economic conditions and macroeconomic forecasts over a reasonable and supportable forecast period, after which the model reverts to historical averages. These inputs, the reasonable and supportable forecast period, and reversion to historical average technique are subject to a formal governance and review process by management. Additionally, management considers qualitative adjustments to the model output to the extent that any relevant information regarding the collectability of the asset is available and not already considered in the quantitative model. If we determine that a financial asset has become collateral dependent, which we determine to be when foreclosure is probable, the allowance is measured as the difference between amortized cost and the fair value of the collateral, less any expected costs to sell.

The initial allowance for invested assets held at amortized cost other than for PCD investments, and subsequent changes in the allowance including PCD investments, are recorded through a charge to credit loss expense within investment related gains (losses) on the condensed consolidated statements of income (loss). Credit loss expense for reinsurance assets held at amortized cost is recorded through policy and other operating expenses on the condensed consolidated statements of income (loss).

We limit accrued interest income on loans to 90 days of interest. Once a loan becomes 90 days past due, the loan is put on non-accrual status and any accrued interest is written off. Once a loan is on non-accrual status, we first apply any payments received to the principal of the loan, and once the principal is repaid, we include amounts received in net investment income. We have elected to present accrued interest receivable separately in accrued investment income on the condensed consolidated balance sheets. We have also elected the practical expedient to exclude the accrued interest receivable from the amortized cost balance used to calculate the allowance given our policy to write off such balances in a timely manner. Any write-off of accrued interest is recorded through a reversal of net investment income on the condensed consolidated statements of income (loss).

Upon determining that all or a portion of the amortized cost of an asset is uncollectible, which is generally when all efforts for collection are exhausted, the amortized cost is written off against the existing allowance. Any write off in excess of the existing allowance is recorded through credit loss expense within investment related gains (losses) on the condensed consolidated statements of income (loss).

We also have certain off-balance sheet credit exposures for which we establish a liability for expected future credit losses. These exposures primarily relate to commitments to fund commercial or residential mortgage loans that are not unconditionally cancelable. The methodology for estimating the liability for these credit exposures is consistent with that described above, with the additional consideration pertaining to the probability of funding. At the time the commitment expires or is funded, the liability is reversed and an allowance for expected credit losses is established, as applicable. The liability for off-balance sheet credit exposures is included in other liabilities on the condensed consolidated balance sheets. The establishment of the initial liability and all subsequent changes are recorded through credit loss expense within investment related gains (losses) on the condensed consolidated statements of income (loss).

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Credit Losses – Available-for-Sale Securities – We evaluate available-for-sale (AFS) securities with a fair value that has declined below amortized cost to determine how the decline in fair value should be recognized. If we determine, based on the facts and circumstances related to the specific security, that we intend to sell a security or it is more likely than not that we would be required to sell a security before the recovery of its amortized cost, any existing allowance for credit losses is reversed and the amortized cost of the security is written down to fair value. If neither of these conditions exist, we evaluate whether the decline in fair value has resulted from a credit loss or other factors.

For non-structured AFS securities, we qualitatively consider relevant facts and circumstances in evaluating whether a decline below fair value is credit-related. Relevant facts and circumstances include but are not limited to: (1) the extent to which the fair value is less than amortized cost; (2) changes in agency credit ratings, (3) adverse conditions related to the security’s industry or geographical area, (4) failure to make scheduled payments, and (5) other known changes in the financial condition of the issuer or quality of any underlying collateral or credit enhancements. For structured AFS securities meeting the definition of beneficial interests, the qualitative assessment is bypassed, and any securities having experienced a decline in fair value below amortized cost move directly to a quantitative analysis.

If upon completion of this analysis it is determined that a potential credit loss exists, an allowance for expected credit losses is established equal to the amount by which the present value of expected cash flows is less than amortized cost, limited by the amount by which fair value is less than amortized cost. A non-structured security’s cash flow estimates are derived from scenario-based outcomes of expected corporate restructurings or the disposition of assets using security-specific facts and circumstances including timing, security interests and loss severity. A structured security’s cash flow estimates are based on security-specific facts and circumstances that may include collateral characteristics, expectations of delinquency and default rates, loss severity, prepayments and structural support, including subordination and guarantees. The expected cash flows are discounted at the effective interest rate implicit to the security at the date of purchase or the current yield to accrete a structured security. For securities with a contractual interest rate that varies based on changes in an independent factor, such as an index or rate, the effective interest rate is calculated based on the factor as it changes over the life of the security. Inherently under the discounted cash flow model, both the timing and amount of cash flows affect the measurement of the allowance for expected credit losses.

The allowance for expected credit losses is remeasured each period for the passage of time, any change in expected cash flows, and changes in the fair value of the security. All impairments, whether intent or requirement to sell or credit-related, are recorded through a charge to credit loss expense within investment related gains (losses) on the condensed consolidated statements of income (loss). All changes in the allowance for expected credit losses are recorded through credit loss expense within investment related gains (losses) on the condensed consolidated statements of income (loss).

We have elected to present accrued interest receivable separately in accrued investment income on the condensed consolidated balance sheets. We have also elected the practical expedient to exclude the accrued interest receivable from the amortized cost balance used to calculate the allowance for expected credit losses, as we have a policy to write off such balances in a timely manner, when they become 90 days past due. Any write-off of accrued interest is recorded through a reversal of net investment income on the condensed consolidated statements of income (loss).

Upon determining that all or a portion of the amortized cost of an asset is uncollectible, which is generally when all efforts for collection are exhausted, the amortized cost is written off against the existing allowance. Any write off in excess of the existing allowance is recorded through credit loss expense within investment related gains (losses) on the condensed consolidated statements of income (loss).

Adopted Accounting Pronouncements

Financial Instruments – Credit Losses (ASU 2019-05, ASU 2019-04, ASU 2018-19 and ASU 2016-13)

This update limits the number of credit impairment models used for different assets and results in accelerated credit loss recognition on assets held at amortized cost, which primarily includes our commercial and residential mortgage loans, but also includes certain other loans and reinsurance assets. The identification of PCD financial assets includes all assets that have experienced a more-than-insignificant deterioration in credit since origination. Additionally, changes in the expected cash flows of purchased credit-deteriorated financial assets are recognized immediately in the income statement. AFS securities are not in scope of the new credit loss model, but were subject to targeted improvements including the establishment of a valuation allowance for credit losses versus the previous direct write down approach. We adopted this update effective January 1, 2020 with a cumulative-effect adjustment that decreased retained earnings by $117 million net of tax and offsetting impacts to DAC, DSI, VOBA and the SOP 03-1 reserve. The adjustment to retained earnings primarily relates to the establishment of an allowance on our commercial mortgage loan portfolio, which represented approximately 1.59% of the amortized cost of the portfolio, but also includes immaterial impacts relating to other assets in scope, including residential mortgage loans, funds withheld at interest, and reinsurance recoverable.

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Additionally, the update requires investments previously considered purchased credit impaired (PCI), which includes certain of our residential mortgage loans and RMBS to become subject to a modified PCD framework at the transition date. Any required allowance at transition for these assets is to be recorded through a gross-up of the amortized cost, rather than a charge to retained earnings. Additionally, under the AFS impairment model, the recording of an allowance is prohibited in instances where fair value exceeds amortized cost as such securities are not considered impaired under the AFS impairment model. Therefore, no allowance was recorded at transition for PCI RMBS that were in an unrealized gain position. The transition increase of amortized cost and corresponding valuation allowance for residential mortgage loans and RMBS was $36 million and $17 million, respectively.

Collaborative Arrangements (ASU 2018-18)

The amendments in this update provide guidance on whether certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606, providing comparability in the presentation of revenue for certain transactions. We adopted this update effective January 1, 2020. This update did not have a material effect on our consolidated financial statements.

Consolidation (ASU 2018-17)

The amendments in this update expand certain discussions in the VIE guidance, including considerations necessary for determining when a decision-making fee is a variable interest. We adopted this update effective January 1, 2020. The adoption of this update did not have a material effect on our consolidated financial statements.

Cloud Computing Arrangements (ASU 2018-15)

The amendments in this update align the requirements for capitalizing implementation costs incurred in a cloud computing service arrangement with the requirements for capitalizing implementation costs incurred for internal-use software. We adopted this update on a prospective basis effective January 1, 2020. This update did not have a material effect on our consolidated financial statements.

Fair Value Measurement – Disclosure Requirements (ASU 2018-13)

The amendments in this update modify the disclosure requirements for fair value measurements by removing, modifying or adding certain disclosures. On October 1, 2018, we early adopted the removal and modification of certain disclosures as permitted. The additional disclosures in the update were adopted effective January 1, 2020. The adoption of this update did not have a material effect on our consolidated financial statements.

Intangibles – Simplifying the Test for Goodwill Impairment (ASU 2017-04)

The amendments in this update simplify the subsequent measurement of goodwill by eliminating the comparison of the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill to determine the goodwill impairment loss. With the adoption of this guidance, a goodwill impairment is the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of the goodwill allocated to that reporting unit. Entities continue to have the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary. We do not have material goodwill and adopted this update on a prospective basis effective January 1, 2020. The adoption of this update did not have a material effect on our consolidated financial statements.

Recently Issued Accounting Pronouncements

Insurance – Targeted Improvements to the Accounting for Long-Duration Contracts (ASU 2019-09, ASU 2018-12)

These updates amend four key areas pertaining to the accounting and disclosures for long-duration insurance and investment contracts.

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The update requires cash flow assumptions used to measure the liability for future policy benefits to be updated at least annually and no longer allows a provision for adverse deviation. The remeasurement of the liability associated with the update of assumptions is required to be recognized in net income. Loss recognition testing is eliminated for traditional and limited-payment contracts. The update also requires the discount rate used in measuring the liability to be an upper-medium grade fixed-income instrument yield, which is to be updated at each reporting date. The change in liability due to changes in the discount rate is to be recognized in other comprehensive income.

•	The update simplifies the amortization of deferred acquisition costs and other balances amortized in proportion to premiums, gross profits, or gross margins, requiring such balances to be amortized on a constant level basis over the expected term of the contracts. Deferred costs are required to be written off for unexpected contract terminations but are not subject to impairment testing.

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The update requires certain contract features meeting the definition of market risk benefits to be measured at fair value. Among the features included in this definition are the guaranteed lifetime withdrawal benefits (GLWB) and guaranteed minimum death benefit (GMDB) riders attached to our annuity products. The change in fair value of the market risk benefits is to be recognized in net income, excluding the portion attributable to changes in instrument-specific credit risk which is recognized in other comprehensive income.

•	The update also introduces disclosure requirements around the liability for future policy benefits, policyholder account balances, market risk benefits, separate account liabilities, and deferred acquisition costs. This includes disaggregated rollforwards of these balances and information about significant inputs, judgments, assumptions and methods used in their measurement.

The amendments in ASU 2018-12 were originally intended to become effective January 1, 2021; however, with the issuance of ASU 2019-09, we will not be required to adopt the amendments until January 1, 2022. Certain provisions of the update are required to be adopted on a fully retrospective basis, while others may be adopted on a modified retrospective basis. Early adoption is permitted. We are currently evaluating the impact of this guidance on our consolidated financial statements.

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Income Taxes – Simplifying the Accounting for Income Taxes (ASU 2019-12)

The amendments in this update simplify the accounting for income taxes by eliminating certain exceptions to the tax accounting guidance related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities related to foreign investment ownership changes. It also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill and allocating consolidated income taxes to separate financial statements of entities not subject to income tax. We will be required to adopt this update January 1, 2021 and apply certain aspects of the update retrospectively while other aspects will be applied on a modified retrospective basis. Early adoption is permitted. We are currently evaluating the impact of this guidance on our consolidated financial statements.

2. Investments

AFS Securities—Our AFS investment portfolio includes bonds, collateralized loan obligations (CLO), asset-backed securities (ABS), commercial mortgage-backed securities (CMBS), RMBS and redeemable preferred stock. Our AFS investment portfolio includes related party investments that are primarily a result of investments over which Apollo can exercise significant influence. These investments are presented as investments in related parties on the condensed consolidated balance sheets, and are separately disclosed below.

The following table represents the amortized cost, allowance for credit losses, gross unrealized gains and losses and fair value of our AFS investments by asset type:

	March 31, 2020
(In millions)	Amortized Cost				Allowance for Credit Losses				Gross Unrealized Gains				Gross Unrealized Losses				Fair Value
AFS securities
U.S. government and agencies	$	37			$	—			$	3			$	—			$	40
U.S. state, municipal and political subdivisions	815				—				102				(8		)		909
Foreign governments	278				—				14				(1		)		291
Corporate	44,315				(15		)		2,138				(1,970		)		44,468
CLO	8,057				—				4				(1,420		)		6,641
ABS	4,970				(5		)		32				(434		)		4,563
CMBS	2,431				(4		)		65				(201		)		2,291
RMBS	6,673				(54		)		116				(267		)		6,468
Total AFS securities	67,576				(78		)		2,474				(4,301		)		65,671
AFS securities – related party
Corporate	18				—				1				—				19
CLO	1,226				—				—				(186		)		1,040
ABS	2,760				—				1				(274		)		2,487
Total AFS securities – related party	4,004				—				2				(460		)		3,546
Total AFS securities including related party	$	71,580			$	(78	)		$	2,476			$	(4,761	)		$	69,217

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The following table represents the amortized cost, gross unrealized gains and losses, fair value and other than temporary impairments (OTTI) in accumulated other comprehensive income (AOCI) of our AFS investments by asset type:

	December 31, 2019
(In millions)	Amortized Cost				Gross Unrealized Gains				Gross Unrealized Losses				Fair Value				OTTI in AOCI
AFS securities
U.S. government and agencies	$	35			$	1			$	—			$	36			$	—
U.S. state, municipal and political subdivisions	1,322				220				(1		)		1,541				—
Foreign governments	298				29				—				327				—
Corporate	44,106				3,332				(210		)		47,228				1
CLO	7,524				21				(196		)		7,349				—
ABS	5,018				124				(24		)		5,118				4
CMBS	2,304				104				(8		)		2,400				1
RMBS	6,872				513				(10		)		7,375				19
Total AFS securities	67,479				4,344				(449		)		71,374				25
AFS securities – related party
Corporate	18				1				—				19				—
CLO	951				3				(18		)		936				—
ABS	2,814				37				(2		)		2,849				—
Total AFS securities – related party	3,783				41				(20		)		3,804				—
Total AFS securities including related party	$	71,262			$	4,385			$	(469	)		$	75,178			$	25

The amortized cost and fair value of AFS securities, including related party, are shown by contractual maturity below:    

	March 31, 2020
(In millions)	Amortized Cost				Fair Value
AFS securities
Due in one year or less	$	1,070			$	1,064
Due after one year through five years	9,168				9,050
Due after five years through ten years	11,040				10,823
Due after ten years	24,167				24,771
CLO, ABS, CMBS and RMBS	22,131				19,963
Total AFS securities	67,576				65,671
AFS securities – related party
Due after one year through five years	18				19
CLO and ABS	3,986				3,527
Total AFS securities – related party	4,004				3,546
Total AFS securities including related party	$	71,580			$	69,217

Actual maturities can differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

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Unrealized Losses on AFS Securities—The following summarizes the fair value and gross unrealized losses for AFS securities, including related party, for which an allowance for credit losses has not been recorded, aggregated by asset type and length of time the fair value has remained below amortized cost:

	March 31, 2020
	Less than 12 months								12 months or more								Total
(In millions)	Fair Value				Gross Unrealized Losses				Fair Value				Gross Unrealized Losses				Fair Value				Gross Unrealized Losses
AFS securities
U.S. state, municipal and political subdivisions	$	157			$	(7	)		$	10			$	(1	)		$	167			$	(8	)
Foreign governments	43				(1		)		—				—				43				(1		)
Corporate	15,956				(1,842		)		335				(127		)		16,291				(1,969		)
CLO	3,996				(751		)		2,436				(637		)		6,432				(1,388		)
ABS	3,255				(395		)		108				(24		)		3,363				(419		)
CMBS	1,082				(183		)		36				(5		)		1,118				(188		)
RMBS	2,856				(176		)		30				(4		)		2,886				(180		)
Total AFS securities	27,345				(3,355		)		2,955				(798		)		30,300				(4,153		)
AFS securities – related party
Corporate	3				—				—				—				3				—
CLO	887				(144		)		153				(42		)		1,040				(186		)
ABS	2,389				(274		)		—				—				2,389				(274		)
Total AFS securities – related party	3,279				(418		)		153				(42		)		3,432				(460		)
Total AFS securities including related party	$	30,624			$	(3,773	)		$	3,108			$	(840	)		$	33,732			$	(4,613	)

The following summarizes the fair value and gross unrealized losses for AFS securities, including related party, aggregated by asset type and length of time the fair value has remained below amortized cost:

	December 31, 2019
	Less than 12 months								12 months or more								Total
(In millions)	Fair Value				Gross Unrealized Losses				Fair Value				Gross Unrealized Losses				Fair Value				Gross Unrealized Losses
AFS securities
U.S. government and agencies	$	3			$	—			$	—			$	—			$	3			$	—
U.S. state, municipal and political subdivisions	78				(1		)		10				—				88				(1		)
Corporate	2,898				(140		)		902				(70		)		3,800				(210		)
CLO	1,959				(38		)		3,241				(158		)		5,200				(196		)
ABS	642				(6		)		255				(18		)		897				(24		)
CMBS	220				(4		)		41				(4		)		261				(8		)
RMBS	445				(6		)		163				(4		)		608				(10		)
Total AFS securities	6,245				(195		)		4,612				(254		)		10,857				(449		)
AFS securities – related party
CLO	362				(7		)		242				(11		)		604				(18		)
ABS	357				(2		)		—				—				357				(2		)
Total AFS securities – related party	719				(9		)		242				(11		)		961				(20		)
Total AFS securities including related party	$	6,964			$	(204	)		$	4,854			$	(265	)		$	11,818			$	(469	)

As of March 31, 2020, we held 4,327 AFS securities that were in an unrealized loss position. Of this total, 346 were in an unrealized loss position 12 months or more. As of March 31, 2020, we held 104 related party AFS securities that were in an unrealized loss position. Of this total, eight were in an unrealized loss position 12 months or more. The unrealized losses on AFS securities can primarily be attributed to changes in market interest rates since acquisition. We did not recognize the unrealized losses in income as we intend to hold these securities and it is not more likely than not we will be required to sell a security before the recovery of its amortized cost.

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Allowance for Credit Losses—The following table summarizes the activity in the allowance for credit losses for AFS securities by asset type:

	Three months ended March 31, 2020
					Additions												Reductions
(In millions)	Beginning balance				Initial credit losses				Initial credit losses on PCD securities				Additions for previously impaired securities				Securities sold during the period				Ending Balance
AFS securities
Corporate	$	—			$	15			$	—			$	—			$	—			$	15
ABS	—				5				—				—				—				5
CMBS	—				4				—				—				—				4
RMBS	17				35				1				2				(1		)		54
Total AFS securities	$	17			$	59			$	1			$	2			$	(1	)		$	78

    

Net Investment Income—Net investment income by asset class consists of the following:

	Three months ended March 31,
(In millions)	2020				2019
AFS securities	$	837			$	753
Trading securities	48				42
Equity securities	4				3
Mortgage loans	186				151
Investment funds	(278		)		26
Funds withheld at interest	41				163
Other	37				39
Investment revenue	875				1,177
Investment expenses	(130		)		(95		)
Net investment income	$	745			$	1,082

Investment Related Gains (Losses)—Investment related gains (losses) by asset class consists of the following:

	Three months ended March 31,
(In millions)	2020				2019
AFS securities
Gross realized gains on investment activity	$	164			$	17
Gross realized losses on investment activity	(134		)		(13		)
Net realized investment gains on AFS securities	30				4
Net recognized investment gains (losses) on trading securities	(223		)		56
Net recognized investment gains (losses) on equity securities	(50		)		18
Derivative gains (losses)	(3,019		)		1,692
Provision for credit losses	(284		)		—
Other gains (losses)	(26		)		6
Investment related gains (losses)	$	(3,572	)		$	1,776

Proceeds from sales of AFS securities were $1,807 million and $1,253 million for the three months ended March 31, 2020 and 2019, respectively.

The following table summarizes the change in unrealized gains (losses) on trading and equity securities we held as of the respective period end:

	Three months ended March 31,
(In millions)	2020				2019
Trading securities	$	(73	)		$	71
Trading securities – related party	(109		)		(2		)
Equity securities	(37		)		18
Equity securities – related party	—				3

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Purchased Financial Assets with Credit Deterioration—During the three months ended March 31, 2020, we purchased PCD investments with the following amounts at the time of purchase:

(In millions)	Fixed maturity securities				Mortgage loans
Purchase price	$	14			$	—
Allowance for credit losses at acquisition	1				—
Discount (premiums) attributable to other factors	1				—
Par value	$	16			$	—

Repurchase Agreements—The following table summarizes the maturities of our repurchase agreements:

	March 31, 2020
	Remaining Contractual Maturity
(In millions)	Overnight and continuous				Up to 30 days				30-90 days				Greater than 90 days				Total
Payables for repurchase agreements1	$	—			$	—			$	293			$	1,001			$	1,294
1 Included in payables for collateral on derivatives and securities to repurchase on the condensed consolidated balance sheets.

	December 31, 2019
	Remaining Contractual Maturity
(In millions)	Overnight and continuous				Up to 30 days				30-90 days				Greater than 90 days				Total
Payables for repurchase agreements1	$	—			$	102			$	200			$	210			$	512
1 Included in payables for collateral on derivatives and securities to repurchase on the condensed consolidated balance sheets.

The following table summarizes the securities pledged as collateral for repurchase agreements:

	March 31, 2020								December 31, 2019
(In millions)	Amortized Cost				Fair Value				Amortized Cost				Fair Value
AFS securities – Corporate	$	1,328			$	1,435			$	498			$	534
Total securities pledged under repurchase agreements	$	1,328			$	1,435			$	498			$	534

Reverse Repurchase Agreements—Reverse repurchase agreements represent the purchase of investments from a seller with the agreement that the investments will be repurchased by the seller at a specified price and date or within a specified period of time. The investments purchased, which represent collateral on a secured lending arrangement, are not reflected in our condensed consolidated balance sheets; however, the secured lending arrangement is recorded as a short-term investment for the principal amount loaned under the agreement. As of March 31, 2020 and December 31, 2019, amounts loaned under reverse repurchase agreements were $190 million and collateral backing the agreement was $616 million and $630 million, respectively.

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Mortgage Loans, including related party—Mortgage loans, net of allowances, consists of the following:

(In millions)	March 31, 2020				December 31, 2019
Commercial mortgage loans	$	11,281			$	10,422
Commercial mortgage loans under development	140				93
Total commercial mortgage loans	11,421				10,515
Allowance for credit losses on commercial mortgage loans	(343		)		(10		)
Commercial mortgage loans, net of allowances	11,078				10,505
Residential mortgage loans	4,021				4,455
Allowance for credit losses on residential mortgage loans	(81		)		(1		)
Residential mortgage loans, net of allowances	3,940				4,454
Mortgage loans, net of allowances	$	15,018			$	14,959

We primarily invest in commercial mortgage loans on income producing properties including office and retail buildings, apartments, hotels and industrial properties. We diversify the commercial mortgage loan portfolio by geographic region and property type to reduce concentration risk. We evaluate mortgage loans based on relevant current information to confirm if properties are performing at a consistent and acceptable level to secure the related debt.

The distribution of commercial mortgage loans, including those under development, net of allowances, by property type and geographic region, is as follows:

	March 31, 2020							December 31, 2019
(In millions, except for percentages)	Net Carrying Value				Percentage of Total			Net Carrying Value				Percentage of Total
Property type
Office building	$	3,465			31.2	%		$	2,899			27.6	%
Retail	2,117				19.1	%		2,182				20.8	%
Apartment	2,333				21.1	%		2,142				20.4	%
Hotels	1,062				9.6	%		1,104				10.5	%
Industrial	1,402				12.7	%		1,448				13.8	%
Other commercial	699				6.3	%		730				6.9	%
Total commercial mortgage loans	$	11,078			100.0	%		$	10,505			100.0	%
U.S. Region
East North Central	$	1,200			10.8	%		$	1,036			9.9	%
East South Central	422				3.8	%		428				4.1	%
Middle Atlantic	2,953				26.6	%		2,580				24.6	%
Mountain	508				4.6	%		528				5.0	%
New England	336				3.0	%		340				3.2	%
Pacific	2,559				23.1	%		2,502				23.8	%
South Atlantic	1,980				17.9	%		1,920				18.3	%
West North Central	140				1.3	%		146				1.4	%
West South Central	770				7.0	%		791				7.5	%
Total U.S. Region	10,868				98.1	%		10,271				97.8	%
International Region	210				1.9	%		234				2.2	%
Total commercial mortgage loans	$	11,078			100.0	%		$	10,505			100.0	%

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Our residential mortgage loan portfolio includes first lien residential mortgage loans collateralized by properties in various geographic locations and is summarized by proportion of the portfolio in the following table:

	March 31, 2020			December 31, 2019
U.S. States
California	26.5	%		27.0	%
Florida	13.5	%		12.7	%
Texas	5.3	%		6.2	%
Other1	41.3	%		41.7	%
Total U.S. residential mortgage loan percentage	86.6	%		87.6	%
International – Ireland	13.4	%		12.4	%
Total residential mortgage loan percentage	100.0	%		100.0	%
1Represents all other states, with each individual state comprising less than 5% of the portfolio.

Loan Valuation Allowance—The allowances for our mortgage loan portfolio and other loans is summarized as follows:

	Three months ended March 31, 2020
(In millions)	Commercial Mortgage				Residential Mortgage				Related Party Other Investments				Total
Beginning balance	$	10			$	1			$	—			$	11
Adoption of accounting standard	167				43				11				221
Provision for expected credit losses	166				37				1				204
Ending balance	$	343			$	81			$	12			$	436

Residential mortgage loans – Our allowance model for residential mortgage loans is based on the characteristics of the loans in our portfolio, historical economic data and loss information, and current and forecasted economic conditions. Key loan characteristics affecting the estimate include, among others: time to maturity, delinquency status, original credit scores and loan-to-value ratios. Key macroeconomic variables include unemployment rates and the housing price index. Management reviews and approves forecasted macroeconomic variables, along with the reasonable and supportable forecast period and mean reversion technique. Management also evaluates assumptions from independent third parties and these assumptions have a high degree of subjectivity. The mean reversion technique varies by macroeconomic variable and may vary by geographic location. As of March 31, 2020, our reasonable and supportable forecast period ranged from 3 months – 1 year, after which, we revert to the 30-year or greater historical average over a period of up to 9 months and then continue at those averages through the contractual life of the loan.

Commercial mortgage loans – Our allowance model for commercial mortgage loans is based on the characteristics of the loans in our portfolio, historical economic data and loss information, and current and forecasted economic conditions. Key loan characteristics affecting the estimate include, among others: time to maturity, delinquency status, loan-to-value ratios, debt service coverage ratios, etc. Key macroeconomic variables include unemployment rates, rent growth, capitalization rates, and the housing price index. Management reviews and approves forecasted macroeconomic variables, along with the reasonable and supportable forecast period and mean reversion technique. Management also evaluates assumptions from independent third parties and these assumptions have a high degree of subjectivity. The mean reversion technique varies by macroeconomic variable and may vary by geographic location. As of March 31, 2020, our reasonable and supportable forecast period ranged from 3 months – 2 years, after which, we revert to the 30-year or greater historical average over a period of up to 10 years.

Related party other investments – The allowance model for the loans included in related party other investments derives an estimate based on historical loss data available for similarly rated unsecured corporate debt obligations, while also incorporating management’s expectations around prepayment.

Credit Quality Indicators

Residential mortgage loans – The underwriting process for our residential mortgage loans includes an evaluation of relevant credit information including past loan performance, credit scores, loan-to-value and other relevant information. Subsequent to purchase or origination, we closely monitor economic conditions and loan performance to manage and evaluate our exposure to credit risk in our residential mortgage loan portfolio. The primary credit quality indicator monitored for residential mortgage loans is loan performance. Nonperforming residential mortgage loans are 90 days or more past due and/or are in non-accrual status.

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The following represents our residential loan portfolio by origination year and performance status:

	March 31, 2020
(In millions)	2020				2019				2018				2017				2016				Prior				Total
Current (less than 30 days past due)	$	38			$	998			$	2,042			$	547			$	151			$	9			$	3,785
30 to 59 days past due	—				47				36				32				15				1				131
60 to 89 days past due	—				7				11				8				4				—				30
Over 90 days past due	—				9				17				32				15				2				75
Total residential mortgages	$	38			$	1,061			$	2,106			$	619			$	185			$	12			$	4,021

As of December 31, 2019, $67 million of our residential mortgage loans were nonperforming.

The following represents our residential loan portfolio in non-accrual status:

(In millions)	March 31, 2020
Beginning amortized cost of residential mortgage loans in non-accrual status	$	67
Ending amortized cost of residential mortgage loans in non-accrual status	75
Amortized cost of residential mortgage loans in non-accrual status without a related allowance for credit losses	6

During the three months ended March 31, 2020, we recognized $1 million of interest income on residential mortgage loans in non-accrual status.

Commercial mortgage loans – The following represents our commercial mortgage loan portfolio by origination year and loan performance status:

	March 31, 2020
(In millions)	2020				2019				2018				2017				2016				Prior				Total
Current (less than 30 days past due)	$	1,103			$	4,537			$	2,846			$	1,050			$	160			$	1,725			$	11,421

As of December 31, 2019, none of our commercial loans were 30 days or more past due.

The following represents our commercial mortgage loan portfolio in non-accrual status:

(In millions)	March 31, 2020
Beginning amortized cost of commercial mortgage loans in non-accrual status	$	—
Ending amortized cost of commercial mortgage loans in non-accrual status	40
Amortized cost of commercial mortgage loans in non-accrual status without a related allowance for credit losses	—

During the three months ended March 31, 2020, no interest income was recognized on commercial mortgage loans in non-accrual status.

Loan-to-value and debt service coverage ratios are measures we use to assess the risk and quality of commercial mortgage loans other than those under development. Loans under development are not evaluated using these ratios as the properties underlying these loans are generally not yet income-producing and the value of the underlying property significantly fluctuates based on the progress of construction. Therefore, the risk and quality of loans under development are evaluated based on the aging and geographical distribution of such loans as shown above.

The loan-to-value ratio is expressed as a percentage of the amount of the loan relative to the value of the underlying property. A loan-to-value ratio in excess of 100% indicates the unpaid loan amount exceeds the value of the underlying collateral. Loan-to-value information is updated annually as part of the re-underwriting process supporting the NAIC risk based capital rating criteria. The following represents the loan-to-value ratio of the commercial mortgage loan portfolio, excluding those under development, by origination year:    

	March 31, 2020
(In millions)	2020				2019				2018				2017				2016				Prior				Total
Less than 50%	$	149			$	760			$	207			$	147			$	74			$	1,351			$	2,688
50% to 60%	143				1,128				786				332				40				172				2,601
61% to 70%	441				2,023				1,481				476				46				108				4,575
71% to 80%	342				599				287				95				—				54				1,377
81% to 100%	—				—				—				—				—				40				40
Commercial mortgage loans	$	1,075			$	4,510			$	2,761			$	1,050			$	160			$	1,725			$	11,281

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The following represents the loan-to-value ratio of the commercial mortgage loan portfolio, excluding those under development, net of valuation allowances:    

(In millions)	December 31, 2019
Less than 50%	$	2,640
50% to 60%	2,486
61% to 70%	4,093
71% to 80%	1,162
81% to 100%	31
Commercial mortgage loans	$	10,412

The debt service coverage ratio is expressed as a percentage of a property’s net operating income to its debt service payments. A debt service ratio of less than 1.0 indicates a property’s operations do not generate enough income to cover debt payments. Debt service coverage ratios are updated as more recent financial statements become available, at least annually or as frequently as quarterly in some cases. The following represents the debt service coverage ratio of the commercial mortgage loan portfolio, excluding those under development, by origination year:    

	March 31, 2020
(In millions)	2020				2019				2018				2017				2016				Prior				Total
Greater than 1.20x	$	860			$	3,661			$	2,703			$	974			$	160			$	1,599			$	9,957
1.00x – 1.20x	149				849				58				53				—				114				1,223
Less than 1.00x	66				—				—				23				—				12				101
Commercial mortgage loans	$	1,075			$	4,510			$	2,761			$	1,050			$	160			$	1,725			$	11,281

The following represents the debt service coverage ratio of the commercial mortgage loan portfolio, excluding those under development, net of valuation allowances:    

(In millions)	December 31, 2019
Greater than 1.20x	$	9,212
1.00x – 1.20x	1,166
Less than 1.00x	34
Commercial mortgage loans	$	10,412

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Investment Funds—Our investment fund portfolio consists of funds that employ various strategies and include investments in real estate, real assets, credit, equity and natural resources. Investment funds can meet the definition of VIEs. Our investment funds do not specify timing of distributions on the funds’ underlying assets.

The following summarizes our investment funds, including related party:

	March 31, 2020							December 31, 2019
(In millions, except for percentages)	Carrying value				Percent of total			Carrying value				Percent of total
Investment funds
Real estate	$	284			38.4	%		$	277			36.9	%
Credit funds	122				16.5	%		153				20.4	%
Private equity	244				33.0	%		236				31.5	%
Real assets	89				12.0	%		83				11.1	%
Natural resources	1				0.1	%		1				0.1	%
Total investment funds	740				100.0	%		750				100.0	%
Investment funds – related parties
Differentiated investments
MidCap FinCo Designated Activity Company (MidCap)1	508				11.0	%		547				15.4	%
AmeriHome Mortgage Company, LLC (AmeriHome)1	508				11.0	%		487				13.7	%
Catalina Holdings Ltd. (Catalina)	296				6.4	%		271				7.6	%
Athora Holding Ltd. (Athora)1	130				2.8	%		132				3.7	%
Venerable Holdings, Inc. (Venerable)1	110				2.4	%		99				2.8	%
Other	281				6.1	%		222				6.3	%
Total differentiated investments	1,833				39.7	%		1,758				49.5	%
Real estate	775				16.7	%		853				24.0	%
Credit funds	446				9.6	%		370				10.4	%
Private equity	227				4.9	%		105				3.0	%
Real assets	256				5.5	%		182				5.1	%
Natural resources	200				4.3	%		163				4.6	%
Public equities	44				1.0	%		119				3.4	%
Investment in Apollo1	850				18.3	%		—				—	%
Total investment funds – related parties	4,631				100.0	%		3,550				100.0	%
Total investment funds including related party	$	5,371						$	4,300
1 See further discussion on MidCap, AmeriHome, Athora, Venerable and our investment in Apollo in Note 9 – Related Parties.

Non-Consolidated Securities and Investment Funds

Fixed maturity securities – We invest in securitization entities as a debt holder or an investor in the residual interest of the securitization vehicle. These entities are deemed VIEs due to insufficient equity within the structure and lack of control by the equity investors over the activities that significantly impact the economics of the entity. In general, we are a debt investor within these entities and, as such, hold a variable interest; however, due to the debt holders’ lack of ability to control the decisions within the trust that significantly impact the entity, and the fact the debt holders are protected from losses due to the subordination of the equity tranche, the debt holders are not deemed the primary beneficiary. Securitization vehicles in which we hold the residual tranche are not consolidated because we do not unilaterally have substantive rights to remove the general partner, or when assessing related party interests, we are not under common control, as defined by GAAP, with the related party, nor are substantially all of the activities conducted on our behalf; therefore, we are not deemed the primary beneficiary. Debt investments and investments in the residual tranche of securitization entities are considered debt instruments and are held at fair value on the balance sheet and classified as AFS or trading.

Investment funds – Investment funds include non-fixed income, alternative investments in the form of limited partnerships or similar legal structures.

Equity securities – We invest in preferred equity securities issued by entities deemed to be VIEs due to insufficient equity within the structure.

Our risk of loss associated with our non-consolidated investments depends on the investment. Investment funds, equity securities and trading securities are limited to the carrying value plus unfunded commitments. AFS securities are limited to amortized cost plus unfunded commitments.

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The following summarizes the carrying value and maximum loss exposure of these non-consolidated investments:

	March 31, 2020								December 31, 2019
(In millions)	Carrying Value				Maximum Loss Exposure				Carrying Value				Maximum Loss Exposure
Investment funds	$	740			$	1,232			$	750			$	1,265
Investment in related parties – investment funds	4,631				6,724				3,550				5,955
Investment in fixed maturity securities	20,380				22,548				22,694				22,170
Investment in related parties – fixed maturity securities	4,245				5,177				4,570				4,878
Investment in related parties – equity securities	49				49				58				58
Total non-consolidated investments	$	30,045			$	35,730			$	31,622			$	34,326

3. Derivative Instruments

We use a variety of derivative instruments to manage risks, primarily equity, interest rate, credit, foreign currency and market volatility. See Note 4 – Fair Value for information about the fair value hierarchy for derivatives.

The following table presents the notional amount and fair value of derivative instruments:

	March 31, 2020											December 31, 2019
	Notional Amount			Fair Value								Notional Amount			Fair Value
(In millions)				Assets				Liabilities							Assets				Liabilities
Derivatives designated as hedges
Foreign currency swaps	3,226			$	519			$	58			3,158			$	113			$	56
Foreign currency forwards	801			6				2				717			1				9
Foreign currency forwards on net investments	136			4				—				139			—				2
Total derivatives designated as hedges				529				60							114				67
Derivatives not designated as hedges
Equity options	48,654			999				11				49,549			2,746				5
Futures	7			19				7				8			10				1
Total return swaps	124			—				25				106			6				—
Foreign currency swaps	11			2				—				35			2				1
Interest rate swaps	776			9				88				776			3				4
Credit default swaps	10			—				7				10			—				3
Foreign currency forwards	3,230			52				24				1,924			7				16
Embedded derivatives
Funds withheld including related party				(389		)		24							1,395				31
Interest sensitive contract liabilities				—				9,089							—				10,942
Total derivatives not designated as hedges				692				9,275							4,169				11,003
Total derivatives				$	1,221			$	9,335						$	4,283			$	11,070

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Derivatives Designated as Hedges

Foreign currency swaps – We use foreign currency swaps to convert foreign currency denominated cash flows of an investment to U.S. dollars to reduce cash flow fluctuations due to changes in currency exchange rates. Certain of these swaps are designated and accounted for as cash flow hedges, which will expire by December 2050. During the three months ended March 31, 2020 and 2019, we had foreign currency swap gains of $401 million and losses of $8 million, respectively, recorded in AOCI. There were no amounts reclassified to income and no amounts deemed ineffective for the three months ended March 31, 2020 and 2019. As of March 31, 2020, no amounts are expected to be reclassified to income within the next 12 months.

Foreign currency forwards – We use foreign currency forward contracts to hedge certain exposures to foreign currency risk. The price is agreed upon at the time of the contract and payment is made at a specified future date. Certain of these forwards are designated and accounted for as fair value hedges. As of March 31, 2020 and December 31, 2019, the carrying amount of the hedged AFS securities was $659 million and $456 million, respectively, and the cumulative amount of fair value hedging adjustments included in the hedged AFS securities included losses of $8 million and gains of $1 million, respectively. The gains and losses on derivatives and the related hedged items in fair value hedge relationships are recorded in investment related gains (losses) on the condensed consolidated statements of income (loss). During the three months ended March 31, 2020 and 2019, the derivatives had gains of $12 million and $3 million, respectively, and the related hedged items had losses of $8 million and $3 million, respectively.

Foreign currency forwards on net investments – We have foreign currency forwards designated as net investment hedges. These forwards hedge the foreign currency exchange rate risk of our investments in subsidiaries that have a reporting currency other than the U.S. dollar. We assess hedge effectiveness based on the changes in forward rates. During the three months ended March 31, 2020, these derivatives had gains of $13 million, which are included in foreign currency translation and other adjustments on the condensed consolidated statements of comprehensive income (loss). As of March 31, 2020 and December 31, 2019, the cumulative foreign currency translation recorded in AOCI related to these net investment hedges were gains of $11 million and losses of $2 million, respectively. During the three months ended March 31, 2020, there were no amounts deemed ineffective.

Derivatives Not Designated as Hedges

Equity options – We use equity indexed options to economically hedge fixed indexed annuity products that guarantee the return of principal to the policyholder and credit interest based on a percentage of the gain in a specified market index, primarily the S&P 500. To hedge against adverse changes in equity indices, we enter into contracts to buy equity indexed options. The contracts are net settled in cash based on differentials in the indices at the time of exercise and the strike price.

Futures – Futures contracts are purchased to hedge the growth in interest credited to the customer as a direct result of increases in the related indices. We enter into exchange-traded futures with regulated futures commission clearing brokers who are members of a trading exchange. Under exchange-traded futures contracts, we agree to purchase a specified number of contracts with other parties and to post variation margin on a daily basis in an amount equal to the difference in the daily fair values of those contracts.

Total return swaps – We purchase total rate of return swaps to gain exposure and benefit from a reference asset or index without ownership. Total rate of return swaps are contracts in which one party makes payments based on a set rate, either fixed or variable, while the other party makes payments based on the return of the underlying asset or index, which includes both the income it generates and any capital gains.

Interest rate swaps – We use interest rate swaps to reduce market risks from interest rate changes and to alter interest rate exposure arising from duration mismatches between assets and liabilities. With an interest rate swap, we agree with another party to exchange the difference between fixed-rate and floating-rate interest amounts tied to an agreed-upon notional principal amount at specified intervals.

Credit default swaps – Credit default swaps provide a measure of protection against the default of an issuer or allow us to gain credit exposure to an issuer or traded index. We use credit default swaps coupled with a bond to synthetically create the characteristics of a reference bond. These transactions have a lower cost and are generally more liquid relative to the cash market. We receive a periodic premium for these transactions as compensation for accepting credit risk.

Hedging credit risk involves buying protection for existing credit risk. The exposure resulting from the agreements, which is usually the notional amount, is equal to the maximum proceeds that must be paid by a counterparty for a defaulted security. If a credit event occurs on a reference entity, then a counterparty who sold protection is required to pay the buyer the trade notional amount less any recovery value of the security.

Embedded derivatives – We have embedded derivatives which are required to be separated from their host contracts and reported as derivatives. Host contracts include reinsurance agreements structured on a modified coinsurance (modco) or funds withheld basis and indexed annuity products.

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The following is a summary of the gains (losses) related to derivatives not designated as hedges:

	Three months ended March 31,
(In millions)	2020				2019
Equity options	$	(1,581	)		$	849
Futures	16				(11		)
Swaps	(75		)		18
Foreign currency forwards	67				6
Embedded derivatives on funds withheld	(1,446		)		830
Amounts recognized in investment related gains (losses)	(3,019		)		1,692
Embedded derivatives in indexed annuity products1	1,177				(1,017		)
Total gains (losses) on derivatives not designated as hedges	$	(1,842	)		$	675
1 Included in interest sensitive contract benefits on the condensed consolidated statements of income (loss).

Credit Risk—We may be exposed to credit-related losses in the event of counterparty nonperformance on derivative financial instruments. Generally, the current credit exposure of our derivative contracts is the fair value at the reporting date less any collateral received from the counterparty.

We manage credit risk related to over-the-counter derivatives by entering into transactions with creditworthy counterparties. Where possible, we maintain collateral arrangements and use master netting agreements that provide for a single net payment from one counterparty to another at each due date and upon termination. We have also established counterparty exposure limits, where possible, in order to evaluate if there is sufficient collateral to support the net exposure.

Collateral arrangements typically require the posting of collateral in connection with its derivative instruments. Collateral agreements often contain posting thresholds, some of which may vary depending on the posting party’s financial strength ratings. Additionally, a decrease in our financial strength rating to a specified level can result in settlement of the derivative position.

The estimated fair value of our net derivative and other financial assets and liabilities after the application of master netting agreements and collateral were as follows:

						Gross amounts not offset on the condensed consolidated balance sheets
(In millions)		Gross amount recognized1				Financial instruments2				Collateral (received)/pledged				Net amount				Off-balance sheet securities collateral3				Net amount after securities collateral
March 31, 2020
Derivative assets		$	1,610			$	(64	)		$	(1,589	)		$	(43	)		$	(170	)		$	(213	)
Derivative liabilities		(222		)		64				15				(143		)		—				(143		)
December 31, 2019
Derivative assets		$	2,888			$	(67	)		$	(2,743	)		$	78			$	(145	)		$	(67	)
Derivative liabilities		(97		)		67				31				1				—				1
1	The gross amounts of recognized derivative assets and derivative liabilities are reported on the condensed consolidated balance sheets. As of March 31, 2020 and December 31, 2019, amounts not subject to master netting or similar agreements were immaterial.
2	Represents amounts offsetting derivative assets and derivative liabilities that are subject to an enforceable master netting agreement or similar agreement that are not netted against the gross derivative assets or gross derivative liabilities for presentation on the condensed consolidated balance sheets.
3	For non-cash collateral received, we do not recognize the collateral on our balance sheet unless the obligor (transferor) has defaulted under the terms of the secured contract and is no longer entitled to redeem the pledged asset. Amounts do not include any excess of collateral pledged or received.

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4. Fair Value

Fair value is the price we would receive to sell an asset or pay to transfer a liability (exit price) in an orderly transaction between market participants. We determine fair value based on the following fair value hierarchy:

Level 1 – Unadjusted quoted prices for identical assets or liabilities in an active market.

Level 2 – Quoted prices for inactive markets or valuation techniques that require observable direct or indirect inputs for substantially the full term of the asset or liability. Level 2 inputs include the following:

•	Quoted prices for similar assets or liabilities in active markets,

•	Observable inputs other than quoted market prices, and

•	Observable inputs derived principally from market data through correlation or other means.

Level 3 – Prices or valuation techniques with unobservable inputs significant to the overall fair value estimate. These valuations use critical assumptions not readily available to market participants. Level 3 valuations are based on market standard valuation methodologies, including discounted cash flows, matrix pricing or other similar techniques.

NAV – Investment funds are typically measured using NAV as a practical expedient in determining fair value and are not classified in the fair value hierarchy. The underlying investments of the investment funds may have significant unobservable inputs, which may include but are not limited to, comparable multiples and weighted average cost of capital rates applied in valuation models or a discounted cash flow model.

The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the instrument’s fair value measurement.

We use a number of valuation sources to determine fair values. Valuation sources can include quoted market prices; third-party commercial pricing services; third-party brokers; industry-standard, vendor modeling software that uses market observable inputs; and other internal modeling techniques based on projected cash flows. We periodically review the assumptions and inputs of third-party commercial pricing services through internal valuation price variance reviews, comparisons to internal pricing models, back testing to recent trades, or monitoring trading volumes.

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The following represents the hierarchy for our assets and liabilities measured at fair value on a recurring basis:

	March 31, 2020
(In millions)	Total				NAV				Level 1				Level 2				Level 3
Assets
AFS securities
U.S. government and agencies	$	40			$	—			$	40			$	—			$	—
U.S. state, municipal and political subdivisions	909				—				—				872				37
Foreign governments	291				—				—				291				—
Corporate	44,468				—				—				43,235				1,233
CLO	6,641				—				—				6,519				122
ABS	4,563				—				—				3,646				917
CMBS	2,291				—				—				2,246				45
RMBS	6,468				—				—				6,426				42
Total AFS securities	65,671				—				40				63,235				2,396
Trading securities
U.S. government and agencies	11				—				8				3				—
U.S. state, municipal and political subdivisions	112				—				—				112				—
Corporate	1,425				—				—				1,393				32
CLO	3				—				—				—				3
ABS	94				—				—				80				14
CMBS	51				—				—				51				—
RMBS	283				—				—				213				70
Total trading securities	1,979				—				8				1,852				119
Equity securities	206				—				23				176				7
Mortgage loans	26				—				—				—				26
Investment funds	157				136				—				—				21
Funds withheld at interest – embedded derivative	(374		)		—				—				—				(374		)
Derivative assets	1,610				—				19				1,591				—
Short-term investments	393				—				42				284				67
Other investments	98				—				—				98				—
Cash and cash equivalents	5,419				—				5,419				—				—
Restricted cash	564				—				564				—				—
Investments in related parties
AFS securities
Corporate	19				—				—				19				—
CLO	1,040				—				—				1,040				—
ABS	2,487				—				—				600				1,887
Total AFS securities – related party	3,546				—				—				1,659				1,887
Trading securities
CLO	42				—				—				10				32
ABS	676				—				—				—				676
Total trading securities – related party	718				—				—				10				708
Equity securities	49				—				—				—				49
Investment funds	1,097				118				—				—				979
Funds withheld at interest – embedded derivative	(15		)		—				—				—				(15		)
Reinsurance recoverable	2,115				—				—				—				2,115
Total assets measured at fair value	$	83,259			$	254			$	6,115			$	68,905			$	7,985
																	(Continued)

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	March 31, 2020
(In millions)	Total				NAV				Level 1				Level 2				Level 3
Liabilities
Interest sensitive contract liabilities
Embedded derivative	$	9,089			$	—			$	—			$	—			$	9,089
Universal life benefits	1,322				—				—				—				1,322
Future policy benefits
AmerUs Life Insurance Company (AmerUs) Closed Block	1,481				—				—				—				1,481
Indianapolis Life Insurance Company (ILICO) Closed Block and life benefits	778				—				—				—				778
Derivative liabilities	222				—				7				208				7
Funds withheld liability – embedded derivative	24				—				—				24				—
Total liabilities measured at fair value	$	12,916			$	—			$	7			$	232			$	12,677
																	(Concluded)

	December 31, 2019
(In millions)	Total				NAV				Level 1				Level 2				Level 3
Assets
AFS securities
U.S. government and agencies	$	36			$	—			$	36			$	—			$	—
U.S. state, municipal and political subdivisions	1,541				—				—				1,501				40
Foreign governments	327				—				—				327				—
Corporate	47,228				—				—				46,503				725
CLO	7,349				—				—				7,228				121
ABS	5,118				—				—				3,744				1,374
CMBS	2,400				—				—				2,354				46
RMBS	7,375				—				—				7,375				—
Total AFS securities	71,374				—				36				69,032				2,306
Trading securities
U.S. government and agencies	11				—				8				3				—
U.S. state, municipal and political subdivisions	135				—				—				135				—
Corporate	1,456				—				—				1,456				—
CLO	6				—				—				—				6
ABS	108				—				—				92				16
CMBS	51				—				—				51				—
RMBS	303				—				—				251				52
Total trading securities	2,070				—				8				1,988				74
Equity securities	247				—				43				201				3
Mortgage loans	27				—				—				—				27
Investment funds	154				132				—				—				22
Funds withheld at interest – embedded derivative	801				—				—				—				801
Derivative assets	2,888				—				10				2,878				—
Short-term investments	406				—				46				319				41
Other investments	93				—				—				93				—
Cash and cash equivalents	4,240				—				4,240				—				—
Restricted cash	402				—				402				—				—
																	(Continued)

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	December 31, 2019
(In millions)	Total				NAV				Level 1				Level 2				Level 3
Investments in related parties
AFS securities
Corporate	19				—				—				19				—
CLO	936				—				—				936				—
ABS	2,849				—				—				525				2,324
Total AFS securities – related party	3,804				—				—				1,480				2,324
Trading securities
CLO	74				—				—				36				38
ABS	711				—				—				—				711
Total trading securities – related party	785				—				—				36				749
Equity securities	64				—				—				—				64
Investment funds	819				687				—				—				132
Funds withheld at interest – embedded derivative	594				—				—				—				594
Short-term investments	—				—				—				—				—
Reinsurance recoverable	1,821				—				—				—				1,821
Total assets measured at fair value	$	90,589			$	819			$	4,785			$	76,027			$	8,958
Liabilities
Interest sensitive contract liabilities
Embedded derivative	$	10,942			$	—			$	—			$	—			$	10,942
Universal life benefits	1,050				—				—				—				1,050
Future policy benefits
AmerUs Closed Block	1,546				—				—				—				1,546
ILICO Closed Block and life benefits	755				—				—				—				755
Derivative liabilities	97				—				1				93				3
Funds withheld liability – embedded derivative	31				—				—				31				—
Total liabilities measured at fair value	$	14,421			$	—			$	1			$	124			$	14,296
																	(Concluded)

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Fair Value Valuation Methods—We used the following valuation methods and assumptions to estimate fair value:

AFS and trading securities – We obtain the fair value for most marketable securities without an active market from several commercial pricing services. These are classified as Level 2 assets. The pricing services incorporate a variety of market observable information in their valuation techniques, including benchmark yields, trading activity, credit quality, issuer spreads, bids, offers and other reference data. This category typically includes U.S. and non-U.S. corporate bonds, U.S. agency and government guaranteed securities, CLO, ABS, CMBS and RMBS.

We also have fixed maturity securities priced based on indicative broker quotes or by employing market accepted valuation models. For certain fixed maturity securities, the valuation model uses significant unobservable inputs and are included in Level 3 in our fair value hierarchy.  Significant unobservable inputs used include: issue specific credit adjustments, material non-public financial information, estimation of future earnings and cash flows, default rate assumptions, liquidity assumptions and indicative quotes from market makers. These inputs are usually considered unobservable, as not all market participants have access to this data.

We value privately placed fixed maturity securities based on the credit quality and duration of comparable marketable securities, which may be securities of another issuer with similar characteristics. In some instances, we use a matrix-based pricing model. These models consider the current level of risk-free interest rates, corporate spreads, credit quality of the issuer and cash flow characteristics of the security. We also consider additional factors such as net worth of the borrower, value of collateral, capital structure of the borrower, presence of guarantees and our evaluation of the borrower’s ability to compete in its relevant market. Privately placed fixed maturity securities are classified as Level 2 or 3.

Equity securities – Fair values of publicly traded equity securities are based on quoted market prices and classified as Level 1. Other equity securities, typically private equities or equity securities not traded on an exchange, we value based on other sources, such as commercial pricing services or brokers, and are classified as Level 2 or 3.

Mortgage loans – Mortgage loans for which we have elected the fair value option or those held for sale are carried at fair value. We estimate fair value on a monthly basis using discounted cash flow analysis and rates being offered for similar loans to borrowers with similar credit ratings. Loans with similar characteristics are aggregated for purposes of the calculations. The discounted cash flow model uses unobservable inputs, including estimates of discount rates and loan prepayments. Mortgage loans are classified as Level 3.

Investment funds – Certain investment funds for which we elected the fair value option are included in Level 3 and are priced based on market accepted valuation models. The valuation models use significant unobservable inputs, which include material non-public financial information, estimation of future distributable earnings and demographic assumptions. These inputs are usually considered unobservable, as not all market participants have access to this data.

Funds withheld at interest embedded derivative – We estimate the fair value of the embedded derivative based on the change in the fair value of the assets supporting the funds withheld payable under modco and funds withheld reinsurance agreements. As a result, the fair value of the embedded derivative is classified as Level 2 or 3 based on the valuation methods used for the assets held supporting the reinsurance agreements.

Derivatives – Derivative contracts can be exchange traded or over-the-counter. Exchange-traded derivatives typically fall within Level 1 of the fair value hierarchy depending on trading activity. Over-the-counter derivatives are valued using valuation models or an income approach using third-party broker valuations. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit curves, measures of volatility, prepayment rates and correlation of the inputs. We consider and incorporate counterparty credit risk in the valuation process through counterparty credit rating requirements and monitoring of overall exposure. We also evaluate and include our own nonperformance risk in valuing derivatives. The majority of our derivatives trade in liquid markets; therefore, we can verify model inputs and model selection does not involve significant management judgment. These are typically classified within Level 2 of the fair value hierarchy.

Cash and cash equivalents, including restricted cash – The carrying amount for cash equals fair value. We estimate the fair value for cash equivalents based on quoted market prices. These assets are classified as Level 1.

Interest sensitive contract liabilities embedded derivative – Embedded derivatives related to interest sensitive contract liabilities with fixed indexed annuity products are classified as Level 3. The valuations include significant unobservable inputs associated with economic assumptions and actuarial assumptions for policyholder behavior.

AmerUs Closed Block – We elected the fair value option for the future policy benefits liability in the AmerUs Closed Block. Our valuation technique is to set the fair value of policyholder liabilities equal to the fair value of assets. There is an additional component which captures the fair value of the open block’s obligations to the closed block business. This component is the present value of the projected release of required capital and future earnings before income taxes on required capital supporting the AmerUs Closed Block, discounted at a rate which represents a market participant’s required rate of return, less the initial required capital. Unobservable inputs include estimates for these items. The AmerUs Closed Block policyholder liabilities and any corresponding reinsurance recoverable are classified as Level 3.

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ILICO Closed Block – We elected the fair value option for the ILICO Closed Block. Our valuation technique is to set the fair value of policyholder liabilities equal to the fair value of assets. There is an additional component which captures the fair value of the open block’s obligations to the closed block business. This component uses the present value of future cash flows which include commissions, administrative expenses, reinsurance premiums and benefits, and an explicit cost of capital. The discount rate includes a margin to reflect the business and nonperformance risk. Unobservable inputs include estimates for these items. The ILICO Closed Block policyholder liabilities and corresponding reinsurance recoverable are classified as Level 3.

Universal life liabilities and other life benefits – We elected the fair value option for certain blocks of universal and other life business ceded to Global Atlantic. We use a present value of liability cash flows. Unobservable inputs include estimates of mortality, persistency, expenses, premium payments and a risk margin used in the discount rates that reflects the riskiness of the business. These universal life policyholder liabilities and corresponding reinsurance recoverable are classified as Level 3.

Fair Value Option—The following represents the gains (losses) recorded for instruments for which we have elected the fair value option, including related parties:

	Three months ended March 31,
(In millions)	2020				2019
Trading securities	$	(223	)		$	56
Investment funds	(300		)		(4		)
Future policy benefits	65				(40		)
Total gains (losses)	$	(458	)		$	12

Gains and losses on trading securities are recorded in investment related gains (losses) on the condensed consolidated statements of income (loss). For fair value option mortgage loans, we record interest income in net investment income and subsequent changes in fair value in investment related gains (losses) on the condensed consolidated statements of income (loss). Gains and losses related to investment funds, including related party investment funds, are recorded in net investment income on the condensed consolidated statements of income (loss). We record the change in fair value of future policy benefits to future policy and other policy benefits on the condensed consolidated statements of income (loss).

The following summarizes information for fair value option mortgage loans:

(In millions)	March 31, 2020				December 31, 2019
Unpaid principal balance	$	23			$	25
Mark to fair value	3				2
Fair value	$	26			$	27

There were no fair value option mortgage loans 90 days or more past due as of March 31, 2020 and December 31, 2019.

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Level 3 Financial Instruments—The following tables are reconciliations for all Level 3 assets and liabilities measured at fair value on a recurring basis. All transfers in and out of Level 3 are based on changes in the availability of pricing sources, as described in the valuation methods above.

	Three months ended March 31, 2020
					Total realized and unrealized gains (losses)
(In millions)	Beginning balance				Included in income				Included in OCI				Net purchases, issuances, sales and settlements				Net transfers in (out)				Ending balance				Total gains (losses) included in income1				Total gains (losses) included in OCI1
Assets
AFS securities
U.S. state, municipal and political subdivisions	$	40			$	—			$	(3	)		$	—			$	—			$	37			$	—			$	(3	)
Corporate	725				(5		)		(33		)		33				513				1,233				—				(31		)
CLO	121				—				(9		)		30				(20		)		122				—				(9		)
ABS	1,374				22				(119		)		(183		)		(177		)		917				—				(103		)
CMBS	46				—				(5		)		4				—				45				—				(5		)
RMBS	—				—				—				—				42				42				—				—
Trading securities
Corporate	—				—				—				—				32				32				—				—
CLO	6				(3		)		—				—				—				3				(3		)		—
ABS	16				—				—				(2		)		—				14				—				—
RMBS	52				(1		)		—				—				19				70				1				—
Equity securities	3				4				—				—				—				7				4				—
Mortgage loans	27				—				—				(1		)		—				26				—				—
Investment funds	22				(1)				—				—				—				21				(1)				—
Funds withheld at interest – embedded derivative	801				(1,175		)		—				—				—				(374		)		—				—
Short-term investments	41				—				(1		)		27				—				67				—				—
Investments in related parties
AFS securities, ABS	2,324				(3		)		(220		)		(50		)		(164		)		1,887				—				(205		)
Trading securities
CLO	38				(16		)		—				1				9				32				(24		)		—
ABS	711				(101		)		—				66				—				676				(101		)		—
Equity securities	64				(10		)		—				1				(6		)		49				(10		)		—
Investment funds	132				(300		)		—				1,147				—				979				(300		)		—
Funds withheld at interest – embedded derivative	594				(609		)		—				—				—				(15		)		—				—
Reinsurance recoverable	1,821				294				—				—				—				2,115				—				—
Total Level 3 assets	$	8,958			$	(1,904	)		$	(390	)		$	1,073			$	248			$	7,985			$	(434	)		$	(356	)
Liabilities
Interest sensitive contract liabilities
Embedded derivative	$	(10,942	)		$	1,177			$	—			$	676			$	—			$	(9,089	)		$	—			$	—
Universal life benefits	(1,050		)		(272		)		—				—				—				(1,322		)		—				—
Future policy benefits
AmerUs Closed Block	(1,546		)		65				—				—				—				(1,481		)		—				—
ILICO Closed Block and life benefits	(755		)		(23		)		—				—				—				(778		)		—				—
Derivative liabilities	(3		)		(4		)		—				—				—				(7		)		—				—
Total Level 3 liabilities	$	(14,296	)		$	943			$	—			$	676			$	—			$	(12,677	)		$	—			$	—
1 Related to instruments held at end of period.

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	Three months ended March 31, 2019
					Total realized and unrealized gains (losses)
(In millions)	Beginning balance				Included in income				Included in OCI				Net purchases, issuances, sales and settlements				Net transfers in (out)				Ending balance				Total gains (losses) included in earnings1				Total gains (losses) included in OCI1
Assets
AFS securities
Corporate	$	898			$	(2	)		$	5			$	165			$	(31	)		$	1,035			$	—			$	—
CLO	107				—				2				30				(29		)		110				—				—
ABS	1,615				3				16				57				(77		)		1,614				—				—
CMBS	187				—				2				(6		)		(9		)		174				—				—
RMBS	56				—				1				—				—				57				—				—
Trading securities
Corporate	—				—				—				—				10				10				—				—
CLO	1				—				—				—				7				8				1				—
ABS	—				—				—				6				—				6				—				—
RMBS	134				(3		)		—				—				(45		)		86				2				—
Equity securities	3				—				—				—				—				3				—				—
Mortgage loans	32				—				—				—				—				32				—				—
Investment funds	29				(3		)		—				(1		)		—				25				(3		)		—
Funds withheld at interest – embedded derivative	57				389				—				—				—				446				—				—
Investments in related parties
AFS securities, ABS	328				—				—				169				—				497				—				—
Trading securities
CLO	113				(1		)		—				(1		)		(22		)		89				4				—
ABS	149				(11		)		—				—				—				138				(11		)		—
Equity securities	133				1				—				173				—				307				4				—
Investment funds	120				(1		)		—				19				—				138				—				—
Funds withheld at interest – embedded derivative	(110		)		324				—				—				—				214				—				—
Reinsurance recoverable	1,676				61				—				—				—				1,737				—				—
Total Level 3 assets	$	5,528			$	757			$	26			$	611			$	(196	)		$	6,726			$	(3	)		$	—
Liabilities
Interest sensitive contract liabilities
Embedded derivative	$	(7,969	)		$	(1,017	)		$	—			$	(120	)		$	—			$	(9,106	)		$	—			$	—
Universal life benefits	(932		)		(47		)		—				—				—				(979		)		—				—
Future policy benefits
AmerUs Closed Block	(1,443		)		(40		)		—				—				—				(1,483		)		—				—
ILICO Closed Block and life benefits	(730		)		(13		)		—				—				—				(743		)		—				—
Derivative liabilities	(4		)		—				—				—				—				(4		)		—				—
Total Level 3 liabilities	$	(11,078	)		$	(1,117	)		$	—			$	(120	)		$	—			$	(12,315	)		$	—			$	—
1 Related to instruments held at end of period.

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The following represents the gross components of purchases, issuances, sales and settlements, net, and net transfers in (out) shown above:

	Three months ended March 31, 2020
(In millions)	Purchases				Issuances				Sales				Settlements				Net purchases, issuances, sales and settlements				Transfers in				Transfers out				Net transfers in (out)
Assets
AFS securities
Corporate	$	74			$	—			$	(10	)		$	(31	)		$	33			$	548			$	(35	)		$	513
CLO	33				—				—				(3		)		30				3				(23		)		(20		)
ABS	73				—				(14		)		(242		)		(183		)		13				(190		)		(177		)
CMBS	4				—				—				—				4				—				—				—
RMBS	—				—				—				—				—				42				—				42
Trading securities
Corporate	—				—				—				—				—				32				—				32
ABS	—				—				(2		)		—				(2		)		—				—				—
RMBS	—				—				—				—				—				20				(1		)		19
Mortgage loans	—				—				—				(1		)		(1		)		—				—				—
Short-term investments	41				—				—				(14		)		27				—				—				—
Investments in related parties
AFS securities, ABS	5				—				—				(55		)		(50		)		—				(164		)		(164		)
Trading securities
CLO	13				—				(12		)		—				1				9				—				9
ABS	66				—				—				—				66				—				—				—
Equity securities	3				—				—				(2		)		1				—				(6		)		(6		)
Investment funds	1,147				—				—				—				1,147				—				—				—
Total Level 3 assets	$	1,459			$	—			$	(38	)		$	(348	)		$	1,073			$	667			$	(419	)		$	248
Liabilities
Interest sensitive contract liabilities – embedded derivative	$	—			$	(116	)		$	—			$	792			$	676			$	—			$	—			$	—
Total Level 3 liabilities	$	—			$	(116	)		$	—			$	792			$	676			$	—			$	—			$	—

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	Three months ended March 31, 2019
(In millions)	Purchases				Issuances				Sales				Settlements				Net purchases, issuances, sales and settlements				Transfers in				Transfers out				Net transfers in (out)
Assets
AFS securities
Corporate	$	238			$	—			$	(1	)		$	(72	)		$	165			$	—			$	(31	)		$	(31	)
CLO	30				—				—				—				30				—				(29		)		(29		)
ABS	189				—				(33		)		(99		)		57				19				(96		)		(77		)
CMBS	—				—				—				(6		)		(6		)		8				(17		)		(9		)
Trading securities
Corporate	—				—				—				—				—				10				—				10
CLO	—				—				—				—				—				7				—				7
ABS	6				—				—				—				6				—				—				—
RMBS	—				—				—				—				—				38				(83		)		(45		)
Investment funds	—				—				—				(1		)		(1		)		—				—				—
Investments in related parties
AFS securities, ABS	170				—				—				(1		)		169				—				—				—
Trading securities, CLO	—				—				(1		)		—				(1		)		—				(22		)		(22		)
Equity securities	177				—				(4		)		—				173				—				—				—
Investment funds	19				—				—				—				19				—				—				—
Total Level 3 assets	$	829			$	—			$	(39	)		$	(179	)		$	611			$	82			$	(278	)		$	(196	)
Liabilities
Interest sensitive contract liabilities – embedded derivative	$	—			$	(233	)		$	—			$	113			$	(120	)		$	—			$	—			$	—
Total Level 3 liabilities	$	—			$	(233	)		$	—			$	113			$	(120	)		$	—			$	—			$	—

Significant Unobservable Inputs—Significant unobservable inputs occur when we could not obtain or corroborate the quantitative detail of the inputs. This applies to fixed maturity securities, equity securities, mortgage loans and certain derivatives, as well as embedded derivatives in liabilities. Additional significant unobservable inputs are described below.

AFS and trading securities – For certain fixed maturity securities, internal models are used to calculate the fair value. We use a discounted cash flow approach. The discount rate is the significant unobservable input due to the determined credit spread being internally developed, illiquid, or as a result of other adjustments made to the base rate. The base rate represents a market comparable rate for securities with similar characteristics. This excludes assets for which significant unobservable inputs are not developed internally, primarily consisting of broker quotes.

Interest sensitive contract liabilities – embedded derivative – Significant unobservable inputs we use in the fixed indexed annuities embedded derivative of the interest sensitive contract liabilities valuation include:

1.	Nonperformance risk – For contracts we issue, we use the credit spread, relative to the U.S. Department of the Treasury (Treasury) curve, based on our public credit rating as of the valuation date. This represents our credit risk for use in the estimate of the fair value of embedded derivatives.

2.	Option budget – We assume future hedge costs in the derivative’s fair value estimate. The level of option budgets determines the future costs of the options and impacts future policyholder account value growth.

3.	Policyholder behavior – We regularly review the lapse and withdrawal assumptions (surrender rate). These are based on our initial pricing assumptions updated for actual experience. Actual experience may be limited for recently issued products.

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The following summarizes the unobservable inputs for AFS and trading securities and the embedded derivatives of fixed indexed annuities:

		March 31, 2020
(In millions, except for percentages)		Fair value				Valuation technique		Unobservable inputs		Minimum			Maximum			Weighted average				Impact of an increase in the input on fair value
AFS and trading securities		$	3,522			Discounted cash flow		Discount		3.8	%		19.0	%		7.8	%	1		Decrease
Interest sensitive contract liabilities – fixed indexed annuities embedded derivatives		$	9,089			Option budget method		Nonperformance risk		1.9	%		2.5	%		2.3	%	2		Decrease
								Option budget		0.7	%		3.7	%		1.9	%	3		Increase
								Surrender rate		5.0	%		10.4	%		7.2	%	4		Decrease
		December 31, 2019
		Fair value				Valuation technique		Unobservable inputs		Minimum			Maximum			Weighted average				Impact of an increase in the input on fair value
AFS and trading securities		$	1,289			Discounted cash flow		Discount		3.0	%		9.0	%		6.6	%	1		Decrease
Interest sensitive contract liabilities – fixed indexed annuities embedded derivatives		$	10,942			Option budget method		Nonperformance risk		0.2	%		1.1	%		0.6	%	2		Decrease
								Option budget		0.7	%		3.7	%		1.9	%	3		Increase
								Surrender rate		3.5	%		8.1	%		7.1	%	4		Decrease
1 The discount weighted average is calculated based on the relative fair values of the securities.
2 The nonperformance risk weighted average is based on the projected excess benefits of reserves used in the calculation of the embedded derivative.
3 The option budget weighted average is calculated based on the indexed account values.
4 The surrender rate weighted average is calculated based on projected account values.

Fair Value of Financial Instruments Not Carried at Fair Value—The following represents our financial instruments not carried at fair value on the condensed consolidated balance sheets:

	March 31, 2020
(In millions)	Carrying Value				Fair Value				NAV				Level 1				Level 2				Level 3
Financial assets
Mortgage loans	$	14,369			$	14,948			$	—			$	—			$	—			$	14,948
Investment funds	583				583				583				—				—				—
Policy loans	403				403				—				—				403				—
Funds withheld at interest	14,090				14,090				—				—				—				14,090
Short-term investments	190				190				—				—				—				190
Other investments	74				74				—				—				—				74
Investments in related parties
Mortgage loans	623				648				—				—				—				648
Investment funds	3,534				3,534				3,534				—				—				—
Funds withheld at interest	12,467				12,467				—				—				—				12,467
Other investments	475				444				—				—				—				444
Total financial assets not carried at fair value	$	46,808			$	47,381			$	4,117			$	—			$	403			$	42,861
Financial liabilities
Interest sensitive contract liabilities	$	58,277			$	58,762			$	—			$	—			$	—			$	58,762
Short-term debt	400				400				—				—				400				—
Long-term debt	986				903				—				—				903				—
Securities to repurchase	1,294				1,294				—				—				1,294				—
Funds withheld liability	372				372				—				—				372				—
Total financial liabilities not carried at fair value	$	61,329			$	61,731			$	—			$	—			$	2,969			$	58,762

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	December 31, 2019
(In millions)	Carrying Value				Fair Value				NAV				Level 1				Level 2				Level 3
Financial assets
Mortgage loans	$	14,279			$	14,719			$	—			$	—			$	—			$	14,719
Investment funds	596				596				596				—				—				—
Policy loans	417				417				—				—				417				—
Funds withheld at interest	14,380				14,380				—				—				—				14,380
Short-term investments	190				190				—				—				—				190
Other investments	65				65				—				—				—				65
Investments in related parties
Mortgage loans	653				641				—				—				—				641
Investment funds	2,731				2,731				2,731				—				—				—
Funds withheld at interest	12,626				12,626				—				—				—				12,626
Other investments	487				537				—				—				—				537
Total financial assets not carried at fair value	$	46,424			$	46,902			$	3,327			$	—			$	417			$	43,158
Financial liabilities
Interest sensitive contract liabilities	$	57,272			$	58,027			$	—			$	—			$	—			$	58,027
Short-term debt	475				475				—				—				475				—
Long-term debt	992				1,036				—				—				1,036				—
Securities to repurchase	512				512				—				—				512				—
Funds withheld liability	377				377				—				—				377				—
Total financial liabilities not carried at fair value	$	59,628			$	60,427			$	—			$	—			$	2,400			$	58,027

We estimate the fair value for financial instruments not carried at fair value using the same methods and assumptions as those we carry at fair value. The financial instruments presented above are reported at carrying value on the condensed consolidated balance sheets; however, in the case of policy loans, funds withheld at interest and liability, short-term investments, short-term debt, and securities to repurchase, the carrying amount approximates fair value.

Investment in related parties – Other investments – The fair value of related party other investments is determined using a discounted cash flow model using discount rates for similar investments.

Interest sensitive contract liabilities – The carrying and fair value of interest sensitive contract liabilities above includes fixed indexed and traditional fixed annuities without mortality or morbidity risks, funding agreements and payout annuities without life contingencies. The embedded derivatives within fixed indexed annuities without mortality or morbidity risks are excluded, as they are carried at fair value. The valuation of these investment contracts is based on discounted cash flow methodologies using significant unobservable inputs. The estimated fair value is determined using current market risk-free interest rates, adding a spread to reflect our nonperformance risk and subtracting a risk margin to reflect uncertainty inherent in the projected cash flows.

Long-term debt – We obtain the fair value of long-term debt from commercial pricing services. These are classified as Level 2. The pricing services incorporate a variety of market observable information in their valuation techniques including benchmark yields, trading activity, credit quality, issuer spreads, bids, offers and other reference data.

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5. Deferred Acquisition Costs, Deferred Sales Inducements and Value of Business Acquired

The following represents a rollforward of deferred acquisition costs (DAC), deferred sales inducements (DSI) and value of business acquired (VOBA):

(In millions)	DAC				DSI				VOBA				Total
Balance at December 31, 2019	$	3,274			$	820			$	914			$	5,008
Adoption of accounting standard	12				5				5				22
Additions	112				38				—				150
Amortization	436				(10		)		(23		)		403
Impact of unrealized investment (gains) losses	489				139				181				809
Balance at March 31, 2020	$	4,323			$	992			$	1,077			$	6,392

(In millions)	DAC				DSI				VOBA				Total
Balance at December 31, 2018	$	3,921			$	799			$	1,187			$	5,907
Additions	173				60				—				233
Amortization	(226		)		(5		)		(5		)		(236		)
Impact of unrealized investment (gains) losses	(149		)		(49		)		(87		)		(285		)
Balance at March 31, 2019	$	3,719			$	805			$	1,095			$	5,619

6. Debt

Short-term Borrowing—As of March 31, 2020, we had $400 million of short-term debt outstanding with the Federal Home Loan Bank (FHLB) through their variable rate short-term federal funds program. As of March 31, 2020, the borrowings had maturity dates ranging from May 4, 2020 to May 11, 2020 and a weighted average interest rate of 1.80%, with interest due at maturity. In connection with short-term borrowings, the FHLB requires the borrower to purchase member stock and post sufficient collateral to secure the borrowing. See Note 10 – Commitments and Contingencies for further discussion regarding existing collateral posting with the FHLB.

Senior Notes—In the second quarter of 2020, AHL issued $500 million of senior unsecured notes due April 3, 2030. The senior notes have a 6.150% coupon rate, payable semi-annually. The senior notes are callable, in whole or in part, at any time prior to January 3, 2030 by AHL, at a price equal to the greater of (1) 100% of the principal and any accrued and unpaid interest and (2) an amount equal to the sum of the present values of remaining scheduled payments, discounted from the scheduled payment date to the redemption date at the Treasury Rate (as defined in the second supplemental indenture, dated April 3, 2020) plus 50 basis points, and any accrued and unpaid interest. Thereafter, the notes are callable, in whole or in part, by AHL at a price equal to 100% of the principal and any accrued and unpaid interest.

7. Earnings Per Share

The following represents our basic and diluted earnings per share (EPS) calculations, which are calculated using unrounded amounts:

	Three months ended March 31, 2020
(In millions, except share and per share data)	Class A				Class B				Class M-1				Class M-2				Class M-3				Class M-4
Net loss available to Athene Holding Ltd. common shareholders – basic and diluted	$	(938	)		$	(98	)		$	(13	)		$	(3	)		$	(4	)		$	(9	)
Basic weighted average shares outstanding	161.4				25.4				3.3				0.8				1.0				2.4
Dilutive effect of stock compensation plans1	—				—				—				—				—				—
Diluted weighted average shares outstanding	161.4				25.4				3.3				0.8				1.0				2.4
Earnings per share
Basic	$	(5.81	)		$	(3.87	)		$	(3.87	)		$	(3.87	)		$	(3.87	)		$	(3.87	)
Diluted	$	(5.81	)		$	(3.87	)		$	(3.87	)		$	(3.87	)		$	(3.87	)		$	(3.87	)
1 The dilutive effect of stock compensation plans is antidilutive as a result of the net loss available to Athene Holding Ltd. common shareholders for the three months ended March 31, 2020.

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	Three months ended March 31, 2019
(In millions, except per share data)	Class A				Class B				Class M-1				Class M-2				Class M-3				Class M-4
Net income available to Athene Holding Ltd. common shareholders – basic and diluted	$	589			$	93			$	12			$	3			$	3			$	8
Basic weighted average shares outstanding	161.3				25.4				3.4				0.8				1.0				2.1
Dilutive effect of stock compensation plans	0.4				—				—				—				—				0.3
Diluted weighted average shares outstanding	161.7				25.4				3.4				0.8				1.0				2.4
Earnings per share
Basic	$	3.65			$	3.65			$	3.65			$	3.65			$	3.65			$	3.65
Diluted	$	3.64			$	3.65			$	3.65			$	3.65			$	3.65			$	3.15

During the first quarter of 2020, as a result of the closing of the share transaction discussed further in Note 9 – Related Parties, we converted outstanding Class B shares to Class A shares and Class M shares were converted to Class A shares and warrants. As a result, the EPS calculation for the first quarter of 2020 uses the weighted average shares for the quarter for all classes to allocate net income; however, for Class B and Class M shares, the weighted average shares outstanding represents only that period of time that the shares were outstanding. The warrants issued as part of the conversion of the Class M shares are evaluated for dilution within the dilutive effect of stock compensation plans.

We use the two-class method for allocating net income available to Athene Holding Ltd. common shareholders to each class of our common stock. Dilutive shares are calculated using the treasury stock method. For Class A shares, this method takes into account shares that can be settled into Class A shares, net of a conversion price. The diluted EPS calculations for Class A shares excluded 11.1 million and 34.8 million shares, restricted stock units, options and warrants as of March 31, 2020 and 2019, respectively.

8. Equity

Preferred Stock—We have two series of preferred stock: 6.35% Fixed-to-Floating Rate Perpetual Non-Cumulative Preference Shares, Series A (Series A) and 5.625% Fixed Rate Perpetual Non-Cumulative Preference Shares, Series B (Series B) as summarized below:

	Series A				Series B
Authorized, issued and outstanding	34,500				13,800
Liquidation preference per share	$	25,000			$	25,000
Dividends declared and paid per share during the period	$	396.88			$	351.56
Aggregate dividends declared and paid during the period (in millions)	$	13			$	5

Preferred stock dividends are payable on a non-cumulative basis only when, as and if declared, quarterly in arrears on the 30^th day of March, June, September and December of each year. Preferred stock ranks senior to our common stock with respect to dividends, to the extent declared, and in liquidation, to the extent of the liquidation preference.

Common Stock—During the first quarter of 2020, shareholders approved amendments to our bye-laws which eliminated our multi-class share structure at closing of the share transaction with Apollo. See Note 9 – Related Parties for further information on this transaction. On February 28, 2020, all Class B shares were converted to Class A shares on a one-to-one basis. Class M shares were converted to Class A shares representing 5% of the Class M value and warrants representing 95% of the Class M value. The warrants were issued with substantially the same terms, including the same economic terms, as the Class M shares.

Our bye-laws place certain restrictions on Class A shares such that a holder of Class A shares, except for shareholders permitted by our board of directors, which include members of the Apollo Group, as defined in our bye-laws, cannot control greater than 9.9% of the total outstanding vote and if a holder of Class A shares were to control greater than 9.9%, then a holder’s voting power is automatically reduced to 9.9% and the other holders of Class A shares would vote the remainder on a prorated basis.

Share Repurchase Authorization

Our board of directors has approved authorizations of $1,567 million for the repurchase of our Class A shares under our repurchase program. We may repurchase shares in open market transactions, in privately negotiated transactions or otherwise. The size and timing of repurchases will depend on legal requirements, market and economic conditions and other factors, and are solely at our discretion. The program has no expiration date, but may be modified, suspended or terminated by the board at any time.

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The following summarizes the activity on our share repurchase authorization:

	Three months ended March 31,
(In millions)	2020				2019
Beginning balance at January 1	$	640			$	150
Repurchases	(319		)		(47		)
Ending balance at March 31	$	321			$	103

The table below shows the changes in each class of shares issued and outstanding:

(In millions)	Three months ended March 31, 2020
Class A
Beginning balance	143.2
Issued shares	35.9
Forfeited shares	(0.1	)
Repurchased shares	(10.4	)
Converted from Class B shares	25.4
Converted from Class M shares	0.3
Ending balance	194.3
Class B
Beginning balance	25.4
Converted to Class A shares	(25.4	)
Ending balance	—
Class M-1
Beginning balance	3.3
Converted to Class A shares	(0.2	)
Converted to warrants	(3.1	)
Ending balance	—
Class M-2
Beginning balance	0.8
Converted to Class A shares	0.0
Converted to warrants	(0.8	)
Ending balance	—
Class M-3
Beginning balance	1.0
Converted to Class A shares	0.0
Converted to warrants	(1.0	)
Ending balance	—
Class M-4
Beginning balance	4.0
Converted to Class A shares	(0.1	)
Converted to warrants	(3.6	)
Repurchased shares	(0.3	)
Ending balance	—

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Accumulated Other Comprehensive Income (Loss)—The following provides the details of AOCI and changes in AOCI:

(In millions)	Unrealized investment gains (losses) on AFS securities without a credit allowance				Unrealized investment gains (losses) on AFS securities with a credit allowance				DAC, DSI, VOBA and future policy benefits adjustments on AFS securities				Unrealized gains (losses) on hedging instruments				Foreign currency translation and other adjustments				Accumulated other comprehensive income (loss)
Balance at December 31, 2019	$	3,102			$	—			$	(879	)		$	61			$	(3	)		$	2,281
Adoption of accounting standards	4				(4		)		(6		)		—				—				(6		)
Other comprehensive income (loss) before reclassifications	(5,762		)		(273		)		1,352				401				9				(4,273		)
Less: Reclassification adjustments for gains (losses) realized in net income (loss)1	171				—				(15		)		—				—				156
Less: Income tax expense (benefit)	(1,128		)		(53		)		287				97				—				(797		)
Less: Other comprehensive income (loss) attributable to NCI	(159		)		—				—				(30		)		6				(183		)
Balance at March 31, 2020	$	(1,540	)		$	(224	)		$	195			$	395			$	—			$	(1,174	)
1 Recognized in investment related gains (losses) on the condensed consolidated statements of income (loss).

(In millions)	Unrealized investment gains (losses) on AFS securities				DAC, DSI, VOBA and future policy benefits adjustments on AFS securities				Unrealized gains (losses) on hedging instruments				Foreign currency translation and other adjustments				Accumulated other comprehensive income (loss)
Balance at December 31, 2018	$	(628	)		$	121			$	39			$	(4	)		$	(472	)
Other comprehensive income (loss) before reclassifications	1,981				(509		)		(8		)		—				1,464
Less: Reclassification adjustments for gains (losses) realized in net income (loss)1	(7		)		2				—				—				(5		)
Less: Income tax expense (benefit)	401				(108		)		(2		)		—				291
Balance at March 31, 2019	$	959			$	(282	)		$	33			$	(4	)		$	706
1 Recognized in investment related gains (losses) on the condensed consolidated statements of income (loss).

9. Related Parties

Apollo

Current fee structure – Substantially all of our investments are managed by Apollo, which provides direct investment management, asset allocation, mergers and acquisition asset diligence and certain operational support services for our investment portfolio, including investment compliance, tax, legal and risk management support.

During the second quarter of 2019, we entered into the Seventh Amended and Restated Fee Agreement, dated as of June 10, 2019, between us and AGM’s subsidiary, Apollo Insurance Solutions Group LP (ISG) (Fee Agreement). Under the Fee Agreement, effective retroactive to January 1, 2019, we pay Apollo:

(1)

a base management fee equal to the sum of (i) 0.225% per year of the lesser of (A) the aggregate market value of substantially all of the assets in substantially all of the investment accounts of or relating to us (collectively, the Accounts) on December 31, 2018 of $103.4 billion (Backbook Value) and (B) the aggregate market value of substantially all of the assets in the Accounts at the end of the respective month, plus (ii) 0.15% per year of the amount, if any (Incremental Value), by which the aggregate market value of substantially all of the assets in the Accounts at the end of the respective month exceeds the Backbook Value; plus

(2)	with respect to each asset in an Account, subject to certain exceptions, that is managed by Apollo and that belongs to a specified asset class tier (Core, Core Plus, Yield, and High Alpha), a sub-allocation fee as follows, which will, in the case of assets acquired after January 1, 2019, be subject to a cap of 10% of the applicable asset’s gross book yield:

(i)	0.065% of the market value of Core assets, which include public investment grade corporate bonds, municipal securities, agency RMBS or CMBS, and obligations of governmental agencies or government sponsored entities that are not expressly backed by the U.S. government;

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(ii)

0.13% of the market value of Core Plus assets, which include private investment grade corporate bonds, fixed rate first lien commercial mortgage loans (CML), and certain obligations issued or assumed by financial institutions and determined by Apollo to be “Tier 2 Capital” under Basel III, a set of recommendations for international banking regulations developed by the Bank for International Settlements;

(iii)

0.375% of the market value of Yield assets, which include non-agency RMBS, investment grade CLO, CMBS and other ABS (other than RMBS and CLO), emerging market investments, below investment grade corporate bonds, subordinated debt obligations, hybrid securities or surplus notes issued or assumed by a financial institution, rated preferred equity, residential mortgage loans (RML), bank loans, investment grade infrastructure debt, and floating rate CMLs on slightly transitional or stabilized traditional real estate;

(iv)

0.70% of the market value of High Alpha assets, which include subordinated CML, below investment grade CLO, unrated preferred equity, debt obligations originated by MidCap, CMLs for redevelopment or construction loans or secured by non-traditional real estate, below investment grade infrastructure debt, certain loans originated directly by Apollo (other than MidCap loans), and agency mortgage derivatives; and

(v)	0.00% of the market value of cash and cash equivalents, U.S. treasuries, non-preferred equities and alternatives.

The following represents assets based on the above sub-allocation structure:

(In millions, except percentages)	March 31, 2020				Percent of Total			December 31, 2019				Percent of Total
Core	$	28,858			23.8	%		$	32,474			25.5	%
Core Plus	29,717				24.5	%		30,155				23.6	%
Yield	44,269				36.4	%		48,557				38.0	%
High Alpha	5,390				4.4	%		5,062				4.0	%
Other	13,290				10.9	%		11,302				8.9	%
Total sub-allocation assets	$	121,524			100.0	%		$	127,550			100.0	%

Additionally, the Fee Agreement provides for a possible payment by Apollo to us, or a possible payment by us to Apollo, equal to 0.025% of the Incremental Value as of the end of each year, beginning on December 31, 2019, depending upon the percentage of our investments that consist of Core and Core Plus assets. If more than 60% of our invested assets that are subject to the sub-allocation fees are invested in Core and Core Plus assets, we will receive a 0.025% fee reduction on the Incremental Value. If less than 50% of our invested assets that are subject to the sub-allocation fee are invested in Core and Core Plus assets, we will pay an additional fee of 0.025% on Incremental Value.

During the three months ended March 31, 2020 and 2019, we incurred management fees, inclusive of the base and sub-allocation fees, of $128 million and $92 million, respectively. Management fees are included within net investment income on the condensed consolidated statements of income (loss). As of March 31, 2020 and December 31, 2019, management fees payable were $43 million and $42 million, respectively, and are included in other liabilities on the condensed consolidated balance sheets.

Investment management agreement (IMA) termination – Our bye-laws currently provide that we may not, and will cause our subsidiaries not to, terminate any IMA among us or any of our subsidiaries, on the one hand, and a member of the Apollo Group (as defined in our bye-laws), on the other hand, other than on June 4, 2023 or any two year anniversary of such date (each such date, an IMA Termination Election Date) and any termination on an IMA Termination Election Date requires (i) the approval of two-thirds of our Independent Directors (as defined in the bye-laws) and (ii) prior written notice to the applicable Apollo subsidiary of such termination at least 30 days, but not more than 90 days, prior to an IMA Termination Election Date. If our Independent Directors make such election to terminate and notice of such termination is delivered, the termination will be effective no earlier than the second anniversary of the applicable IMA Termination Election Date (IMA Termination Effective Date). Notwithstanding the foregoing, (A) except as set forth in clause (B) below, our board of directors may only elect to terminate an IMA on an IMA Termination Election Date if two-thirds of our Independent Directors determine, in their sole discretion and acting in good faith, that either (i) there has been unsatisfactory long-term performance materially detrimental to us by the applicable Apollo subsidiary or (ii) the fees being charged by the applicable Apollo subsidiary are unfair and excessive compared to a comparable asset manager (provided, that in either case such Independent Directors must deliver notice of any such determination to the applicable Apollo subsidiary and the applicable Apollo subsidiary will have until the applicable IMA Termination Effective Date to address such concerns, and provided, further, that in the case of such a determination that the fees being charged by the applicable Apollo subsidiary are unfair and excessive, the applicable Apollo subsidiary has the right to lower its fees to match the fees of such comparable asset manager) and (B) upon the determination by two-thirds of our Independent Directors, we or our subsidiaries may also terminate an IMA with the applicable Apollo subsidiary, on a date other than an IMA Termination Effective Date, as a result of either (i) a material violation of law relating to the applicable Apollo subsidiary’s advisory business, or (ii) the applicable Apollo subsidiary’s gross negligence, willful misconduct or reckless disregard of its obligations under the relevant agreement, in each case of this clause (B), that is materially detrimental to us, and in either case of this clause (B), subject to the delivery of written notice at least 30 days prior to such termination; provided, that in connection with an event described in clause (B)(i) or (B)(ii), the applicable Apollo subsidiary shall have the right to dispute such determination of the Independent Directors within 30 days after receiving notice from us of such determination, in which case the matter will be submitted to binding arbitration and such IMA shall continue to remain in effect during the period of the arbitration (the events described in the foregoing clauses (A) and (B) are referred to in more detail in our bye-laws as “AHL Cause”).

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Governance – We have a management investment committee, which includes members of our senior management and reports to the risk committee of our board of directors. The committee focuses on strategic decisions involving our investment portfolio, such as approving investment limits, new asset classes and our allocation strategy, reviewing large asset transactions, as well as monitoring our credit risk, and the management of our assets and liabilities.

A significant voting interest in the Company is held by shareholders who are members of the Apollo Group. Also, James Belardi, our Chief Executive Officer, is an employee of ISG and receives remuneration from acting as Chief Executive Officer of ISG. Mr. Belardi also owns a 5% profit interest in ISG (Interest). It is expected that the Interest will be revised such that Mr. Belardi will receive a lesser interest in the equity of ISG and also receive a specified percentage of other fee streams earned by Apollo, potentially comprised of or including the sub-allocation fees. Additionally, six of the fifteen members of our board of directors are employees of or consultants to Apollo (including Mr. Belardi). In order to protect against potential conflicts of interest resulting from transactions into which we have entered and will continue to enter into with the Apollo Group, our bye-laws require us to maintain a conflicts committee comprised solely of directors who are not officers or employees of any member of the Apollo Group. The conflicts committee reviews and approves material transactions between us and the Apollo Group, subject to certain exceptions.

Other related party transactions

A-A Mortgage Opportunities, L.P. (A-A Mortgage) – We have an equity method investment of $508 million and $487 million as of March 31, 2020 and December 31, 2019, respectively, in A-A Mortgage, which has an investment in AmeriHome. We have a loan purchase agreement with AmeriHome. The agreement allows us to purchase residential mortgage loans which AmeriHome has purchased from correspondent sellers and pooled for sale in the secondary market. AmeriHome retains the servicing rights to the sold loans. We purchased $169 million and $0 million of residential mortgage loans under this agreement during the three months ended March 31, 2020 and 2019, respectively. Additionally, we hold ABS securities issued by AmeriHome affiliates of $164 million and $170 million as of March 31, 2020 and December 31, 2019, respectively, which are included in related party AFS securities on the condensed consolidated balances sheets. We also have commitments to make additional equity investments in A-A Mortgage of $169 million as of March 31, 2020.

MidCap – AAA Investment (Co Invest VII), L.P. (CoInvest VII) holds a significant investment in MidCap, which was $508 million and $547 million as of March 31, 2020 and December 31, 2019, respectively. CoInvest VII is included in related party investment funds on the condensed consolidated balance sheets and was reflected as a consolidated VIE in prior periods. We have also advanced amounts under a subordinated debt facility to Midcap and, as of March 31, 2020 and December 31, 2019, the principal balance was $345 million and, net of discounts and allowances, was $330 million and $339 million, respectively, which is included in other related party investments on the condensed consolidated balance sheets. Our total investment in MidCap, including amounts advanced under credit facilities, was $838 million and $886 million as of March 31, 2020 and December 31, 2019, respectively. Additionally, we hold ABS and CLO securities issued by MidCap affiliates of $524 million and $624 million as of March 31, 2020 and December 31, 2019, respectively, which are included in related party AFS securities on the condensed consolidated balance sheets.

Athora – We have a cooperation agreement with Athora, pursuant to which, among other things, (1) for a period of 30 days from the receipt of notice of a cession, we have the right of first refusal to reinsure (i) up to 50% of the liabilities ceded from Athora’s reinsurance subsidiaries to Athora Life Re Ltd. and (ii) up to 20% of the liabilities ceded from a third party to any of Athora’s insurance subsidiaries, subject to a limitation in the aggregate of 20% of Athora’s liabilities, (2) Athora agreed to cause its insurance subsidiaries to consider the purchase of certain funding agreements and/or other spread instruments issued by our insurance subsidiaries, subject to a limitation that the fair market value of such funding agreements purchased by any of Athora’s insurance subsidiaries may generally not exceed 3% of the fair market value of such subsidiary’s total assets, (3) we provide Athora with a right of first refusal to pursue acquisition and reinsurance transactions in Europe (other than the UK) and (4) Athora provides us and our subsidiaries with a right of first refusal to pursue acquisition and reinsurance transactions in North America and the UK. Notwithstanding the foregoing, pursuant to the cooperation agreement, Athora is only required to use its reasonable best efforts to cause its subsidiaries to adhere to the provisions set forth in the cooperation agreement and therefore Athora’s ability to cause its subsidiaries to act pursuant to the cooperation agreement may be limited by, among other things, legal prohibitions or the inability to obtain the approval of the board of directors or other applicable governing body of the applicable subsidiary, which approval is solely at the discretion of such governing body. As of March 31, 2020, we have not exercised our right of first refusal to reinsure liabilities ceded to Athora’s insurance or reinsurance subsidiaries.

Our investment in Athora, which is included in related party investment funds on the condensed consolidated balance sheets, was $130 million and $132 million as of March 31, 2020 and December 31, 2019, respectively. Additionally, as of March 31, 2020 and December 31, 2019, we had $110 million and $146 million, respectively, of funding agreements outstanding to Athora. During the first quarter of 2020, Athora called capital and we remitted $361 million to Athora. We did not receive shares from Athora until April 1, 2020; therefore, we recorded a receivable in other assets on the consolidated balance sheets as of March 31, 2020 for the capital funding. We also have commitments to make additional equity investments in Athora of $364 million as of March 31, 2020.

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Venerable – We have coinsurance and modco agreements with Venerable Insurance and Annuity Company (VIAC, formerly Voya Insurance and Annuity Company). VIAC is a related party due to our minority equity investment in its holding company’s parent, VA Capital Company LLC (VA Capital), which was $110 million and $99 million as of March 31, 2020 and December 31, 2019, respectively. The minority equity investment in VA Capital is included in related party investment funds on the condensed consolidated balance sheets and accounted for as an equity method investment. VA Capital is owned by a consortium of investors, led by affiliates of AGM, Crestview Partners and Reverence Capital Partners, and is the parent of Venerable, which is the parent of VIAC. Additionally, we have a 15-year term loan receivable from Venerable due in 2033, which is included in related party other investments on the condensed consolidated balance sheets. The loan is held at the principal balance less allowances and was $145 million and $148 million as of March 31, 2020 and December 31, 2019, respectively. While management views the overall transactions with Venerable as favorable to us, the stated interest rate of 6.257% on the term loan to Venerable represents a below-market interest rate, and management considered such rate as part of its evaluation and pricing of the reinsurance transactions.

Strategic Partnership – On October 24, 2018, we entered into an agreement pursuant to which we may invest up to $2.5 billion over three years in funds managed by Apollo entities (Strategic Partnership). This arrangement is intended to permit us to invest across the Apollo alternatives platform into credit-oriented, strategic and other alternative investments in a manner and size that is consistent with our existing investment strategy. Fees for such investments payable by us to Apollo would be more favorable to us than market rates, and consistent with our existing alternative investments, investments made under the Strategic Partnership require approval of ISG and remain subject to our existing governance processes, including approval by our conflicts committee where applicable. As of March 31, 2020 and December 31, 2019, we had $162 million and $97 million, respectively, of investments under the Strategic Partnership and these investments are included in related party investment funds on the condensed consolidated balance sheets and were reflected as consolidated VIEs in prior periods.

PK AirFinance – During the fourth quarter of 2019, we and Apollo purchased PK AirFinance (PK), an aviation lending business, including PK’s in force loan portfolio (Aviation Loans), from the Aviation Services Unit of GE Capital (GE). The Aviation Loans are generally fully secured by aircraft leases and aircraft. In connection with such transaction, Apollo acquired the PK loan origination platform, including personnel and systems and, pursuant to certain agreements entered into between us, Apollo, and certain entities managed by Apollo (collectively, PK Transaction Agreements), the existing Aviation Loans were acquired and securitized by a newly formed SPV for which Apollo acts as ABS manager (ABS-SPV). The ABS-SPV issued tranches of senior notes and subordinated notes, which are secured by the Aviation Loans.

In connection with the acquisition of the existing Aviation Loans by the ABS-SPV (i) a tranche of senior notes was acquired by third-party investors and (ii) we purchased mezzanine tranches of the senior notes and the subordinated notes. As of March 31, 2020 and December 31, 2019, our investment in securitizations of loans originated by PK was $1,141 million and $1,282 million, respectively, and are included in related party AFS or trading securities on the condensed consolidated balance sheets.

In addition to the investment in the senior notes and subordinated notes, we also have a right to acquire, whether directly, through the ABS-SPV or through a similar vehicle, all Aviation Loans originated by PK (Forward Flow Loans). All servicing and administrative costs and expenses of Apollo (determined at cost, without mark-up) that are incurred in connection with the sourcing, origination, servicing and maintaining the Forward Flow Loans, net of any service fees and servicing and administrative cost and expense reimbursement amounts received directly from the ABS-SPV or other entities investing in the Forward Flow Loans are allocated to, and reimbursed by the ABS-SPV or us, as applicable, subject to an agreed-upon annual cap.

In addition to the payment of the expenses described in the preceding paragraph and the base management fee paid to Apollo on all assets managed by Apollo, we have paid or expect to pay the following fees to Apollo or certain service providers that are affiliates of, or are companies managed by, Apollo in connection with the PK Transaction Agreements:

(A)	To Apollo, sub-allocation fees on the senior notes based on the rates applicable to Yield assets and sub-allocation fees on the subordinated notes based on the rates applicable to High Alpha assets.

(B)

To Redding Ridge Asset Management LLC, a company in which certain funds managed by Apollo have an interest, as consideration for assistance with the structuring, monitoring, support and maintenance of the securitization transactions, a one-time structuring fee, as well as ongoing support fees equal to 1.5 bps on the total capitalization amount and certain other fees, which may become due upon the occurrence of certain events; and

(C)

To Merx Aviation Servicing Limited, a company externally managed by Apollo Investment Management, L.P., with respect to certain diligence, technical support and enforcement, remarketing and restructuring services with respect to the existing Aviation Loans and the Forward Flow Loans, a one-time servicing fee, as well as certain special situations fees, which may become due upon the occurrence of certain events.

Apollo/Athene Dedicated Investment Program (ADIP) – Our subsidiary, Athene Co-Invest Reinsurance Affiliate 1A Ltd. (together with its subsidiaries, ACRA) is partially owned by ADIP, which is managed by AGM. As of March 31, 2020, ADIP owned 67% of the equity interests, while we retained 100% of the voting power and 33% of the equity interests in ACRA. During the first quarter of 2020, we received capital of $240 million from and paid a dividend of $46 million to ADIP. On April 1, 2020, ALRe purchased 14,000 newly issued ACRA shares for $66 million, which resulted in ALRe holding 36.55% of the economic interests in ACRA. The remaining 63.45% of the economic interests in ACRA are held by ADIP.

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Apollo Share Exchange and Related Transactions – On February 28, 2020, we closed a strategic transaction with AGM and certain affiliates of AGM which collectively comprise the Apollo Operating Group (AOG), pursuant to which we sold 27,959,184 newly issued Class A common shares to the AOG for an investment in Apollo of 29,154,519 newly issued AOG units valued at $1.1 billion and we sold 7,575,758 newly issued Class A common shares to the AOG for $350 million. Pursuant to the underlying transaction agreements, among other things (1) AGM has the right to purchase additional Class A common shares until August 26, 2020 to the extent AOG and certain affiliates, employees and consultants of AGM do not beneficially own at least 35% of the issued and outstanding Class A common shares (inclusive of Class A common shares over which any such persons have a valid proxy), on a fully diluted basis, in a number to achieve such 35% ownership level at a price based upon a weighted average price during the 30 days prior to the exercise of the purchase right and (2) Apollo Management Holdings, L.P. (AMH) has the right to purchase up to that number of Class A common shares that would increase by 5 percentage points the percentage of the issued and outstanding Class A common shares beneficially owned by the AOG and certain affiliates, employees and consultants of AGM (inclusive of Class A common shares over which any such persons have a valid proxy), calculated on a fully diluted basis. In connection with the closing of the transaction, we made certain amendments to our bye-laws which, among other things, eliminated our current multi-class share structure.

Concurrently with our entry into the transaction agreements, AMH, James Belardi, our Chief Executive Officer, and William Wheeler, our President (each an “Other Shareholder”), entered into a voting agreement, pursuant to which each Other Shareholder irrevocably appointed AMH as its proxy and attorney-in-fact (Proxy) to vote all of such Other Shareholder’s Class A common shares at any meeting of our shareholders occurring following the closing date and in connection with any written consent of our shareholders following the closing date. The Proxy will be of no force and effect if Apollo and certain affiliates thereof cease to hold some minimum level of ownership not to exceed 7.5% of our Class A common shares.

AA Infrastructure Fund 1 LLC (AA Infrastructure) – We have an investment in preferred shares of AA Infrastructure, which is a fund managed by ISG. As of March 31, 2020 and December 31, 2019, we held $49 million and $58 million, respectively, of preferred shares, which are included in related party equity securities on the consolidated balance sheets and also held AA Infrastructure ABS securities of $284 million and $267 million, respectively, which are included in related party trading securities on the consolidated balance sheets.

10. Commitments and Contingencies

Contingent Commitments—We had commitments to make investments, primarily capital contributions to investment funds, inclusive of related party commitments discussed previously, of $4,939 million and $4,793 million as of March 31, 2020 and December 31, 2019, respectively. We expect most of our current commitments will be invested over the next five years; however, these commitments could become due any time upon counterparty request.

Funding Agreements—We are a member of the FHLB and, through membership, we have issued funding agreements to the FHLB in exchange for cash advances. As of March 31, 2020 and December 31, 2019, we had $1,426 million and $1,226 million, respectively, of FHLB funding agreements outstanding. We are required to provide collateral in excess of the funding agreement amounts outstanding, considering any discounts to the securities posted and prepayment penalties.

We have a funding agreement backed notes (FABN) program, which allows Athene Global Funding, a special-purpose, unaffiliated statutory trust, to offer its senior secured medium-term notes. Athene Global Funding uses the net proceeds from each sale to purchase one or more funding agreements from us. As of March 31, 2020 and December 31, 2019, we had $4,325 million and $3,700 million, respectively, of FABN funding agreements outstanding. We had $5,375 million of remaining FABN capacity as of March 31, 2020.

Pledged Assets and Funds in Trust (Restricted Assets)—The total restricted assets included on the condensed consolidated balance sheets are as follows:

(In millions)	March 31, 2020				December 31, 2019
AFS securities	$	8,877			$	9,369
Trading securities	46				45
Equity securities	16				22
Mortgage loans	2,964				2,535
Investment funds	7				84
Derivative assets	60				105
Short-term investments	101				92
Other investments	93				88
Restricted cash	564				402
Total restricted assets	$	12,728			$	12,742

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The restricted assets are primarily related to reinsurance trusts established in accordance with coinsurance agreements, and the FHLB funding agreements described above.

Letter of Credit—We have an undrawn letter of credit for $188 million as of March 31, 2020. This letter of credit was issued for our reinsurance program and expires by December 31, 2020.

Litigation, Claims and Assessments

Corporate-owned Life Insurance (COLI) Matter – In 2000 and 2001, two insurance companies, which were subsequently merged into Athene Annuity and Life Company (AAIA), purchased broad based variable COLI policies from American General Life Insurance Company (American General) that, as of March 31, 2020, had an asset value of $382 million, and is included in other assets on the condensed consolidated balance sheets. In January 2012, the COLI policy administrator delivered to AAIA a supplement to the existing COLI policies and advised that American General and ZC Resource Investment Trust (ZC Trust) had unilaterally implemented changes set forth in the supplement that, if effective, would: (1) potentially negatively impact the crediting rate for the policies and (2) change the exit and surrender protocols set forth in the policies. In March 2013, AAIA filed suit against American General, ZC Trust, and ZC Resource LLC in Chancery Court in Delaware, seeking, among other relief, a declaration that the changes set forth in the supplement were ineffectual and in breach of the parties’ agreement. The parties filed cross motions for judgment as a matter of law, and the court granted defendants’ motion and dismissed without prejudice on ripeness grounds. The issue that negatively impacts the crediting rate for one of the COLI policies has subsequently been triggered and, on April 3, 2018, we filed suit against the same defendants in Chancery Court in Delaware seeking substantially similar relief. Defendants moved to dismiss and the court heard oral arguments on February 13, 2019. The court issued an opinion on July 31, 2019 that did not address the merits, but found that the Chancery Court did not have jurisdiction over our claims and directed us to either amend our complaint or transfer the matter to Delaware Superior Court. The matter has been transferred to the Delaware Superior Court. Defendants renewed their motion to dismiss and the Superior Court heard oral arguments on December 18, 2019. The Superior Court took the matter under advisement and we expect an opinion in the next few months. If the supplement is ultimately deemed to be effective, the purported changes to the policies could impair AAIA’s ability to access the value of guarantees associated with the policies. The value of the guarantees included within the asset value reflected above is $202 million as of March 31, 2020.

Regulatory Matters – Beginning in 2015, our U.S. insurance subsidiaries have experienced increased complaints related to the conversion and administration of the block of life insurance business acquired in connection with our acquisition of Aviva USA and reinsured to affiliates of Global Atlantic. The life insurance policies included in this block have been and are currently being administered by AllianceOne Inc. (AllianceOne), a subsidiary of DXC Technology Company, which was retained by such Global Atlantic affiliates to provide third party administration services on such policies. AllianceOne also administers a small block of annuity policies that were on Aviva USA’s legacy policy administration systems that were also converted in connection with the acquisition of Aviva USA and have experienced some similar service and administration issues, but on a reduced scale.

As a result of the difficulties experienced with respect to the administration of such policies, we have received notifications from several state regulators, including but not limited to New York State Department of Financial Services (NYSDFS), the California Department of Insurance (CDI) and the Texas Department of Insurance, indicating, in each case, that the respective regulator planned to undertake a market conduct examinations or enforcement proceeding of the applicable U.S. insurance subsidiary relating to the treatment of policyholders subject to our reinsurance agreements with affiliates of Global Atlantic and the conversion of the life and annuity policies, including the administration of such blocks by AllianceOne. We have entered into consent orders with several states, including the NYSDFS, to resolve underlying matters in those states. All fines and costs, including those associated with remediation plans, paid in connection with the consent orders are subject to indemnification by Global Atlantic or affiliates of Global Atlantic. Global Atlantic is currently in negotiation with the CDI to resolve the pending joint action related to the converted life insurance policies.

In addition to the examinations and proceedings initiated to date, it is possible that other regulators may pursue similar formal examinations, inquiries or enforcement proceedings and that any examinations, inquiries and/or enforcement proceedings may result in fines, administrative penalties and payments to policyholders. While we do not expect the amount of any such fines, penalties or payments arising from these matters to be material to our financial condition, results of operations or cash flows, it is possible that such amounts could be material.

Pursuant to the terms of the reinsurance agreements between us and the relevant affiliates of Global Atlantic, the applicable affiliates of Global Atlantic have financial responsibility for the ceded life block and are subject to significant administrative service requirements, including compliance with applicable law. The agreements also provide for indemnification to us, including for administration issues.

On January 23, 2019, we received a letter from the NYSDFS, with respect to a pension risk transfer (PRT) transaction, which expressed concerns with our interpretation and reliance upon certain exemptions from licensing in New York in connection with certain activities performed by employees in our PRT channel, including specific activities performed within New York. On April 13, 2020, we entered into a consent order with the NYSDFS to resolve this matter. Pursuant to the consent order, the NYSDFS imposed a fine of $45 million, which was accrued in other liabilities on the consolidated balance sheets as of December 31, 2019.

Caldera Matters – On May 3, 2018, AHL filed a writ commencing litigation in the Supreme Court of Bermuda against a former officer of AHL, a former director of AHL (who is also considered a former officer pursuant to Bermuda law), and Caldera Holdings, Ltd. (Caldera). AHL alleges in the writ, among other things, that the defendants breached various duties owed to AHL under Bermuda law by using AHL’s confidential information in their attempted acquisition of a company referred to in the litigation as Company A. AHL is seeking injunctive relief and

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damages. Athene amended its writ on October 16, 2018. The trial court denied two separate motions to dismiss made by defendant Caldera on June 28, 2018 and by the former officer and former director defendants on January 14, 2019. On September 20, 2019, the Bermuda Court of Appeal affirmed both trial court rulings and dismissed the defendants’ appeal. Defendants have not further pursued an appeal of this decision to the Judicial Committee of the Privy Council, the court of final appeal for matters litigated in Bermuda. On March 17, 2020, we filed an application for leave to amend the complaint to more broadly assert defendants’ breaches of duties.

On May 3, 2018, following AHL’s filing of the writ in Bermuda described above, Caldera, Caldera Life Reinsurance Company, and Caldera Shareholder, L.P., commenced an action in the Supreme Court of the State of New York, County of New York, by filing a Summons with Notice against AHL, Apollo, certain affiliates of Apollo and Leon Black, a founder of Apollo. On July 12, 2018, plaintiffs filed a complaint alleging claims for tortious interference with prospective business relations, defamation, and unfair competition related to plaintiffs’ attempt to purchase Company A and seeking alleged damages of “no less than $1.5 billion.” AHL has moved to dismiss the complaint. On January 21, 2019, plaintiffs filed an amended complaint, which revised certain allegations about jurisdiction, venue and the merits of the plaintiffs’ claims. We have renewed our motion to dismiss and, on December 20, 2019, the court granted our motion to dismiss. Plaintiffs have filed an appeal. We believe we have meritorious defenses to the claims and intend to vigorously defend the litigation. In light of the inherent uncertainties involved in this matter, reasonably possible losses, if any, cannot be estimated at this time.

11. Segment Information

We operate our core business strategies out of one reportable segment, Retirement Services. In addition to Retirement Services, we report certain other operations in Corporate and Other.

Retirement Services—Retirement Services is comprised of our U.S. and Bermuda operations, which issue and reinsure retirement savings products and institutional products. Retirement Services has retail operations, which provide annuity retirement solutions to our policyholders. Retirement Services also has reinsurance operations, which reinsure multi-year guaranteed annuities, fixed indexed annuities, traditional one-year guarantee fixed deferred annuities, immediate annuities and institutional products from our reinsurance partners. In addition, our institutional operations, including funding agreements and group annuities, are included in our Retirement Services segment.

Corporate and Other—Corporate and Other includes certain other operations related to our corporate activities such as corporate allocated expenses, merger and acquisition costs, debt costs, preferred stock dividends, certain integration and restructuring costs, certain stock-based compensation and intersegment eliminations. In addition, we also hold capital in excess of the level of capital we hold in Retirement Services to support our operating strategy.

Financial Measures—Segment adjusted operating income available to common shareholders is an internal measure used by the chief operating decision maker to evaluate and assess the results of our segments.

Adjusted operating revenue is a component of adjusted operating income available to common shareholders and excludes market volatility and adjustments for other non-operating activity. Our adjusted operating revenue equals our total revenue, adjusted to eliminate the impact of the following non-operating adjustments:

•	Change in fair values of derivatives and embedded derivatives – index annuities, net of offsets;

•	Investment gains (losses), net of offsets; and

•	VIE expenses, noncontrolling interests and other adjustments to revenues.

The table below reconciles segment adjusted operating revenues to total revenues presented on the condensed consolidated statements of income (loss):

	Three months ended March 31,
(In millions)	2020				2019
Retirement Services	$	2,469			$	3,306
Corporate and Other	(330		)		32
Non-operating adjustments
Change in fair values of derivatives and embedded derivatives – index annuities, net of offsets	(1,671		)		940
Investment gains (losses), net of offsets	(1,685		)		713
VIE expenses, noncontrolling interest and other adjustments to revenues	(332		)		4
Total revenues	$	(1,549	)		$	4,995

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Adjusted operating income available to common shareholders is an internal measure used to evaluate our financial performance excluding market volatility and expenses related to integration, restructuring, stock compensation and certain other expenses. Our adjusted operating income available to common shareholders equals net income available to Athene Holding Ltd. common shareholders adjusted to eliminate the impact of the following non-operating adjustments:

•	Investment gains (losses), net of offsets;

•	Change in fair values of derivatives and embedded derivatives – index annuities, net of offsets;

•	Integration, restructuring and other non-operating expenses;

•	Stock-based compensation, excluding the long-term incentive plan (LTIP); and

•	Income tax (expense) benefit – non-operating.

The table below reconciles segment adjusted operating income available to common shareholders to net income available to Athene Holding Ltd. common shareholders presented on the condensed consolidated statements of income (loss):

	Three months ended March 31,
(In millions)	2020				2019
Retirement Services	$	204			$	286
Corporate and Other	(312		)		1
Non-operating adjustments
Investment gains (losses), net of offsets	(1,139		)		458
Change in fair values of derivatives and embedded derivatives – index annuities, net of offsets	65				(27		)
Integration, restructuring and other non-operating expenses	(4		)		(1		)
Stock-based compensation, excluding LTIP	(10		)		(3		)
Income tax (expense) benefit – non-operating	131				(6		)
Net income (loss) available to Athene Holding Ltd. common shareholders	$	(1,065	)		$	708

The following represents total assets by segment:

(In millions)	March 31, 2020				December 31, 2019
Retirement Services	$	139,097			$	143,881
Corporate and Other	3,082				2,994
Total assets	$	142,179			$	146,875

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Investment Gains (Losses), Net of Offsets—Consists of the realized gains and losses on the sale of AFS securities, the change in fair value of reinsurance assets, unrealized gains and losses, allowances, and other investment gains and losses. Unrealized, allowances and other investment gains and losses are comprised of the fair value adjustments of trading securities (other than CLOs) and investments held under the fair value option, derivative gains and losses not hedging FIA index credits, and the change in credit loss allowances recognized in operations net of the change in AmerUs Closed Block fair value reserve related to the corresponding change in fair value of investments and the change in unit-linked reserves related to the corresponding trading securities. Investment gains and losses are net of offsets related to DAC, DSI, and VOBA amortization and changes to guaranteed lifetime withdrawal benefit (GLWB) and guaranteed minimum death benefit (GMDB) reserves (together, GLWB and GMDB reserves represent rider reserves) as well as the market value adjustments (MVA) associated with surrenders or terminations of contracts.

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Change in Fair Values of Derivatives and Embedded Derivatives – FIAs, Net of Offsets—Consists of impacts related to the fair value accounting for derivatives hedging the FIA index credits and the related embedded derivative liability fluctuations from period to period. The index reserve is measured at fair value for the current period and all periods beyond the current policyholder index term. However, the FIA hedging derivatives are purchased to hedge only the current index period. Upon policyholder renewal at the end of the period, new FIA hedging derivatives are purchased to align with the new term. The difference in duration between the FIA hedging derivatives and the index credit reserves creates a timing difference in earnings. This timing difference of the FIA hedging derivatives and index credit reserves is included as a non-operating adjustment, net of offsets related to DAC, DSI, and VOBA amortization and changes to rider reserves.

•	Integration, Restructuring, and Other Non-operating Expenses—Consists of restructuring and integration expenses related to acquisitions and block reinsurance costs as well as certain other expenses, which are not predictable or related to our underlying profitability drivers.

•	Stock Compensation Expense—Consists of stock compensation expenses associated with our share incentive plans, excluding our long-term incentive plan, which are not related to our underlying profitability drivers and fluctuate from time to time due to the structure of our plans.

•	Bargain Purchase Gain—Consists of adjustments to net income (loss) available to AHL common shareholders as they are not related to our underlying profitability drivers.

•	Income Tax (Expense) Benefit – Non-operating—Consists of the income tax effect of non-operating adjustments and is computed by applying the appropriate jurisdiction’s tax rate to the non-operating adjustments that are subject to income tax.

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•	our projected net cumulative cash flows, including both new business and target levels of new investments under a “plan scenario” and a “moderately severe scenario” event, are non-negative over a rolling 12-month horizon;

•	we hold enough cash, cash equivalents and other discounted liquid limit assets to cover 12 months of AHL’s and Athene USA’s projected obligations, including debt servicing costs:

▪	minimum of 50% of expenses and 100% of debt servicing to be held in cash and cash equivalents at AHL operating accounts

▪	minimum of 50% of any required AHL – Athene USA inter-company loan commitments to be held in cash and cash equivalents by AHL

▪	dividends from ALRe sufficient to support the ongoing operations of AHL must be available under moderate and substantial stress scenarios

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for purposes of administering this test, liquid limit assets are discounted by 25% and include public corporate bonds rated A- or above, liquid ABS (defined as prime auto, auto floorplan, Tier 1 subprime auto, auto lease, prime credit cards, equipment lease or utility stranded assets); RMBS with weighted average lives less than three years rated A- or above and CMBS with weighted average lives less than three years rated AAA- or above

•	we seek to maintain sufficient capital and surplus at ALRe to meet the following collateral and capital maintenance calls under a substantial stress event, such as the failure of a major financial institution (Lehman event):

▪	collateral calls from modco and third-party reinsurance contracts

▪	AARe capital maintenance calls arising from AARe collateral calls from modco reinsurance contracts; and

▪	U.S. regulated entity capital maintenance calls from nonmodco activity.

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•	fair value of investments;

•	credit loss allowances;

•	future policy benefit reserves;

•	derivatives valuation, including embedded derivatives;

•	deferred acquisition costs, deferred sales inducements and value of business acquired;

•	consolidation of VIEs; and

•	valuation allowances on deferred tax assets.

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•	Collateral market exposure: Abrupt changes to interest rate, equity, and/or currency markets, such as that experienced during the three months ended March 31, 2020, have and may further increase collateral requirements to counterparties and may create liquidity risk.

•	Asset liability mismatch: There are liquidity risks associated with liabilities coming due prior to the matching asset cash flows. Structural maturities mismatch can occur in activities such as securities lending, where the liabilities are effectively overnight open transactions or otherwise short-term in nature and may be used to fund longer-term assets.

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Funding Availability: We have availed ourselves of the financial markets for funding (such as through the issuance of senior notes, securities lending and repurchase arrangements and other forms of borrowing in the capital markets). These sources might not be available during times of stress, or may only be available on unfavorable terms, which can result in a decrease in our profitability and a significant reduction in our financial flexibility.

•	Policyholder cash flows: We face potential liquidity risks from unexpected cash demands due to severe mortality, policyholder withdrawals or lapse events. If such events were to occur, we may face unexpectedly high levels of claim payments to policyholders.

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AmeriHome relies upon a subservicer to perform servicing operations on the loans for which it has mortgage servicing rights. If the subservicer were to experience financial distress or fail to provide adequate or timely services, AmeriHome may have difficulty finding another subservicer to perform servicing operations and may experience a significant decline in its financial performance. Such risks may be heightened in the current economic environment. In addition, mortgage servicers are obligated to advance certain amounts not paid by borrowers, including amounts arising from the forbearance of certain payments as mandated by the CARES Act. AmeriHome may require significant liquidity in order to make these advances and adequate sources of liquidity could be unavailable to AmeriHome to satisfy these obligations.

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As a life insurer, Athora is subject to credit risk with respect to its investment portfolio and mortality risk with respect to its product liabilities, each of which may be exacerbated by unforeseen events, including but not limited to the spread of the COVID-19 pandemic. Further, Athora has significant European operations, which expose it to volatile economic conditions and risks relating to European member countries and withdrawals thereof, such as the UK. In addition, Athora is subject to multiple legal and regulatory regimes that may hinder or prevent it from achieving its business objectives.

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Our investment in the PK AirFinance securitization of loans is subject to risks to the aircraft and airline industries generally, and specifically in connection with the decrease in air travel as a result of the spread of COVID-19, which has likely resulted in a reduction in aircraft valuations and/or delinquent loan payments. While our investment is supported by significant equity subordination provided by borrowers, if borrowers default on their loans, PK AirFinance may pursue foreclosure and re-market the related aircraft or may restructure the defaulted loans. To the extent that the proceeds from any such restructuring or re-marketing were not sufficient to satisfy the corresponding principal balance in the securitization, significant losses on our investment could be recognized, beginning with the equity tranche of the securitization that we hold.

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