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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. See Note 4 – Variable Interest Entities for further information on VIEs.

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 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.

For entities that are consolidated, but not 100% owned, we allocate a portion of the income or loss and corresponding equity to the owners other than us. We include the aggregate of the income or loss and corresponding equity that is not owned by us in noncontrolling interests in the consolidated financial statements.

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.

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.

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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).

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.

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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 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.

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.

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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.

While we are currently required to adopt these updates on January 1, 2022, the Financial Accounting Standards Board has proposed a deferral to the adoption date, which, if codified, would require adoption on January 1, 2023. 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.

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 comprised 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.

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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:

	June 30, 2020
(In millions)	Amortized Cost				Allowance for Credit Losses				Gross Unrealized Gains				Gross Unrealized Losses				Fair Value
AFS securities
U.S. government and agencies	$	71			$	—			$	3			$	—			$	74
U.S. state, municipal and political subdivisions	799				—				146				(2		)		943
Foreign governments	318				—				20				(1		)		337
Corporate	47,251				(31		)		4,608				(629		)		51,199
CLO	8,441				(1		)		19				(507		)		7,952
ABS	4,923				(2		)		110				(258		)		4,773
CMBS	2,402				(10		)		53				(148		)		2,297
RMBS	7,010				(129		)		343				(64		)		7,160
Total AFS securities	71,215				(173		)		5,302				(1,609		)		74,735
AFS securities – related party
Corporate	18				—				2				—				20
CLO	1,297				(2		)		5				(61		)		1,239
ABS	2,858				—				26				(73		)		2,811
Total AFS securities – related party	4,173				(2		)		33				(134		)		4,070
Total AFS securities including related party	$	75,388			$	(175	)		$	5,335			$	(1,743	)		$	78,805

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

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

	June 30, 2020
(In millions)	Amortized Cost				Fair Value
AFS securities
Due in one year or less	$	1,203			$	1,210
Due after one year through five years	9,089				9,467
Due after five years through ten years	11,247				11,958
Due after ten years	26,900				29,918
CLO, ABS, CMBS and RMBS	22,776				22,182
Total AFS securities	71,215				74,735
AFS securities – related party
Due after one year through five years	18				20
CLO and ABS	4,155				4,050
Total AFS securities – related party	4,173				4,070
Total AFS securities including related party	$	75,388			$	78,805

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.

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:

	June 30, 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. government and agencies	$	11			$	—			$	—			$	—			$	11			$	—
U.S. state, municipal and political subdivisions	43				(1		)		10				(1		)		53				(2		)
Foreign governments	76				(1		)		—				—				76				(1		)
Corporate	7,217				(451		)		398				(84		)		7,615				(535		)
CLO	4,063				(189		)		2,782				(305		)		6,845				(494		)
ABS	2,161				(211		)		159				(23		)		2,320				(234		)
CMBS	878				(123		)		30				(10		)		908				(133		)
RMBS	817				(36		)		32				(2		)		849				(38		)
Total AFS securities	15,266				(1,012		)		3,411				(425		)		18,677				(1,437		)
AFS securities – related party
CLO	937				(44		)		172				(17		)		1,109				(61		)
ABS	1,930				(73		)		—				—				1,930				(73		)
Total AFS securities – related party	2,867				(117		)		172				(17		)		3,039				(134		)
Total AFS securities including related party	$	18,133			$	(1,129	)		$	3,583			$	(442	)		$	21,716			$	(1,571	)

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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 June 30, 2020, we held 2,316 AFS securities that were in an unrealized loss position. Of this total, 365 were in an unrealized loss position 12 months or more. As of June 30, 2020, we held 152 related party AFS securities that were in an unrealized loss position. Of this total, 18 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.

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 June 30, 2020
					Additions								Reductions
(In millions)	Beginning balance				Initial credit losses				Initial credit losses on PCD securities				Securities sold during the period				Additions (reductions) to previously impaired securities				Ending Balance
AFS securities
Corporate	$	15			$	16			$	—			$	—			$	—			$	31
CLO	—				1				—				—				—				1
ABS	5				—				—				—				(3		)		2
CMBS	4				5				—				—				1				10
RMBS	54				13				60				(1		)		3				129
Total AFS securities	78				35				60				(1		)		1				173
AFS securities – related party
CLO	—				1				—				—				1				2
Total AFS securities including related party	$	78			$	36			$	60			$	(1	)		$	2			$	175

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	Six months ended June 30, 2020
					Additions								Reductions
(In millions)	Beginning balance				Initial credit losses				Initial credit losses on PCD securities				Securities sold during the period				Additions (reductions) to previously impaired securities				Ending Balance
AFS securities
Corporate	$	—			$	31			$	—			$	—			$	—			$	31
CLO	—				1				—				—				—				1
ABS	—				5				—				—				(3		)		2
CMBS	—				9				—				—				1				10
RMBS	17				48				61				(2		)		5				129
Total AFS securities	17				94				61				(2		)		3				173
AFS securities – related party
CLO	—				1				—				—				1				2
Total AFS securities including related party	$	17			$	95			$	61			$	(2	)		$	4			$	175

    

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

	Three months ended June 30,								Six months ended June 30,
(In millions)	2020				2019				2020				2019
AFS securities	$	790			$	763			$	1,627			$	1,516
Trading securities	42				49				90				91
Equity securities	2				4				6				7
Mortgage loans	175				159				361				310
Investment funds	372				123				94				149
Funds withheld at interest	43				134				84				297
Other	38				45				75				84
Investment revenue	1,462				1,277				2,337				2,454
Investment expenses	(126		)		(95		)		(256		)		(190		)
Net investment income	$	1,336			$	1,182			$	2,081			$	2,264

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

	Three months ended June 30,								Six months ended June 30,
(In millions)	2020				2019				2020				2019
AFS securities
Gross realized gains on investment activity	$	68			$	56			$	232			$	73
Gross realized losses on investment activity	(66		)		(4		)		(200		)		(17		)
Net realized investment gains on AFS securities	2				52				32				56
Net recognized investment gains (losses) on trading securities	191				79				(32		)		135
Net recognized investment gains (losses) on equity securities	30				1				(20		)		19
Derivative gains (losses)	2,330				1,181				(689		)		2,873
Provision for credit losses	(5		)		—				(289		)		—
Other gains (losses)	—				—				(26		)		6
Investment related gains (losses)	$	2,548			$	1,313			$	(1,024	)		$	3,089

Proceeds from sales of AFS securities were $1,778 million and $1,958 million for the three months ended June 30, 2020 and 2019, respectively, and $3,585 million and $3,211 million for the six months ended June 30, 2020 and 2019, respectively.

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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 June 30,								Six months ended June 30,
(In millions)	2020				2019				2020				2019
Trading securities	$	135			$	98			$	62			$	169
Trading securities – related party	66				(13		)		(43		)		(15		)
Equity securities	17				2				(20		)		20
Equity securities – related party	—				(5		)		—				(2		)

Purchased Financial Assets with Credit Deterioration—The following table summarizes our PCD investment purchases with the following amounts at the time of purchase:

	Three months ended June 30, 2020								Six months ended June 30, 2020
(In millions)	Fixed maturity securities				Mortgage loans				Fixed maturity securities				Mortgage loans
Purchase price	$	225			$	—			$	239			$	—
Allowance for credit losses at acquisition	60				—				61				—
Discount (premiums) attributable to other factors	33				—				34				—
Par value	$	318			$	—			$	334			$	—

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

	June 30, 2020
	Remaining Contractual Maturity
(In millions)	Overnight and continuous				Less than 30 days				30-90 days				91 days – 1 year				Greater than 1 year				Total
Payables for repurchase agreements1	$	—			$	—			$	501			$	500			$	598			$	1,599
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				Less than 30 days				30-90 days				91 days – 1 year				Greater than 1 year				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:

	June 30, 2020								December 31, 2019
(In millions)	Amortized Cost				Fair Value				Amortized Cost				Fair Value
AFS securities – Corporate	$	1,595			$	1,829			$	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 June 30, 2020 and December 31, 2019, amounts loaned under reverse repurchase agreements were $0 million and $190 million, respectively, and collateral backing the agreement was $0 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)	June 30, 2020				December 31, 2019
Commercial mortgage loans	$	11,339			$	10,422
Commercial mortgage loans under development	186				93
Total commercial mortgage loans	11,525				10,515
Allowance for credit losses on commercial mortgage loans	(294		)		(10		)
Commercial mortgage loans, net of allowances	11,231				10,505
Residential mortgage loans	4,683				4,455
Allowance for credit losses on residential mortgage loans	(85		)		(1		)
Residential mortgage loans, net of allowances	4,598				4,454
Mortgage loans, net of allowances	$	15,829			$	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:

	June 30, 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	$	3,545			31.6	%		$	2,899			27.6	%
Retail	2,080				18.5	%		2,182				20.8	%
Apartment	2,401				21.4	%		2,142				20.4	%
Hotels	1,131				10.1	%		1,104				10.5	%
Industrial	1,385				12.3	%		1,448				13.8	%
Other commercial	689				6.1	%		730				6.9	%
Total commercial mortgage loans	$	11,231			100.0	%		$	10,505			100.0	%
U.S. Region
East North Central	$	1,202			10.7	%		$	1,036			9.9	%
East South Central	417				3.7	%		428				4.1	%
Middle Atlantic	3,058				27.3	%		2,580				24.6	%
Mountain	508				4.5	%		528				5.0	%
New England	336				3.0	%		340				3.2	%
Pacific	2,585				23.0	%		2,502				23.8	%
South Atlantic	1,988				17.7	%		1,920				18.3	%
West North Central	137				1.2	%		146				1.4	%
West South Central	765				6.8	%		791				7.5	%
Total U.S. Region	10,996				97.9	%		10,271				97.8	%
International Region	235				2.1	%		234				2.2	%
Total commercial mortgage loans	$	11,231			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:

	June 30, 2020			December 31, 2019
U.S. States
California	36.5	%		27.0	%
Florida	11.5	%		12.7	%
Texas	4.4	%		6.2	%
Other1	35.5	%		41.7	%
Total U.S. residential mortgage loan percentage	87.9	%		87.6	%
International – Ireland	11.9	%		12.4	%
International – Other2	0.2	%		—	%
Total residential mortgage loan percentage	100.0	%		100.0	%
1 Represents all other states, with each individual state comprising less than 5% of the portfolio.
2 Represents all other countries, with each individual country 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 June 30, 2020																Six months ended June 30, 2020
(In millions)	Commercial Mortgage				Residential Mortgage				Other Investments				Total				Commercial Mortgage				Residential Mortgage				Other Investments				Total
Beginning balance	$	343			$	81			$	12			$	436			$	10			$	1			$	—			$	11
Adoption of accounting standard	—				—				—				—				167				43				11				221
Provision (reversal) for expected credit losses	(49		)		5				8				(36		)		117				42				9				168
Loans charged-off	—				(1		)		—				(1		)		—				(1		)		—				(1		)
Ending balance	$	294			$	85			$	20			$	399			$	294			$	85			$	20			$	399

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 June 30, 2020, our reasonable and supportable forecast period was one year, after which, we revert to the 30-year or greater historical average over a period of up to one year 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 June 30, 2020, our reasonable and supportable forecast period ranged from one year to two years, after which, we revert to the 30-year or greater historical average over a period of up to eight years.

Other investments – The allowance model for the loans included in other investments and 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. See Note 11 – Related Parties for further information on the related party loans.

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:

	June 30, 2020
(In millions)	2020				2019				2018				2017				2016				Prior				Total
Current (less than 30 days past due)	$	794			$	959			$	1,782			$	467			$	114			$	8			$	4,124
30 to 59 days past due	4				30				85				43				19				—				181
60 to 89 days past due	1				53				122				50				22				—				248
Over 90 days past due	—				22				34				48				24				2				130
Total residential mortgages	$	799			$	1,064			$	2,023			$	608			$	179			$	10			$	4,683

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)	June 30, 2020
Beginning amortized cost of residential mortgage loans in non-accrual status	$	67
Ending amortized cost of residential mortgage loans in non-accrual status	130
Amortized cost of residential mortgage loans in non-accrual status without a related allowance for credit losses	22

During the three months and six months ended June 30, 2020, we recognized $0 million and $1 million, respectively, 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:

	June 30, 2020
(In millions)	2020				2019				2018				2017				2016				Prior				Total
Current (less than 30 days past due)	$	1,266			$	4,553			$	2,860			$	1,049			$	146			$	1,651			$	11,525

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)	June 30, 2020
Beginning amortized cost of commercial mortgage loans in non-accrual status	$	—
Ending amortized cost of commercial mortgage loans in non-accrual status	39
Amortized cost of commercial mortgage loans in non-accrual status without a related allowance for credit losses	—

During the three months and six months ended June 30, 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:    

	June 30, 2020
(In millions)	2020				2019				2018				2017				2016				Prior				Total
Less than 50%	$	274			$	631			$	207			$	147			$	60			$	1,324			$	2,643
50% to 60%	144				1,268				831				332				40				135				2,750
61% to 70%	442				2,023				1,445				475				46				106				4,537
71% to 80%	342				599				287				95				—				47				1,370
Greater than 100%	—				—				—				—				—				39				39
Commercial mortgage loans	$	1,202			$	4,521			$	2,770			$	1,049			$	146			$	1,651			$	11,339

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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:    

	June 30, 2020
(In millions)	2020				2019				2018				2017				2016				Prior				Total
Greater than 1.20x	$	928			$	3,501			$	2,712			$	994			$	146			$	1,564			$	9,845
1.00x – 1.20x	274				1,020				58				32				—				80				1,464
Less than 1.00x	—				—				—				23				—				7				30
Commercial mortgage loans	$	1,202			$	4,521			$	2,770			$	1,049			$	146			$	1,651			$	11,339

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:

	June 30, 2020							December 31, 2019
(In millions, except for percentages)	Carrying value				Percent of total			Carrying value				Percent of total
Investment funds
Real estate	$	274			40.2	%		$	277			36.9	%
Credit funds	115				16.9	%		153				20.4	%
Private equity	232				34.0	%		236				31.5	%
Real assets	61				8.9	%		83				11.1	%
Natural resources	—				—	%		1				0.1	%
Total investment funds	682				100.0	%		750				100.0	%
Investment funds – related parties
Differentiated investments
MidCap FinCo Designated Activity Company (MidCap)1	517				9.8	%		547				15.4	%
AmeriHome Mortgage Company, LLC (AmeriHome)1	594				11.3	%		487				13.7	%
Catalina Holdings Ltd. (Catalina)	295				5.6	%		271				7.6	%
Athora Holding Ltd. (Athora)1	497				9.4	%		132				3.7	%
Venerable Holdings, Inc. (Venerable)1	118				2.2	%		99				2.8	%
Other	246				4.7	%		222				6.3	%
Total differentiated investments	2,267				43.0	%		1,758				49.5	%
Real estate	709				13.4	%		853				24.0	%
Credit funds	363				6.9	%		370				10.4	%
Private equity	255				4.8	%		105				3.0	%
Real assets	233				4.4	%		182				5.1	%
Natural resources	95				1.8	%		163				4.6	%
Public equities	43				0.8	%		119				3.4	%
Investment in Apollo1	1,313				24.9	%		—				—	%
Total investment funds – related parties	5,278				100.0	%		3,550				100.0	%
Total investment funds including related party	$	5,960						$	4,300
1 See further discussion on MidCap, AmeriHome, Athora, Venerable and our investment in Apollo in Note 11 – 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:

	June 30, 2020								December 31, 2019
(In millions)	Carrying Value				Maximum Loss Exposure				Carrying Value				Maximum Loss Exposure
Investment funds	$	682			$	1,165			$	750			$	1,265
Investment in related parties – investment funds	5,278				7,316				3,550				5,955
Investment in fixed maturity securities	22,589				23,183				22,694				22,170
Investment in related parties – fixed maturity securities	4,922				5,393				4,570				4,878
Investment in related parties – equity securities	52				52				58				58
Total non-consolidated investments	$	33,523			$	37,109			$	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 5 – Fair Value for information about the fair value hierarchy for derivatives.

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

	June 30, 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	3,255			$	414			$	38			3,158			$	113			$	56
Foreign currency forwards	1,055			4				1				717			1				9
Foreign currency forwards on net investments	132			1				—				139			—				2
Total derivatives designated as hedges				419				39							114				67
Derivatives not designated as hedges
Equity options	52,123			1,836				14				49,549			2,746				5
Futures	19			80				—				8			10				1
Total return swaps	516			7				2				106			6				—
Foreign currency swaps	511			2				2				35			2				1
Interest rate swaps	887			14				44				776			3				4
Credit default swaps	10			—				5				10			—				3
Foreign currency forwards	2,964			21				12				1,924			7				16
Embedded derivatives
Funds withheld including related party				1,323				46							1,395				31
Interest sensitive contract liabilities				—				11,140							—				10,942
Total derivatives not designated as hedges				3,283				11,265							4,169				11,003
Total derivatives				$	3,702			$	11,304						$	4,283			$	11,070

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 June 30, 2020 and 2019, we had foreign currency swap losses of $83 million and gains of $55 million, respectively, recorded in AOCI. During the six months ended June 30, 2020 and 2019, we had foreign currency swap gains of $318 million and $47 million, respectively, recorded in AOCI. There were no amounts reclassified to income and no amounts deemed ineffective for the six months ended June 30, 2020 and 2019. As of June 30, 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 June 30, 2020 and December 31, 2019, the carrying amount of the hedged AFS securities was $1,065 million and $456 million, respectively, and the cumulative amount of fair value hedging adjustments included in the hedged AFS securities included gains of $10 million and $1 million, respectively.

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The following is a summary of the gains (losses) related to the derivatives and related hedged items in fair value hedge relationships, which are included in investment related gains (losses) on the condensed consolidated statements of income (loss):

	Three months ended June 30,								Six months ended June 30,
(In millions)	2020				2019				2020				2019
Derivatives	$	(20	)		$	(3	)		$	(8	)		$	—
Related AFS securities	17				(4		)		9				(1		)
Total gains (losses) on derivatives and related hedged items	$	(3	)		$	(7	)		$	1			$	(1	)

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 and six months ended June 30, 2020, these derivatives had losses of $11 million and gains of $2 million, respectively, which are included in foreign currency translation and other adjustments on the condensed consolidated statements of comprehensive income (loss). As of June 30, 2020 and December 31, 2019, the cumulative foreign currency translation recorded in AOCI related to these net investment hedges were gains of $1 million and losses of $2 million, respectively. During the three and six months ended June 30, 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 June 30,								Six months ended June 30,
(In millions)	2020				2019				2020				2019
Equity options	$	672			$	439			$	(909	)		$	1,288
Futures	(3		)		(3		)		13				(14		)
Swaps	55				11				(20		)		29
Foreign currency forwards	(23		)		(1		)		44				5
Embedded derivatives on funds withheld	1,629				735				183				1,565
Amounts recognized in investment related gains (losses)	2,330				1,181				(689		)		2,873
Embedded derivatives in indexed annuity products1	(1,534		)		(638		)		(357		)		(1,655		)
Total gains (losses) on derivatives not designated as hedges	$	796			$	543			$	(1,046	)		$	1,218
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
June 30, 2020
Derivative assets		$	2,379			$	(32	)		$	(2,117	)		$	230			$	(93	)		$	137
Derivative liabilities		(118		)		32				9				(77		)		—				(77		)
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 June 30, 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.

4. Variable Interest Entities

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 11 – 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).

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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 us. We did not recognize a gain or loss upon deconsolidation, as the deconsolidated VIEs accounted for their assets and liabilities at fair value. The investments remaining from the deconsolidated VIEs are included at net asset value (NAV) in related party investment funds on the condensed consolidated balance sheets after March 31, 2020.

Commercial Mortgage Loan Securitization Trust—During the second quarter of 2020, we formed Hamlet Securitization Trust 2020-CRE1 (Hamlet) to securitize a portion of our commercial mortgage loan portfolio as CMBS securities, which are held by AHL subsidiaries and third-party cedant portfolios. Securitization of these commercial mortgage loans allows us to retain the full economics of these assets while being able to pledge these assets as collateral to the Federal Home Loan Bank (FHLB) under the funding agreement program. As substantially all of the activities and economics of Hamlet are conducted on our behalf, we are the primary beneficiary and consolidate Hamlet and the assets are included in mortgage loans on the condensed consolidated balance sheets. Additionally, as Hamlet is in the form of a trust, the commercial mortgage loan assets are included in the pledged assets and funds in trust table in Note 12 – Commitments and Contingencies.

ALR Aircraft Investment Ireland Limited (ALR)—ALR was formed to invest in a joint venture that provides airplane lease financing to a major commercial airline. We were the only investor in the profit participating notes and, as substantially all of the activities of ALR were conducted on our behalf, we were the primary beneficiary and consolidated ALR. During the second quarter of 2020, we received final payment on the profit participating notes and no longer consolidate ALR.

5. 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:

	June 30, 2020
(In millions)	Total				NAV				Level 1				Level 2				Level 3
Assets
AFS securities
U.S. government and agencies	$	74			$	—			$	74			$	—			$	—
U.S. state, municipal and political subdivisions	943				—				—				903				40
Foreign governments	337				—				—				337				—
Corporate	51,199				—				—				50,325				874
CLO	7,952				—				—				7,792				160
ABS	4,773				—				—				3,905				868
CMBS	2,297				—				—				2,248				49
RMBS	7,160				—				—				7,144				16
Total AFS securities	74,735				—				74				72,654				2,007
Trading securities
U.S. government and agencies	11				—				8				3				—
U.S. state, municipal and political subdivisions	114				—				—				114				—
Corporate	1,543				—				—				1,537				6
CLO	3				—				—				—				3
ABS	81				—				—				81				—
CMBS	51				—				—				51				—
RMBS	272				—				—				217				55
Total trading securities	2,075				—				8				2,003				64
Equity securities	237				—				28				203				6
Mortgage loans	25				—				—				—				25
Investment funds	146				129				—				—				17
Funds withheld at interest – embedded derivative	763				—				—				—				763
Derivative assets	2,379				—				81				2,298				—
Short-term investments	364				—				43				207				114
Other investments	109				—				—				109				—
Cash and cash equivalents	6,240				—				6,240				—				—
Restricted cash	1,281				—				1,281				—				—
Investments in related parties
AFS securities
Corporate	20				—				—				20				—
CLO	1,239				—				—				1,239				—
ABS	2,811				—				—				750				2,061
Total AFS securities – related party	4,070				—				—				2,009				2,061
Trading securities
CLO	48				—				—				3				45
ABS	824				—				—				—				824
Total trading securities – related party	872				—				—				3				869
Equity securities	52				—				—				—				52
Investment funds	1,885				75				—				—				1,810
Funds withheld at interest – embedded derivative	560				—				—				—				560
Reinsurance recoverable	2,099				—				—				—				2,099
Total assets measured at fair value	$	97,892			$	204			$	7,755			$	79,486			$	10,447
																	(Continued)

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	June 30, 2020
(In millions)	Total				NAV				Level 1				Level 2				Level 3
Liabilities
Interest sensitive contract liabilities
Embedded derivative	$	11,140			$	—			$	—			$	—			$	11,140
Universal life benefits	1,323				—				—				—				1,323
Future policy benefits
AmerUs Life Insurance Company (AmerUs) Closed Block	1,573				—				—				—				1,573
Indianapolis Life Insurance Company (ILICO) Closed Block and life benefits	761				—				—				—				761
Derivative liabilities	118				—				—				113				5
Funds withheld liability – embedded derivative	46				—				—				46				—
Total liabilities measured at fair value	$	14,961			$	—			$	—			$	159			$	14,802
																	(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
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 June 30,								Six months ended June 30,
(In millions)	2020				2019				2020				2019
Trading securities	$	191			$	79			$	(32	)		$	135
Mortgage loans	—				1				—				1
Investment funds	466				4				166				—
Future policy benefits	(92		)		(52		)		(27		)		(92		)
Total gains (losses)	$	565			$	32			$	107			$	44

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)	June 30, 2020				December 31, 2019
Unpaid principal balance	$	23			$	25
Mark to fair value	2				2
Fair value	$	25			$	27

There were no fair value option mortgage loans 90 days or more past due as of June 30, 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 June 30, 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 earnings1				Total gains (losses) included in OCI1
Assets
AFS securities
U.S. state, municipal and political subdivisions	$	37			$	—			$	3			$	—			$	—			$	40			$	—			$	3
Corporate	1,233				—				41				(32		)		(368		)		874				—				41
CLO	122				—				2				39				(3		)		160				—				2
ABS	917				1				9				(39		)		(20		)		868				—				10
CMBS	45				(5		)		(1		)		(4		)		14				49				—				(1		)
RMBS	42				—				2				1				(29		)		16				—				—
Trading securities
Corporate	32				4				—				—				(30		)		6				4				—
CLO	3				—				—				—				—				3				—				—
ABS	14				—				—				(14		)		—				—				—				—
RMBS	70				2				—				—				(17		)		55				7				—
Equity securities	7				(1		)		—				—				—				6				(1		)		—
Mortgage loans	26				—				—				(1)				—				25				(1		)		—
Investment funds	21				(4		)		—				—				—				17				(4		)		—
Funds withheld at interest – embedded derivative	(374		)		1,137				—				—				—				763				—				—
Short-term investments	67				—				(1		)		53				(5		)		114				—				—
Investments in related parties
AFS securities, ABS	1,887				4				169				1				—				2,061				—				169
Trading securities
CLO	32				5				—				—				8				45				4				—
ABS	676				74				—				74				—				824				74				—
Equity securities	49				4				—				(1		)		—				52				4				—
Investment funds	979				470				—				361				—				1,810				470				—
Funds withheld at interest – embedded derivative	(15		)		575				—				—				—				560				—				—
Reinsurance recoverable	2,115				(16		)		—				—				—				2,099				—				—
Total Level 3 assets	$	7,985			$	2,250			$	224			$	438			$	(450	)		$	10,447			$	557			$	224
Liabilities
Interest sensitive contract liabilities
Embedded derivative	$	(9,089	)		$	(1,534	)		$	—			$	(517	)		$	—			$	(11,140	)		$	—			$	—
Universal life benefits	(1,322		)		(1		)		—				—				—				(1,323		)		—				—
Future policy benefits
AmerUs Closed Block	(1,481		)		(92		)		—				—				—				(1,573		)		—				—
ILICO Closed Block and life benefits	(778		)		17				—				—				—				(761		)		—				—
Derivative liabilities	(7		)		2				—				—				—				(5		)		2				—
Total Level 3 liabilities	$	(12,677	)		$	(1,608	)		$	—			$	(517	)		$	—			$	(14,802	)		$	2			$	—
1 Related to instruments held at end of period.

---

	Three months ended June 30, 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
Assets
AFS securities
U.S. state, municipal and political subdivisions	$	—			$	—			$	—			$	40			$	—			$	40			$	—
Corporate	1,035				3				12				32				(261		)		821				—
CLO	110				—				—				122				(32		)		200				—
ABS	1,614				2				19				120				(359		)		1,396				—
CMBS	174				—				1				39				(8		)		206				—
RMBS	57				—				3				—				(60		)		—				—
Trading securities
Corporate	10				1				—				—				(5		)		6				1
CLO	8				(1		)		—				—				—				7				6
ABS	6				—				—				—				—				6				—
RMBS	86				(2		)		—				—				(38		)		46				2
Equity securities	3				—				—				—				—				3				1
Mortgage loans	32				1				—				(1		)		—				32				—
Investment funds	25				2				—				(2		)		—				25				2
Funds withheld at interest – embedded derivative	446				258				—				—				—				704				—
Short-term investments	—				—				—				45				—				45				—
Investments in related parties
AFS securities
CLO	—				—				—				37				—				37				—
ABS	497				—				13				(8		)		(103		)		399				—
Trading securities
CLO	89				(2		)		—				(47		)		55				95				(1		)
ABS	138				(7		)		—				(17		)		104				218				(14		)
Equity securities	307				7				—				36				—				350				(5		)
Investment funds	138				3				—				—				—				141				2
Funds withheld at interest – embedded derivative	214				287				—				—				—				501				—
Reinsurance recoverable	1,737				97				—				—				—				1,834				—
Total Level 3 assets	$	6,726			$	649			$	48			$	396			$	(707	)		$	7,112			$	(6	)
Liabilities
Interest sensitive contract liabilities
Embedded derivative	$	(9,106	)		$	(638	)		$	—			$	(161	)		$	—			$	(9,905	)		$	—
Universal life benefits	(979		)		(72		)		—				—				—				(1,051		)		—
Future policy benefits
AmerUs Closed Block	(1,483		)		(52		)		—				—				—				(1,535		)		—
ILICO Closed Block and life benefits	(743		)		(26		)		—				—				—				(769		)		—
Derivative liabilities	(4		)		—				—				—				—				(4		)		—
Total Level 3 liabilities	$	(12,315	)		$	(788	)		$	—			$	(161	)		$	—			$	(13,264	)		$	—
1 Related to instruments held at end of period.

---

	Six months ended June 30, 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			$	—			$	—			$	—			$	—			$	40			$	—			$	—
Corporate	725				(4		)		(8		)		(10		)		171				874				—				(8		)
CLO	121				—				(4		)		69				(26		)		160				—				(4		)
ABS	1,374				23				(102		)		(246		)		(181		)		868				—				(101		)
CMBS	46				(4		)		(7		)		(4		)		18				49				—				(6		)
RMBS	—				—				—				—				16				16				—				—
Trading securities
Corporate	—				—				—				—				6				6				—				—
CLO	6				(3		)		—				—				—				3				(1		)		—
ABS	16				—				—				(16		)		—				—				—				—
RMBS	52				(1		)		—				—				4				55				5				—
Equity securities	3				3				—				—				—				6				3				—
Mortgage loans	27				—				—				(2		)		—				25				—				—
Investment funds	22				(5		)		—				—				—				17				(5		)		—
Funds withheld at interest – embedded derivative	801				(38		)		—				—				—				763				—				—
Short-term investments	41				—				(1		)		74				—				114				—				—
Investments in related parties
AFS securities, ABS	2,324				1				(53		)		(49		)		(162		)		2,061				—				(53		)
Trading securities
CLO	38				(17		)		—				14				10				45				(23		)		—
ABS	711				(27		)		—				140				—				824				(27		)		—
Equity securities	64				(6		)		—				—				(6		)		52				(6		)		—
Investment funds	132				170				—				1,508				—				1,810				170				—
Funds withheld at interest – embedded derivative	594				(34		)		—				—				—				560				—				—
Reinsurance recoverable	1,821				278				—				—				—				2,099				—				—
Total Level 3 assets	$	8,958			$	336			$	(175	)		$	1,478			$	(150	)		$	10,447			$	116			$	(172	)
Liabilities
Interest sensitive contract liabilities
Embedded derivative	$	(10,942	)		$	(357	)		$	—			$	159			$	—			$	(11,140	)		$	—			$	—
Universal life benefits	(1,050		)		(273		)		—				—				—				(1,323		)		—				—
Future policy benefits
AmerUs Closed Block	(1,546		)		(27		)		—				—				—				(1,573		)		—				—
ILICO Closed Block and life benefits	(755		)		(6		)		—				—				—				(761		)		—				—
Derivative liabilities	(3		)		(2		)		—				—				—				(5		)		(2		)		—
Total Level 3 liabilities	$	(14,296	)		$	(665	)		$	—			$	159			$	—			$	(14,802	)		$	(2	)		$	—
1 Related to instruments held at end of period.

---

	Six months ended June 30, 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
Assets
AFS securities
U.S. state, municipal and political subdivisions	$	—			$	—			$	—			$	40			$	—			$	40			$	—
Corporate	898				1				10				47				(135		)		821				—
CLO	107				—				3				121				(31		)		200				—
ABS	1,615				4				36				129				(388		)		1,396				—
CMBS	187				1				4				32				(18		)		206				—
RMBS	56				—				3				1				(60		)		—				—
Trading securities
Corporate	—				—				—				—				6				6				—
CLO	1				(1		)		—				—				7				7				6
ABS	—				—				—				6				—				6				—
RMBS	134				(5		)		—				—				(83		)		46				5
Equity securities	3				—				—				—				—				3				—
Mortgage loans	32				1				—				(1		)		—				32				1
Investment funds	29				(1		)		—				(3		)		—				25				(2		)
Funds withheld at interest – embedded derivative	57				647				—				—				—				704				—
Short-term investments	—				—				—				45				—				45				—
Investments in related parties
AFS securities
CLO	—				—				—				37				—				37				—
ABS	328				—				13				161				(103		)		399				—
Trading securities
CLO	113				(3		)		—				(48		)		33				95				2
ABS	149				(18		)		—				(17		)		104				218				(17		)
Equity securities	133				9				—				208				—				350				(2		)
Investment funds	120				2				—				19				—				141				2
Funds withheld at interest – embedded derivative	(110		)		611				—				—				—				501				—
Reinsurance recoverable	1,676				158				—				—				—				1,834				—
Total Level 3 assets	$	5,528			$	1,406			$	69			$	777			$	(668	)		$	7,112			$	(5	)
Liabilities
Interest sensitive contract liabilities
Embedded derivative	$	(7,969	)		$	(1,655	)		$	—			$	(281	)		$	—			$	(9,905	)		$	—
Universal life benefits	(932		)		(119		)		—				—				—				(1,051		)		—
Future policy benefits
AmerUs Closed Block	(1,443		)		(92		)		—				—				—				(1,535		)		—
ILICO Closed Block and life benefits	(730		)		(39		)		—				—				—				(769		)		—
Derivative liabilities	(4		)		—				—				—				—				(4		)		—
Total Level 3 liabilities	$	(11,078	)		$	(1,905	)		$	—			$	(281	)		$	—			$	(13,264</