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Business

Voya Retirement Insurance and Annuity Company ("VRIAC") is a stock life insurance company domiciled in the State of Connecticut. VRIAC and its wholly owned subsidiary (collectively, the "Company") provide financial products and services in the United States. VRIAC is authorized to conduct its insurance business in all states and in the District of Columbia and in Guam, Puerto Rico and the Virgin Islands.

Prior to May 2013, Voya Financial, Inc. ("Voya Financial"), together with its subsidiaries, including the Company was an indirect, wholly owned subsidiary of ING Groep N.V. ("ING Group" or "ING"), a global financial services holding company based in The Netherlands. In May 2013, Voya Financial, Inc., completed its initial public offering of common stock, including the issuance and sale of common stock by Voya Financial, Inc. and the sale of shares of common stock owned indirectly by ING Group. Between October 2013 and March 2015, ING Group completed the sale of its remaining shares of common stock of Voya Financial, Inc. in a series of registered public offerings.

VRIAC is a direct, wholly owned subsidiary of Voya Holdings Inc. ("Parent"), which is a direct, wholly owned subsidiary of Voya Financial, Inc.

Effective December 31, 2019, VRIAC’s sole shareholder, Voya Holdings, Inc., transferred ownership of Voya Institutional Plan Services, LLC (“VIPS”) and Voya Retirement Advisors, LLC (“VRA”) to VRIAC for no cash consideration. VIPS and VRA provide retirement recordkeeping and investment advisory services, respectively, and the transfer was made to more closely align recordkeeping and related activities of VRIAC’s retirement business. It also had the effect of reducing VRIAC's tax liability. This transaction was accounted for under the accounting guidance for transactions under common control which requires that financial statements reflect the transferred business for all prior periods as if the transfer occurred as of the beginning of the first period presented. As such, the Consolidated Financial Statements for the prior periods presented have been restated to reflect the transfer of VIPS and VRA to VRIAC. The related impact to the previously reported Net income (loss) for the three months ended March 31, 2019 was a decrease in net income of $20. In addition to these non-insurance subsidiaries, VRIAC also has the wholly-owned non-insurance subsidiary, Voya Financial Partners, LLC ("VFP").

On December 18, 2019, VRIAC’s ultimate parent, Voya Financial, entered into a Master Transaction Agreement (the “Resolution MTA”) with Resolution Life U.S. Holdings Inc. (“Resolution Life US”), pursuant to which Resolution Life US will acquire Security Life of Denver Insurance Company (“SLD”), Security Life of Denver International Limited (“SLDI”) and Roaring River II, Inc. ("RRII") including several subsidiaries of SLD. The transaction is expected to close by September 30, 2020 and is subject to conditions specified in the Resolution MTA, including the receipt of required regulatory approvals.

Concurrently with the sale, SLD will enter into reinsurance agreements with ReliaStar Life Insurance Company ("RLI"), ReliaStar Life Insurance Company of New York (“RLNY”), and VRIAC, each of which is a direct or indirect wholly owned subsidiary of Voya Financial. Pursuant to these agreements, RLI and VRIAC will reinsure to SLD a 100% quota share, and RLNY will reinsure to SLD a 75% quota share, of their respective individual life insurance and annuities businesses. RLI, RLNY, and VRIAC will remain subsidiaries of Voya Financial. Voya Financial currently expects that these reinsurance transactions will be carried out on a coinsurance basis, with SLD’s reinsurance obligations collateralized in one of three ways: (1) invested assets placed in a comfort trust; (2) funds withheld basis with invested assets remaining on the respective subsidiaries of the Company; or (3) some combination of these two collateralization structures. The reinsurance agreements along with the sale of the legal entities noted above (referred to as the "Individual Life Transaction") will result in the disposition of substantially all of Voya Financial's life insurance and legacy non-retirement annuity businesses and related assets. Pursuant to the Individual Life Transaction, VRIAC's reserves related to legacy non-retirement annuity business as well as pension risk transfer products will be ceded to SLD and related assets will be transferred.

On June 1, 2018, VRIAC's ultimate parent, Voya Financial, consummated a series of transactions (collectively, the "2018 Transaction'') pursuant to a Master Transaction Agreement dated December 20, 2017 (the "MTA") with VA Capital Company LLC ("VA Capital") and Athene Holding Ltd. ("Athene"). As part of the 2018 Transaction, VA Capital's wholly owned subsidiary Venerable Holdings Inc. ("Venerable") acquired certain of Voya Financial's assets, including all of the shares of capital stock of

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Voya Insurance and Annuity Company ("VIAC"), the Company's Iowa-domiciled insurance affiliate, as well as the membership interests of DSL, the Company's former broker-dealer subsidiary. Following the closing of the 2018 Transaction, VRIAC acquired a 9.99% equity interest in VA Capital.

The Company offers qualified and nonqualified annuity contracts that include a variety of funding and payout options for individuals and employer-sponsored retirement plans qualified under Internal Revenue Code Sections 401, 403, 408, 457 and 501, as well as nonqualified deferred compensation plans and related services. The Company's products are offered primarily to public and private school systems, higher education institutions, hospitals and healthcare facilities, not-for-profit organizations, state and local governments, small to mid-sized corporations and individuals. The Company also provides stable value investment options, including separate account guaranteed investment contracts (e.g., GICs) and synthetic GICs, to institutional clients. Pension risk transfer group annuity solutions were previously offered to institutional plan sponsors who needed to transfer their defined benefit plan obligations to the Company. The Company discontinued sales of these solutions in late 2016 to better align business activities to the Company's priorities. This business will be transferred as part of the Individual Life Transaction described above. The Company's products are generally distributed through independent brokers and advisors, third-party administrators, consultants, and representatives associated with Voya Financial's broker-dealer and investment advisor, Voya Financial Advisors, Inc. ("VFA").

Products offered by the Company include deferred and immediate (i.e., payout) annuity contracts. The Company's products also include programs offered to qualified plans and nonqualified deferred compensation plans that package administrative and record-keeping services, participant education, and retirement readiness planning tools along with a variety of investment options, including proprietary and non-proprietary mutual funds and variable and fixed investment options. In addition, the Company offers wrapper agreements entered into with retirement plans, which contain certain benefit responsive guarantees (i.e., guarantees of principal and previously accrued interest for benefits paid under the terms of the plan) with respect to portfolios of plan-owned assets not invested with the Company. Stable value products are also provided to institutional plan sponsors where the Company may or may not be providing other employer sponsored products and services.

The Company has one operating segment.

Basis of Presentation

The accompanying Condensed Consolidated Financial Statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") and are unaudited. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. The inputs into the Company's estimates and assumptions consider the economic implications of COVID-19 on the Company's critical and significant accounting estimates. Those estimates are inherently subject to change and actual results could differ from those estimates, and the differences may be material to the Condensed Consolidated Financial Statements.

The Condensed Consolidated Financial Statements include the accounts of VRIAC and its wholly owned subsidiaries VFP, VIPS and VRA. Intercompany transactions and balances have been eliminated.

The accompanying Condensed Consolidated Financial Statements reflect adjustments (including normal, recurring adjustments) necessary to present fairly the financial position of the Company as of March 31, 2020, its results of operations, comprehensive income and changes in shareholder's equity for the three months ended March 31, 2020 and 2019, and its statements of cash flows for the three months ended March 31, 2020 and 2019, in conformity with U.S. GAAP. Interim results are not necessarily indicative of full year performance.

The December 31, 2019 Consolidated Balance Sheet is from the audited Consolidated Financial Statements included in the Company's Annual Report on Form 10-K, filed with the SEC. Therefore, these unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and related notes included in the Company's Annual Report on Form 10-K.

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Subsequent Events

The Company has evaluated subsequent events through the issuance date of the Condensed Consolidated financial statements including the implications of the COVID-19 pandemic. The Company is not aware of any material matters that could impact the Company's financial position, results of operations or cash flows or for which a disclosure is required.

Significant Accounting Policies

Effective January 1, 2020, the Company adopted Accounting Standards Update ("ASU") 2016-13 "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”, as amended" ("ASU 2016-13"). The Company adopted ASU 2016-13 using the modified retrospective method for financial assets measured at amortized cost and the prospective method for available-for-sale debt securities as required by ASU 2016-13. As a result, the Company had changes to the following significant accounting policies:

•	Investments: Mortgage Loans on Real Estate,

•	Impairments, and

•	Reinsurance.

Comparative information has not been adjusted and continues to be reported under previously applicable U.S. GAAP. The Company’s accounting policies amended by the adoption of ASU 2016-13 are as follows:

Investments

Mortgage Loans on Real Estate: The Company's mortgage loans on real estate are all commercial mortgage loans, which are reported at amortized cost, net of the allowance for credit losses. Amortized cost is the principal balance outstanding, net of deferred loan fees and costs. Accrued interest receivable is reported in Accrued investment income on the Condensed Consolidated Balance Sheets.

Mortgage loans are evaluated by the Company's investment professionals, including an appraisal of loan-specific performance, property characteristics and market trends. Loan performance is continuously monitored on a loan-specific basis throughout the year. The Company's review includes submitted appraisals, operating statements, rent revenues and annual inspection reports, among other items. This review evaluates whether the properties are performing at a consistent and acceptable level to secure the debt.

Management estimates the credit loss allowance balance using a factor-based method of probability of default and loss given default which incorporates relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Included in the factor-based method are the consideration of debt type, capital market factors, and market vacancy rates, and loan-specific risk characteristics such as debt service coverage ratios (“DSCR”), loan-to-value (“LTV”), collateral size, seniority of the loan, segmentation, and property types.

The allowance for credit losses is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. The change in the allowance for credit losses is recorded in Other net realized capital gains (losses) in the Condensed Consolidated Statements of Operations. Loans are written off against the allowance when management believes the uncollectability of a loan balance is confirmed. Expected recoveries do not exceed the aggregate of amounts previously written-off and expected to be written-off.

Mortgages are rated for the purpose of quantifying the level of risk. Those loans with higher risk are placed on a watch list and are closely monitored for collateral deficiency or other credit events that may lead to a potential loss of principal or interest. The Company defines delinquent mortgage loans consistent with industry practice as 60 days past due.

Commercial mortgage loans are placed on non-accrual status when 90 days in arrears if the Company has concerns regarding the collectability of future payments, or if a loan has matured without being paid off or extended. Factors considered may include conversations with the borrower, loss of major tenant, bankruptcy of borrower or major tenant, decreased property cash flow, number of days past due, or various other circumstances. Based on an assessment as to the collectability of the principal, a determination is made either to apply against the book value or apply according to the contractual terms of the loan. Funds recovered

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in excess of book value would then be applied to recover expenses, credit loss allowance, and then interest. Accrual of interest resumes after factors resulting in doubts about collectability have improved.

For those mortgages that are determined to require foreclosure, expected credit losses are based on the fair value of the underlying collateral, net of estimated costs to obtain and sell at the point of foreclosure. Property obtained from foreclosed mortgage loans is recorded in Other investments on the Condensed Consolidated Balance Sheets.

Impairments

The Company evaluates its available-for-sale investments quarterly to determine whether a decline in fair value below the amortized cost basis has resulted from credit loss or other factors. This evaluation process entails considerable judgment and estimation. Factors considered in this analysis include, but are not limited to, the extent to which the fair value has been less than amortized cost, the issuer's financial condition and near-term prospects, future economic conditions and market forecasts, interest rate changes and changes in ratings of the security. A severe unrealized loss position on a fixed maturity may not have any impact on: (a) the ability of the issuer to service all scheduled interest and principal payments and (b) the evaluation of recoverability of all contractual cash flows or the ability to recover an amount at least equal to its amortized cost based on the present value of the expected future cash flows to be collected.

When assessing the Company's intent to sell a security, or if it is more likely than not it will be required to sell a security before recovery of its amortized cost basis, management evaluates facts and circumstances such as, but not limited to, decisions to rebalance the investment portfolio and sales of investments to meet cash flow or capital needs. When the Company has determined it has the intent to sell, or if it is more likely than not that the Company will be required to sell a security before recovery of its amortized cost basis, and the fair value has declined below amortized cost ("intent impairment"), the individual security is written down from amortized cost to fair value, and a corresponding charge is recorded in Net realized capital gains (losses) in the Condensed Consolidated Statements of Operations as Impairments.

For available-for-sale securities that do not meet the intent impairment criteria but the Company has determined that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss allowance is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in Other comprehensive income (loss).

The Company uses the following methodology and significant inputs in determining whether a credit loss exists:

•

When determining collectability and the period over which the value is expected to recover for U.S. and foreign corporate securities, foreign government securities and state and political subdivision securities, the Company applies the same considerations utilized in its overall impairment evaluation process, which incorporates information regarding the specific security, the industry and geographic area in which the issuer operates and overall macroeconomic conditions. Projected future cash flows are estimated using assumptions derived from the Company's best estimates of likely scenario-based outcomes, after giving consideration to a variety of variables that includes, but is not limited to: general payment terms of the security; the likelihood that the issuer can service the scheduled interest and principal payments; the quality and amount of any credit enhancements; the security's position within the capital structure of the issuer; possible corporate restructurings or asset sales by the issuer; and changes to the rating of the security or the issuer by rating agencies.

•

Additional considerations are made when assessing the unique features that apply to certain structured securities, such as subprime, Alt-A, non-agency RMBS, CMBS and ABS. These additional factors for structured securities include, but are not limited to: the quality of underlying collateral; expected prepayment speeds; loan-to-value ratios; debt service coverage ratios; current and forecasted loss severity; consideration of the payment terms of the underlying assets backing a particular security; and the payment priority within the tranche structure of the security.

•

When determining the amount of the credit loss for U.S. and foreign corporate securities, foreign government securities and state and political subdivision securities, the Company considers the estimated fair value as the recovery value when available information does not indicate that another value is more appropriate. When information is identified that indicates a recovery value other than estimated fair value, the Company considers in the determination of recovery value the same considerations utilized in its overall impairment evaluation process, which incorporates available information and the Company's best estimate of scenario-based outcomes regarding the specific security and issuer;

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possible corporate restructurings or asset sales by the issuer; the quality and amount of any credit enhancements; the security's position within the capital structure of the issuer; fundamentals of the industry and geographic area in which the security issuer operates; and the overall macroeconomic conditions.

•	The Company performs a discounted cash flow analysis comparing the current amortized cost of a security to the present value of future cash flows expected to be received, including estimated defaults and prepayments. The discount rate is generally the effective interest rate of the fixed maturity prior to impairment.

Changes in the allowance for credit losses are recorded in Net realized capital gains (losses) as Impairments in the Condensed Consolidated Statements of Operations. Losses are charged against the allowance when the Company believes the uncollectability of an available-for-sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

Accrued interest receivable on available-for-sale securities is excluded from the estimate of credit losses.

Reinsurance

The Company utilizes reinsurance agreements in most aspects of its insurance business to reduce its exposure to large losses. Such reinsurance permits recovery of a portion of losses from reinsurers, although it does not discharge the primary liability of the Company as direct insurer of the risks reinsured.

Accounting for reinsurance requires use of assumptions and estimates, particularly related to the future performance of the underlying business and the potential impact of counterparty credit risks. The Company periodically reviews actual and anticipated experience compared to the assumptions used to establish assets and liabilities relating to ceded and assumed reinsurance. The Company also evaluates the financial strength of potential reinsurers and continually monitors the financial condition of reinsurers.

Reinsurance recoverable balances are reported net of the allowance for credit losses in the Company’s Condensed Consolidated Balance Sheets. Management estimates the credit loss allowance balance using a factor-based method of probability of default and loss given default which incorporates relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Included in the factor-based method are the consideration of capital market factors, counterparty financial information and ratings, and reinsurance agreement-specific risk characteristics such as collateral type, collateral size, and covenant strength.

The allowance for credit losses is a valuation account that is deducted from the reinsurance recoverable balance to present the net amount expected to be collected on the reinsurance recoverable. The change in the allowance for credit losses is recorded in Policyholder benefits in the Condensed Consolidated Statements of Operations.

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Adoption of New Pronouncements

The following table provides a description of the Company's adoption of new Accounting Standard Updates ("ASUs") issued by the Financial Accounting Standards Board ("FASB") and the impact of the adoption on the Company's financial statements.

Standard	Description of Requirements	Effective date and Method of Adoption	Effect on the Financial Statements or Other Significant Matters
ASU 2018-15, Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract	This standard, issued in August 2018, requires a customer in a hosting arrangement that is a service contract to follow the guidance for internal-use software projects to determine which implementation costs to capitalize as an asset. Capitalized implementation costs are required to be expensed over the term of the hosting arrangement. In addition, a customer is required to apply the impairment and abandonment guidance for long-lived assets to the capitalized implementation costs. Balances related to capitalized implementation costs must be presented in the same financial statement line items as other hosting arrangement balances, and additional disclosures are required.	January 1, 2020 using the prospective method.	Adoption of the ASU did not have a material impact on the Company's financial condition, results of operations, or cash flows.
ASU 2018-13, Changes to the Disclosure Requirements for Fair Value Measurement	This standard, issued in August 2018, simplifies certain disclosure requirements for fair value measurement.	January 1, 2020 using the transition method prescribed for each applicable provision.	Adoption of this ASU had no effect on the Company's financial condition, results of operations, or cash flows. The adoption resulted in various disclosure changes that have been included in Note 5, Fair Value Measurements.
ASU 2016-13, Measurement of Credit Losses on Financial Instruments	This standard, issued in June 2016: • Introduces a new current expected credit loss ("CECL") model to measure impairment on certain types of financial instruments, • Requires an entity to estimate lifetime expected credit losses, under the new CECL model, based on relevant information about historical events, current conditions, and reasonable and supportable forecasts, • Modifies the impairment model for available-for-sale debt securities, and • Provides a simplified accounting model for purchased financial assets with credit deterioration since their origination. In addition, the FASB issued various amendments during 2018, 2019, and 2020 to clarify the provisions of ASU 2016-13.	January 1, 2020, using the modified retrospective method for financial assets measured at amortized cost and the prospective method for available-for-sale debt securities.	The Company recorded a $8 decrease, net of tax, to Unappropriated retained earnings as of January 1, 2020 for the cumulative effect of adopting ASU 2016-13. The transition adjustment includes recognition of an allowance for credit losses of $12 related to mortgage loans, net of the effect of DAC/VOBA and other intangibles of $2 and deferred income taxes of $2. The provisions that required prospective adoption had no effect on the Company's financial condition, results of operations, or cash flows. In addition, disclosures have been updated to reflect accounting policy changes made as a result of the implementation of ASU 2016-13. (See the Significant Accounting Policies section.) Comparative information has not been adjusted and continues to be reported under previously applicable U.S. GAAP.

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Future Adoption of Accounting Pronouncements

Long-Duration Contracts

In August 2018, the FASB issued ASU 2018-12, "Financial Services - Insurance (Topic 944) Targeted Improvements to the Accounting for Long-Duration Contracts" ("ASU 2018-12"), which changes the measurement and disclosures of insurance liabilities and deferred acquisition costs ("DAC") for long-duration contracts issued by insurers. In October, 2019, the FASB voted to amend the effective date of ASU 2018-12 for public business entities that are required to file with the SEC to fiscal years beginning after December 15, 2021, including interim periods, with early adoption permitted. The Company is currently in the process of evaluating the provisions of ASU 2018-12. While it is not possible to estimate the expected impact of adoption at this time, the Company believes there is a reasonable possibility that implementation of ASU 2018-12 may result in a significant impact on Shareholders’ equity and future earnings patterns.

In addition to requiring significantly expanded interim and annual disclosures regarding long-duration insurance contract assets and liabilities, ASU 2018-12's provisions include modifications to the accounting for such contracts in the following areas:

ASU 2018-12 Subject Area	Description of Requirements	Transition Provisions	Effect on the Financial Statements or Other Significant Matters
Assumptions used to measure the liability for future policy benefits for nonparticipating traditional and limited payment insurance contracts	Requires insurers to review and, if necessary, update cash flow assumptions at least annually. The effect of updating cash flow assumptions will be measured on a retrospective catch-up basis and presented in the Statement of Operations in the period in which the update is made. The rate used to discount the liability for future policy benefits will be required to be updated quarterly, with related changes in the liability recorded in AOCI. The discount rate will be based on an upper-medium grade fixed-income corporate instrument yield reflecting the duration characteristics of the relevant liabilities.	Initial adoption is required to be reported using either a full retrospective or modified retrospective approach. Under either method, upon adoption the liability for future policy benefits will be remeasured using current discount rates as of the beginning of the earliest period presented with the impact recorded as a cumulative effect adjustment to AOCI.	The application of periodic assumption updates for nonparticipating traditional and limited payment insurance contracts is significantly different from the current accounting approach for such liabilities, which is based on assumptions that are locked in at contract inception unless a premium deficiency occurs. Under the current accounting guidance, the liability discount rate is based on expected yields on the underlying investment portfolio held by the insurer. The implications of these requirements, including transition options, and related potential financial statement impacts are currently being evaluated.

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ASU 2018-12 Subject Area	Description of Requirements	Transition Provisions	Effect on the Financial Statements or Other Significant Matters
Measurement of market risk benefits	Creates a new category of benefit features called market risk benefits, defined as features that protect contract holders from capital market risk and expose the insurers to that risk. Market risk benefits will be required to be measured at fair value, with changes in fair value recognized in the Statement of Operations, except for changes in fair value attributable to changes in the instrument-specific credit risk, which will be recorded in AOCI.	Full retrospective application is required. Upon adoption, any difference between the fair value and pre-adoption carrying value of market risk benefits not currently measured at fair value will be recorded to retained earnings. In addition, the cumulative effect of changes in instrument-specific credit risk will be reclassified from retained earnings to AOCI.	Under the current accounting guidance, certain features that are expected to meet the definition of market risk benefits are accounted for as either insurance liabilities or embedded derivatives. The implications of these requirements and related potential financial statement impacts are currently being evaluated.
Amortization of DAC and other balances	Requires DAC (and other balances that refer to the DAC model, such as deferred sales inducement costs and unearned revenue liabilities) for all long-duration contracts to be measured on a constant level basis over the expected life of the contract.	Initial adoption is required to be reported using either a full retrospective or modified retrospective approach. The method of transition applied for DAC and other balances must be consistent with the transition method selected for future policy benefit liabilities, as described above.	This approach is intended to approximate straight-line amortization and cannot be based on revenue or profits as it is under the current accounting model. Related amounts in AOCI will be eliminated upon adoption. ASU 2018-12 did not change the existing accounting guidance related to value of business acquired ("VOBA") and net cost of reinsurance, which allows, but does not require, insurers to amortize such balances on a basis consistent with DAC. The implications of these requirements, including transition options, and related potential financial statement impacts are currently being evaluated.

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The following table provides a description of future adoptions of other new accounting standards that may have an impact on the Company's financial statements when adopted:

Standard	Description of Requirements	Effective date and transition provisions	Effect on the financial statements or other significant matters
ASU 2020-04, Reference Rate Reform	This standard, issued in March 2020, provides temporary optional expedients and exceptions for applying U.S. GAAP principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.	The amendments are effective as of March 12, 2020, the issuance date of the ASU. An entity may elect to apply the amendments prospectively through December 31, 2022.	The Company expects that it will elect to apply some of the expedients and exceptions provided in ASU 2020-04; however, the Company is still evaluating the guidance, and therefore, the impact of the adoption of ASU 2020-04 on the Company’s financial condition and results of operations has not yet been determined.
ASU 2019-12, Simplifying the Accounting for Income Taxes	This standard, issued in December 2019, simplifies the accounting for income taxes by eliminating certain exceptions to the general principles and simplifying several aspects of ASC 740, Income taxes, including requirements related to the following: • The intraperiod tax allocation exception to the incremental approach, • The tax basis step-up in goodwill obtained in a transaction that is not a business combination, • Hybrid tax regimes, • Ownership changes in investments - changes from a subsidiary to an equity method investment, • Separate financial statements of entities not subject to tax, • Interim-period accounting for enacted changes in tax law, and • The year-to-date loss limitation in interim-period tax accounting.	January 1, 2021 with early adoption permitted. Early adoption in an interim period must reflect any adjustments as of the beginning of the annual period. Initial adoption of ASU 2019-12 is required to be reported on a prospective basis, except for certain provisions that are required to be applied retrospectively or modified retrospectively.	The Company is currently in the process of determining the impact of adoption of the provisions of ASU 2019-12.
ASU 2018-14, Changes to the Disclosure Requirements for Defined Benefit Plans	This standard, issued in August 2018, eliminates certain disclosure requirements that are no longer considered cost beneficial and requires new disclosures that are considered relevant.	December 31, 2020 with early adoption permitted. Initial adoption of ASU 2018-14 is required to be reported on a retrospective basis for all periods presented.	The Company is currently in the process of determining the impact of adoption of the provisions of ASU 2018-14.

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2.    Investments

   

Fixed Maturities

Available-for-sale and fair value option ("FVO") fixed maturities were as follows as of March 31, 2020:

	Amortized Cost				Gross Unrealized Capital Gains				Gross Unrealized Capital Losses				Embedded Derivatives(2)				Fair Value				Allowance for credit losses
Fixed maturities:
U.S. Treasuries	$	566			$	233			$	—			$	—			$	799			$	—
U.S. Government agencies and authorities	19				1				—				—				20				—
State, municipalities and political subdivisions	742				68				2				—				808				—
U.S. corporate public securities	7,011				696				200				—				7,507				—
U.S. corporate private securities	3,754				154				97				—				3,811				—
Foreign corporate public securities and foreign governments(1)	2,423				147				73				—				2,497				—
Foreign corporate private securities(1)	3,153				54				138				—				3,068				1
Residential mortgage-backed securities	4,138				147				131				15				4,169				—
Commercial mortgage-backed securities	2,553				132				231				—				2,453				1
Other asset-backed securities	1,478				6				142				—				1,340				2
Total fixed maturities, including securities pledged	25,837				1,638				1,014				15				26,472				4
Less: Securities pledged	848				103				32				—				919				—
Total fixed maturities	$	24,989			$	1,535			$	982			$	15			$	25,553			$	4

⁽¹⁾ Primarily U.S. dollar denominated.

⁽²⁾ Embedded derivatives within fixed maturity securities are reported with the host investment. The changes in fair value of embedded derivatives are reported in Other net realized capital gains (losses) in the Condensed Consolidated Statements of Operations.

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Available-for-sale and FVO fixed maturities were as follows as of December 31, 2019:

	Amortized Cost				Gross Unrealized Capital Gains				Gross Unrealized Capital Losses				Embedded Derivatives(2)				Fair Value				OTTI(3)(4)
Fixed maturities:
U.S. Treasuries	$	565			$	129			$	3			$	—			$	691			$	—
U.S. Government agencies and authorities	19				—				—				—				19				—
State, municipalities and political subdivisions	747				68				—				—				815				—
U.S. corporate public securities	7,103				941				13				—				8,031				—
U.S. corporate private securities	3,776				306				16				—				4,066				—
Foreign corporate public securities and foreign governments(1)	2,417				265				3				—				2,679				—
Foreign corporate private securities(1)	3,171				205				1				—				3,375				—
Residential mortgage-backed securities	3,685				125				11				11				3,810				2
Commercial mortgage-backed securities	2,381				122				3				—				2,500				—
Other asset-backed securities	1,472				15				13				—				1,474				1
Total fixed maturities, including securities pledged	25,336				2,176				63				11				27,460				3
Less: Securities pledged	749				85				6				—				828				—
Total fixed maturities	$	24,587			$	2,091			$	57			$	11			$	26,632			$	3

⁽¹⁾ Primarily U.S. dollar denominated.

⁽²⁾ Embedded derivatives within fixed maturity securities are reported with the host investment. The changes in fair value of embedded derivatives are reported in Other net realized capital gains (losses) in the Condensed Consolidated Statements of Operations.

⁽³⁾ Represents OTTI reported as a component of Other comprehensive income (loss).

⁽⁴⁾ Amount excludes $137 of net unrealized gains on impaired available-for-sale securities.

The amortized cost and fair value of fixed maturities, including securities pledged, as of March 31, 2020, are shown below by contractual maturity. Actual maturities may differ from contractual maturities as securities may be restructured, called or prepaid. Mortgage-backed securities ("MBS") and Other asset-backed securities ("ABS") are shown separately because they are not due at a single maturity date.

	Amortized Cost				Fair Value
Due to mature:
One year or less	$	740			$	743
After one year through five years	3,393				3,382
After five years through ten years	5,628				5,657
After ten years	7,907				8,728
Mortgage-backed securities	6,691				6,622
Other asset-backed securities	1,478				1,340
Fixed maturities, including securities pledged	$	25,837			$	26,472

The investment portfolio is monitored to maintain a diversified portfolio on an ongoing basis. Credit risk is mitigated by monitoring concentrations by issuer, sector and geographic stratification and limiting exposure to any one issuer. 

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As of March 31, 2020 and December 31, 2019, the Company did not have any investments in a single issuer, other than obligations of the U.S. Government and government agencies, with a carrying value in excess of 10% of the Company's Total shareholder's equity.

The following tables present the composition of the U.S. and foreign corporate securities within the fixed maturity portfolio by industry category as of the dates indicated:

	Amortized Cost				Gross Unrealized Capital Gains				Gross Unrealized Capital Losses				Fair Value
March 31, 2020
Communications	$	976			$	117			$	4			$	1,089
Financial	2,614				205				33				2,786
Industrial and other companies	7,014				459				178				7,295
Energy	1,616				38				189				1,465
Utilities	2,938				171				55				3,054
Transportation	856				39				37				858
Total	$	16,014			$	1,029			$	496			$	16,547
December 31, 2019
Communications	$	1,002			$	156			$	—			$	1,158
Financial	2,650				302				—				2,952
Industrial and other companies	7,053				667				11				7,709
Energy	1,675				185				18				1,842
Utilities	2,913				294				1				3,206
Transportation	856				78				2				932
Total	$	16,149			$	1,682			$	32			$	17,799

The Company has elected the FVO for certain of its fixed maturities to better match the measurement of assets and liabilities in the Condensed Consolidated Statements of Operations. Certain collateralized mortgage obligations ("CMOs"), primarily interest-only and principal-only strips, are accounted for as hybrid instruments and reported at fair value with changes in the fair value recorded in Other net realized capital gains (losses) in the Condensed Consolidated Statements of Operations.

The Company invests in various categories of CMOs, including CMOs that are not agency-backed, that are subject to different degrees of risk from changes in interest rates and defaults. The principal risks inherent in holding CMOs are prepayment and extension risks related to significant decreases and increases in interest rates resulting in the prepayment of principal from the underlying mortgages, either earlier or later than originally anticipated. As of March 31, 2020 and December 31, 2019, approximately 48.9% and 48.4%, respectively, of the Company’s CMO holdings, were invested in the above mentioned types of CMOs such as interest-only or principal-only strips, that are subject to more prepayment and extension risk than traditional CMOs.

Public corporate fixed maturity securities are distinguished from private corporate fixed maturity securities based upon the manner in which they are transacted. Public corporate fixed maturity securities are issued initially through market intermediaries on a registered basis or pursuant to Rule 144A under the Securities Act of 1933 (the "Securities Act") and are traded on the secondary market through brokers acting as principal. Private corporate fixed maturity securities are originally issued by borrowers directly to investors pursuant to Section 4(a)(2) of the Securities Act, and are traded in the secondary market directly with counterparties, either without the participation of a broker or in agency transactions.

 

Repurchase Agreements

As of March 31, 2020 and December 31, 2019, the Company did not have any securities pledged in dollar rolls, repurchase agreement transactions or reverse repurchase agreements.

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Securities Lending

The Company engages in securities lending whereby the initial collateral is required at a rate of 102% of the market value of the loaned securities.  The lending agent retains the collateral and invests it in high quality liquid assets on behalf of the Company. The market value of the loaned securities is monitored on a daily basis with additional collateral obtained or refunded as the market value of the loaned securities fluctuates. The lending agent indemnifies the Company against losses resulting from the failure of a counterparty to return securities pledged where collateral is insufficient to cover the loss. As of March 31, 2020 and December 31, 2019, the fair value of loaned securities was $820 and $715, respectively, and is included in Securities pledged on the Condensed Consolidated Balance Sheets.

If cash is received as collateral, the lending agent retains the cash collateral and invests it in short-term liquid assets on behalf of the Company. As of March 31, 2020 and December 31, 2019, cash collateral retained by the lending agent and invested in short-term liquid assets on the Company's behalf was $776 and $650, respectively, and is recorded in Short-term investments under securities loan agreements, including collateral delivered on the Condensed Consolidated Balance Sheets. As of March 31, 2020 and December 31, 2019, liabilities to return collateral of $776 and $650, respectively, are included in Payables under securities loan agreements, including collateral held, on the Condensed Consolidated Balance Sheets.

The Company accepts non-cash collateral in the form of securities. The securities retained as collateral by the lending agent may not be sold or re-pledged, except in the event of default, and are not reflected on the Company’s Condensed Consolidated Balance Sheets. This collateral generally consists of U.S. Treasury, U.S. Government agency securities and MBS pools. As of March 31, 2020 and December 31, 2019, the fair value of securities retained as collateral by the lending agent on the Company’s behalf was $64 and $91, respectively.

The following table presents borrowings under securities lending transactions by asset class pledged as of the dates indicated:

	March 31, 2020 (1)(2)				December 31, 2019 (1)(2)
U.S. Treasuries	$	115			$	109
U.S. Government agencies and authorities	11				—
U.S. corporate public securities	508				447
Foreign corporate public securities and foreign governments	204				185
Payables under securities loan agreements	$	838			$	741

⁽¹⁾ As of March 31, 2020 and December 31, 2019, borrowings under securities lending transactions include cash collateral of $776 and $650, respectively.

⁽²⁾ As of March 31, 2020 and December 31, 2019, borrowings under securities lending transactions include non-cash collateral of $64 and $91, respectively.

The Company's securities lending activities are conducted on an overnight basis, and all securities loaned can be recalled at any time. The Company does not offset assets and liabilities associated with its securities lending program.

Variable Interest Entities ("VIEs")

The Company holds certain VIEs for investment purposes. VIEs may be in the form of private placement securities, structured securities, securitization transactions or limited partnerships. The Company has reviewed each of its holdings and determined that consolidation of these investments in the Company’s financial statements is not required, as the Company is not the primary beneficiary, because the Company does not have both the power to direct the activities that most significantly impact the entity’s economic performance and the obligation or right to potentially significant losses or benefits, for any of its investments in VIEs. The Company did not provide any non-contractual financial support and its carrying value represents the Company’s exposure to loss. The carrying value of the investments in VIEs was $784 and $738 as of March 31, 2020 and December 31, 2019, respectively; these investments are included in Limited partnerships/corporations on the Condensed Consolidated Balance Sheets. Income and losses recognized on these investments are reported in Net investment income in the Condensed Consolidated Statements of Operations.

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Securitizations

The Company invests in various tranches of securitization entities, including Residential mortgage-backed securities ("RMBS"), Commercial mortgage-backed securities ("CMBS") and ABS. Through its investments, the Company is not obligated to provide any financial or other support to these entities. Each of the RMBS, CMBS and ABS entities are thinly capitalized by design and considered VIEs. The Company's involvement with these entities is limited to that of a passive investor. The Company has no unilateral right to appoint or remove the servicer, special servicer or investment manager, which are generally viewed to have the power to direct the activities that most significantly impact the securitization entities' economic performance, in any of these entities, nor does the Company function in any of these roles. The Company, through its investments or other arrangements, does not have the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the entity. Therefore, the Company is not the primary beneficiary and does not consolidate any of the RMBS, CMBS and ABS entities in which it holds investments. These investments are accounted for as investments available-for-sale as described in the Fair Value Measurements Note to these Condensed Consolidated Financial Statements and unrealized capital gains (losses) on these securities are recorded directly in AOCI, except for certain RMBS that are accounted for under the FVO, for which changes in fair value are reflected in Other net realized capital gains (losses) in the Condensed Consolidated Statements of Operations. The Company’s maximum exposure to loss on these structured investments is limited to the amount of its investment.

Allowance for credit losses

The following table presents a rollforward of the allowance for credit losses on available-for-sale fixed maturity securities for the period presented:

	Three Months Ended March 31, 2020
	Residential mortgage-backed securities				Commercial mortgage-backed securities				Foreign corporate private securities				Other asset-backed securities				Total
Balance as of January 1	$	—			$	—			$	—			$	—			$	—
Credit losses on securities for which credit losses were not previously recorded	—				1				1				2				4
Initial allowance for credit losses recognized on financial assets accounted for as PCD	—				—				—				—				—
Reductions for securities sold during the period	—				—				—				—				—
Reductions for intent to sell or more likely than not will be required to sell securities prior to recovery of amortized cost	—				—				—				—				—
Increase (decrease) on securities with allowance recorded in previous period	—				—				—				—				—
Write-offs	—				—				—				—				—
Recoveries of amounts previously written off	—				—				—				—				—
Balance as of March 31	$	—			$	1			$	1			$	2			$	4

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Unrealized Capital Losses

The following table presents available-for-sale fixed maturities, including securities pledged, for which an allowance for credit losses has not been recorded by market sector and duration as of the date indicated:

	Twelve Months or Less Below Amortized Cost											More Than Twelve Months Below Amortized Cost											Total
March 31, 2020	Fair Value				Unrealized Capital  Losses				Number of securities			Fair Value				Unrealized Capital  Losses				Number of securities			Fair Value				Unrealized Capital  Losses				Number of securities
U.S. Treasuries	$	—			$	—			—			$	—			$	—			—			$	—			$	—			—
State, municipalities and political subdivisions	42				2				15			—				—				—			42				2				15
U.S. corporate public securities	1,501				186				371			28				14				9			1,529				200				380
U.S. corporate private securities	1,013				67				108			77				30				11			1,090				97				119
Foreign corporate public securities and foreign governments	686				68				198			13				5				8			699				73				206
Foreign corporate private securities	1,557				131				144			36				7				6			1,593				138				150
Residential mortgage-backed	1,401				117				322			97				14				53			1,498				131				375
Commercial mortgage-backed	1,295				231				291			—				—				—			1,295				231				291
Other asset-backed	909				99				238			254				43				102			1,163				142				340
Total	$	8,404			$	901			1,687			$	505			$	113			189			$	8,909			$	1,014			1,876

The Company concluded that an allowance for credit losses was unnecessary for these securities because the unrealized losses are not credit related.

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Unrealized capital losses (including noncredit impairments), along with the fair value of fixed maturity securities, including securities pledged, by market sector and duration were as follows as of December 31, 2019:

	Twelve Months or Less Below Amortized Cost								More Than Twelve Months Below Amortized Cost								Total
	Fair Value				Unrealized Capital Losses				Fair Value				Unrealized Capital Losses				Fair Value				Unrealized Capital Losses
U.S. Treasuries	$	68			$	3			$	12			$	—		*	$	80			$	3
State, municipalities and political subdivisions	21				—				—				—				21				—
U.S. corporate public securities	97				3				131				10				228				13
U.S. corporate private securities	75				—				134				16				209				16
Foreign corporate public securities and foreign governments	6				—				53				3				59				3
Foreign corporate private securities	21				—				56				1				77				1
Residential mortgage-backed	535				6				139				5				674				11
Commercial mortgage-backed	331				3				18				—				349				3
Other asset-backed	217				2				500				11				717				13
Total	$	1,389			$	17			$	1,043			$	46			$	2,432			$	63
Total number of securities in an unrealized loss position	289								278								567

*Less than $1.

Based on the Company's quarterly evaluation of its securities in a unrealized loss position, described below, the Company concluded that these securities were not impaired as of March 31, 2020. The Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases. See the Business, Basis of Presentation and Significant Accounting Policies Note to these Consolidated Financial Statements for the policy used to evaluate whether the investments are impaired.

Gross unrealized capital losses on fixed maturities, including securities pledged, increased $951 from $63 to $1,014 for the three months ended March 31, 2020. The increase in gross unrealized capital losses was primarily due to non-credit related market factors.

At March 31, 2020, $7 of the total $1,014 of gross unrealized losses were from 3 available-for-sale fixed maturity securities with an unrealized loss position of 20% or more of amortized cost for 12 months or greater.

Evaluating Securities for Impairments

The Company performs a regular evaluation, on a security-by-security basis, of its available-for-sale securities holdings, including fixed maturity securities in accordance with its impairment policy in order to evaluate whether such investments are impaired.

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The following tables identify the Company's impairments included in the Condensed Consolidated Statements of Operations, excluding impairments included in Other comprehensive income (loss) by type for the periods indicated:

	Three Months Ended March 31,
	2020							2019
	Impairment				No. of Securities			Impairment				No. of Securities
U.S. corporate public securities	$	6			2			$	—			—
Foreign corporate public securities and foreign governments(1)	—				—			—				—
Foreign corporate private securities(1)	—				—			18				3
Residential mortgage-backed	1				7			—				10
Commercial mortgage-backed	—			*	1			—				—
Limited partnerships	—				—			—				2
Total	$	7			10			$	18			15
Credit Impairments	$	—						$	18
Intent Impairments	$	7						$	—
(1) Primarily U.S. dollar denominated.
*Less than $1.

The Company may sell securities during the period in which fair value has declined below amortized cost for fixed maturities. In certain situations, new factors, including changes in the business environment, can change the Company’s previous intent to continue holding a security. Accordingly, these factors may lead the Company to record additional intent related capital losses.

Troubled Debt Restructuring

The Company invests in high quality, well performing portfolios of commercial mortgage loans and private placements. Under certain circumstances, modifications are granted to these contracts. Each modification is evaluated as to whether a troubled debt restructuring has occurred. A modification is a troubled debt restructuring when the borrower is in financial difficulty and the creditor makes concessions. Generally, the types of concessions may include reducing the face amount or maturity amount of the debt as originally stated, reducing the contractual interest rate, extending the maturity date at an interest rate lower than current market interest rates and/or reducing accrued interest. The Company considers the amount, timing and extent of the concession granted in determining any impairment or changes in the specific credit allowance recorded in connection with the troubled debt restructuring. A credit allowance may have been recorded prior to the quarter when the loan is modified in a troubled debt restructuring. Accordingly, the carrying value (net of the allowance) before and after modification through a troubled debt restructuring may not change significantly, or may increase if the expected recovery is higher than the pre-modification recovery assessment. For the three months ended March 31, 2020, the Company did not have any new commercial mortgage loan or private placement troubled debt restructuring. For the three months ended March 31, 2019, the Company did not have any new commercial mortgage loan and had one new private placement troubled debt restructuring with a pre-modification cost basis of $74 and post-modification carrying value of $57.

For the three months ended March 31, 2020 and March 31, 2019, the Company did not have any commercial mortgage loans or private placements modified in a troubled debt restructuring with a subsequent payment default.

Mortgage Loans on Real Estate

The Company diversifies its commercial mortgage loan portfolio by geographic region and property type to reduce concentration risk. The Company manages risk when originating commercial mortgage loans by generally lending only up to 75% of the estimated fair value of the underlying real estate. Subsequently, the Company continuously evaluates mortgage loans based on relevant current information including a review of loan-specific performance, property characteristics and market trends. Loan performance is monitored on a loan specific basis through the review of submitted appraisals, operating statements, rent revenues and annual

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inspection reports, among other items. This review ensures properties are performing at a consistent and acceptable level to secure the debt. The components to evaluate debt service coverage are received and reviewed at least annually to determine the level of risk.

Loan-to-value ("LTV") and debt service coverage ("DSC") ratios are measures commonly used to assess the risk and quality of mortgage loans. The LTV ratio, calculated at time of origination, is expressed as a percentage of the amount of the loan relative to the value of the underlying property. A LTV ratio in excess of 100% indicates the unpaid loan amount exceeds the underlying collateral. The DSC ratio, based upon the most recently received financial statements, is expressed as a percentage of the amount of a property’s net income to its debt service payments. A DSC ratio of less than 1.0 indicates that a property’s operations do not generate sufficient income to cover debt payments. These ratios are utilized as part of the review process described above.

The following tables present commercial mortgage loans by year of origination and LTV ratio as of the dates indicated. The information is updated as of March 31, 2020 and December 31, 2019, respectively.

	As of March 31, 2020
	Loan-to-Value Ratios
Year of Origination	0% - 50%				>50% - 60%				>60% - 70%				>70% - 80%				>80% and above				Total
2020	$	41			$	126			$	28			$	—			$	—			$	195
2019	263				152				80				15				—				510
2018	116				109				90				—				—				315
2017	547				362				17				—				—				926
2016	400				280				13				—				—				693
2015	381				145				—				—				—				526
2014 and prior	1,193				392				24				—				—				1,609
Total	$	2,941			$	1,566			$	252			$	15			$	—			$	4,774

	As of December 31, 2019
	Loan-to-Value Ratios
Year of Origination	0% - 50%				>50% - 60%				>60% - 70%				>70% - 80%				>80% and above				Total
2020	$	—			$	—			$	—			$	—			$	—			$	—
2019	85				96				145				170				26				522
2018	4				88				110				133				14				349
2017	101				244				566				13				10				934
2016	46				150				470				31				—				697
2015	10				343				168				8				—				529
2014 and prior	134				252				1,093				154				—				1,633
Total	$	380			$	1,173			$	2,552			$	509			$	50			$	4,664

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The following tables present commercial mortgage loans by year of origination and DSC ratio as of the dates indicated. The information is updated as of March 31, 2020 and December 31, 2019, respectively.

	As of March 31, 2020
	Debt Service Coverage Ratios
Year of Origination	>1.5x				>1.25x - 1.5x				>1.0x - 1.25x				<1.0x				Commercial mortgage loans secured by land or construction loans				Total
2020	$	140			$	31			$	24			$	—			$	—			$	195
2019	392				76				42				—				—				510
2018	217				3				64				31				—				315
2017	491				224				143				68				—				926
2016	607				63				23				—				—				693
2015	494				32				—				—				—				526
2014 and prior	1,353				134				76				46				—				1,609
Total	$	3,694			$	563			$	372			$	145			$	—			$	4,774

	As of December 31, 2019
	Debt Service Coverage Ratios
Year of Origination	>1.5x				>1.25x - 1.5x				>1.0x - 1.25x				<1.0x				Commercial mortgage loans secured by land or construction loans				Total
2020	$	—			$	—			$	—			$	—			$	—			$	—
2019	353				127				42				—				—				522
2018	236				3				60				50				—				349
2017	481				238				133				82				—				934
2016	615				59				23				—				—				697
2015	492				32				—				5				—				529
2014 and prior	1,358				128				88				59				—				1,633
Total	$	3,535			$	587			$	346			$	196			$	—			$	4,664

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The following tables present the commercial mortgage loans by year of origination and U.S. region as of the dates indicated. The information is updated as of March 31, 2020 and December 31, 2019, respectively.

	As of March 31, 2020
	U.S. Region
Year of Origination	Pacific				South Atlantic				Middle Atlantic				West South Central				Mountain				East North Central				New England				West North Central				East South Central				Total
2020	$	14			$	111			$	17			$	23			$	14			$	8			$	—			$	—			$	8			$	195
2019	64				128				11				155				53				44				18				11				26				510
2018	49				112				60				44				26				11				—				13				—				315
2017	102				99				390				150				77				60				5				43				—				926
2016	157				132				185				32				74				77				9				21				6				693
2015	123				159				103				34				42				51				10				4				—				526
2014 and prior	437				311				246				118				167				139				42				119				30				1609
Total	$	946			$	1,052			$	1,012			$	556			$	453			$	390			$	84			$	211			$	70			$	4,774

	As of December 31, 2019
	U.S. Region
Year of Origination	Pacific				South Atlantic				Middle Atlantic				West South Central				Mountain				East North Central				New England				West North Central				East South Central				Total
2020	$	—			$	—			$	—			$	—			$	—			$	—			$	—			$	—			$	—			$	—
2019	63				127				26				155				53				43				18				11				26				522
2018	50				132				60				43				26				11				—				12				15				349
2017	103				99				396				151				77				60				5				43				—				934
2016	158				132				187				32				75				77				9				21				6				697
2015	125				160				103				34				43				50				10				4				—				529
2014 and prior	445				316				247				122				168				142				42				121				30				1633
Total	$	944			$	966			$	1,019			$	537			$	442			$	383			$	84			$	212			$	77			$	4,664

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The following tables present the commercial mortgage loans by year of origination and property type as of the dates indicated. The information is updated as of March 31, 2020 and December 31, 2019, respectively.

	As of March 31, 2020
	Property Type
Year of Origination	Retail				Industrial				Apartments				Office				Hotel/Motel				Other				Mixed Use				Total
2020	$	44			$	8			$	98			$	45			$	—			$	—			$	—			$	195
2019	33				90				286				81				20				—				—				510
2018	50				90				137				17				3				18				—				315
2017	103				456				218				145				4				—				—				926
2016	130				251				147				146				8				7				4				693
2015	147				183				68				62				24				42				—				526
2014 and prior	721				134				292				226				68				128				40				1609
Total	$	1,228			$	1,212			$	1,246			$	722			$	127			$	195			$	44			$	4,774

	As of December 31, 2019
	Property Type
Year of Origination	Retail				Industrial				Apartments				Office				Hotel/Motel				Other				Mixed Use				Total
2020	$	—			$	—			$	—			$	—			$	—			$	—			$	—			$	—
2019	33				90				299				81				19				—				—				522
2018	52				91				152				32				4				18				—				349
2017	104				461				218				147				4				—				—				934
2016	131				254				147				146				8				7				4				697
2015	148				185				69				62				23				42				—				529
2014 and prior	730				135				300				229				69				130				40				1633
Total	$	1,198			$	1,216			$	1,185			$	697			$	127			$	197			$	44			$	4,664

The following table summarizes the activity in the allowance for losses for commercial mortgage loans for the periods indicated:

	March 31, 2020
Allowance for credit losses, balance at January 1	$	12
Credit losses on mortgage loans for which credit losses were not previously recorded	1
Initial allowance for credit losses recognized on financial assets accounted for as PCD	—
Increase (decrease) on mortgage loans with allowance recorded in previous period	4
Provision for expected credit losses	17
Writeoffs	—
Recoveries of amounts previously written off	—
Allowance for credit losses, end of period	$	17

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The following table presents past due commercial mortgage loans as of the dates indicated:

	March 31, 2020				December 31, 2019
Delinquency:
Current	$	4,774			$	4,664
30-59 days past due	—				—
60-89 days past due	—				—
Greater than 90 days past due	—				—
Total	$	4,774			$	4,664

Commercial mortgage loans are placed on non-accrual status when 90 days in arrears if the Company has concerns regarding the collectability of future payments, or if a loan has matured without being paid off or extended. As of March 31, 2020 and December 31, 2019, the Company had no commercial mortgage loans in non-accrual status. There was no interest income recognized on loans in non-accrual status for the three months ended March 31, 2020 and December 31, 2019.

As of March 31, 2020 and December 31, 2019, the Company had no commercial mortgage loans that were over 90 days or more past due but are not on non-accrual status. The Company had no commercial mortgage loans on non-accrual status for which there is no related allowance for credit losses as of March 31, 2020.

Net Investment Income

The following table summarizes Net investment income for the periods indicated:

	Three Months Ended March 31,
	2020				2019
Fixed maturities	$	373			$	352
Equity securities	2				2
Mortgage loans on real estate	50				54
Policy loans	2				2
Short-term investments and cash equivalents	1				1
Other	30				1
Gross investment income	458				412
Less: Investment expenses	19				18
Net investment income	$	439			$	394

As of March 31, 2020 and December 31, 2019, the Company had $2 and $0, respectively, of investments in fixed maturities that did not produce net investment income. Fixed maturities are moved to a non-accrual status when the investment defaults.

Interest income on fixed maturities is recorded when earned using an effective yield method, giving effect to amortization of premiums and accretion of discounts. Such interest income is recorded in Net investment income in the Condensed Consolidated Statements of Operations.

Net Realized Capital Gains (Losses)

Net realized capital gains (losses) comprise the difference between the amortized cost of investments and proceeds from sale and redemption, as well as losses incurred due to the credit-related and intent-related impairment of investments. Realized investment gains and losses are also primarily generated from changes in fair value of embedded derivatives within products and fixed maturities, changes in fair value of fixed maturities recorded at FVO and changes in fair value including accruals on derivative instruments, except for effective cash flow hedges. Net realized capital gains (losses) also include changes in fair value of equity securities. The cost of the investments on disposal is generally determined based on first-in-first-out ("FIFO") methodology.

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Net realized capital gains (losses) were as follows for the periods indicated:

	Three Months Ended March 31,
	2020				2019
Fixed maturities, available-for-sale, including securities pledged	$	(18	)		$	(16	)
Fixed maturities, at fair value option	55				24
Equity securities	(5		)		1
Derivatives	46				(32		)
Embedded derivatives - fixed maturities	4				1
Guaranteed benefit derivatives	(169		)		—
Other investments	(5		)		(2		)
Net realized capital gains (losses)	$	(92	)		$	(24	)

For the three months ended March 31, 2020, the change in fair value of equity securities still held as of March 31, 2020 was $(5). For the three months ended March 31, 2019, the change in fair value of equity securities still held as of March 31, 2019 was $(1).

Proceeds from the sale of fixed maturities, available-for-sale, and equity securities and the related gross realized gains and losses, before tax, were as follows for the periods indicated:

	Three Months Ended March 31,
	2020				2019
Proceeds on sales	$	277			$	1,223
Gross gains	5				12
Gross losses	13				11

The Company enters into the following types of derivatives:

Interest rate caps: The Company uses interest rate cap contracts to hedge the interest rate exposure arising from duration mismatches between assets and liabilities. Interest rate caps are also used to hedge interest rate exposure if rates rise above a specified level. Such increases in rates will require the Company to incur additional expenses. The future payout from the interest rate caps fund this increased exposure. The Company pays an upfront premium to purchase these caps. The Company utilizes these contracts in non-qualifying hedging relationships.

Interest rate swaps: Interest rate swaps are used by the Company primarily to reduce market risks from changes in interest rates and to alter interest rate exposure arising from mismatches between assets and/or liabilities. Interest rate swaps are also used to hedge the interest rate risk associated with the value of assets it owns or in an anticipation of acquiring them. Using interest rate swaps, the Company agrees with another party to exchange, at specified intervals, the difference between fixed rate and floating rate interest payments, calculated by reference to an agreed upon notional principal amount. These transactions are entered into pursuant to master agreements that provide for a single net payment to be made to/from the counterparty at each due date. The Company utilizes these contracts in qualifying hedging relationships as well as non-qualifying hedging relationships.

Foreign exchange swaps: The Company uses foreign exchange or currency swaps to reduce the risk of change in the value, yield or cash flows associated with certain foreign denominated invested assets. Foreign exchange swaps represent contracts that require the exchange of foreign currency cash flows against U.S. dollar cash flows at regular periods, typically quarterly or semi-annually. The Company utilizes these contracts in qualifying hedging relationships as well as non-qualifying hedging relationships.

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Credit default swaps: Credit default swaps are used to reduce credit loss exposure with respect to certain assets that the Company owns, or to assume credit exposure on certain assets that the Company does not own. Payments are made to, or received from, the counterparty at specified intervals. In the event of a default on the underlying credit exposure, the Company will either receive a payment (purchased credit protection) or will be required to make a payment (sold credit protection) equal to the par minus recovery value of the swap contract. The Company utilizes these contracts in non-qualifying hedging relationships.

Currency forwards: The Company utilizes currency forward contracts to hedge currency exposure related to invested assets. The Company utilizes these contracts in non-qualifying hedging relationships.

Forwards: The Company uses forward contracts to hedge certain invested assets against movement in interest rates, particularly mortgage rates. The Company uses To Be Announced mortgage-backed securities as an economic hedge against rate movements. The Company utilizes forward contracts in non-qualifying hedging relationships.

Futures: The Company uses interest rate futures contracts to hedge its exposure to market risks due to changes in interest rates. The Company enters into exchange traded futures with regulated futures commissions that are members of the exchange. The Company also posts initial and variation margins, with the exchange, on a daily basis. The Company utilizes exchange-traded futures in non-qualifying hedging relationships. The Company may also use futures contracts as a hedge against an increase in certain equity indices.

Swaptions: A swaption is an option to enter into a swap with a forward starting effective date. The Company uses swaptions to hedge the interest rate exposure associated with the minimum crediting rate and book value guarantees embedded in the retirement products that the Company offers. Increases in interest rates will generate losses on assets that are backing such liabilities. In certain instances, the Company locks in the economic impact of existing purchased swaptions by entering into offsetting written swaptions. The Company pays a premium when it purchases the swaption. The Company utilizes these contracts in non-qualifying hedging relationships.

Options: The Company uses equity options to hedge against an increase in various equity indices. Such increases may result in increased payments to the holders of the FIA contracts. The Company pays an upfront premium to purchase these options. The Company utilizes these options in non-qualifying hedging relationships.

Managed custody guarantees ("MCGs"): The Company issues certain credited rate guarantees on variable fixed income portfolios that represent stand-alone derivatives. The market value is partially determined by, among other things, levels of or changes in interest rates, prepayment rates and credit ratings/spreads.

Embedded derivatives: The Company also invests in certain fixed maturity instruments and has issued certain products that contain embedded derivatives for which market value is at least partially determined by, among other things, levels of or changes in domestic and/or foreign interest rates (short-term or long-term), exchange rates, prepayment rates, equity rates, or credit ratings/spreads. In addition, the Company has entered into coinsurance with funds withheld arrangements, which contain embedded derivatives.

The Company's use of derivatives is limited mainly to economic hedging to reduce the Company's exposure to cash flow variability of assets and liabilities, interest rate risk, credit risk, exchange rate risk and equity market risk. It is the Company's policy not to offset amounts recognized for derivative instruments and amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral arising from derivative instruments executed with the same counterparty under a master netting arrangement, which provides the Company with the legal right of offset. However, in accordance with the Chicago Mercantile Exchange ("CME") rules related to the variation margin payments, the Company is required to adjust the derivative balances with the variation margin payments related to its cleared derivatives executed through CME.

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The notional amounts and fair values of derivatives were as follows as of the dates indicated:

	March 31, 2020												December 31, 2019
	Notional Amount				Asset Fair Value				Liability Fair Value				Notional Amount				Asset Fair Value				Liability Fair Value
Derivatives: Qualifying for hedge accounting(1)
Cash flow hedges:
Interest rate contracts	$	23			$	—			$	—			$	23			$	—			$	—
Foreign exchange contracts	652				69				—				652				10				18
Derivatives: Non-qualifying for hedge accounting(1)
Interest rate contracts	20,341				646				793				18,640				210				261
Foreign exchange contracts	70				3				—				54				—				1
Equity contracts	59				1				—				63				4				3
Credit contracts	205				—				2				182				—				2
Embedded derivatives and Managed custody guarantees:
Within fixed maturity investments	N/A				15				—				N/A				11				—
Within products	N/A				—				176				N/A				—				33
Within reinsurance agreements	N/A				—				—				N/A				—				23
Managed custody guarantees	N/A				—				26				N/A				—				—
Total					$	734			$	997							$	235			$	341

⁽¹⁾ Open derivative contracts are reported as Derivatives assets or liabilities on the Condensed Consolidated Balance Sheets at fair value.

N/A - Not Applicable

Based on the notional amounts, a substantial portion of the Company’s derivative positions was not designated or did not qualify for hedge accounting as part of a hedging relationship as of March 31, 2020 and December 31, 2019. The Company utilizes derivative contracts mainly to hedge exposure to variability in cash flows, interest rate risk, credit risk, foreign exchange risk and equity market risk. The majority of derivatives used by the Company are designated as product hedges, which hedge the exposure arising from insurance liabilities or guarantees embedded in the contracts the Company offers through various product lines. These derivatives do not qualify for hedge accounting as they do not meet the criteria of being "highly effective" as outlined in ASC Topic 815, but do provide an economic hedge, which is in line with the Company’s risk management objectives. The Company also uses derivatives contracts to hedge its exposure to various risks associated with the investment portfolio. The Company does not seek hedge accounting treatment for certain of these derivatives as they generally do not qualify for hedge accounting due to the criteria required under the portfolio hedging rules outlined in ASC Topic 815. The Company also uses credit default swaps coupled with other investments in order to produce the investment characteristics of otherwise permissible investments that do not qualify as effective accounting hedges under ASC Topic 815.

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Although the Company has not elected to net its derivative exposures, the notional amounts and fair values of Over-The-Counter ("OTC") and cleared derivatives excluding exchange traded contracts are presented in the tables below as of the dates indicated:

	March 31, 2020
	Notional Amount				Asset Fair Value				Liability Fair Value
Credit contracts	$	205			$	—			$	2
Equity contracts	59				1				—
Foreign exchange contracts	722				72				—
Interest rate contracts	19,176				646				792
					719				794
Counterparty netting(1)					(619		)		(619		)
Cash collateral netting(1)					(96		)		(174		)
Securities collateral netting(1)					(3		)		—
Net receivables/payables					$	1			$	1

⁽¹⁾ Represents the netting of receivable balances with payable balances, net of collateral, for the same counterparty under eligible netting agreements.

	December 31, 2019
	Notional Amount				Asset Fair Value				Liability Fair Value
Credit contracts	$	182			$	—			$	2
Equity contracts	63				4				3
Foreign exchange contracts	706				10				19
Interest rate contracts	17,621				210				261
					224				285
Counterparty netting(1)					(217		)		(217		)
Cash collateral netting(1)					(6		)		(58		)
Securities collateral netting(1)					—				(5		)
Net receivables/payables					$	1			$	5

⁽¹⁾ Represents the netting of receivable balances with payable balances, net of collateral, for the same counterparty under eligible netting agreements.

Collateral

Under the terms of the OTC Derivative International Swaps and Derivatives Association, Inc. ("ISDA") agreements, the Company may receive from, or deliver to, counterparties, collateral to assure that terms of the ISDA agreements will be met with regard to the Credit Support Annex ("CSA"). The terms of the CSA call for the Company to pay interest on any cash received equal to the Federal Funds rate. To the extent cash collateral is received and delivered, it is included in Payables under securities loan agreements, including collateral held and Short-term investments under securities loan agreements, including collateral delivered, respectively, on the Condensed Consolidated Balance Sheets and is reinvested in short-term investments. Collateral held is used in accordance with the CSA to satisfy any obligations. Investment grade bonds owned by the Company are the source of noncash collateral posted, which is reported in Securities pledged on the Condensed Consolidated Balance Sheets. As of March 31, 2020, the Company held $111 and pledged $176 of net cash collateral related to OTC derivative contracts and cleared derivative contracts, respectively. As of December 31, 2019, the Company held $7 and delivered $55 of net cash collateral related to OTC derivative contracts and cleared derivative contracts, respectively. In addition, as of March 31, 2020, the Company delivered $99 of securities and held $6 of securities as collateral. As of December 31, 2019, the Company delivered $113 of securities and held no securities as collateral.

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The location and effect of derivatives qualifying for hedge accounting on the Consolidated Statements of Operations and Consolidated Statements of Comprehensive Income are as follows for the periods indicated:

	Interest Rate Contracts				Foreign Exchange Contracts
Derivatives: Qualifying for hedge accounting
Location of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income	Net Investment Income				Net Investment Income
Three Months Ended March 31, 2020
Amount of Gain or (Loss) Recognized in Other Comprehensive Income	$	1			$	77
Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income	—				3
Three Months Ended March 31, 2019
Amount of Gain or (Loss) Recognized in Other Comprehensive Income	$	1			$	(8	)
Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income	—				2

The location and amount of gain (loss) recognized in the Consolidated Statements of Operations for derivatives qualifying for hedge accounting are as follows for the periods indicated:

	Three Months Ended March 31, 2020
	Net Investment Income				Other net realized capital gains/(losses)
Total amounts of line items presented in the statement of operations in which the effects of cash flow hedges are recorded	$	439			$	(85	)
Derivatives: Qualifying for hedge accounting
Cash flow hedges:
Interest rate contracts:
Gain (loss) reclassified from accumulated other comprehensive income into income	—				—
Foreign exchange contracts:
Gain (loss) reclassified from accumulated other comprehensive income into income	$	3			$	—

	Three Months Ended March 31, 2019
	Net Investment Income				Other net realized capital gains/(losses)
Total amounts of line items presented in the statement of operations in which the effects of cash flow hedges are recorded	$	394			$	(4	)
Derivatives: Qualifying for hedge accounting
Cash flow hedges:
Interest rate contracts:
Gain (loss) reclassified from accumulated other comprehensive income into income	—				—
Foreign exchange contracts:
Gain (loss) reclassified from accumulated other comprehensive income into income	$	2			$	—

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The location and effect of derivatives not designated as hedging instruments on the Condensed Consolidated Statements of Operations are as follows for the periods indicated:

	Location of Gain or (Loss) Recognized in Income on Derivative		Three Months Ended March 31,
			2020				2019
Derivatives: Non-qualifying for hedge accounting
Interest rate contracts	Other net realized capital gains (losses)		$	42			$	(36	)
Foreign exchange contracts	Other net realized capital gains (losses)		4				1
Equity contracts	Other net realized capital gains (losses)		(1		)		1
Credit contracts	Other net realized capital gains (losses)		1				1
Embedded derivatives and Managed custody guarantees:
Within fixed maturity investments	Other net realized capital gains (losses)		(26		)		1
Within products	Other net realized capital gains (losses)		(143		)		—
Within reinsurance agreements	Policyholder benefits		23				(38		)
Total			$	(100	)		$	(70	)

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Fair Value Measurement

The following table presents the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis as of March 31, 2020:

	Level 1				Level 2				Level 3				Total
Assets:
Fixed maturities, including securities pledged:
U.S. Treasuries	$	625			$	174			$	—			$	799
U.S. Government agencies and authorities	—				20				—				20
State, municipalities and political subdivisions	—				808				—				808
U.S. corporate public securities	—				7,463				44				7,507
U.S. corporate private securities	—				2,920				891				3,811
Foreign corporate public securities and foreign governments(1)	—				2,494				3				2,497
Foreign corporate private securities (1)	—				2,909				159				3,068
Residential mortgage-backed securities	—				4,154				15				4,169
Commercial mortgage-backed securities	—				2,453				—				2,453
Other asset-backed securities	—				1,285				55				1,340
Total fixed maturities, including securities pledged	625				24,680				1,167				26,472
Equity securities	15				—				58				73
Derivatives:
Interest rate contracts	28				618				—				646
Foreign exchange contracts	—				72				—				72
Equity contracts	—				1				—				1
Cash and cash equivalents, short-term investments and short-term investments under securities loan agreements	2,052				—				—				2,052
Assets held in separate accounts	59,476				6,945				141				66,562
Total assets	$	62,196			$	32,316			$	1,366			$	95,878
Percentage of Level to Total	65		%		34		%		1		%		100		%
Liabilities:
Derivatives:
Guaranteed benefit derivatives:
FIA	$	—			$	—			$	9			$	9
Stabilizer and MCGs	—				—				193				193
Other derivatives:
Interest rate contracts	2				791				—				793
Foreign exchange contracts	—				—				—				—
Equity contracts	—				—				—				—
Credit contracts	—				2				—				2
Embedded derivative on reinsurance	—				—				—				—
Total liabilities	$	2			$	793			$	202			$	997

⁽¹⁾ Primarily U.S. dollar denominated.

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The following table presents the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis as of December 31, 2019:

	Level 1				Level 2				Level 3				Total
Assets:
Fixed maturities, including securities pledged:
U.S. Treasuries	$	536			$	155			$	—			$	691
State, municipalities and political subdivisions	—				815				—				815
U.S. corporate public securities	—				7,984				47				8,031
U.S. corporate private securities	—				3,064				1,002				4,066
Foreign corporate public securities and foreign governments(1)	—				2,679				—				2,679
Foreign corporate private securities (1)	—				3,185				190				3,375
Residential mortgage-backed securities	—				3,794				16				3,810
Commercial mortgage-backed securities	—				2,500				—				2,500
Other asset-backed securities	—				1,426				48				1,474
Total fixed maturities, including securities pledged	536				25,621				1,303				27,460
Equity securities, available-for-sale	17				—				63				80
Derivatives:
Interest rate contracts	1				209				—				210
Foreign exchange contracts	—				10				—				10
Equity contracts	—				4				—				4
Cash and cash equivalents, short-term investments and short-term investments under securities loan agreements	1,429				—				—				1,429
Assets held in separate accounts	72,448				6,150				115				78,713
Total assets	$	74,431			$	31,994			$	1,481			$	107,906
Percentage of Level to total	69		%		30		%		1		%		100		%
Liabilities:
Derivatives:
Guaranteed benefit derivatives:
FIA	$	—			$	—			$	11			$	11
Stabilizer and MCGs	—				—				22				22
Other derivatives:
Interest rate contracts	—				261				—				261
Foreign exchange contracts	—				19				—				19
Equity contracts	—				3				—				3
Credit contracts	—				2				—				2
Embedded derivative on reinsurance	—				23				—				23
Total liabilities	$	—			$	308			$	33			$	341

⁽¹⁾ Primarily U.S. dollar denominated.

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Valuation of Financial Assets and Liabilities at Fair Value

Certain assets and liabilities are measured at estimated fair value on the Company's Condensed Consolidated Balance Sheets. The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The exit price and the transaction (or entry) price will be the same at initial recognition in many circumstances. However, in certain cases, the transaction price may not represent fair value. The fair value of a liability is based on the amount that would be paid to transfer a liability to a third-party with an equal credit standing. Fair value is required to be a market-based measurement that is determined based on a hypothetical transaction at the measurement date, from a market participant's perspective. The Company considers three broad valuation approaches when a quoted price is unavailable: (i) the market approach, (ii) the income approach and (iii) the cost approach. The Company determines the most appropriate valuation technique to use, given the instrument being measured and the availability of sufficient inputs. The Company prioritizes the inputs to fair valuation approaches and allows for the use of unobservable inputs to the extent that observable inputs are not available.

The Company utilizes a number of valuation methodologies to determine the fair values of its financial assets and liabilities in conformity with the concepts of exit price and the fair value hierarchy as prescribed in ASC Topic 820. Valuations are obtained from third-party commercial pricing services, brokers and industry-standard, vendor-provided software that models the value based on market observable inputs. The valuations obtained from third-party commercial pricing services are non-binding. The Company reviews the assumptions and inputs used by third-party commercial pricing services for each reporting period in order to determine an appropriate fair value hierarchy level. The documentation and analysis obtained from third-party commercial pricing services are reviewed by the Company, including in-depth validation procedures confirming the observability of inputs. The valuations are reviewed and validated monthly through the internal valuation committee price variance review, comparisons to internal pricing models, back testing to recent trades or monitoring of trading volumes.

The valuation approaches and key inputs for each category of assets or liabilities that are classified within Level 2 and Level 3 of the fair value hierarchy are presented below.

For fixed maturities classified as Level 2 assets, fair values are determined using a matrix-based market approach, based on prices obtained from third-party commercial pricing services and the Company’s matrix and analytics-based pricing models, which in each case incorporate a variety of market observable information as valuation inputs. The market observable inputs used for these fair value measurements, by fixed maturity asset class, are as follows:

U.S. Treasuries: Fair value is determined using third-party commercial pricing services, with the primary inputs being stripped interest and principal U.S. Treasury yield curves that represent a U.S. Treasury zero-coupon curve.

U.S. government agencies and authorities, State, municipalities and political subdivisions: Fair value is determined using third-party commercial pricing services, with the primary inputs being U.S. Treasury yield curves, trades of comparable securities, credit spreads off benchmark yields and issuer ratings.

U.S. corporate public securities, Foreign corporate public securities and foreign governments: Fair value is determined using third-party commercial pricing services, with the primary inputs being benchmark yields, trades of comparable securities, issuer ratings, bids and credit spreads off benchmark yields.

U.S. corporate private securities and Foreign corporate private securities: Fair values are determined using a matrix and analytics-based pricing model. The model incorporates the current level of risk-free interest rates, current corporate credit spreads, credit quality of the issuer and cash flow characteristics of the security. The model also considers a liquidity spread, the value of any collateral, the capital structure of the issuer, the presence of guarantees, and prices and quotes for comparably rated publicly traded securities.

RMBS, CMBS and ABS: Fair value is determined using third-party commercial pricing services, with the primary inputs being credit spreads off benchmark yields, prepayment speed assumptions, current and forecasted loss severity, debt service coverage ratios, collateral type, payment priority within tranche and the vintage of the loans underlying the security.

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Generally, the Company does not obtain more than one vendor price from pricing services per instrument. The Company uses a hierarchy process in which prices are obtained from a primary vendor and, if that vendor is unable to provide the price, the next vendor in the hierarchy is contacted until a price is obtained or it is determined that a price cannot be obtained from a commercial pricing service. When a price cannot be obtained from a commercial pricing service, independent broker quotes are solicited.  Securities priced using independent broker quotes are classified as Level 3.

Fair values of privately placed bonds are determined primarily using a matrix-based pricing model and are generally classified as Level 2 assets. The model considers the current level of risk-free interest rates, current corporate spreads, the credit quality of the issuer and cash flow characteristics of the security. Also considered are factors such as the net worth of the borrower, the value of collateral, the capital structure of the borrower, the presence of guarantees and the Company's evaluation of the borrower's ability to compete in its relevant market. Using this data, the model generates estimated market values which the Company considers reflective of the fair value of each privately placed bond.

Equity securities: Level 2 and Level 3 equity securities, typically private equities or equity securities not traded on an exchange, are valued by other sources such as analytics or brokers.

Derivatives: Derivatives are carried at fair value, which is determined using the Company's derivative accounting system in conjunction with observable key financial data from third party sources, such as yield curves, exchange rates, S&P 500 Index prices, London Interbank Offered Rates ("LIBOR") and Overnight Index Swap ("OIS") rates. The Company uses OIS for valuations of collateralized interest rate derivatives, which are obtained from third-party sources. For those derivatives that are unable to be valued by the accounting system, the Company typically utilizes values established by third-party brokers. Counterparty credit risk is considered and incorporated in the Company's valuation process through counterparty credit rating requirements and monitoring of overall exposure. It is the Company's policy to transact only with investment grade counterparties with a credit rating of A- or better. The Company's nonperformance risk is also considered and incorporated in the Company's valuation process. The Company also has certain credit default swaps and options that are priced by third party vendors or by using models that primarily use market observable inputs, but contain inputs that are not observable to market participants, which have been classified as Level 3. The remaining derivative instruments are valued based on market observable inputs and are classified as Level 2.

Guaranteed benefit derivatives: The index-crediting feature in the Company's FIA contract is an embedded derivative that is required to be accounted for separately from the host contract. The fair value of the obligation is calculated based on actuarial and capital market assumptions related to the projected cash flows, including benefits and related contract charges, over the anticipated life of the related contracts. The cash flow estimates are produced by market implied assumptions. These derivatives are classified as Level 3 liabilities in the fair value hierarchy.

The Company records reserves for Stabilizer and MCG contracts containing guaranteed credited rates. The guarantee is treated as an embedded derivative or a stand-alone derivative (depending on the underlying product) and is required to be reported at fair value. The estimated fair value is determined based on the present value of projected future claims, minus the present value of future guaranteed premiums. At inception of the contract, the Company projects a guaranteed premium to be equal to the present value of the projected future claims. The income associated with the contracts is projected using relevant actuarial and capital market assumptions, including benefits and related contract charges, over the anticipated life of the related contracts. The cash flow estimates are produced by using stochastic techniques under a variety of risk neutral scenarios and other market implied assumptions. These derivatives are classified as Level 3 liabilities.

The discount rate used to determine the fair value of the embedded derivatives and stand-alone derivative includes an adjustment for nonperformance risk. The nonperformance risk adjustment incorporates a blend of observable, similarly rated peer holding company credit spreads, adjusted to reflect the credit quality of the Company, as well as an adjustment to reflect the non-default spreads and the priority and recovery rates of policyholder claims.

Embedded derivatives on reinsurance: The carrying value of embedded derivatives is estimated based upon the change in the fair value of the assets supporting the funds withheld payable under reinsurance agreements. The fair value of the embedded derivatives is based on market observable inputs and is classified as Level 2.

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Level 3 Financial Instruments

The fair values of certain assets and liabilities are determined using prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement (i.e., Level 3 as defined by ASC Topic 820), including but not limited to liquidity spreads for investments within markets deemed not currently active. These valuations, whether derived internally or obtained from a third-party, use critical assumptions that are not widely available to estimate market participant expectations in valuing the asset or liability. In addition, the Company has determined, for certain financial instruments, an active market is such a significant input to determine fair value that the presence of an inactive market may lead to classification in Level 3. In light of the methodologies employed to obtain the fair values of financial assets and liabilities classified as Level 3, additional information is presented below.

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The following tables summarize the change in fair value of the Company’s Level 3 assets and liabilities and transfers in and out of Level 3 for the periods indicated:

	Three Months Ended March 31, 2020
	Fair Value as of January 1				Total Realized/Unrealized Gains (Losses) Included in:								Purchases				Issuances				Sales				Settlements				Transfers into Level 3				Transfers out of Level 3				Fair Value as of March 31				Change in Unrealized Gains (Losses) Included in Earnings(3)				Change in Unrealized Gains (Losses) Included in OCI(3)
					Net Income				OCI
Fixed maturities, including securities pledged:
U.S. Corporate public securities	$	47			$	—			$	(1	)		$	—			$	—			$	—			$	(2	)		$	—			$	—			$	44			$	—			$	(1	)
U.S. Corporate private securities	1,002				—				(51		)		26				—				(1		)		(43		)		—				(42		)		891				—				(51		)
Foreign corporate public securities and foreign governments(1)	—				—				—				3				—				—				—				—				—				3				—				—
Foreign corporate private securities(1)	190				(1		)		(27		)		2				—				(3		)		—				3				(5		)		159				—				(27		)
Residential mortgage-backed securities	16				(1		)		—				8				—				—				—				—				(8		)		15				(1		)		—
Other asset-backed securities	48				—				—				8				—				—				(1		)		—				—				55				—				—
Total fixed maturities, including securities pledged	1,303				(2		)		(79		)		47				—				(4		)		(46		)		3				(55		)		1,167				(1		)		(79		)
Equity securities	63				(5		)		—				—				—				—				—				—				—				58				(5		)		—
Derivatives:
Guaranteed benefit derivatives:
Stabilizer and MCGs(2)	(22		)		(171		)		—				—				—				—				—				—				—				(193		)		—				—
FIA(2)	(11		)		2				—				—				—				—				—				—				—				(9		)		—				—
Assets held in separate accounts(4)	115				(2		)		—				47				—				(1		)		—				—				(18		)		141				—				—
(1) Primarily U.S. dollar denominated.
(2) All gains and losses on Level 3 liabilities are classified as realized gains (losses) for the purpose of this disclosure because it is impracticable to track realized and unrealized gains (losses) separately on a contract-by-contract basis. These amounts are included in Other net realized capital gains (losses) in the Condensed Consolidated Statements of Operations.
(3) For financial instruments still held as of March 31, amounts are included in Net investment income and Total net realized capital gains (losses) in the Condensed Consolidated Statements of Operations or Unrealized gains (losses) on securities in the Condensed Consolidated Statements of Comprehensive Income.
(4) The investment income and realized gains (losses) and change in unrealized gains (losses) included in net income (loss) for separate account assets are offset by an equal amount for separate account liabilities, which results in a net zero impact on Net income (loss) for the Company.

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The following tables summarize the change in fair value of the Company’s Level 3 assets and liabilities and transfers in and out of Level 3 for the periods indicated:

	Three Months Ended March 31, 2019
	Fair Value as of January 1				Total Realized/Unrealized Gains (Losses) Included in:								Purchases				Issuances				Sales				Settlements				Transfers into Level 3				Transfers out of Level 3				Fair Value as of March 31				Change in Unrealized Gains (Losses) Included in Earnings(3)
					Net Income				OCI
Fixed maturities, including securities pledged:
U.S. Corporate public securities	$	28			$	—			$	1			$	—			$	—			$	—			$	—			$	23			$	—			$	52			$	—
U.S. Corporate private securities	771				—				29				102				—				(6		)		(8		)		—				—				888				—
Foreign corporate private securities(1)	124				(17		)		23				48				—				(56		)		—				—				—				122				—
Residential mortgage-backed securities	10				(1		)		—				22				—				—				—				—				—				31				(1		)
Commercial mortgage-backed securities	12				—				—				—				—				—				(1		)		—				—				11				—
Other asset-backed securities	94				—				—				16				—				—				(1		)		—				(20		)		89				—
Total fixed maturities, including securities pledged	1,039				(18		)		53				188				—				(62		)		(10		)		23				(20		)		1,193				(1		)
Equity securities, available-for-sale	50				1				—				29				—				—				—				—				—				80				—
Derivatives:
Guaranteed benefit derivatives:
Stabilizer and MCGs(2)	(4		)		1				—				—				(1		)		—				—				—				—				(4		)		—
FIA(2)	(11		)		(1		)		—				—				—				—				1				—				—				(11		)		—
Assets held in separate accounts(4)	61				1				—				6				—				—				—				3				(4		)		67				—
(1) Primarily U.S. dollar denominated.
(2) All gains and losses on Level 3 liabilities are classified as realized gains (losses) for the purpose of this disclosure because it is impracticable to track realized and unrealized gains (losses) separately on a contract-by-contract basis. These amounts are included in Other net realized capital gains (losses) in the Condensed Consolidated Statements of Operations.
(3) For financial instruments still held as of March 31, amounts are included in Net investment income and Total net realized capital gains (losses) in the Condensed Consolidated Statements of Operations.
(4) The investment income and realized gains (losses) and change in unrealized gains (losses) included in net income (loss) for separate account assets are offset by an equal amount for separate account liabilities, which results in a net zero impact on Net income (loss) for the Company.

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For the three months ended March 31, 2020 and 2019, the transfers in and out of Level 3 for fixed maturities and separate accounts were due to the variation in inputs relied upon for valuation each quarter. Securities that are primarily valued using independent broker quotes when prices are not available from one of the commercial pricing services are reflected as transfers into Level 3. When securities are valued using more widely available information, the securities are transferred out of Level 3 and into Level 1 or 2, as appropriate.

Significant Unobservable Inputs

The Company's Level 3 fair value measurements of its fixed maturities, equity securities and equity and credit derivative contracts are primarily based on broker quotes.

Other Financial Instruments

The following disclosures are made in accordance with the requirements of ASC Topic 825 which requires disclosure of fair value information about financial instruments, whether or not recognized at fair value on the Consolidated Balance Sheets.

ASC Topic 825 excludes certain financial instruments, including insurance contracts and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.

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The carrying values and estimated fair values of the Company’s financial instruments as of the dates indicated:

	March 31, 2020								December 31, 2019
	Carrying Value				Fair Value				Carrying Value				Fair Value
Assets:
Fixed maturities, including securities pledged	$	26,472			$	26,472			$	27,460			$	27,460
Equity securities	73				73				80				80
Mortgage loans on real estate	4,774				4,846				4,664				4,912
Policy loans	201				201				205				205
Cash and cash equivalents, short-term investments and short-term investments under securities loan agreements	2,052				2,052				1,429				1,429
Derivatives	719				719				224				224
Other Investments	44				44				43				43
Assets held in separate accounts	66,562				66,562				78,713				78,713
Liabilities:
Investment contract liabilities:
Funding agreements without fixed maturities and deferred annuities(1)	27,296				34,269				26,337				32,697
Funding agreements with fixed maturities	857				829				877				876
Supplementary contracts, immediate annuities and other	303				369				312				384
Deposit liabilities	—				—				76				152
Derivatives:
Guaranteed benefit derivatives:
FIA	9				9				11				11
Stabilizer and MCGs	193				193				22				22
Other derivatives	795				795				285				285
Short-term debt(2)	29				29				1				1
Long-term debt(2)	3				3				4				4
Embedded derivatives on reinsurance	—				—				23				23

⁽¹⁾ Certain amounts included in Funding agreements without fixed maturities and deferred annuities are also reflected within the Guaranteed benefit derivatives section of the table above.

⁽²⁾ Included in Other Liabilities on the Consolidated Balance Sheets.

The following table presents the classification of financial instruments which are not carried at fair value on the Condensed Consolidated Balance Sheets:

Financial Instrument	Classification
Mortgage loans on real estate	Level 3
Policy loans	Level 2
Other investments	Level 2
Funding agreements without fixed maturities and deferred annuities	Level 3
Funding agreements with fixed maturities	Level 2
Supplementary contracts, immediate annuities and other	Level 3
Deposit liabilities	Level 3
Short-term debt and Long-term debt	Level 2

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The following tables present a rollforward of DAC and VOBA for the periods indicated:

	2020
	DAC				VOBA				Total
Balance as of January 1, 2020	$	288			$	305			$	593
Impact of ASU 2016-13	2				—				2
Deferrals of commissions and expenses	13				—				13
Amortization:
Amortization, excluding unlocking	(22		)		(21		)		(43		)
Unlocking (1)	(3		)		(9		)		(12		)
Interest accrued	9				9			(2)	18
Net amortization included in the Condensed Consolidated Statements of Operations	(16		)		(21		)		(37		)
Change due to unrealized capital gains/losses on available-for-sale securities	177				178				355
Balance as of March 31, 2020	$	464			$	462			$	926

	2019
	DAC				VOBA				Total
Balance as of January 1, 2019	$	536			$	551			$	1,087
Deferrals of commissions and expenses	13				2				15
Amortization:
Amortization, excluding unlocking	(17		)		(16		)		(33		)
Unlocking (1)	—			*	9				9
Interest accrued	9				9			(2)	18
Net amortization included in the Condensed Consolidated Statements of Operations	(8		)		2				(6		)
Change due to unrealized capital gains/losses on available-for-sale securities	(113		)		(107		)		(220		)
Balance as of March 31, 2019	$	428			$	448			$	876

⁽¹⁾ Includes the impacts of annual review of assumptions which typically occurs in the third quarter; and retrospective and prospective unlocking.

⁽²⁾ Interest accrued at the following rates for VOBA: 5.5% to 7.0% during 2020 and 2019.

*Less than $1.

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Shareholder’s equity included the following components of AOCI as of the dates indicated:

	March 31,
	2020				2019
Fixed maturities, net of impairments	$	624			$	1,030
Derivatives(1)	190				126
DAC/VOBA and Sales inducements adjustment on available-for-sale securities	(196		)		(293		)
Premium deficiency reserve adjustment	(110		)		(86		)
Unrealized capital gains (losses), before tax	508				777
Deferred income tax asset (liability)	21				(35		)
Unrealized capital gains (losses), after tax	529				742
Pension and other postretirement benefits liability, net of tax	4				5
AOCI	$	533			$	747

⁽¹⁾ Gains and losses reported in Accumulated Other Comprehensive Income (AOCI) from hedge transactions that resulted in the acquisition of an identified asset are reclassified into earnings in the same period or periods during which the asset acquired affects earnings. As of March 31, 2020, the portion of the AOCI that is expected to be reclassified into earnings within the next twelve months is $23.

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Changes in AOCI, including the reclassification adjustments recognized in the Condensed Consolidated Statements of Operations were as follows for the periods indicated:

	Three Months Ended March 31, 2020
	Before-Tax Amount				Income Tax				After-Tax Amount
Available-for-sale securities:
Fixed maturities	$	(1,504	)		$	315			$	(1,189	)
Adjustments for amounts recognized in Net realized capital gains (losses) in the Condensed Consolidated Statements of Operations	15				(3		)		12
DAC/VOBA and Sales inducements	355			(1)	(74		)		281
Premium deficiency reserve adjustment	101				(21		)		80
Change in unrealized gains/losses on available-for-sale securities	(1,033		)		217				(816		)
Derivatives:
Derivatives	79			(2)	(17		)		62
Adjustments related to effective cash flow hedges for amounts recognized in Net investment income in the Condensed Consolidated Statements of Operations	(6		)		1				(5		)
Change in unrealized gains/losses on derivatives	73				(16		)		57
Pension and other postretirement benefits liability:
Amortization of prior service cost recognized in Operating expenses in the Condensed Consolidated Statements of Operations	—				—				—
Change in pension and other postretirement benefits liability	—				—				—
Change in Other comprehensive income (loss)	$	(960	)		$	201			$	(759	)

⁽¹⁾ See the Deferred Policy Acquisition Costs and Value of Business Acquired Note to these Condensed Consolidated Financial Statements for additional information.

⁽²⁾ See the Derivative Financial Instruments Note to these Condensed Consolidated Financial Statements for additional information.

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	Three Months Ended March 31, 2019
	Before-Tax Amount				Income Tax				After-Tax Amount
Available-for-sale securities:
Fixed maturities	$	887			$	(184	)		$	703
Adjustments for amounts recognized in Net realized capital gains (losses) in the Condensed Consolidated Statements of Operations	15				(3		)		12
DAC/VOBA and Sales inducements	(220		)	(1)	46				(174		)
Premium deficiency reserve adjustment	(35		)		7				(28		)
Change in unrealized gains/losses on available-for-sale securities	647				(134		)		513
Derivatives:
Derivatives	(8		)	(2)	2				(6		)
Adjustments related to effective cash flow hedges for amounts recognized in Net investment income in the Condensed Consolidated Statements of Operations	(6		)		1				(5		)
Change in unrealized gains/losses on derivatives	(14		)		3				(11		)
Pension and other postretirement benefits liability:
Amortization of prior service cost recognized in Operating expenses in the Condensed Consolidated Statements of Operations	—				—				—
Change in pension and other postretirement benefits liability	—				—				—
Change in Other comprehensive income (loss)	$	633			$	(131	)		$	502

⁽¹⁾ See the Deferred Policy Acquisition Costs and Value of Business Acquired Note to these Condensed Consolidated Financial Statements for additional information.

⁽²⁾ See the Derivative Financial Instruments Note to these Condensed Consolidated Financial Statements for additional information.

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The Company's effective tax rate for the three months ended March 31, 2020 was (17.2)%. The effective tax rate differed from the statutory rate of 21% primarily due to the effect of the dividends received deduction ("DRD") and tax credits.

The Company's effective tax rate for the three months ended March 31, 2019 was (2.3)%. The effective tax rate differed from the statutory rate of 21% primarily due to the effect of the DRD.

The Coronavirus Aid, Relief and Economic Security (“CARES”) Act, which became effective on March 27, 2020, has not had, nor is it expected to have, any significant impact on corporate income tax.

Tax Sharing Agreement

The results of the Company's operations are included in the consolidated tax return of Voya Financial, Inc. Generally, the Company's consolidated financial statements recognize the current and deferred income tax consequences that result from the Company's activities during the current and preceding periods pursuant to the provisions of Income Taxes (ASC Topic 740) as if the Company were a separate taxpayer rather than a member of Voya Financial, Inc.'s consolidated income tax return group with the exception of any net operating loss carryforwards and capital loss carryforwards, which are recorded pursuant to the tax sharing agreement. If the Company instead were to follow a separate taxpayer approach without any exceptions, there would be no impact to income tax expense (benefit) for the periods indicated above. Also, any current tax benefit related to the Company's tax attributes realized by virtue of its inclusion in the consolidated tax return of Voya Financial, Inc. would have been recorded directly to equity rather than income. Under the tax sharing agreement, Voya Financial, Inc. will pay the Company for the tax benefits of ordinary and capital losses only in the event that the consolidated tax group actually uses the tax benefit of losses generated.

Tax Regulatory Matters

For the tax years 2018 through 2020, Voya Financial, Inc. participates in the IRS Compliance Assurance Process ("CAP"), which is a continuous audit program provided by the IRS. The IRS finalized the audit of Voya Financial, Inc. for the period ended December 31, 2018. For the periods ended December 31, 2019 and December 31, 2020, the IRS has determined that Voya Financial, Inc. would be in the Compliance Maintenance Bridge ("Bridge") phase of CAP. In the Bridge phase, the IRS does not intend to conduct any review or provide any letters of assurance for the tax year.

Reciprocal Loan Agreement

The Company maintains a reciprocal loan agreement with Voya Financial, Inc., an affiliate, to facilitate the handling of unanticipated short-term cash requirements that arise in the ordinary course of business. Under this agreement, which became effective in June 2001 and expires on April 1, 2021, either party can borrow from the other up to 3.0% of the Company’s statutory admitted assets as of the preceding December 31. Effective January 2014, interest on any borrowing by either the Company or Voya Financial, Inc. is charged at a rate based on the prevailing market rate for similar third-party borrowings or securities.

Under this agreement, the Company incurred immaterial interest expense and earned immaterial interest income for the three months ended March 31, 2020 and 2019. As of March 31, 2020, VRIAC had an outstanding receivable of $626, and VIPS had an outstanding payable of $28. As of December 31, 2019, the Company had an outstanding receivable of $69 and no outstanding payable from/to Voya Financial, Inc. under the reciprocal loan agreement.

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Commitments

Through the normal course of investment operations, the Company commits to either purchase or sell securities, mortgage loans, or money market instruments, at a specified future date and at a specified price or yield. The inability of counterparties to honor these commitments may result in either a higher or lower replacement cost. Also, there is likely to be a change in the value of the securities underlying the commitments. As of March 31, 2020, the Company had off-balance sheet commitments to acquire mortgage loans of $77 and purchase limited partnerships and private placement investments of $506.

Restricted Assets

The Company is required to maintain assets on deposit with various regulatory authorities to support its insurance operations. The Company may also post collateral in connection with certain securities lending, repurchase agreements, funding agreements, letter of credit ("LOC") and derivative transactions as described further in this note. The components of the fair value of the restricted assets were as follows as of the dates indicated:

	March 31, 2020				December 31, 2019
Fixed maturity collateral pledged to FHLB(1)	$	1,111			$	1,087
FHLB restricted stock(2)	44				44
Other fixed maturities-state deposits	14				14
Cash and cash equivalents	5				5
Securities pledged(3)	919				828
Total restricted assets	$	2,093			$	1,978

⁽¹⁾ Included in Fixed maturities, available for sale, at fair value on the Condensed Consolidated Balance Sheets.

⁽²⁾ Included in Other investments on the Condensed Consolidated Balance Sheets.

⁽³⁾ Includes the fair value of loaned securities of $820 and $715 as of March 31, 2020 and December 31, 2019, respectively. In addition, as of March 31, 2020 and December 31, 2019, the Company delivered securities as collateral of $99 and $113, respectively. Loaned securities and securities delivered as collateral are included in Securities pledged on the Condensed Consolidated Balance Sheets.

Federal Home Loan Bank Funding

On January 18, 2018, the Company became a member of the Federal Home Loan Bank of Boston ("FHLB"). The Company is required to pledge collateral to back funding agreements issued to the FHLB. As of March 31, 2020 and December 31, 2019, the Company had $856 and $877, respectively, in non-putable funding agreements, which are included in Future policy benefits and contract owner account balances on the Condensed Consolidated Balance Sheets. As of March 31, 2020 and December 31, 2019, assets with a market value of approximately $1,111 and $1,087, respectively, collateralized the FHLB funding agreements. Assets pledged to the FHLB are included in Fixed maturities, available-for-sale, at fair value on the Condensed Consolidated Balance Sheets.

Litigation, Regulatory Matters and Loss Contingencies

Litigation, regulatory and other loss contingencies arise in connection with the Company's activities as a diversified financial services firm. The Company is a defendant in a number of litigation matters arising from the conduct of its business, both in the ordinary course and otherwise. In some of these matters, claimants seek to recover very large or indeterminate amounts, including compensatory, punitive, treble and exemplary damages. Modern pleading practice in the U.S. permits considerable variation in the assertion of monetary damages and other relief. Claimants are not always required to specify the monetary damages they seek or they may be required only to state an amount sufficient to meet a court's jurisdictional requirements. Moreover, some jurisdictions allow claimants to allege monetary damages that far exceed any reasonably possible verdict. The variability in pleading requirements and past experience demonstrates that the monetary and other relief that may be requested in a lawsuit or claim often bears little relevance to the merits or potential value of a claim. Litigation against the Company includes a variety of claims including negligence, breach of contract, fraud, violation of regulation or statute, breach of fiduciary duty, negligent misrepresentation, failure to supervise, elder abuse and other torts.

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As with other financial services companies, the Company periodically receives informal and formal requests for information from various state and federal governmental agencies and self-regulatory organizations in connection with inquiries and investigations of the products and practices of the Company or the financial services industry. It is the practice of the Company to cooperate fully in these matters.

The outcome of a litigation or regulatory matter is difficult to predict and the amount or range of potential losses associated with these or other loss contingencies requires significant management judgment. It is not possible to predict the ultimate outcome or to provide reasonably possible losses or ranges of losses for all pending regulatory matters, litigation, and other loss contingencies.

While it is possible that an adverse outcome in certain cases could have a material adverse effect upon the Company's financial position, based on information currently known, management believes that neither the outcome of pending litigation and regulatory matters, nor potential liabilities associated with other loss contingencies, are likely to have such an effect. However, given the large and indeterminate amounts sought in certain litigation and the inherent unpredictability of all such matters, it is possible that an adverse outcome in certain of the Company's litigation or regulatory matters, or liabilities arising from other loss contingencies, could, from time to time, have a material adverse effect upon the Company's results of operations or cash flows in a particular quarterly or annual period.

For some matters, the Company is able to estimate a possible range of loss. For such matters in which a loss is probable, an accrual has been made. For matters where the Company, however, believes a loss is reasonably possible, but not probable, no accrual is required. For matters for which an accrual has been made, but there remains a reasonably possible range of loss in excess of the amounts accrued or for matters where no accrual is required, the Company develops an estimate of the unaccrued amounts of the reasonably possible range of losses. As of March 31, 2020, the Company estimates the aggregate range of reasonably possible losses, in excess of any amounts accrued for these matters as of such date, is not material to the Company.

For other matters, the Company is currently not able to estimate the reasonably possible loss or range of loss. The Company is often unable to estimate the possible loss or range of loss until developments in such matters have provided sufficient information to support an assessment of the range of possible loss, such as quantification of a damage demand from plaintiffs, discovery from plaintiffs and other parties, investigation of factual allegations, rulings by a court on motions or appeals, analysis by experts and the progress of settlement discussions. On a quarterly and annual basis, the Company reviews relevant information with respect to litigation and regulatory contingencies and updates the Company's accruals, disclosures and reasonably possible losses or ranges of loss based on such reviews.

Litigation includes Goetz v. Voya Financial and Voya Retirement Insurance and Annuity Company (USDC District of Delaware, No. 1:17-cv-1289) (filed September 8, 2017), a putative class action in which plaintiff, a participant in a 401(k) plan, seeks to represent other participants in the plan as well as a class of similarly situated plans that "contract with [Voya] for recordkeeping and other services." Plaintiff alleges that "Voya" breached its fiduciary duty to the plan and other plan participants by charging unreasonable and excessive recordkeeping fees, and that "Voya" distributed materially false and misleading 404a-5 administrative and fund fee disclosures to conceal its excessive fees. The Company denies the allegations, which it believes are without merit, and intends to defend the case vigorously.

Finally, industry wide, life insurers continue to be exposed to class action litigation related to the cost of insurance rates and periodic deductions from cash value. Common allegations include that insurance companies have breached the terms of their universal life insurance policies by establishing or increasing the cost of insurance rates using cost factors not permitted by the contract, thereby unjustly enriching themselves. This litigation is generally known as cost of insurance litigation.

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Operating Agreements

The Company has operating agreements whereby the Company provides or receives services from affiliated entities. For the three months ended March 31, 2020 and 2019, revenues with affiliated entities related to these agreements were $23 and $22, respectively. For the three months ended March 31, 2020 and 2019, expenses with affiliated entities related to the aforementioned operating agreements, as amended, were $154 and $146, respectively.

Reinsurance Agreements

Effective December 31, 2012, the Company entered into an automatic reinsurance agreement with its affiliate, SLDI, to manage the reserve and capital requirements in connection with a portion of its deferred annuities business. Under the terms of the agreement, the Company reinsured to SLDI, on an indemnity reinsurance basis, a quota share of its liabilities on certain contracts. On March 26, 2020, this agreement was recaptured and resulted in a loss of $20 that was recorded in the first quarter of 2020. As of December 31, 2019, the Company had deposit assets of approximately $36 and deposit liabilities of $76 related to this agreement.

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When determining collectability and the period over which the value is expected to recover for U.S. and foreign corporate securities, foreign government securities and state and political subdivision securities, we apply the same considerations utilized in our overall impairment evaluation process, which incorporates information regarding the specific security, the industry and geographic area in which the issuer operates and overall macroeconomic conditions. Projected future cash flows are estimated using assumptions derived from our best estimates of likely scenario-based outcomes, after giving consideration to a variety of variables that includes, but is not limited to: general payment terms of the security; the likelihood that the issuer can service the scheduled interest and principal payments; the quality and amount of any credit enhancements; the security's position within the capital structure of the issuer; possible corporate restructurings or asset sales by the issuer; and changes to the rating of the security or the issuer by rating agencies.

•

Additional considerations are made when assessing the unique features that apply to certain structured securities, such as subprime, Alt-A, non-agency RMBS, CMBS and ABS. These additional factors for structured securities include, but are not limited to: the quality of underlying collateral; expected prepayment speeds; loan-to-value ratio; debt service coverage ratios; current and forecasted loss severity; consideration of the payment terms of the underlying assets backing a particular security; and the payment priority within the tranche structure of the security.

•

When determining the amount of the credit loss for U.S. and foreign corporate securities, foreign government securities and state and political subdivision securities, we consider the estimated fair value as the recovery value when available information does not indicate that another value is more appropriate. When information is identified that indicates a recovery value other than estimated fair value, we consider in the determination of recovery value the same considerations utilized in its overall impairment evaluation process, which incorporates available information and our best estimate of scenario-based outcomes regarding the specific security and issuer; possible corporate restructurings or asset sales by the

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•	We perform a discounted cash flow analysis comparing the current amortized cost of a security to the present value of future cash flows expected to be received, including estimated defaults and prepayments. The discount rate is generally the effective interest rate of the fixed maturity prior to impairment.

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•	lower forecasted sales volumes, particularly in corporate markets, as companies delay new plan RFPs, offset in part by anticipated lower plan surrenders;

•	a decline in deposits, as plan sponsors suspend or reduce matching contributions;

•	furloughs and terminations of plan participants; and

•	an increase in participant loans. hardship withdrawals, and qualifying CARES Act distributions and withdrawals, offset to some extent by a reduction in required minimum distributions.

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•	higher alternative investment income; and

•	higher income due to a change in the mix of portfolio assets in the current period.

•	an increase in separate account performance.

•	unfavorable changes in the fair value of embedded derivatives on product guarantees as the result of interest rate movements and the impact of non-performance risk in the current period compared to the prior period; and

•	unfavorable changes in equity securities, available for sale primarily due to a negative valuation on Interserve common and preferred stock holdings.

•	favorable changes in the fair values of derivatives due to interest rate movements; and

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•	favorable changes in fixed maturities, using the fair value option due to interest rate movements and spread changes.

•	unfavorable unlocking in the current period compared to the prior period related to separate account performance and variable fund net flow;

•	higher amortization driven by the change in the embedded derivative associated with the recapture of a reinsurance agreement; and

•	unfavorable unlocking in current period due to an update in assumptions related to expected surrender of the State of Tennessee.

•	favorable unlocking in the current period driven by fixed fund net flow and higher than expected internal replacement activities in the prior period that did not reoccur this period; and

•	lower amortization due to lower gross profits.

•	a decrease in income before income taxes; and

•	an increase in tax credits.

•	a decrease in the dividends received deduction ("DRD").

•	higher Net realized capital losses

•	higher Net amortization of DAC and VOBA; and

•	lower Other revenue.

•	lower Interest credited and other benefits to contract owners/policyholders;

•	higher Net investment income;

•	higher Fee income; and

•	higher Income tax benefit.

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A reciprocal loan agreement with Voya Financial, Inc., an affiliate, whereby either party can borrow from the other up to 3.0% of VRIAC's statutory admitted assets as of the prior December 31. As of March 31, 2020, VRIAC had an outstanding receivable of $626 million, and VIPS had a $28 million outstanding payable. As of December 31, 2019, we had an outstanding receivable of $69 million and no outstanding payable from/to Voya Financial, Inc. under the reciprocal loan agreement. We and Voya Financial, Inc. continue to maintain the reciprocal loan agreement and future borrowings by either party will be subjected to the reciprocal loan terms summarized above. Effective January 2014, interest on any borrowing by either us or Voya Financial, Inc. is charged at a rate based on the prevailing market rate for similar third-party borrowings or securities.

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We hold approximately 49.5% of our assets in marketable securities. These assets include cash, U.S. Treasuries, Agencies, Corporate Bonds, ABS, CMBS and collateralized mortgage obligations ("CMO") and Equity securities. In the event of a temporary liquidity need, cash may be raised by entering into repurchase agreements, dollar rolls and/or security lending agreements by temporarily lending securities and receiving cash collateral. Under our Liquidity Plan, up to 12% of our general account statutory admitted assets may be allocated to repurchase, securities lending and dollar roll programs. At the time a temporary cash need arises, the actual percentage of admitted assets available for repurchase transactions will depend upon outstanding allocations to the three programs. As of March 31, 2020, VRIAC had securities lending collateral assets of $776 million, which represents approximately 0.7% of its general account statutory admitted assets. As of December 31, 2019, VRIAC had securities lending collateral assets of $650 million, which represents approximately 2.0% of its general account statutory admitted assets.

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Increased impairments or credit rating downgrades within our general account portfolio, which consume our excess capital and reduce our dividend capacity. Although we currently believe that we have adequate liquidity for the foreseeable future, if our asset portfolio were to experience a material amount of impairments or ratings downgrades, Voya Financial might require us to maintain additional statutory capital and would need to consider additional steps to preserve liquidity at the holding company;

•	Declines in fee revenues from lower AUM/AUA and plan participant counts, as a result of increased unemployment and furloughs, lower asset prices, suspensions or reductions in participant plan deposits or employer matching contributions, and an increase in plan loans and withdrawals;

•	Decreased spread-based revenues due to lower interest rates;

•	Material harm to the financial condition of our reinsurers, which would increase the probability of default on reinsurance recoveries; and

•	Reduced sales levels due to decreased RFP activity or delayed decision making by our clients or prospective clients.

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