GENWORTH FINANCIAL INC, 10-Q filed on 8/5/2015
Quarterly Report
Document and Entity Information
6 Months Ended
Jun. 30, 2015
Jul. 31, 2015
Document Information [Line Items]
 
 
Document Type
10-Q 
 
Amendment Flag
false 
 
Document Period End Date
Jun. 30, 2015 
 
Document Fiscal Year Focus
2015 
 
Document Fiscal Period Focus
Q2 
 
Trading Symbol
GNW 
 
Entity Registrant Name
GENWORTH FINANCIAL INC 
 
Entity Central Index Key
0001276520 
 
Current Fiscal Year End Date
--12-31 
 
Entity Filer Category
Large Accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
497,419,100 
Condensed Consolidated Balance Sheets (USD $)
In Millions, unless otherwise specified
Jun. 30, 2015
Dec. 31, 2014
Assets
 
 
Fixed maturity securities available-for-sale, at fair value
$ 60,568 
$ 61,276 
Equity securities available-for-sale, at fair value
299 
275 
Commercial mortgage loans
6,175 
6,100 
Restricted commercial mortgage loans related to securitization entities
181 
201 
Policy loans
1,584 
1,501 
Other invested assets
2,191 
2,244 
Restricted other invested assets related to securitization entities, at fair value
410 
411 
Total investments
71,408 
72,008 
Cash and cash equivalents
4,100 
4,716 
Accrued investment income
615 
664 
Deferred acquisition costs
4,896 
4,849 
Intangible assets
286 
250 
Goodwill
15 
16 
Reinsurance recoverable
17,297 
17,314 
Other assets
625 
524 
Separate account assets
8,702 
9,208 
Assets held for sale related to discontinued operations
1,220 
1,809 
Total assets
109,164 
111,358 
Liabilities and stockholders' equity
 
 
Future policy benefits
36,298 
35,915 
Policyholder account balances
25,987 
26,032 
Liability for policy and contract claims
7,990 
7,937 
Unearned premiums
3,431 
3,547 
Other liabilities ($34 and $45 of other liabilities are related to securitization entities)
3,136 
3,282 
Borrowings related to securitization entities ($84 and $85 are at fair value)
199 
219 
Non-recourse funding obligations
1,967 
1,996 
Long-term borrowings
4,607 
4,639 
Deferred tax liability
258 
858 
Separate account liabilities
8,702 
9,208 
Liabilities held for sale related to discontinued operations
862 
928 
Total liabilities
93,437 
94,561 
Commitments and contingencies
   
   
Stockholders' equity:
 
 
Class A common stock, $0.001 par value; 1.5 billion shares authorized; 586 million and 585 million shares issued as of June 30, 2015 and December 31, 2014, respectively; 497 million shares outstanding as of June 30, 2015 and December 31, 2014
Additional paid-in capital
11,940 
11,997 
Net unrealized investment gains (losses):
 
 
Net unrealized gains (losses) on securities not other-than-temporarily impaired
1,606 
2,431 
Net unrealized gains (losses) on other-than-temporarily impaired securities
22 
22 
Net unrealized investment gains (losses)
1,628 1
2,453 1
Derivatives qualifying as hedges
1,913 2
2,070 2
Foreign currency translation and other adjustments
(232)
(77)
Total accumulated other comprehensive income (loss)
3,309 
4,446 
Retained earnings
1,140 
1,179 
Treasury stock, at cost (88 million shares as of June 30, 2015 and December 31, 2014)
(2,700)
(2,700)
Total Genworth Financial, Inc.'s stockholders' equity
13,690 
14,923 
Noncontrolling interests
2,037 
1,874 
Total stockholders' equity
15,727 
16,797 
Total liabilities and stockholders' equity
$ 109,164 
$ 111,358 
Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
In Millions, except Share data, unless otherwise specified
Jun. 30, 2015
Dec. 31, 2014
Other liabilities, securitization entities
$ 34 
$ 45 
Borrowings related to securitization entities, fair value
$ 84 
$ 85 
Class A common stock, par value
$ 0.001 
$ 0.001 
Class A common stock, shares authorized
1,500,000,000 
1,500,000,000 
Class A common stock, shares issued
586,000,000 
585,000,000 
Class A common stock, shares outstanding
497,000,000 
497,000,000 
Treasury stock, shares
88,000,000 
88,000,000 
Condensed Consolidated Statements of Income (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2015
Jun. 30, 2014
Jun. 30, 2015
Jun. 30, 2014
Revenues:
 
 
 
 
Premiums
$ 1,134 
$ 1,144 
$ 2,277 
$ 2,276 
Net investment income
793 
791 
1,574 
1,567 
Net investment gains (losses)
34 
(8)
16 
Insurance and investment product fees and other
222 
225 
449 
451 
Total revenues
2,157 
2,194 
4,292 
4,310 
Benefits and expenses:
 
 
 
 
Benefits and other changes in policy reserves
1,232 
1,200 
2,424 
2,348 
Interest credited
181 
184 
361 
367 
Acquisition and operating expenses, net of deferrals
295 
282 
562 
555 
Amortization of deferred acquisition costs and intangibles
101 
108 
196 
212 
Interest expense
103 
112 
210 
223 
Total benefits and expenses
1,912 
1,886 
3,753 
3,705 
Income from continuing operations before income taxes
245 
308 
539 
605 
Provision for income taxes
70 
84 
161 
171 
Income from continuing operations
175 
224 
378 
434 
Income (loss) from discontinued operations, net of taxes
(314)
(313)
13 
Net income (loss)
(139)
228 
65 
447 
Less: net income attributable to noncontrolling interests
54 
52 
104 
87 
Net income (loss) available to Genworth Financial, Inc.'s common stockholders
(193)
176 
(39)
360 
Income from continuing operations available to Genworth Financial, Inc.'s common stockholders per common share:
 
 
 
 
Basic
$ 0.24 
$ 0.35 
$ 0.55 
$ 0.70 
Diluted
$ 0.24 
$ 0.34 
$ 0.55 
$ 0.69 
Net income (loss) available to Genworth Financial, Inc.'s common stockholders per common share:
 
 
 
 
Basic
$ (0.39)
$ 0.35 
$ (0.08)
$ 0.73 
Diluted
$ (0.39)
$ 0.35 
$ (0.08)
$ 0.72 
Weighted-average common shares outstanding:
 
 
 
 
Basic
497.4 
496.6 
497.2 
496.2 
Diluted
499.3 
503.6 
499.1 
503.2 
Supplemental disclosures:
 
 
 
 
Total other-than-temporary impairments
(2)
(3)
(3)
Portion of other-than-temporary impairments included in other comprehensive income (loss)
Net other-than-temporary impairments
(2)
(3)
(3)
Other investments gains (losses)
36 
(5)
19 
Net investment gains (losses)
$ 8 
$ 34 
$ (8)
$ 16 
Condensed Consolidated Statements of Comprehensive Income (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2015
Jun. 30, 2014
Jun. 30, 2015
Jun. 30, 2014
Net income (loss)
$ (139)
$ 228 
$ 65 
$ 447 
Other comprehensive income (loss), net of taxes:
 
 
 
 
Net unrealized gains (losses) on securities not other-than-temporarily impaired
(1,138)
533 
(815)
1,239 
Net unrealized gains (losses) on other-than-temporarily impaired securities
(2)
Derivatives qualifying as hedges
(334)1
114 1
(157)1
333 1
Foreign currency translation and other adjustments
53 
148 
(317)
127 
Total other comprehensive income (loss)
(1,421)
796 
(1,289)
1,706 
Total comprehensive income (loss)
(1,560)
1,024 
(1,224)
2,153 
Less: comprehensive income (loss) attributable to noncontrolling interests
40 
113 
(24)
117 
Total comprehensive income (loss) available to Genworth Financial, Inc.'s common stockholders
$ (1,600)
$ 911 
$ (1,200)
$ 2,036 
Condensed Consolidated Statements of Changes in Stockholders' Equity (USD $)
In Millions, unless otherwise specified
Total
Common stock
Additional paid-in capital
Accumulated other comprehensive income (loss)
Retained earnings
Treasury stock, at cost
Total Genworth Financial, Inc.'s stockholders' equity
Noncontrolling interests
Balances at Dec. 31, 2013
$ 15,620 
$ 1 
$ 12,127 
$ 2,542 
$ 2,423 
$ (2,700)
$ 14,393 
$ 1,227 
Sale of subsidiary shares to noncontrolling interests
511 
(145)
(57)
(202)
713 
Comprehensive income (loss):
 
 
 
 
 
 
 
 
Net income (loss)
447 
360 
360 
87 
Net unrealized gains (losses) on securities not other-than-temporarily impaired
1,239 
1,217 
1,217 
22 
Net unrealized gains (losses) on other-than-temporarily impaired securities
Derivatives qualifying as hedges
333 1
333 
333 
Foreign currency translation and other adjustments
127 
119 
119 
Total comprehensive income (loss)
2,153 
 
 
 
 
 
2,036 
117 
Dividends to noncontrolling interests
(27)
(27)
Stock-based compensation expense and exercises and other
Balances at Jun. 30, 2014
18,264 
11,986 
4,161 
2,783 
(2,700)
16,231 
2,033 
Balances at Dec. 31, 2014
16,797 
11,997 
4,446 
1,179 
(2,700)
14,923 
1,874 
Sale of subsidiary shares to noncontrolling interests
226 
(65)
24 
(41)
267 
Repurchase of subsidiary shares
(17)
(17)
Comprehensive income (loss):
 
 
 
 
 
 
 
 
Net income (loss)
65 
(39)
(39)
104 
Net unrealized gains (losses) on securities not other-than-temporarily impaired
(815)
(811)
(811)
(4)
Net unrealized gains (losses) on other-than-temporarily impaired securities
Derivatives qualifying as hedges
(157)1
(157)
(157)
Foreign currency translation and other adjustments
(317)
(193)
(193)
(124)
Total comprehensive income (loss)
(1,224)
 
 
 
 
 
(1,200)
(24)
Dividends to noncontrolling interests
(66)
(66)
Stock-based compensation expense and exercises and other
11 
Balances at Jun. 30, 2015
$ 15,727 
$ 1 
$ 11,940 
$ 3,309 
$ 1,140 
$ (2,700)
$ 13,690 
$ 2,037 
Condensed Consolidated Statements of Cash Flows (USD $)
In Millions, unless otherwise specified
6 Months Ended
Jun. 30, 2015
Jun. 30, 2014
Cash flows from operating activities:
 
 
Net income
$ 65 
$ 447 
Less (income) loss from discontinued operations, net of taxes
313 
(13)
Adjustments to reconcile net income to net cash from operating activities:
 
 
Amortization of fixed maturity securities discounts and premiums and limited partnerships
(49)
(76)
Net investment losses (gains)
(16)
Charges assessed to policyholders
(393)
(376)
Acquisition costs deferred
(155)
(183)
Amortization of deferred acquisition costs and intangibles
196 
212 
Deferred income taxes
103 
42 
Net increase (decrease) in trading securities, held-for-sale investments and derivative instruments
(193)
79 
Stock-based compensation expense
14 
Change in certain assets and liabilities:
 
 
Accrued investment income and other assets
(51)
(65)
Insurance reserves
866 
793 
Current tax liabilities
(91)
(182)
Other liabilities, policy and contract claims and other policy-related balances
(97)
(100)
Cash from operating activities-discontinued operations
(19)
Net cash from operating activities
511 
578 
Cash flows from investing activities:
 
 
Fixed maturity securities
2,395 
2,479 
Commercial mortgage loans
436 
262 
Restricted commercial mortgage loans related to securitization entities
21 
17 
Proceeds from sales of investments:
 
 
Fixed maturity and equity securities
821 
1,180 
Purchases and originations of investments:
 
 
Fixed maturity and equity securities
(4,397)
(4,715)
Commercial mortgage loans
(514)
(347)
Other invested assets, net
(39)
190 
Policy loans, net
Cash from investing activities-discontinued operations
13 
(8)
Net cash from investing activities
(1,261)
(938)
Cash flows from financing activities:
 
 
Deposits to universal life and investment contracts
1,142 
1,548 
Withdrawals from universal life and investment contracts
(1,079)
(1,270)
Redemption of non-recourse funding obligations
(30)
(14)
Proceeds from issuance of long-term debt
144 
Repayment and repurchase of long-term debt
(621)
Repayment of borrowings related to securitization entities
(19)
(17)
Proceeds from sale of subsidiary shares to noncontrolling interests
226 
519 
Repurchase of subsidiary shares
(17)
Dividends paid to noncontrolling interests
(66)
(27)
Other, net
(19)
Cash from financing activities-discontinued operations
(39)
(13)
Net cash from financing activities
127 
230 
Effect of exchange rate changes on cash and cash equivalents (includes $(3) and $2 related to discontinued operations
(41)
54 
Net change in cash and cash equivalents
(664)
(76)
Cash and cash equivalents at beginning of period
4,918 
4,214 
Cash and cash equivalents at end of period
4,254 
4,138 
Less cash and cash equivalents of discontinued operations at end of period
154 
254 
Cash and cash equivalents of continuing operations at end of period
$ 4,100 
$ 3,884 
Condensed Consolidated Statements of Cash Flows (Parenthetical) (USD $)
In Millions, unless otherwise specified
6 Months Ended
Jun. 30, 2015
Jun. 30, 2014
Effect of exchange rate changes on cash and cash equivalents related to discontinued operations
$ (3)
$ 2 
Formation of Genworth and Basis of Presentation
Formation of Genworth and Basis of Presentation

(1) Formation of Genworth and Basis of Presentation

Genworth Holdings, Inc. (“Genworth Holdings”) (formerly known as Genworth Financial, Inc.) was incorporated in Delaware in 2003 in preparation for an initial public offering of Genworth common stock, which was completed on May 28, 2004. On April 1, 2013, Genworth Holdings completed a holding company reorganization pursuant to which Genworth Holdings became a direct, 100% owned subsidiary of a new public holding company that it had formed. The new public holding company was incorporated in Delaware on December 5, 2012, in connection with the reorganization, under the name Sub XLVI, Inc., and was renamed Genworth Financial, Inc. (“Genworth Financial”) upon the completion of the reorganization.

The accompanying unaudited condensed financial statements include on a consolidated basis the accounts of Genworth Financial and the affiliate companies in which it holds a majority voting interest or where it is the primary beneficiary of a variable interest entity (“VIE”). All intercompany accounts and transactions have been eliminated in consolidation.

References to “Genworth,” the “Company,” “we” or “our” in the accompanying condensed consolidated financial statements and these notes thereto are, unless the context otherwise requires, to Genworth Financial on a consolidated basis.

We have the following operating segments:

 

    International Mortgage Insurance. We are a leading provider of mortgage insurance products and related services in Canada and Australia and also participate in select European and other countries. Our products predominantly insure prime-based, individually underwritten residential mortgage loans, also known as flow mortgage insurance. We also selectively provide mortgage insurance on a structured, or bulk, basis that aids in the sale of mortgages to the capital markets and helps lenders manage capital and risk. Additionally, we offer services, analytical tools and technology that enable lenders to operate efficiently and manage risk.

 

    U.S. Mortgage Insurance. In the United States, we offer mortgage insurance products predominantly insuring prime-based, individually underwritten residential mortgage loans, also known as flow mortgage insurance. We selectively provide mortgage insurance on a bulk basis with essentially all of our bulk writings being prime-based. Additionally, we offer services, analytical tools and technology that enable lenders to operate efficiently and manage risk.

 

    U.S. Life Insurance. We offer and manage a variety of insurance and fixed annuity products in the United States. Our primary products include long-term care insurance, life insurance and fixed annuities.

 

    Runoff. The Runoff segment includes the results of non-strategic products which are no longer actively sold. Our non-strategic products primarily include our variable annuity, variable life insurance, institutional, corporate-owned life insurance and other accident and health insurance products. Institutional products consist of funding agreements, funding agreements backing notes (“FABNs”) and guaranteed investment contracts (“GICs”). We no longer offer retail and group variable annuities but continue to service our existing blocks of business.

We also have Corporate and Other activities which include debt financing expenses that are incurred at the Genworth Holdings level, unallocated corporate income and expenses, eliminations of inter-segment transactions and the results of other non-core businesses that are managed outside of our operating segments, including discontinued operations.

 

In June 2015, our Board of Directors approved a transaction to sell our lifestyle protection insurance business, which had previously been designated as a non-core business. Because the business is available for immediate sale and the sale is anticipated to occur during the next 12 months and certain other criteria were met, the held-for-sale criteria was satisfied during the second quarter of 2015. As a result, we recorded an estimated loss to reduce the carrying value of the business to the fair value less pension settlement costs and closing costs. Our lifestyle protection insurance business, previously the only business in the International Protection segment, has been reported as discontinued operations and its financial position, results of operations and cash flows are separately reported for all periods presented. All prior periods reflected herein have been re-presented on this basis. See note 12 for additional information.

The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Preparing financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect reported amounts and related disclosures. Actual results could differ from those estimates. These unaudited condensed consolidated financial statements include all adjustments (including normal recurring adjustments) considered necessary by management to present a fair statement of the financial position, results of operations and cash flows for the periods presented. The results reported in these unaudited condensed consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. The unaudited condensed consolidated financial statements included herein should be read in conjunction with the audited consolidated financial statements and related notes contained in our 2014 Annual Report on Form 10-K. Certain prior year amounts have been reclassified to conform to the current year presentation.

We have revised our condensed consolidated statement of cash flows previously reported in our Quarterly Report on Form 10-Q for the six months ended June 30, 2014 to reflect a correction related to the calculation of the change in reinsurance recoverable that impacted the lines “insurance reserves” and “other liabilities, policy and contract claims and other policy-related balances.” As a result, the change in insurance reserves decreased by $311 million and the change in other liabilities, policy and contract claims and other policy-related balances increased by $311 million. The revisions had no impact on net cash flows from operating activities or the total change in cash and cash equivalents within our condensed consolidated statement of cash flows. Additionally, there was no impact on our unaudited condensed consolidated balance sheet or unaudited condensed consolidated statement of income.

 

Accounting Changes
Accounting Changes

(2) Accounting Changes

a) Accounting Pronouncements Recently Adopted

On January 1, 2015, we early adopted new accounting guidance related to measuring the financial assets and financial liabilities of a consolidated collateralized financing entity. The guidance addresses the accounting for the measurement difference between the fair value of financial assets and the fair value of financial liabilities of a collateralized financing entity. The new guidance provides an alternative whereby a reporting entity could measure the financial assets and financial liabilities of the collateralized financing entity in its consolidated financial statements using the more observable of the fair values. There was no impact on our consolidated financial statements.

On January 1, 2015, we adopted new accounting guidance related to the accounting for repurchase-to-maturity transactions and repurchase financings. The new guidance changed the accounting for repurchase-to-maturity transactions and repurchase financing such that they were consistent with secured borrowing accounting. In addition, the guidance required new disclosures for all repurchase agreements and securities lending transactions which were effective beginning in the second quarter of 2015. We do not have repurchase-to-maturity transactions, but have repurchase agreements and securities lending transactions that are subject to additional disclosures. This new guidance did not have an impact on our consolidated financial statements but did impact our disclosures.

On January 1, 2015, we adopted new accounting guidance related to the accounting for investments in affordable housing projects that qualify for the low-income housing tax credit. The new guidance permits reporting entities to make an accounting policy election to account for investments in qualified affordable housing projects by amortizing the initial cost of the investment in proportion to the tax benefits received and recognize the net investment performance as a component of income tax expense (called the proportional amortization method) if certain conditions are met. The new guidance requires use of the equity method or cost method for investments in qualified affordable housing projects not accounted for using the proportional amortization method. The adoption of this new guidance did not have a material impact on our consolidated financial statements.

On January 1, 2015, we early adopted new accounting guidance related to the accounting for share-based payment awards when the terms of an award provide that a performance target can be achieved after the requisite service period. The guidance requires that such performance targets should not be reflected in estimating the grant-date fair value of an award, and that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved. We have a performance stock unit plan where awards for employees who are retirement eligible can vest on a pro-rata basis upon retirement even if retirement occurs before the performance target is achieved. There was no impact on our consolidated financial statements.

b) Accounting Pronouncement Not Yet Adopted

In May 2015, the Financial Accounting Standards Board (the “FASB”) issued new disclosure requirements for short-duration insurance contracts. The new guidance requires additional disclosures on short-duration policy and contract claims liabilities for incurred and paid claims development, unpaid claims and claims frequency. These new disclosures will be effective for us on December 31, 2016 with early adoption permitted and will only impact our disclosures.

In April 2015, the FASB issued new guidance related to the presentation of debt issuance costs. This guidance requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The guidance is effective for us on January 1, 2016, with early adoption permitted, and is required to be applied on a retrospective basis. We are still in the process of evaluating the impact the guidance will have on our consolidated financial statements.

In February 2015, the FASB issued new accounting guidance related to consolidation. This guidance primarily impacts limited partnerships and similar legal entities, evaluation of fees paid to a decision maker as a variable interest, the effect of fee arrangements and related parties on the primary beneficiary determination and certain investment funds. This guidance is effective for us on January 1, 2016, with early adoption permitted. We are in the process of determining the impact on our consolidated financial statements.

Earnings (Loss) Per Share
Earnings (Loss) Per Share

(3) Earnings (Loss) Per Share

Basic and diluted earnings per share are calculated by dividing each income (loss) category presented below by the weighted-average basic and diluted shares outstanding for the periods indicated:

 

     Three months ended
June 30,
     Six months ended
June 30,
 

(Amounts in millions, except per share amounts)

       2015             2014          2015     2014  

Weighted-average shares used in basic earnings per common share calculations

     497.4       496.6        497.2       496.2  

Potentially dilutive securities:

         

Stock options, restricted stock units and stock appreciation rights

     1.9       7.0        1.9       7.0  
  

 

 

   

 

 

    

 

 

   

 

 

 

Weighted-average shares used in diluted earnings per common share calculations

     499.3       503.6        499.1       503.2  
  

 

 

   

 

 

    

 

 

   

 

 

 
         

Income from continuing operations:

         

Income from continuing operations

   $ 175     $ 224      $ 378     $ 434  

Less: income from continuing operations attributable to noncontrolling interests

     54       52        104       87  
  

 

 

   

 

 

    

 

 

   

 

 

 

Income from continuing operations available to Genworth Financial, Inc.’s common stockholders

   $ 121     $ 172      $ 274     $ 347  
  

 

 

   

 

 

    

 

 

   

 

 

 

Basic per common share

   $ 0.24     $ 0.35      $ 0.55     $ 0.70  
  

 

 

   

 

 

    

 

 

   

 

 

 

Diluted per common share

   $ 0.24     $ 0.34      $ 0.55     $ 0.69  
  

 

 

   

 

 

    

 

 

   

 

 

 

Income (loss) from discontinued operations:

         

Income (loss) from discontinued operations, net of taxes

   $ (314   $ 4      $ (313   $ 13  

Less: income from discontinued operations, net of taxes, attributable to noncontrolling interests

     —         —          —         —    
  

 

 

   

 

 

    

 

 

   

 

 

 

Income (loss) from discontinued operations, net of taxes, available to Genworth Financial, Inc.’s common stockholders

   $ (314   $ 4      $ (313   $ 13  
  

 

 

   

 

 

    

 

 

   

 

 

 

Basic per common share

   $ (0.63   $ 0.01      $ (0.63   $ 0.03  
  

 

 

   

 

 

    

 

 

   

 

 

 

Diluted per common share

   $ (0.63   $ 0.01      $ (0.63   $ 0.03  
  

 

 

   

 

 

    

 

 

   

 

 

 

Net income (loss):

         

Income from continuing operations

   $ 175     $ 224      $ 378     $ 434  

Income (loss) from discontinued operations, net of taxes

     (314     4        (313     13  
  

 

 

   

 

 

    

 

 

   

 

 

 

Net income (loss)

     (139     228        65       447  

Less: net income attributable to noncontrolling interests

     54       52        104       87  
  

 

 

   

 

 

    

 

 

   

 

 

 

Net income (loss) available to Genworth Financial, Inc.’s common stockholders

   $ (193   $ 176      $ (39   $ 360  
  

 

 

   

 

 

    

 

 

   

 

 

 

Basic per common share

   $ (0.39   $ 0.35      $ (0.08   $ 0.73  
  

 

 

   

 

 

    

 

 

   

 

 

 

Diluted per common share

   $ (0.39   $ 0.35      $ (0.08   $ 0.72  
  

 

 

   

 

 

    

 

 

   

 

 

 

Investments
Investments

(4) Investments

(a) Net Investment Income

Sources of net investment income were as follows for the periods indicated:

 

    Three months ended
June 30,
    Six months ended
June 30,
 

(Amounts in millions)

      2015             2014         2015     2014  

Fixed maturity securities—taxable

  $ 645     $ 658     $ 1,277     $ 1,297  

Fixed maturity securities—non-taxable

    3       3       6       6  

Commercial mortgage loans

    83       81       168       164  

Restricted commercial mortgage loans related to securitization entities

    3       4       7       8  

Equity securities

    4       4       8       8  

Other invested assets

    37       25       77       54  

Restricted other invested assets related to securitization entities

    1       1       2       2  

Policy loans

    35       32       68       63  

Cash, cash equivalents and short-term investments

    4       7       7       12  
 

 

 

   

 

 

   

 

 

   

 

 

 

Gross investment income before expenses and fees

    815       815       1,620       1,614  

Expenses and fees

    (22     (24     (46     (47
 

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income

  $ 793     $ 791     $ 1,574     $ 1,567  
 

 

 

   

 

 

   

 

 

   

 

 

 

(b) Net Investment Gains (Losses)

The following table sets forth net investment gains (losses) for the periods indicated:

 

     Three months ended
June 30,
    Six months ended
June 30,
 

(Amounts in millions)

       2015             2014             2015             2014      

Available-for-sale securities:

        

Realized gains

   $ 20     $ 38     $ 35     $ 44  

Realized losses

     (6     (14     (18     (37
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized gains (losses) on available-for-sale securities

     14       24       17       7  
  

 

 

   

 

 

   

 

 

   

 

 

 

Impairments:

        

Total other-than-temporary impairments

     —         (2     (3     (3

Portion of other-than-temporary impairments included in other comprehensive income (loss)

     —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Net other-than-temporary impairments

     —         (2     (3     (3
  

 

 

   

 

 

   

 

 

   

 

 

 

Trading securities

     (16     8       (10     20  

Commercial mortgage loans

     2       3       4       6  

Net gains (losses) related to securitization entities

     2       9       10       15  

Derivative instruments (1)

     6       (7     (26     (28

Other

     —         (1     —         (1
  

 

 

   

 

 

   

 

 

   

 

 

 

Net investment gains (losses)

   $ 8     $ 34     $ (8   $ 16  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)  See note 5 for additional information on the impact of derivative instruments included in net investment gains (losses).

 

We generally intend to hold securities in unrealized loss positions until they recover. However, from time to time, our intent on an individual security may change, based upon market or other unforeseen developments. In such instances, we sell securities in the ordinary course of managing our portfolio to meet diversification, credit quality, yield and liquidity requirements. If a loss is recognized from a sale subsequent to a balance sheet date due to these unexpected developments, the loss is recognized in the period in which we determined that we have the intent to sell the securities or it is more likely than not that we will be required to sell the securities prior to recovery. The aggregate fair value of securities sold at a loss during the three months ended June 30, 2015 and 2014 was $144 million and $241 million, respectively, which was approximately 96% and 94%, respectively, of book value. The aggregate fair value of securities sold at a loss during the six months ended June 30, 2015 and 2014 was $284 million and $506 million, respectively, which was approximately 94% and 93%, respectively, of book value.

The following represents the activity for credit losses recognized in net income (loss) on debt securities where an other-than-temporary impairment was identified and a portion of other-than-temporary impairments was included in other comprehensive income (loss) (“OCI”) as of and for the periods indicated:

 

     As of or for the
three months ended
June 30,
    As of or for the
six months ended
June 30,
 

(Amounts in millions)

     2015         2014         2015         2014    

Beginning balance

   $ 78     $ 99     $ 83     $ 101  

Additions:

        

Other-than-temporary impairments not previously recognized

     —         1       —         1  

Reductions:

        

Securities sold, paid down or disposed

     (3     (5     (8     (7
  

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ 75     $ 95     $ 75     $ 95  
  

 

 

   

 

 

   

 

 

   

 

 

 

(c) Unrealized Investment Gains and Losses

Net unrealized gains and losses on available-for-sale investment securities reflected as a separate component of accumulated other comprehensive income (loss) were as follows as of the dates indicated:

 

(Amounts in millions)

   June 30,
2015
    December 31,
2014
 

Net unrealized gains (losses) on investment securities:

    

Fixed maturity securities

   $ 4,102     $ 5,560  

Equity securities

     12       32  

Other invested assets

     (1     (2
  

 

 

   

 

 

 

Subtotal

     4,113       5,590  

Adjustments to deferred acquisition costs, present value of future profits, sales inducements and benefit reserves

     (1,445     (1,656

Income taxes, net

     (921     (1,372
  

 

 

   

 

 

 

Net unrealized investment gains (losses)

     1,747       2,562  

Less: net unrealized investment gains (losses) attributable to noncontrolling interests

     119       109  
  

 

 

   

 

 

 

Net unrealized investment gains (losses) attributable to Genworth Financial, Inc.

   $ 1,628     $ 2,453  
  

 

 

   

 

 

 

 

The change in net unrealized gains (losses) on available-for-sale investment securities reported in accumulated other comprehensive income (loss) was as follows as of and for the periods indicated:

 

     As of or for the
three months ended
June 30,
 

(Amounts in millions)

   2015     2014  

Beginning balance

   $ 2,748     $ 1,624  

Unrealized gains (losses) arising during the period:

    

Unrealized gains (losses) on investment securities

     (2,406     1,193  

Adjustment to deferred acquisition costs

     168       (96

Adjustment to present value of future profits

     70       (39

Adjustment to sales inducements

     18       (15

Adjustment to benefit reserves

     411       (200

Provision for income taxes

     608       (295
  

 

 

   

 

 

 

Change in unrealized gains (losses) on investment securities

     (1,131     548  

Reclassification adjustments to net investment (gains) losses, net of taxes of $5 and $8

     (9     (14
  

 

 

   

 

 

 

Change in net unrealized investment gains (losses)

     (1,140     534  

Less: change in net unrealized investment gains (losses) attributable to noncontrolling interests

     (20     30  
  

 

 

   

 

 

 

Ending balance

   $ 1,628     $ 2,128  
  

 

 

   

 

 

 

 

     As of or for the
six months ended
June 30,
 

(Amounts in millions)

   2015     2014  

Beginning balance

   $ 2,453     $ 926  

Unrealized gains (losses) arising during the period:

    

Unrealized gains (losses) on investment securities

     (1,463     2,624  

Adjustment to deferred acquisition costs

     70       (195

Adjustment to present value of future profits

     50       (91

Adjustment to sales inducements

     3       (28

Adjustment to benefit reserves

     88       (388

Provision for income taxes

     446       (673
  

 

 

   

 

 

 

Change in unrealized gains (losses) on investment securities

     (806     1,249  

Reclassification adjustments to net investment (gains) losses, net of taxes of $5 and $2

     (9     (3
  

 

 

   

 

 

 

Change in net unrealized investment gains (losses)

     (815     1,246  

Less: change in net unrealized investment gains (losses) attributable to noncontrolling interests

     10       44  
  

 

 

   

 

 

 

Ending balance

   $ 1,628     $ 2,128  
  

 

 

   

 

 

 

 

(d) Fixed Maturity and Equity Securities

As of June 30, 2015, the amortized cost or cost, gross unrealized gains (losses) and fair value of our fixed maturity and equity securities classified as available-for-sale were as follows:

 

          Gross unrealized gains     Gross unrealized losses        

(Amounts in millions)

  Amortized
cost or
cost
    Not other-than-
temporarily
impaired
    Other-than-
temporarily
impaired
    Not other-than-
temporarily
impaired
    Other-than-
temporarily
impaired
    Fair
value
 

Fixed maturity securities:

           

U.S. government, agencies and government-sponsored enterprises

  $ 5,041     $ 729     $ —        $ (49   $ —        $ 5,721  

State and political subdivision

    2,259       168       —         (38     —         2,389  

Non-U.S. government

    1,841       132       —         (3     —         1,970  

U.S. corporate:

           

Utilities

    3,359       399       —         (24     —         3,734  

Energy

    2,666       210       —         (26     —         2,850  

Finance and insurance

    5,245       414       19       (42     —         5,636  

Consumer—non-cyclical

    3,623       385       —         (26     —         3,982  

Technology and communications

    2,276       147       —         (23     —         2,400  

Industrial

    1,222       79       —         (19     —         1,282  

Capital goods

    1,843       206       —         (12     —         2,037  

Consumer—cyclical

    1,734       114       —         (14     —         1,834  

Transportation

    940       88       —         (11     —         1,017  

Other

    355       25       —         (1     —         379  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total U.S. corporate

    23,263       2,067       19       (198     —         25,151  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-U.S. corporate:

           

Utilities

    873       44       —         (4     —         913  

Energy

    1,868       136       —         (30     —         1,974  

Finance and insurance

    2,738       177       1       (6     —         2,910  

Consumer—non-cyclical

    782       32       —         (14     —         800  

Technology and communications

    1,018       49       —         (10     —         1,057  

Industrial

    1,171       49       —         (25     —         1,195  

Capital goods

    629       27       —         (9     —         647  

Consumer—cyclical

    588       15       —         (1     —         602  

Transportation

    561       61       —         (2     —         620  

Other

    2,866       223       —         (10     —         3,079  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total non-U.S. corporate

    13,094       813       1       (111     —         13,797  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Residential mortgage-backed

    4,759       333       12       (18     (1     5,085  

Commercial mortgage-backed

    2,473       118       4       (13     —         2,582  

Other asset-backed

    3,887       24       1       (39     —         3,873  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total fixed maturity securities

    56,617       4,384       37       (469     (1     60,568  

Equity securities

    299       8       —         (8     —         299  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total available-for-sale securities

  $ 56,916     $ 4,392     $ 37     $ (477   $ (1   $ 60,867  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

As of December 31, 2014, the amortized cost or cost, gross unrealized gains (losses) and fair value of our fixed maturity and equity securities classified as available-for-sale were as follows:

 

          Gross unrealized gains     Gross unrealized losses        

(Amounts in millions)

  Amortized
cost or
cost
    Not other-than-
temporarily
impaired
    Other-than-
temporarily
impaired
    Not other-than-
temporarily
impaired
    Other-than-
temporarily
impaired
    Fair
value
 

Fixed maturity securities:

           

U.S. government, agencies and government-sponsored enterprises

  $ 5,006     $ 995     $ —        $ (1   $ —        $ 6,000  

State and political subdivision

    2,013       236       —         (27     —         2,222  

Non-U.S. government

    1,778       144       —         (2     —         1,920  

U.S. corporate:

           

Utilities

    3,292       577       —         (5     —         3,864  

Energy

    2,498       265       —         (21     —         2,742  

Finance and insurance

    5,109       537       20       (13     —         5,653  

Consumer—non-cyclical

    3,489       538       —         (8     —         4,019  

Technology and communications

    2,112       217       —         (4     —         2,325  

Industrial

    1,195       100       —         (8     —         1,287  

Capital goods

    1,748       263       —         (5     —         2,006  

Consumer—cyclical

    1,750       158       —         (8     —         1,900  

Transportation

    929       114       —         (4     —         1,039  

Other

    370       31       —         —         —         401  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total U.S. corporate

    22,492       2,800       20       (76     —         25,236  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-U.S. corporate:

           

Utilities

    867       48       —         (2     —         913  

Energy

    1,925       163       —         (38     —         2,050  

Finance and insurance

    2,812       203       —         (3     —         3,012  

Consumer—non-cyclical

    780       41       —         (9     —         812  

Technology and communications

    999       71       —         (4     —         1,066  

Industrial

    1,178       65       —         (18     —         1,225  

Capital goods

    605       31       —         (5     —         631  

Consumer—cyclical

    535       14       —         —         —         549  

Transportation

    525       70       —         (1     —         594  

Other

    3,169       257       —         (15     —         3,411  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total non-U.S. corporate

    13,395       963       —         (95     —         14,263  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Residential mortgage-backed

    4,871       362       13       (17     (1     5,228  

Commercial mortgage-backed

    2,564       143       4       (9     —         2,702  

Other asset-backed

    3,735       23       1       (54     —         3,705  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total fixed maturity securities

    55,854       5,666       38       (281     (1     61,276  

Equity securities

    250       32       —         (7     —         275  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total available-for-sale securities

  $ 56,104     $ 5,698     $ 38     $ (288   $ (1   $ 61,551  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

The following table presents the gross unrealized losses and fair values of our investment securities, aggregated by investment type and length of time that individual investment securities have been in a continuous unrealized loss position, as of June 30, 2015:

 

    Less than 12 months     12 months or more     Total  

(Dollar amounts in millions)

  Fair
value
    Gross
unrealized
losses
    Number of
securities
    Fair
value
    Gross
unrealized
losses (1)
    Number of
securities
    Fair
value
    Gross
unrealized
losses (1)
    Number of
securities
 

Description of Securities

                 

Fixed maturity securities:

                 

U.S. government, agencies and government-sponsored enterprises

  $ 1,026     $ (49     29     $ —       $ —          —       $ 1,026     $ (49     29  

State and political subdivision

    554       (21     103       160       (17     —         714       (38     103  

Non-U.S. government

    213       (3     31       —         —          17       213       (3     48  

U.S. corporate

    4,497       (170     617       443       (28     61       4,940       (198     678  

Non-U.S. corporate

    2,181       (87     308       260       (24     39       2,441       (111     347  

Residential mortgage-backed

    520       (9     59       118       (10     70       638       (19     129  

Commercial mortgage-backed

    501       (11     73       74       (2     16       575       (13     89  

Other asset-backed

    846       (3     132       388       (36     48       1,234       (39     180  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal, fixed maturity securities

    10,338       (353     1,352       1,443       (117     251       11,781       (470     1,603  

Equity securities

    176       (7     63       21       (1     3       197       (8     66  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total for securities in an unrealized loss position

  $ 10,514     $ (360     1,415     $ 1,464     $ (118     254     $ 11,978     $ (478     1,669  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

% Below cost—fixed maturity securities:

                 

<20% Below cost

  $ 10,306     $ (343     1,348     $ 1,343     $ (75     232     $ 11,649     $ (418     1,580  

20%-50% Below cost

    32       (10     4       100       (41     13       132       (51     17  

>50% Below cost

    —         —         —         —         (1     6       —         (1     6  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total fixed maturity securities

    10,338       (353     1,352       1,443       (117     251       11,781       (470     1,603  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

% Below cost—equity securities:

                 

<20% Below cost

    176       (7     63       21       (1     3       197       (8     66  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total equity securities

    176       (7     63       21       (1     3       197       (8     66  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total for securities in an unrealized loss position

  $ 10,514     $ (360     1,415     $ 1,464     $ (118     254     $ 11,978     $ (478     1,669  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Investment grade

  $ 9,888     $ (326     1,294     $ 1,267     $ (92     196     $ 11,155     $ (418     1,490  

Below investment grade (2)

    626       (34     121       197       (26     58       823       (60     179  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total for securities in an unrealized loss position

  $ 10,514     $ (360     1,415     $ 1,464     $ (118     254     $ 11,978     $ (478     1,669  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)  Amounts included $1 million of unrealized losses on other-than-temporarily impaired securities.
(2)  Amounts that have been in a continuous unrealized loss position for 12 months or more included $1 million of unrealized losses on other-than-temporarily impaired securities.

 

The following table presents the gross unrealized losses and fair values of our corporate securities, aggregated by investment type and length of time that individual investment securities have been in a continuous unrealized loss position, based on industry, as of June 30, 2015:

 

    Less than 12 months     12 months or more     Total  

(Dollar amounts in millions)

  Fair
value
    Gross
unrealized
losses
    Number of
securities
    Fair
value
    Gross
unrealized
losses
    Number of
securities
    Fair
value
    Gross
unrealized
losses
    Number of
securities
 

Description of Securities

                 

U.S. corporate:

                 

Utilities

  $ 434     $ (23     63     $ 18     $ (1     5     $ 452     $ (24     68  

Energy

    646       (20     91       73       (6     11       719       (26     102  

Finance and insurance

    1,033       (34     142       110       (8     13       1,143       (42     155  

Consumer—non-cyclical

    590       (23     76       82       (3     11       672       (26     87  

Technology and communications

    618       (23     83       —         —         —         618       (23     83  

Industrial

    298       (15     43       48       (4     8       346       (19     51  

Capital goods

    306       (10     42       26       (2     4       332       (12     46  

Consumer—cyclical

    375       (11     47       64       (3     7       439       (14     54  

Transportation

    159       (10     25       22       (1     2       181       (11     27  

Other

    38       (1     5       —         —         —         38       (1     5  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal, U.S. corporate securities

    4,497       (170     617       443       (28     61       4,940       (198     678  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-U.S. corporate:

                 

Utilities

    90       (2     15       25       (2     3       115       (4     18  

Energy

    483       (28     62       22       (2     6       505       (30     68  

Finance and insurance

    384       (5     60       18       (1     3       402       (6     63  

Consumer—non-cyclical

    219       (12     22       33       (2     3       252       (14     25  

Technology and communications

    188       (7     27       32       (3     5       220       (10     32  

Industrial

    303       (15     37       104       (10     14       407       (25     51  

Capital goods

    140       (6     24       11       (3     2       151       (9     26  

Consumer—cyclical

    65       (1     10       —         —         —         65       (1     10  

Transportation

    115       (2     15       —         —         —         115       (2     15  

Other

    194       (9     36       15       (1     3       209       (10     39  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal, non-U.S. corporate securities

    2,181       (87     308       260       (24     39       2,441       (111     347  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total for corporate securities in an unrealized loss position

  $ 6,678     $ (257     925     $ 703     $ (52     100     $ 7,381     $ (309     1,025  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As indicated in the tables above, the majority of the securities in a continuous unrealized loss position for less than 12 months were investment grade and less than 20% below cost. These unrealized losses were primarily attributable to the increase in interest rates, mostly concentrated in our corporate securities. For securities that have been in a continuous unrealized loss position for less than 12 months, the average fair value percentage below cost was approximately 3% as of June 30, 2015.

 

Fixed Maturity Securities In A Continuous Unrealized Loss Position For 12 Months Or More

Of the $75 million of unrealized losses on fixed maturity securities in a continuous unrealized loss for 12 months or more that were less than 20% below cost, the weighted-average rating was “BBB+” and approximately 78% of the unrealized losses were related to investment grade securities as of June 30, 2015. These unrealized losses were predominantly attributable to corporate securities and municipal securities including fixed rate securities purchased in a lower rate environment and variable rate securities purchased in a higher rate and lower spread environment. The average fair value percentage below cost for these securities was approximately 5% as of June 30, 2015. See below for additional discussion related to fixed maturity securities that have been in a continuous unrealized loss position for 12 months or more with a fair value that was more than 20% below cost.

The following tables present the concentration of gross unrealized losses and fair values of fixed maturity securities that were more than 20% below cost and in a continuous unrealized loss position for 12 months or more by asset class as of June 30, 2015:

 

    Investment Grade  
    20% to 50%     Greater than 50%  

(Dollar amounts in millions)

  Fair
value
    Gross
unrealized
losses
    % of total
gross
unrealized
losses
    Number of
securities
    Fair
value
    Gross
unrealized
losses
    % of total
gross
unrealized
losses
    Number of
securities
 

Fixed maturity securities:

               

State and political subdivision

  $ 8     $ (4     1     1     $ —       $ —         —       —    

Non-U.S. corporate:

               

Industrial

    4       (2     1       1       —         —         —         —    

Capital goods

    7       (2     —         1       —         —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total non-U.S. corporate

    11       (4     1       2       —         —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Structured securities:

               

Other asset-backed

    68       (25     5       4       —         —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total structured securities

    68       (25     5       4       —         —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 87     $ (33     7     7     $ —        $ —         —       —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

    Below Investment Grade
 
    20% to 50%     Greater than 50%  

(Dollar amounts in millions)

  Fair
value
    Gross
unrealized
losses
    % of total
gross
unrealized
losses
    Number of
securities
    Fair
value
    Gross
unrealized
losses
    % of total
gross
unrealized
losses
    Number of
securities
 

Fixed maturity securities:

               

Non-U.S. corporate—capital goods

  $ 4     $ (1     —       1     $ —       $ —         —       —    

Structured securities:

               

Residential mortgage-backed

    1       (1     —         4       —         (1     —         6  

Other asset-backed

    8       (6     1       1       —         —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total structured securities

    9       (7     1       5       —         (1     —         6  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 13     $ (8     1     6     $ —       $ (1     —       6  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

For all securities in an unrealized loss position, we expect to recover the amortized cost based on our estimate of the amount and timing of cash flows to be collected. We do not intend to sell nor do we expect that we will be required to sell these securities prior to recovering our amortized cost. See below for further discussion of gross unrealized losses by asset class.

Structured Securities

Of the $33 million of unrealized losses related to structured securities that have been in an unrealized loss position for 12 months or more and were more than 20% below cost, $1 million related to other-than-temporarily impaired securities where the unrealized losses represented the portion of the other-than-temporary impairment recognized in OCI. The extent and duration of the unrealized loss position on our structured securities was primarily due to credit spreads that have widened since acquisition. Additionally, the fair value of certain structured securities has been impacted from high risk premiums being incorporated into the valuation as a result of the amount of potential losses that may be absorbed by the security in the event of additional deterioration in the U.S. economy.

While we consider the length of time each security had been in an unrealized loss position, the extent of the unrealized loss position and any significant declines in fair value subsequent to the balance sheet date in our evaluation of impairment for each of these individual securities, the primary factor in our evaluation of impairment is the expected performance for each of these securities. Our evaluation of expected performance is based on the historical performance of the associated securitization trust as well as the historical performance of the underlying collateral. Our examination of the historical performance of the securitization trust included consideration of the following factors for each class of securities issued by the trust: (i) the payment history, including failure to make scheduled payments; (ii) current payment status; (iii) current and historical outstanding balances; (iv) current levels of subordination and losses incurred to date; and (v) characteristics of the underlying collateral. Our examination of the historical performance of the underlying collateral included: (i) historical default rates, delinquency rates, voluntary and involuntary prepayments and severity of losses, including recent trends in this information; (ii) current payment status; (iii) loan to collateral value ratios, as applicable; (iv) vintage; and (v) other underlying characteristics such as current financial condition.

We use our assessment of the historical performance of both the securitization trust and the underlying collateral for each security, along with third-party sources, when available, to develop our best estimate of cash flows expected to be collected. These estimates reflect projections for future delinquencies, prepayments, defaults and losses for the assets that collateralize the securitization trust and are used to determine the expected cash flows for our security, based on the payment structure of the trust. Our projection of expected cash flows is primarily based on the expected performance of the underlying assets that collateralize the securitization trust and is not directly impacted by the rating of our security. While we consider the rating of the security as an indicator of the financial condition of the issuer, this factor does not have a significant impact on our expected cash flows for each security. In limited circumstances, our expected cash flows include expected payments from reliable financial guarantors where we believe the financial guarantor will have sufficient assets to pay claims under the financial guarantee when the cash flows from the securitization trust are not sufficient to make scheduled payments. We then discount the expected cash flows using the effective yield of each security to determine the present value of expected cash flows.

Based on this evaluation, the present value of expected cash flows was greater than or equal to the amortized cost for each security. Accordingly, we determined that the unrealized losses on each of our structured securities represented temporary impairments as of June 30, 2015.

 

Despite the considerable analysis and rigor employed on our structured securities, it is at least reasonably possible that the underlying collateral of these investments will perform worse than current market expectations. Such events may lead to adverse changes in cash flows on our holdings of structured securities and future write-downs within our portfolio of structured securities.

The following table presents the gross unrealized losses and fair values of our investment securities, aggregated by investment type and length of time that individual investment securities have been in a continuous unrealized loss position, as of December 31, 2014:

 

    Less than 12 months     12 months or more     Total  

(Dollar amounts in millions)

  Fair
value
    Gross
unrealized
losses
    Number of
securities
    Fair
value
    Gross
unrealized
losses (1)
    Number of
securities
    Fair
value
    Gross
unrealized
losses (1)
    Number of
securities
 

Description of Securities

                 

Fixed maturity securities:

                 

U.S. government, agencies and government-sponsored enterprises

  $ —       $ —         —       $ 75     $ (1     10     $ 75     $ (1     10  

State and political subdivision

    9       —         7       267       (27     45       276       (27     52  

Non-U.S. government

    64       (1     15       22       (1     4       86       (2     19  

U.S. corporate

    1,646       (33     233       1,201       (43     174       2,847       (76     407  

Non-U.S. corporate

    1,529       (67     230       504       (28     67       2,033       (95     297  

Residential mortgage-backed

    180       (1     24       249       (17     87       429       (18     111  

Commercial mortgage-backed

    163       —         21       362       (9     49       525       (9     70  

Other asset-backed

    1,551       (12     215       487       (42     55       2,038       (54     270  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal, fixed maturity securities

    5,142       (114     745       3,167       (168     491       8,309       (282     1,236  

Equity securities

    30       (3     46       48       (4     6       78       (7     52  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total for securities in an unrealized loss position

  $ 5,172     $ (117     791     $ 3,215     $ (172     497     $ 8,387     $ (289     1,288  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

% Below cost—fixed maturity securities:

                 

<20% Below cost

  $ 5,105     $ (103     741     $ 3,036     $ (114     470     $ 8,141     $ (217     1,211  

20%-50% Below cost

    37       (11     4       131       (53     15       168       (64     19  

>50% Below cost

    —         —         —         —         (1     6       —         (1     6  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total fixed maturity securities

    5,142       (114     745       3,167       (168     491       8,309       (282     1,236  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

% Below cost—equity securities:

                 

<20% Below cost

    26       (2     40       48       (4     6       74       (6     46  

20%-50% Below cost

    4       (1     6       —         —          —         4       (1     6  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total equity securities

    30       (3     46       48       (4     6       78       (7     52  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total for securities in an unrealized loss position

  $ 5,172     $ (117     791     $ 3,215     $ (172     497     $ 8,387     $ (289     1,288  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Investment grade

  $ 4,581     $ (75     664     $ 2,918     $ (145     424     $ 7,499     $ (220     1,088  

Below investment grade (2)

    591       (42     127       297       (27     73       888       (69     200  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total for securities in an unrealized loss position

  $ 5,172     $ (117     791     $ 3,215     $ (172     497     $ 8,387     $ (289     1,288  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)  Amounts included $1 million of unrealized losses on other-than-temporarily impaired securities.
(2)  Amounts that have been in a continuous unrealized loss position for 12 months or more included $1 million of unrealized losses on other-than-temporarily impaired securities.

 

The following table presents the gross unrealized losses and fair values of our corporate securities, aggregated by investment type and length of time that individual investment securities have been in a continuous unrealized loss position, based on industry, as of December 31, 2014:

 

    Less than 12 months     12 months or more     Total  

(Dollar amounts in millions)

  Fair
value
    Gross
unrealized
losses
    Number of
securities
    Fair
value
    Gross
unrealized
losses
    Number of
securities
    Fair
value
    Gross
unrealized
losses
    Number of
securities
 

Description of Securities

                 

U.S. corporate:

                 

Utilities

  $ 55     $ —         10     $ 164     $ (5     23     $ 219     $ (5     33  

Energy

    404       (16     56       96       (5     15       500       (21     71  

Finance and insurance

    401       (3     57       257       (10     35       658       (13     92  

Consumer—non-cyclical

    165       (3     21       182       (5     32       347       (8     53  

Technology and communications

    181       (3     27       97       (1     15       278       (4     42  

Industrial

    151       (4     21       80       (4     11       231       (8     32  

Capital goods

    85       —         13       122       (5     18       207       (5     31  

Consumer—cyclical

    132       (2     17       139       (6     18       271       (8     35  

Transportation

    52       (2     9       57       (2     6       109       (4     15  

Other

    20       —         2       7       —         1       27       —         3  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal, U.S. corporate securities

    1,646       (33     233       1,201       (43     174       2,847       (76     407  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-U.S. corporate:

                 

Utilities

    80       —         14       43       (2     5       123       (2     19  

Energy

    449       (33     60       58       (5     13       507       (38     73  

Finance and insurance

    261       (2     41       29       (1     6       290       (3     47  

Consumer—non-cyclical

    142       (6     13       83       (3     9       225       (9     22  

Technology and communications

    88       (2     18       81       (2     8       169       (4     26  

Industrial

    218       (9     31       116       (9     15       334       (18     46  

Capital goods

    68       (2     10       38       (3     4       106       (5     14  

Consumer—cyclical

    10       —         3       —         —         —         10       —         3  

Transportation

    34       —         7       14       (1     1       48       (1     8  

Other

    179       (13     33       42       (2     6       221       (15     39  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal, non-U.S. corporate securities

    1,529       (67     230       504       (28     67       2,033       (95     297  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total for corporate securities in an unrealized loss position

  $ 3,175     $ (100     463     $ 1,705     $ (71     241     $ 4,880     $ (171     704  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

The scheduled maturity distribution of fixed maturity securities as of June 30, 2015 is set forth below. Actual maturities may differ from contractual maturities because issuers of securities may have the right to call or prepay obligations with or without call or prepayment penalties.

 

(Amounts in millions)

   Amortized
cost or
cost
     Fair
value
 

Due one year or less

   $ 2,050      $ 2,069  

Due after one year through five years

     10,541        11,069  

Due after five years through ten years

     11,771        12,212  

Due after ten years

     21,136        23,678  
  

 

 

    

 

 

 

Subtotal

     45,498        49,028  

Residential mortgage-backed

     4,759        5,085  

Commercial mortgage-backed

     2,473        2,582  

Other asset-backed

     3,887        3,873  
  

 

 

    

 

 

 

Total

   $ 56,617      $ 60,568  
  

 

 

    

 

 

 

As of June 30, 2015, $7,376 million of our investments (excluding mortgage-backed and asset-backed securities) were subject to certain call provisions.

As of June 30, 2015, securities issued by finance and insurance, energy, utilities and consumer—non-cyclical industry groups represented approximately 22%, 13%, 12% and 12%, respectively, of our domestic and foreign corporate fixed maturity securities portfolio. No other industry group comprised more than 10% of our investment portfolio. This portfolio is widely diversified among various geographic regions in the United States and internationally, and is not dependent on the economic stability of one particular region.

As of June 30, 2015, we did not hold any fixed maturity securities in any single issuer, other than securities issued or guaranteed by the U.S. government, which exceeded 10% of stockholders’ equity.

(e) Commercial Mortgage Loans

Our mortgage loans are collateralized by commercial properties, including multi-family residential buildings. The carrying value of commercial mortgage loans is stated at original cost net of principal payments, amortization and allowance for loan losses.

 

We diversify our commercial mortgage loans by both property type and geographic region. The following tables set forth the distribution across property type and geographic region for commercial mortgage loans as of the dates indicated:

 

     June 30, 2015     December 31, 2014  

(Amounts in millions)

   Carrying
value
    %
of
total
    Carrying
value
    % of
total
 

Property type:

        

Retail

   $ 2,154       35   $ 2,150       35

Office

     1,726       28       1,643       27  

Industrial

     1,578       25       1,597       26  

Apartments

     471       8       494       8  

Mixed use/other

     265       4       239       4  
  

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal

     6,194       100     6,123       100
    

 

 

     

 

 

 

Unamortized balance of loan origination fees and costs

     (1       (1  

Allowance for losses

     (18       (22  
  

 

 

     

 

 

   

Total

   $ 6,175       $ 6,100    
  

 

 

     

 

 

   

 

     June 30, 2015     December 31, 2014  

(Amounts in millions)

   Carrying
value
    %
of
total
    Carrying
value
    % of
total
 

Geographic region:

        

South Atlantic

   $ 1,609       26   $ 1,673       27

Pacific

     1,608       26       1,636       27  

Middle Atlantic

     878       14       826       14  

Mountain

     574       9       536       9  

West North Central

     403       7       382       6  

East North Central

     399       6       397       7  

West South Central

     289       5       268       4  

New England

     272       4       264       4  

East South Central

     162       3       141       2  
  

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal

     6,194       100     6,123       100
    

 

 

     

 

 

 

Unamortized balance of loan origination fees and costs

     (1       (1  

Allowance for losses

     (18       (22  
  

 

 

     

 

 

   

Total

   $ 6,175       $ 6,100    
  

 

 

     

 

 

   

 

The following tables set forth the aging of past due commercial mortgage loans by property type as of the dates indicated:

 

     June 30, 2015  

(Amounts in millions)

   31 - 60 days
past due
    61 - 90 days
past due
    Greater than
90 days past
due
    Total
past due
    Current     Total  

Property type:

            

Retail

   $ 1     $ —       $ —       $ 1     $ 2,153     $ 2,154  

Office

     6       —         3       9       1,717       1,726  

Industrial

     —         —         —         —         1,578       1,578  

Apartments

     —         —         —         —         471       471  

Mixed use/other

     —         —         —         —         265       265  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total recorded investment

   $ 7     $ —       $ 3     $ 10     $ 6,184     $ 6,194  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

% of total commercial mortgage loans

     —       —       —       —       100     100
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     December 31, 2014  

(Amounts in millions)

   31 - 60 days
past due
    61 - 90 days
past due
    Greater
than 90
days
past
due
    Total
past due
    Current     Total  

Property type:

            

Retail

   $ —       $ —       $ —       $ —       $ 2,150     $ 2,150  

Office

     —         —         6       6       1,637       1,643  

Industrial

     —         —         2       2       1,595       1,597  

Apartments

     —         —         —         —         494       494  

Mixed use/other

     —         —         —         —         239       239  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total recorded investment

   $ —       $ —       $ 8     $ 8     $ 6,115     $ 6,123  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

% of total commercial mortgage loans

     —       —       —       —       100     100
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As of June 30, 2015 and December 31, 2014, we had no commercial mortgage loans that were past due for more than 90 days and still accruing interest. We also did not have any commercial mortgage loans that were past due for less than 90 days on non-accrual status as of June 30, 2015 and December 31, 2014.

We evaluate the impairment of commercial mortgage loans on an individual loan basis. As of June 30, 2015, our commercial mortgage loans greater than 90 days past due included loans with appraised values in excess of the recorded investment and the current recorded investment of these loans was expected to be recoverable.

During the six months ended June 30, 2015 and the year ended December 31, 2014, we modified or extended 7 and 28 commercial mortgage loans, respectively, with a total carrying value of $73 million and $254 million, respectively. All of these modifications or extensions were based on current market interest rates, did not result in any forgiveness in the outstanding principal amount owed by the borrower and were not considered troubled debt restructurings.

 

The following table sets forth the allowance for credit losses and recorded investment in commercial mortgage loans as of or for the periods indicated:

 

     Three months ended
June 30,
    Six months ended
June 30,
 

(Amounts in millions)

   2015     2014     2015     2014  

Allowance for credit losses:

        

Beginning balance

   $ 20     $ 30     $ 22     $ 33  

Charge-offs

     —         —         (3     (1

Recoveries

     —         —         —         —    

Provision

     (2     (3     (1     (5
  

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ 18     $ 27     $ 18     $ 27  
  

 

 

   

 

 

   

 

 

   

 

 

 

Ending allowance for individually impaired loans

   $ —       $ —       $ —       $ —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Ending allowance for loans not individually impaired that were evaluated collectively for impairment

   $ 18     $ 27     $ 18     $ 27  
  

 

 

   

 

 

   

 

 

   

 

 

 

Recorded investment:

        

Ending balance

   $ 6,194     $ 6,013     $ 6,194     $ 6,013  
  

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance of individually impaired loans

   $ 18     $ 17     $ 18     $ 17  
  

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance of loans not individually impaired that were evaluated collectively for impairment

   $ 6,176     $ 5,996     $ 6,176     $ 5,996  
  

 

 

   

 

 

   

 

 

   

 

 

 

As of June 30, 2015, we had an individually impaired commercial mortgage loan included within the office property type with a recorded investment of $3 million, an unpaid principal balance of $6 million and charge-offs of $3 million. As of June 30, 2015 and December 31, 2014, we had an individually impaired commercial mortgage loan included within the industrial property type with a recorded investment of $15 million, an unpaid principal balance of $16 million and charge-offs of $1 million, which were recorded in the first quarter of 2014.

In evaluating the credit quality of commercial mortgage loans, we assess the performance of the underlying loans using both quantitative and qualitative criteria. Certain risks associated with commercial mortgage loans can be evaluated by reviewing both the loan-to-value and debt service coverage ratio to understand both the probability of the borrower not being able to make the necessary loan payments as well as the ability to sell the underlying property for an amount that would enable us to recover our unpaid principal balance in the event of default by the borrower. The average loan-to-value ratio is based on our most recent estimate of the fair value for the underlying property which is evaluated at least annually and updated more frequently if necessary to better indicate risk associated with the loan. A lower loan-to-value indicates that our loan value is more likely to be recovered in the event of default by the borrower if the property was sold. The debt service coverage ratio is based on “normalized” annual net operating income of the property compared to the payments required under the terms of the loan. Normalization allows for the removal of annual one-time events such as capital expenditures, prepaid or late real estate tax payments or non-recurring third-party fees (such as legal, consulting or contract fees). This ratio is evaluated at least annually and updated more frequently if necessary to better indicate risk associated with the loan. A higher debt service coverage ratio indicates the borrower is less likely to default on the loan. The debt service coverage ratio should not be used without considering other factors associated with the borrower, such as the borrower’s liquidity or access to other resources that may result in our expectation that the borrower will continue to make the future scheduled payments.

 

The following tables set forth the loan-to-value of commercial mortgage loans by property type as of the dates indicated:

 

     June 30, 2015  

(Amounts in millions)

   0% - 50%     51% - 60%     61% - 75%     76% - 100%     Greater
than 100% (1)
    Total  

Property type:

            

Retail

   $ 713     $ 415     $ 942     $ 66     $ 18      $ 2,154  

Office

     451       302       848       99       26        1,726  

Industrial

     402       295       803       76       2        1,578  

Apartments

     188       78       197       8       —          471  

Mixed use/other

     55       38       166       6       —          265  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total recorded investment

   $ 1,809     $ 1,128     $ 2,956     $ 255     $ 46      $ 6,194  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

% of total

     29     18     48     4     1     100
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average debt service coverage ratio

     2.13       1.77       1.62       0.91       0.79        1.76  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)  Included $46 million of loans in good standing, where borrowers continued to make timely payments, with a total weighted-average loan-to-value of 122%.

 

     December 31, 2014  

(Amounts in millions)

   0% - 50%     51% - 60%     61% - 75%     76% - 100%     Greater
than 100% (1)
    Total  

Property type:

            

Retail

   $ 671     $ 419     $ 967     $ 75     $ 18      $ 2,150  

Office

     383       278       782       164       36        1,643  

Industrial

     451       285       778       60       23        1,597  

Apartments

     211       76       199       8       —          494  

Mixed use/other

     45       43       145       6       —          239  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total recorded investment

   $ 1,761     $ 1,101     $ 2,871     $ 313     $ 77      $ 6,123  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

% of total

     29     18     47     5     1     100
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average debt service coverage ratio

     2.27       1.75       1.61       1.02       0.72        1.78  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)  Included $15 million of impaired loans, $6 million of loans past due and not individually impaired and $56 million of loans in good standing, where borrowers continued to make timely payments, with a total weighted-average loan-to-value of 120%.

 

The following tables set forth the debt service coverage ratio for fixed rate commercial mortgage loans by property type as of the dates indicated:

 

     June 30, 2015  

(Amounts in millions)

   Less than 1.00     1.00 - 1.25     1.26 - 1.50     1.51 - 2.00     Greater
than 2.00
    Total  

Property type:

            

Retail

   $ 71     $ 237     $ 551     $ 890     $ 405     $ 2,154  

Office

     105       88       299       849       378       1,719  

Industrial

     155       137       229       704       353       1,578  

Apartments

     1       44       85       195       146       471  

Mixed use/other

     6       1       85       137       36       265  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total recorded investment

   $ 338     $ 507     $ 1,249     $ 2,775     $ 1,318     $ 6,187  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

% of total

     5     8     20     45     22     100
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average loan-to-value

     73     63     60     60     45     58
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     December 31, 2014  

(Amounts in millions)

   Less than 1.00     1.00 - 1.25     1.26 - 1.50     1.51 - 2.00     Greater
than 2.00
    Total  

Property type:

            

Retail

   $ 80     $ 253     $ 524     $ 870     $ 423     $ 2,150  

Office