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Investments
6 Months Ended
Jun. 30, 2012
Investments [Abstract]  
Investments

4. INVESTMENTS

 

Fixed Maturities and Equity Securities

 

The following tables provide information relating to fixed maturities and equity securities (excluding investments classified as trading) as of the dates indicated:

 

     June 30, 2012
               
               Other-than-
       Gross Gross   temporary
     Amortized Unrealized Unrealized Fair Impairments
     Cost Gains Losses Value in AOCI (3)
                   
     (in millions)
Fixed maturities, available-for-sale  
U.S. Treasury securities and obligations of U.S.                
 government authorities and agencies $11,951 $3,520 $11 $15,460 $0
Obligations of U.S. states and their political               
 subdivisions  2,895  530  1  3,424  0
Foreign government bonds  74,770  6,230  138  80,862  0
Corporate securities  122,796  11,159  2,100  131,855  (6)
Asset-backed securities(1)  12,132  169  1,455  10,846  (1,121)
Commercial mortgage-backed securities  11,780  703  60  12,423  11
Residential mortgage-backed securities(2)  8,847  500  52  9,295  (12)
Total fixed maturities, available-for-sale $245,171 $22,811 $3,817 $264,165 $(1,128)
Equity securities, available-for-sale $6,654 $1,240 $191 $7,703   

       

(1)       Includes credit tranched securities collateralized by sub-prime mortgages, auto loans, credit cards, education loans, and other asset types.

(2)       Includes publicly-traded agency pass-through securities and collateralized mortgage obligations.

(3)       Represents the amount of other-than-temporary impairment losses in “Accumulated other comprehensive income (loss),” or “AOCI,” which were not included in earnings. Amount excludes $359 million of net unrealized gains on impaired securities relating to changes in the value of such securities subsequent to the impairment measurement date.

 

 

 

     June 30, 2012
               
               Other-than-
       Gross Gross   temporary
     Amortized Unrealized Unrealized Fair Impairments
     Cost Gains Losses Value in AOCI (4)
                   
     (in millions)
Fixed maturities, held-to-maturity  
Foreign government bonds $1,213 $131 $0 $1,344 $0
Corporate securities(1)  1,134  28  76  1,086  0
Asset-backed securities(2)  1,138  72  0  1,210  0
Commercial mortgage-backed securities  376  55  0  431  0
Residential mortgage-backed securities(3)  910  60  0  970  0
Total fixed maturities, held-to-maturity(1) $4,771 $346 $76 $5,041 $0

       

(1)       Excludes notes with amortized cost of $750 million (fair value, $785 million) which have been offset with the associated payables under a netting agreement.

(2)       Includes credit tranched securities primarily collateralized by non-sub-prime mortgages.

(3)       Includes publicly-traded agency pass-through securities and collateralized mortgage obligations.

(4)       Represents the amount of other-than-temporary impairment losses in AOCI, which were not included in earnings. Amount excludes $1 million of net unrealized losses on impaired securities relating to changes in the value of such securities subsequent to the impairment measurement date.

     December 31, 2011
               
             Other-than-
       Gross Gross   temporary
     Amortized Unrealized Unrealized Fair Impairments
     Cost Gains Losses Value in AOCI(3)
                   
     (in millions)
Fixed maturities, available-for-sale  
U.S. Treasury securities and obligations of U.S.                
 government authorities and agencies $12,249 $2,873 $18 $15,104 $0
Obligations of U.S. states and their political               
 subdivisions  2,664  393  2  3,055  0
Foreign government bonds  72,442  4,754  209  76,987  0
Corporate securities  119,800  10,088  3,015  126,873  (22)
Asset-backed securities(1)  12,346  172  1,825  10,693  (1,199)
Commercial mortgage-backed securities  11,519  669  108  12,080  8
Residential mortgage-backed securities(2)  9,404  531  79  9,856  (13)
Total fixed maturities, available-for-sale $240,424 $19,480 $5,256 $254,648 $(1,226)
Equity securities, available-for-sale $6,922 $1,061 $448 $7,535   

       

(1)       Includes credit tranched securities collateralized by sub-prime mortgages, auto loans, credit cards, education loans, and other asset types.

(2)       Includes publicly-traded agency pass-through securities and collateralized mortgage obligations.

(3)       Represents the amount of other-than-temporary impairment losses in AOCI, which were not included in earnings. Amount excludes $223 million of net unrealized gains on impaired securities relating to changes in the value of such securities subsequent to the impairment measurement date.

 

     December 31, 2011
                   
               
             Other-than-
       Gross Gross   temporary
     Amortized Unrealized Unrealized Fair Impairments
     Cost Gains Losses Value in AOCI (4)
                   
     (in millions)
Fixed maturities, held-to-maturity  
Foreign government bonds $1,260 $128 $0 $1,388 $0
Corporate securities(1)  1,157  21  98  1,080  0
Asset-backed securities(2)  1,213  62  0  1,275  0
Commercial mortgage-backed securities  428  69  0  497  0
Residential mortgage-backed securities(3)  1,049  65  0  1,114  0
Total fixed maturities, held-to-maturity(1) $5,107 $345 $98 $5,354 $0

       

  • Excludes notes with amortized cost of $500 million (fair value, $519 million) which have been offset with the associated payables under a netting agreement.
  • Includes credit tranched securities primarily collateralized by non-sub-prime mortgages.
  • Includes publicly-traded agency pass-through securities and collateralized mortgage obligations.
  • Represents the amount of other-than-temporary impairment losses in AOCI, which were not included in earnings.

 

The amortized cost and fair value of fixed maturities by contractual maturities at June 30, 2012 are as follows:

 

     Available-for-Sale Held-to-Maturity
     Amortized Fair Amortized Fair
     Cost Value Cost Value
                
     (in millions)
Due in one year or less $14,398 $14,569 $0 $0
Due after one year through five years  45,276  46,568  66  68
Due after five years through ten years  53,953  58,122  403  410
Due after ten years(1)  98,785  112,342  1,878  1,952
Asset-backed securities  12,132  10,846  1,138  1,210
Commercial mortgage-backed securities  11,780  12,423  376  431
Residential mortgage-backed securities  8,847  9,295  910  970
 Total(1) $245,171 $264,165 $4,771 $5,041

       

  • Excludes notes with amortized cost of $750 million (fair value, $785 million) which have been offset with the associated payables under a netting agreement.

 

Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Asset-backed, commercial mortgage-backed and residential mortgage-backed securities are shown separately in the table above, as they are not due at a single maturity date.

 

The following table depicts the sources of fixed maturity proceeds and related investment gains (losses), as well as losses on impairments of both fixed maturities and equity securities:

 

     Three Months Ended Six Months Ended 
     June 30, June 30, 
     2012 2011 2012 2011 
                 
     (in millions) 
Fixed maturities, available-for-sale        
  Proceeds from sales $3,795 $7,788 $9,458 $10,929 
  Proceeds from maturities/repayments  5,296  5,327  10,285  9,258 
  Gross investment gains from sales, prepayments, and maturities  141  244  268  442 
  Gross investment losses from sales and maturities  (80)  (112)  (158)  (181) 
                 
Fixed maturities, held-to-maturity             
  Gross investment gains from prepayments $0 $0 $0 $0 
  Proceeds from maturities/repayments  124  131  247  270 
                 
Equity securities, available-for-sale             
  Proceeds from sales $1,068 $1,206 $2,150 $1,686 
  Gross investment gains from sales  92  212  214  309 
  Gross investment losses from sales  (75)  (57)  (161)  (70) 
                 
Fixed maturity and equity security impairments             
  Net writedowns for other-than-temporary impairment losses on             
   fixed maturities recognized in earnings(1) $(93) $(153) $(205) $(257) 
  Writedowns for impairments on equity securities  (41)  (37)  (90)  (59) 

       

  • Excludes the portion of other-than-temporary impairments recorded in “Other comprehensive income (loss),” representing any difference between the fair value of the impaired debt security and the net present value of its projected future cash flows at the time of impairment.

 

As discussed in Note 2, a portion of certain other-than-temporary impairment (“OTTI”) losses on fixed maturity securities are recognized in “Other comprehensive income (loss)” (“OCI”). For these securities, the net amount recognized in earnings (“credit loss impairments”) represents the difference between the amortized cost of the security and the net present value of its projected future cash flows discounted at the effective interest rate implicit in the debt security prior to impairment. Any remaining difference between the fair value and amortized cost is recognized in OCI. The following tables set forth the amount of pre-tax credit loss impairments on fixed maturity securities held by the Company as of the dates indicated, for which a portion of the OTTI loss was recognized in OCI, and the corresponding changes in such amounts.

Credit losses recognized in earnings on fixed maturity securities held by the Company for which a portion of
 the OTTI loss was recognized in OCI      
    Three Months Six Months
    Ended Ended
    June 30, June 30,
    2012 2012
         
    (in millions)
         
Balance, beginning of period $ 1,465 $ 1,475
Credit loss impairments previously recognized on securities which matured, paid down,      
 prepaid or were sold during the period   (67)   (85)
Credit loss impairments previously recognized on securities impaired to fair value during      
  the period(1)  0   (59)
Credit loss impairment recognized in the current period on securities not previously impaired   6   30
Additional credit loss impairments recognized in the current period on securities      
 previously impaired   21   58
Increases due to the passage of time on previously recorded credit losses   16   29
Accretion of credit loss impairments previously recognized due to an increase in       
 cash flows expected to be collected   (8)   (15)
Balance, end of period $ 1,433 $ 1,433

    Three Months Six Months
    Ended Ended
    June 30, June 30,
    2011 2011
         
    (in millions)
         
Balance, beginning of period $ 1,392 $1,493
Credit loss impairments previously recognized on securities which matured, paid down,      
  prepaid or were sold during the period   (69)  (237)
Credit loss impairments previously recognized on securities impaired to fair value during      
  the period(1)   (30)  (31)
Credit loss impairment recognized in the current period on securities not previously      
 impaired   9  26
Additional credit loss impairments recognized in the current period on securities previously      
 impaired   112  158
Increases due to the passage of time on previously recorded credit losses   13  27
Accretion of credit loss impairments previously recognized due to an increase in       
 cash flows expected to be collected   (8)  (17)
Balance, end of period $ 1,419 $ 1,419

       

(1)        Represents circumstances where the Company determined in the current period that it intends to sell the security or it is more likely than not that it will be required to sell the security before recovery of the security's amortized cost.

 

Trading Account Assets Supporting Insurance Liabilities

 

The following table sets forth the composition of “Trading account assets supporting insurance liabilities” as of the dates indicated:

 

     June 30, 2012 December 31, 2011
     Amortized Fair Amortized Fair
     Cost Value Cost Value
                
  (in millions)
                
Short-term investments and cash equivalents $270 $270 $951 $951
             
Fixed maturities:            
 Corporate securities  11,260  12,086  10,297  11,036
 Commercial mortgage-backed securities  1,987  2,110  2,157  2,247
 Residential mortgage-backed securities(1)  1,825  1,891  1,786  1,844
 Asset-backed securities(2)  1,308  1,204  1,504  1,367
 Foreign government bonds  706  725  644  655
 U.S. government authorities and agencies and obligations            
  of U.S. states  412  459  440  470
Total fixed maturities  17,498  18,475  16,828  17,619
Equity securities  1,029  984  1,050  911
                
Total trading account assets supporting insurance liabilities $18,797 $19,729 $18,829 $19,481

       

  • Includes publicly-traded agency pass-through securities and collateralized mortgage obligations.
  • Includes credit tranched securities collateralized by sub-prime mortgages, auto loans, credit cards, education loans and other asset types.

 

The net change in unrealized gains and losses from trading account assets supporting insurance liabilities still held at period end, recorded within “Asset management fees and other income” included $17 million and $152 million of gains during the three months ended June 30, 2012 and 2011, respectively, and $280 million and $108 million of gains during the six months ended June 30, 2012 and 2011, respectively.

 

Other Trading Account Assets

 

The following table sets forth the composition of the Other trading account assets as of the dates indicated:

 

     June 30, 2012 December 31, 2011 
     Amortized  Fair Amortized  Fair
     Cost Value Cost Value 
                 
 (in millions) 
Short-term investments and cash equivalents $1 $1 $4 $3 
                 
Fixed maturities:             
 Asset-backed securities  356  316  698  652 
 Residential mortgage-backed securities  164  86  186  96 
 Corporate securities  797  799  557  555 
 Commercial mortgage-backed securities  134  97  155  110 
 U.S. government authorities and agencies and obligations             
  of U.S. states  51  41  41  31 
 Foreign government bonds  49  49  47  47 
Total fixed maturities  1,551  1,388  1,684  1,491 
Other  3  5  15  19 
Equity securities  1,583  1,581  1,682  1,621 
 Subtotal $3,138 $2,975 $3,385 $3,134 
                 
Derivative instruments     2,661     2,411 
Total other trading account assets $3,138 $5,636 $3,385 $5,545 

 

The net change in unrealized gains and losses from other trading account assets, excluding derivative instruments, still held at period end, recorded within “Asset management fees and other income included $49 million of losses and $52 million of gains during the three months ended June 30, 2012 and 2011, respectively, and $88 million and $103 million of gains during the six months ended June 30, 2012 and 2011, respectively.

 

Concentrations of Financial Instruments

The Company monitors its concentrations of financial instruments on an on-going basis, and mitigates credit risk by maintaining a diversified investment portfolio which limits exposure to any one issuer.

As of June 30, 2012 and December 31, 2011, the Company was not exposed to any concentrations of credit risk of any single issuer greater than 10% of the Company's stockholders' equity, other than securities of the U.S. government, certain U.S. government agencies and certain securities guaranteed by the U.S. government, as well as the securities disclosed below.

 

     June 30, 2012 December 31, 2011 
     Amortized  Fair Amortized  Fair
     Cost Value Cost Value 
                 
Investments in Japanese government and government agency (in millions) 
  securities:             
Fixed maturities, available-for-sale $61,855 $66,608 $60,323 $63,846 
Fixed maturities, held-to-maturity  1,213  1,344  1,260  1,388 
Trading account assets supporting insurance liabilities  537  552  471  483 
Other trading account assets  40  41  40  40 
Short-term investments  0  0  0  0 
Cash equivalents  1,521  1,521  0  0 
 Total  $65,166 $70,066 $62,094 $65,757 
                 
     June 30, 2012 December 31, 2011 
     Amortized  Fair Amortized  Fair
     Cost Value Cost Value 
                 
Investments in South Korean government and government  (in millions)
  agency securities:             
Fixed maturities, available-for-sale $5,078 $5,786 $4,678 $5,240 
Fixed maturities, held-to-maturity  0  0  0  0 
Trading account assets supporting insurance liabilities  17  18  17  18 
Other trading account assets  4  4  2  2 
Short-term investments  0  0  0  0 
Cash equivalents  0  0  0  0 
 Total  $5,099 $5,808 $4,697 $5,260 

Commercial Mortgage and Other Loans

The Company's commercial mortgage and other loans are comprised as follows, as of the dates indicated:

     June 30, 2012  December 31, 2011 
     Amount % of  Amount % of 
     (in millions) Total  (in millions) Total 
                  
Commercial and agricultural mortgage loans by property type:              
Office $6,477  19.2% $6,391  19.8%
Retail  8,389  24.8   7,309  22.7 
Apartments/Multi-Family  5,013  14.8   5,277  16.4 
Industrial  7,302  21.6   7,049  21.8 
Hospitality  1,576  4.7   1,486  4.6 
Other  2,861  8.5   2,707  8.4 
                  
Total commercial mortgage loans  31,618  93.6   30,219  93.7 
                 
Agricultural property loans  2,160  6.4   2,046  6.3 
Total commercial and agricultural mortgage loans by property type  33,778  100.0%  32,265  100.0%
Valuation allowance  (299)      (313)    
                  
Total net commercial and agricultural mortgage loans by              
 property type  33,479      31,952    
                  
Other loans              
Uncollateralized loans  1,927      2,323    
Residential property loans  927      1,034    
Other collateralized loans  157      176    
                  
Total other loans  3,011      3,533    
Valuation allowance  (47)      (54)    
           
Total net other loans  2,964      3,479    
              
Total commercial mortgage and other loans(1) $36,443     $35,431    

       

  • Includes loans held at fair value.

 

The commercial mortgage and agricultural property loans are geographically dispersed throughout the United States, Canada and Asia with the largest concentrations in California (26%), New York (11%) and Texas (8%) at June 30, 2012.

 

Activity in the allowance for losses for all commercial mortgage and other loans, as of the dates indicated, is as follows:

     June 30, 2012
  Commercial Agricultural Residential Other      
     Mortgage Property Property Collateralized Uncollateralized   
     Loans Loans Loans Loans Loans Total
                      
  (in millions)
                   
Allowance for losses, beginning of year $294 $19 $16 $18 $20 $367
Addition to / (release of) allowance of                  
 losses  1  1  (3)  (3)  0  (4)
Charge-offs, net of recoveries  (15)  0  0  (1)  0  (16)
Change in foreign exchange  (1)  0  0  0  0  (1)
Total Ending Balance $279 $20 $13 $14 $20 $346
                      
     December 31, 2011
  Commercial Agricultural Residential Other      
     Mortgage Property Property Collateralized Uncollateralized   
     Loans Loans Loans Loans Loans Total
                      
  (in millions)
                   
Allowance for losses, beginning of year $497 $8 $17 $20 $33 $575
Addition to / (release of) allowance of                  
 losses  (94)  11  (2)  13  1  (71)
Charge-offs, net of recoveries  (109)  0  0  (15)  (15)  (139)
Change in foreign exchange  0  0  1  0  1  2
Total Ending Balance $294 $19 $16 $18 $20 $367

The following tables set forth the allowance for credit losses and the recorded investment in commercial mortgage and other loans as of the dates indicated:

     June 30, 2012
  Commercial Agricultural Residential Other      
     Mortgage Property Property Collateralized Uncollateralized   
     Loans Loans Loans Loans Loans Total
                      
Allowance for Credit Losses: (in millions)
Ending balance: individually evaluated                  
 for impairment $109 $12 $0 $14 $0 $135
Ending balance: collectively evaluated                  
 for impairment  170  8  13  0  20  211
Ending balance: loans acquired with                  
 deteriorated credit quality  0  0  0  0  0  0
Total ending balance $279 $20 $13 $14 $20 $346
                   
Recorded Investment:(1)                  
Ending balance gross of reserves:                   
 individually evaluated for impairment $1,534 $49 $0 $100 $8 $1,691
Ending balance gross of reserves:                   
 collectively evaluated for impairment  30,084  2,111  927  57  1,919  35,098
Ending balance gross of reserves: loans                  
 acquired with deteriorated credit                  
 quality  0  0  0  0  0  0
Total ending balance, gross of reserves $31,618 $2,160 $927 $157 $1,927 $36,789

       

  • Recorded investment reflects the balance sheet carrying value gross of related allowance.

 

     December 31, 2011
  Commercial Agricultural Residential Other      
     Mortgage Property Property Collateralized Uncollateralized   
     Loans Loans Loans Loans Loans Total
                      
Allowance for Credit Losses: (in millions)
Ending balance: individually evaluated                  
 for impairment $120 $11 $0 $18 $0 $149
Ending balance: collectively evaluated                  
 for impairment  174  8  16  0  20  218
Ending balance: loans acquired with                  
 deteriorated credit quality  0  0  0  0  0  0
Total ending balance $294 $19 $16 $18 $20 $367
                   
Recorded Investment:(1)                  
Ending balance gross of reserves:                   
 individually evaluated for impairment $1,903 $45 $0 $110 $92 $2,150
Ending balance gross of reserves:                   
 collectively evaluated for impairment  28,316  2,001  1,034  66  2,231  33,648
Ending balance gross of reserves: loans                  
 acquired with deteriorated credit                  
 quality  0  0  0  0  0  0
Total ending balance, gross of reserves $30,219 $2,046 $1,034 $176 $2,323 $35,798

       

  • Recorded investment reflects the balance sheet carrying value gross of related allowance.

 

Impaired loans include those loans for which it is probable that all amounts due will not be collected according to the contractual terms of the loan agreement. Impaired commercial mortgage and other loans identified in management's specific review of probable loan losses and the related allowance for losses, as of the dates indicated are as follows:

     As of June 30, 2012
               Average   
               Recorded   
        Unpaid      Investment  Interest
     Recorded  Principal Related  Before   Income
     Investment (1) Balance Allowance  Allowance (2)  Recognized (3)
                   
  (in millions)
With no related allowance recorded:               
Commercial mortgage loans:               
 Industrial $15 $15 $0 $11 $1
 Retail  6  6  0  2  0
 Office  1  83  0  6  0
 Apartments/Multi-Family  0  0  0  7  0
 Hospitality  11  74  0  25  3
 Other  20  20  0  18  0
Total commercial mortgage loans  53  198  0  69  4
                 
Agricultural property loans  0  0  0  0  0
Residential property loans  0  0  0  0  0
Other collateralized loans  0  0  0  0  0
Uncollateralized loans  5  13  0  6  0
Total with no related allowance $58 $211 $0 $75 $4
                 
With an allowance recorded:               
Commercial mortgage loans:               
 Industrial $23 $23 $19 $35 $0
 Retail  73  73  15  69  2
 Office  33  33  4  34  1
 Apartments/Multi-Family  41  41  5  81  1
 Hospitality  90  90  55  103  1
 Other  78  78  11  100  2
Total commercial mortgage loans  338  338  109  422  7
                 
Agricultural property loans  17  17  12  15  0
Residential property loans  0  0  0  0  0
Other collateralized loans  20  20  14  21  0
Uncollateralized loans  0  0  0  0  0
Total with related allowance $375 $375 $135 $458 $7
                 
Total:               
 Commercial mortgage loans $391 $536 $109 $491 $11
 Agricultural property loans  17  17  12  15  0
 Residential property loans  0  0  0  0  0
 Other collateralized loans  20  20  14  21  0
 Uncollateralized loans  5  13  0  6  0
Total $433 $586 $135 $533 $11

       

  • Recorded investment reflects the balance sheet carrying value gross of related allowance.
  • Average recorded investment represents the average of the beginning-of-period and all subsequent quarterly end-of-period balances.
  • The interest income recognized is for the year-to-date income regardless of when the impairments occurred.

 

     As of December 31, 2011
               Average   
               Recorded   
        Unpaid      Investment  Interest
     Recorded  Principal Related  Before   Income
     Investment (1) Balance Allowance  Allowance (2)  Recognized (3)
                   
  (in millions)
With no related allowance recorded:               
Commercial mortgage loans:               
 Industrial $0 $0 $0 $0 $0
 Retail  0  0  0  0  0
 Office  2  84  0  1  0
 Apartments/Multi-Family  0  0  0  0  0
 Hospitality  0  0  0  23  0
 Other  17  17  0  11  1
Total commercial mortgage loans  19  101  0  35  1
                 
Agricultural property loans  0  0  0  1  0
Residential property loans  0  0  0  0  0
Other collateralized loans  0  0  0  0  0
Uncollateralized loans  6  13  0  6  0
Total with no related allowance $25 $114 $0 $42 $1
                 
With an allowance recorded:               
Commercial mortgage loans:               
 Industrial $54 $54 $19 $36 $1
 Retail  89  89  11  114  3
 Office  47  47  3  49  0
 Apartments/Multi-Family  102  102  19  197  4
 Hospitality  129  129  55  178  0
 Other  92  92  13  100  2
Total commercial mortgage loans  513  513  120  674  10
                 
Agricultural property loans  19  19  11  14  0
Residential property loans  0  0  0  5  0
Other collateralized loans  21  21  18  31  2
Uncollateralized loans  0  0  0  13  0
Total with related allowance $553 $553 $149 $737 $12
                 
Total:               
 Commercial mortgage loans $532 $614 $120 $709 $11
 Agricultural property loans  19  19  11  15  0
 Residential property loans  0  0  0  5  0
 Other collateralized loans  21  21  18  31  2
 Uncollateralized loans  6  13  0  19  0
Total $578 $667 $149 $779 $13

       

  • Recorded investment reflects the balance sheet carrying value gross of related allowance.
  • Average recorded investment represents the average of the beginning-of-period and all subsequent quarterly end-of-period balances.
  • The interest income recognized is for the year-to-date income regardless of when the impairments occurred.

 

The net carrying value of commercial and other loans held for sale by the Company as of June 30, 2012 and December 31, 2011 was $120 million and $514 million, respectively. In all these transactions, the Company pre-arranges that it will sell the loan to an investor. As of June 30, 2012 and December 31, 2011, all of the Company's commercial and other loans held for sale were collateralized, with collateral primarily consisting of office buildings, retail properties, apartment complexes and industrial buildings.

 

The following tables set forth the credit quality indicators as of June 30, 2012, based upon the recorded investment gross of allowance for credit losses.

 

Commercial mortgage loans - Industrial                  
                        
     Debt Service Coverage Ratio - June 30, 2012
     Greater than 2.0X 1.8X to 2.0X 1.5X to <1.8X 1.2X to <1.5X 1.0X to <1.2X Less than 1.0X Grand Total
                         
Loan-to-Value Ratio (in millions)
0%-49.99% $765 $171 $230 $251 $26 $37 $1,480
50%-59.99%  291  69  339  330  79  108  1,216
60%-69.99%  730  36  511  378  445  85  2,185
70%-79.99%  437  433  178  314  209  89  1,660
80%-89.99%  0  19  0  106  102  373  600
90%-100%  0  0  0  0  0  112  112
Greater than 100%  0  0  0  16  6  27  49
                         
Total Industrial $2,223 $728 $1,258 $1,395 $867 $831 $ 7,302
                         
Commercial mortgage loans - Retail                     
     Debt Service Coverage Ratio - June 30, 2012
     Greater than 2.0X 1.8X to 2.0X 1.5X to <1.8X 1.2X to <1.5X 1.0X to <1.2X Less than 1.0X Grand Total
                         
Loan-to-Value Ratio (in millions)
0%-49.99% $1,173 $311 $354 $128 $46 $2 $2,014
50%-59.99%  842  736  281  177  55  9  2,100
60%-69.99%  1,211  440  1,113  331  103  22  3,220
70%-79.99%  27  10  240  538  14  19  848
80%-89.99%  0  0  0  20  22  8  50
90%-100%  0  0  5  48  0  38  91
Greater than 100%  0  0  0  28  8  30  66
                         
Total Retail $3,253 $1,497 $1,993 $1,270 $248 $128 $8,389
                         
Commercial mortgage loans - Office                     
    Debt Service Coverage Ratio - June 30, 2012
     Greater than 2.0X 1.8X to 2.0X 1.5X to <1.8X 1.2X to <1.5X 1.0X to <1.2X Less than 1.0X Grand Total
                         
Loan-to-Value Ratio (in millions)
0%-49.99% $1,807 $161 $283 $190 $6 $70 $2,517
50%-59.99%  549  62  290  20  137  67  1,125
60%-69.99%  821  89  306  307  87  65  1,675
70%-79.99%  127  10  0  20  619  15  791
80%-89.99%  0  0  0  55  123  97  275
90%-100%  0  0  0  17  0  17  34
Greater than 100%  0  0  0  17  34  9  60
                         
Total Office $3,304 $322 $879 $626 $1,006 $340 $ 6,477
                         
Commercial mortgage loans - Apartments/Multi-Family               
    Debt Service Coverage Ratio - June 30, 2012
     Greater than 2.0X 1.8X to 2.0X 1.5X to <1.8X 1.2X to <1.5X 1.0X to <1.2X Less than 1.0X Grand Total
                         
Loan-to-Value Ratio (in millions)
0%-49.99% $785 $175 $304 $204 $192 $39 $1,699
50%-59.99%  197  43  107  210  108  19  684
60%-69.99%  424  89  224  350  98  0  1,185
70%-79.99%  159  21  326  431  69  16  1,022
80%-89.99%  0  0  0  16  152  52  220
90%-100%  0  0  0  15  2  133  150
Greater than 100%  0  0  0  18  7  28  53
                         
Total Apartments/Multi-Family $1,565 $328 $961 $1,244 $628 $287 $5,013
                         
Commercial mortgage loans - Hospitality                  
    Debt Service Coverage Ratio - June 30, 2012
     Greater than 2.0X 1.8X to 2.0X 1.5X to <1.8X 1.2X to <1.5X 1.0X to <1.2X Less than 1.0X Grand Total
                         
Loan-to-Value Ratio (in millions)
0%-49.99% $314 $118 $162 $56 $0 $0 $650
50%-59.99%  150  0  33  0  0  0  183
60%-69.99%  73  0  25  176  11  0  285
70%-79.99%  0  0  0  150  47  0  197
80%-89.99%  0  0  0  70  3  60  133
90%-100%  0  0  5  19  2  0  26
Greater than 100%  0  0  0  0  10  92  102
Total Hospitality $537 $118 $225 $471 $73 $152 $ 1,576
                         
Commercial mortgage loans - Other                   
     Debt Service Coverage Ratio - June 30, 2012
     Greater than 2.0X 1.8X to 2.0X 1.5X to <1.8X 1.2X to <1.5X 1.0X to <1.2X Less than 1.0X Grand Total
                         
Loan-to-Value Ratio (in millions)
0%-49.99% $234 $10 $68 $17 $0 $0 $329
50%-59.99%  324  98  13  78  9  0  522
60%-69.99%  404  78  519  169  37  1  1,208
70%-79.99%  282  0  0  300  22  0  604
80%-89.99%  0  0  0  60  0  6  66
90%-100%  0  0  0  0  16  12  28
Greater than 100%  0  0  19  12  2  71  104
                         
Total Other $1,244 $186 $619 $636 $86 $90 $ 2,861
                         
Commercial mortgage loans - Agricultural Properties                
     Debt Service Coverage Ratio - June 30, 2012
     Greater than 2.0X 1.8X to 2.0X 1.5X to <1.8X 1.2X to <1.5X 1.0X to <1.2X Less than 1.0X Grand Total
                         
Loan-to-Value Ratio (in millions)
0%-49.99% $534 $136 $310 $425 $150 $2 $1,557
50%-59.99%  58  3  118  42  0  0  221
60%-69.99%  155  5  178  0  0  0  338
70%-79.99%  0  0  0  0  0  0  0
80%-89.99%  0  0  0  0  0  44  44
90%-100%  0  0  0  0  0  0  0
Greater than 100%  0  0  0  0  0  0  0
                         
Total Agricultural  $747 $144 $606 $467 $150 $46 $ 2,160
                         
Commercial mortgage and agricultural loans                  
                         
     Debt Service Coverage Ratio - June 30, 2012
     Greater than 2.0X 1.8X to 2.0X 1.5X to <1.8X 1.2X to <1.5X 1.0X to <1.2X Less than 1.0X Grand Total
                         
Loan-to-Value Ratio (in millions)
0%-49.99% $5,612 $1,082 $1,711 $1,271 $420 $150 $10,246
50%-59.99%  2,411  1,011  1,181  857  388  203  6,051
60%-69.99%  3,818  737  2,876  1,711  781  173  10,096
70%-79.99%  1,032  474  744  1,753  980  139  5,122
80%-89.99%  0  19  0  327  402  640  1,388
90%-100%  0  0  10  99  20  312  441
Greater than 100%  0  0  19  91  67  257  434
 Total Commercial Mortgage                      
  and Agricultural  $12,873 $3,323 $6,541 $6,109 $3,058 $1,874 $ 33,778

The following tables set forth the credit quality indicators as of December 31, 2011, based upon the recorded investment gross of allowance for credit losses.

 

Commercial mortgage loans - Industrial                  
                        
     Debt Service Coverage Ratio - December 31, 2011
     Greater than 2.0X 1.8X to 2.0X 1.5X to <1.8X 1.2X to <1.5X 1.0X to <1.2X Less than 1.0X Grand Total
                         
Loan-to-Value Ratio (in millions)
0%-49.99% $627 $311 $211 $254 $19 $48 $1,470
50%-59.99%  299  86  315  246  73  46  1,065
60%-69.99%  922  287  380  308  373  105  2,375
70%-79.99%  175  86  136  448  402  95  1,342
80%-89.99%  0  0  0  106  114  236  456
90%-100%  19  0  0  0  0  162  181
Greater than 100%  16  0  0  0  19  125  160
                         
Total Industrial $2,058 $770 $1,042 $1,362 $1,000 $817 $ 7,049
                         
Commercial mortgage loans - Retail                     
     Debt Service Coverage Ratio - December 31, 2011
     Greater than 2.0X 1.8X to 2.0X 1.5X to <1.8X 1.2X to <1.5X 1.0X to <1.2X Less than 1.0X Grand Total
                         
Loan-to-Value Ratio (in millions)
0%-49.99% $1,188 $251 $523 $87 $18 $3 $2,070
50%-59.99%  627  507  590  54  48  3  1,829
60%-69.99%  351  539  739  485  82  17  2,213
70%-79.99%  0  47  289  608  18  0  962
80%-89.99%  0  31  0  9  17  23  80
90%-100%  0  0  18  14  16  40  88
Greater than 100%  0  0  0  21  46  0  67
Total Retail $2,166 $1,375 $2,159 $1,278 $245 $86 $ 7,309
                         
Commercial mortgage loans - Office                     
    Debt Service Coverage Ratio - December 31, 2011
     Greater than 2.0X 1.8X to 2.0X 1.5X to <1.8X 1.2X to <1.5X 1.0X to <1.2X Less than 1.0X Grand Total
                         
Loan-to-Value Ratio (in millions)
0%-49.99% $1,756 $365 $181 $132 $23 $31 $2,488
50%-59.99%  572  106  210  198  16  9  1,111
60%-69.99%  612  412  79  460  61  38  1,662
70%-79.99%  65  0  31  15  618  15  744
80%-89.99%  0  0  0  138  52  54  244
90%-100%  0  0  16  0  0  18  34
Greater than 100%  0  0  17  71  8  12  108
Total Office $3,005 $883 $534 $1,014 $778 $177 $ 6,391
                         
Commercial mortgage loans - Apartments/Multi-Family               
    Debt Service Coverage Ratio - December 31, 2011
     Greater than 2.0X 1.8X to 2.0X 1.5X to <1.8X 1.2X to <1.5X 1.0X to <1.2X Less than 1.0X Grand Total
                         
Loan-to-Value Ratio (in millions)
0%-49.99% $726 $176 $272 $172 $215 $61 $1,622
50%-59.99%  95  16  257  156  59  31  614
60%-69.99%  425  18  341  356  76  88  1,304
70%-79.99%  107  99  146  729  130  47  1,258
80%-89.99%  0  15  0  107  0  52  174
90%-100%  0  0  13  16  2  77  108
Greater than 100%  0  0  0  36  21  140  197
Total Apartments/Multi-Family $1,353 $324 $1,029 $1,572 $503 $496 $ 5,277
                         
Commercial mortgage loans - Hospitality                  
    Debt Service Coverage Ratio - December 31, 2011
     Greater than 2.0X 1.8X to 2.0X 1.5X to <1.8X 1.2X to <1.5X 1.0X to <1.2X Less than 1.0X Grand Total
                         
Loan-to-Value Ratio (in millions)
0%-49.99% $143 $158 $0 $115 $22 $0 $438
50%-59.99%  51  0  0  9  57  0  117
60%-69.99%  0  6  45  350  11  0  412
70%-79.99%  6  0  0  0  117  61  184
80%-89.99%  0  0  77  49  37  36  199
90%-100%  0  0  19  0  21  15  55
Greater than 100%  0  0  0  0  2  79  81
Total Hospitality $200 $164 $141 $523 $267 $191 $ 1,486
                         
Commercial mortgage loans - Other                   
     Debt Service Coverage Ratio - December 31, 2011
     Greater than 2.0X 1.8X to 2.0X 1.5X to <1.8X 1.2X to <1.5X 1.0X to <1.2X Less than 1.0X Grand Total
                         
Loan-to-Value Ratio (in millions)
0%-49.99% $333 $31 $6 $74 $1 $1 $446
50%-59.99%  50  185  20  7  0  0  262
60%-69.99%  111  173  280  295  118  7  984
70%-79.99%  286  0  202  286  13  0  787
80%-89.99%  0  0  61  21  15  5  102
90%-100%  0  19  0  0  16  15  50
Greater than 100%  0  0  0  0  2  74  76
                         
Total Other $780 $408 $569 $683 $165 $102 $ 2,707
                         
Commercial mortgage loans - Agricultural Properties                
     Debt Service Coverage Ratio - December 31, 2011
     Greater than 2.0X 1.8X to 2.0X 1.5X to <1.8X 1.2X to <1.5X 1.0X to <1.2X Less than 1.0X Grand Total
                         
Loan-to-Value Ratio (in millions)
0%-49.99% $383 $123 $340 $427 $154 $0 $1,427
50%-59.99%  70  120  8  39  0  3  240
60%-69.99%  155  5  181  0  0  0  341
70%-79.99%  0  0  0  0  0  0  0
80%-89.99%  0  0  0  0  0  0  0
90%-100%  0  0  0  0  0  38  38
Greater than 100%  0  0  0  0  0  0  0
                         
Total Agricultural  $608 $248 $529 $466 $154 $41 $ 2,046
                         
Commercial mortgage and agricultural loans                  
                         
     Debt Service Coverage Ratio - December 31, 2011
     Greater than 2.0X 1.8X to 2.0X 1.5X to <1.8X 1.2X to <1.5X 1.0X to <1.2X Less than 1.0X Grand Total
                         
Loan-to-Value Ratio (in millions)
0%-49.99% $5,156 $1,415 $1,533 $1,261 $452 $144 $9,961
50%-59.99%  1,764  1,020  1,400  709  253  92  5,238
60%-69.99%  2,576  1,440  2,045  2,254  721  255  9,291
70%-79.99%  639  232  804  2,086  1,298  218  5,277
80%-89.99%  0  46  138  430  235  406  1,255
90%-100%  19  19  66  30  55  365  554
Greater than 100%  16  0  17  128  98  430  689
 Total Commercial Mortgage                      
  and Agricultural  $10,170 $4,172 $6,003 $6,898 $3,112 $1,910 $ 32,265

The following tables provide an aging of past due commercial mortgage and other loans as of the dates indicated, based upon the recorded investment gross of allowance for credit losses.

     As of June 30, 2012
                       Total
           Greater  Greater    Commercial
           Than 90 Than 90   Mortgage
       30-59 Days  60-89 Days Days - Days - Not Total Past and Other
     Current Past Due Past Due Accruing Accruing Due Loans
                         
  (in millions)
Commercial mortgage loans:                     
 Industrial $7,302 $0 $0 $0 $0 $0 $7,302
 Retail  8,384  0  0  0  5  5  8,389
 Office  6,444  5  0  0  28  33  6,477
 Apartments/Multi-Family  4,995  0  0  0  18  18  5,013
 Hospitality  1,571  0  0  0  5  5  1,576
 Other  2,850  5  0  0  6  11  2,861
Total commercial mortgage                      
 loans  31,546  10  0  0  62  72  31,618
                      
Agricultural property loans  2,116  0  0  0  44  44  2,160
Residential property loans  894  13  4  0  16  33  927
Other collateralized loans  155  0  0  0  2  2  157
Uncollateralized loans  1,927  0  0  0  0  0  1,927
Total $36,638 $23 $4 $0 $124 $151 $36,789
                         
                         
     As of December 31, 2011
                       Total
           Greater  Greater    Commercial
           Than 90 Than 90   Mortgage
       30-59 Days  60-89 Days Days - Days - Not Total Past and Other
     Current Past Due Past Due Accruing Accruing Due Loans
                         
  (in millions)
Commercial mortgage loans:                     
 Industrial $7,047 $0 $2 $0 $0 $2 $7,049
 Retail  7,294  0  0  0  15  15  7,309
 Office  6,369  5  0  0  17  22  6,391
 Apartments/Multi-Family  5,207  0  0  0  70  70  5,277
 Hospitality  1,486  0  0  0  0  0  1,486
 Other  2,657  13  10  0  27  50  2,707
Total commercial mortgage                      
 loans  30,060  18  12  0  129  159  30,219
                      
Agricultural property loans  2,005  0  1  1  39  41  2,046
Residential property loans  988  22  6  0  18  46  1,034
Other collateralized loans  174  0  0  0  2  2  176
Uncollateralized loans  2,323  0  0  0  0  0  2,323
Total $35,550 $40 $19 $1 $188 $248 $35,798

See Note 2 for further discussion regarding nonaccrual status loans. The following table sets forth commercial mortgage and other loans on nonaccrual status as of the dates indicated, based upon the recorded investment gross of allowance for credit losses:

     June 30, 2012 December 31, 2011
          
  (in millions)
Commercial mortgage loans:      
 Industrial $42 $54
 Retail  78  72
 Office  62  58
 Apartments/Multi-Family  59  129
 Hospitality  114  169
 Other  109  144
Total commercial mortgage loans  464  626
       
Agricultural property loans  48  44
Residential property loans  15  18
Other collateralized loans  20  15
Uncollateralized loans  8  8
       
Total $555 $711

The following table sets forth the commercial mortgage and other loans acquired and sold during the three months ended June 30, 2012:

 

     Commercial Agricultural Residential Other      
     Mortgage Property Property Collateralized Uncollateralized   
     Loans Loans Loans Loans Loans Total
                      
  (in millions)
Acquired(1) $0 $0 $0 $0 $47 $47
Sold(2)  0  0  0  0  0  0

       

  • Reported at purchase price of commercial mortgage and other loans acquired.
  • Reported at book value of commercial mortgage and other loans sold.

 

The following tables provide information about commercial mortgage and other loans involved in a troubled debt restructuring as of the dates indicated. The pre-modification outstanding recorded investment has been adjusted for any partial payoffs, and the table excludes troubled debt restructurings where we have received assets, other than loans, in full satisfaction of the loan. See Note 2 for additional information relating to the accounting for troubled debt restructurings.

     Three Months Ended June 30, 2012 Six Months Ended June 30, 2012
     Adjusted   Adjusted  
     Pre-Modification Post-Modification Pre-Modification Post-Modification
     Outstanding Outstanding Outstanding Outstanding
     Recorded Recorded Recorded Recorded
     Investment Investment Investment Investment
                
  (in millions)
Commercial mortgage loans:            
 Industrial $0 $0 $0 $0
 Retail  0  0  0  0
 Office  0  0  5  5
 Apartments/Multi-Family  0  0  0  0
 Hospitality  0  0  0  0
 Other  15  13  15  13
Total commercial mortgage loans  15  13  20  18
             
Agricultural property loans  0  0  0  0
Residential property loans  0  0  0  0
Other collateralized loans  0  0  0  0
Uncollateralized loans  0  0  0  0
             
Total $15 $13 $20 $18

 

The amount of payment defaults during the period on commercial mortgage and other loans that were modified as a troubled debt restructuring within the last 12 months was less than $1 million as of June 30, 2012.

 

As of June 30, 2012, the Company committed to fund $6 million to borrowers that have been involved in a troubled debt restructuring.

Net Investment Income

 

Net investment income for the three and six months ended June 30, 2012 and 2011 was from the following sources:

 

  Three Months Ended Six Months Ended
  June 30, June 30,
  2012 2011 2012 2011
   (in millions)
Fixed maturities, available-for-sale $2,416 $2,374 $4,817 $4,557
Fixed maturities, held-to-maturity  34  31  68  68
Equity securities, available-for-sale  86  108  162  181
Trading account assets  220  208  451  419
Commercial mortgage and other loans  484  473  971  949
Policy loans  147  149  295  293
Broker-dealer related receivables  0  0  0  0
Short-term investments and cash equivalents  12  18  24  31
Other long-term investments  71  70  111  149
Gross investment income  3,470  3,431  6,899  6,647
Less: investment expenses  (112)  (104)  (221)  (202)
Net investment income $3,358 $3,327 $6,678 $6,445

Realized Investment Gains (Losses), Net 

Realized investment gains (losses), net, for the three and six months ended June 30, 2012 and 2011, were from the following sources:

     Three Months Ended Six Months Ended
     June 30, June 30,
     2012 2011 2012 2011
                
     (in millions)
Fixed maturities $(32) $(21) $(95) $4
Equity securities  (24)  118  (37)  180
Commercial mortgage and other loans  10  23  21  34
Investment real-estate  (70)  (9)  (67)  (12)
Joint ventures and limited partnerships  6  59  2  58
Derivatives(1)  1,874  297  555  136
Other  (1)  1  0  18
Realized investment gains (losses), net $1,763 $468 $379 $418

       

(1) Includes the offset of hedged items in qualifying effective hedge relationships prior to maturity or termination.

 

Net Unrealized Investment Gains (Losses)

 

Net unrealized investment gains and losses on securities classified as “available-for-sale” and certain other long-term investments and other assets are included in the Consolidated Statements of Financial Position as a component of “Accumulated other comprehensive income (loss),” or “AOCI.” Changes in these amounts include reclassification adjustments to exclude from “Other comprehensive income (loss)” those items that are included as part of “Net income” for a period that had been part of “Other comprehensive income (loss)” in earlier periods. The amounts for the periods indicated below, split between amounts related to fixed maturity securities on which an OTTI loss has been recognized, and all other net unrealized investment gains and losses, are as follows:

 

Net Unrealized Investment Gains and Losses on Fixed Maturity Securities on which an OTTI loss has been recognized

                      
        Deferred            
        Policy            
        Acquisition          Accumulated
       Costs,       Other
       Deferred       Comprehensive
     Net Sales       Income (Loss)
     Unrealized Inducements,     Deferred Related To Net
     Gains (Losses) and Value Future   Income Tax Unrealized
     on  of Business Policy  Policyholders' (Liability) Investment
     Investments Acquired Benefits Dividends Benefit Gains (Losses)
                      
  (in millions)
Balance, December 31, 2011 $(1,003) $16 $14 $466 $269 $(238)
Net investment gains (losses) on                  
 investments arising during the                   
  period  125           (44)  81
Reclassification adjustment for (gains)                   
 losses included in net income  194           (68)  126
Reclassification adjustment for OTTI                  
 losses excluded from net income(1)  (85)           30  (55)
Impact of net unrealized investment                  
 (gains) losses on deferred policy                  
 acquisition costs, deferred sales                  
 inducements and value of                   
 business acquired     (2)        0  (2)
Impact of net unrealized investment                  
 (gains) losses on future policy                  
  benefits        (4)     1  (3)
Impact of net unrealized investment                  
 (gains) losses on policyholders'                  
 dividends           (92)  32  (60)
Balance, June 30, 2012 $(769) $14 $10 $374 $220 $(151)

       

  • Represents “transfers in” related to the portion of OTTI losses recognized during the period that were not recognized in earnings for securities with no prior OTTI loss.

 

All Other Net Unrealized Investment Gains and Losses in AOCI

 

        Deferred            
        Policy            
        Acquisition          Accumulated
       Costs,       Other
       Deferred       Comprehensive
     Net Sales       Income (Loss)
     Unrealized Inducements,     Deferred Related To Net
     Gains (Losses) and Value Future   Income Tax Unrealized
     on  of Business Policy  Policyholders' (Liability) Investment
     Investments(1) Acquired Benefits Dividends Benefit Gains (Losses)
                      
  (in millions)
Balance, December 31, 2011 $15,748 $(1,182) $(1,269) $(4,319) $(2,935) $6,043
Net investment gains (losses) on                  
 investments arising during the                   
  period  5,048           (1,774)  3,274
Reclassification adjustment for (gains)                   
 losses included in net income  (45)           16  (29)
Reclassification adjustment for OTTI                  
 losses excluded from net income(2)  85           (30)  55
Impact of net unrealized investment                  
 (gains) losses on deferred policy                  
 acquisition costs, deferred sales                  
 inducements and value of                   
 business acquired     (95)        33  (62)
Impact of net unrealized investment                  
 (gains) losses on future policy                  
  benefits        (102)     36  (66)
Impact of net unrealized investment                  
 (gains) losses on policyholders'                  
 dividends           (709)  248  (461)
Balance, June 30, 2012 $20,836 $(1,277) $(1,371) $(5,028) $(4,406) $8,754

       

  • Includes cash flow hedges. See Note 14 for information on cash flow hedges.
  • Represents “transfers out” related to the portion of OTTI losses recognized during the period that were not recognized in earnings for securities with no prior OTTI loss.

 

The table below presents net unrealized gains (losses) on investments by asset class as of the dates indicated:

 

 

     June 30, December 31,
     2012 2011
          
  (in millions)
Fixed maturity securities on which an OTTI loss has been recognized $ (769) $ (1,003)
Fixed maturity securities, available-for-sale - all other   19,763   15,227
Equity securities, available-for-sale   1,049   613
Derivatives designated as cash flow hedges (1)   (9)   (86)
Other investments (2)   33   (6)
Net unrealized gains (losses) on investments $ 20,067 $ 14,745

       

  • See Note 14 for more information on cash flow hedges.
  • As of June 30, 2012, includes $79 million of net unrealized losses on held-to-maturity securities that were previously transferred from available-for-sale. Also includes net unrealized gains on certain joint ventures that are included in “Other assets.

 

Duration of Gross Unrealized Loss Positions for Fixed Maturities

 

The following table shows the fair value and gross unrealized losses aggregated by investment category and length of time that individual fixed maturity securities have been in a continuous unrealized loss position, as of the dates indicated:

 

    June 30, 2012
    Less than twelve months Twelve months or more Total
                     
    Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses
                     
  (in millions)
Fixed maturities(1)  
U.S. Treasury securities and obligations of                  
 U.S. government authorities and agencies $432 $6 $57 $5 $489 $11
Obligations of U.S. states and their political                  
 subdivisions  59  0  5  1  64  1
Foreign government bonds  1,686  117  155  21  1,841  138
Corporate securities  14,494  472  10,158  1,704  24,652  2,176
Commercial mortgage-backed securities  1,356  25  246  35  1,602  60
Asset-backed securities  1,130  23  4,200  1,432  5,330  1,455
Residential mortgage-backed securities  210  4  450  48  660  52
  Total $19,367 $647 $15,271 $3,246 $34,638 $3,893

       

  • Includes $600 million of fair value and $76 million of gross unrealized losses at June 30, 2012, on securities classified as held-to-maturity, a portion of which are not reflected in “Accumulated other comprehensive income (loss).

    December 31, 2011
    Less than twelve months Twelve months or more Total
                     
    Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses
                     
  (in millions)
Fixed maturities(1)  
U.S. Treasury securities and obligations of                  
 U.S. government authorities and agencies $870 $8 $130 $10 $1,000 $18
Obligations of U.S. states and their political                  
 subdivisions  7  0  46  2  53  2
Foreign government bonds  4,017  182  306  27  4,323  209
Corporate securities  21,419  1,144  9,691  1,969  31,110  3,113
Commercial mortgage-backed securities  917  61  362  47  1,279  108
Asset-backed securities  2,746  40  4,134  1,785  6,880  1,825
Residential mortgage-backed securities  422  19  378  60  800  79
  Total $30,398 $1,454 $15,047 $3,900 $45,445 $5,354

  • Includes $706 million of fair value and $98 million of gross unrealized losses at December 31, 2011, on securities classified as held-to-maturity, a portion of which are not reflected in “Accumulated other comprehensive income (loss).

 

The gross unrealized losses at June 30, 2012 and December 31, 2011, are composed of $2,673 million and $3,535 million, respectively, related to high or highest quality securities based on NAIC or equivalent rating and $1,220 million and $1,819 million, respectively, related to other than high or highest quality securities based on NAIC or equivalent rating. At June 30, 2012, $2,376 million of the gross unrealized losses represented declines in value of greater than 20%, $318 million of which had been in that position for less than six months, as compared to $3,478 million at December 31, 2011, that represented declines in value of greater than 20%, $871 million of which had been in that position for less than six months. At June 30, 2012, the $3,246 million of gross unrealized losses of twelve months or more were concentrated in asset-backed securities, and in the manufacturing, public utilities, and finance sectors of the Company's corporate securities. At December 31, 2011, the $3,900 million of gross unrealized losses of twelve months or more were concentrated in asset-backed securities, and in the manufacturing, finance, and public utilities sectors of the Company's corporate securities. In accordance with its policy described in Note 2, the Company concluded that an adjustment to earnings for other-than-temporary impairments for these securities was not warranted at June 30, 2012 or December 31, 2011. These conclusions are based on a detailed analysis of the underlying credit and cash flows on each security. The gross unrealized losses are primarily attributable to foreign currency movements, credit spread widening and increased liquidity discounts. At June 30, 2012, the Company does not intend to sell the securities and it is not more likely than not that the Company will be required to sell the securities before the anticipated recovery of its remaining amortized cost basis.

 

Duration of Gross Unrealized Loss Positions for Equity Securities

 

The following table shows the fair value and gross unrealized losses aggregated by length of time that individual equity securities have been in a continuous unrealized loss position, as of the following dates:

 

    June 30, 2012
    Less than twelve months Twelve months or more Total
    Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses
                     
  (in millions)
Equity securities, available-for-sale $1,802 $191 $0 $0 $1,802 $191
                     
    December 31, 2011
    Less than twelve months Twelve months or more Total
    Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses
                     
  (in millions)
Equity securities, available-for-sale $2,602 $448 $0 $0 $2,602 $448

At June 30, 2012, $39 million of the gross unrealized losses represented declines of greater than 20%, $34 million of which had been in that position for less than six months. At December 31, 2011, $236 million of the gross unrealized losses represented declines of greater than 20%, $225 million of which had been in that position for less than six months. In accordance with its policy described in Note 2, the Company concluded that an adjustment for other-than-temporary impairments for these equity securities was not warranted at June 30, 2012 or December 31, 2011.