Investments

The following table provides cost or amortized cost, gross unrealized gains, gross unrealized losses and fair value for our invested assets:



(In millions)	Cost or amortized cost		Gross unrealized				Fair value
At December 31, 2013	Cost or amortized cost		gains		losses		Fair value
Fixed maturity securities:
States, municipalities and political subdivisions	$	3,107	$	125	$	21	$	3,211
Convertibles and bonds with warrants attached	17		—		—		17
United States government	7		—		—		7
Government-sponsored enterprises	227		—		27		200
Foreign government	10		—		—		10
Commercial mortgage-backed	148		—		5		143
Corporate	5,122		433		22		5,533
Subtotal	8,638		558		75		9,121
Equity securities:
Common equities	2,396		1,818		1		4,213
Nonredeemable preferred equities	127		38		3		162
Subtotal	2,523		1,856		4		4,375
Total	$	11,161	$	2,414	$	79	$	13,496

At December 31, 2012
Fixed maturity securities:
States, municipalities and political subdivisions	$	3,040	$	250	$	1	$	3,289
Convertibles and bonds with warrants attached	31		—		—		31
United States government	7		1		—		8
Government-sponsored enterprises	164		—		—		164
Foreign government	3		—		—		3
Commercial mortgage-backed	27		1		—		28
Corporate	4,950		622		2		5,570
Subtotal	8,222		874		3		9,093
Equity securities:
Common equities	2,270		977		9		3,238
Nonredeemable preferred equities	99		37		1		135
Subtotal	2,369		1,014		10		3,373
Total	$	10,591	$	1,888	$	13	$	12,466

The net unrealized investment gains in our fixed-maturity portfolio are primarily the result of the continued low interest rate environment that has increased the fair value of our fixed-maturity portfolio. The five largest net unrealized investment gains in our common stock portfolio are from Exxon Mobil Corporation (NYSE:XOM), The Procter & Gamble Company (NYSE:PG), Chevron Corporation (NYSE:CVX), Dover Corporation (NYSE:DOV), and Honeywell International Inc. (NYSE:HON), which had a combined net gain position of $452 million. We had

$18 million and $31 million of fair value of hybrid securities included in fixed maturities that follow ASC 815-15-25, Accounting for Certain Hybrid Financial Instruments, at December 31, 2013 and 2012, respectively. The hybrid securities are carried at fair value, and the changes in fair value are included in realized investment gains and losses.

The table below provides fair values and unrealized losses by investment category and by the duration of the securities’ continuous unrealized loss position:



(In millions)	Less than 12 months				12 months or more				Total
At December 31, 2013	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
Fixed maturity securities:
States, municipalities and political subdivisions	$	490	$	18	$	42	$	3	$	532	$	21
United States government	1		—		—		—		1		—
Government-sponsored enterprises	199		27		1		—		200		27
Foreign government	10		—		—		—		10		—
Commercial mortgage-backed	125		5		—		—		125		5
Corporate	572		20		43		2		615		22
Subtotal	1,397		70		86		5		1,483		75
Equity securities:
Common equities	77		1		—		—		77		1
Nonredeemable preferred equities	42		3		—		—		42		3
Subtotal	119		4		—		—		119		4
Total	$	1,516	$	74	$	86	$	5	$	1,602	$	79

At December 31, 2012
Fixed maturity securities:
States, municipalities and political subdivisions	$	53	$	1	$	—	$	—	$	53	$	1
Government-sponsored enterprises	1		—		—		—		1		—
Corporate	58		1		17		1		75		2
Subtotal	112		2		17		1		129		3
Equity securities:
Common equities	107		9		—		—		107		9
Nonredeemable preferred equities	4		1		—		—		4		1
Subtotal	111		10		—		—		111		10
Total	$	223	$	12	$	17	$	1	$	240	$	13

Contractual maturity dates for fixed-maturity investments were:



(In millions)	Amortized cost		Fair value		% of fair value
At December 31, 2013	Amortized cost		Fair value		% of fair value
Maturity dates occurring:
Less than 1 year	$	545	$	556	6.1	%
Years 1 - 5	3,244		3,497		38.3
Years 6 - 10	3,485		3,674		40.3
Due after ten years	1,364		1,394		15.3
Total	$	8,638	$	9,121	100.0	%

Actual maturities may differ from contractual maturities when there is a right to call or prepay obligations with or without call or prepayment penalties.

At December 31, 2013, fixed-maturity investments with amortized cost of $80 million and fair value of $84 million were on deposit with various states in compliance with regulatory requirements. At December 31, 2012, fixed‑maturity investments with amortized cost of $85 million and fair value of $93 million were on deposit with various states in compliance with regulatory requirements.

The following table provides investment income, realized investment gains and losses and the change in unrealized investment gains and losses and other items, by investment category:



(In millions)	Years ended December 31,
	2013			2012			2011
Investment income summary:
Interest on fixed maturities	$	413		$	420		$	424
Dividends on equity securities	122			115			104
Other investment income	3			3			4
Total	538			538			532
Less investment expenses	9			7			7
Total	$	529		$	531		$	525

Realized investment gains and losses summary:
Fixed maturities:
Gross realized gains	$	12		$	35		$	11
Gross realized losses	—			—			—
Other-than-temporary impairments	(2		)	(1		)	(5		)
Equity securities:
Gross realized gains	64			39			151
Gross realized losses	—			(2		)	(40		)
Other-than-temporary impairments	—			(32		)	(52		)
Securities with embedded derivatives	3			1			(1		)
Other	6			2			6
Total	$	83		$	42		$	70

Change in unrealized investment gains and losses and other summary:
Fixed maturities	$	(387	)	$	176		$	200
Equity securities	847			210			39
Pension obligations	83			(13		)	(25		)
Adjustment to deferred acquisition costs and life policy reserves	41			(28		)	(14		)
Other	(7		)	7			3
Income taxes on above	(202		)	(124		)	(71		)
Total	$	375		$	228		$	132

For the years ended December 31, 2013, 2012 and 2011, there were no credit losses on fixed-maturity securities for which a portion of OTTI has been recognized in other comprehensive income.

During 2013, we other-than-temporarily impaired seven securities. At December 31, 2013, 40 fixed-maturity investments with a total unrealized loss of $5 million had been in an unrealized loss position for 12 months or more. Of that total, no fixed-maturity investments had fair values below 70 percent of amortized cost. There were no equity investments in an unrealized loss position for 12 months or more as of December 31, 2013.

During 2012, we other-than-temporarily impaired 13 securities. At December 31, 2012, four fixed-maturity investments with a total unrealized loss of $1 million had been in an unrealized loss position for 12 months or more. Of that total, no fixed-maturity investments had fair values below 70 percent of amortized cost. There were no equity investments in an unrealized loss position for 12 months or more as of December 31, 2012.

During 2011, we other-than-temporarily impaired 12 securities. At December 31, 2011, 20 fixed-maturity investments with a total unrealized loss of $5 million had been in an unrealized loss position for 12 months or more. Of that total, no fixed-maturity investments had fair values below 70 percent of amortized cost. Two equity investments with a total unrealized loss of less than $1 million had been in an unrealized loss position for 12 months or more as of December 31, 2011. Of that total, no equity investments were trading below 70 percent of cost.

When determining OTTI charges for our fixed-maturity portfolio, management places significant emphasis on whether issuers of debt are current on contractual payments and whether future contractual amounts are likely to be paid. As required by ASC 320, our invested asset impairment policy for fixed-maturity securities states that OTTI is considered to have occurred (1) if we intend to sell the impaired fixed-maturity security or (2) if it is more likely than not we will be required to sell the impaired fixed-maturity security before recovery of its amortized cost basis. If we intend to sell or it is more likely than not we will be required to sell, the amortized cost of any such securities is reduced to fair value as the new cost basis, and a realized loss is recorded in the period in which it is recognized. When we believe that full collection of interest and/or principal is not likely, we determine the net present value of future cash flows by using the effective interest rate implicit in the security at the date of acquisition as the discount rate and compare that amount to the amortized cost and fair value of the security. The difference between the net present value of the expected future cash flows and amortized cost of the security is considered a credit loss and recognized as a realized loss in the period in which it occurred. The difference between the fair value and the net present value of the cash flows of the security, the noncredit loss, is recognized in other comprehensive income as an unrealized loss.

When determining OTTI charges for our equity portfolio, our invested asset impairment policy considers qualitative and quantitative factors, including facts and circumstances specific to individual securities, asset classes, the financial condition of the issuer, changes in dividend payment, the length of time fair value had been less than cost, the severity of the decline in fair value below cost, the volatility of the security and our ability and intent to hold each position until its forecasted recovery.

For each of our equity securities in an unrealized loss position at December 31, 2013, we applied the objective qualitative and quantitative criteria of our invested asset impairment policy for OTTI. Our long-term equity investment philosophy, emphasizing companies with strong indications of paying and growing dividends, combined with our strong surplus, liquidity and cash flow, supports our ability to hold these investments to recovery. Based on the individual qualitative and quantitative factors, as discussed above, we evaluate and determine an expected recovery period for each security. A change in the condition of a security can warrant an OTTI charge before the expected recovery period. If the security has not recovered cost within the expected recovery period, the security is other-than-temporarily impaired.