Life Policy and Investment Contract Reserves

3 Months Ended

Mar. 31, 2012

Life Policy and Investment Contract Reserves

NOTE 7 – Life Policy and Investment Contract Reserves

We establish the reserves for traditional life insurance policies based on expected expenses, mortality, morbidity, withdrawal rates and investment yields, including a provision for uncertainty. Once these assumptions are established, they generally are maintained throughout the lives of the contracts. We use both our own experience and industry experience, adjusted for historical trends, in arriving at our assumptions for expected mortality, morbidity and withdrawal rates as well as for expected expenses. We base our assumptions for expected investment income on our own experience adjusted for current economic conditions.

We establish reserves for the company’s universal life, deferred annuity and structured settlements equal to the cumulative account balances, which include premium deposits plus credited interest less charges and withdrawals. Some of our universal life policies contain no-lapse guarantee provisions. For these policies, we establish a reserve in addition to the account balance, based on expected no-lapse guarantee benefits and expected policy assessments.

(In millions)	March 31,		December 31,
	2012		2011
Ordinary/traditional life	$	704	$	691
Universal life		485		481
Deferred annuities		837		827
Structured settlements		197		198
Other		17		17
Total gross reserves	$	2,240	$	2,214