NOTE 3 – INVESTMENTS

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

	Cost or
(In millions)	amortized		Gross unrealized				Fair
At September 30, 2012	cost		gains		losses		value
Fixed maturities:
States, municipalities and political subdivisions	$	3,023	$	265	$	-	$	3,288
Convertibles and bonds with warrants attached		31		-		-		31
United States government		7		1		-		8
Government-sponsored enterprises		116		-		-		116
Foreign government		3		-		-		3
Corporate securities		5,053		621		4		5,670
Subtotal		8,233		887		4		9,116
Equity securities:
Common equities		2,212		1,000		2		3,210
Preferred equities		103		36		-		139
Subtotal		2,315		1,036		2		3,349
Total	$	10,548	$	1,923	$	6	$	12,465

At December 31, 2011
Fixed maturities:
States, municipalities and political subdivisions	$	3,006	$	246	$	-	$	3,252
Convertibles and bonds with warrants attached		59		-		-		59
United States government		6		1		-		7
Government-sponsored enterprises		159		1		-		160
Foreign government		3		-		-		3
Corporate securities		4,851		465		18		5,298
Subtotal		8,084		713		18		8,779
Equity securities:
Common equities		2,088		801		35		2,854
Preferred equities		74		28		-		102
Subtotal		2,162		829		35		2,956
Total	$	10,246	$	1,542	$	53	$	11,735

The net unrealized investment gains in our fixed-maturity portfolio are primarily the result of the current low interest rate environment that increased the fair value of our fixed-maturity portfolio. Included in corporate fixed maturities are $27 million of AAA rated commercial mortgage-backed securities. The three largest net unrealized investment gains in our common stock portfolio are from Exxon Mobil Corporation (NYSE:XOM), The Procter & Gamble Company (NYSE:PG) and Chevron Corporation (NYSE:CVX), which had a combined net gain position of $300 million. At September 30, 2012, we had $31 million fair value of hybrid securities included in fixed maturities that follow Accounting Standards Codification (ASC) 815-15-25, Accounting for Certain Hybrid Financial Instruments. The hybrid securities are carried at fair value, and the changes in fair value are included in realized investment gains and losses. At September 30, 2012 and December 31, 2011, there were no other-than-temporary impairments included within accumulated other comprehensive income (AOCI).

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

	Less than 12 months				12 months or more				Total
(In millions)	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
At September 30, 2012	value		losses		value		losses		value		losses
Fixed maturities:
States, municipalities and political subdivisions	$	18	$	-	$	-	$	-	$	18	$	-
Government-sponsored enterprises		10		-		-		-		10		-
Corporate securities		74		2		31		2		105		4
Subtotal		102		2		31		2		133		4
Equity securities:
Common equities		41		2		-		-		41		2
Preferred equities		6		-		-		-		6		-
Subtotal		47		2		-		-		47		2
Total	$	149	$	4	$	31	$	2	$	180	$	6

At December 31, 2011
Fixed maturities:
States, municipalities and political subdivisions	$	-	$	-	$	12	$	-	$	12	$	-
United States government		1		-		-		-		1		-
Government-sponsored enterprises		10		-		-		-		10		-
Corporate securities		380		13		57		5		437		18
Subtotal		391		13		69		5		460		18
Equity securities:
Common equities		333		35		-		-		333		35
Preferred equities		5		-		19		-		24		-
Subtotal		338		35		19		-		357		35
Total	$	729	$	48	$	88	$	5	$	817	$	53

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

	Three months ended September 30,						Nine months ended September 30,
(In millions)	2012			2011			2012			2011
Realized investment gains and losses summary:
Fixed maturities:
Gross realized gains	$	14		$	2		$	30		$	9
Gross realized losses		-			-			-			-
Other-than-temporary impairments		-			(3	)		-			(3	)
Equity securities:
Gross realized gains		1			18			30			132
Gross realized losses		-			(17	)		(1	)		(35	)
Other-than-temporary impairments		(2	)		-			(32	)		(30	)
Securities with embedded derivatives		(4	)		(4	)		1			-
Other		1			2			1			4
Total	$	10		$	(2	)	$	29		$	77

Change in unrealized gains and losses summary:
Fixed maturities	$	110		$	76		$	188		$	180
Equity securities		143			(379	)		240			(278	)
Adjustment to deferred acquisition costs and life policy reserves		(6	)		(7	)		(21	)		(11	)
Amortization of pension actuarial loss and prior service cost		2			1			5			3
Other		-			1			5			4
Income taxes on above		(88	)		108			(147	)		36
Total	$	161		$	(200	)	$	270		$	(66	)

During the three and nine months ended September 30, 2012 and 2011, there were no credit losses on fixed-maturity securities for which a portion of other-than-temporary impairment (OTTI) has been recognized in other comprehensive income.

During the quarter ended September 30, 2012, we other-than-temporarily impaired seven securities. At September 30, 2012, eight fixed-maturity investments with a total unrealized loss of $2 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 September 30, 2012.

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.