Investments (Tables)

6 Months Ended

Jun. 30, 2012

Net Investment Income



Periods ended June 30	Three Months						Six Months
(In millions)	2012			2011			2012			2011
Fixed maturity securities	$	505		$	505		$	1,021		$	1,011
Short term investments	2			2			3			4
Limited partnership investments	(35		)	11			95			125
Equity securities	2			6			6			12
Mortgage loans	5			2			8			4
Trading portfolio (a)	4			3			11			6
Other	2			3			3			5
Gross investment income	485			532			1,147			1,167
Investment expense	(15		)	(15		)	(29		)	(30		)
Net investment income	$	470		$	517		$	1,118		$	1,137

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(a)	There were no net unrealized gains (losses) related to changes in fair value of trading securities still held included in net investment income for the three or six months ended June 30, 2012 or 2011.

Net realized investment gains (losses)

Net Realized Investment Gains (Losses)



Periods ended June 30	Three Months						Six Months
(In millions)	2012			2011			2012			2011
Net realized investment gains (losses):
Fixed maturity securities:
Gross realized gains	$	49		$	89		$	118		$	177
Gross realized losses	(32		)	(69		)	(71		)	(137		)
Net realized investment gains (losses) on fixed maturity securities	17			20			47			40
Equity securities:
Gross realized gains	2			1			5			6
Gross realized losses	(2		)	(3		)	(4		)	(8		)
Net realized investment gains (losses) on equity securities	—			(2		)	1			(2		)
Derivatives	1			—			—			(1		)
Short term investments and other (a) (b)	4			(3		)	10			(9		)
Net realized investment gains (losses), net of participating policyholders’ interests	$	22		$	15		$	58		$	28

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(a)	The six months ended June 30, 2011 included a $9 million loss related to the early extinguishment of debt in 2011.


(b)	Includes net unrealized gains (losses) related to changes in the fair value of securities for which the fair value option has been elected. There were no net unrealized gains (losses) for the three months ended June 30, 2012 or 2011. There were no net unrealized gains (losses) for the six months ended June 30, 2012 as compared with unrealized gains of $1 million for the same period in 2011.

Components of other-than-temporary impairment losses recognized in earnings

The components of net other-than-temporary impairment (OTTI) losses recognized in earnings by asset type are summarized in the following table.



Periods ended June 30	Three Months				Six Months
(In millions)	2012		2011		2012		2011
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	6	$	15	$	16	$	24
Asset-backed:
Residential mortgage-backed	15		46		29		74
U.S. Treasury and obligation of government-sponsored enterprises	—		—		1		—
Total fixed maturity securities available-for-sale	21		61		46		98
Equity securities available-for-sale:
Common stock	2		1		4		4
Preferred stock	—		—		—		1
Total equity securities available-for-sale	2		1		4		5
Net OTTI losses recognized in earnings	$	23	$	62	$	50	$	103

Summary of fixed maturity and equity securities

Summary of Fixed Maturity and Equity Securities



June 30, 2012	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Unrealized OTTI Losses (Gains)
(In millions)	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Unrealized OTTI Losses (Gains)
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	19,350	$	2,209	$	79	$	21,480	$	—
States, municipalities and political subdivisions	9,225		1,225		66		10,384		—
Asset-backed:
Residential mortgage-backed	5,817		215		141		5,891		42
Commercial mortgage-backed	1,514		82		27		1,569		(2		)
Other asset-backed	1,046		20		1		1,065		—
Total asset-backed	8,377		317		169		8,525		40
U.S. Treasury and obligations of government-sponsored enterprises	172		12		—		184		—
Foreign government	616		23		—		639		—
Redeemable preferred stock	101		10		—		111		—
Total fixed maturity securities available-for-sale	37,841		3,796		314		41,323		$	40
Total fixed maturity securities trading	44		—		—		44
Equity securities available-for-sale:
Common stock	27		21		—		48
Preferred stock	225		17		—		242
Total equity securities available-for-sale	252		38		—		290
Total	$	38,137	$	3,834	$	314	$	41,657



December 31, 2011	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Unrealized OTTI Losses (Gains)
(In millions)	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Unrealized OTTI Losses (Gains)
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	19,086	$	1,946	$	154	$	20,878	$	—
States, municipalities and political subdivisions	9,018		900		136		9,782		—
Asset-backed:
Residential mortgage-backed	5,786		172		183		5,775		99
Commercial mortgage-backed	1,365		48		59		1,354		(2		)
Other asset-backed	946		13		4		955		—
Total asset-backed	8,097		233		246		8,084		97
U.S. Treasury and obligations of government-sponsored enterprises	479		14		—		493		—
Foreign government	608		28		—		636		—
Redeemable preferred stock	51		7		—		58		—
Total fixed maturity securities available-for-sale	37,339		3,128		536		39,931		$	97
Total fixed maturity securities trading	6		—		—		6
Equity securities available-for-sale:
Common stock	30		17		—		47
Preferred stock	258		4		5		257
Total equity securities available-for-sale	288		21		5		304
Total	$	37,633	$	3,149	$	541	$	40,241

Securities in a gross unrealized loss position

Securities in a Gross Unrealized Loss Position



	Less than 12 Months				12 Months or Longer				Total
June 30, 2012	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
(In millions)	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	1,550	$	53	$	192	$	26	$	1,742	$	79
States, municipalities and political subdivisions	174		2		301		64		475		66
Asset-backed:
Residential mortgage-backed	276		13		923		128		1,199		141
Commercial mortgage-backed	158		5		153		22		311		27
Other asset-backed	181		1		—		—		181		1
Total asset-backed	615		19		1,076		150		1,691		169
Total	$	2,339	$	74	$	1,569	$	240	$	3,908	$	314



	Less than 12 Months				12 Months or Longer				Total
December 31, 2011	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
(In millions)	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	2,552	$	126	$	159	$	28	$	2,711	$	154
States, municipalities and political subdivisions	67		1		721		135		788		136
Asset-backed:
Residential mortgage-backed	719		36		874		147		1,593		183
Commercial mortgage-backed	431		39		169		20		600		59
Other asset-backed	389		4		—		—		389		4
Total asset-backed	1,539		79		1,043		167		2,582		246
Total fixed maturity securities available-for-sale	4,158		206		1,923		330		6,081		536
Equity securities available-for-sale:
Preferred stock	117		5		—		—		117		5
Total	$	4,275	$	211	$	1,923	$	330	$	6,198	$	541

The following table summarizes the activity for the three and six months ended June 30, 2012 and 2011 related to the pretax credit loss component reflected in Retained earnings on fixed maturity securities still held at June 30, 2012 and 2011 for which a portion of an OTTI loss was recognized in Other comprehensive income (loss).



Periods ended June 30	Three Months						Six Months
(In millions)	2012			2011			2012			2011
Beginning balance of credit losses on fixed maturity securities	$	100		$	113		$	92		$	141
Additional credit losses for securities for which an OTTI loss was previously recognized	10			8			21			18
Credit losses for securities for which an OTTI loss was not previously recognized	1			—			2			1
Reductions for securities sold during the period	(4		)	(21		)	(8		)	(46		)
Reductions for securities the Company intends to sell or more likely than not will be required to sell	(8		)	(18		)	(8		)	(32		)
Ending balance of credit losses on fixed maturity securities	$	99		$	82		$	99		$	82

Ratings distribution of asset-backed securities in a gross unrealized loss position

Gross Unrealized Losses by Ratings Distribution



June 30, 2012	Amortized Cost		Estimated Fair Value		Gross Unrealized Losses
(In millions)	Amortized Cost		Estimated Fair Value		Gross Unrealized Losses
U.S. Government, Government Agencies, and Government-Sponsored Enterprises	$	468	$	405	$	63
AAA	247		241		6
AA	163		155		8
A	141		134		7
BBB	162		148		14
Non-investment grade	679		608		71
Total	$	1,860	$	1,691	$	169

Contractual maturity

Contractual Maturity



	June 30, 2012				December 31, 2011
(In millions)	Cost or Amortized Cost		Estimated Fair Value		Cost or Amortized Cost		Estimated Fair Value
Due in one year or less	$	1,889	$	1,904	$	1,802	$	1,812
Due after one year through five years	13,118		13,728		13,110		13,537
Due after five years through ten years	8,561		9,228		8,410		8,890
Due after ten years	14,273		16,463		14,017		15,692
Total	$	37,841	$	41,323	$	37,339	$	39,931

- Definition

Tabular disclosure of the amount of other than temporary impairment (OTTI) related to credit losses recognized in earnings including: (a) the beginning balance of the amount related to credit losses on debt securities held by the investor at the beginning of the period for which a portion of an OTTI was recognized in other comprehensive income; (b) additions for the amount related to the credit loss for which an OTTI was not previously recognized; (c) reductions for securities sold during the period (realized); (d) reductions for securities for which the amount previously recognized in other comprehensive income was recognized in earnings because the investor intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis; (e) additional increases to the amount related to the credit loss for which an OTTI was previously recognized when the investor does not intend to sell the security and it is not more likely than not that the investor will be required to sell the security before recovery of its amortized cost basis; (f) reductions for increases in cash flows expected to be collected that are recognized over the remaining life of the security; and (g) the ending balance of the amount related to credit losses on debt securities held by the entity at the end of the period for which a portion of an OTTI was recognized in other comprehensive income.

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