Investments

3 Months Ended

Mar. 31, 2014

Investments [Abstract]

Investments

Note C. Investments

The significant components of net investment income are presented in the following table.

Net Investment Income

Three months ended March 31
(In millions)	2014			2013
Fixed maturity securities	$	452		$	457
Short term investments	1			1
Limited partnership investments	73			131
Equity securities	2			3
Mortgage loans	6			5
Trading portfolio	3			5
Other	2			1
Gross investment income	539			603
Investment expense	(13		)	(12		)
Net investment income	$	526		$	591

Net realized investment gains (losses) are presented in the following table.

Net Realized Investment Gains (Losses)

Three months ended March 31
(In millions)	2014			2013
Net realized investment gains (losses):
Fixed maturity securities:
Gross realized gains	$	53		$	39
Gross realized losses	(15		)	(12		)
Net realized investment gains (losses) on fixed maturity securities	38			27
Equity securities:
Gross realized gains	5			2
Gross realized losses	—			(15		)
Net realized investment gains (losses) on equity securities	5			(13		)
Derivatives	—			2
Short term investments and other	3			7
Net realized investment gains (losses)	$	46		$	23

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

Three months ended March 31
(In millions)	2014		2013
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	1	$	3
Asset-backed - residential mortgage-backed	1		—
Total fixed maturity securities available-for-sale	2		3
Equity securities available-for-sale:
Preferred stock	—		15
Net OTTI losses recognized in continuing earnings	$	2	$	18

The following tables provide a summary of fixed maturity and equity securities.

Summary of Fixed Maturity and Equity Securities

March 31, 2014	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Unrealized OTTI Losses (Gains)
(In millions)
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	17,265	$	1,612	$	56	$	18,821	$	—
States, municipalities and political subdivisions	11,113		871		129		11,855		—
Asset-backed:
Residential mortgage-backed	4,854		156		66		4,944		(47		)
Commercial mortgage-backed	1,974		92		13		2,053		(3		)
Other asset-backed	966		12		2		976		—
Total asset-backed	7,794		260		81		7,973		(50		)
U.S. Treasury and obligations of government-sponsored enterprises	135		7		1		141		—
Foreign government	559		18		1		576		—
Redeemable preferred stock	32		2		—		34		—
Total fixed maturity securities available-for-sale	36,898		2,770		268		39,400		$	(50	)
Total fixed maturity securities trading	15		—		—		15
Equity securities available-for-sale:
Common stock	33		9		—		42
Preferred stock	130		2		—		132
Total equity securities available-for-sale	163		11		—		174
Total	$	37,076	$	2,781	$	268	$	39,589

December 31, 2013	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Unrealized OTTI Losses (Gains)
(In millions)
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	19,352	$	1,645	$	135	$	20,862	$	—
States, municipalities and political subdivisions	11,281		548		272		11,557		—
Asset-backed:
Residential mortgage-backed	4,940		123		92		4,971		(37		)
Commercial mortgage-backed	1,995		90		22		2,063		(3		)
Other asset-backed	945		13		3		955		—
Total asset-backed	7,880		226		117		7,989		(40		)
U.S. Treasury and obligations of government-sponsored enterprises	139		6		1		144		—
Foreign government	531		15		3		543		—
Redeemable preferred stock	92		10		—		102		—
Total fixed maturity securities available-for-sale	39,275		2,450		528		41,197		$	(40	)
Total fixed maturity securities trading	36		—		—		36
Equity securities available-for-sale:
Common stock	36		9		—		45
Preferred stock	143		1		4		140
Total equity securities available-for-sale	179		10		4		185
Total	$	39,490	$	2,460	$	532	$	41,418

The net unrealized gains on investments included in the tables above are recorded as a component of Accumulated other comprehensive income (AOCI). When presented in AOCI, these amounts are net of tax and any required Shadow Adjustments. At March 31, 2014 and December 31, 2013, the net unrealized gains on investments included in AOCI were net of after-tax Shadow Adjustments of $712 million and $532 million. To the extent that unrealized gains on fixed income securities supporting certain products within the Life & Group Non-Core segment would result in a premium deficiency if realized, a related decrease in Deferred acquisition costs and/or increase in Insurance reserves are recorded, net of tax, as a reduction of net unrealized gains through Other comprehensive income (loss) (Shadow Adjustments).

The following tables summarize the estimated fair value and gross unrealized losses of available-for-sale fixed maturity and equity securities in a gross unrealized loss position by the length of time in which the securities have continuously been in that position.

Securities in a Gross Unrealized Loss Position

	Less than 12 Months				12 Months or Longer				Total
March 31, 2014	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
(In millions)
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	2,002	$	48	$	109	$	8	$	2,111	$	56
States, municipalities and political subdivisions	1,397		56		244		73		1,641		129
Asset-backed:
Residential mortgage-backed	739		13		347		53		1,086		66
Commercial mortgage-backed	515		12		91		1		606		13
Other asset-backed	167		2		3		—		170		2
Total asset-backed	1,421		27		441		54		1,862		81
U.S. Treasury and obligations of government-sponsored enterprises	6		1		3		—		9		1
Foreign government	61		1		4		—		65		1
Total fixed maturity securities available-for-sale	4,887		133		801		135		5,688		268
Equity securities available-for-sale:
Preferred stock	16		—		—		—		16		—
Total	$	4,903	$	133	$	801	$	135	$	5,704	$	268

	Less than 12 Months				12 Months or Longer				Total
December 31, 2013	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
(In millions)
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	3,592	$	129	$	72	$	6	$	3,664	$	135
States, municipalities and political subdivisions	3,251		197		129		75		3,380		272
Asset-backed:
Residential mortgage-backed	1,293		29		343		63		1,636		92
Commercial mortgage-backed	640		22		—		—		640		22
Other asset-backed	269		3		—		—		269		3
Total asset-backed	2,202		54		343		63		2,545		117
U.S. Treasury and obligations of government-sponsored enterprises	13		1		—		—		13		1
Foreign government	111		3		—		—		111		3
Total fixed maturity securities available-for-sale	9,169		384		544		144		9,713		528
Equity securities available-for-sale:
Preferred stock	87		4		—		—		87		4
Total	$	9,256	$	388	$	544	$	144	$	9,800	$	532

Based on current facts and circumstances, the Company believes the unrealized losses presented in the March 31, 2014 Securities in a Gross Unrealized Loss Position table above, are primarily attributable to broader economic conditions, changes in interest rates and credit spreads, market illiquidity and other market factors, but are not indicative of the ultimate collectibility of the current amortized cost of the securities. The investments with longer duration, primarily included within the states, municipalities and political subdivision asset category, were more significantly affected by changes in market interest rates. The Company has no current intent to sell these securities, nor is it more likely than not that it will be required to sell prior to recovery of amortized cost; accordingly, the Company has determined that there are no additional OTTI losses to be recorded at March 31, 2014.

The following table summarizes the activity for the three months ended March 31, 2014 and 2013 related to the pretax credit loss component reflected in Retained earnings on fixed maturity securities still held at March 31, 2014 and 2013 for which a portion of an OTTI loss was recognized in Other comprehensive income (loss).

Three months ended March 31
(In millions)	2014			2013
Beginning balance of credit losses on fixed maturity securities	$	74		$	95
Reductions for securities sold during the period	(2		)	(3		)
Reductions for securities the Company intends to sell or more likely than not will be required to sell	(3		)	—
Ending balance of credit losses on fixed maturity securities	$	69		$	92

Contractual Maturity

The following table summarizes available-for-sale fixed maturity securities by contractual maturity at March 31, 2014 and December 31, 2013. Actual maturities may differ from contractual maturities because certain securities may be called or prepaid with or without call or prepayment penalties. Securities not due at a single date are allocated based on weighted average life.

Contractual Maturity

	March 31, 2014				December 31, 2013
(In millions)	Cost or Amortized Cost		Estimated Fair Value		Cost or Amortized Cost		Estimated Fair Value
Due in one year or less	$	2,684	$	2,729	$	2,420	$	2,455
Due after one year through five years	8,839		9,401		9,496		10,068
Due after five years through ten years	11,455		11,876		11,667		11,954
Due after ten years	13,920		15,394		15,692		16,720
Total	$	36,898	$	39,400	$	39,275	$	41,197

Investment Commitments

As of March 31, 2014, the Company had committed approximately $384 million to future capital calls from various third-party limited partnership investments in exchange for an ownership interest in the related partnerships.

As of March 31, 2014, the Company had mortgage loan commitments of $59 million representing signed loan applications received and accepted.

The Company invests in various privately placed debt securities, including bank loans, as part of its overall investment strategy and has committed to additional future purchases, sales and funding. As of March 31, 2014, the Company had commitments to purchase or fund additional amounts of $154 million and sell $180 million under the terms of such securities.