Investments

6 Months Ended

Jun. 30, 2014

Investments [Abstract]

Investments

Note C. Investments

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

Net Investment Income

Periods ended June 30	Three Months						Six Months
(In millions)	2014			2013			2014			2013
Fixed maturity securities	$	451		$	454		$	903		$	911
Short term investments	—			1			1			2
Limited partnership investments	97			79			170			210
Equity securities	3			3			5			6
Mortgage loans	9			6			15			11
Trading portfolio	3			5			6			10
Other	1			—			3			1
Gross investment income	564			548			1,103			1,151
Investment expense	(14		)	(14		)	(27		)	(26		)
Net investment income	$	550		$	534		$	1,076		$	1,125

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

Net Realized Investment Gains (Losses)

Periods ended June 30	Three Months						Six Months
(In millions)	2014			2013			2014			2013
Net realized investment gains (losses):
Fixed maturity securities:
Gross realized gains	$	20		$	33		$	73		$	72
Gross realized losses	(39		)	(40		)	(54		)	(52		)
Net realized investment gains (losses) on fixed maturity securities	(19		)	(7		)	19			20
Equity securities:
Gross realized gains	—			5			5			7
Gross realized losses	—			(7		)	—			(22		)
Net realized investment gains (losses) on equity securities	—			(2		)	5			(15		)
Derivatives	1			(5		)	1			(3		)
Short term investments and other	4			—			7			7
Net realized investment gains (losses)	$	(14	)	$	(14	)	$	32		$	9

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)	2014		2013		2014		2013
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	2	$	5	$	3	$	8
Asset-backed:
Residential mortgage-backed	1		3		2		3
Other asset-backed	1		1		1		1
Total asset-backed	2		4		3		4
Total fixed maturity securities available-for-sale	4		9		6		12
Equity securities available-for-sale:
Common stock	1		2		1		2
Preferred stock	—		5		—		20
Total equity securities available-for-sale	1		7		1		22
Net OTTI losses recognized in earnings	$	5	$	16	$	7	$	34

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

Summary of Fixed Maturity and Equity Securities

June 30, 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	$	17,276	$	1,852	$	30	$	19,098	$	—
States, municipalities and political subdivisions	11,215		1,178		70		12,323		—
Asset-backed:
Residential mortgage-backed	4,882		202		14		5,070		(51		)
Commercial mortgage-backed	1,999		107		7		2,099		(3		)
Other asset-backed	1,172		16		3		1,185		—
Total asset-backed	8,053		325		24		8,354		(54		)
U.S. Treasury and obligations of government-sponsored enterprises	61		6		1		66		—
Foreign government	533		18		1		550		—
Redeemable preferred stock	39		3		—		42		—
Total fixed maturity securities available-for-sale	37,177		3,382		126		40,433		$	(54	)
Total fixed maturity securities trading	35		—		—		35
Equity securities available-for-sale:
Common stock	46		14		—		60
Preferred stock	129		5		—		134
Total equity securities available-for-sale	175		19		—		194
Total	$	37,387	$	3,401	$	126	$	40,662

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 June 30, 2014 and December 31, 2013, the net unrealized gains on investments included in AOCI were net of after-tax Shadow Adjustments of $937 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
June 30, 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	$	813	$	12	$	548	$	18	$	1,361	$	30
States, municipalities and political subdivisions	316		2		587		68		903		70
Asset-backed:
Residential mortgage-backed	125		1		332		13		457		14
Commercial mortgage-backed	205		2		171		5		376		7
Other asset-backed	269		3		12		—		281		3
Total asset-backed	599		6		515		18		1,114		24
U.S. Treasury and obligations of government-sponsored enterprises	2		1		4		—		6		1
Foreign government	39		1		9		—		48		1
Total fixed maturity securities available-for-sale	1,769		22		1,663		104		3,432		126
Equity securities available-for-sale:
Preferred stock	10		—		2		—		12		—
Total	$	1,779	$	22	$	1,665	$	104	$	3,444	$	126

	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 June 30, 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 Company has no current intent to sell securities with unrealized losses, 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 June 30, 2014.

The following table summarizes the activity for the three and six months ended June 30, 2014 and 2013 related to the pretax credit loss component reflected in Retained earnings on fixed maturity securities still held at June 30, 2014 and 2013 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)	2014			2013			2014			2013
Beginning balance of credit losses on fixed maturity securities	$	69		$	92		$	74		$	95
Additional credit losses for securities for which an OTTI loss was previously recognized	—			1			—			1
Reductions for securities sold during the period	(3		)	(4		)	(5		)	(7		)
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	$	66		$	89		$	66		$	89

Contractual Maturity

The following table summarizes available-for-sale fixed maturity securities by contractual maturity at June 30, 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

	June 30, 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	$	2,832	$	2,883	$	2,420	$	2,455
Due after one year through five years	9,251		9,893		9,496		10,068
Due after five years through ten years	11,206		11,792		11,667		11,954
Due after ten years	13,888		15,865		15,692		16,720
Total	$	37,177	$	40,433	$	39,275	$	41,197

Investment Commitments

As of June 30, 2014, the Company had committed approximately $348 million to future capital calls from various third-party limited partnership investments in exchange for an ownership interest in the related partnerships.

As of June 30, 2014, the Company had mortgage loan commitments of $40 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 June 30, 2014, the Company had commitments to purchase or fund additional amounts of $244 million and sell $158 million under the terms of such securities.