Investments

9 Months Ended

Sep. 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 September 30	Three Months						Nine Months
(In millions)	2014			2013			2014			2013
Fixed maturity securities	$	453		$	461		$	1,356		$	1,372
Short term investments	1			1			2			3
Limited partnership investments	29			93			199			303
Equity securities	2			3			7			9
Mortgage loans	7			6			22			17
Trading portfolio	2			3			8			13
Other	—			1			3			2
Gross investment income	494			568			1,597			1,719
Investment expense	(14		)	(13		)	(41		)	(39		)
Net investment income	$	480		$	555		$	1,556		$	1,680

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

Net Realized Investment Gains (Losses)

Periods ended September 30	Three Months						Nine Months
(In millions)	2014			2013			2014			2013
Net realized investment gains (losses):
Fixed maturity securities:
Gross realized gains	$	51		$	47		$	124		$	119
Gross realized losses	(12		)	(45		)	(66		)	(97		)
Net realized investment gains (losses) on fixed maturity securities	39			2			58			22
Equity securities:
Gross realized gains	1			3			6			10
Gross realized losses	(4		)	(5		)	(4		)	(27		)
Net realized investment gains (losses) on equity securities	(3		)	(2		)	2			(17		)
Derivatives	—			(1		)	1			(4		)
Short term investments and other	1			2			8			9
Net realized investment gains (losses)	$	37		$	1		$	69		$	10

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

Periods ended September 30	Three Months				Nine Months
(In millions)	2014		2013		2014		2013
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	6	$	8	$	9	$	16
Asset-backed:
Residential mortgage-backed	2		2		4		5
Other asset-backed	—		1		1		2
Total asset-backed	2		3		5		7
Total fixed maturity securities available-for-sale	8		11		14		23
Equity securities available-for-sale:
Common stock	2		3		3		5
Preferred stock	—		2		—		22
Total equity securities available-for-sale	2		5		3		27
Net OTTI losses recognized in earnings	$	10	$	16	$	17	$	50

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

Summary of Fixed Maturity and Equity Securities

September 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	$	17,480	$	1,704	$	40	$	19,144	$	—
States, municipalities and political subdivisions	11,217		1,295		53		12,459		—
Asset-backed:
Residential mortgage-backed	4,972		187		13		5,146		(54		)
Commercial mortgage-backed	2,079		87		8		2,158		(2		)
Other asset-backed	1,222		13		5		1,230		—
Total asset-backed	8,273		287		26		8,534		(56		)
U.S. Treasury and obligations of government-sponsored enterprises	25		5		—		30		—
Foreign government	456		16		1		471		—
Redeemable preferred stock	39		3		—		42		—
Total fixed maturity securities available-for-sale	37,490		3,310		120		40,680		$	(56	)
Total fixed maturity securities trading	20						20
Equity securities available-for-sale:
Common stock	35		11		—		46
Preferred stock	162		4		1		165
Total equity securities available-for-sale	197		15		1		211
Total	$	37,707	$	3,325	$	121	$	40,911

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 September 30, 2014 and December 31, 2013, the net unrealized gains on investments included in AOCI were net of after-tax Shadow Adjustments of $972 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
September 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	$	1,726	$	23	$	402	$	17	$	2,128	$	40
States, municipalities and political subdivisions	176		2		435		51		611		53
Asset-backed:
Residential mortgage-backed	208		3		254		10		462		13
Commercial mortgage-backed	506		4		112		4		618		8
Other asset-backed	507		4		13		1		520		5
Total asset-backed	1,221		11		379		15		1,600		26
U.S. Treasury and obligations of government-sponsored enterprises	—		—		5		—		5		—
Foreign government	35		—		8		1		43		1
Total fixed maturity securities available-for-sale	3,158		36		1,229		84		4,387		120
Equity securities available-for-sale:
Preferred stock	32		1		1		—		33		1
Total	$	3,190	$	37	$	1,230	$	84	$	4,420	$	121

	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 September 30, 2014 Securities in a Gross Unrealized Loss Position table above, are not indicative of the ultimate collectibility of the current amortized cost of the securities, but rather are primarily attributable to changes in interest rates and credit spreads, market illiquidity and other factors. 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 September 30, 2014.

The following table summarizes the activity for the three and nine months ended September 30, 2014 and 2013 related to the pretax credit loss component reflected in Retained earnings on fixed maturity securities still held at September 30, 2014 and 2013 for which a portion of an OTTI loss was recognized in Other comprehensive income (loss).

Periods ended September 30	Three Months						Nine Months
(In millions)	2014			2013			2014			2013
Beginning balance of credit losses on fixed maturity securities	$	66		$	89		$	74		$	95
Additional credit losses for securities for which an OTTI loss was previously recognized	—			1			—			2
Reductions for securities sold during the period	(2		)	(7		)	(7		)	(14		)
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	$	64		$	83		$	64		$	83

Contractual Maturity

The following table summarizes available-for-sale fixed maturity securities by contractual maturity at September 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

	September 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	$	2,329	$	2,368	$	2,420	$	2,455
Due after one year through five years	8,888		9,455		9,496		10,068
Due after five years through ten years	12,446		12,951		11,667		11,954
Due after ten years	13,827		15,906		15,692		16,720
Total	$	37,490	$	40,680	$	39,275	$	41,197

Investment Commitments

As of September 30, 2014, the Company had committed approximately $365 million to future capital calls from various third-party limited partnership investments in exchange for an ownership interest in the related partnerships.

As of September 30, 2014, the Company had mortgage loan commitments of $19 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 September 30, 2014, the Company had commitments to purchase or fund additional amounts of $140 million and sell $103 million under the terms of such securities.