Investments

3 Months Ended

Mar. 31, 2015

Investments [Abstract]

Investments

Note C. Investments

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

Three months ended March 31
(In millions)	2015			2014
Fixed maturity securities	$	443		$	452
Short term investments	2			1
Limited partnership investments	114			73
Equity securities	3			2
Mortgage loans	8			6
Trading portfolio	2			3
Other	—			2
Gross investment income	572			539
Investment expense	(14		)	(13		)
Net investment income	$	558		$	526

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

Three months ended March 31
(In millions)	2015			2014
Net realized investment gains (losses):
Fixed maturity securities:
Gross realized gains	$	33		$	53
Gross realized losses	(21		)	(15		)
Net realized investment gains (losses) on fixed maturity securities	12			38
Equity securities:
Gross realized gains	1			5
Gross realized losses	(1		)	—
Net realized investment gains (losses) on equity securities	—			5
Derivatives	(1		)	—
Short term investments and other	(1		)	3
Net realized investment gains (losses)	$	10		$	46

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

Three months ended March 31
(In millions)	2015		2014
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	5	$	1
States, municipalities and political subdivisions	5		—
Asset-backed - residential mortgage-backed	1		1
Total fixed maturity securities available-for-sale	11		2
Equity securities available-for-sale:
Common stock	1		—
Net OTTI losses recognized in earnings	$	12	$	2

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

March 31, 2015	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	$	16,721	$	1,867	$	43	$	18,545	$	—
States, municipalities and political subdivisions	11,407		1,536		9		12,934		—
Asset-backed:
Residential mortgage-backed	4,998		241		13		5,226		(51		)
Commercial mortgage-backed	2,151		114		5		2,260		(3		)
Other asset-backed	1,109		15		1		1,123		—
Total asset-backed	8,258		370		19		8,609		(54		)
U.S. Treasury and obligations of government-sponsored enterprises	24		6		—		30		—
Foreign government	390		19		—		409		—
Redeemable preferred stock	39		3		—		42		—
Total fixed maturity securities available-for-sale	36,839		3,801		71		40,569		$	(54	)
Total fixed maturity securities trading	36						36
Equity securities available-for-sale:
Common stock	41		9		—		50
Preferred stock	172		7		4		175
Total equity securities available-for-sale	213		16		4		225
Total	$	37,088	$	3,817	$	75	$	40,830

December 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	$	17,210	$	1,721	$	61	$	18,870	$	—
States, municipalities and political subdivisions	11,285		1,463		8		12,740		—
Asset-backed:
Residential mortgage-backed	5,028		218		13		5,233		(53		)
Commercial mortgage-backed	2,056		93		5		2,144		(2		)
Other asset-backed	1,234		11		10		1,235		—
Total asset-backed	8,318		322		28		8,612		(55		)
U.S. Treasury and obligations of government-sponsored enterprises	26		5		—		31		—
Foreign government	438		16		—		454		—
Redeemable preferred stock	39		3		—		42		—
Total fixed maturity securities available-for-sale	37,316		3,530		97		40,749		$	(55	)
Total fixed maturity securities trading	19						19
Equity securities available-for-sale:
Common stock	38		9		—		47
Preferred stock	172		5		2		175
Total equity securities available-for-sale	210		14		2		222
Total	$	37,545	$	3,544	$	99	$	40,990

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. As of March 31, 2015 and December 31, 2014, the net unrealized gains on investments included in AOCI were net of after-tax Shadow Adjustments of $1,370 million and $1,288 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 present the estimated fair value and gross unrealized losses of 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.

	Less than 12 Months				12 Months or Longer				Total
March 31, 2015	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	$	840	$	31	$	139	$	12	$	979	$	43
States, municipalities and political subdivisions	479		6		100		3		579		9
Asset-backed:
Residential mortgage-backed	318		5		148		8		466		13
Commercial mortgage-backed	175		3		62		2		237		5
Other asset-backed	187		1		5		—		192		1
Total asset-backed	680		9		215		10		895		19
U.S. Treasury and obligations of government-sponsored enterprises	3		—		—		—		3		—
Foreign government	13		—		1		—		14		—
Total fixed maturity securities available-for-sale	2,015		46		455		25		2,470		71
Equity securities available-for-sale:
Preferred stock	15		4		—		—		15		4
Total	$	2,030	$	50	$	455	$	25	$	2,485	$	75

	Less than 12 Months				12 Months or Longer				Total
December 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	$	1,330	$	46	$	277	$	15	$	1,607	$	61
States, municipalities and political subdivisions	335		5		127		3		462		8
Asset-backed:
Residential mortgage-backed	293		5		189		8		482		13
Commercial mortgage-backed	264		2		99		3		363		5
Other asset-backed	607		10		7		—		614		10
Total asset-backed	1,164		17		295		11		1,459		28
U.S. Treasury and obligations of government-sponsored enterprises	3		—		4		—		7		—
Foreign government	3		—		3		—		6		—
Redeemable preferred stock	3		—		—		—		3		—
Total fixed maturity securities available-for-sale	2,838		68		706		29		3,544		97
Equity securities available-for-sale:
Preferred stock	17		2		1		—		18		2
Total	$	2,855	$	70	$	707	$	29	$	3,562	$	99

Based on current facts and circumstances, the Company believes the unrealized losses presented in the March 31, 2015 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 as of March 31, 2015.

The following table presents the activity related to the pretax credit loss component reflected in Retained earnings on fixed maturity securities still held as of March 31, 2015 and 2014 for which a portion of an OTTI loss was recognized in Other comprehensive income.

Three months ended March 31
(In millions)	2015			2014
Beginning balance of credit losses on fixed maturity securities	$	62		$	74
Reductions for securities sold during the period	(1		)	(2		)
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	$	61		$	69

Contractual Maturity

The following table presents available-for-sale fixed maturity securities by contractual maturity.

	March 31, 2015				December 31, 2014
(In millions)	Cost or Amortized Cost		Estimated Fair Value		Cost or Amortized Cost		Estimated Fair Value
Due in one year or less	$	2,011	$	2,043	$	2,479	$	2,511
Due after one year through five years	8,760		9,340		9,054		9,605
Due after five years through ten years	12,401		13,108		12,055		12,584
Due after ten years	13,667		16,078		13,728		16,049
Total	$	36,839	$	40,569	$	37,316	$	40,749

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.

Derivative Financial Instruments

The following tables present the aggregate contractual or notional amounts and estimated fair values related to derivative financial instruments.

March 31, 2015	Contractual/ Notional Amount		Estimated Fair Value
(In millions)			Asset		Liability
Without hedge designation
Currency forwards	$	18	$	2	$	—
Equity warrants	5		—		—
Embedded derivative on funds withheld liability	184		—		5
Total			$	2	$	5

December 31, 2014	Contractual/ Notional Amount		Estimated Fair Value
(In millions)			Asset		Liability
Without hedge designation
Currency forwards	$	9	$	—	$	—
Equity warrants	5		—		—
Embedded derivative on funds withheld liability	184		—		3
Total			$	—	$	3

Derivative financial instruments are presented gross in Other invested assets and Other liabilities on the Condensed Consolidated Balance Sheets. There would be no significant difference in the balance included in such accounts if the estimated fair values were presented net as of March 31, 2015 and December 31, 2014.

Investment Commitments

As of March 31, 2015, the Company had committed approximately $338 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, 2015, the Company had mortgage loan commitments of $41 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, 2015, the Company had commitments to purchase or fund additional amounts of $82 million and sell $71 million under the terms of such securities.