Investment Securities

12 Months Ended

Dec. 31, 2011

Investment Securities [Abstract]

Investment Securities

4. INVESTMENT SECURITIES

Investment securities classified as current and long-term were as follows at December 31, 2011 and 2010, respectively:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in millions)
December 31, 2011
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	705	$	20	$	0		$	725
Mortgage-backed securities		1,701		85		(2	)		1,784
Tax-exempt municipal securities		2,709		149		(2	)		2,856
Mortgage-backed securities:
Residential		46		0		(2	)		44
Commercial		356		25		0			381
Asset-backed securities		82		1		0			83
Corporate debt securities		3,329		262		(11	)		3,580
Total debt securities	$	8,928	$	542	$	(17	)	$	9,453
December 31, 2010
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	698	$	14	$	0		$	712
Mortgage-backed securities		1,615		50		(1	)		1,664
Tax-exempt municipal securities		2,440		37		(44	)		2,433
Mortgage-backed securities:
Residential		58		1		(3	)		56
Commercial		306		15		0			321
Asset-backed securities		148		2		0			150
Corporate debt securities		2,906		140		(14	)		3,032
Redeemable preferred stock		5		0		0			5
Total debt securities	$	8,176	$	259	$	(62	)	$	8,373

We participated in a securities lending program where we loaned certain investment securities for short periods of time in exchange for collateral, consisting of cash or U.S. Government securities, initially equal to at least 102% of the fair value of the investment securities on loan. We terminated the securities lending program in the fourth quarter of 2011. Investment securities with a fair value of $54 million at December 31, 2010 were on loan.

Gross unrealized losses and fair values aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position were as follows at December 31, 2011 and 2010, respectively:

	Less than 12 months					12 months or more					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
	(in millions)
December 31, 2011
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	117	$	0		$	0	$	0		$	117	$	0
Mortgage-backed securities		67		(1	)		18		(1	)		85		(2	)
Tax-exempt municipal securities		53		0			48		(2	)		101		(2	)
Mortgage-backed securities:
Residential		3		0			24		(2	)		27		(2	)
Commercial		14		0			0		0			14		0
Asset-backed securities		16		0			4		0			20		0
Corporate debt securities		355		(10	)		41		(1	)		396		(11	)
Total debt securities	$	625	$	(11	)	$	135	$	(6	)	$	760	$	(17	)
December 31, 2010
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	142	$	0		$	0	$	0		$	142	$	0
Mortgage-backed securities		110		(1	)		6		0			116		(1	)
Tax-exempt municipal securities		1,168		(33	)		98		(11	)		1,266		(44	)
Mortgage-backed securities:
Residential		0		0			33		(3	)		33		(3	)
Commercial		0		0			3		0			3		0
Asset-backed securities		17		0			0		0			17		0
Corporate debt securities		384		(10	)		31		(4	)		415		(14	)
Total debt securities	$	1,821	$	(44	)	$	171	$	(18	)	$	1,992	$	(62	)

Approximately 95% of our debt securities were investment-grade quality, with a weighted average credit rating of AA- by S&P at December 31, 2011. Most of the debt securities that were below investment-grade were rated BB, the higher end of the below investment-grade rating scale. At December 31, 2011, 12% of our tax-exempt municipal securities were pre-refunded, generally with U.S. government and agency securities. Tax-exempt municipal securities that were not pre-refunded were diversified among general obligation bonds of U.S. states and local municipalities as well as special revenue bonds. General obligation bonds, which are backed by the taxing power and full faith of the issuer, accounted for 45% of the tax-exempt municipals that were not pre-refunded in the portfolio. Special revenue bonds, issued by a municipality to finance a specific public works project such as utilities, water and sewer, transportation, and education, and supported by the revenues of that project, accounted for the remaining 55% of these municipals. Our general obligation bonds are diversified across the U.S. with no individual state exceeding 11%. Our investment policy limits investments in a single issuer and requires diversification among various asset types. In addition, 22% of our tax-exempt securities were insured by bond insurers and had an equivalent weighted average S&P credit rating of AA exclusive of the bond insurers' guarantee.

The recoverability of our residential and commercial mortgage-backed securities is supported by factors such as seniority, underlying collateral characteristics and credit enhancements. Our residential and commercial mortgage-backed securities at December 31, 2011 primarily were composed of senior tranches having high credit support, with 99% of the collateral consisting of prime loans. The weighted average credit rating of all commercial mortgage-backed securities was AA at December 31, 2011.

The percentage of corporate securities associated with the financial services industry was 19.3% at December 31, 2011 and 29.4% at December 31, 2010.

Several European countries, including Spain, Italy, Ireland, Portugal, and Greece, have been subject to credit deterioration due to weakness in their economic and fiscal situations. We have no direct exposure to sovereign issuances of these five countries.

All issuers of securities we own that were trading at an unrealized loss at December 31, 2011 remain current on all contractual payments. After taking into account these and other factors previously described, we believe these unrealized losses primarily were caused by an increase in market interest rates and tighter liquidity conditions in the current markets than when the securities were purchased. At December 31, 2011, we did not intend to sell the securities with an unrealized loss position in accumulated other comprehensive income, and it is not likely that we will be required to sell these securities before recovery of their amortized cost basis. As a result, we believe that the securities with an unrealized loss were not other-than-temporarily impaired at December 31, 2011.

The detail of realized gains (losses) related to investment securities and included within investment income was as follows for the years ended December 31, 2011, 2010, and 2009:

	2011			2010			2009
	(in millions)
Gross realized gains	$	33		$	35		$	123
Gross realized losses		(22	)		(29	)		(103	)
Net realized capital gains	$	11		$	6		$	20

There were no material other-than-temporary impairments in 2011, 2010, or 2009.

The contractual maturities of debt securities available for sale at December 31, 2011, regardless of their balance sheet classification, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized Cost		Fair Value
	(in millions)
Due within one year	$	427	$	431
Due after one year through five years		1,841		1,905
Due after five years through ten years		2,688		2,863
Due after ten years		1,787		1,962
Mortgage and asset-backed securities		2,185		2,292
Total debt securities	$	8,928	$	9,453