4. INVESTMENT SECURITIES

Investment securities classified as current and long-term were as follows at March 31, 2014 and December 31, 2013, respectively:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in millions)
March 31, 2014
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	517	$	7	$	(4	)	$	520
Mortgage-backed securities		1,870		37		(35	)		1,872
Tax-exempt municipal securities		3,067		116		(17	)		3,166
Mortgage-backed securities:
Residential		21		0		(1	)		20
Commercial		656		20		(11	)		665
Asset-backed securities		49		1		0			50
Corporate debt securities		3,493		275		(13	)		3,755

Total debt securities	$	9,673	$	456	$	(81	)	$	10,048


December 31, 2013
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	584	$	6	$	(6	)	$	584
Mortgage-backed securities		1,834		34		(48	)		1,820
Tax-exempt municipal securities		2,911		93		(33	)		2,971
Mortgage-backed securities:
Residential		22		0		0			22
Commercial		662		20		(9	)		673
Asset-backed securities		63		1		(1	)		63
Corporate debt securities		3,474		223		(30	)		3,667

Total debt securities	$	9,550	$	377	$	(127	)	$	9,800

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 March 31, 2014 and December 31, 2013, 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)
March 31, 2014
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	212	$	(4	)	$	3	$	0		$	215	$	(4	)
Mortgage-backed securities		1,145		(34	)		20		(1	)		1,165		(35	)
Tax-exempt municipal securities		413		(13	)		115		(4	)		528		(17	)
Mortgage-backed securities:
Residential		5		0			1		(1	)		6		(1	)
Commercial		148		(3	)		152		(8	)		300		(11	)
Asset-backed securities		35		0			0		0			35		0
Corporate debt securities		333		(11	)		35		(2	)		368		(13	)

Total debt securities	$	2,291	$	(65	)	$	326	$	(16	)	$	2,617	$	(81	)


December 31, 2013
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	231	$	(6	)	$	5	$	0		$	236	$	(6	)
Mortgage-backed securities		1,076		(47	)		21		(1	)		1,097		(48	)
Tax-exempt municipal securities		693		(28	)		57		(5	)		750		(33	)
Mortgage-backed securities:
Residential		6		0			1		0			7		0
Commercial		270		(8	)		40		(1	)		310		(9	)
Asset-backed securities		35		(1	)		0		0			35		(1	)
Corporate debt securities		594		(28	)		17		(2	)		611		(30	)

Total debt securities	$	2,905	$	(118	)	$	141	$	(9	)	$	3,046	$	(127	)

Approximately 95% of our debt securities were investment-grade quality, with a weighted average credit rating of AA- by S&P at March 31, 2014. Most of the debt securities that were below investment-grade were rated BB, the higher end of the below investment-grade rating scale. At March 31, 2014, 6% 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 39% 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, or education, and supported by the revenues of that project, accounted for the remaining 61% of these municipals. Our general obligation bonds are diversified across the United States with no individual state exceeding 12%. In addition, 18% 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. Our investment policy limits investments in a single issuer and requires diversification among various asset types.

The recoverability of our non-agency residential and commercial mortgage-backed securities is supported by factors such as seniority, underlying collateral characteristics and credit enhancements. These residential and commercial mortgage-backed securities at March 31, 2014 primarily were composed of senior tranches having high credit support, with over 99% of the collateral consisting of prime loans. The weighted average credit rating of all commercial mortgage-backed securities was AA+ at March 31, 2014.

The percentage of corporate securities associated with the financial services industry was 22% at March 31, 2014 and 23% at December 31, 2013.

All issuers of securities we own that were trading at an unrealized loss at March 31, 2014 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 March 31, 2014, 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 March 31, 2014.

The detail of realized gains (losses) related to investment securities and included within investment income was as follows for the three months ended March 31, 2014 and 2013:


	For the three months ended March 31,
	2014		2013
	(in millions)
Gross realized gains	$	1	$	6
Gross realized losses		0		(1	)

Net realized capital gains	$	1	$	5

There were no material other-than-temporary impairments for the three months ended March 31, 2014 or 2013.

The contractual maturities of debt securities available for sale at March 31, 2014, 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	$	477	$	483
Due after one year through five years		2,114		2,214
Due after five years through ten years		2,533		2,663
Due after ten years		1,953		2,081
Mortgage and asset-backed securities		2,596		2,607

Total debt securities	$	9,673	$	10,048