4. INVESTMENT SECURITIES

Investment securities classified as current and long-term were as follows at June 30, 2014 and December 31, 2013, respectively:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in millions)
June 30, 2014
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	372	$	8	$	(2	)	$	378
Mortgage-backed securities		1,490		48		(16	)		1,522
Tax-exempt municipal securities		2,998		141		(7	)		3,132
Mortgage-backed securities:
Residential		20		1		(1	)		20
Commercial		636		19		(11	)		644
Asset-backed securities		41		1		—			42
Corporate debt securities		3,402		326		(6	)		3,722

Total debt securities	$	8,959	$	544	$	(43	)	$	9,460


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		—		—			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 June 30, 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)
June 30, 2014
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	38	$	—		$	92	$	(2	)	$	130	$	(2	)
Mortgage-backed securities		36		—			505		(16	)		541		(16	)
Tax-exempt municipal securities		118		(2	)		239		(5	)		357		(7	)
Mortgage-backed securities:
Residential		4		—			2		(1	)		6		(1	)
Commercial		106		(1	)		192		(10	)		298		(11	)
Asset-backed securities		—		—			16		—			16		—
Corporate debt securities		30		—			176		(6	)		206		(6	)

Total debt securities	$	332	$	(3	)	$	1,222	$	(40	)	$	1,554	$	(43	)


December 31, 2013
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	231	$	(6	)	$	5	$	—		$	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		—			1		—			7		—
Commercial		270		(8	)		40		(1	)		310		(9	)
Asset-backed securities		35		(1	)		—		—			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 June 30, 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 June 30, 2014, 5% 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 38% 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 62% of these municipals. Our general obligation bonds are diversified across the United States with no individual state exceeding 11%. In addition, 17% 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 June 30, 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 June 30, 2014.

The percentage of corporate securities associated with the financial services industry was 21% at June 30, 2014 and 23% at December 31, 2013.

All issuers of securities we own that were trading at an unrealized loss at June 30, 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 June 30, 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 June 30, 2014.

The detail of realized gains (losses) related to investment securities and included within investment income was as follows for the three and six months ended June 30, 2014 and 2013:


	Three months ended June 30,						Six months ended June 30,
	2014			2013			2014			2013
	(in millions)
Gross realized gains	$	6		$	11		$	7		$	17
Gross realized losses		(4	)		(5	)		(4	)		(7	)

Net realized capital gains	$	2		$	6		$	3		$	10

There were no material other-than-temporary impairments for the three and six months ended June 30, 2014 or 2013.

The contractual maturities of debt securities available for sale at June 30, 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	$	422	$	427
Due after one year through five years		2,144		2,268
Due after five years through ten years		2,264		2,413
Due after ten years		1,942		2,124
Mortgage and asset-backed securities		2,187		2,228

Total debt securities	$	8,959	$	9,460