The following realized gains and losses on investments include other-than-temporary impairments on debt securities but exclude amounts required to adjust future policy benefits for the run-off settlement annuity business:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In millions)	2011		2010		2011		2010
Fixed maturities	$	(14)	$	14	$	36	$	48
Equity securities		(9)		4		(5)		7
Commercial mortgage loans		-		(1)		(16)		(16)
Other investments, including derivatives		36		11		41		5
Realized investment gains before income taxes		13		28		56		44
Less income taxes		4		10		19		15
Net realized investment gains	$	9	$	18	$	37	$	29

Included in pre-tax realized investment gains above were changes in valuation reserves, asset write-downs and other-than-temporary impairments on fixed maturities as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In millions)	2011		2010		2011		2010
Credit-related ⁽¹⁾	$	5	$	1	$	21	$	31
Other ⁽²⁾		22		-		24		1
Total	$	27	$	1	$	45	$	32

(1) Credit-related losses include other-than-temporary declines in fair value of fixed maturities and equity securities, and changes in valuation reserves and asset write-downs related to commercial mortgage loans and investments in real estate entities.
(2) Other primarily represents the impact of rising market yields on investments where the Company could not demonstrate the intent and ability to hold until recovery.

Securities in the following table are included in fixed maturities and equity securities on the Company's Consolidated Balance Sheets. These securities are carried at fair value with changes in fair value reported in other realized investment gains (losses) and interest and dividends reported in net investment income. The Company's hybrid investments include preferred stock or debt securities with call or conversion features.

	As of September 30,		As of December 31,
(In millions)	2011		2010
Included in fixed maturities:
Trading securities (amortized cost: $2; $3)	$	2	$	3
Hybrid securities (amortized cost: $29; $45)		31		52
Total	$	33	$	55
Included in equity securities:
Hybrid securities (amortized cost: $112; $108)	$	87	$	86

Fixed maturities included $81 million at September 30, 2011, that were pledged as collateral to brokers as required under certain futures contracts. These fixed maturities were primarily federal government securities.

The following information about fixed maturities excludes trading and hybrid securities. The amortized cost and fair value by contractual maturity periods for fixed maturities were as follows at September 30, 2011:

		Amortized		Fair
(In millions)		Cost		Value
Due in one year or less	$	954	$	966
Due after one year through five years		4,738		5,069
Due after five years through ten years		5,200		5,746
Due after ten years		2,605		3,459
Other asset and mortgage-backed securities		845		999
Total	$	14,342	$	16,239

Actual maturities could differ from contractual maturities because issuers may have the right to call or prepay obligations, with or without penalties. Also, in some cases the Company may extend maturity dates.

Gross unrealized appreciation (depreciation) on fixed maturities (excluding trading securities and hybrid securities with a fair value of $33 million at September 30, 2011 and $55 million at December 31, 2010) by type of issuer is shown below.


	September 30, 2011
				Unrealized		Unrealized
		Amortized		Appre-		Depre-		Fair
(In millions)		Cost		ciation		ciation		Value
Federal government and agency	$	549	$	398	$	0	$	947
State and local government		2,214		251		(4)		2,461
Foreign government		1,148		94		(2)		1,240
Corporate		9,586		1,047		(41)		10,592
Federal agency mortgage-backed		9		-		0		9
Other mortgage-backed		75		10		(4)		81
Other asset-backed		761		158		(10)		909
Total	$	14,342	$	1,958	$	(61)	$	16,239
(In millions)	December 31, 2010
Federal government and agency	$	459	$	229	$	(1)	$	687
State and local government		2,305		172		(10)		2,467
Foreign government		1,095		63		(4)		1,154
Corporate		8,697		744		(49)		9,392
Federal agency mortgage-backed		9		1		-		10
Other mortgage-backed		80		10		(3)		87
Other asset-backed		752		117		(12)		857
Total	$	13,397	$	1,336	$	(79)	$	14,654

The above table includes investments with a fair value of $2.9 billion supporting the Company's run-off settlement annuity business, with gross unrealized appreciation of $842 million and gross unrealized depreciation of $23 million at September 30, 2011. Such unrealized amounts are required to support future policy benefit liabilities of this business and, as such, are not included in accumulated other comprehensive income. At December 31, 2010, investments supporting this business had a fair value of $2.5 billion, gross unrealized appreciation of $476 million and gross unrealized depreciation of $33 million.

Sales information for available-for-sale fixed maturities and equity securities were as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In millions)	2011		2010		2011		2010
Proceeds from sales	$	153	$	239	$	457	$	688
Gross gains on sales	$	8	$	9	$	36	$	36
Gross losses on sales	$	(3)	$	-	$	(4)	$	(3)

Review of declines in fair value. Management reviews fixed maturities with a decline in fair value from cost for impairment based on criteria that include:

Excluding trading and hybrid securities, as of September 30, 2011, fixed maturities with a decline in fair value from amortized cost (that were primarily investment grade corporate bonds) were as follows, including the length of time of such decline:

	Fair		Amortized		Unrealized		Number
(In millions)	Value		Cost		Depreciation		of Issues
Fixed maturities:
One year or less:
Investment grade	$	635	$	654	$	(19)	232
Below investment grade	$	381	$	388	$	(7)	195
More than one year:
Investment grade	$	234	$	261	$	(27)	56
Below investment grade	$	25	$	33	$	(8)	15

The unrealized depreciation of investment grade fixed maturities is primarily due to increases in market yields since purchase. Equity securities with a fair value lower than cost were not material as of September 30, 2011.

Mortgage loans held by the Company are made exclusively to commercial borrowers and are diversified by property type, location and borrower. Loans are secured by high quality, primarily completed and substantially leased operating properties, generally carried at unpaid principal balances and issued at a fixed rate of interest.

Credit quality. The Company has one portfolio segment and one class of mortgage loans and applies a consistent and disciplined approach to evaluating and monitoring credit risk, beginning with the initial underwriting of a mortgage loan and continuing throughout the investment holding period. Mortgage origination professionals employ an internal rating system developed from the Company's experience in real estate investing and mortgage lending. A quality rating, designed to evaluate the relative risk of the transaction, is assigned at each loan's origination and is updated each year as part of the annual portfolio loan review. The Company monitors credit quality on an ongoing basis, classifying each loan as a loan in good standing, potential problem loan or problem loan.

Quality ratings are based on internal evaluations of each loan's specific characteristics considering a number of key inputs, including real estate market-related factors such as rental rates and vacancies, and property-specific inputs such as growth rate assumptions and lease rollover statistics. However, the two most significant contributors to the credit quality rating are the debt service coverage and loan-to-value ratios. The debt service coverage ratio measures the amount of property cash flow available to meet annual interest and principal payments on debt. A debt service coverage ratio below 1.0 indicates that there is not enough cash flow to cover the loan payments. The loan-to-value ratio, commonly expressed as a percentage, compares the amount of the loan to the fair value of the underlying property collateralizing the loan.

The following table summarizes the credit risk profile of the Company's commercial mortgage loan portfolio based on loan-to-value and debt service coverage ratios, as of September 30, 2011:

(Dollars in millions)		Debt Service Coverage Ratio
		1.30x or		1.20x to		1.10x to		1.00x to		Less than
Loan-to-Value Ratios		Greater		1.29x		1.19x		1.09x		1.00x		Total
Below 50%	$	274	$	-	$	4	$	50	$	9	$	337
50% to 59%		368		102		26		-		53		549
60% to 69%		517		140		42		-		74		773
70% to 79%		150		133		142		159		37		621
80% to 89%		112		81		115		72		72		452
90% to 99%		36		35		30		59		116		276
100% or above		-		10		50		87		144		291
Total	$	1,457	$	501	$	409	$	427	$	505	$	3,299

The Company's annual in-depth review of its commercial mortgage loan investments is the primary mechanism for identifying emerging risks in the portfolio. The most recent review was completed by the Company's investment professionals in the second quarter of 2011 and included an analysis of each underlying property's most recent annual financial statements, rent rolls, operating plans, budgets, a physical inspection of the property and other pertinent factors. Based on historical results, current leases, lease expirations and rental conditions in each market, the Company estimates the current year and future stabilized property income and fair value, and categorizes the investments as loans in good standing, potential problem loans or problem loans. Based on property valuations and cash flows estimated as part of this review, and considering updates for loans where material changes were subsequently identified, the portfolio's average loan-to-value ratio improved to 71% at September 30, 2011, decreasing from 74% as of December 31, 2010. The portfolio's average debt service coverage ratio was estimated to be 1.36 as of September 30, 2011, a decrease from 1.38 as of December 31, 2010, reflecting payoff activity on loans with high debt service coverage ratios.

Quality ratings are adjusted between annual reviews if new property information is received or events such as delinquency or a borrower request for restructure cause management to believe that the Company's estimate of financial performance, fair value or the risk profile of the underlying property has been impacted.

During the nine months ended September 30, 2011, the Company restructured a $65 million potential problem mortgage loan. The original loan was modified into two notes, including a $55 million loan at current market terms and a $10 million loan issued at a below market interest rate. This modification is considered a troubled debt restructuring because the borrower was experiencing financial difficulties and a concession was granted as the second loan was issued at a below market interest rate. No valuation reserve was required because the fair value of the underlying property exceeds the total outstanding loans. As a part of this restructuring, both the borrower and the Company have committed to fund additional capital for leasing and capital requirements.

Other loans were modified during the nine months ended September 30, 2011, but were not considered troubled debt restructures. The impact of modifications to these loans was not material to the Company's results of operations, financial condition or liquidity.

Potential problem mortgage loans are considered current (no payment more than 59 days past due), but exhibit certain characteristics that increase the likelihood of future default. The characteristics management considers include, but are not limited to, the deterioration of debt service coverage below 1.0, an increase of estimated loan-to-value ratios to 100% or more, downgrade in quality rating and request from the borrower for restructuring. In addition, loans are considered potential problems if principal or interest payments are past due by more than 30 but less than 60 days. Problem mortgage loans are either in default by 60 days or more or have been restructured as to terms, which could include concessions on interest rate, principal payment or maturity date. The Company monitors each problem and potential problem mortgage loan on an ongoing basis, and updates the loan categorization and quality rating when warranted.

Problem and potential problem mortgage loans, net of valuation reserves, totaled $380 million at September 30, 2011 and $383 million at December 31, 2010. At September 30, 2011, mortgage loans collateralized by industrial properties represent the most significant component of problem and potential problem mortgage loans, with no significant concentration by geographic region. There were no significant concentrations by property type or geographic region at December 31, 2010.

Impaired commercial mortgage loans. A commercial mortgage loan is considered impaired when it is probable that the Company will not collect all amounts due (principal and interest) according to the terms of the original loan agreement. The Company assesses each loan individually for impairment, utilizing the information obtained from the quality review process discussed above. Impaired loans are carried at the lower of unpaid principal balance or the fair value of the underlying collateral. Certain commercial mortgage loans without valuation reserves are considered impaired because the Company will not collect all interest due according to the terms of the original agreements; however, the Company expects to recover their remaining carrying value primarily because it is less than the fair value of the underlying property.

The carrying value of the Company's impaired commercial mortgage loans and related valuation reserves were as follows:

(In millions)		September 30, 2011					December 31, 2010
		Gross		Reserves		Net		Gross		Reserves		Net
Impaired commercial mortgage loans with valuation reserves	$	171	$	(27)	$	144	$	47	$	(12)	$	35
Impaired commercial mortgage loans with no valuation reserves		60		-		60		60		-		60
Total	$	231	$	(27)	$	204	$	107	$	(12)	$	95

The average recorded investment in impaired loans was $166 million for the nine months ended September 30, 2011 and $185 million for the nine months ended September 30, 2010. The Company recognizes interest income on problem mortgage loans only when payment is actually received because of the risk profile of the underlying investment. Interest income that would have been reflected in net income if interest on non-accrual commercial mortgage loans had been received in accordance with the original terms was not significant for the nine months ended September 30, 2011 or 2010. Interest income on impaired commercial mortgage loans was not significant for the nine months ended September 30, 2011 or 2010.

The following table summarizes the changes in valuation reserves for commercial mortgage loans:

(In millions)	2011		2010
Reserve balance, January 1,	$	12	$	17
Increase in valuation reserves		16		17
Charge-offs upon sales and repayments, net of recoveries		(1)		(12)
Transfers to real estate		-		(12)

Reserve balance, September 30,	$	27	$	10

Short-term investments and cash equivalents include corporate securities of $1.5 billion, federal government securities of $203 million and money market funds of $33 million as of September 30, 2011. The Company's short-term investments and cash equivalents as of December 31, 2010 included corporate securities of $1.1 billion, federal government securities of $137 million and money market funds of $40 million.