Financing Receivables

The Company’s financing receivables include commercial mortgage loans, syndicated loans, consumer loans, policy loans, certificate loans and margin loans. Commercial mortgage loans, syndicated loans, consumer loans, policy loans and certificate loans are reflected in investments. Margin loans are recorded in receivables.

Allowance for Loan Losses

Policy and certificate loans do not exceed the cash surrender value at origination. As there is minimal risk of loss related to policy and certificate loans, the Company does not record an allowance for loan losses. The Company monitors collateral supporting margin loans and requests additional collateral when necessary in order to mitigate the risk of loss. As there is minimal risk of loss related to margin loans, the allowance for loan losses is immaterial.

The following tables present a rollforward of the allowance for loan losses for the nine months ended and the ending balance of the allowance for loan losses by impairment method and type of loan:



	September 30, 2014
	Commercial Mortgage Loans			Syndicated Loans			Consumer Loans			Total
	(in millions)
Beginning balance	$	26		$	6		$	5		$	37
Charge-offs	(1		)	(2		)	(1		)	(4		)
Provisions	—			2			—			2
Ending balance	$	25		$	6		$	4		$	35

Individually evaluated for impairment	$	8		$	—		$	1		$	9
Collectively evaluated for impairment	17			6			3			26



	September 30, 2013
	Commercial Mortgage Loans			Syndicated Loans			Consumer Loans			Total
	(in millions)
Beginning balance	$	29		$	7		$	8		$	44
Charge-offs	(3		)	(1		)	(2		)	(6		)
Recoveries	—			—			1			1
Ending balance	$	26		$	6		$	7		$	39

Individually evaluated for impairment	$	6		$	—		$	1		$	7
Collectively evaluated for impairment	20			6			6			32

The recorded investment in financing receivables by impairment method and type of loan was as follows:



	September 30, 2014
	Commercial Mortgage Loans		Syndicated Loans		Consumer Loans		Total
	(in millions)
Individually evaluated for impairment	$	36	$	5	$	7	$	48
Collectively evaluated for impairment	2,678		489		780		3,947
Total	$	2,714	$	494	$	787	$	3,995



	December 31, 2013
	Commercial Mortgage Loans		Syndicated Loans		Consumer Loans		Total
	(in millions)
Individually evaluated for impairment	$	42	$	9	$	7	$	58
Collectively evaluated for impairment	2,640		370		873		3,883
Total	$	2,682	$	379	$	880	$	3,941

As of September 30, 2014 and December 31, 2013, the Company’s recorded investment in financing receivables individually evaluated for impairment for which there was no related allowance for loan losses was $17 million and $21 million, respectively. Unearned income, unamortized premiums and discounts, and net unamortized deferred fees and costs are not material to the Company’s total loan balance. During the three months and nine months ended September 30, 2014, the Company purchased $96 million and $186 million, respectively, and sold $1 million and $11 million, respectively, of syndicated loans. During the three months and nine months ended September 30, 2013, the Company purchased $8 million and $67 million, respectively, and sold nil and $2 million, respectively, of syndicated loans.

The Company has not acquired any loans with deteriorated credit quality as of the acquisition date.

Credit Quality Information

Nonperforming loans, which are generally loans 90 days or more past due, were $12 million and $22 million as of September 30, 2014 and December 31, 2013, respectively. All other loans were considered to be performing.

Commercial Mortgage Loans

The Company reviews the credit worthiness of the borrower and the performance of the underlying properties in order to determine the risk of loss on commercial mortgage loans. Based on this review, the commercial mortgage loans are assigned an internal risk rating, which management updates as necessary. Commercial mortgage loans which management has assigned its highest risk rating were 1% and 2% of total commercial mortgage loans at September 30, 2014 and December 31, 2013, respectively. Loans with the highest risk rating represent distressed loans which the Company has identified as impaired or expects to become delinquent or enter into foreclosure within the next six months. In addition, the Company reviews the concentrations of credit risk by region and property type.

Concentrations of credit risk of commercial mortgage loans by U.S. region were as follows:



	Loans				Percentage
	September 30, 2014		December 31, 2013		September 30, 2014		December 31, 2013
	(in millions)
East North Central	$	235	$	251	9	%	9	%
East South Central	65		71		2		3
Middle Atlantic	220		211		8		8
Mountain	261		257		10		10
New England	141		149		5		5
Pacific	680		661		25		25
South Atlantic	733		713		27		26
West North Central	217		207		8		8
West South Central	162		162		6		6
	2,714		2,682		100	%	100	%
Less: allowance for loan losses	25		26
Total	$	2,689	$	2,656

Concentrations of credit risk of commercial mortgage loans by property type were as follows:



	Loans				Percentage
	September 30, 2014		December 31, 2013		September 30, 2014		December 31, 2013
	(in millions)
Apartments	$	478	$	488	18	%	18	%
Hotel	34		33		1		1
Industrial	476		454		18		17
Mixed use	45		36		2		1
Office	556		559		20		21
Retail	977		951		36		36
Other	148		161		5		6
	2,714		2,682		100	%	100	%
Less: allowance for loan losses	25		26
Total	$	2,689	$	2,656

Syndicated Loans

The Company’s syndicated loan portfolio is diversified across industries and issuers. The primary credit indicator for syndicated loans is whether the loans are performing in accordance with the contractual terms of the syndication. Total nonperforming syndicated loans at September 30, 2014 and December 31, 2013 were $5 million and $4 million, respectively.

Consumer Loans

The Company considers the credit worthiness of borrowers (FICO score), collateral characteristics such as loan-to-value (“LTV”) and geographic concentration in determining the allowance for loan losses for consumer loans. At a minimum, management updates FICO scores and LTV ratios semiannually.

As of September 30, 2014 and December 31, 2013, approximately 6% and 5%, respectively, of consumer loans had FICO scores below 640. As of both September 30, 2014 and December 31, 2013, approximately 2% of the Company’s residential mortgage loans had LTV ratios greater than 90%. The Company’s most significant geographic concentration for consumer loans is in California representing 37% and 38% of the portfolio as of September 30, 2014 and December 31, 2013, respectively. No other state represents more than 10% of the total consumer loan portfolio.

Troubled Debt Restructurings

The following table presents the number of loans restructured by the Company during the period and their recorded investment at the end of the period:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
	(in millions, except number of loans)
Commercial mortgage loans	1	$	6	3	$	12	3	$	14	7	$	22
Syndicated loans	—	—		—	—		1	1		1	—
Consumer loans	—	—		4	—		4	—		13	—
Total	1	$	6	7	$	12	8	$	15	21	$	22

The troubled debt restructurings did not have a material impact to the Company’s allowance for loan losses or income recognized for the three months and nine months ended September 30, 2014 and 2013. There are no material commitments to lend additional funds to borrowers whose loans have been restructured.