5. 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. 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.

Allowance for Loan Losses

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

	June 30, 2013
	Commercial
	Mortgage		Syndicated			Consumer
	Loans		Loans			Loans			Total
	(in millions)
Beginning balance	$	29	$	7		$	8		$	44
Charge-offs	—		(1		)	(1		)	(2		)
Ending balance	$	29	$	6		$	7		$	42
Individually evaluated for impairment	$	8	$	—		$	1		$	9
Collectively evaluated for impairment	21		6			6			33

	June 30, 2012
	Commercial
	Mortgage			Syndicated			Consumer
	Loans			Loans			Loans			Total
	(in millions)
Beginning balance	$	35		$	9		$	16		$	60
Charge-offs	(2		)	(2		)	(5		)	(9		)
Recoveries	—			—			1			1
Provisions	—			—			3			3
Ending balance	$	33		$	7		$	15		$	55
Individually evaluated for impairment	$	10		$	1		$	2		$	13
Collectively evaluated for impairment	23			6			13			42

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

	June 30, 2013
	Commercial
	Mortgage		Syndicated		Consumer
	Loans		Loans		Loans		Total
	(in millions)
Individually evaluated for impairment	$	58	$	4	$	7	$	69
Collectively evaluated for impairment	2,584		305		970		3,859
Total	$	2,642	$	309	$	977	$	3,928

	December 31, 2012
	Commercial
	Mortgage		Syndicated		Consumer
	Loans		Loans		Loans		Total
	(in millions)
Individually evaluated for impairment	$	44	$	2	$	8	$	54
Collectively evaluated for impairment	2,562		335		1,061		3,958
Total	$	2,606	$	337	$	1,069	$	4,012

As of June 30, 2013 and December 31, 2012, the Company’s recorded investment in financing receivables individually evaluated for impairment for which there was no related allowance for loan losses was $18 million and $17 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.

Purchases and sales of loans were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
	(in millions)
Purchases
Consumer loans	$	—	$	—	$	—	$	51
Syndicated loans	37		24		59		53
Total loans purchased	$	37	$	24	$	59	$	104

Sales
Consumer loans	$	—	$	58	$	—	$	121
Syndicated loans	1		—		2		—
Total loans sold	$	1	$	58	$	2	$	121

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 $21 million and $7 million as of June 30, 2013 and December 31, 2012, 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 2% of total commercial mortgage loans at both June 30, 2013 and December 31, 2012. 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
	June 30, 2013		December 31, 2012		June 30, 2013		December 31, 2012
	(in millions)
East North Central	$	258	$	260	10	%	10	%
East South Central	70		66		3		3
Middle Atlantic	207		207		8		8
Mountain	270		272		10		10
New England	145		146		5		6
Pacific	626		597		24		23
South Atlantic	670		661		25		25
West North Central	223		232		8		9
West South Central	173		165		7		6
	2,642		2,606		100	%	100	%
Less: allowance for loan losses	29		29
Total	$	2,613	$	2,577

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

	Loans				Percentage
	June 30, 2013		December 31, 2012		June 30, 2013		December 31, 2012
	(in millions)
Apartments	$	473	$	450	18	%	17	%
Hotel	28		36		1		1
Industrial	467		474		18		18
Mixed use	33		42		1		2
Office	593		610		22		24
Retail	897		858		34		33
Other	151		136		6		5
	2,642		2,606		100	%	100	%
Less: allowance for loan losses	29		29
Total	$	2,613	$	2,577

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 both June 30, 2013 and December 31, 2012 were $3 million.

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 both June 30, 2013 and December 31, 2012, approximately 5% of consumer loans had FICO scores below 640. At June 30, 2013 and December 31, 2012, approximately 2% and 8%, respectively, 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 38% of the portfolio as of both June 30, 2013 and December 31, 2012. 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 June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
	Number	Recorded		Number	Recorded		Number	Recorded		Number	Recorded
	of Loans	Investment		of Loans	Investment		of Loans	Investment		of Loans	Investment
	(in millions, except number of loans)
Commercial mortgage loans	4	$	10	1	$	1	4	$	10	1	$	1
Syndicated loans	1	—		—	—		1	—		2	2
Consumer bank loans	4	—		13	—		9	—		39	—
Total	9	$	10	14	$	1	14	$	10	42	$	3

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 six months ended June 30, 2013 and 2012. There are no material commitments to lend additional funds to borrowers whose loans have been restructured.