INVESTMENTS

6 Months Ended

Jun. 30, 2011

Investments Disclosure [Abstract]

INVESTMENTS

3)       INVESTMENTS

Fixed Maturities and Equity Securities

The following table provides information relating to fixed maturities classified as AFS; no equity securities were classified as AFS:

Available-for-Sale Securities by Classification
					Gross		Gross
			Amortized		Unrealized		Unrealized		Fair		OTTI
			Cost		Gains		Losses		Value		in AOCI(3)
			(In Millions)
June 30, 2011:
Fixed Maturities:
	Corporate		$	1,602	$	125	$	3	$	1,724	$	-
	U.S. Treasury, government
		and agency		69		2		-		71		-
	States and political subdivisions			21		-		-		21		-
	Foreign governments			4		-		-		4		-
	Commercial mortgage-backed			64		1		30		35		2
	Residential mortgage-backed(1)			28		2		-		30		-
	Asset-backed(2)			9		1		-		10		-
	Redeemable preferred stock			81		-		2		79		-
Total at June 30, 2011			$	1,878	$	131	$	35	$	1,974	$	2
December 31, 2010:
Fixed Maturities:
	Corporate		$	1,522	$	112	$	5	$	1,629	$	-
	U.S. Treasury, government
		and agency		87		1		-		88		-
	States and political subdivisions			21		-		1		20		-
	Foreign governments			4		-		-		4		-
	Commercial mortgage-backed			68		-		32		36		3
	Residential mortgage-backed(1)			33		2		-		35		-
	Asset-backed(2)			10		1		-		11		-
	Redeemable preferred stock			81		-		4		77		-
Total at December 31, 2010			$	1,826	$	116	$	42	$	1,900	$	3

• Includes publicly traded agency pass-through securities and collateralized mortgage obligations.
• Includes credit-tranched securities collateralized by sub-prime mortgages and other asset types and credit tenant loans.
• Amounts represent OTTI losses in AOCI, which were not included in earnings (loss) in accordance with current accounting guidance.

The contractual maturities of AFS fixed maturities (excluding redeemable preferred stock) at June 30, 2011 are shown in the table below. Bonds not due at a single maturity date have been included in the table in the year of final maturity. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

Available-for-Sale Fixed Maturities
Contractual Maturities at June 30, 2011
		Amortized Cost		Fair Value
		(In Millions)
Due in one year or less		$	71	$	73
Due in years two through five			762		822
Due in years six through ten			723		777
Due after ten years			140		148
	Subtotal		1,696		1,820
Commercial mortgage-backed securities			64		35
Residential mortgage-backed securities			28		30
Asset-backed securities			9		10
Total		$	1,797	$	1,895

For the first sixmonths of 2011 and 2010, proceeds received on sales of fixed maturities classified as AFS amounted to $10 million and $21 million, respectively. Gross gains of $1 million and $1 million and gross losses of $1 million and $0 million were realized on these sales for the first six months of 2011 and 2010, respectively. The change in unrealized investment gains (losses) related to fixed maturities classified as AFS for the first six months of 2011 and 2010 amounted to $22 million and $61 million, respectively.

MLOA recognized OTTI on AFS fixed maturities as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
	(In Millions)
Credit losses recognized in earnings (loss)	$	(1)	$	(3)	$	(1)	$	(6)
Non-credit losses recognized in OCI		-		-		-		(1)
Total OTTI	$	(1)	$	(3)	$	(1)	$	(7)

The following table sets forth the amount of credit loss impairments on fixed maturity securities held by MLOA at the dates indicated and the corresponding changes in such amounts.

	Fixed Maturities - Credit Loss Impairments
		Three Months Ended					Six Months Ended
		June 30,					June 30,
			2011		2010		2011		2010
			(In Millions)
Balances, beginning of period			$	(72)	$	(57)	$	(83)	$	(54)
Previously recognized impairments on securities that matured,
	paid, prepaid or sold			-		26		11		26
Recognized impairments on securities impaired to fair value this period(1)				-		-		-		-
Impairments recognized this period on securities not previously impaired				(1)		(2)		(1)		(5)
Additional impairments this period on securities previously impaired				-		(1)		-		(1)
Increases due to passage of time on previously recorded credit losses				-		-		-		-
Accretion of previously recognized impairments due to increases in
	expected cash flows			-		-		-		-
Balances at June 30,			$	(73)	$	(34)	$	(73)	$	(34)

(1)        Represents circumstances where MLOA determined in the current period that it intends to sell the security or it is more likely than not that it will be required to sell the security before recovery of the security's amortized cost.

Net unrealized investment gains (losses) on fixed maturities classified as AFS are included in the balance sheets as a component of AOCI. The table below presents these amounts as of the dates indicated:

			June 30,		December 31,
			2011		2010
			(In Millions)
AFS Securities:
	Fixed maturities:
		With OTTI loss	$	(3)	$	(3)
		All other		99		77
Net Unrealized Gains (Losses)			$	96	$	74

Changes in net unrealized investment gains (losses) recognized in AOCI include reclassification adjustments to reflect amounts realized in Net earnings (loss) for the current period that had been part of OCI in earlier periods. The tables that follow below present a rollforward of net unrealized investment gains (losses) recognized in AOCI, split between amounts related to fixed maturity securities on which an OTTI loss has been recognized, and all other:

Net Unrealized Gains (Losses) on Fixed Maturities with OTTI Losses
								AOCI Gain
		Net						(Loss) Related
		Unrealized				Deferred		to Net
		Gains				Income		Unrealized
		(Losses) on		DAC and		Tax Asset		Investment
		Investments		VOBA		(Liability)		Gains (Losses)
		(In Millions)
Balance, April 1, 2011		$	(2)	$	-	$	1	$	(1)
Net investment gains (losses) arising during the period			(1)		-		-		(1)
Reclassification adjustment for OTTI losses:
	Included in Net earnings (loss)		-		-		-		-
	Excluded from Net earnings (loss)(1)		-		-		-		-
Impact of net unrealized investment gains (losses) on:
	DAC and VOBA		-		-		-		-
	Deferred income taxes		-		-		-		-
Balance, June 30, 2011		$	(3)	$	-	$	1	$	(2)
Balance, April 1, 2010		$	(1)	$	1	$	-	$	-
Net investment gains (losses) arising during the period			2		-		-		2
Reclassification adjustment for OTTI losses:
	Included in Net earnings (loss)		(1)		-		-		(1)
	Excluded from Net earnings (loss)(1)		-		-		-		-
Impact of net unrealized investment gains (losses) on:
	DAC and VOBA		-		(1)		-		(1)
	Deferred income taxes		-		-		-		-
Balance, June 30, 2010		$	-	$	-	$	-	$	-

• Represents “transfers in” related to the portion of OTTI losses recognized during the period that were not recognized in earnings (loss) for securities with no prior OTTI loss.

								AOCI Gain
		Net						(Loss) Related
		Unrealized				Deferred		to Net
		Gains				Income		Unrealized
		(Losses) on		DAC and		Tax Asset		Investment
		Investments		VOBA		(Liability)		Gains (Losses)
		(In Millions)
Balance, January 1, 2011		$	(3)	$	-	$	1	$	(2)
Net investment gains (losses) arising during the period			-		-		-		-
Reclassification adjustment for OTTI losses:
	Included in Net earnings (loss)		-		-		-		-
	Excluded from Net earnings (loss)(1)		-		-		-		-
Impact of net unrealized investment gains (losses) on:
	DAC and VOBA		-		-		-		-
	Deferred income taxes		-		-		-		-
Balance, June 30, 2011		$	(3)	$	-	$	1	$	(2)
Balance, January 1, 2010		$	-	$	-	$	-	$	-
Net investment gains (losses) arising during the period			2		-		-		2
Reclassification adjustment for OTTI losses:
	Included in Net earnings (loss)		(1)		-		-		(1)
	Excluded from Net earnings (loss)(1)		(1)		-		-		(1)
Impact of net unrealized investment gains (losses) on:
	DAC and VOBA		-		-		-		-
	Deferred income taxes		-		-		-		-
Balance, June 30, 2010		$	-	$	-	$	-	$	-

• Represents “transfers in” related to the portion of OTTI losses recognized during the period that were not recognized in earnings (loss) for securities with no prior OTTI loss.

All Other Net Unrealized Investment Gains (Losses) in AOCI
								AOCI Gain
		Net						(Loss) Related
		Unrealized				Deferred		to Net
		Gains				Income		Unrealized
		(Losses) on		DAC and		Tax Asset		Investment
		Investments		VOBA		(Liability)		Gains (Losses)
		(In Millions)
Balance, April 1, 2011		$	77	$	(19)	$	(20)	$	38
Net investment gains (losses) arising during the period			23		-		-		23
Reclassification adjustment for OTTI losses:
	Included in Net earnings (loss)		(1)		-		-		(1)
	Excluded from Net earnings (loss)(1)		-		-		-		-
Impact of net unrealized investment gains (losses) on:
	DAC and VOBA		-		(5)		-		(5)
	Deferred income taxes		-		-		(6)		(6)
Balance, June 30, 2011		$	99	$	(24)	$	(26)	$	49
Balance, April 1, 2010		$	3	$	(3)	$	-	$	-
Net investment gains (losses) arising during the period			33		-		-		33
Reclassification adjustment for OTTI losses:
	Included in Net earnings (loss)		1		-		-		1
	Excluded from Net earnings (loss)(1)		-		-		-		-
Impact of net unrealized investment gains (losses) on:
	DAC and VOBA		-		1		-		1
	Deferred income taxes		-		-		(12)		(12)
Balance, June 30, 2010		$	37	$	(2)	$	(12)	$	23

• Represents “transfers out” related to the portion of OTTI losses recognized during the period that were not recognized in earnings (loss) for securities with no prior OTTI loss.

								AOCI Gain
		Net						(Loss) Related
		Unrealized				Deferred		to Net
		Gains				Income		Unrealized
		(Losses) on		DAC and		Tax Asset		Investment
		Investments		VOBA		(Liability)		Gains (Losses)
		(In Millions)
Balance, January 1, 2011		$	77	$	(6)	$	(24)	$	47
Net investment gains (losses) arising during the period			23		-		-		23
Reclassification adjustment for OTTI losses:
	Included in Net earnings (loss)		(1)		-		-		(1)
	Excluded from Net earnings (loss)(1)		-		-		-		-
Impact of net unrealized investment gains (losses) on:
	DAC and VOBA		-		(18)		-		(18)
	Deferred income taxes		-		-		(2)		(2)
Balance, June 30, 2011		$	99	$	(24)	$	(26)	$	49
Balance, January 1, 2010		$	(24)	$	7	$	6	$	(11)
Net investment gains (losses) arising during the period			57		-		-		57
Reclassification adjustment for OTTI losses:
	Included in Net earnings (loss)		3		-		-		3
	Excluded from Net earnings (loss)(1)		1		-		-		1
Impact of net unrealized investment gains (losses) on:
	DAC and VOBA		-		(9)		-		(9)
	Deferred income taxes		-		-		(18)		(18)
Balance, June 30, 2010		$	37	$	(2)	$	(12)	$	23

• Represents “transfers out” related to the portion of OTTI losses recognized during the period that were not recognized in earnings (loss) for securities with no prior OTTI loss.

The following tables disclose the fair values and gross unrealized losses of the 95 issues at June 30, 2011 and the 108 issues at December 31, 2010 of fixed maturities that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position for the specified periods at the dates indicated:

			Less Than 12 Months				12 Months or Longer				Total
					Gross				Gross				Gross
					Unrealized				Unrealized				Unrealized
			Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
			(In Millions)
June 30, 2011:
Fixed Maturities:
Corporate			$	74	$	(2)	$	16	$	(1)	$	90	$	(3)
	U.S. Treasury, government
		and agency		3		-		-		-		3		-
	States and political subdivisions			18		-		-		-		18		-
	Foreign governments			2		-		-		-		2		-
	Commercial mortgage-backed			1		(2)		32		(28)		33		(30)
	Asset-backed			-		-		1		-		1		-
	Redeemable preferred stock			27		-		35		(2)		62		(2)
Total			$	125	$	(4)	$	84	$	(31)	$	209	$	(35)
December 31, 2010:
Fixed Maturities:
Corporate			$	87	$	(3)	$	30	$	(2)	$	117	$	(5)
	U.S. Treasury, government
		and agency		2		-		-		-		2		-
	States and political subdivisions			19		(1)		-		-		19		(1)
	Foreign governments			2		-		-		-		2		-
	Commercial mortgage-backed			1		(1)		32		(31)		33		(32)
	Asset-backed			-		-		1		-		1		-
	Redeemable preferred stock			-		-		70		(4)		70		(4)
Total			$	111	$	(5)	$	133	$	(37)	$	244	$	(42)

MLOA's investments in fixed maturity securities do not include concentrations of credit risk of any single issuer greater than 10% of the shareholder's equity of MLOA, other than securities of the U.S. government, U.S. government agencies and certain securities guaranteed by the U.S. government. MLOA maintains a diversified portfolio of corporate securities across industries and issuers and does not have exposure to any single issuer in excess of 1.2% of total investments. The largest exposures to a single issuer of corporate securities held at June 30, 2011 and December 31, 2010 were $27 million and $27 million, respectively. Corporate high yield securities, consisting primarily of public high yield bonds, are classified as other than investment grade by the various rating agencies, i.e., a rating below Baa3/BBB- or the NAIC designation of 3 (medium grade), 4 or 5 (below investment grade) or 6 (in or near default). At June 30, 2011 and December 31, 2010, respectively, approximately $164 million and $175 million, or 8.7% and 9.6%, of the $1,878 million and $1,826 million aggregate amortized cost of fixed maturities held by MLOA were considered to be other than investment grade. These securities had net unrealized losses of $27 million and $30 million at June 30, 2011 and December 31, 2010, respectively.

MLOA does not originate, purchase or warehouse residential mortgages and is not in the mortgage servicing business. MLOA's fixed maturity investment portfolio includes RMBS backed by subprime and Alt-A residential mortgages comprised of loans made by banks or mortgage lenders to residential borrowers with lower credit ratings. The criteria used to categorize such subprime borrowers include FICO scores, interest rates charged, debt-to-income ratios and loan-to-value ratios. Alt-A residential mortgages are mortgage loans where the risk profile falls between prime and subprime; borrowers typically have clean credit histories but the mortgage loan has an increased risk profile due to higher loan-to-value and debt-to-income ratios and/or inadequate documentation of the borrowers' income. At June 30, 2011 and December 31, 2010, MLOA owned $5 million and $5 million, respectively, in RMBS backed by subprime residential mortgage loans and no RMBS backed by Alt-A residential mortgage loans. RMBS backed by subprime and Alt-A residential mortgages are fixed income investments supporting General Account liabilities.

At June 30, 2011, the carrying value of fixed maturities which were non-income producing for the twelve months preceding that date was $2 million.

For the second quarter and first six months of 2011 and 2010, investment income is shown net of investment expenses of $1 million, $2 million, $1 million and $2 million, respectively.

Mortgage Loans

Mortgage loans on real estate are placed on nonaccrual status once management believes the collection of accrued interest is doubtful. Once mortgage loans on real estate are classified as nonaccrual loans, interest income is recognized under the cash basis of accounting and the resumption of the interest accrual would commence only after all past due interest has been collected or the mortgage loan on real estate has been restructured to where the collection of interest is considered likely. At June 30, 2011 and December 31, 2010, respectively, the carrying values of commercial and agricultural mortgage loans on real estate that had been classified as nonaccrual loans were $9 million and $9 million for commercial and $0 million and $0 million for agricultural, respectively.

Valuation Allowances for Mortgage Loans:

Allowances for credit losses for mortgage loans for the first six months of 2011 are as follows:

		Mortgage Loans
		Commercial		Agricultural		Total
		(In Millions)
Allowance for credit losses:
Beginning balance, January 1,		$	2	$	-	$	2
	Charge-offs		-		-		-
	Recoveries		-		-		-
	Provision		-		-		-
Ending Balance, June 30,		$	2	$	-	$	2
Ending Balance, June 30,:
	Individually Evaluated for Impairment	$	2	$	-	$	2
	Collectively Evaluated for Impairment	$	-	$	-	$	-
	Loans Acquired with Deteriorated Credit Quality	$	-	$	-	$	-

Investment valuation allowances for mortgage loans totaled $2 million at June 30, 2010.

The values used in these ratio calculations were developed as part of the periodic review of the commercial and agricultural mortgage loan portfolio, which includes an evaluation of the underlying collateral value. The following table provides information relating to the debt service coverage ratio for commercial and agricultural mortgage loans at June 30, 2011.

Mortgage Loans by Loan-to-Value and Debt Service Coverage Ratios
June 30, 2011
		Debt Service Coverage Ratio
												Less		Total
		Greater		1.8x to		1.5x to		1.2x to		1.0x to		than		Mortgage
Loan-to-Value Ratio:(2)		than 2.0x		2.0x		1.8x		1.5x		1.2x		1.0x		Loans
		(In Millions)
Commercial Mortgage Loans(1)
0% - 50%		$	5	$	-	$	-	$	-	$	2	$	-	$	7
50% - 70%			-		-		17		20		-		-		37
70% - 90%			-		-		-		-		27		-		27
90% plus			10		-		-		-		-		-		10
Total Commercial
	Mortgage Loans	$	15	$	-	$	17	$	20	$	29	$	-	$	81
Agricultural Mortgage Loans(1)
0% - 50%		$	2	$	-	$	6	$	10	$	1	$	23	$	42
50% - 70%			1		-		1		2		4		3		11
70% - 90%			-		-		-		-		-		-		-
90% plus			-		-		-		-		-		-		-
Total Agricultural
	Mortgage Loans	$	3	$	-	$	7	$	12	$	5	$	26	$	53
Total Mortgage Loans(1)
0% - 50%		$	7	$	-	$	6	$	10	$	3	$	23	$	49
50% - 70%			1		-		18		22		4		3		48
70% - 90%			-		-		-		-		27		-		27
90% plus			10		-		-		-		-		-		10
Total Mortgage Loans		$	18	$	-	$	24	$	32	$	34	$	26	$	134

• The debt service coverage ratio is calculated using the most recently reported net operating income results from property operations divided by annual debt service.
• The loan-to-value ratio is derived from current loan balance divided by the fair market value of the property. The fair market value of the underlying commercial properties is updated annually.

The following table provides information relating to the age analysis of past due mortgage loans at June 30, 2011.

Age Analysis of Past Due Mortgage Loans
														Recorded
														Investment
												Total		> 90 Days
		30-59		60-89		90 Days						Financing		and
		Days		Days		or >		Total		Current		Receivables		Accruing
								(In Millions)
	Commercial	$	-	$	-	$	-	$	-	$	81	$	81	$	-
	Agricultural		-		-		-		-		53		53		-
Total Mortgage Loans		$	-	$	-	$	-	$	-	$	134	$	134	$	-

The following table provides information relating to impaired mortgage loans at June 30, 2011 and December 31, 2010, respectively.

Impaired Mortgage Loans
				Unpaid				Average		Interest
		Recorded		Principal		Related		Recorded		Income
		Investment		Balance		Allowance		Investment(1)		Recognized
		(In Millions)
June 30, 2011:
With no related allowance recorded:
	Commercial mortgage loans - other	$	-	$	-	$	-	$	-	$	-
	Agricultural mortgage loans		-		-		-		-		-
Total		$	-	$	-	$	-	$	-	$	-
With related allowance recorded:
	Commercial mortgage loans - other	$	10	$	8	$	(2)	$	10	$	-
	Agricultural mortgage loans		-		-		-		-		-
Total		$	10	$	8	$	(2)	$	10	$	-
December 31, 2010:
With no related allowance recorded:
	Commercial mortgage loans - other	$	-	$	-	$	-	$	-	$	-
	Agricultural mortgage loans		-		-		-		-		-
Total		$	-	$	-	$	-	$	-	$	-
With related allowance recorded:
	Commercial mortgage loans - other	$	10	$	8	$	(2)	$	10	$	1
	Agricultural mortgage loans		-		-		-		-		-
Total		$	10	$	8	$	(2)	$	10	$	1

(1)       Represents a five-quarter average of recorded amortized cost.

Equity Investments

The following table presents MLOA's investment in 2.6 million units in AllianceBernstein, an affiliate, which is included in Other invested assets:

	Six Months Ended
	June 30,
	2011		2010
	(In Millions)
Balances, beginning of year	$	76	$	78
Equity in net earnings (loss)		2		2
Dividends received		(3)		(3)
Balances, End of period	$	75	$	77

MLOA holds equity in limited partnership interests and other equity method investments that primarily invest in securities considered to be other than investment grade. The carrying values of June 30, 2011 and December 31, 2010 were $2 million and $2 million, respectively.