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INVESTMENTS

12 Months Ended

Dec. 31, 2011

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 at December 31, 2011 and 2010.

Available-for-Sale Securities by Classification

					Gross		Gross
			Amortized		Unrealized		Unrealized		Fair		OTTI
			Cost		Gains		Losses		Value		in AOCI⁽³⁾

			(In Millions)
December 31, 2011:
Fixed Maturities:
	Corporate		$	1,554	$	147	$	8	$	1,693	$	-
	U.S. Treasury, government
		and agency		99		6		-		105		-
	States and political subdivisions			21		1		-		22		-
	Foreign governments			4		-		-		4		-
	Commercial mortgage-backed			63		-		34		29		2
	Residential mortgage-backed ⁽¹⁾			26		2		-		28		-
	Asset-backed ⁽²⁾			9		1		-		10		-
	Redeemable preferred stock			81		-		5		76		-
Total at December 31, 2011			$	1,857	$	157	$	47	$	1,967	$	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 December 31, 2011 are shown in the table below. Bonds not due at a single maturity date have been included in the table in the final year of 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 December 31, 2011

		Amortized Cost		Fair Value

		(In Millions)

Due in one year or less		$	74	$	75
Due in years two through five			812		868
Due in years six through ten			653		726
Due after ten years			139		155
	Subtotal		1,678		1,824
Commercial mortgage-backed securities			63		29
Residential mortgage-backed securities			26		28
Asset-backed securities			9		10
Total		$	1,776	$	1,891

MLOA recognized OTTI on AFS fixed maturities as follows:

	December 31,
	2011		2010		2009

	(In Millions)

Credit losses recognized in earnings (loss)⁽¹⁾	$	(2)	$	(54)	$	(53)
Non-credit losses recognized in OCI		-		(2)		-
Total OTTI	$	(2)	$	(56)	$	(53)

During 2011, 2010 and 2009, respectively, included in credit losses recognized in earnings (loss) were OTTI of $0 million, $1 million and $0 million related to AFS fixed maturities as MLOA intended to sell or expected to be required to sell these impaired fixed maturities prior to recovering their amortized cost.

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

	2011		2010

	(In Millions)

Balances at January 1,	$	(83)	$	(54)
Previously recognized impairments on securities that matured, paid, prepaid or sold		11		25
Recognized impairments on securities impaired to fair value this period⁽¹⁾		-		(1)
Impairments recognized this period on securities not previously impaired		(2)		(52)
Additional impairments this period on securities previously impaired		-		(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 December 31,	$	(74)	$	(83)

(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 and equity securities 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:

			December 31,
			2011		2010

			(In Millions)

AFS Securities:
	Fixed maturities:
		With OTTI loss	$	(5)	$	(3)
		All other		115		77
Net Unrealized (Gains) Losses			$	110	$	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, January 1, 2011		$	(3)	$	-	$	1	$	(2)
Net investment gains (losses) arising during the period			(2)		-		-		(2)
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		-		1		-		1
	Deferred income taxes		-		-		1		1
Balance, December 31, 2011		$	(5)	$	1	$	2	$	(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⁾		(2)		-		-		(2)
Impact of net unrealized investment gains (losses) on:
	DAC and VOBA		-		-		-		-
	Deferred income taxes		-		-		1		1
	Policyholders liabilities		-		-		-		-
Balance, December 31, 2010		$	(3)	$	-	$	1	$	(2)

(1) 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, January 1, 2011		$	77	$	(6)	$	(24)	$	47
Net investment gains (losses) arising during the period			36		-		-		36
Reclassification adjustment for OTTI losses:
	Included in Net earnings (loss)		2		-		-		2
	Excluded from Net earnings (loss)⁽¹⁾		-		-		-		-
Impact of net unrealized investment gains (losses) on:
	DAC and VOBA		-		(21)		-		(21)
	Deferred income taxes		-		-		(7)		(7)
Balance, December 31, 2011		$	115	$	(27)	$	(31)	$	57

Balance, January 1, 2010		$	(24)	$	7	$	6	$	(11)
Net investment gains (losses) arising during the period			52		-		-		52
Reclassification adjustment for OTTI losses:
	Included in Net earnings (loss)		47		-		-		47
	Excluded from Net earnings (loss)⁽¹⁾		2		-		-		2
Impact of net unrealized investment gains (losses) on:
	DAC and VOBA		-		(13)		-		(13)
	Deferred income taxes		-		-		(30)		(30)
	Policyholders liabilities		-		-		-		-
Balance, December 31, 2010		$	77	$	(6)	$	(24)	$	47

(1) Represents “transfers out” related to the portion of OTTI losses 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 93 issues at December 31, 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)
December 31, 2011
Fixed Maturities:
Corporate			$	105	$	(6)	$	13	$	(2)	$	118	$	(8)
	U.S. Treasury, government
		and agency		-		-		-		-		-		-
	States and political subdivisions
	Foreign governments			-		-		2		-		2		-
	Commercial mortgage-backed			1		(2)		27		(32)		28		(34)
	Residential mortgage-backed			-		-		-		-		-		-
	Asset-backed			-		-		-		-		-		-
	Redeemable preferred stock			29		(2)		30		(3)		59		(5)

Total			$	135	$	(10)	$	72	$	(37)	$	207	$	(47)

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)
	Residential mortgage-backed			-		-		-		-		-		-
	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 December 31, 2011 and 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 National Association of Insurance Commissioners (“NAIC”) designation of 3 (medium grade), 4 or 5 (below investment grade) or 6 (in or near default). At December 31, 2011 and 2010, respectively, approximately $150 million and $175 million, or 8.1% and 9.6%, of the $1,857 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 $35 million and $30 million at December 31, 2011 and 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 residential mortgage backed securities (“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 Fair Isaac Credit Organization (“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 December 31, 2011 and 2010, respectively, MLOA owned $4 million and $5 million in RMBS backed by subprime residential mortgage loans, and $0 million and $0 million in 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 December 31, 2011, the carrying value of fixed maturities that were non-income producing for the twelve months preceding that date was $2 million.

Valuation Allowances for Mortgage Loans:

Allowances for credit losses for mortgage loans in 2011 are as follows:

		Commercial Mortgage Loans
		2011		2010		2009

		(In Millions)
Allowance for credit losses:
Beginning Balance, January 1,		$	2	$	2	$	-
	Charge-offs		-		-		-
	Recoveries		-		-		-
	Provision		1		-		2
Ending Balance, December 31,		$	3	$	2	$	2

Ending Balance, December 31,:
	Individually Evaluated for Impairment	$	3	$	2	$	2

	Collectively Evaluated for Impairment	$	-	$	-	$	-

	Loans Acquired with Deteriorated Credit Quality	$	-	$	-	$	-

There were no allowances for credit losses for agricultural mortgage loans in 2011, 2010 and 2009.

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 tables provide information relating to the debt service coverage ratio for commercial and agricultural mortgage loans at December 31, 2011 and 2010, respectively.

Mortgage Loans by Loan-to-Value and Debt Service Coverage Ratios
December 31, 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	$	-	$	17	$	-	$	1	$	-	$	23
50% - 70%			-		-		-		41		-		-		41
70% - 90%			-		-		-		6		-		-		6
90% plus			10		-		-		-		-		-		10
Total Commercial
	Mortgage Loans	$	15	$	-	$	17	$	47	$	1	$	-	$	80

Agricultural Mortgage Loans⁽¹⁾
0% - 50%		$	1	$	-	$	5	$	9	$	1	$	21	$	37
50% - 70%			1		-		2		2		3		2		10
70% - 90%			-		-		-		-		-		-		-
90% plus			-		-		-		-		-		-		-
Total Agricultural
	Mortgage Loans	$	2	$	-	$	7	$	11	$	4	$	23	$	47

Total Mortgage Loans⁽¹⁾
0% - 50%		$	6	$	-	$	22	$	9	$	2	$	21	$	60
50% - 70%			1		-		2		43		3		2		51
70% - 90%			-		-		-		6		-		-		6
90% plus			10		-		-		-		-		-		10

Total Mortgage Loans		$	17	$	-	$	24	$	58	$	5	$	23	$	127

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.

Mortgage Loans by Loan-to-Value and Debt Service Coverage Ratios
December 31, 2010

		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%			-		-		30		7		4		-		41
70% - 90%			-		-		-		28		-		-		28
90% plus			10		-		-		-		-		-		10
Total Commercial
	Mortgage Loans	$	15	$	-	$	30	$	35	$	6	$	-	$	86

Agricultural Mortgage Loans⁽¹⁾
0% - 50%		$	2	$	-	$	6	$	7	$	1	$	25	$	41
50% - 70%			1		-		1		5		4		5		16
70% - 90%			-		-		-		-		-		-		-
90% plus			-		-		-		-		-		-		-
Total Agricultural
	Mortgage Loans	$	3	$	-	$	7	$	12	$	5	$	30	$	57

Total Mortgage Loans⁽¹⁾
0% - 50%		$	7	$	-	$	6	$	7	$	3	$	25	$	48
50% - 70%			1		-		31		12		8		5		57
70% - 90%			-		-		-		28		-		-		28
90% plus			10		-		-		-		-		-		10

Total Mortgage Loans		$	18	$	-	$	37	$	47	$	11	$	30	$	143

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 aging analysis of past due mortgage loans at December 31, 2011 and 2010, respectively.

		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)
December 31, 2011
	Commercial	$	-	$	-	$	-	$	-	$	80	$	80	$	-
	Agricultural		-		-		-		-		47		47		-
Total Mortgage Loans		$	-	$	-	$	-	$	-	$	127	$	127	$	-

December 31, 2010
	Commercial	$	-	$	-	$	-	$	-	$	86	$	86	$	-
	Agricultural		-		-		-		-		57		57		-
Total Mortgage Loans		$	-	$	-	$	-	$	-	$	143	$	143	$	-

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

Impaired Mortgage Loans

				Unpaid				Average		Interest
		Recorded		Principal		Related		Recorded		Income
		Investment		Balance		Allowance		Investment⁽¹⁾		Recognized

		(In Millions)
December 31, 2011
With no related allowance recorded:
	Commercial mortgage loans - other	$	-	$	-	$	-	$	-	$	-
	Agricultural mortgage loans		-		-		-		-		-
Total		$	-	$	-	$	-	$	-	$	-

With related allowance recorded:
	Commercial mortgage loans - other	$	10	$	10	$	(3)	$	10	$	-
	Agricultural mortgage loans		-		-		-		-		-
Total		$	10	$	10	$	(3)	$	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	$	10	$	(2)	$	10	$	1
	Agricultural mortgage loans		-		-		-		-		-
Total		$	10	$	10	$	(2)	$	10	$	1

Represents a five-quarter average of recorded amortized cost.

Impaired mortgage loans along with the related investment valuation allowances at December 31, 2009 follow:

	December 31,
	2009

	(In Millions)

Impaired mortgage loans with investment valuation allowances	$	10
Impaired mortgage loans without investment valuation allowances		-
Recorded investment in impaired mortgage loans		10
Investment valuation allowances		(2)
Net Impaired Mortgage Loans	$	8

During 2009, MLOA's average recorded investment in impaired mortgage loans was $6 million. Interest income recognized on these impaired mortgage loans totaled $0 million for 2009.

Equity Investments

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 at December 31, 2011 and 2010 were $2 million and $2 million, respectively.

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

	2011		2010

	(In Millions)

Balance at January 1,	$	76	$	79
Equity in net earnings (loss)		(2)		4
Impact of repurchase/issuance of AllianceBernstein Units		2		(2)
Dividends received		(4)		(5)
Balance at December 31,	$	72	$	76

4) VALUE OF BUSINESS ACQUIRED

The following table presents MLOA's VOBA asset at December 31, 2011 and 2010:

- Definition

Tabular disclosure of investments in certain debt and equity securities (and certain other trading assets) which include all debt and equity securities (other than those equity securities accounted for under the equity or cost methods of accounting) with readily determinable fair values. Other trading assets include assets that are carried on the balance sheet at fair value and held for trading purposes. A debt security represents a creditor relationship with an enterprise that is in the form of a security. Debt securities include, among other items, US Treasury securities, US government securities, municipal securities, corporate bonds, convertible debt, commercial paper, and all securitized debt instruments. An equity security represents an ownership interest in an enterprise or the right to acquire or dispose of an ownership interest in an enterprise at fixed or determinable prices. Equity securities include, among other things, common stock, certain preferred stock, warrant rights, call options, and put options, but do not include convertible debt. An entity may opt to provide the reader with additional narrative text to better understand the nature of investments in debt and equity securities (and other trading assets).

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 320

-SubTopic 10

-Section 50

-Paragraph 10

-URI http://asc.fasb.org/extlink&oid=6872113&loc=d3e27405-111563

Reference 2: http://www.xbrl.org/2003/role/presentationRef

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-Name Accounting Standards Codification

-Topic 310

-SubTopic 30

-Section 50

-Paragraph 2

-URI http://asc.fasb.org/extlink&oid=6379141&loc=d3e15032-111544

Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Glossary Equity Security

-URI http://asc.fasb.org/extlink&oid=6511694

-Topic 320

Reference 4: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

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Reference 5: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Glossary Debt Security

-URI http://asc.fasb.org/extlink&oid=6509901

-Topic 320

Reference 6: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 115

-Paragraph 3, 19, 20, 21, 22, 137

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 7: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 320

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-URI http://asc.fasb.org/extlink&oid=6872113&loc=d3e27232-111563

Reference 8: http://www.xbrl.org/2003/role/presentationRef

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-Topic 320

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-URI http://asc.fasb.org/extlink&oid=6872113&loc=d3e27357-111563

Reference 9: http://www.xbrl.org/2003/role/presentationRef

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-Paragraph 2

-URI http://asc.fasb.org/extlink&oid=6957658&loc=d3e62557-112803

Reference 10: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 320

-SubTopic 10

-Section 50

-Paragraph 6

-URI http://asc.fasb.org/extlink&oid=6872113&loc=d3e27290-111563

+ Details