The amortized cost and fair value of investments in fixed maturities classified as available for sale were as follows:

			Gross Unrealized

	Amortized Cost		Gross Unrealized				Fair Value
(at December 31, 2011, in millions)	Amortized Cost		Gains		Losses		Fair Value
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities	$	2,396	$	101	$	—	$	2,497
Obligations of states, municipalities and political subdivisions:
Pre-refunded		6,820		513		1		7,332
All other		29,391		2,303		4		31,690

Total obligations of states, municipalities and political subdivisions		36,211		2,816		5		39,022
Debt securities issued by foreign governments		2,228		91		1		2,318
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities		3,288		249		22		3,515
All other corporate bonds		15,845		1,066		61		16,850
Redeemable preferred stock		26		4		—		30

Total	$	59,994	$	4,327	$	89	$	64,232

			Gross Unrealized

	Amortized Cost		Gross Unrealized				Fair Value
(at December 31, 2010, in millions)	Amortized Cost		Gains		Losses		Fair Value
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities	$	1,914	$	94	$	—	$	2,008
Obligations of states, municipalities and political subdivisions:
Pre-refunded		6,787		505		1		7,291
All other		31,277		1,121		154		32,244

Total obligations of states, municipalities and political subdivisions		38,064		1,626		155		39,535
Debt securities issued by foreign governments		2,156		50		4		2,202
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities		3,952		248		36		4,164
All other corporate bonds		14,051		876		51		14,876
Redeemable preferred stock		33		2		—		35

Total	$	60,170	$	2,896	$	246	$	62,820

The amortized cost and fair value of fixed maturities by contractual maturity follow. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

(at December 31, 2011, in millions)	Amortized Cost		Fair Value

Due in one year or less	$	5,829	$	5,901
Due after 1 year through 5 years		19,843		21,144
Due after 5 years through 10 years		17,107		18,694
Due after 10 years		13,927		14,978

		56,706		60,717
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities		3,288		3,515

Total	$	59,994	$	64,232

Pre-refunded bonds of $7.33 billion and $7.29 billion at December 31, 2011 and 2010, respectively, were bonds for which an irrevocable trust has been established to fund the remaining payments of principal and interest.

The Company's fixed maturity investment portfolio at December 31, 2011 and 2010 included $3.52 billion and $4.16 billion, respectively, of residential mortgage-backed securities, which include pass-through-securities and collateralized mortgage obligations (CMO). Included in the totals at December 31, 2011 and 2010 were $1.82 billion and $2.09 billion, respectively, of GNMA, FNMA and FHLMC (excluding FHA project loans) guaranteed residential mortgage-backed pass-through securities classified as available for sale. Also included in those totals were residential CMOs classified as available for sale with a fair value of $1.70 billion and $2.07 billion, respectively. Approximately 38% of the Company's CMO holdings were guaranteed by or fully collateralized by securities issued by GNMA, FNMA or FHLMC at both December 31, 2011 and 2010. The average credit rating of the $1.05 billion and $1.28 billion of non-guaranteed CMO holdings at December 31, 2011 and 2010, respectively, was "Ba1" and "Baa1," respectively. The average credit rating of all of the above securities was "Aa3" and "Aa1" at December 31, 2011 and 2010, respectively.

At December 31, 2011 and 2010, the Company held commercial mortgage-backed securities (CMBS, including FHA project loans) of $446 million and $549 million, respectively, which are included in "All other corporate bonds" in the tables above. At December 31, 2011 and 2010, approximately $81 million and $155 million of these securities, respectively, or the loans backing such securities, contained guarantees by the U.S. government or a government-sponsored enterprise, and $10 million and $20 million at December 31, 2011 and 2010, respectively, were comprised of Canadian non-guaranteed securities. The average credit rating of the $365 million of non-guaranteed securities at December 31, 2011 was "Aaa," and 71% of those securities were issued in 2004 and prior years. The CMBS portfolio is supported by loans that are diversified across economic sectors and geographical areas. The average credit rating of the CMBS portfolio was "Aaa" at both December 31, 2011 and 2010.

At December 31, 2011 and 2010, the Company had $126 million and $186 million, respectively, of securities on loan as part of a tri-party lending agreement.

Proceeds from sales of fixed maturities classified as available for sale were $1.16 billion, $3.71 billion and $2.81 billion in 2011, 2010 and 2009, respectively. Gross gains of $63 million, $106 million and $119 million and gross losses of $10 million, $11 million and $19 million were realized on sales in 2011, 2010 and 2009, respectively.

At December 31, 2011 and 2010, the Company's insurance subsidiaries had $4.70 billion and $4.51 billion, respectively, of securities on deposit at financial institutions in certain states pursuant to the respective states' insurance regulatory requirements. Funds deposited with third parties to be used as collateral to secure various liabilities on behalf of insureds, cedants and other creditors had a fair value of $90 million and $86 million at December 31, 2011 and 2010, respectively. Other investments pledged as collateral securing outstanding letters of credit had a fair value of $59 million and $88 million at December 31, 2011 and 2010, respectively.

			Gross Unrealized

			Gross Unrealized				Fair Value
(at December 31, 2011, in millions)	Cost		Gains		Losses		Fair Value
Common stock	$	311	$	120	$	3	$	428
Non-redeemable preferred stock		103		29		1		131

Total	$	414	$	149	$	4	$	559

Proceeds from sales of equity securities were $135 million, $201 million and $65 million in 2011, 2010 and 2009, respectively. Gross gains of $48 million, $128 million and $13 million and gross realized losses of $2 million, less than $1 million and $2 million were realized on those sales in 2011, 2010 and 2009, respectively. In 2010, proceeds from the sales of equity securities and gross gains realized on those sales included $115 million and $102 million, respectively, from the sale of substantially all of the Company's remaining common stock holdings in Verisk Analytics, Inc. (Verisk), a portion of which was classified as an equity security at the time of sale.

In 2010 and 2009, the Company also sold portions of its investment in Verisk that were classified as an "other investment" at the time of sale due to transfer restrictions that were scheduled to expire after one year. Proceeds from those sales of Verisk shares in 2010 and 2009 totaled $115 million and $184 million, respectively. Gross gains realized on those sales were $103 million and $159 million, respectively.

The Company's real estate investments include warehouses, office buildings and other commercial land and properties that are directly owned. The Company negotiates commercial leases with individual tenants through unrelated, licensed real estate brokers. Negotiated terms and conditions include, among others, rental rates, length of lease period and improvements to the premises to be provided by the landlord.

In 2011 and 2009, there were no sales of real estate investments. Proceeds from the sale of real estate investments totaled $10 million in 2010. Gross gains of $3 million were realized on those sales and there were no gross losses. The Company had no real estate held for sale at December 31, 2011 and 2010. Accumulated depreciation on real estate held for investment purposes was $226 million and $200 million at December 31, 2011 and 2010, respectively.

Future minimum rental income expected on operating leases relating to the Company's real estate properties is $80 million, $72 million, $62 million, $53 million, $36 million for 2012, 2013, 2014, 2015 and 2016, respectively, and $56 million for 2017 and thereafter.

The Company's short-term securities consist of Aaa-rated registered money market funds, U.S. Treasury securities and high-quality commercial paper (primarily A1/P1) with a combined average of 79 days to maturity at December 31, 2011. The amortized cost of these securities, which totaled $3.59 billion and $5.62 billion at December 31, 2011 and 2010, respectively, approximated their fair value.

Entities which do not have sufficient equity at risk to allow the entity to finance its activities without additional financial support or in which the equity investors, as a group, do not have the characteristic of a controlling financial interest are referred to as variable interest entities (VIE). A VIE is consolidated by the variable interest holder that is determined to have the controlling financial interest (primary beneficiary) as a result of having both the power to direct the activities of a VIE that most significantly impact the VIE's economic performance and the obligation to absorb losses or right to receive benefits from the VIE that could potentially be significant to the VIE. The Company determines whether it is the primary beneficiary of an entity subject to consolidation based on a qualitative assessment of the VIE's capital structure, contractual terms, nature of the VIE's operations and purpose and the Company's relative exposure to the related risks of the VIE on the date it becomes initially involved in the VIE. The Company reassesses its VIE determination with respect to an entity on an ongoing basis.

The Company is a passive investor in limited partner equity interests issued by third party VIEs. These include certain of the Company's investments in private equity limited partnerships, hedge funds and real estate partnerships where the Company is not related to the general partner. These investments are generally accounted for under the equity method and reported in the Company's consolidated balance sheet as other investments unless the Company is deemed the primary beneficiary. These equity interests generally cannot be redeemed. Distributions from these investments are received by the Company as a result of liquidation of the underlying investments of the funds and/or as income distribution. The Company's maximum exposure to loss with respect to these investments is limited to the investment carrying amounts reported in the Company's consolidated balance sheet and any unfunded commitment. Neither the carrying amounts nor the unfunded commitments related to these VIEs are material.

The following tables summarize, for all investments in an unrealized loss position at December 31, 2011 and 2010, the aggregate fair value and gross unrealized loss by length of time those securities have been continuously in an unrealized loss position. The fair value amounts reported in the tables are estimates that are prepared using the process described in note 4. The Company also relies upon estimates of several factors in its review and evaluation of individual investments, using the process described in note 1, in determining whether such investments are other-than-temporarily impaired.

	Less than 12 months				12 months or longer				Total

(at December 31, 2011, in millions)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Fixed maturities
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities	$	356	$	—	$	—	$	—	$	356	$	—
Obligations of states, municipalities and political subdivisions		27		—		191		5		218		5
Debt securities issued by foreign governments		96		1		2		—		98		1
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities		362		12		155		10		517		22
All other corporate bonds		1,295		42		105		19		1,400		61

Total fixed maturities		2,136		55		453		34		2,589		89

Equity securities
Common stock		64		3		—		—		64		3
Non-redeemable preferred stock		37		1		7		—		44		1

Total equity securities		101		4		7		—		108		4

Total	$	2,237	$	59	$	460	$	34	$	2,697	$	93

	Less than 12 months				12 months or longer				Total

(at December 31, 2010, in millions)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Fixed maturities
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities	$	155	$	—	$	—	$	—	$	155	$	—
Obligations of states, municipalities and political subdivisions		5,364		149		139		6		5,503		155
Debt securities issued by foreign governments		419		4		13		—		432		4
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities		77		1		420		35		497		36
All other corporate bonds		1,230		32		185		19		1,415		51
Redeemable preferred stock		—		—		3		—		3		—

Total fixed maturities		7,245		186		760		60		8,005		246

Equity securities
Common stock		3		—		3		—		6		—
Non-redeemable preferred stock		45		1		49		4		94		5

Total equity securities		48		1		52		4		100		5

Total	$	7,293	$	187	$	812	$	64	$	8,105	$	251

The following table summarizes, for all fixed maturities and equity securities reported at fair value for which fair value is less than 80% of amortized cost at December 31, 2011, the gross unrealized investment loss by length of time those securities have continuously been in an unrealized loss position of greater than 20% of amortized cost:

	Period For Which Fair Value Is Less Than 80% of Amortized Cost

(in millions)	3 Months or Less		Greater Than 3 Months, 6 Months or Less		Greater Than 6 Months, 12 Months or Less		Greater Than 12 Months		Total
Fixed maturities:
Mortgage-backed securities	$	2	$	—	$	—	$	—	$	2
Other		—		5		6		9		20

Total fixed maturities		2		5		6		9		22
Equity securities		—		—		—		—		—

Total	$	2	$	5	$	6	$	9	$	22

These unrealized losses at December 31, 2011 represented less than 1% of the combined fixed maturity and equity security portfolios on a pretax basis and less than 1% of shareholders' equity on an after-tax basis.

Impairment charges included in net realized investment gains in the consolidated statement of income were as follows:

(for the year ended December 31, in millions)	2011		2010		2009

Fixed maturities
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities	$	—	$	—	$	—
Obligations of states, municipalities and political subdivisions		—		—		—
Debt securities issued by foreign governments		—		—		—
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities		13		4		81
All other corporate bonds		5		9		88
Redeemable preferred stock		—		—		—

Total fixed maturities		18		13		169

Equity securities
Common stock		6		2		15
Non-redeemable preferred stock		—		1		64

Total equity securities		6		3		79

Other investments		1		10		10

Total	$	25	$	26	$	258

In the second quarter of 2009, the Company adopted updated accounting guidance that changed the reporting of other-than-temporary impairments (OTTI). As a result, the credit component of OTTI on fixed maturities was reported separately effective April 1, 2009, the date of adoption.

The following tables present a roll-forward of the credit component of OTTI on fixed maturities recognized in the consolidated statement of income for which a portion of the OTTI was recognized in accumulated other changes in equity from nonowner sources for the years ended December 31, 2011 and 2010:

Year ended December 31, 2011 (in millions)	Cumulative OTTI Credit Losses Recognized for Securities Held, Beginning of Period		Additions for OTTI Securities Where No Credit Losses Were Previously Recognized		Additions for OTTI Securities Where Credit Losses Have Been Previously Recognized		Reductions Due to Sales/Defaults of Credit- Impaired Securities			Adjustments to Book Value of Credit- Impaired Securities due to Changes in Cash Flows			Cumulative OTTI Credit Losses Recognized for Securities Still Held, End of Period

Fixed maturities
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	$	47	$	—	$	12	$	—		$	(1	)	$	58
All other corporate bonds		88		2		2		(4	)		6			94

Total fixed maturities	$	135	$	2	$	14	$	(4	)	$	5		$	152

Year ended December 31, 2010 (in millions)	Cumulative OTTI Credit Losses Recognized for Securities Held, Beginning of Period		Additions for OTTI Securities Where No Credit Losses Were Previously Recognized		Additions for OTTI Securities Where Credit Losses Have Been Previously Recognized		Reductions Due to Sales/Defaults of Credit- Impaired Securities			Adjustments to Book Value of Credit- Impaired Securities due to Changes in Cash Flows		Cumulative OTTI Credit Losses Recognized for Securities Still Held, End of Period

Fixed maturities
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	$	46	$	—	$	4	$	(3	)	$	—	$	47
All other corporate bonds		93		—		5		(13	)		3		88

Total fixed maturities	$	139	$	—	$	9	$	(16	)	$	3	$	135

Concentrations of credit risk arise from exposure to counterparties that are engaged in similar activities and have similar economic characteristics that could cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions. The Company seeks to mitigate credit risk by actively monitoring the creditworthiness of counterparties, obtaining collateral as deemed appropriate, and applying controls that include credit approvals, limits of credit exposure, and other monitoring procedures.

At December 31, 2011 and 2010, other than U.S. Treasury securities and obligations of U.S. government and government agencies and authorities, the Company was not exposed to any concentration of credit risk of a single issuer greater than 5% of shareholders' equity of the Company.

Included in fixed maturities are below investment grade assets totaling $1.96 billion and $1.88 billion at December 31, 2011 and 2010, respectively. The Company defines its below investment grade assets as those securities rated below investment grade by external rating agencies, or the equivalent by the Company when a public rating does not exist. Such assets include publicly traded below investment grade bonds and certain other privately issued bonds that are classified as below investment grade loans.

(for the year ended December 31, in millions)	2011		2010		2009

Gross investment income (loss)
Fixed maturities	$	2,543	$	2,710	$	2,822
Equity securities		29		31		30
Short-term securities		12		13		27
Real estate		34		35		36
Other investments		292		304		(106	)

Gross investment income		2,910		3,093		2,809
Investment expenses		31		34		33

Net investment income	$	2,879	$	3,059	$	2,776

Changes in net unrealized gains (losses) on investment securities that are included as a separate component of accumulated other changes in equity from nonowner sources were as follows:

(at and for the year ended December 31, in millions)	2011			2010			2009

Change in net unrealized investment gains (losses)
Fixed maturities	$	1,588		$	114		$	2,830
Equity securities		(2	)		69			160
Other investments		(14	)		(178	)		87

		1,572			5			3,077
Related tax expense		560			2			1,075

Change in net unrealized gain on investment securities		1,012			3			2,002
Balance, beginning of year		1,859			1,856			(146	)

Balance, end of year	$	2,871		$	1,859		$	1,856

The Company uses U.S. Treasury note futures transactions to modify the effective duration of specific assets within the investment portfolio and enters into 90-day futures contracts on 2-year, 5-year, 10-year and 30-year U.S. Treasury notes which require a daily mark-to-market and settlement with the broker. The notional value of the open U.S. Treasury futures contracts was $900 million and $400 million at December 31, 2011 and 2010, respectively. Net realized investment gains in 2011, 2010 and 2009 included net losses of $62 million, net losses of $30 million and net gains of $23 million, respectively, related to U.S. Treasury futures contracts.

In 2010 and 2009, the Company recorded net realized investment gains of $5 million and $7 million, respectively, related to its holdings of six million stock purchase warrants of Platinum Underwriters Holdings, Ltd., a publicly-held company. These warrants were not designated and did not qualify for hedge accounting, and, as such, the mark-to-market changes in fair value were reflected in net realized investment gains (losses). In October 2010, the Company sold these stock purchase warrants for proceeds that approximated their carrying value at the date of sale.

The Company purchases investments that have embedded derivatives, primarily convertible debt securities. These embedded derivatives are carried at fair value with changes in value reflected in net realized investment gains (losses). Derivatives embedded in convertible debt securities are reported on a combined basis with their host instrument and are classified as fixed maturity securities. The Company recorded a net realized investment loss of $2 million in 2011, a net realized investment loss of $1 million in 2010 and a net realized investment gain of $1 million in 2009 related to these embedded derivatives.