3. INVESTMENTS

Fixed Maturities

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

Amortized

Gross Unrealized

Fair

(at March 31, 2014, in millions)

Cost

Gains

Losses

Value

U.S. Treasury securities and obligations of U.S. government and government agencies and authorities

2,192

2,223

Obligations of states, municipalities and political subdivisions:

Pre-refunded

8,320

380

8,699

All other

25,699

1,168

174

26,693

Total obligations of states, municipalities and political subdivisions

34,019

1,548

175

35,392

Debt securities issued by foreign governments

2,539

2,571

Mortgage-backed securities, collateralized mortgage obligations and pass-through securities

2,202

174

2,361

All other corporate bonds

20,914

846

173

21,587

Redeemable preferred stock

129

—

137

Total

61,995

2,651

375

64,271

	Amortized		Gross Unrealized				Fair
(at December 31, 2013, in millions)	Cost		Gains		Losses		Value
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities	$	2,288	$	39	$	12	$	2,315
Obligations of states, municipalities and political subdivisions:
Pre-refunded	9,074		445		1		9,518
All other	25,414		991		361		26,044
Total obligations of states, municipalities and political subdivisions	34,488		1,436		362		35,562
Debt securities issued by foreign governments	2,552		33		8		2,577
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	2,263		179		18		2,424
All other corporate bonds	20,472		767		299		20,940
Redeemable preferred stock	133		6		1		138
Total	$	62,196	$	2,460	$	700	$	63,956

Pre-refunded bonds of $8.70 billion and $9.52 billion at March 31, 2014 and December 31, 2013, respectively, were bonds for which states or municipalities have established irrevocable trusts, almost exclusively comprised of U.S. Treasury securities, which were created to satisfy their responsibility for payments of principal and interest.

Equity Securities

The cost and fair value of investments in equity securities were as follows:

			Gross Unrealized				Fair
(at March 31, 2014, in millions)	Cost		Gains		Losses		Value
Common stock	$	385	$	248	$	2	$	631
Non-redeemable preferred stock	275		34		2		307
Total	$	660	$	282	$	4	$	938

			Gross Unrealized				Fair
(at December 31, 2013, in millions)	Cost		Gains		Losses		Value
Common stock	$	385	$	226	$	1	$	610
Non-redeemable preferred stock	301		34		2		333
Total	$	686	$	260	$	3	$	943

Unrealized Investment Losses

The following tables summarize, for all investments in an unrealized loss position at March 31, 2014 and December 31, 2013, 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.

	Less than 12 months				12 months or longer				Total
(at March 31, 2014, 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	$	158	$	9	$	—	$	—	$	158	$	9
Obligations of states, municipalities and political subdivisions	3,143		105		890		70		4,033		175
Debt securities issued by foreign governments	520		3		4		—		524		3
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	508		14		20		1		528		15
All other corporate bonds	4,875		132		504		41		5,379		173
Total fixed maturities	9,204		263		1,418		112		10,622		375
Equity securities
Common stock	53		2		—		—		53		2
Non-redeemable preferred stock	176		2		—		—		176		2
Total equity securities	229		4		—		—		229		4
Total	$	9,433	$	267	$	1,418	$	112	$	10,851	$	379

	Less than 12 months				12 months or longer				Total
(at December 31, 2013, 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	$	433	$	12	$	—	$	—	$	433	$	12
Obligations of states, municipalities and political subdivisions	4,785		298		432		64		5,217		362
Debt securities issued by foreign governments	907		8		1		—		908		8
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	542		17		21		1		563		18
All other corporate bonds	6,887		253		421		46		7,308		299
Redeemable preferred stock	82		1		—		—		82		1
Total fixed maturities	13,636		589		875		111		14,511		700
Equity securities
Common stock	53		1		—		—		53		1
Non-redeemable preferred stock	147		2		—		—		147		2
Total equity securities	200		3		—		—		200		3
Total	$	13,836	$	592	$	875	$	111	$	14,711	$	703

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 March 31, 2014, 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
(at March 31, 2014, 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	$	—	$	—	$	—	$	—	$	—
Other	6		—		—		3		9
Total fixed maturities	6		—		—		3		9
Equity securities	—		—		—		—		—
Total	$	6	$	—	$	—	$	3	$	9

These unrealized losses at March 31, 2014 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

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

(for the three months ended March 31, in millions)	2014		2013
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	—		1
All other corporate bonds	3		—
Redeemable preferred stock	—		—
Total fixed maturities	3		1

Equity securities
Common stock	5		—
Non-redeemable preferred stock	—		—
Total equity securities	5		—

Other investments	1		4
Total	$	9	$	5

The following tables present the changes during the reporting period in the credit component of other-than-temporary impairments (OTTI) on fixed maturities recognized in the consolidated statement of income for which a portion of the OTTI was recognized in other comprehensive income:

(for the three months ended March 31, 2014, in millions)	Cumulative OTTI Credit Losses Recognized for Securities Held, Beginning of Year		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	$	69	$	—	$	—	$	(3	)	$	8		$	74
All other corporate bonds	101		—		3		—			(1		)	103
Total fixed maturities	$	170	$	—	$	3	$	(3	)	$	7		$	177

(for the three months ended March 31, 2013, in millions)	Cumulative OTTI Credit Losses Recognized for Securities Held, Beginning of Year		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	$	63	$	—	$	1	$	—	$	1	$	65
All other corporate bonds	102		—		—		—		1		103
Total fixed maturities	$	165	$	—	$	1	$	—	$	2	$	168

Derivative Financial Instruments

From time to time, the Company enters into U.S. Treasury note futures contracts to modify the effective duration of specific assets within the investment portfolio. U.S. Treasury futures contracts require a daily mark-to-market and settlement with the broker. At March 31, 2014 and December 31, 2013, the Company had no open U.S. Treasury futures contracts. Net realized investment gains in the three months ended March 31, 2014 and 2013 included net gains of $1 million and net losses of $19 million, respectively, related to U.S. Treasury futures contracts.