Investments

6 Months Ended

Jun. 30, 2014

Investments disclosure

Investments disclsoure [Text Block]

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 June 30, 2014, in millions)	Cost		Gains		Losses		Value
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities	$	2,060	$	40	$	6	$	2,094
Obligations of states, municipalities and political subdivisions:
Pre-refunded	8,096		359		—		8,455
All other	25,309		1,341		80		26,570
Total obligations of states, municipalities and political subdivisions	33,405		1,700		80		35,025
Debt securities issued by foreign governments	2,549		37		4		2,582
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	2,154		178		6		2,326
All other corporate bonds	21,541		969		95		22,415
Redeemable preferred stock	132		9		—		141
Total	$	61,841	$	2,933	$	191	$	64,583

	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 $8.46 billion and $9.52 billion at June 30, 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 June 30, 2014, in millions)	Cost		Gains		Losses		Value
Common stock	$	396	$	303	$	—	$	699
Non-redeemable preferred stock	252		31		2		281
Total	$	648	$	334	$	2	$	980

			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 June 30, 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 June 30, 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	$	40	$	1	$	106	$	5	$	146	$	6
Obligations of states, municipalities and political subdivisions	1,378		4		2,750		76		4,128		80
Debt securities issued by foreign governments	425		2		115		2		540		4
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	77		—		268		6		345		6
All other corporate bonds	1,015		7		2,914		88		3,929		95
Total fixed maturities	2,935		14		6,153		177		9,088		191
Equity securities
Common stock	29		—		1		—		30		—
Non-redeemable preferred stock	152		2		—		—		152		2
Total equity securities	181		2		1		—		182		2
Total	$	3,116	$	16	$	6,154	$	177	$	9,270	$	193

	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 June 30, 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 June 30, 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	1		4		1		2		8
Total fixed maturities	1		4		1		2		8
Equity securities	—		—		—		—		—
Total	$	1	$	4	$	1	$	2	$	8

These unrealized losses at June 30, 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:

	Three Months Ended  June 30,				Six Months Ended June 30,
(in millions)	2014		2013		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		1		1		2
All other corporate bonds	—		—		3		—
Redeemable preferred stock	—		—		—		—
Total fixed maturities	1		1		4		2
Equity securities
Common stock	—		1		5		1
Non-redeemable preferred stock	—		—		—		—
Total equity securities	—		1		5		1
Other investments	—		—		1		4
Total	$	1	$	2	$	10	$	7

The following tables present the cumulative amount of and the changes during the reporting period in the credit losses 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:

	2014
(for the three months ended June 30, 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	$	42	$	—	$	1	$	—		$	—		$	43
All other corporate bonds	69		—		—		—			(3		)	66
Total fixed maturities	$	111	$	—	$	1	$	—		$	(3	)	$	109
(for the six months ended June 30, in millions)
Fixed maturities
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	$	53	$	—	$	1	$	(3	)	$	(8	)	$	43
All other corporate bonds	65		—		3		—			(2		)	66
Total fixed maturities	$	118	$	—	$	4	$	(3	)	$	(10	)	$	109

	2013
(for the three months ended June 30, 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	$	55	$	—	$	1	$	—	$	(1	)	$	55
All other corporate bonds	71		—		—		—		(1		)	70
Total fixed maturities	$	126	$	—	$	1	$	—	$	(2	)	$	125
(for the six months ended June 30, in millions)
Fixed maturities
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	$	55	$	—	$	2	$	—	$	(2	)	$	55
All other corporate bonds	72		—		—		—		(2		)	70
Total fixed maturities	$	127	$	—	$	2	$	—	$	(4	)	$	125

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 June 30, 2014 and December 31, 2013, the Company had $100 million and $0 notional value of open U.S. Treasury futures contracts, respectively.  Net realized investment gains in the three months ended June 30, 2014 and 2013 included net losses of $1 million and net gains of $134 million, respectively, related to U.S. Treasury futures contracts.  Net realized investment gains in the six months ended June 30, 2014 and 2013 included net losses of $0.2 million and net gains of $115 million, respectively, related to U.S. Treasury futures contracts.