Investments

3 Months Ended

Mar. 31, 2015

Investments disclosure

Investments disclosure [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 March 31, 2015, in millions)	Cost		Gains		Losses		Value
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities	$	2,036	$	45	$	2	$	2,079
Obligations of states, municipalities and political subdivisions:
Pre-refunded	6,893		324		—		7,217
All other	24,591		1,276		24		25,843
Total obligations of states, municipalities and political subdivisions	31,484		1,600		24		33,060
Debt securities issued by foreign governments	2,117		65		—		2,182
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	1,986		170		3		2,153
All other corporate bonds	22,180		1,036		45		23,171
Redeemable preferred stock	113		11		—		124
Total	$	59,916	$	2,927	$	74	$	62,769

	Amortized		Gross Unrealized				Fair
(at December 31, 2014, in millions)	Cost		Gains		Losses		Value
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities	$	2,022	$	36	$	5	$	2,053
Obligations of states, municipalities and political subdivisions:
Pre-refunded	7,229		332		—		7,561
All other	24,666		1,356		10		26,012
Total obligations of states, municipalities and political subdivisions	31,895		1,688		10		33,573
Debt securities issued by foreign governments	2,320		48		—		2,368
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	2,052		165		4		2,213
All other corporate bonds	22,390		844		99		23,135
Redeemable preferred stock	122		10		—		132
Total	$	60,801	$	2,791	$	118	$	63,474

Pre-refunded bonds of $7.22 billion and $7.56 billion at March 31, 2015 and December 31, 2014, 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.

Proceeds from sales of fixed maturities classified as available for sale were $906 million and $406 million during the three months ended March 31, 2015 and 2014, respectively. Gross gains of $19 million and $13 million and gross losses of $1 million and $4 million were realized on those sales during the three months ended March 31, 2015 and 2014, respectively.

Equity Securities

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

			Gross Unrealized				Fair
(at March 31, 2015, in millions)	Cost		Gains		Losses		Value
Public common stock	$	399	$	278	$	3	$	674
Non-redeemable preferred stock	164		30		2		192
Total	$	563	$	308	$	5	$	866

			Gross Unrealized				Fair
(at December 31, 2014, in millions)	Cost		Gains		Losses		Value
Public common stock	$	400	$	295	$	4	$	691
Non-redeemable preferred stock	179		31		2		208
Total	$	579	$	326	$	6	$	899

Proceeds from sales of equity securities were $11 million and $36 million during the three months ended March 31, 2015 and 2014, respectively.  Gross gains and losses realized on those sales during the three months ended March 31, 2015 and 2014 were insignificant in both periods.

Unrealized Investment Losses

The following tables summarize, for all investments in an unrealized loss position at March 31, 2015 and December 31, 2014, 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 herein and in note 4 of notes to the consolidated financial statements in the Company’s 2014 Annual Report.

	Less than 12 months				12 months or longer				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(at March 31, 2015, in millions)	Value		Losses		Value		Losses		Value		Losses
Fixed maturities
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities	$	500	$	2	$	15	$	—	$	515	$	2
Obligations of states, municipalities and political subdivisions	1,884		20		143		4		2,027		24
Debt securities issued by foreign governments	75		—		—		—		75		—
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	60		—		133		3		193		3
All other corporate bonds	1,494		27		593		18		2,087		45
Redeemable preferred stock	1		—		—		—		1		—
Total fixed maturities	4,014		49		884		25		4,898		74
Equity securities
Public common stock	74		3		1		—		75		3
Non-redeemable preferred stock	72		1		30		1		102		2
Total equity securities	146		4		31		1		177		5
Total	$	4,160	$	53	$	915	$	26	$	5,075	$	79

	Less than 12 months				12 months or longer				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(at December 31, 2014, in millions)	Value		Losses		Value		Losses		Value		Losses
Fixed maturities
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities	$	180	$	2	$	125	$	3	$	305	$	5
Obligations of states, municipalities and political subdivisions	173		1		797		9		970		10
Debt securities issued by foreign governments	50		—		24		—		74		—
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	68		—		192		4		260		4
All other corporate bonds	2,148		38		2,355		61		4,503		99
Total fixed maturities	2,619		41		3,493		77		6,112		118
Equity securities
Public common stock	81		4		1		—		82		4
Non-redeemable preferred stock	44		1		42		1		86		2
Total equity securities	125		5		43		1		168		6
Total	$	2,744	$	46	$	3,536	$	78	$	6,280	$	124

Unrealized losses 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, 2015 totaled $9 million, representing 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 $3 million and $9 million for the three months ended March 31, 2015 and 2014, respectively.

The cumulative 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 fixed maturities held at March 31, 2015 and 2014 totaled $94 million and $111 million, respectively, representing less than 1% of the fixed maturity portfolio on a pretax basis and less than 1% of shareholders’ equity on an after-tax basis at both dates.  There were no significant changes in the credit component of OTTI during the three months ended March 31, 2015 and 2014 from that disclosed in note 3 of notes to the consolidated financial statements in the Company’s 2014 Annual Report.

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, 2015 and December 31, 2014, the Company had $400 million and $350 million notional value of open U.S. Treasury futures contracts, respectively.  Net realized investment gains in the three months ended March 31, 2015 and 2014 included net losses of $10 million and net gains of $1 million, respectively, related to U.S. Treasury futures contracts.