Investments

6 Months Ended

Jun. 30, 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 June 30, 2015, in millions)	Cost		Gains		Losses		Value
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities	$	2,025	$	28	$	7	$	2,046
Obligations of states, municipalities and political subdivisions:
Pre-refunded	6,966		306		1		7,271
All other	24,704		888		153		25,439
Total obligations of states, municipalities and political subdivisions	31,670		1,194		154		32,710
Debt securities issued by foreign governments	2,049		52		1		2,100
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	1,905		147		6		2,046
All other corporate bonds	22,341		714		147		22,908
Redeemable preferred stock	113		10		—		123
Total	$	60,103	$	2,145	$	315	$	61,933

	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 $7.27 billion and $7.56 billion at June 30, 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 $1.23 billion and $785 million during the six months ended June 30, 2015 and 2014, respectively.  Gross gains of $40 million and $23 million and gross losses of $3 million and $4 million were realized on those sales during the six months ended June 30, 2015 and 2014, respectively.

Equity Securities

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

			Gross Unrealized				Fair
(at June 30, 2015, in millions)	Cost		Gains		Losses		Value
Public common stock	$	410	$	235	$	6	$	639
Non-redeemable preferred stock	163		29		3		189
Total	$	573	$	264	$	9	$	828

			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 $28 million and $95 million during the six months ended June 30, 2015 and 2014, respectively.  Gross gains of $5 million and $19 million and gross losses of $3 million and $3 million were realized on those sales during the six months ended June 30, 2015 and 2014, respectively.

Unrealized Investment Losses

The following tables summarize, for all investments in an unrealized loss position at June 30, 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
(at June 30, 2015, 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	$	507	$	7	$	24	$	—	$	531	$	7
Obligations of states, municipalities and political subdivisions	7,737		147		135		7		7,872		154
Debt securities issued by foreign governments	154		1		—		—		154		1
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	274		2		126		4		400		6
All other corporate bonds	5,509		114		570		33		6,079		147
Redeemable preferred stock	2		—		—		—		2		—
Total fixed maturities	14,183		271		855		44		15,038		315
Equity securities
Public common stock	51		6		29		—		80		6
Non-redeemable preferred stock	55		1		50		2		105		3
Total equity securities	106		7		79		2		185		9
Total	$	14,289	$	278	$	934	$	46	$	15,223	$	324

	Less than 12 months				12 months or longer				Total
(at December 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	$	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 June 30, 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 $6 million and $1 million for the three months ended June 30, 2015 and 2014, respectively, and $9 million and $10 million for the six months ended June 30, 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 June 30, 2015 and 2014 totaled $88 million and $109 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 and six months ended June 30, 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 June 30, 2015 and December 31, 2014, the Company had $450 million and $350 million notional value of open U.S. Treasury futures contracts, respectively.  Net realized investment gains in the three months ended June 30, 2015 and 2014 and the six months ended June 30, 2015 and 2014 related to U.S. Treasury futures contracts were not significant.