Investments (Tables)

6 Months Ended

Jun. 30, 2012

Investments

Schedule for fixed income securities at amortized cost, gross unrealized gains and losses and fair value

($ in millions)		Amortized		Gross unrealized					Fair
		cost		Gains		Losses			value
June 30, 2012
U.S. government and agencies	$	4,872	$	374	$	--		$	5,246
Municipal		13,087		991		(186	)		13,892
Corporate		44,229		3,251		(226	)		47,254
Foreign government		1,942		227		--			2,169
Residential mortgage-backed securities (“RMBS”)		3,887		118		(330	)		3,675
Commercial mortgage-backed securities (“CMBS”)		1,831		56		(171	)		1,716
Asset-backed securities (“ABS”)		4,054		110		(215	)		3,949
Redeemable preferred stock		23		2		--			25
Total fixed income securities	$	73,925	$	5,129	$	(1,128	)	$	77,926
December 31, 2011
U.S. government and agencies	$	5,966	$	349	$	--		$	6,315
Municipal		13,634		863		(256	)		14,241
Corporate		41,217		2,743		(379	)		43,581
Foreign government		1,866		216		(1	)		2,081
RMBS		4,532		110		(521	)		4,121
CMBS		1,962		48		(226	)		1,784
ABS		4,180		73		(287	)		3,966
Redeemable preferred stock		22		2		--			24
Total fixed income securities	$	73,379	$	4,404	$	(1,670	)	$	76,113

Schedule for fixed income securities based on contractual maturities

($ in millions)		Amortized		Fair
		cost		value
Due in one year or less	$	4,556	$	4,610
Due after one year through five years		20,445		21,401
Due after five years through ten years		24,033		25,934
Due after ten years		16,950		18,357
		65,984		70,302
RMBS and ABS		7,941		7,624
Total	$	73,925	$	77,926

Schedule of net investment income

($ in millions)		Three months ended June 30,						Six months ended June 30,
		2012			2011			2012			2011
Fixed income securities	$	818		$	899		$	1,624		$	1,799
Equity securities		24			34			45			53
Mortgage loans		92			87			185			176
Limited partnership interests (1)		107			18			216			28
Short-term investments		1			1			2			3
Other		34			26			64			37
Investment income, before expense		1,076			1,065			2,136			2,096
Investment expense		(50	)		(45	)		(99	)		(94	)
Net investment income	$	1,026		$	1,020		$	2,037		$	2,002

(1) Income from limited partnership interests accounted for under the equity method of accounting (“EMA”) is reported in net investment income in 2012 and realized capital gains and losses in 2011.

Schedule of realized capital gains and losses by asset type

($ in millions)		Three months ended June 30,						Six months ended June 30,
		2012			2011			2012			2011
Fixed income securities	$	6		$	39		$	(23	)	$	12
Equity securities		13			15			172			137
Mortgage loans		9			(3	)		8			(9	)
Limited partnership interests (1)		3			53			13			121
Derivatives		7			(53	)		28			(120	)
Other		(11	)		6			(3	)		12
Realized capital gains and losses	$	27		$	57		$	195		$	153

(1) Income from EMA limited partnerships is reported in net investment income in 2012 and realized capital gains and losses in 2011.

Schedule of realized capital gains and losses by transaction type

($ in millions)		Three months ended June 30,						Six months ended June 30,
		2012			2011			2012			2011
Impairment write-downs	$	(49	)	$	(70	)	$	(88	)	$	(184	)
Change in intent write-downs		(1	)		(16	)		(45	)		(85	)
Net other-than-temporary impairment losses recognized in earnings		(50	)		(86	)		(133	)		(269	)
Sales		70			141			299			424
Valuation of derivative instruments		(10	)		(50	)		1			(28	)
Settlements of derivative instruments		17			(3	)		28			(92	)
EMA limited partnership income		--			55			--			118
Realized capital gains and losses	$	27		$	57		$	195		$	153

Schedule of other-than-temporary impairment losses by asset type

($ in millions)		Three months ended June 30, 2012									Six months ended June 30, 2012
		Gross			Included in OCI			Net			Gross			Included in OCI			Net
Fixed income securities:
Municipal	$	(25	)	$	17		$	(8	)	$	(26	)	$	17		$	(9	)
Corporate		--			(1	)		(1	)		(18	)		(1	)		(19	)
RMBS		(12	)		--			(12	)		(55	)		4			(51	)
CMBS		(9	)		3			(6	)		(15	)		3			(12	)
Total fixed income securities		(46	)		19			(27	)		(114	)		23			(91	)
Equity securities		(20	)		--			(20	)		(36	)		--			(36	)
Mortgage loans		7			--			7			4			--			4
Limited partnership interests		(1	)		--			(1	)		(3	)		--			(3	)
Other		(9	)		--			(9	)		(7	)		--			(7	)
Other-than-temporary impairment losses	$	(69	)	$	19		$	(50	)	$	(156	)	$	23		$	(133	)

		Three months ended June 30, 2011									Six months ended June 30, 2011
		Gross			Included in OCI			Net			Gross			Included in OCI			Net
Fixed income securities:
Municipal	$	(15	)	$	(1	)	$	(16	)	$	(42	)	$	(3	)	$	(45	)
Corporate		--			--			--			(5	)		1			(4	)
Foreign government		--			--			--			(1	)		--			(1	)
RMBS		(35	)		--			(35	)		(107	)		(25	)		(132	)
CMBS		(10	)		(3	)		(13	)		(26	)		(7	)		(33	)
ABS		--			--			--			(7	)		3			(4	)
Total fixed income securities		(60	)		(4	)		(64	)		(188	)		(31	)		(219	)
Equity securities		(13	)		--			(13	)		(33	)		--			(33	)
Mortgage loans		(7	)		--			(7	)		(13	)		--			(13	)
Limited partnership interests		(1	)		--			(1	)		(2	)		--			(2	)
Other		(1	)		--			(1	)		(2	)		--			(2	)
Other-than-temporary impairment losses	$	(82	)	$	(4	)	$	(86	)	$	(238	)	$	(31	)	$	(269	)

Schedule of other-than-temporary impairment losses on fixed income securities included in Accumulated Other Comprehensive Income

($ in millions)		June 30, 2012			December 31, 2011
Municipal	$	(28	)	$	(11	)
Corporate		(34	)		(35	)
RMBS		(283	)		(353	)
CMBS		(22	)		(19	)
ABS		(20	)		(21	)
Total	$	(387	)	$	(439	)

Schedule of credit losses on fixed income securities recognized in earnings

($ in millions)		Three months ended June 30,						Six months ended June 30,
		2012			2011			2012			2011
Beginning balance	$	(820	)	$	(963	)	$	(944	)	$	(1,046	)
Additional credit loss for securities previously other-than-temporarily impaired		(16	)		(31	)		(36	)		(90	)
Additional credit loss for securities not previously other-than-temporarily impaired		(10	)		(17	)		(19	)		(44	)
Reduction in credit loss for securities disposed or collected		65			94			211			247
Reduction in credit loss for securities the Company has made the decision to sell or more likely than not will be required to sell		--			--			7			15
Change in credit loss due to accretion of increase in cash flows		--			5			--			6
Ending balance	$	(781	)	$	(912	)	$	(781	)	$	(912	)

Schedule of unrealized net capital gains and losses

($ in millions)		Fair			Gross unrealized				Unrealized net
June 30, 2012		value			Gains		Losses		gains (losses)
Fixed income securities	$	77,926		$	5,129	$	(1,128	)	$	4,001
Equity securities		3,681			361		(110	)		251
Short-term investments		1,867			--		--			--
Derivative instruments (1)		(11	)		--		(16	)		(16	)
EMA limited partnerships (2)										4
Unrealized net capital gains and losses, pre-tax										4,240
Amounts recognized for:
Insurance reserves (3)										(700	)
DAC and DSI (4)										(352	)
Amounts recognized										(1,052	)
Deferred income taxes										(1,118	)
Unrealized net capital gains and losses, after-tax									$	2,070

(1)	Included in the fair value of derivative instruments are $(6) million classified as assets and $5 million classified as liabilities.
(2)	Unrealized net capital gains and losses for limited partnership interests represent the Company’s share of EMA limited partnerships’ other comprehensive income.  Fair value and gross gains and losses are not applicable.
(3)	The insurance reserves adjustment represents the amount by which the reserve balance would increase if the net unrealized gains in the applicable product portfolios were realized and reinvested at current lower interest rates, resulting in a premium deficiency.  Although the Company evaluates premium deficiencies on the combined performance of life insurance and immediate annuities with life contingencies, the adjustment primarily relates to structured settlement annuities with life contingencies, in addition to annuity buy-outs and certain payout annuities with life contingencies.
(4)	The DAC and DSI adjustment balance represents the amount by which the amortization of DAC and DSI would increase or decrease if the unrealized gains or losses in the respective product portfolios were realized.

		Fair			Gross unrealized				Unrealized net
December 31, 2011		value			Gains		Losses		gains (losses)
Fixed income securities	$	76,113		$	4,404	$	(1,670	)	$	2,734
Equity securities		4,363			369		(209	)		160
Short-term investments		1,291			--		--			--
Derivative instruments (1)		(12	)		3		(20	)		(17	)
EMA limited partnerships										2
Unrealized net capital gains and losses, pre-tax										2,879
Amounts recognized for:
Insurance reserves										(594	)
DAC and DSI										(124	)
Amounts recognized										(718	)
Deferred income taxes										(761	)
Unrealized net capital gains and losses, after-tax									$	1,400

(1) Included in the fair value of derivative instruments are $(5) million classified as assets and $7 million classified as liabilities.

Schedule of change in unrealized net capital gains and losses

($ in millions)
Fixed income securities	$	1,267
Equity securities		91
Derivative instruments		1
EMA limited partnerships		2
Total		1,361
Amounts recognized for:
Insurance reserves		(106	)
DAC and DSI		(228	)
Amounts recognized		(334	)
Deferred income taxes		(357	)
Increase in unrealized net capital gains and losses	$	670

Schedule of gross unrealized losses and fair value of available for sale securities by length of time

($ in millions)	Less than 12 months						12 months or more							Total
	Number		Fair		Unrealized		Number		Fair		Unrealized			unrealized
	of issues		value		losses		of issues		value		losses			losses
June 30, 2012
Fixed income securities
U.S. government and agencies	5	$	185	$	--		--	$	--	$	--		$	--
Municipal	98		733		(12	)	146		1,189		(174	)		(186	)
Corporate	179		2,080		(68	)	84		1,042		(158	)		(226	)
Foreign government	4		17		--		1		1		--			--
RMBS	298		42		(2	)	284		1,045		(328	)		(330	)
CMBS	18		109		(4	)	70		572		(167	)		(171	)
ABS	37		544		(20	)	90		912		(195	)		(215	)
Redeemable preferred stock	1		--		--		--		--		--			--
Total fixed income securities	640		3,710		(106	)	675		4,761		(1,022	)		(1,128	)
Equity securities	1,263		1,368		(93	)	88		53		(17	)		(110	)
Total fixed income and equity securities	1,903	$	5,078	$	(199	)	763	$	4,814	$	(1,039	)	$	(1,238	)
Investment grade fixed income securities	538	$	2,868	$	(56	)	395	$	2,807	$	(437	)	$	(493	)
Below investment grade fixed income securities	102		842		(50	)	280		1,954		(585	)		(635	)
Total fixed income securities	640	$	3,710	$	(106	)	675	$	4,761	$	(1,022	)	$	(1,128	)
December 31, 2011
Fixed income securities
U.S. government and agencies	4	$	61	$	--		--	$	--	$	--		$	--
Municipal	29		135		(11	)	303		1,886		(245	)		(256	)
Corporate	307		3,439		(113	)	105		1,273		(266	)		(379	)
Foreign government	11		85		(1	)	1		1		--			(1	)
RMBS	321		373		(11	)	294		1,182		(510	)		(521	)
CMBS	47		378		(49	)	68		489		(177	)		(226	)
ABS	89		960		(17	)	108		1,020		(270	)		(287	)
Redeemable preferred stock	1		--		--		--		--		--			--
Total fixed income securities	809		5,431		(202	)	879		5,851		(1,468	)		(1,670	)
Equity securities	1,397		2,120		(203	)	32		30		(6	)		(209	)
Total fixed income and equity securities	2,206	$	7,551	$	(405	)	911	$	5,881	$	(1,474	)	$	(1,879	)
Investment grade fixed income securities	665	$	4,480	$	(145	)	555	$	3,773	$	(700	)	$	(845	)
Below investment grade fixed income securities	144		951		(57	)	324		2,078		(768	)		(825	)
Total fixed income securities	809	$	5,431	$	(202	)	879	$	5,851	$	(1,468	)	$	(1,670	)

Carrying value of non-impaired fixed and variable rate mortgage loans by debt service coverage ratio distribution

($ in millions)		June 30, 2012						December 31, 2011
Debt service coverage ratio distribution		Fixed rate mortgage loans		Variable rate mortgage loans		Total		Fixed rate mortgage loans		Variable rate mortgage loans		Total
Below 1.0	$	296	$	--	$	296	$	345	$	--	$	345
1.0 - 1.25		1,255		44		1,299		1,527		44		1,571
1.26 - 1.50		1,737		22		1,759		1,573		24		1,597
Above 1.50		3,200		168		3,368		3,214		168		3,382
Total non-impaired mortgage loans	$	6,488	$	234	$	6,722	$	6,659	$	236	$	6,895

Net carrying value of impaired mortgage loans

($ in millions)		June 30, 2012		December 31, 2011
Impaired mortgage loans with a valuation allowance	$	206	$	244
Impaired mortgage loans without a valuation allowance		--		--
Total impaired mortgage loans	$	206	$	244
Valuation allowance on impaired mortgage loans	$	48	$	63

Valuation allowance on impaired mortgage loans

($ in millions)		Three months ended				Six months ended
		June 30,				June 30,
		2012		2011		2012		2011
Beginning balance	$	60	$	77	$	63	$	84
Net (decrease) increase in valuation allowance		(7)		7		(4)		13
Charge offs		(5)		(16)		(11)		(29)
Ending balance	$	48	$	68	$	48	$	68

Carrying value of past due mortgage loans

($ in millions)		June 30,		December 31,
		2012		2011
Less than 90 days past due	$	4	$	--
90 days or greater past due		4		43
Total past due		8		43
Current loans		6,920		7,096
Total mortgage loans	$	6,928	$	7,139