Investments (Tables)

3 Months Ended

Mar. 31, 2014

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
March 31, 2014
U.S. government and agencies	$	3,674	$	135	$	(3)	$	3,806
Municipal		8,295		472		(51)		8,716
Corporate		39,416		1,951		(208)		41,159
Foreign government		1,641		100		(4)		1,737
Asset-backed securities (“ABS”)		3,459		71		(33)		3,497
Residential mortgage-backed securities (“RMBS”)		1,345		114		(21)		1,438
Commercial mortgage-backed securities (“CMBS”)		736		52		(5)		783
Redeemable preferred stock		21		4		--		25
Total fixed income securities	$	58,587	$	2,899	$	(325)	$	61,161
December 31, 2013
U.S. government and agencies	$	2,791	$	129	$	(7)	$	2,913
Municipal		8,446		364		(87)		8,723
Corporate		39,331		1,659		(387)		40,603
Foreign government		1,736		99		(11)		1,824
ABS		4,491		71		(44)		4,518
RMBS		1,403		101		(30)		1,474
CMBS		788		48		(7)		829
Redeemable preferred stock		22		4		--		26
Total fixed income securities	$	59,008	$	2,475	$	(573)	$	60,910

Schedule for fixed income securities based on contractual maturities

($ in millions)		Amortized cost		Fair value
Due in one year or less	$	3,062	$	3,105
Due after one year through five years		25,246		26,005
Due after five years through ten years		16,198		16,955
Due after ten years		8,541		9,378
		53,047		55,443
ABS, RMBS and CMBS		5,540		5,718
Total	$	58,587	$	61,161

Schedule of net investment income

($ in millions)		2014		2013
Fixed income securities	$	705	$	762
Equity securities		28		25
Mortgage loans		81		98
Limited partnership interests		142		107
Short-term investments		1		2
Other		42		37
Investment income, before expense		999		1,031
Investment expense		(40)		(48)
Net investment income	$	959	$	983

Schedule of realized capital gains and losses by asset type

($ in millions)		2014		2013
Fixed income securities	$	36	$	72
Equity securities		22		29
Mortgage loans		3		31
Limited partnership interests		2		5
Derivatives		(12)		(4)
Other		3		(2)
Realized capital gains and losses	$	54	$	131

Schedule of realized capital gains and losses by transaction type

($ in millions)		2014		2013
Impairment write-downs	$	(16)	$	(10)
Change in intent write-downs		(65)		(27)
Net other-than-temporary impairment losses recognized in earnings		(81)		(37)
Sales		147		172
Valuation of derivative instruments		(4)		(4)
Settlements of derivative instruments		(8)		--
Realized capital gains and losses	$	54	$	131

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

($ in millions)		2014						2013
		Gross		Included in OCI		Net		Gross		Included in OCI		Net
Fixed income securities:
Municipal	$	(5)	$	--	$	(5)	$	(13)	$	(2)	$	(15)
ABS		(1)		--		(1)		--		--		--
RMBS		--		(1)		(1)		--		(1)		(1)
CMBS		--		--		--		(19)		(7)		(26)
Total fixed income securities		(6)		(1)		(7)		(32)		(10)		(42)
Equity securities		(65)		--		(65)		(19)		--		(19)
Mortgage loans		4		--		4		26		--		26
Limited partnership interests		(13)		--		(13)		--		--		--
Other		--		--		--		(2)		--		(2)
Other-than-temporary impairment losses	$	(80)	$	(1)	$	(81)	$	(27)	$	(10)	$	(37)

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

($ in millions)		March 31, 2014		December 31, 2013
Municipal	$	(9)	$	(9)
ABS		(10)		(10)
RMBS		(147)		(152)
CMBS		(12)		(12)
Total	$	(178)	$	(183)

Schedule of credit losses on fixed income securities recognized in earnings

($ in millions)		Three months ended March 31,
		2014		2013
Beginning balance	$	(513)	$	(617)
Additional credit loss for securities previously other-than-temporarily impaired		(5)		(15)
Additional credit loss for securities not previously other-than-temporarily impaired		(1)		(15)
Reduction in credit loss for securities disposed or collected		26		47
Reduction in credit loss for securities the Company has made the decision to sell or more likely than not will be required to sell		--		--
Change in credit loss due to accretion of increase in cash flows		--		--
Ending balance (1)	$	(493)	$	(600)

(1) The March 31, 2014 ending balance includes $59 million of cumulative credit losses recognized in earnings for fixed income securities that are classified as held for sale.

Schedule of unrealized net capital gains and losses

($ in millions)		Fair		Gross unrealized			Unrealized net
March 31, 2014		value		Gains		Losses	gains (losses)
Fixed income securities	$	61,161	$	2,899	$	(325)	$	2,574
Equity securities		5,297		736		(14)		722
Short-term investments		2,573		--		--		--
Derivative instruments (1)		(15)		1		(20)		(19	)
EMA limited partnerships (2)								(4	)
Investments classified as held for sale								327
Unrealized net capital gains and losses, pre-tax								3,600
Amounts recognized for:
Insurance reserves (3)								(134	)
DAC and DSI (4)								(245	)
Amounts recognized								(379	)
Deferred income taxes								(1,130	)
Unrealized net capital gains and losses, after-tax							$	2,091

(1)	Included in the fair value of derivative instruments are $1 million classified as assets and $16 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.

($ in millions)		Fair		Gross unrealized			Unrealized net
December 31, 2013		value		Gains		Losses	gains (losses)
Fixed income securities	$	60,910	$	2,475	$	(573)	$	1,902
Equity securities		5,097		658		(34)		624
Short-term investments		2,393		--		--		--
Derivative instruments (1)		(13)		1		(19)		(18	)
EMA limited partnerships								(3	)
Investments classified as held for sale								190
Unrealized net capital gains and losses, pre-tax								2,695
Amounts recognized for:
Insurance reserves								--
DAC and DSI								(158	)
Amounts recognized								(158	)
Deferred income taxes								(891	)
Unrealized net capital gains and losses, after-tax							$	1,646

(1) Included in the fair value of derivative instruments are $1 million classified as assets and $14 million classified as liabilities.

Schedule of change in unrealized net capital gains and losses

The change in unrealized net capital gains and losses for the three months ended March 31, 2014 is as follows:

($ in millions)
Fixed income securities	$	672
Equity securities		98
Derivative instruments		(1	)
EMA limited partnerships		(1	)
Investments classified as held for sale		137
Total		905
Amounts recognized for:
Insurance reserves		(134	)
DAC and DSI		(87	)
Amounts recognized		(221	)
Deferred income taxes		(239	)
Increase in unrealized net capital gains and losses, after-tax	$	445

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
March 31, 2014
Fixed income securities
U.S. government and agencies	23	$	1,335	$	(3)	--	$	--	$	--	$	(3	)
Municipal	252		1,646		(18)	35		183		(33)		(51	)
Corporate	513		7,310		(141)	54		541		(67)		(208	)
Foreign government	13		110		(2)	2		25		(2)		(4	)
ABS	35		639		(6)	31		303		(27)		(33	)
RMBS	127		146		(2)	167		200		(19)		(21	)
CMBS	7		28		--	5		41		(5)		(5	)
Total fixed income securities	970		11,214		(172)	294		1,293		(153)		(325	)
Equity securities	14		464		(14)	--		--		--		(14	)
Total fixed income and equity securities	984	$	11,678	$	(186)	294	$	1,293	$	(153)	$	(339	)
Investment grade fixed income securities	871	$	10,432	$	(158)	210	$	848	$	(91)	$	(249	)
Below investment grade fixed income securities	99		782		(14)	84		445		(62)		(76	)
Total fixed income securities	970	$	11,214	$	(172)	294	$	1,293	$	(153)	$	(325	)
December 31, 2013
Fixed income securities
U.S. government and agencies	22	$	700	$	(7)	--	$	--	$	--	$	(7	)
Municipal	315		2,065		(41)	38		208		(46)		(87	)
Corporate	796		10,375		(308)	54		550		(79)		(387	)
Foreign government	36		262		(9)	1		18		(2)		(11	)
ABS	85		1,715		(10)	43		429		(34)		(44	)
RMBS	134		149		(4)	175		247		(26)		(30	)
CMBS	8		22		--	7		52		(7)		(7	)
Total fixed income securities	1,396		15,288		(379)	318		1,504		(194)		(573	)
Equity securities	158		982		(34)	1		--		--		(34	)
Total fixed income and equity securities	1,554	$	16,270	$	(413)	319	$	1,504	$	(194)	$	(607	)
Investment grade fixed income securities	1,217	$	14,019	$	(340)	221	$	975	$	(116)	$	(456	)
Below investment grade fixed income securities	179		1,269		(39)	97		529		(78)		(117	)
Total fixed income securities	1,396	$	15,288	$	(379)	318	$	1,504	$	(194)	$	(573	)

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

($ in millions)		March 31, 2014						December 31, 2013
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	$	179	$	--	$	179	$	153	$	--	$	153
1.0 - 1.25		597		--		597		613		--		613
1.26 - 1.50		1,184		2		1,186		1,233		2		1,235
Above 1.50		2,433		63		2,496		2,562		77		2,639
Total non-impaired mortgage loans	$	4,393	$	65	$	4,458	$	4,561	$	79	$	4,640

Net carrying value of impaired mortgage loans

($ in millions)		March 31,  2014		December 31, 2013
Impaired mortgage loans with a valuation allowance	$	14	$	81
Impaired mortgage loans without a valuation allowance		--		--
Total impaired mortgage loans	$	14	$	81
Valuation allowance on impaired mortgage loans	$	9	$	21

Valuation allowance on impaired mortgage loans

($ in millions)		2014		2013
Beginning balance	$	21	$	42
Net decrease in valuation allowance		(4)		(26)
Charge offs		(8)		(1)
Ending balance	$	9	$	15