Invested Assets

9 Months Ended

Sep. 30, 2011

Invested Assets [Abstract]

Invested Assets

3) Invested Assets

     (a) The amortized cost and fair value of fixed maturities and equity securities were as follows:

	September 30, 2011
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Appreciation		Depreciation		Value
	(in millions)
Fixed maturities
Tax exempt	$	18,879	$	1,297	$	42	$	20,134
Taxable
U.S. Government and government agency and authority obligations		812		50		2		860
Corporate bonds		6,420		449		31		6,838
Foreign government and government agency obligations		6,293		372		6		6,659
Residential mortgage-backed securities		937		47		5		979
Commercial mortgage-backed securities		1,875		62		2		1,935
		16,337		980		46		17,271
Total fixed maturities	$	35,216	$	2,277	$	88	$	37,405
Equity securities	$	1,271	$	232	$	137	$	1,366

	December 31, 2010
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Appreciation		Depreciation		Value
	(in millions)
Fixed maturities
Tax exempt	$	19,072	$	824	$	122	$	19,774
Taxable
U.S. Government and government agency and authority obligations		807		31		9		829
Corporate bonds		6,258		411		21		6,648
Foreign government and government agency obligations		5,943		231		13		6,161
Residential mortgage-backed securities		1,293		63		6		1,350
Commercial mortgage-backed securities		1,688		70		1		1,757
		15,989		806		50		16,745
Total fixed maturities	$	35,061	$	1,630	$	172	$	36,519
Equity securities	$	1,285	$	340	$	75	$	1,550

At September 30, 2011 and December 31, 2010, the gross unrealized depreciation of fixed maturities included $2 million and $4 million, respectively, of unrealized other-than-temporary impairment losses recognized in accumulated other comprehensive income.

The amortized cost and fair value of fixed maturities at September 30, 2011 by contractual maturity were as follows:

	Amortized		Fair
	Cost		Value
	(in millions)
Due in one year or less	$	2,069	$	2,101
Due after one year through five years		11,635		12,274
Due after five years through ten years		11,595		12,626
Due after ten years		7,105		7,490
		32,404		34,491
Residential mortgage-backed securities		937		979
Commercial mortgage-backed securities		1,875		1,935
	$	35,216	$	37,405

     Actual maturities could differ from contractual maturities because borrowers may have the right to call or prepay obligations.

     The Corporation’s equity securities comprise a diversified portfolio of primarily U.S. publicly-traded common stocks.

     The Corporation is involved in the normal course of business with variable interest entities (VIEs) primarily as a passive investor in residential mortgage-backed securities, commercial mortgage-backed securities and private equity limited partnerships issued by third party VIEs. The Corporation is not the primary beneficiary of these VIEs. The Corporation’s maximum exposure to loss with respect to these investments is limited to the investment carrying values included in the Corporation’s consolidated balance sheet and any unfunded partnership commitments.

(b)   The components of unrealized appreciation or depreciation, including unrealized other-than-temporary impairment losses, of investments carried at fair value were as follows:

	September 30		December 31
	2011		2010
	(in millions)
Fixed maturities
Gross unrealized appreciation	$	2,277	$	1,630
Gross unrealized depreciation		88		172
		2,189		1,458
Equity securities
Gross unrealized appreciation		232		340
Gross unrealized depreciation		137		75
		95		265
		2,284		1,723
Deferred income tax liability		799		603
	$	1,485	$	1,120

     When the fair value of an investment is lower than its cost, an assessment is made to determine whether the decline is temporary or other than temporary. The assessment of other-than-temporary impairment of fixed maturities and equity securities is based on both quantitative criteria and qualitative information and also considers a number of other factors including, but not limited to, the length of time and the extent to which the fair value has been less than the cost, the financial condition and near term prospects of the issuer, whether the issuer is current on contractually obligated interest and principal payments, general market conditions and industry or sector specific factors.

     In determining whether fixed maturities are other than temporarily impaired, the Corporation is required to recognize an other-than-temporary impairment loss when it concludes it has the intent to sell or it is more likely than not it will be required to sell an impaired fixed maturity before the security recovers to its amortized cost value or it is likely it will not recover the entire amortized cost value of an impaired debt security. If the Corporation has the intent to sell or it is more likely than not that the Corporation will be required to sell an impaired fixed maturity before the security recovers to its amortized cost value, the security is written down to fair value and the entire amount of the writedown is included in net income as a realized investment loss. For all other impaired fixed maturities, the impairment loss is separated into the amount representing the credit loss and the amount representing the loss related to all other factors. The amount of the impairment loss that represents the credit loss is included in net income as a realized investment loss and the amount of the impairment loss that relates to all other factors is included in other comprehensive income.

     For fixed maturities, the split between the amount of other-than-temporary impairment losses that represents credit losses and the amount that relates to all other factors is principally based on assumptions regarding the amount and timing of projected cash flows. For fixed maturities other than mortgage-backed securities, cash flow estimates are based on assumptions regarding the probability of default and estimates regarding the timing and amount of recoveries associated with a default. For mortgage-backed securities, cash flow estimates are based on assumptions regarding future prepayment rates, default rates, loss severity and timing of recoveries. The Corporation has developed the estimates of projected cash flows using information based on historical market data, industry analyst reports and forecasts and other data relevant to the collectability of a security.

     In determining whether equity securities are other than temporarily impaired, the Corporation considers its intent and ability to hold a security for a period of time sufficient to allow for the recovery of cost. If the decline in the fair value of an equity security is deemed to be other than temporary, the security is written down to fair value and the amount of the writedown is included in net income as a realized investment loss.

     The following table summarizes, for all investment securities in an unrealized loss position at September 30, 2011, the aggregate fair value and gross unrealized depreciation, including unrealized other-than-temporary impairment losses, by investment category and length of time that individual securities have continuously been in an unrealized loss position:

	Less Than 12 Months				12 Months or More				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Depreciation		Value		Depreciation		Value		Depreciation
	(in millions)
Fixed maturities
Tax exempt	$	292	$	3	$	270	$	39	$	562	$	42
Taxable
U.S. Government and government agency and authority obligations		62		1		49		1		111		2
Corporate bonds		753		23		176		8		929		31
Foreign government and government agency obligations		486		5		43		1		529		6
Residential mortgage- backed securities		69		1		21		4		90		5
Commercial mortgage- backed securities		73		1		2		1		75		2
		1,443		31		291		15		1,734		46
Total fixed maturities		1,735		34		561		54		2,296		88
Equity securities		322		72		160		65		482		137
	$	2,057	$	106	$	721	$	119	$	2,778	$	225

     At September 30, 2011, approximately 595 individual fixed maturity and equity securities were in an unrealized loss position, of which approximately 540 were fixed maturities. The Corporation does not have the intent to sell and it is not more likely than not that the Corporation will be required to sell these fixed maturities before the securities recover to their amortized cost value. In addition, the Corporation believes that none of the declines in the fair values of these fixed maturities relate to credit losses. The Corporation has the intent and ability to hold the equity securities in an unrealized loss position for a period of time sufficient to allow for the recovery of cost. The Corporation believes that none of the declines in the fair value of these fixed maturities and equity securities were other than temporary at September 30, 2011.

     The following table summarizes, for all investment securities in an unrealized loss position at December 31, 2010, the aggregate fair value and gross unrealized depreciation, including unrealized other-than-temporary impairment losses, by investment category and length of time that individual securities have continuously been in an unrealized loss position:

	Less Than 12 Months				12 Months or More				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Depreciation		Value		Depreciation		Value		Depreciation
	(in millions)
Fixed maturities
Tax exempt	$	2,498	$	79	$	284	$	43	$	2,782	$	122
Taxable
U.S. Government and government agency and authority obligations		111		3		45		6		156		9
Corporate bonds		474		12		166		9		640		21
Foreign government and government agency obligations		990		12		27		1		1,017		13
Residential mortgage- backed securities		9		1		41		5		50		6
Commercial mortgage- backed securities		38		1		—		—		38		1
		1,622		29		279		21		1,901		50
Total fixed maturities		4,120		108		563		64		4,683		172
Equity securities		69		14		299		61		368		75
	$	4,189	$	122	$	862	$	125	$	5,051	$	247

     The change in unrealized appreciation or depreciation of investments carried at fair value, including the change in unrealized other-than-temporary impairment losses, was as follows:

	Periods Ended September 30
	Third Quarter					Nine Months
	2011			2010		2011			2010
	(in millions)
Change in unrealized appreciation of fixed maturities	$	478		$	589	$	731		$	1,031
Change in unrealized appreciation of equity securities		(276	)		118		(170	)		(67	)
		202			707		561			964
Deferred income tax		70			247		196			337
	$	132		$	460	$	365		$	627

     (c) Realized investment gains and losses were as follows:

	Periods Ended September 30
	Third Quarter						Nine Months
	2011			2010			2011			2010
	(in millions)
Fixed maturities
Gross realized gains	$	25		$	14		$	48		$	71
Gross realized losses		(10	)		(6	)		(25	)		(17	)
Other-than-temporary impairment losses		(1	)		—			(1	)		(3	)
		14			8			22			51
Equity securities
Gross realized gains		16			18			45			30
Gross realized losses		—			—			(1	)		(1	)
Other-than-temporary impairment losses		(6	)		—			(22	)		(6	)
		10			18			22			23
Other invested assets		47			28			256			197
	$	71		$	54		$	300		$	271

(d) As of September 30, 2011 and December 31, 2010, fixed maturities still held by the Corporation for which a portion of their other-than-temporary impairment losses were recognized in other comprehensive income had cumulative credit-related losses of $20 million and $21 million, respectively, recognized in net income.