Investments

6 Months Ended

Jun. 30, 2010

Investments, Debt and Equity Securities [Abstract]

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

Investments

The significant components of net investment income are presented in the following table.

Net Investment Income

Periods ended June 30	Three Months						Six Months
(In millions)	2011			2010			2011			2010
Fixed maturity securities	$	505		$	519		$	1,011		$	1,029
Short term investments	2			5			4			11
Limited partnership investments	11			(4		)	125			68
Equity securities	6			9			12			19
Mortgage loans	2			—			4			—
Trading portfolio (a)	3			2			6			6
Other	3			3			5			5
Gross investment income	532			534			1,167			1,138
Investment expense	(15		)	(13		)	(30		)	(27		)
Net investment income	$	517		$	521		$	1,137		$	1,111

____________________

(a) There were no net unrealized gains (losses) related to changes in fair value of trading securities still held included in net investment income for the three and six months ended June 30, 2011 and 2010.

Net realized investment gains are presented in the following table.

Net Realized Investment Gains

Periods ended June 30	Three Months						Six Months
(In millions)	2011			2010			2011			2010
Net realized investment gains:
Fixed maturity securities:
Gross realized gains	$	89		$	133		$	177		$	231
Gross realized losses	(69		)	(67		)	(137		)	(138		)
Net realized investment gains on fixed maturity securities	20			66			40			93
Equity securities:
Gross realized gains	1			—			6			4
Gross realized losses	(3		)	(28		)	(8		)	(29		)
Net realized investment losses on equity securities	(2		)	(28		)	(2		)	(25		)
Derivatives	—			—			(1		)	—
Short term investments and other (a) (b)	(3		)	(9		)	(9		)	(5		)
Net realized investment gains, net of participating policyholders’ interests	$	15		$	29		$	28		$	63

____________________

(a) The six months ended June 30, 2011 includes a $9 million loss related to the early extinguishment of $400 million of senior notes originally due August 15, 2011.

(b) There were no net unrealized gains (losses) included in the three months ended June 30, 2011 and $1 million of net unrealized gains included in the six months ended June 30, 2011 related to changes in fair value of securities for which the fair value option has been elected.

The components of net other-than-temporary impairment (OTTI) losses recognized in earnings by asset type are summarized in the following table.

Periods ended June 30	Three Months				Six Months
(In millions)	2011		2010		2011		2010
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	15	$	24	$	24	$	42
States, municipalities and political subdivisions	—		6		—		20
Asset-backed:
Residential mortgage-backed	46		11		74		37
Commercial mortgage-backed	—		—		—		2
Other asset-backed	—		2		—		2
Total asset-backed	46		13		74		41
Total fixed maturity securities available-for-sale	61		43		98		103
Equity securities available-for-sale:
Common stock	1		5		4		5
Preferred stock	—		9		1		9
Total equity securities available-for-sale	1		14		5		14
Net OTTI losses recognized in earnings	$	62	$	57	$	103	$	117

A security is impaired if the fair value of the security is less than its cost adjusted for accretion, amortization and previously recorded OTTI losses, otherwise defined as an unrealized loss. When a security is impaired, the impairment is evaluated to determine whether it is temporary or other-than-temporary.

Significant judgment is required in the determination of whether an OTTI loss has occurred for a security. The Company follows a consistent and systematic process for determining and recording an OTTI loss. The Company has established a committee responsible for the OTTI process. This committee, referred to as the Impairment Committee, is made up of three officers appointed by the Company’s Chief Financial Officer. The Impairment Committee is responsible for evaluating all securities in an unrealized loss position on at least a quarterly basis.

The Impairment Committee’s assessment of whether an OTTI loss has occurred incorporates both quantitative and qualitative information. Fixed maturity securities that the Company intends to sell, or it more likely than not will be required to sell before recovery of amortized cost, are considered to be other-than-temporarily impaired and the entire difference between the amortized cost basis and fair value of the security is recognized as an OTTI loss in earnings. The remaining fixed maturity securities in an unrealized loss position are evaluated to determine if a credit loss exists. The factors considered by the Impairment Committee include (a) the financial condition and near term prospects of the issuer, (b) whether the debtor is current on interest and principal payments, (c) credit ratings of the securities and (d) general market conditions and industry or sector specific outlook. The Company also considers results and analysis of cash flow modeling for asset-backed securities, and when appropriate, other fixed maturity securities. The focus of the analysis for asset-backed securities is on assessing the sufficiency and quality of underlying collateral and timing of cash flows based on scenario tests. If the present value of the modeled expected cash flows equals or exceeds the amortized cost of a security, no credit loss is judged to exist and the asset-backed security is deemed to be temporarily impaired. If the present value of the expected cash flows is less than amortized cost, the security is judged to be other-than-temporarily impaired for credit reasons and that shortfall, referred to as the credit component, is recognized as an OTTI loss in earnings. The difference between the adjusted amortized cost basis and fair value, referred to as the non-credit component, is recognized as OTTI in Other comprehensive income. In subsequent reporting periods, a change in intent to sell or further credit impairment on a security whose fair value has not deteriorated will cause the non-credit component originally recorded as OTTI in Other comprehensive income to be recognized as an OTTI loss in earnings.

The Company performs the discounted cash flow analysis using stressed scenarios to determine future expectations regarding recoverability. For asset-backed securities, significant assumptions enter into these cash flow projections including delinquency rates, probable risk of default, loss severity upon a default, over collateralization and interest coverage triggers, credit support from lower level tranches and impacts of rating agency downgrades.

The Company applies the same impairment model as described above for the majority of non-redeemable preferred stock securities on the basis that these securities possess characteristics similar to debt securities and that the issuers maintain their ability to pay dividends. For all other equity securities, in determining whether the security is other-than-temporarily impaired, the Impairment Committee considers a number of factors including, but not limited to: (a) the length of time and the extent to which the fair value has been less than amortized cost, (b) the financial condition and near term prospects of the issuer, (c) the intent and ability of the Company to retain its investment for a period of time sufficient to allow for an anticipated recovery in value and (d) general market conditions and industry or sector specific outlook.

The following tables provide a summary of fixed maturity and equity securities.

Summary of Fixed Maturity and Equity Securities

June 30, 2011	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Unrealized OTTI Losses (Gains)
(In millions)
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	19,213	$	1,705	$	39	$	20,879	$	—
States, municipalities and political subdivisions	8,628		357		268		8,717		—
Asset-backed:
Residential mortgage-backed	6,076		103		166		6,013		61
Commercial mortgage-backed	1,011		62		36		1,037		(9		)
Other asset-backed	925		17		9		933		—
Total asset-backed	8,012		182		211		7,983		52
U.S. Treasury and obligations of government-sponsored enterprises	231		14		1		244		—
Foreign government	659		18		—		677		—
Redeemable preferred stock	48		6		—		54		—
Total fixed maturity securities available-for-sale	36,791		2,282		519		38,554		$	52
Equity securities available-for-sale:
Common stock	107		26		—		133
Preferred stock	213		2		2		213
Total equity securities available-for-sale	320		28		2		346
Total	$	37,111	$	2,310	$	521	$	38,900

Summary of Fixed Maturity and Equity Securities

December 31, 2010	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Unrealized OTTI Losses (Gains)
(In millions)
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	19,492	$	1,603	$	70	$	21,025	$	—
States, municipalities and political subdivisions	8,157		142		410		7,889		—
Asset-backed:
Residential mortgage-backed	6,254		101		265		6,090		114
Commercial mortgage-backed	994		40		41		993		(2		)
Other asset-backed	753		18		8		763		—
Total asset-backed	8,001		159		314		7,846		112
U.S. Treasury and obligations of government-sponsored enterprises	122		16		1		137		—
Foreign government	602		18		—		620		—
Redeemable preferred stock	47		7		—		54		—
Total fixed maturity securities available-for-sale	36,421		1,945		795		37,571		$	112
Total fixed maturity securities trading	6		—		—		6
Equity securities available-for-sale:
Common stock	90		25		—		115
Preferred stock	332		2		9		325
Total equity securities available-for-sale	422		27		9		440
Total	$	36,849	$	1,972	$	804	$	38,017

The following tables summarize the estimated fair value and gross unrealized losses of available-for-sale fixed maturity and equity securities in a gross unrealized loss position by the length of time in which the securities have continuously been in that position.

Securities in a Gross Unrealized Loss Position

	Less than 12 Months				Greater than 12 Months				Total
June 30, 2011	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
(In millions)
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	1,321	$	23	$	197	$	16	$	1,518	$	39
States, municipalities and political subdivisions	1,331		62		663		206		1,994		268
Asset-backed:
Residential mortgage-backed	2,131		42		1,016		124		3,147		166
Commercial mortgage-backed	317		15		194		21		511		36
Other asset-backed	168		4		61		5		229		9
Total asset-backed	2,616		61		1,271		150		3,887		211
U.S. Treasury and obligations of government-sponsored enterprises	118		1		—		—		118		1
Total fixed maturity securities available-for-sale	5,386		147		2,131		372		7,517		519
Equity securities available-for-sale:
Preferred stock	90		1		19		1		109		2
Total equity securities available-for-sale	90		1		19		1		109		2
Total	$	5,476	$	148	$	2,150	$	373	$	7,626	$	521

Securities in a Gross Unrealized Loss Position

	Less than 12 Months				Greater than 12 Months				Total
December 31, 2010	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
(In millions)
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	1,719	$	34	$	405	$	36	$	2,124	$	70
States, municipalities and political subdivisions	3,339		164		745		246		4,084		410
Asset-backed:
Residential mortgage-backed	1,800		52		1,801		213		3,601		265
Commercial mortgage-backed	164		3		333		38		497		41
Other asset-backed	122		1		60		7		182		8
Total asset-backed	2,086		56		2,194		258		4,280		314
U.S. Treasury and obligations of government-sponsored enterprises	8		1		—		—		8		1
Total fixed maturity securities available-for-sale	7,152		255		3,344		540		10,496		795
Equity securities available-for-sale:
Preferred stock	175		5		70		4		245		9
Total equity securities available-for-sale	175		5		70		4		245		9
Total	$	7,327	$	260	$	3,414	$	544	$	10,741	$	804

The amount of pretax net unrealized gains on available-for-sale securities reclassified out of accumulated other comprehensive income (AOCI) into earnings was $20 million and $41 million for the three and six months ended June 30, 2011 and $39 million and $71 million for the three and six months ended June 30, 2010.

The following table summarizes the activity for the three and six months ended June 30, 2011 and 2010 related to the pretax credit loss component reflected in Retained earnings on fixed maturity securities still held at June 30, 2011 and 2010 for which a portion of an OTTI loss was recognized in Other comprehensive income.

Periods ended June 30	Three Months						Six Months
(In millions)	2011			2010			2011			2010
Beginning balance of credit losses on fixed maturity securities	$	113		$	171		$	141		$	164
Additional credit losses for which an OTTI loss was previously recognized	8			11			18			22
Credit losses for which an OTTI loss was not previously recognized	—			3			1			8
Reductions for securities sold during the period	(21		)	(14		)	(46		)	(23		)
Reductions for securities the Company intends to sell or more likely than not will be required to sell	(18		)	—			(32		)	—
Ending balance of credit losses on fixed maturity securities	$	82		$	171		$	82		$	171

Based on current facts and circumstances, the Company has determined that no additional OTTI losses related to the securities in an unrealized loss position presented in the June 30, 2011 Securities in a Gross Unrealized Loss Position table above are required to be recorded. A discussion of some of the factors reviewed in making that determination is presented below.

The classification between investment grade and non-investment grade presented in the discussion below is based on a ratings methodology that takes into account ratings from two major providers, Standard & Poor’s (S&P) and Moody’s Investors Service, Inc. (Moody’s) in that order of preference. If a security is not rated by these providers, the Company formulates an internal rating. For securities with credit support from third party guarantees, the rating reflects the greater of the underlying rating of the issuer or the insured rating.

States, Municipalities and Political Subdivisions

The fair value of total states, municipalities and political subdivisions holdings at June 30, 2011 was $8,717 million. These holdings consist of both tax-exempt and taxable bonds, 72% of which are special revenue and assessment bonds, followed by general obligation political subdivision bonds at 19% and state general obligation bonds at 9%.

The unrealized losses on the Company's investments in this category are primarily due to market conditions for zero coupon bonds, particularly for those with maturity dates that exceed 20 years. Yields for these securities continue to be higher than historical norms relative to after-tax returns on similar fixed income securities. The holdings for all securities in this category include 304 securities that have at least one trade lot in a gross unrealized loss position. The aggregate severity of the total gross unrealized losses was approximately 12% of amortized cost.

The following table summarizes the ratings distribution of states, municipalities and political subdivisions securities in a gross unrealized loss position at June 30, 2011.

Gross Unrealized Losses by Ratings Distribution

June 30, 2011	Amortized Cost		Estimated Fair Value		Gross Unrealized Losses
(In millions)
AAA	$	412	$	387	$	25
AA	1,050		877		173
A	713		650		63
BBB	71		65		6
Non-investment grade	16		15		1
Total	$	2,262	$	1,994	$	268

The largest exposures at June 30, 2011 as measured by gross unrealized losses were several separate issues of Puerto Rico sales tax revenue bonds with gross unrealized losses of $102 million and several separate issues of New Jersey transit revenue bonds with gross unrealized losses of $41 million. All of these securities are rated investment grade.

The Company has no current intent to sell these securities, nor is it more likely than not that it will be required to sell prior to recovery of amortized cost. Additionally, the Company believes that the unrealized losses on these securities were not due to factors regarding the ultimate collection of principal and interest; accordingly, the Company has determined that there are no additional OTTI losses to be recorded at June 30, 2011.

Asset-Backed Securities

The fair value of total asset-backed holdings at June 30, 2011 was $7,983 million which was comprised of 2,057 different securities. The fair value of these securities tends to be influenced by the characteristics and projected cash flows of the underlying collateral rather than the credit of the issuer. Each security has deal-specific tranche structures, credit support that results from the unique deal structure, particular collateral characteristics and other distinct security terms. As a result, seemingly common factors such as delinquency rates and collateral performance affect each security differently. Of these securities, 138 have underlying collateral that is either considered sub-prime or Alt-A in nature. The exposure to sub-prime residential mortgage (sub-prime) collateral and Alternative A residential mortgages that have lower than normal standards of loan documentation (Alt-A) collateral is measured by the original deal structure.

Residential mortgage-backed securities include 137 non-agency structured securities that have at least one trade lot in a gross unrealized loss position. In addition, there were 95 mortgage-backed securities guaranteed by agencies or sponsored enterprises of the U.S. Government that have at least one trade lot in a gross unrealized loss position. The aggregate severity of the gross unrealized loss for residential mortgage-backed securities was approximately 5% of amortized cost.

Commercial mortgage-backed securities include 50 securities that have at least one trade lot in a gross unrealized loss position. The aggregate severity of the gross unrealized loss was approximately 7% of amortized cost.

Other asset-backed securities include 21 securities that have at least one trade lot in a gross unrealized loss position. The aggregate severity of the gross unrealized loss was approximately 4% of amortized cost.

The following table summarizes asset-backed securities in a gross unrealized loss position by ratings distribution at June 30, 2011.

Gross Unrealized Losses by Ratings Distribution

June 30, 2011	Amortized Cost		Estimated Fair Value		Gross Unrealized Losses
(In millions)
U.S. Government, Government Agencies, and Government-Sponsored Enterprises	$	1,881	$	1,852	$	29
AAA	688		660		28
AA	318		295		23
A	173		164		9
BBB	296		256		40
Non-investment grade and equity tranches	742		660		82
Total	$	4,098	$	3,887	$	211

The Company believes the unrealized losses are primarily attributable to broader economic conditions, changes in interest rates, wider than historical bid/ask spreads, and uncertainty with regard to the timing and amount of ultimate collateral realization, but are not indicative of the ultimate collectibility of the current carrying values of securities. The Company has no current intent to sell these securities, nor is it more likely than not that it will be required to sell prior to recovery of amortized cost. Generally, non-investment grade asset-backed securities consist of investments which were investment grade at the time of purchase but have subsequently been downgraded and primarily consist of holdings senior to the equity tranche. Additionally, the Company believes that the unrealized losses on these securities were not due to factors regarding the ultimate collection of principal and interest, collateral shortfalls, or substantial changes in future cash flow expectations; accordingly, the Company has determined that there are no additional OTTI losses to be recorded at June 30, 2011.

Contractual Maturity

The following table summarizes available-for-sale fixed maturity securities by contractual maturity at June 30, 2011 and December 31, 2010. Actual maturities may differ from contractual maturities because certain securities may be called or prepaid with or without call or prepayment penalties. Securities not due at a single date are allocated based on weighted average life.

Contractual Maturity

	June 30, 2011				December 31, 2010
(In millions)	Cost or Amortized Cost		Estimated Fair Value		Cost or Amortized Cost		Estimated Fair Value
Due in one year or less	$	1,641	$	1,649	$	1,515	$	1,506
Due after one year through five years	11,352		11,882		11,198		11,653
Due after five years through ten years	9,778		10,274		10,022		10,425
Due after ten years	14,020		14,749		13,686		13,987
Total	$	36,791	$	38,554	$	36,421	$	37,571

Commercial Mortgage Loans

Mortgage loans are commercial in nature and are carried at unpaid principal balance, net of unamortized fees and any valuation allowance. Mortgage loans are considered to be impaired loans when it is probable that contractual principal and interest payments will not be collected. A valuation allowance is established for impaired loans to the extent that the present value of expected future cash flows discounted at the loan's original effective interest rate is less than the carrying value of the loan. Interest income from mortgage loans is recognized on an accrual basis using the effective yield method. Accrual of income is generally suspended for mortgage loans that are impaired and collection of principal and interest payment is unlikely. Mortgage loans are considered past due when full principal or interest payments have not been received according to contractual terms.

Risks related to the recoverability of loan balances include declines in the estimated cash flows from underlying property leases, declines in the fair value of collateral, and creditworthiness of tenants of credit tenant loan properties, where lease payments directly service the loan. As of June 30, 2011, 17% of the carrying value of mortgage loans related to credit tenant loans. The Company identifies loans for evaluation of impairment primarily based on the collection experience of each loan. As of June 30, 2011, there were no loans past due or in non-accrual status, and no valuation allowance was recorded.

Investment Commitments

As of June 30, 2011, the Company had committed approximately $154 million to future capital calls from various third-party limited partnership investments in exchange for an ownership interest in the related partnerships.

The Company invests in various privately placed debt securities, including bank loans, as part of its overall investment strategy and has committed to additional future purchases and sales. The purchase and sale of these investments are recorded on the date that the legal agreements are finalized and cash settlements are made. As of June 30, 2011, the Company had commitments to purchase $104 million and sell $96 million of such investments.