Investments (Tables)

6 Months Ended

Jun. 30, 2013

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, 2013
U.S. government and agencies	$	1,018	$	158	$	(1)	$	1,175
Municipal		3,906		389		(53)		4,242
Corporate		28,432		1,699		(380)		29,751
Foreign government		1,019		113		(10)		1,122
Asset-backed securities (“ABS”)		1,490		42		(69)		1,463
Residential mortgage-backed securities (“RMBS”)		1,411		67		(29)		1,449
Commercial mortgage-backed securities (“CMBS”)		1,204		49		(32)		1,221
Redeemable preferred stock		14		3		--		17
Total fixed income securities	$	38,494	$	2,520	$	(574)	$	40,440
December 31, 2012
U.S. government and agencies	$	2,137	$	242	$	--	$	2,379
Municipal		4,153		612		(61)		4,704
Corporate		28,748		2,896		(113)		31,531
Foreign government		1,017		164		(1)		1,180
ABS		1,921		49		(105)		1,865
RMBS		1,778		82		(69)		1,791
CMBS		1,425		60		(77)		1,408
Redeemable preferred stock		15		3		--		18
Total fixed income securities	$	41,194	$	4,108	$	(426)	$	44,876

Schedule for fixed income securities based on contractual maturities

The scheduled maturities for fixed income securities are as follows as of June 30, 2013:

($ in millions)		Amortized cost		Fair value
Due in one year or less	$	1,630	$	1,663
Due after one year through five years		8,399		8,934
Due after five years through ten years		15,283		15,866
Due after ten years		9,077		9,844
		34,389		36,307
ABS, RMBS and CMBS		4,105		4,133
Total	$	38,494	$	40,440

Schedule of net investment income

($ in millions)		Three months ended June 30,				Six months ended June 30,
		2013		2012		2013		2012
Fixed income securities	$	494	$	525	$	990	$	1,046
Mortgage loans		87		85		178		170
Equity securities		3		2		5		3
Limited partnership interests		37		39		67		106
Short-term investments		--		--		1		--
Policy loans		12		13		24		26
Other		16		16		32		30
Investment income, before expense		649		680		1,297		1,381
Investment expense		(30)		(30)		(57)		(58)
Net investment income	$	619	$	650	$	1,240	$	1,323

Schedule of realized capital gains and losses by asset type

($ in millions)		Three months ended June 30,				Six months ended June 30,
		2013		2012		2013		2012
Fixed income securities	$	24	$	(6)	$	6	$	(56)
Mortgage loans		(6)		9		25		8
Equity securities		31		--		32		--
Limited partnership interests		(3)		2		(3)		1
Derivatives		12		4		19		26
Other		--		(2)		(2)		6
Realized capital gains and losses	$	58	$	7	$	77	$	(15)

Schedule of realized capital gains and losses by transaction type

($ in millions)		Three months ended June 30,				Six months ended June 30,
		2013		2012		2013		2012
Impairment write-downs	$	(16)	$	(6)	$	(18)	$	(26)
Change in intent write-downs		(1)		--		(8)		(16)
Net other-than-temporary impairment losses recognized in earnings		(17)		(6)		(26)		(42)
Sales		63		9		84		--
Valuation of derivative instruments		6		(11)		2		(3)
Settlements of derivative instruments		6		15		17		30
Realized capital gains and losses	$	58	$	7	$	77	$	(15)

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

($ in millions)		Three months ended June 30, 2013						Six months ended June 30, 2013
		Gross		Included in OCI		Net		Gross		Included in OCI		Net
Fixed income securities:
Municipal	$	(1)	$	--	$	(1)	$	(8)	$	--	$	(8)
ABS		--		(1)		(1)		--		(1)		(1)
RMBS		--		--		--		1		(1)		--
CMBS		--		(1)		(1)		(19)		(8)		(27)
Total fixed income securities		(1)		(2)		(3)		(26)		(10)		(36)
Mortgage loans		(9)		--		(9)		17		--		17
Equity securities		(1)		--		(1)		(1)		--		(1)
Limited partnership interests		(4)		--		(4)		(4)		--		(4)
Other		--		--		--		(2)		--		(2)
Other-than-temporary impairment losses	$	(15)	$	(2)	$	(17)	$	(16)	$	(10)	$	(26)

($ 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:
Corporate	$	(1)	$	--	$	(1)	$	(14)	$	--	$	(14)
RMBS		(5)		--		(5)		(17)		(3)		(20)
CMBS		(9)		3		(6)		(15)		3		(12)
Total fixed income securities		(15)		3		(12)		(46)		--		(46)
Mortgage loans		7		--		7		4		--		4
Limited partnership interests		(1)		--		(1)		(2)		--		(2)
Other		--		--		--		2		--		2
Other-than-temporary impairment losses	$	(9)	$	3	$	(6)	$	(42)	$	--	$	(42)

Schedule of other-than-temporary impairment losses on fixed income securities included in accumulated other comprehensive income

($ in millions)		June 30, 2013		December 31, 2012
Municipal	$	(5)	$	(5)
Corporate		(1)		(1)
ABS		(10)		(14)
RMBS		(92)		(103)
CMBS		(12)		(19)
Total	$	(120)	$	(142)

Schedule of rollforwards of the cumulative credit losses recognized in earnings for fixed income securities held

($ in millions)		Three months ended June 30,				Six months ended June 30,
		2013		2012		2013		2012
Beginning balance	$	(343)	$	(495)	$	(345)	$	(581)
Additional credit loss for securities previously other-than-temporarily impaired		(2)		(7)		(12)		(23)
Additional credit loss for securities not previously other-than-temporarily impaired		(1)		(5)		(17)		(7)
Reduction in credit loss for securities disposed or collected		28		47		56		151
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	$	(318)	$	(460)	$	(318)	$	(460)

Schedule of unrealized net capital gains and losses

($ in millions)		Fair		Gross unrealized			Unrealized net
June 30, 2013		value		Gains		Losses	gains (losses)
Fixed income securities	$	40,440	$	2,520	$	(574)	$	1,946
Equity securities		550		39		(7)		32
Short-term investments		744		--		--		--
Derivative instruments (1)		(7)		3		(10)		(7)
EMA limited partnerships (2)								(1)
Unrealized net capital gains and losses, pre-tax								1,970
Amounts recognized for:
Insurance reserves (3)								(76)
DAC and DSI (4)								(197)
Amounts recognized								(273)
Deferred income taxes								(599)
Unrealized net capital gains and losses, after-tax							$	1,098

_________________

(1) Included in the fair value of derivative instruments are $(1) million classified as assets and $6 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, 2012		value		Gains		Losses	gains (losses)
Fixed income securities	$	44,876	$	4,108	$	(426)	$	3,682
Equity securities		345		36		(1)		35
Short-term investments		875		--		--		--
Derivative instruments (1)		(17)		2		(19)		(17)
EMA limited partnerships								1
Unrealized net capital gains and losses, pre-tax								3,701
Amounts recognized for:
Insurance reserves								(771)
DAC and DSI								(408)
Amounts recognized								(1,179)
Deferred income taxes								(888)
Unrealized net capital gains and losses, after-tax							$	1,634

______________

(1) Included in the fair value of derivative instruments are $2 million classified as assets and $19 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 six months ended June 30, 2013 is as follows:

($ in millions)
Fixed income securities	$	(1,736)
Equity securities		(3)
Derivative instruments		10
EMA limited partnerships		(2)
Total		(1,731)
Amounts recognized for:
Insurance reserves		695
DAC and DSI		211
Amounts recognized		906
Deferred income taxes		289
Decrease in unrealized net capital gains and losses	$	(536)

Summary of gross unrealized losses and fair value of fixed income and equity 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, 2013
Fixed income securities
U.S. government and agencies	4	$	57	$	(1)	--	$	--	$	--	$	(1)
Municipal	49		365		(18)	28		143		(35)		(53)
Corporate	543		6,460		(295)	54		677		(85)		(380)
Foreign government	8		183		(10)	--		--		--		(10)
ABS	3		26		--	70		729		(69)		(69)
RMBS	80		131		(4)	139		238		(25)		(29)
CMBS	21		222		(5)	20		132		(27)		(32)
Total fixed income securities	708		7,444		(333)	311		1,919		(241)		(574)
Equity securities	34		109		(7)	--		--		--		(7)
Total fixed income and equity securities	742	$	7,553	$	(340)	311	$	1,919	$	(241)	$	(581)
Investment grade fixed income securities	520	$	6,594	$	(299)	221	$	1,342	$	(147)	$	(446)
Below investment grade fixed income securities	188		850		(34)	90		577		(94)		(128)
Total fixed income securities	708	$	7,444	$	(333)	311	$	1,919	$	(241)	$	(574)
December 31, 2012
Fixed income securities
U.S. government and agencies	1	$	15	$	--	--	$	--	$	--	$	--
Municipal	11		101		(7)	50		395		(54)		(61)
Corporate	79		1,086		(27)	66		829		(86)		(113)
Foreign government	2		121		(1)	--		--		--		(1)
ABS	5		38		--	76		763		(105)		(105)
RMBS	49		30		--	164		442		(69)		(69)
CMBS	10		65		--	43		358		(77)		(77)
Redeemable preferred stock	--		--		--	1		--		--		--
Total fixed income securities	157		1,456		(35)	400		2,787		(391)		(426)
Equity securities	3		57		(1)	1		--		--		(1)
Total fixed income and equity securities	160	$	1,513	$	(36)	401	$	2,787	$	(391)	$	(427)
Investment grade fixed income securities	132	$	1,244	$	(29)	262	$	1,919	$	(195)	$	(224)
Below investment grade fixed income securities	25		212		(6)	138		868		(196)		(202)
Total fixed income securities	157	$	1,456	$	(35)	400	$	2,787	$	(391)	$	(426)

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

($ in millions)		June 30, 2013						December 31, 2012
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	$	224	$	--	$	224	$	266	$	--	$	266
1.0 - 1.25		1,128		8		1,136		1,158		--		1,158
1.26 - 1.50		1,207		3		1,210		1,364		17		1,381
Above 1.50		3,032		134		3,166		2,854		129		2,983
Total non-impaired mortgage loans	$	5,591	$	145	$	5,736	$	5,642	$	146	$	5,788

Schedule of net carrying value of impaired mortgage loans

($ in millions)		June 30, 2013		December 31, 2012
Impaired mortgage loans with a valuation allowance	$	67	$	147
Impaired mortgage loans without a valuation allowance		--		8
Total impaired mortgage loans	$	67	$	155
Valuation allowance on impaired mortgage loans	$	21	$	42

Schedule of rollforward of the valuation allowance on impaired mortgage loans

($ in millions)		Three months ended June 30				Six months ended June 30,
		2013		2012		2013		2012
Beginning balance	$	15	$	60	$	42	$	63
Net increase (decrease) in valuation allowance		9		(7)		(17)		(4)
Charge offs		(3)		(5)		(4)		(11)
Ending balance	$	21	$	48	$	21	$	48

Schedule of carrying value of past due mortgage loans

($ in millions)		June 30, 2013		December 31, 2012
Less than 90 days past due	$	--	$	20
90 days or greater past due		3		4
Total past due		3		24
Current loans		5,800		5,919
Total mortgage loans	$	5,803	$	5,943