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Investments (Tables)

9 Months Ended

Sep. 30, 2013

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
September 30, 2013
U.S. government and agencies	$	705	$	110	$	(1)	$	814
Municipal		3,184		273		(47)		3,410
Corporate		20,545		1,320		(270)		21,595
Foreign government		726		94		(4)		816
Asset-backed securities (“ABS”)		942		32		(36)		938
Residential mortgage-backed securities (“RMBS”)		903		53		(17)		939
Commercial mortgage-backed securities (“CMBS”)		776		47		(17)		806
Redeemable preferred stock		15		2		--		17
Total fixed income securities	$	27,796	$	1,931	$	(392)	$	29,335

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 September 30, 2013:

($ in millions)		Amortized cost		Fair value
Due in one year or less	$	1,085	$	1,111
Due after one year through five years		5,191		5,603
Due after five years through ten years		10,882		11,343
Due after ten years		8,017		8,595
		25,175		26,652
ABS, RMBS and CMBS		2,621		2,683
Total	$	27,796	$	29,335

Schedule of net investment income

($ in millions)		Three months ended September 30,				Nine months ended September 30,
		2013		2012		2013		2012
Fixed income securities	$	487	$	521	$	1,477	$	1,567
Mortgage loans		91		86		269		256
Equity securities		3		2		8		5
Limited partnership interests		37		11		104		117
Short-term investments		--		1		1		1
Policy loans		12		13		36		39
Other		18		16		50		46
Investment income, before expense		648		650		1,945		2,031
Investment expense		(27)		(29)		(84)		(87)
Net investment income	$	621	$	621	$	1,861	$	1,944

Schedule of realized capital gains and losses by asset type

($ in millions)		Three months ended September 30,				Nine months ended September 30,
		2013		2012		2013		2012
Fixed income securities	$	(12)	$	(60)	$	(6)	$	(116)
Mortgage loans		(6)		(3)		19		5
Equity securities		5		(1)		37		(1)
Limited partnership interests		--		--		(3)		1
Derivatives		(5)		8		14		34
Other		2		(1)		--		5
Realized capital gains and losses	$	(16)	$	(57)	$	61	$	(72)

Schedule of realized capital gains and losses by transaction type

($ in millions)		Three months ended September 30,				Nine months ended September 30,
		2013		2012		2013		2012
Impairment write-downs	$	(10)	$	(12)	$	(28)	$	(38)
Change in intent write-downs		(7)		(1)		(15)		(17)
Net other-than-temporary impairment losses recognized in earnings		(17)		(13)		(43)		(55)
Sales		6		(52)		90		(52)
Valuation of derivative instruments		(5)		(3)		(3)		(6)
Settlements of derivative instruments		--		11		17		41
Realized capital gains and losses	$	(16)	$	(57)	$	61	$	(72)

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

($ in millions)		Three months ended September 30, 2013						Nine months ended September 30, 2013
		Gross		Included in OCI		Net		Gross		Included in OCI		Net
Fixed income securities:
Municipal	$	--	$	--	$	--	$	(8)	$	--	$	(8)
ABS		--		--		--		--		(1)		(1)
RMBS		(5)		4		(1)		(4)		3		(1)
CMBS		(8)		4		(4)		(27)		(4)		(31)
Total fixed income securities		(13)		8		(5)		(39)		(2)		(41)
Mortgage loans		(6)		--		(6)		11		--		11
Equity securities		(4)		--		(4)		(5)		--		(5)
Limited partnership interests		(1)		--		(1)		(5)		--		(5)
Other		(1)		--		(1)		(3)		--		(3)
Other-than-temporary impairment losses	$	(25)	$	8	$	(17)	$	(41)	$	(2)	$	(43)

		Three months ended September 30, 2012						Nine months ended September 30, 2012
		Gross		Included in OCI		Net		Gross		Included in OCI		Net
Fixed income securities:
Corporate	$	--	$	(2)	$	(2)	$	(14)	$	(2)	$	(16)
RMBS		(1)		(5)		(6)		(18)		(8)		(26)
CMBS		(4)		3		(1)		(19)		6		(13)
Total fixed income securities		(5)		(4)		(9)		(51)		(4)		(55)
Mortgage loans		(1)		--		(1)		3		--		3
Equity securities		(1)		--		(1)		(1)		--		(1)
Limited partnership interests		--		--		--		(2)		--		(2)
Other		(2)		--		(2)		--		--		--
Other-than-temporary impairment losses	$	(9)	$	(4)	$	(13)	$	(51)	$	(4)	$	(55)

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

($ in millions)		September 30, 2013		December 31, 2012
Municipal	$	(5)	$	(5)
Corporate		(7)		(1)
ABS		(10)		(14)
RMBS		(86)		(103)
CMBS		(16)		(19)
Total	$	(124)	$	(142)

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

($ in millions)		Three months ended September 30,				Nine months ended September 30,
		2013		2012		2013		2012
Beginning balance	$	(318)	$	(460)	$	(345)	$	(581)
Additional credit loss for securities previously other-than-temporarily impaired		--		(7)		(12)		(29)
Additional credit loss for securities not previously other-than-temporarily impaired		(2)		(2)		(19)		(10)
Reduction in credit loss for securities disposed or collected		12		80		68		231
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)	$	(308)	$	(389)	$	(308)	$	(389)

________________

(1) The September 30, 2013 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 included in accumulated other comprehensive income

($ in millions)		Fair		Gross unrealized			Unrealized net
September 30, 2013		value		Gains		Losses	gains (losses)
Fixed income securities	$	29,335	$	1,931	$	(392)	$	1,539
Equity securities		631		52		(5)		47
Short-term investments		511		--		--		--
Derivative instruments (1)		(14)		2		(16)		(14)
EMA limited partnerships (2)								(1)
Investments classified as held for sale								244
Unrealized net capital gains and losses, pre-tax								1,815
Amounts recognized for:
Insurance reserves (3)								--
DAC and DSI (4)								(188)
Amounts recognized								(188)
Deferred income taxes								(574)
Unrealized net capital gains and losses, after-tax							$	1,053

(1) Included in the fair value of derivative instruments are $2 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.

		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

($ in millions)
Fixed income securities	$	(2,143)
Equity securities		12
Derivative instruments		3
EMA limited partnerships		(2)
Investments classified as held for sale		244
Total		(1,886)
Amounts recognized for:
Insurance reserves		771
DAC and DSI		220
Amounts recognized		991
Deferred income taxes		314
Decrease in unrealized net capital gains and losses	$	(581)

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
September 30, 2013
Fixed income securities
U.S. government and agencies	3	$	51	$	(1)	--	$	--	$	--	$	(1)
Municipal	50		281		(16)	22		136		(31)		(47)
Corporate	515		4,668		(206)	41		428		(64)		(270)
Foreign government	8		103		(4)	--		--		--		(4)
ABS	3		14		--	42		401		(36)		(36)
RMBS	79		82		(2)	99		124		(15)		(17)
CMBS	8		61		--	9		73		(17)		(17)
Total fixed income securities	666		5,260		(229)	213		1,162		(163)		(392)
Equity securities	33		94		(5)	--		--		--		(5)
Total fixed income and equity securities	699	$	5,354	$	(234)	213	$	1,162	$	(163)	$	(397)

Investment grade fixed income securities	507	$	4,614	$	(202)	155	$	806	$	(98)	$	(300)
Below investment grade fixed income securities	159		646		(27)	58		356		(65)		(92)
Total fixed income securities	666	$	5,260	$	(229)	213	$	1,162	$	(163)	$	(392)

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)		September 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	$	146	$	--	$	146	$	266	$	--	$	266
1.0 - 1.25		658		--		658		1,158		--		1,158
1.26 - 1.50		969		3		972		1,364		17		1,381
Above 1.50		2,288		112		2,400		2,854		129		2,983
Total non-impaired mortgage loans	$	4,061	$	115	$	4,176	$	5,642	$	146	$	5,788

Schedule of net carrying value of impaired mortgage loans

($ in millions)		September 30, 2013		December 31, 2012
Impaired mortgage loans with a valuation allowance	$	88	$	147
Impaired mortgage loans without a valuation allowance		--		8
Total impaired mortgage loans	$	88	$	155
Valuation allowance on impaired mortgage loans	$	25	$	42

Schedule of rollforward of the valuation allowance on impaired mortgage loans

($ in millions)		Three months ended September 30				Nine months ended September 30,
		2013		2012		2013		2012
Beginning balance	$	21	$	48	$	42	$	63
Net increase (decrease) in valuation allowance		6		1		(11)		(3)
Charge offs		--		(2)		(4)		(13)
Mortgage loans classified as held for sale		(2)		--		(2)		--
Ending balance	$	25	$	47	$	25	$	47

Schedule of carrying value of past due mortgage loans

($ in millions)		September 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		4,261		5,919
Total mortgage loans	$	4,264	$	5,943