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	$	683	$	96	$	--	$	779
Municipal		3,103		334		(36)		3,401
Corporate		20,552		1,482		(161)		21,873
Foreign government		703		84		(3)		784
Asset-backed securities (“ABS”)		771		28		(28)		771
Residential mortgage-backed securities (“RMBS”)		703		56		(8)		751
Commercial mortgage-backed securities (“CMBS”)		670		51		(4)		717
Redeemable preferred stock		14		2		--		16
Total fixed income securities	$	27,199	$	2,133	$	(240)	$	29,092
December 31, 2013
U.S. government and agencies	$	678	$	90	$	(2)	$	766
Municipal		3,135		231		(62)		3,304
Corporate		20,397		1,214		(295)		21,316
Foreign government		715		83		(6)		792
ABS		1,011		30		(34)		1,007
RMBS		752		50		(12)		790
CMBS		724		47		(7)		764
Redeemable preferred stock		15		2		--		17
Total fixed income securities	$	27,427	$	1,747	$	(418)	$	28,756

Schedule for fixed income securities based on contractual maturities

The scheduled maturities for fixed income securities are as follows as of March 31, 2014:

($ in millions)		Amortized cost		Fair value
Due in one year or less	$	1,304	$	1,333
Due after one year through five years		5,025		5,438
Due after five years through ten years		11,086		11,634
Due after ten years		7,640		8,448
		25,055		26,853
ABS, RMBS and CMBS		2,144		2,239
Total	$	27,199	$	29,092

Schedule of net investment income

($ in millions)		2014		2013
Fixed income securities	$	474	$	496
Mortgage loans		75		91
Equity securities		4		2
Limited partnership interests		67		30
Short-term investments		--		1
Policy loans		11		12
Other		15		16
Investment income, before expense		646		648
Investment expense		(20)		(27)
Net investment income	$	626	$	621

Schedule of realized capital gains and losses by asset type

($ in millions)		2014		2013
Fixed income securities	$	(5)	$	(18)
Mortgage loans		3		31
Equity securities		2		1
Limited partnership interests		(5)		--
Derivatives		2		7
Other		3		(2)
Realized capital gains and losses	$	--	$	19

Schedule of realized capital gains and losses by transaction type

($ in millions)		2014		2013
Impairment write-downs	$	(4)	$	(2)
Change in intent write-downs		(5)		(7)
Net other-than-temporary impairment losses recognized in earnings		(9)		(9)
Sales		7		21
Valuation of derivative instruments		3		(4)
Settlements of derivative instruments		(1)		11
Realized capital gains and losses	$	--	$	19

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	$	(1)	$	--	$	(1)	$	(7)	$	--	$	(7)
RMBS		--		(1)		(1)		1		(1)		--
CMBS		--		--		--		(19)		(7)		(26)
Total fixed income securities		(1)		(1)		(2)		(25)		(8)		(33)
Mortgage loans		4		--		4		26		--		26
Equity securities		(4)		--		(4)		--		--		--
Limited partnership interests		(7)		--		(7)		--		--		--
Other		--		--		--		(2)		--		(2)
Other-than-temporary impairment losses	$	(8)	$	(1)	$	(9)	$	(1)	$	(8)	$	(9)

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	$	(5)	$	(5)
ABS		(10)		(10)
RMBS		(87)		(90)
CMBS		(12)		(12)
Total	$	(114)	$	(117)

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

($ in millions)		Three months ended March 31,
		2014		2013
Beginning balance	$	(299)	$	(345)
Additional credit loss for securities previously other-than-temporarily impaired		(1)		(11)
Additional credit loss for securities not previously other-than-temporarily impaired		--		(15)
Reduction in credit loss for securities disposed or collected		7		28
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)	$	(293)	$	(343)

(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 included in accumulated other comprehensive income

($ in millions)		Fair		Gross unrealized			Unrealized net
March 31, 2014		value		Gains		Losses	gains (losses)
Fixed income securities	$	29,092	$	2,133	$	(240)	$	1,893
Equity securities		903		112		(5)		107
Short-term investments		763		--		--		--
Derivative instruments (1)		(15)		1		(16)		(15)
EMA limited partnerships (2)								(2)
Investments classified as held for sale								327
Unrealized net capital gains and losses, pre-tax								2,310
Amounts recognized for:
Insurance reserves (3)								(134)
DAC and DSI (4)								(242)
Amounts recognized								(376)
Deferred income taxes								(682)
Unrealized net capital gains and losses, after-tax							$	1,252

(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	$	28,756	$	1,747	$	(418)	$	1,329
Equity securities		650		90		(5)		85
Short-term investments		590		--		--		--
Derivative instruments (1)		(13)		1		(14)		(13)
EMA limited partnerships								(2)
Investments classified as held for sale								190
Unrealized net capital gains and losses, pre-tax								1,589
Amounts recognized for:
Insurance reserves								--
DAC and DSI								(156)
Amounts recognized								(156)
Deferred income taxes								(506)
Unrealized net capital gains and losses, after-tax							$	927

(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	$	564
Equity securities		22
Derivative instruments		(2)
Investments classified as held for sale		137
Total		721
Amounts recognized for:
Insurance reserves		(134)
DAC and DSI		(86)
Amounts recognized		(220)
Deferred income taxes		(176)
Increase in unrealized net capital gains and losses, after-tax	$	325

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
March 31, 2014
Fixed income securities
U.S. government and agencies	3	$	37	$	--	--	$	--	$	--	$	--
Municipal	37		192		(9)	21		110		(27)		(36)
Corporate	309		3,088		(99)	46		465		(62)		(161)
Foreign government	5		55		(2)	1		14		(1)		(3)
ABS	6		38		(1)	31		296		(27)		(28)
RMBS	35		38		(1)	41		96		(7)		(8)
CMBS	5		22		--	4		41		(4)		(4)
Total fixed income securities	400		3,470		(112)	144		1,022		(128)		(240)
Equity securities	28		81		(5)	--		--		--		(5)
Total fixed income and equity securities	428	$	3,551	$	(117)	144	$	1,022	$	(128)	$	(245)
Investment grade fixed income securities	328	$	3,091	$	(103)	97	$	743	$	(88)	$	(191)
Below investment grade fixed income securities	72		379		(9)	47		279		(40)		(49)
Total fixed income securities	400	$	3,470	$	(112)	144	$	1,022	$	(128)	$	(240)
December 31, 2013
Fixed income securities
U.S. government and agencies	4	$	76	$	(2)	--	$	--	$	--	$	(2)
Municipal	63		347		(24)	21		99		(38)		(62)
Corporate	530		5,191		(224)	48		467		(71)		(295)
Foreign government	7		76		(4)	1		13		(2)		(6)
ABS	17		162		(1)	42		400		(33)		(34)
RMBS	35		42		(2)	47		129		(10)		(12)
CMBS	5		14		--	6		52		(7)		(7)
Total fixed income securities	661		5,908		(257)	165		1,160		(161)		(418)
Equity securities	25		80		(5)	--		--		--		(5)
Total fixed income and equity securities	686	$	5,988	$	(262)	165	$	1,160	$	(161)	$	(423)
Investment grade fixed income securities	526	$	5,272	$	(236)	110	$	834	$	(112)	$	(348)
Below investment grade fixed income securities	135		636		(21)	55		326		(49)		(70)
Total fixed income securities	661	$	5,908	$	(257)	165	$	1,160	$	(161)	$	(418)

Summary of 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		544		--		544		560		--		560
1.26 - 1.50		1,119		2		1,121		1,167		2		1,169
Above 1.50		2,063		38		2,101		2,176		38		2,214
Total non-impaired mortgage loans	$	3,905	$	40	$	3,945	$	4,056	$	40	$	4,096

Schedule of net carrying value of impaired mortgage loans

($ in millions)		March 31, 2014		December 31, 2013
Impaired mortgage loans with a valuation allowance	$	14	$	77
Impaired mortgage loans without a valuation allowance		--		--
Total impaired mortgage loans	$	14	$	77
Valuation allowance on impaired mortgage loans	$	9	$	21

Schedule of rollforward of the 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