Pursuant to the Fair Value Measurements and Disclosures Topic of the FASB ASC, we have categorized AFS securities into a three-level hierarchy, based on the priority of the inputs to the respective valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3), as described in Note 1, which also includes additional disclosures regarding our fair value measurements.

The amortized cost, gross unrealized gains, losses and OTTI and fair value of AFS securities (in millions) were as follows:

				As of December 31, 2011
				Amortized		Gross Unrealized						Fair
				Cost		Gains		Losses		OTTI		Value
Fixed maturity securities:
	Corporate bonds			$	53,661	$	6,185	$	517	$	68	$	59,261
	U.S. Government bonds				439		55		-		-		494
	Foreign government bonds				668		65		-		-		733
	RMBS				7,690		548		73		126		8,039
	CMBS				1,642		73		106		9		1,600
	CDOs				121		-		19		-		102
	State and municipal bonds				3,490		566		9		-		4,047
	Hybrid and redeemable preferred securities				1,277		50		170		-		1,157
	VIEs' fixed maturity securities				673		27		-		-		700
		Total fixed maturity securities			69,661		7,569		894		203		76,133
Equity securities					135		16		12		-		139
			Total AFS securities	$	69,796	$	7,585	$	906	$	203	$	76,272

				As of December 31, 2010
				Amortized		Gross Unrealized						Fair
				Cost		Gains		Losses		OTTI		Value
Fixed maturity securities:
	Corporate bonds			$	48,863	$	3,571	$	607	$	87	$	51,740
	U.S. Government bonds				150		17		2		-		165
	Foreign government bonds				473		38		3		-		508
	RMBS				8,673		430		119		146		8,838
	CMBS				2,144		95		180		6		2,053
	CDOs				174		22		13		9		174
	State and municipal bonds				3,222		27		94		-		3,155
	Hybrid and redeemable preferred securities				1,476		56		135		-		1,397
	VIEs' fixed maturity securities				570		14		-		-		584
		Total fixed maturity securities			65,745		4,270		1,153		248		68,614
Equity securities					179		25		7		-		197
			Total AFS securities	$	65,924	$	4,295	$	1,160	$	248	$	68,811

The amortized cost and fair value of fixed maturity AFS securities by contractual maturities (in millions) were as follows:

			As of December 31, 2011
			Amortized		Fair
			Cost		Value
Due in one year or less			$	2,342	$	2,378
Due after one year through five years				12,418		13,288
Due after five years through ten years				22,456		24,593
Due after ten years				22,992		26,133
	Subtotal			60,208		66,392
MBS				9,332		9,639
CDOs				121		102
		Total fixed maturity AFS securities	$	69,661	$	76,133

Actual maturities may differ from contractual maturities because issuers may have the right to call or pre-pay obligations.

The fair value and gross unrealized losses, including the portion of OTTI recognized in OCI, of AFS securities (dollars in millions), aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows:

					As of December 31, 2011
					Less Than or Equal				Greater Than
					to Twelve Months				Twelve Months				Total
							Gross				Gross				Gross
							Unrealized				Unrealized				Unrealized
					Fair		Losses and		Fair		Losses and		Fair		Losses and
					Value		OTTI		Value		OTTI		Value		OTTI
Fixed maturity securities:
	Corporate bonds				$	2,848	$	162	$	1,452	$	423	$	4,300	$	585
	RMBS					565		125		429		74		994		199
	CMBS					178		15		146		100		324		115
	CDOs					9		1		80		18		89		19
	State and municipal bonds					31		-		30		9		61		9
	Hybrid and redeemable
		preferred securities				324		23		353		147		677		170
			Total fixed maturity securities			3,955		326		2,490		771		6,445		1,097
Equity securities						38		12		-		-		38		12
				Total AFS securities	$	3,993	$	338	$	2,490	$	771	$	6,483	$	1,109

Total number of AFS securities in an unrealized loss position																897

					As of December 31, 2010
					Less Than or Equal				Greater Than
					to Twelve Months				Twelve Months				Total
							Gross				Gross				Gross
							Unrealized				Unrealized				Unrealized
					Fair		Losses and		Fair		Losses and		Fair		Losses and
					Value		OTTI		Value		OTTI		Value		OTTI
Fixed maturity securities:
	Corporate bonds				$	5,271	$	297	$	2,007	$	397	$	7,278	$	694
	U.S. Government bonds					28		2		2		-		30		2
	Foreign government bonds					19		-		9		3		28		3
	RMBS					655		126		750		139		1,405		265
	CMBS					75		8		304		178		379		186
	CDOs					-		-		147		22		147		22
	State and municipal bonds					1,889		84		27		10		1,916		94
	Hybrid and redeemable
		preferred securities				203		10		568		125		771		135
			Total fixed maturity securities			8,140		527		3,814		874		11,954		1,401
Equity securities						60		7		-		-		60		7
				Total AFS securities	$	8,200	$	534	$	3,814	$	874	$	12,014	$	1,408

Total number of AFS securities in an unrealized loss position																1,237

We perform detailed analysis on the AFS securities backed by pools of residential and commercial mortgages that are most at risk of impairment based on factors discussed in Note 1. Selected information for these securities in a gross unrealized loss position (in millions) was as follows:

		As of December 31, 2011
		Amortized		Fair		Unrealized
		Cost		Value		Loss
Total
AFS securities backed by pools of residential mortgages		$	2,023	$	1,553	$	470
AFS securities backed by pools of commercial mortgages			472		344		128
	Total	$	2,495	$	1,897	$	598

Subject to Detailed Analysis
AFS securities backed by pools of residential mortgages		$	2,015	$	1,545	$	470
AFS securities backed by pools of commercial mortgages			126		61		65
	Total	$	2,141	$	1,606	$	535

		As of December 31, 2010
		Amortized		Fair		Unrealized
		Cost		Value		Loss
Total
AFS securities backed by pools of residential mortgages		$	2,539	$	2,006	$	533
AFS securities backed by pools of commercial mortgages			611		410		201
	Total	$	3,150	$	2,416	$	734

Subject to Detailed Analysis
AFS securities backed by pools of residential mortgages		$	2,303	$	1,776	$	527
AFS securities backed by pools of commercial mortgages			185		76		109
	Total	$	2,488	$	1,852	$	636

For the years ended December 31, 2011 and 2010, we recorded OTTI for AFS securities backed by pools of residential and commercial mortgages of $135 million and $163 million, pre-tax, respectively, and before associated amortization expense for DAC, VOBA, DSI and DFEL, of which $(15) million and $19 million, respectively, was recognized in OCI and $150 million and $144 million, respectively, was recognized in net income (loss).

The fair value, gross unrealized losses, the portion of OTTI recognized in OCI (in millions) and number of AFS securities where the fair value had declined and remained below amortized cost by greater than 20% were as follows:

		As of December 31, 2011
								Number
		Fair		Gross Unrealized				of
		Value		Losses		OTTI		Securities⁽¹⁾
Less than six months		$	385	$	125	$	31		56
Six months or greater, but less than nine months			53		30		12		18
Nine months or greater, but less than twelve months			2		-		1		7
Twelve months or greater			615		470		111		175
	Total	$	1,055	$	625	$	155		256

		As of December 31, 2010
								Number
		Fair		Gross Unrealized				of
		Value		Losses		OTTI		Securities⁽¹⁾
Less than six months		$	170	$	73	$	5		41
Six months or greater, but less than nine months			60		22		-		13
Nine months or greater, but less than twelve months			42		17		1		13
Twelve months or greater			929		520		184		224
	Total	$	1,201	$	632	$	190		291

We regularly review our investment holdings for OTTI. Our gross unrealized losses on AFS securities as of December 31, 2011, decreased $299 million in comparison to December 31, 2010. This change was attributable primarily to a decline in overall market yields, which was driven by market uncertainty and weakening economic activity. As discussed further below, we believe the unrealized loss position as of December 31, 2011, does not represent OTTI as we did not intend to sell these fixed maturity AFS securities, it is not more likely than not that we will be required to sell the fixed maturity AFS securities before recovery of their amortized cost basis, the estimated future cash flows were equal to or greater than the amortized cost basis of the debt securities, or we had the ability and intent to hold the equity AFS securities for a period of time sufficient for recovery.

Based upon this evaluation as of December 31, 2011, management believed we had the ability to generate adequate amounts of cash from our normal operations (e.g., insurance premiums and fees and investment income) to meet cash requirements with a prudent margin of safety without requiring the sale of our temporarily-impaired securities.

As of December 31, 2011, the unrealized losses associated with our corporate bond securities were attributable primarily to securities that were backed by commercial loans and individual issuer companies. For our corporate bond securities with commercial loans as the underlying collateral, we evaluated the projected credit losses in the underlying collateral and concluded that we had sufficient subordination or other credit enhancement when compared with our estimate of credit losses for the individual security and we expected to recover the entire amortized cost for each security. For individual issuers, we performed detailed analysis of the financial performance of the issuer and determined that we expected to recover the entire amortized cost for each security.

As of December 31, 2011, the unrealized losses associated with our MBS and CDOs were attributable primarily to collateral losses and credit spreads. We assessed for credit impairment using a cash flow model as discussed above. The key assumptions included default rates, severities and prepayment rates. We estimated losses for a security by forecasting the underlying loans in each transaction. The forecasted loan performance was used to project cash flows to the various tranches in the structure, as applicable. Our forecasted cash flows also considered, as applicable, independent industry analyst reports and forecasts, sector credit ratings and other independent market data. Based upon our assessment of the expected credit losses of the security given the performance of the underlying collateral compared to our subordination or other credit enhancement, we expected to recover the entire amortized cost basis of each security.

As of December 31, 2011, the unrealized losses associated with our hybrid and redeemable preferred securities were attributable primarily to wider credit spreads caused by illiquidity in the market and subordination within the capital structure, as well as credit risk of specific issuers. For our hybrid and redeemable preferred securities, we evaluated the financial performance of the issuer based upon credit performance and investment ratings and determined we expected to recover the entire amortized cost of each security.

Changes in the amount of credit loss of OTTI recognized in net income (loss) where the portion related to other factors was recognized in OCI (in millions) on fixed maturity AFS securities were as follows:

				For the Years Ended December 31,
				2011		2010		2009
Balance as of beginning-of-year				$	319	$	268	$	-
	Cumulative effect from adoption of new accounting standard				-		-		31
	Increases attributable to:
		Credit losses on securities for which an OTTI was not previously recognized			55		14		267
		Credit losses on securities for which an OTTI was previously recognized			71		65		-
	Decreases attributable to:
		Securities sold			(55)		(28)		(30)
			Balance as of end-of-year	$	390	$	319	$	268

During the years ended December 31, 2011, 2010 and 2009, we recorded credit losses on securities for which an OTTI was not previously recognized as we determined the cash flows expected to be collected would not be sufficient to recover the entire amortized cost basis of the debt security. The credit losses we recorded on securities for which an OTTI was not previously recognized were attributable primarily to one or a combination of the following reasons:

We recognize the OTTI attributed to the noncredit portion as a separate component in OCI referred to as unrealized OTTI on AFS securities.

Details of the amount of credit loss of OTTI recognized in net income (loss) where the portion related to other factors was recognized in OCI (in millions), were as follows:

		As of December 31, 2011
				Gross Unrealized						OTTI in
		Amortized				Losses and		Fair		Credit
		Cost		Gains		OTTI		Value		Losses
Corporate bonds		$	169	$	1	$	67	$	103	$	51
RMBS			690		1		128		563		301
CMBS			17		-		10		7		38
	Total	$	876	$	2	$	205	$	673	$	390

				As of December 31,
				2011		2010
Fixed maturity securities:
	Corporate bonds			$	1,908	$	1,801
	U.S. Government bonds				376		362
	Foreign government bonds				39		29
	RMBS				244		255
	CMBS				31		67
	CDOs				4		5
	State and municipal bonds				26		24
	Hybrid and redeemable preferred securities				45		51
		Total fixed maturity securities			2,673		2,594
Equity securities					2		2
			Total trading securities	$	2,675	$	2,596

The portion of the market adjustment for losses that relate to trading securities still held as of December 31, 2011, 2010 and 2009, was $118 million, $93 million and $137 million, respectively.

Mortgage loans on real estate principally involve commercial real estate. The commercial loans are geographically diversified throughout the U.S. with the largest concentrations in California and Texas, which accounted for approximately 32% and 30% of mortgage loans on real estate as of December 31, 2011 and 2010, respectively.

The following provides the current and past due composition of our mortgage loans on real estate (in millions):

		As of December 31,
		2011		2010
Current		$	6,858	$	6,697
60 to 90 days past due			26		8
Greater than 90 days past due			76		40
Valuation allowance associated with impaired mortgage loans on real estate			(31)		(13)
Unamortized premium (discount)			13		20
	Total carrying value	$	6,942	$	6,752

The number of impaired mortgage loans on real estate, each of which had an associated specific valuation allowance, and the carrying value of impaired mortgage loans on real estate (dollars in millions) were as follows:

		As of December 31,
		2011		2010
Number of impaired mortgage loans on real estate		12		9

Principal balance of impaired mortgage loans on real estate		$	100	$	75
Valuation allowance associated with impaired mortgage loans on real estate			(31)		(13)
	Carrying value of impaired mortgage loans on real estate	$	69	$	62

The average carrying value on the impaired mortgage loans on real estate (in millions) was as follows:

	For the Years Ended December 31,
	2011		2010		2009
Average carrying value for impaired mortgage loans on real estate	$	57	$	54	$	33
Interest income recognized on impaired mortgage loans on real estate		2		3		1
Interest income collected on impaired mortgage loans on real estate		2		3		1

As described in Note 1, we use the loan-to-value and debt-service coverage ratios as credit quality indicators for our mortgage loans, which were as follows (dollars in millions):

		As of December 31, 2011					As of December 31, 2010
						Debt-					Debt-
						Service					Service
		Principal		% of		Coverage	Principal		% of		Coverage
Loan-to-Value		Amount		Total		Ratio	Amount		Total		Ratio
Less than 65%		$	5,338	76.7	%	1.61	$	4,863	72.1	%	1.62
65% to 74%			1,198	17.2	%	1.37		1,484	22.0	%	1.40
75% to 100%			308	4.4	%	0.92		179	2.7	%	0.85
Greater than 100%			116	1.7	%	0.36		219	3.2	%	1.06
	Total mortgage loans on real estate	$	6,960	100.0	%		$	6,745	100.0	%

As of December 31, 2011 and 2010, alternative investments included investments in approximately 96 and 95 different partnerships, respectively, and the portfolio represented less than 1% of our overall invested assets.

The major categories of net investment income (in millions) on our Consolidated Statements of Income (Loss) were as follows:

				For the Years Ended December 31,
				2011		2010		2009
Fixed maturity AFS securities				$	3,842	$	3,694	$	3,474
VIEs' fixed maturity AFS securities					14		14		-
Equity AFS securities					5		6		8
Trading securities					154		157		159
Mortgage loans on real estate					408		424		462
Real estate					22		24		18
Standby real estate equity commitments					1		1		1
Policy loans					165		169		172
Invested cash					4		7		15
Commercial mortgage loan prepayment
	and bond makewhole premiums				82		67		24
Alternative investments					90		93		(55)
Consent fees					3		8		5
Other investments					(27)		(3)		9
		Investment income			4,763		4,661		4,292
Investment expense					(111)		(120)		(114)
			Net investment income	$	4,652	$	4,541	$	4,178

The detail of the realized gain (loss) related to certain investments (in millions) was as follows:

			For the Years Ended December 31,
			2011		2010		2009
Fixed maturity AFS securities:
	Gross gains		$	86	$	107	$	161
	Gross losses			(227)		(248)		(709)
Equity AFS securities:
	Gross gains			12		9		6
	Gross losses			-		(3)		(27)
Gain (loss) on other investments				(9)		(53)		(130)
Associated amortization of DAC, VOBA, DSI and DFEL
	and changes in other contract holder funds			(13)		8		161
		Total realized gain (loss) related to certain investments	$	(151)	$	(180)	$	(538)

Details underlying write-downs taken as a result of OTTI (in millions) that were recognized in net income (loss) and included in realized gain (loss) on AFS securities above, and the portion of OTTI recognized in OCI (in millions) were as follows:

					For the Years Ended December 31,
					2011		2010		2009
OTTI Recognized in Net Income (Loss)
Fixed maturity securities:
	Corporate bonds				$	(14)	$	(90)	$	(214)
	RMBS					(79)		(65)		(250)
	CMBS					(57)		(41)		-
	CDOs					(1)		(1)		(39)
	Hybrid and redeemable preferred securities					(2)		(5)		(67)
		Total fixed maturity securities				(153)		(202)		(570)
Equity securities						-		(3)		(27)
			Gross OTTI recognized in net income (loss)			(153)		(205)		(597)
			Associated amortization of DAC, VOBA, DSI and DFEL			35		53		205
				Net OTTI recognized in net income (loss), pre-tax	$	(118)	$	(152)	$	(392)

Portion of OTTI Recognized in OCI
Gross OTTI recognized in OCI					$	58	$	98	$	357
Change in DAC, VOBA, DSI and DFEL						(11)		(10)		(82)
	Net portion of OTTI recognized in OCI, pre-tax				$	47	$	88	$	275

As of December 31, 2011 and 2010, we reviewed our corporate bond and CDO portfolios for potential shortfall in contractual principal and interest based on numerous subjective and objective inputs. The factors used to determine the amount of credit loss for each individual security, include, but are not limited to, near term risk, substantial discrepancy between book and market value, sector or company-specific volatility, negative operating trends and trading levels wider than peers.

Credit ratings express opinions about the credit quality of a security. Securities rated investment grade, that is those rated BBB- or higher by Standard & Poor's (“S&P”) Rating Services or Baa3 or higher by Moody's Investors Service (“Moody's”), are generally considered by the rating agencies and market participants to be low credit risk. As of December 31, 2011 and 2010, 96% and 95%, respectively, of the fair value of our corporate bond portfolio was rated investment grade. As of December 31, 2011 and 2010, the portion of our corporate bond portfolio rated below investment grade had an amortized cost of $2.6 billion and a fair value of $2.4 billion. As of December 31, 2011 and 2010, 97% and 91%, respectively, of the fair value of our CDO portfolio was rated investment grade. As of December 31, 2011 and 2010, the portion of our CDO portfolio rated below investment grade had an amortized cost of $3 million and $24 million and fair value of $3 million and $16 million, respectively. Based upon the analysis discussed above, we believed as of December 31, 2011 and 2010, that we would recover the amortized cost of each investment grade corporate bond and CDO security.

For securities where we recorded an OTTI recognized in net income (loss) for the years ended December 31, 2011 and 2010, the recovery as a percentage of amortized cost was 98% and 80% for corporate bonds, respectively, and 0% for CDOs.

As of December 31, 2011 and 2010, default rates were projected by considering underlying MBS loan performance and collateral type. Projected default rates on existing delinquencies vary between 25% to 100% depending on loan type and severity of delinquency status. In addition, we estimate the potential contributions of currently performing loans that may become delinquent in the future based on the change in delinquencies and loan liquidations experienced in the recent history. Finally, we develop a default rate timing curve by aggregating the defaults for all loans (delinquent loans, foreclosure and real estate owned and new delinquencies from currently performing loans) in the pool to project the future expected cash flows.

We use certain available loan characteristics such as lien status, loan sizes and occupancy to estimate the loss severity of loans. Second lien loans are assigned 100% severity, if defaulted. For first lien loans, we assume a minimum of 30% severity with higher severity assumed for investor properties and further housing price depreciation.

The carrying values of the payables for collateral on investments (in millions) included on our Consolidated Balance Sheets and the fair value of the related investments or collateral consisted of the following:

			As of December 31, 2011				As of December 31, 2010
			Carrying		Fair		Carrying		Fair
			Value		Value		Value		Value
Collateral payable held for derivative investments⁽¹⁾			$	2,980	$	2,980	$	800	$	800
Securities pledged under securities lending agreements⁽²⁾				200		193		199		192
Securities pledged under reverse repurchase agreements⁽³⁾				280		294		280		294
Securities pledged for Term Asset-Backed Securities
	Loan Facility ("TALF")⁽⁴⁾			173		199		280		318
Securities pledged for Federal Home Loan Bank of
	Indianapolis Securities ("FHLBI")⁽⁵⁾			100		142		100		110
		Total payables for collateral on investments	$	3,733	$	3,808	$	1,659	$	1,714

Increase (decrease) in payables for collateral on investments (in millions) included on the Consolidated Statements of Cash Flows consisted of the following:

		For the Years Ended December 31,
		2011		2010		2009
Collateral payable held for derivative investments		$	2,180	$	183	$	(2,192)
Securities pledged under securities lending agreements			1		(302)		74
Securities pledged under reverse repurchase agreements			-		(64)		(126)
Securities pledged for TALF			(107)		(65)		345
Securities pledged for FHLBI			-		-		100
	Total increase (decrease) in payables for collateral on investments	$	2,074	$	(248)	$	(1,799)

As of December 31, 2011, our investment commitments were $541 million, which included $233 million of LPs, $191 million of private placements and $117 million of mortgage loans on real estate.

As of December 31, 2011 and 2010, our most significant investments in one issuer were our investments in securities issued by the Federal Home Loan Mortgage Corporation with a fair value of $5.0 billion, or 5% and 6% of our invested assets portfolio, respectively, and our investments in securities issued by Fannie Mae with a fair value of $2.6 billion and $2.9 billion, or 3% of our invested assets portfolio, respectively. These investments are included in corporate bonds in the tables above.

As of December 31, 2011, and December 31, 2010, our most significant investments in one industry were our investment securities in the electric industry with a fair value of $7.7 billion and $6.7 billion, or 8% of our invested assets portfolio, respectively, and our investment securities in the CMO industry with a fair value of $5.6 billion and $6.5 billion, or 6% and 8% of our invested assets portfolio, respectively. We utilized the industry classifications to obtain the concentration of financial instruments amount; as such, this amount will not agree to the AFS securities table above.