Financing Receivables

The Company’s financing receivables include commercial and residential mortgage loans, syndicated loans and policy loans. Syndicated loans are reflected in other investments. Policy loans do not exceed the cash surrender value of the policy at origination. As there is minimal risk of loss related to policy loans, the Company does not record an allowance for loan losses for policy loans. The Company does not currently have an allowance for loan losses for residential mortgage loans.

Allowance for Loan Losses

The following table presents a rollforward of the allowance for loan losses for the six months ended and the ending balance of the allowance for loan losses by impairment method and type of loan:



	June 30, 2014									June 30, 2013
	Commercial Mortgage Loans			Syndicated Loans			Total			Commercial Mortgage Loans		Syndicated Loans		Total
	(in millions)
Beginning balance	$	24		$	4		$	28		$	26	$	4	$	30
Charge-offs	(1		)	(1		)	(2		)	—		—		—
Ending balance	$	23		$	3		$	26		$	26	$	4	$	30

Individually evaluated for impairment	$	8		$	—		$	8		$	7	$	—	$	7
Collectively evaluated for impairment	15			3			18			19		4		23

The recorded investment in financing receivables by impairment method and type of loan was as follows:



	June 30, 2014
	Commercial Mortgage Loans		Residential Mortgage Loans		Syndicated Loans		Total
	(in millions)
Individually evaluated for impairment	$	34	$	—	$	3	$	37
Collectively evaluated for impairment	2,560		736		394		3,690
Total	$	2,594	$	736	$	397	$	3,727



	December 31, 2013
	Commercial Mortgage Loans		Residential Mortgage Loans		Syndicated Loans		Total
	(in millions)
Individually evaluated for impairment	$	40	$	—	$	5	$	45
Collectively evaluated for impairment	2,524		786		356		3,666
Total	$	2,564	$	786	$	361	$	3,711

As of June 30, 2014 and December 31, 2013, the Company’s recorded investment in financing receivables individually evaluated for impairment for which there was no related allowance for loan losses was $9 million and $12 million, respectively.

Residential mortgage loans are presented net of unamortized discount of $43 million and $53 million as of June 30, 2014 and December 31, 2013, respectively.

During the three months ended June 30, 2014 and 2013, the Company purchased $25 million and $37 million, respectively, and sold $6 million and nil, respectively of syndicated loans. During the six months ended June 30, 2014 and 2013, the Company purchased $90 million and $59 million, respectively, and sold $10 million and $1 million, respectively, of syndicated loans.

The Company has not acquired any loans with deteriorated credit quality as of the acquisition date.

Credit Quality Information

Nonperforming loans, which are generally loans 90 days or more past due, were $10 million and $20 million as of June 30, 2014 and December 31, 2013, respectively. All other loans were considered to be performing.

Commercial Mortgage Loans

The Company reviews the credit worthiness of the borrower and the performance of the underlying properties in order to determine the risk of loss on commercial mortgage loans. Based on this review, the commercial mortgage loans are assigned an internal risk rating, which management updates as necessary. Commercial mortgage loans which management has assigned its highest risk rating were 1% and 2% of total commercial mortgage loans at June 30, 2014 and December 31, 2013, respectively. Loans with the highest risk rating represent distressed loans which the Company has identified as impaired or expects to become delinquent or enter into foreclosure within the next six months. In addition, the Company reviews the concentrations of credit risk by region and property type.

Concentrations of credit risk of commercial mortgage loans by U.S. region were as follows:



	Loans				Percentage
	June 30, 2014		December 31, 2013		June 30, 2014		December 31, 2013
	(in millions)
South Atlantic	$	706	$	679	27	%	26	%
Pacific	642		631		25		25
Mountain	253		248		10		10
East North Central	236		248		9		10
Middle Atlantic	213		202		8		8
West North Central	199		194		8		7
West South Central	148		153		6		6
New England	132		138		5		5
East South Central	65		71		2		3
	2,594		2,564		100	%	100	%
Less: allowance for loan losses	23		24
Total	$	2,571	$	2,540

Concentrations of credit risk of commercial mortgage loans by property type were as follows:



	Loans				Percentage
	June 30, 2014		December 31, 2013		June 30, 2014		December 31, 2013
	(in millions)
Retail	$	933	$	917	36	%	36	%
Office	552		548		21		21
Industrial	455		431		18		17
Apartments	432		454		17		18
Mixed use	45		36		2		1
Hotel	34		32		1		1
Other	143		146		5		6
	2,594		2,564		100	%	100	%
Less: allowance for loan losses	23		24
Total	$	2,571	$	2,540

Residential Mortgage Loans

The Company considers the credit worthiness of borrowers (FICO score), collateral characteristics such as loan-to-value (“LTV”) and geographic concentration to determine when an amount for an allowance for loan losses for residential mortgage loans is appropriate. At a minimum, management updates FICO scores and LTV ratios semiannually. As of June 30, 2014 and December 31, 2013, no allowance for loan losses was recorded.

As of both June 30, 2014 and December 31, 2013, approximately 4% of residential mortgage loans had FICO scores below 640. As of both June 30, 2014 and December 31, 2013, approximately 1% of the Company’s residential mortgage loans had LTV ratios greater than 90%. The Company’s most significant geographic concentration for residential mortgage loans is in California representing 37% and 38% of the portfolio as of June 30, 2014 and December 31, 2013, respectively. No other state represents more than 10% of the total residential mortgage loan portfolio.

Syndicated Loans

The Company’s syndicated loan portfolio is diversified across industries and issuers. The primary credit indicator for syndicated loans is whether the loans are performing in accordance with the contractual terms of the syndication. Total nonperforming syndicated loans at both June 30, 2014 and December 31, 2013 were $3 million.

Troubled Debt Restructurings

The following table presents the number of loans restructured by the Company during the period and their recorded investment at the end of the period:



	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
	(in millions, except number of loans)
Commercial mortgage loans	—	$	—	3	$	9	2	$	8	3	$	9
Residential mortgage loans	2	—		—	—		2	—		2	—
Syndicated loans	—	—		—	—		1	—		—	—
Total	2	$	—	3	$	9	5	$	8	5	$	9

The troubled debt restructurings did not have a material impact to the Company’s allowance for loan losses or income recognized for the three months and six months ended June 30, 2014 and 2013. There are no material commitments to lend additional funds to borrowers whose loans have been restructured.